Burger King 2012 Annual Report Download - page 125

Table of Contents
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On September 10, 2008, a class action lawsuit was filed against the Company in the United States District Court for the Northern District of California.
The complaint alleged that all 96 restaurants in California leased by the Company and operated by franchisees violate accessibility requirements
under federal and state law. In September 2009, the court issued a decision on the plaintiffs’ motion for class certification. In its decision, the court limited the
class action to the 10 restaurants visited by the named plaintiffs, with a separate class of plaintiffs for each of the 10 restaurants and 10 separate trials. In
March 2010, the Company agreed to settle the lawsuit with respect to the 10 restaurants and, in July 2010, the court gave final approval to the settlement. In
February 2011, a class action lawsuit styled Vallabhapurapu v. Burger King Corporation, No. C11-00667 (U.S. District Court for the Northern District of
California) was filed with respect to the other 86 restaurants. In January 2012, we agreed to settle the lawsuit. Under the settlement, $19.0 million was paid
for the benefit of the class members, with $5.0 million funded by our franchisees, $3.9 million by BKC, and the balance by BKC’s insurance carrier. These
amounts were funded in December 2012.
From time to time, the Company is involved in other legal proceedings arising in the ordinary course of business relating to matters including, but not
limited to, disputes with franchisees, suppliers, employees and customers, as well as disputes over our intellectual property.
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We carry insurance programs to cover claims such as workers’ compensation, general liability, automotive liability, executive risk and property, and are
self-insured for healthcare claims for eligible participating employees. Through the use of insurance program deductibles (ranging from $0.1 million to
$2.5 million) and self insurance, we retain a significant portion of the expected losses under these programs.
Insurance reserves have been recorded based on our estimate of the anticipated ultimate costs to settle all claims, both reported and incurred-but-not-
reported (IBNR), and such reserves include judgments and independent actuarial assumptions about economic conditions, the frequency or severity of claims
and claim development patterns, and claim reserve, management and settlement practices. During 2012, we recorded a $4.1 million reduction in our self
insurance reserve as we completed refranchising transactions and operated fewer Company restaurants. During 2010, we made a $1.5 million favorable
adjustment to our self insurance reserve to adjust our IBNR confidence level and an additional adjustment of $3.3 million as a result of favorable
developments in our claim trends. There were no comparable adjustments recorded during 2011. We had $26.7 million in accrued liabilities as of
December 31, 2012 and $32.3 million as of December 31, 2011 for these claims.
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We operate in the fast food hamburger restaurant category of the quick service segment of the restaurant industry. Revenues include retail sales at
Company restaurants and franchise revenues, consisting primarily of royalties based on a percentage of sales reported by franchise restaurants and franchise
fees paid by franchisees as well as property income we derive from properties we lease to our franchisees. Our business is managed in four distinct geographic
segments: (1) United States (“U.S.”) and Canada; (2) Europe, the Middle East and Africa (“EMEA”); (3) Latin America and the Caribbean (“LAC”); and
(4) Asia Pacific (“APAC”).
The unallocated amounts reflected in certain tables below include corporate support costs in areas such as facilities, finance, human resources,
information technology, legal, marketing and supply chain management, which benefit all of our geographic segments and system-wide restaurants and are not
allocated specifically to any of the geographic segments.
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Source: Burger King Worldwide, Inc., 10-K, February 22, 2013 Powered by Morningstar® Document Research℠
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