Dunkin' Donuts 2012 Annual Report Download - page 100

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$16.4 million and $3.0 million of expense during fiscal years 2011 and 2010, respectively, related to Sponsor management fees,
which is included in general and administrative expenses, net in the consolidated statements of operations.
At December 29, 2012 and December 31, 2011, certain affiliates of the Sponsors held $52.4 million and $64.8 million,
respectively, of term loans, issued under the Company’s senior credit facility. The terms of these loans are identical to all other
term loans issued to unrelated lenders in the senior credit facility.
The Sponsors have historically held a substantial interest in our Company as well as several other entities. The existence of
such common ownership and management control could result in differences within our operating results or financial position
than if the entities were autonomous; however, we believe such transactions were negotiated at arms-length. The Company
made payments to entities in which the Sponsors have ownership interests totaling approximately $1.6 million, $979 thousand,
and $769 thousand during fiscal years 2012, 2011, and 2010, respectively, primarily for the purchase of training services and
leasing of restaurant space. At December 29, 2012 and December 31, 2011, the Company had a net payable of $150 thousand
and $127 thousand, respectively, to these entities.
(b) Joint ventures
The Company received royalties from its joint ventures as follows (in thousands):
Fiscal year ended
December 29,
2012
December 31,
2011
December 25,
2010
BR Japan $ 2,549 2,473 2,110
BR Korea 3,662 3,371 2,990
$ 6,211 5,844 5,100
At December 29, 2012 and December 31, 2011, the Company had $1.2 million and $1.0 million, respectively, of royalties
receivable from its joint ventures which were recorded in accounts receivable, net of allowance for doubtful accounts, in the
consolidated balance sheets.
The Company made net payments to its joint ventures totaling approximately $1.6 million, $2.8 million, and $1.5 million, in
fiscal years 2012, 2011, and 2010, respectively, primarily for the purchase of ice cream products and incentive payments.
(c) Board of directors
Certain family members of one of our directors hold an ownership interest in an entity that owns and operates Dunkin’ Donuts
restaurants and holds the right to develop additional restaurants under store development agreements. During fiscal years 2012
and 2011, the Company received $961 thousand and $713 thousand, respectively, in royalty and rental payments from this
entity. No amounts were received during fiscal year 2010. During fiscal year 2012, the Company recognized $174 thousand of
income primarily related to initial franchise fees and renewals with this entity. All material terms of the franchise and store
development agreements with this entity are consistent with other unrelated franchisees in the market.
(20) Closure of manufacturing plant
During the second quarter of 2012, the Company’s board of directors approved a plan to close our Peterborough, Ontario,
Canada manufacturing plant, which supplied ice cream to certain of Baskin-Robbins' international markets. Manufacturing of
ice cream products that had been produced in Peterborough began transitioning to existing third-party partner suppliers during
the third quarter of 2012, and production ceased at the plant at the end of September 2012. The majority of the costs and
activities related to the closure of the plant and transition to third-party suppliers occurred in fiscal year 2012, with the
exception of the settlement of our Canadian pension plan, which is subject to government approval that may not be obtained
until the end of 2013 or early 2014.
During fiscal year 2012, the Company recorded costs related to the plant closure of $11.9 million, including $4.2 million of
accelerated depreciation on property, plant, and equipment, $2.7 million of incremental ice cream production costs, $2.0 million
of ongoing termination benefits, $1.1 million of one-time termination benefits, and $1.9 million of other costs related to the
closing and transition. The accelerated depreciation and the incremental ice cream production costs are included in depreciation
and cost of ice cream products, respectively, in the consolidated statements of operations, while all other costs are included in
general and administrative expenses, net in the consolidated statements of operations. The Company also expects to incur
additional costs of approximately $3.0 million to $4.0 million primarily related to the settlement of our Canadian pension plan
upon final government approval.