Baskin Robbins 2011 Annual Report Download

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Table of contents

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  • Page 8
    ... company (as defined in Rule 12b-2 of the Exchange Act). Yes ' No È The aggregate market value of the voting and non-voting stock of the registrant held by non-affiliates of Dunkin' Brands Group, Inc. computed by reference to the closing price of the registrant's common stock on the NASDAQ Global...

  • Page 9
    DUNKIN' BRANDS GROUP, INC. AND SUBSIDIARIES TABLE OF CONTENTS Page Part I. Item 1. Item 1A. Item 1B. Item 2. Item 3. Item 4. Business Risk Factors Unresolved Staff Comments Properties Legal Proceedings Mine Safety Disclosures Part II. Market for Registrant's Common Equity, Related Stockholder ...

  • Page 10
    ... guarantees of future performance and that our actual results of operations, financial condition and liquidity, and the development of the industry in which we operate may differ materially from those made in or suggested by the forward-looking statements contained in this report. In addition, even...

  • Page 11
    ...1. Business . Our Company We are one of the world's leading franchisors of quick service restaurants ("QSRs") serving hot and cold coffee and baked goods, as well as hard serve ice cream. We franchise restaurants under our Dunkin' Donuts and Baskin-Robbins brands. With approximately 16,800 points of...

  • Page 12
    ... from us. Gross store openings in fiscal 2011 were 374 for Dunkin' Donuts U.S., 341 for Dunkin' Donuts International, 571 for Baskin-Robbins International and 49 for Baskin-Robbins U.S. Expansion requires limited financial investment by us, given that new store development and substantially all of...

  • Page 13
    ... goods and ice cream categories of the QSR segment of the restaurant industry, and deliver shareholder value by executing on the following strategies: Increase comparable store sales and profitability in Dunkin' Donuts U.S. Our largest operating segment, Dunkin' Donuts U.S., has experienced positive...

  • Page 14
    ... 31, 2011 Increase penetration in existing markets. In our traditional core markets of New England and New York, we now have one Dunkin' Donuts store for every 9,560 people. In the near term, we intend to focus our development on other markets east of the Mississippi River, where we currently have...

  • Page 15
    ... markets. Our international development strategy for both brands includes growth in our existing core markets. For the Dunkin' Donuts brand, we intend to focus on growth in South Korea and the Middle East, where we currently have 857 and 229 points of distribution, respectively. For Baskin-Robbins...

  • Page 16
    ... Donuts, are positioned to capture additional coffee market share through an increased focus on coffee offerings. Our Baskin-Robbins brand competes primarily in QSR segment categories and subcategories that include hardserve ice cream as well as those that include soft serve ice cream, frozen yogurt...

  • Page 17
    ... ice cream consumers nationwide. For fiscal year 2011, the Baskin-Robbins franchise system generated U.S. franchisee-reported sales of $496 million, which accounted for approximately 5.9% of our global franchisee-reported sales, and had 2,457 U.S. points of distribution at period end. International...

  • Page 18
    ... to open a franchised restaurant at one or multiple locations (via a store development agreement, or "SDA"). When granting the right to operate a restaurant to a potential franchisee, we will generally evaluate the potential franchisee's prior food-service experience, history in managing profit and...

  • Page 19
    ... required to purchase ice cream from Baskin-Robbins or an approved supplier. In most countries, the master franchisee is also required to spend a certain percentage of gross sales on advertising in such foreign country in order to promote the brand. Generally, the master franchise agreement serves...

  • Page 20
    ...Indonesia Japan Kazakhstan Korea Kuwait Latvia Lebanon Malaysia Maldives Mauritius Mexico Nepal New Zealand Oman Pakistan Panama Peru Philippines Portugal Qatar Russia Saudi Arabia Scotland Singapore South Africa Spain St Maarten Srilanka Taiwan Thailand UAE Ukraine United States Vietnam Wales Yemen...

  • Page 21
    ... of our sale of ice cream products to them, and in 2011 our effective royalty rate in this segment was approximately 0.7%. In 2010, we supplemented and modified certain SDAs, and franchise agreements entered into pursuant to such SDAs, for restaurants located in certain new or developing markets, by...

  • Page 22
    ...Foods Alliance Agreement, Dunkin' Brands receives a license fee based on total gallons of ice cream sold. For fiscal year 2011, we generated 1.2%, or $7.4 million, of our total revenue from license fees from Dean Foods. We manufacture and supply ice cream products to a majority of the Baskin-Robbins...

  • Page 23
    ... operating restaurants located in South Korea with ice cream, donuts and coffee products. Japan Restaurants in Japan accounted for approximately 28% of total franchisee-reported sales from international operations for fiscal year 2011, 100% of which came from Baskin-Robbins. We conduct business in...

  • Page 24
    ... various pricing strategies, so that our products appeal to a broad range of customers. The supply chain Domestic We do not typically supply products to our domestic franchisees. With the exception of licensing fees paid by Dean Foods on domestic ice cream sales, we do not typically derive revenues...

  • Page 25
    ...just baked on demand" donut manufacturing platform enables the Dunkin' Donuts brand to more efficiently expand its restaurant base in newer markets where franchisees may not have access to a CML. Baskin-Robbins ice cream Prior to 2000, we manufactured and sold ice cream products to substantially all...

  • Page 26
    ... equipment, and laws regulating foreign investment. We believe that the international disclosure statements, franchise offering documents and franchising procedures for our Baskin-Robbins brand and Dunkin' Donuts brand comply in all material respects with the laws of the applicable countries. -16-

  • Page 27
    ... Factors. Risks related to our business and industry Our financial results are affected by the operating results of our franchisees. We receive a substantial majority of our revenues in the form of royalties, which are generally based on a percentage of gross sales at franchised restaurants, rent...

  • Page 28
    ... sold at other QSRs, local and regional beverage and food operations, specialty beverage and food retailers, supermarkets and wholesale suppliers, many bearing recognized brand names and having significant customer loyalty. In addition to the prevailing baseline level of competition, major market...

  • Page 29
    ... competitive position, we could experience lower demand for products, downward pressure on prices, the loss of market share and the inability to attract, or loss of, qualified franchisees, which could result in lower franchise fees and royalty income, and materially and adversely affect our business...

  • Page 30
    ... higher debt service requirements, which could adversely affect our cash flow. While we may in the future enter into agreements limiting our exposure to higher interest rates, any such agreements may not offer complete protection from this risk. The terms of our indebtedness restrict our current and...

  • Page 31
    ...our intellectual property could harm our business. We regard our Dunkin' Donuts® and Baskin-Robbins® trademarks as having significant value and as being important factors in the marketing of our brands. We have also obtained trademark protection for several of our product offerings and advertising...

  • Page 32
    ... to avoid donuts and other products we offer in favor of foods that are perceived as more healthy, our franchisees' sales would suffer, resulting in lower royalty payments to us, and our business and operating results would be harmed. If we fail to successfully implement our growth strategy, which...

  • Page 33
    ... in the supply chain of these commodities. If the prices of these commodities rise, we may increase the cost of ice cream sold to such international franchisees, but only after a thirty-day notice period required under our franchise agreements, during which our margin on such sales would decline...

  • Page 34
    ... produces ice cream for resale by us. Disruptions in these relationships may reduce franchisee sales and, in turn, our royalty income. Overall difficulty of suppliers (including DBCL and those of the International JVs) meeting franchisee product demand, interruptions in the supply chain, obstacles...

  • Page 35
    ...applicable tax laws; legal and regulatory changes and the burdens and costs of local operators' compliance with a variety of laws, including trade restrictions and tariffs; interruptions in the supply of product; increases in anti-American sentiment and the identification of the Dunkin' Donuts brand...

  • Page 36
    ... of our brands in a particular market or markets. Any such delay or interruption would result in a delay in, or loss of, royalty income to us whether by way of delayed royalty income or delayed revenues from the sale of ice cream products by us to franchisees internationally, or reduced sales. Any...

  • Page 37
    ... of performance. If the franchisee, however, were to neglect to remit royalty payments in a timely fashion, we may be unable to enforce the payment of such fees which, in turn, may materially and adversely affect our business and operating results. While we generally require franchise arrangements...

  • Page 38
    ... our operating results and financial condition. We are subject to income taxes in both the United States and numerous foreign jurisdictions. The federal income tax returns of the Company for fiscal years 2006 through 2009 are currently under audit by the Internal Revenue Service ("IRS"), and the IRS...

  • Page 39
    ... result in higher tax costs, penalties and interests, thereby negatively and adversely impacting our financial condition, results of operations, or cash flows. We are subject to a variety of additional risks associated with our franchisees. Our franchise system subjects us to a number of risks, any...

  • Page 40
    ...of the Dunkin' Donuts brand and the Baskin-Robbins brand. The councils are comprised of franchisees, brand employees and executives, and they meet to discuss the strengths, weaknesses, challenges and opportunities facing the brands as well as the rollout of new products and projects. Internationally...

  • Page 41
    ... temporary closing of a number of Baskin-Robbins restaurants, two of which remained closed as of December 31, 2011. These events could reduce traffic in our restaurants and demand for our products; make it difficult or impossible for our franchisees to receive products from their suppliers; disrupt...

  • Page 42
    ... governance requirements of The NASDAQ Global Select Market. Our stock price could be extremely volatile and, as a result, you may not be able to resell your shares at or above the price you paid for them. Since our initial public offering in July 2011, the price of our common stock, as reported by...

  • Page 43
    ... affect the market price of our common stock and make it difficult for us to raise funds through securities offerings in the future. The shares sold in the IPO and secondary offering in November 2011 are eligible for immediate sale in the public market without restriction by persons other than...

  • Page 44
    ..., human resources, public relations, financial and research and development. Our Peterborough Facility manufactures ice cream products for sale in certain international markets. As of December 31, 2011, we owned 96 properties and leased 952 locations across the U.S. and Canada, a majority of...

  • Page 45
    ... require the payment of additional rent equal to a percentage (ranging from 2.0% to 13.5%) of annual sales in excess of specified amounts. Of the sites owned or leased by the Company in the U.S., 25 are locations that no longer have a Dunkin' Donuts or Baskin-Robbins restaurant (surplus properties...

  • Page 46
    ... terms of franchise and development agreements, including claims or threats of claims of breach of contract, negligence, and other alleged violations by us. At December 31, 2011, contingent liabilities totaling $4.7 million were included in other current liabilities in the consolidated balance sheet...

  • Page 47
    ... since that date. The stock price performance shown in the graph is not necessarily indicative of future price performance. $102 $100 $98 $96 $94 $92 $90 7/27/2011 DNKN S&P 500 S&P Consumer Discretionary 7/27/2011 12/31/2011 12/31/2011 Dunkin' Brands Group, Inc. (DNKN) ...S&P 500 ...S&P Consumer...

  • Page 48
    .... Fiscal Year 2007 2008 2009 2010 2011 ($ in thousands, except per share data or as otherwise noted) Consolidated Statements of Operations Data: Franchise fees and royalty income ...$ 325,441 Rental income ...98,860 Sales of ice cream products ...63,777 Other revenues ...28,857 Total revenues...

  • Page 49
    ...points ...Comparable Store Sales Growth (U.S. Only)(10): Dunkin' Donuts ...Baskin-Robbins ...Franchisee-Reported Sales ($ in millions)(11): Dunkin' Donuts U.S...Dunkin' Donuts International ...Baskin-Robbins U.S...Baskin-Robbins International ...Total Franchisee-Reported Sales ...Company-Owned Store...

  • Page 50
    ... management agreement termination fee, and secondary offering costs, and, in the case of adjusted net income, loss on debt extinguishment and refinancing transactions, net of the tax impact of such adjustments. The Company uses adjusted operating income and adjusted net income as key performance...

  • Page 51
    ... statements. Introduction and overview We are one of the world's leading franchisors of quick service restaurants ("QSRs") serving hot and cold coffee and baked goods, as well as hard serve ice cream. We franchise restaurants under our Dunkin' Donuts and Baskin-Robbins brands. With 16,794 points...

  • Page 52
    ... for fiscal year 2011 was generated from rental income from franchisees that lease or sublease their properties from us. The balance of our revenue for fiscal year 2011 consisted of license fees on products sold in non-franchised outlets, license fees on sales of ice cream products to Baskin-Robbins...

  • Page 53
    ...9.1% for fiscal year 2011, or 7.4% on a 52-week basis, resulted from the following: • Dunkin' Donuts U.S. systemwide sales growth of 9.4%, which was the result of comparable store sales growth of 5.1% driven by both increased average ticket and transaction counts, net restaurant development of 243...

  • Page 54
    ... fiscal year 2011 primarily resulted from increased franchise fees and royalty income of $38.5 million, driven by the increase in Dunkin' Donuts U.S. systemwide sales, as well as a $15.1 million increase in sales of ice cream products. Approximately $8.0 million of the increase in total revenues was...

  • Page 55
    ... well as strong sales growth in the Middle East. The increase in total revenues of $39.1 million, or 7.3%, for fiscal year 2010 primarily resulted from increased franchise fees and royalty income of $15.9 million, driven primarily by the increase in Dunkin' Donuts U.S. systemwide sales, as well as...

  • Page 56
    ... earnings per pro forma common share and diluted adjusted earnings per pro forma common share: 2009 Fiscal year 2010 2011 Diluted earnings per pro forma common share: Net income (in thousands) ...Pro forma weighted average number of common shares - diluted: Weighted average number of Class L shares...

  • Page 57
    ... in the average number of company-owned stores held during fiscal year 2011. Approximately $8.0 million of the increase in total revenues was attributable to the extra week in fiscal year 2011, consisting primarily of additional royalty income and sales of ice cream products. Increase (Decrease...

  • Page 58
    ... new point-of-sale system for Baskin-Robbins franchisees. Offsetting these declines was an increase in personnel costs of $13.2 million, of which approximately $2.4 million was attributable to the extra week in fiscal year 2011, with the remaining increase related to investment in our Dunkin' Donuts...

  • Page 59
    ... profit for the Dunkin' Donuts International and Baskin-Robbins International segments include equity in net income (loss) from joint ventures, except for the impairment charge, net of the related reduction in depreciation and amortization, net of tax, recorded in fiscal year 2011 on the investment...

  • Page 60
    ... growth strategy and higher projected incentive compensation payouts. Dunkin' Donuts International Increase (Decrease) Fiscal year Fiscal year 2010 2011 $ % (In thousands, except percentages) Royalty income ...Franchise fees ...Rental income ...Other revenues ...Total revenues ...Segment profit...

  • Page 61
    ... costs and travel of $1.2 million. Baskin-Robbins International Increase (Decrease) Fiscal year Fiscal year 2010 2011 $ % (In thousands, except percentages) Royalty income ...Franchise fees ...Rental income ...Sales of ice cream products ...Other revenues ...Total revenues ...Segment profit...

  • Page 62
    ... increase in Baskin-Robbins International segment profit for fiscal year 2011 resulted primarily from the increase in royalty income noted above and a $1.8 million increase in net margin on sales of ice cream products driven by higher sales volume. Offsetting these increases in segment profit was an...

  • Page 63
    ... changes in state tax rates, which resulted in a deferred tax benefit of approximately $5.7 million in fiscal 2010. The effective tax rate for both years was also impacted by changes in reserves for uncertain tax positions, which are not driven by changes in income before income taxes. Reserves for...

  • Page 64
    ... primarily from lease reserves recorded. Dunkin' Donuts International Fiscal year Fiscal year Increase (Decrease) 2009 2010 $ % (In thousands, except percentages) Royalty income ...Franchise fees ...Rental income ...Other revenues ...Total revenues ...Segment profit ... $10,146 1,516 446 218...

  • Page 65
    ... for all gift certificates outstanding. Baskin-Robbins International Increase (Decrease) Fiscal year Fiscal year 2010 $ % 2009 (In thousands, except percentages) Royalty income ...Franchise fees ...Rental income ...Sales of ice cream products ...Other revenues ...Total revenues ...Segment profit...

  • Page 66
    ... of long-term debt, net of repayment and voluntary retirement of debt and debt issuance costs, of $353.4 million and a $16.1 million decrease in debt-related restricted cash balances. On November 23, 2010, we consummated a refinancing transaction whereby Dunkin' Brands, Inc. (i) issued and sold $625...

  • Page 67
    ... 1, 2011, we completed an initial public offering in which we sold 22,250,000 shares of common stock at an initial public offering price of $19.00 per share, resulting in net proceeds to us of approximately $390.0 million after deducting underwriter discounts and commissions and offering-related...

  • Page 68
    ... non-cash adjustments, including stock compensation expense, legal reserves, and other non-cash gains and losses. (c) Represents direct and indirect cost and expenses related to the Company's refinancing, initial public offering, and secondary offering transactions. (d) Represents annual fees paid...

  • Page 69
    ..., under this guarantee. Based on current internal forecasts, we believe the franchisees will achieve the required volume of purchases, and therefore, we would not be required to make payments under this agreement. Additionally, the Company has various supply chain contracts that provide for purchase...

  • Page 70
    ... yield curve. Our term loans also require us to prepay an amount equal to 25% of excess cash flow (as defined in the senior credit facility) for the preceding fiscal year beginning in the first quarter of fiscal 2012 based on our leverage ratio at the end of fiscal year 2011. If our leverage ratio...

  • Page 71
    ... shipment. Licensing fees are recognized when earned, which is generally upon sale of the underlying products by the licensees. Retail store revenues at company-owned restaurants are recognized when payment is tendered at the point of sale, net of sales tax and other sales-related taxes. Gains on...

  • Page 72
    ... its implied fair value. Fair value of a reporting unit is estimated based on a combination of comparative market multiples and discounted cash flow valuation approaches. Currently, we have selected the first day of our fiscal third quarter as the date on which to perform our annual impairment tests...

  • Page 73
    ... year 2008 through our initial public offering on July 26, 2011, we granted restricted shares and stock options to employees with a fair value of the underlying common stock as follows: Number of restricted shares Number of executive options Number of nonexecutive options Fair value per common share...

  • Page 74
    .... Dunkin' Brands Canada Ltd. ("DBCL") files separate Canadian and provincial tax returns, and Dunkin Brands (UK) Limited, Dunkin' Brands Australia Pty. Ltd ("DBA"), and Baskin-Robbins Australia Pty. Ltd ("BRA") file separate tax returns in the United Kingdom and Australia. The current income tax...

  • Page 75
    ...liabilities are determined based on the differences between the financial statement carrying amounts of assets and liabilities and the respective tax bases of assets and liabilities using enacted tax rates that are expected to apply in years in which the temporary differences are expected to reverse...

  • Page 76
    ... consolidated balance sheets of Dunkin' Brands Group, Inc. and subsidiaries as of December 31, 2011 and December 25, 2010, and the related consolidated statements of operations, comprehensive income, stockholders' equity (deficit), and cash flows for the years ended December 31, 2011, December...

  • Page 77
    ... Consolidated Balance Sheets (In thousands, except share data) December 31, December 25, 2010 2011 Assets Current assets: Cash and cash equivalents ...$ 246,715 Accounts receivable, net ...37,122 Notes and other receivables, net ...21,665 Assets held for sale ...1,266 Deferred income taxes, net...

  • Page 78
    ... (In thousands, except per share data) December 31, 2011 Fiscal year ended December 25, December 26, 2010 2009 Revenues: Franchise fees and royalty income ...Rental income ...Sales of ice cream products ...Other revenues ...Total revenues ...Operating costs and expenses: Occupancy expenses...

  • Page 79
    DUNKIN' BRANDS GROUP, INC. AND SUBSIDIARIES Consolidated Statements of Comprehensive Income (In thousands) Fiscal year ended December 31, 2011 December 25, 2010 December 26, 2009 Net income ...Other comprehensive income (loss), net: Effect of foreign currency translation, net of deferred taxes of $...

  • Page 80
    DUNKIN' BRANDS GROUP, INC. AND SUBSIDIARIES Consolidated Statements of Stockholders' Equity (Deficit) (In thousands) Common stock Shares Amount Accumulated Additional other paid-in Treasury Accumulated comprehensive capital stock, at cost deficit income (loss) Total Balance at December 27, 2008 ...

  • Page 81
    ...100 53,210 Cash and cash equivalents, end of year ...$ 246,715 134,100 Supplemental cash flow information: Cash paid for income taxes ...$ 43,143 Cash paid for interest ...103,147 Noncash investing activities: Property and equipment included in accounts payable and other current liabilities ...1,641...

  • Page 82
    ... located in Canada and the United Kingdom ("UK") manufacture and/or distribute Baskin-Robbins ice cream products to Baskin-Robbins franchisees and licensees in various international markets. DBGI is majority-owned by investment funds affiliated with Bain Capital Partners, LLC, The Carlyle Group...

  • Page 83
    ...programs rather than to fund operations. Total cash balances related to the advertising funds and gift card/certificate programs as of December 31, 2011 and December 25, 2010 were $123.1 million and $82.3 million, respectively. (e) Fair value of financial instruments The carrying amounts of accounts...

  • Page 84
    ...estimated fair values of our term loans and senior notes are estimated based on current bid and offer prices, if available, for the same or similar instruments. Considerable judgment is required to develop these estimates. (f) Inventories Inventories consist of ice cream products. Cost is determined...

  • Page 85
    ... statements of operations. Generally, internal specialists estimate the amount to be recovered from the sale of such assets based on their knowledge of the (a) market in which the store is located, (b) results of the Company's previous efforts to dispose of similar assets, and (c) current...

  • Page 86
    ... on the present value of anticipated future cash flows or, if required, by independent third-party valuation specialists, depending on the nature of the assets or asset group. (k) Investments in joint ventures The Company accounts for its joint venture interests in B-R 31 Ice Cream Co., Ltd. ("BR...

  • Page 87
    ... or SDA agreements. Initial franchise fee revenue is recognized upon substantial completion of the services required of the Company as stated in the franchise agreement, which is generally upon opening of the respective restaurant. Fees collected in advance are deferred until earned, with deferred...

  • Page 88
    ... income in current liabilities in the consolidated balance sheets. Sales of ice cream products Our subsidiaries in Canada and the UK manufacture and/or distribute Baskin-Robbins ice cream products to Baskin-Robbins franchisees and licensees in Canada and other international locations. Revenue...

  • Page 89
    ...franchise fees, royalty income, and sales of ice cream products. In addition, we have note and lease receivables from certain of our franchisees and licensees. The financial condition of these franchisees and licensees is largely dependent upon the underlying business trends of our brands and market...

  • Page 90
    ... financial statements were filed. (3) Franchise fees and royalty income Franchise fees and royalty income consisted of the following (in thousands): December 31, 2011 Fiscal year ended December 25, 2010 December 26, 2009 Royalty income ...Initial franchise fees, including renewal income ...Total...

  • Page 91
    ...Dunkin' Donuts and Baskin-Robbins advertising funds, the Company collects a percentage, which is generally 5% of gross retail sales from Dunkin' Donuts and Baskin-Robbins franchisees, to be used for various forms of advertising for each brand. In most of our international markets, franchisees manage...

  • Page 92
    ...in the consolidated statements of operations for fiscal years 2011, 2010, and 2009 includes $868 thousand, $897 thousand, and $899 thousand, respectively, of net expense related to the amortization of intangible franchise rights and related deferred tax liabilities noted above. As required under the...

  • Page 93
    ... quarter of 2011, management concluded that indicators of potential impairment were present related to our investment in BR Korea based on continued declines in the operating performance and future projections of the Korea Dunkin' Donuts business. Accordingly, the Company engaged an independent...

  • Page 94
    ...following (in thousands): Weighted average amortization period (years) Gross carrying amount Accumulated amortization Net carrying amount Definite lived intangibles: Franchise rights ...Favorable operating leases acquired ...License rights ...Indefinite lived intangible: Trade names ... 20 14 10...

  • Page 95
    ... the remaining principal balance due in November 2017. Additionally, following the end of each fiscal year, if DBI's leverage ratio, which is a measure of DBI's cash income to outstanding debt, exceeds 4.00x, the Company is required to prepay an amount equal to 25% of excess cash flow (as defined in...

  • Page 96
    ...debt issuance costs related to the senior notes was $1.0 million and $182 thousand for fiscal years 2011 and 2010, respectively, which is included in interest expense in the consolidated statements of operations. In conjunction with the additional term loan borrowings during 2011, the Company repaid...

  • Page 97
    ... of annual sales by our franchisees, are stipulated in certain prime lease and sublease agreements. The Company is generally obligated for the cost of property taxes, insurance, and maintenance relating to these leases. Such costs are typically charged to the sublessee based on the terms of...

  • Page 98
    ...locations, including corporate facilities and company-owned restaurants, is included in general and administrative expenses, net, in the consolidated statements of operations. Total rental expense for all operating leases consisted of the following (in thousands): December 31, 2011 Fiscal year ended...

  • Page 99
    ... used in the consolidated financial statements. Subsequent to December 25, 2010, and as part of fiscal year 2011 management reporting, intersegment royalties and rental income earned from company-owned restaurants are now eliminated from Dunkin' Donuts U.S. segment revenues. Revenues for all periods...

  • Page 100
    ...' Donuts International and Baskin-Robbins International segments above. No individual foreign country accounted for more than 10% of total revenues for any fiscal year presented. For purposes of evaluating segment profit, Dunkin' Donuts U.S. includes the net operating income earned from company...

  • Page 101
    ... profit for the Dunkin' Donuts International and Baskin-Robbins International reportable segments. Expenses included in "Other" in the segment profit table below represent the impairment charge recorded in fiscal year 2011 related to our investment in BR Korea (see note 6). Equity in net income...

  • Page 102
    ..., by the initial public offering price net of the estimated underwriting discount and a pro rata portion, based upon the number of shares sold in the offering, of the estimated offering-related expenses. As such, the 22,866,379 shares of Class L common stock that were outstanding at the time of the...

  • Page 103
    ... in the consolidated balance sheets include vested and unvested restricted shares. Common stock in the consolidated statement of stockholders' equity (deficit) excludes unvested restricted shares. (c) Treasury stock During fiscal years 2011, 2010, and 2009, the Company repurchased a total of 23,624...

  • Page 104
    ... of the service, performance, and market conditions. As the performance condition could not be deemed probable of occurring until an initial public offering or change of control event was completed, no compensation cost was recognized related to the Tranche 3 shares prior to fiscal year 2011. Upon...

  • Page 105
    ... compensation cost related to the Tranche 3 shares. The total grant-date fair value of shares vested during fiscal years 2011, 2010, and 2009, was $484 thousand, $1.3 million, and $1.9 million, respectively. 2006 Plan stock options-executive During fiscal years 2011 and 2010, the Company granted...

  • Page 106
    ...status of the Company's executive stock options as of December 31, 2011 and changes during fiscal year 2011 are presented below: Weighted average exercise price Weighted average remaining contractual term (years) Aggregate intrinsic value (in millions) Number of shares Share options outstanding at...

  • Page 107
    ...impacted by the Company's stock price and certain assumptions related to the Company's stock and employees' exercise behavior. The following weighted average assumptions were utilized in determining the fair value of nonexecutive and 2011 Plan options granted during fiscal years 2011, 2010, and 2009...

  • Page 108
    ...27, 2011, the fair value of the common stock underlying the options granted was determined based on the closing price of the Company's common stock on the NASDAQ Global Select Market on the date of grant. As of December 31, 2011, there was $3.4 million of total unrecognized compensation cost related...

  • Page 109
    ...distribution . . Common stock fair value per share (initial public offering price per share) ...Fair value of Class L base shares (in thousands) ...$ $ 22,866,379 0.2189 5,005,775 19.00 95,110 The weighted average number of Class L shares in the Class L earnings per share calculation represents the...

  • Page 110
    ...: December 31, 2011 Fiscal year ended December 25, December 26, 2010 2009 Computed federal income tax expense, at statutory rate ...Permanent differences: Impairment of investment in BR Korea ...Other permanent differences ...State income taxes ...Benefits and taxes related to foreign operations...

  • Page 111
    ... in future state income tax rates. During fiscal year 2010, the Company recognized a deferred tax benefit of $5.7 million, due to changes in the estimated apportionment of income among the states in which the Company earns income and enacted changes in future state income tax rates. These changes...

  • Page 112
    ... the annual effective tax rate. The Company's major tax jurisdictions are the United States and Canada. For Canada, the Company has open tax years dating back to tax years ended August 2003. In the United States, the Company is currently under audits in certain state jurisdictions for tax periods...

  • Page 113
    ...or cash flows. A summary of the changes in the Company's unrecognized tax benefits is as follows (in thousands): December 31, 2011 Fiscal year ended December 25, December 26, 2010 2009 Balance at beginning of year ...Increases related to prior year tax positions ...Increases related to current year...

  • Page 114
    ... contributions were made during fiscal years 2011, 2010, and 2009. NQDC Plan The Company, excluding employees of certain international subsidiaries, also offers to a limited group of management and highly compensated employees, as defined by the Employee Retirement Income Security Act ("ERISA"), the...

  • Page 115
    ..., 2010, total investments held for the NQDC Plan were $3.2 million and $4.3 million, respectively, and have been recorded in other assets in the consolidated balance sheets. Canadian Pension Plan The Company sponsors a contributory defined benefit pension plan in Canada, The Baskin-Robbins Employees...

  • Page 116
    ... 31, 2011 and December 25, 2010. The pooled fund is comprised of numerous underlying investments and is valued at the unit fair values supplied by the fund's administrator, which represents the fund's proportionate share of underlying net assets at market value determined using closing market prices...

  • Page 117
    ... assets, and other long-term liabilities, in the accompanying consolidated balance sheets. (18) Related-party transactions (a) Sponsors Prior to the closing of the Company's initial public offering on August 1, 2011, the Company was charged an annual management fee by the Sponsors of $1.0 million...

  • Page 118
    ... 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...

  • Page 119
    ... of approximately $14.7 million related to the termination of the Sponsor management agreement incurred in connection with the completion of the initial public offering in August 2011 (see note 18). The fourth quarter of fiscal year 2011 includes an impairment of the investment in the Korea joint...

  • Page 120
    ... of Dunkin' Brands since January 2009 and assumed the role of President of Dunkin' Donuts in October 2009. From 2005 through 2008, Mr. Travis served as President and Chief Executive Officer, and on the board of directors of Papa John's International, Inc., a publicly-traded international pizza chain...

  • Page 121
    ... senior positions at Burger King Corporation. Mr. Travis currently serves on the board of directors of Lorillard, Inc. and formerly served on the board of Bombay Company, Inc. Neil Moses, age 53, joined Dunkin' Brands as Chief Financial Officer in November 2010. Mr. Moses joined Dunkin' Brands from...

  • Page 122
    ...six months of their fiscal year end. Accordingly, the financial statements of these joint ventures will be filed via an amendment to this Annual Report on Form 10-K on or before June 30, 2012. All other financial statement schedules are omitted because they are not required or are not applicable, or...

  • Page 123
    ....4 to the Company's Registration Statement on Form S-1, File No. 333-173898, as amended on July 11, 2011) Form of Option Award under 2011 Omnibus Long-Term Incentive Plan Form of Restricted Stock Unit Award under 2011 Omnibus Long-Term Incentive Plan Dunkin' Brands Group, Inc. Annual Incentive Plan...

  • Page 124
    ... and Restated Investor Agreement among Dunkin' Brands Group, Inc. (f/k/a Dunkin' Brands Group Holdings, Inc.), Dunkin' Brands Holdings, Inc., Dunkin' Brands, Inc. and the Investors named therein (incorporated by reference to Exhibit 10.18 to the Company's Registration Statement on Form S-1, File...

  • Page 125
    ... Franchise Agreement (incorporated by reference to Exhibit 10.32 to the Company's Registration Statement on Form S-1, File No. 333173898, as amended on June 23, 2011) Form of Dunkin' Donuts Store Development Agreement Form of Baskin-Robbins Store Development Agreement Subsidiaries of Dunkin' Brands...

  • Page 126
    ... authorized. Date: February 24, 2012 DUNKIN' BRANDS GROUP, INC. By: /s/ Nigel Travis Name: Nigel Travis Title: Chief Executive Officer Pursuant to the requirements of the Securities and Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant and...

  • Page 127