Baskin Robbins 2012 Annual Report Download - page 67

Download and view the complete annual report

Please find page 67 of the 2012 Baskin Robbins annual report below. You can navigate through the pages in the report by either clicking on the pages listed below, or by using the keyword search tool below to find specific information within the annual report.

Page out of 112

  • 1
  • 2
  • 3
  • 4
  • 5
  • 6
  • 7
  • 8
  • 9
  • 10
  • 11
  • 12
  • 13
  • 14
  • 15
  • 16
  • 17
  • 18
  • 19
  • 20
  • 21
  • 22
  • 23
  • 24
  • 25
  • 26
  • 27
  • 28
  • 29
  • 30
  • 31
  • 32
  • 33
  • 34
  • 35
  • 36
  • 37
  • 38
  • 39
  • 40
  • 41
  • 42
  • 43
  • 44
  • 45
  • 46
  • 47
  • 48
  • 49
  • 50
  • 51
  • 52
  • 53
  • 54
  • 55
  • 56
  • 57
  • 58
  • 59
  • 60
  • 61
  • 62
  • 63
  • 64
  • 65
  • 66
  • 67
  • 68
  • 69
  • 70
  • 71
  • 72
  • 73
  • 74
  • 75
  • 76
  • 77
  • 78
  • 79
  • 80
  • 81
  • 82
  • 83
  • 84
  • 85
  • 86
  • 87
  • 88
  • 89
  • 90
  • 91
  • 92
  • 93
  • 94
  • 95
  • 96
  • 97
  • 98
  • 99
  • 100
  • 101
  • 102
  • 103
  • 104
  • 105
  • 106
  • 107
  • 108
  • 109
  • 110
  • 111
  • 112

-57-
breakage, and (g) contingencies. Estimates are based on historical experience, current conditions, and various other
assumptions that are believed to be reasonable under the circumstances. These estimates form the basis for making judgments
about the carrying values of assets and liabilities when they are not readily apparent from other sources. We adjust such
estimates and assumptions when facts and circumstances dictate. Actual results may differ from these estimates under different
assumptions or conditions. Illiquid credit markets and volatile equity and foreign currency markets have combined to increase
the uncertainty inherent in such estimates and assumptions.
(d) Cash and cash equivalents and restricted cash
The Company continually monitors its positions with, and the credit quality of, the financial institutions in which it maintains
its deposits and investments. As of December 29, 2012 and December 31, 2011, we maintained balances in various cash
accounts in excess of federally insured limits. All highly liquid instruments purchased with an original maturity of three months
or less are considered cash equivalents.
As part of the securitization transaction (see note 8), certain cash accounts were established in the name of Citibank, N.A.
(the “Trustee”) for the benefit of Ambac Assurance Corporation (“Ambac”), the Trustee, and the holders of our ABS Notes
(see note 8), and were restricted in their use. Historically, restricted cash primarily represented (i) cash collections held by the
Trustee, (ii) interest, insurer premiums, and commitment fee reserves held by the Trustee related to our ABS Notes, (iii) product
sourcing and real estate reserves used to pay ice cream product obligations to affiliates and real estate obligations, respectively,
(iv) cash collections related to the advertising funds and gift card/certificate programs, and (v) cash collateral requirements
associated with our Canadian guaranteed financing arrangements (see note 17(b)). Changes in restricted cash held for interest,
insurer premiums, commitment fee reserves, or other financing arrangements are presented as a component of cash flows from
financing activities in the accompanying consolidated statements of cash flows. Other changes in restricted cash are presented
as a component of operating activities. In connection with the repayment of the ABS Notes in December 2010 (see note 8), the
cash restrictions associated with the ABS Notes were released.
Cash held related to the advertising funds and the Company’s gift card/certificate programs are classified as unrestricted cash as
there are no legal restrictions on the use of these funds; however, the Company intends to use these funds solely to support the
advertising funds and gift card/certificate programs rather than to fund operations. Total cash balances related to the advertising
funds and gift card/certificate programs as of December 29, 2012 and December 31, 2011 were $125.4 million and $123.1
million, respectively.
(e) Fair value of financial instruments
The carrying amounts of accounts receivable, notes and other receivables, assets and liabilities related to the advertising funds,
accounts payable, and other current liabilities approximate fair value because of their short-term nature. For long-term
receivables, we review the creditworthiness of the counterparty on a quarterly basis, and adjust the carrying value as necessary.
We believe the carrying value of long-term receivables of $5.8 million and $4.8 million as of December 29, 2012 and
December 31, 2011, respectively, approximates fair value.
Financial assets and liabilities are categorized, based on the inputs to the valuation technique, into a three-level fair value
hierarchy. The fair value hierarchy gives the highest priority to the quoted prices in active markets for identical assets and
liabilities and lowest priority to unobservable inputs. Observable market data, when available, is required to be used in making
fair value measurements. When inputs used to measure fair value fall within different levels of the hierarchy, the level within
which the fair value measurement is categorized is based on the lowest level input that is significant to the fair value
measurement.