Baskin Robbins 2013 Annual Report Download - page 55

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million, offset by $15.1 million of other net non-cash reconciling adjustments, as well as $0.6 million of changes in operating
assets and liabilities. The $15.1 million of other net non-cash reconciling adjustments primarily resulted from net income from
equity method investments and a deferred tax benefit, offset by share-based compensation expense and the amortization of
deferred financing costs and original issue discount. The $0.6 million of changes in operating assets and liabilities was
primarily driven by cash paid for income taxes, offset by the increase in the legal reserve for the Bertico litigation and an
increase in accrued interest based on the timing of interest payments. During fiscal year 2012, we invested $22.4 million in
capital additions to property and equipment. Net cash used in financing activities was $125.6 million during fiscal year 2012,
driven primarily by the repurchase of common stock of $450.4 million and dividend payments of $70.1 million, offset by net
proceeds from the issuance of long-term debt of $380.6 million and additional tax benefits of $12.0 million realized from the
exercise of stock options. The cash used for the repurchase of common stock was related to 15.0 million shares of common
stock repurchased directly from certain shareholders in a private, non-underwritten transaction in August 2012. In connection
with that repurchase, we borrowed an additional $400.0 million, less original issue discount of $4.0 million, under our existing
term loan facility.
Our senior credit facility is guaranteed by certain of Dunkin’ Brands, Inc.’s wholly-owned domestic subsidiaries and includes
term loan and revolving credit facilities. The original aggregate borrowings available under the senior credit facility are
approximately $2.00 billion, consisting of a fully-drawn approximately $1.90 billion term loan facility and an undrawn $100.0
million revolving credit facility. As of December 28, 2013, there was $1.83 billion of total principal outstanding on the term
loans, while there was $97.0 million in available borrowings under the revolving credit facility as $3.0 million of letters of
credit were outstanding.
In February 2014, we amended the senior credit facility to reduce the applicable interest rate. The senior credit facility now
consists of $1.38 billion in term loans due February 2021 ("2021 Term Loans"), $450.0 million in term loans due September
2017 ("2017 Term Loans"), and a $100.0 million revolving credit facility due February 2019. Pursuant to the February 2014
amendment to the senior credit facility, principal amortization repayments are required to be made on the 2017 Term Loans
equal to $4.5 million per calendar year, payable in quarterly installments beginning June 2014 through June 2017. Pursuant to
the February 2014 amendment to the senior credit facility, principal amortization repayments are required to be made on the
2021 Term Loans equal to approximately $13.8 million per calendar year, payable in quarterly installments beginning June
2015 through December 2020. The final scheduled principal payments on the outstanding borrowings under the 2017 Term
Loans and 2021 Term Loans are due in September 2017 and February 2021, respectively. Additionally, following the end of
each fiscal year, the Company is required to prepay an amount equal to 25% of excess cash flow (as defined in the senior credit
facility) for such fiscal year. If DBI’s leverage ratio, which is a measure of DBI’s outstanding debt to earnings before interest,
taxes, depreciation, and amortization, adjusted for certain items (as specified in the credit facility), is less than 4.75x, no excess
cash flow payments are required. The Company intends to make quarterly payments of $5.0 million.
As a result of the February 2014 amendment to the senior credit facility, the 2021 Term Loans bear interest at a rate per annum
equal to an applicable margin plus, at our option, either (1) a base rate determined by reference to the highest of (a) the Federal
Funds rate plus 0.5%, (b) the prime rate, (c) the LIBOR rate plus 1.0%, and (d) 1.75% or (2) a LIBOR rate provided that
LIBOR shall not be lower than 0.75%. The applicable margin under the term loan facility is 1.50% for loans based upon the
base rate and 2.50% for loans based upon the LIBOR rate.
As a result of the February 2014 amendment to the senior credit facility, the 2017 Term Loans bear interest at a rate per annum
equal to an applicable margin plus, at our option, either (1) a base rate determined by reference to the highest of (a) the Federal
Funds rate plus 0.5%, (b) the prime rate, and (c) the LIBOR rate plus 1.0%, or (2) a LIBOR rate. The applicable margin under
the term loan facility is 1.50% for loans based upon the base rate and 2.50% for loans based upon the LIBOR rate.
As a result of the February 2014 amendment to the senior credit facility, borrowings under the revolving credit facility bear
interest at a rate per annum equal to an applicable margin plus, at our option, either (1) a base rate determined by reference to
the highest of (a) the Federal Funds rate plus 0.5%, (b) the prime rate, and (c) the LIBOR rate plus 1.0%, or (2) a LIBOR rate.
The applicable margin under the revolving credit facility is 1.25% for loans based upon the base rate and 2.25% for loans based
upon the LIBOR rate. In addition, we are required to pay a 0.5% commitment fee per annum on the unused portion of the
revolver and a fee for letter of credit amounts outstanding of 2.25%.
As of December 28, 2013, we had variable-to-fixed interest rate swap agreements to hedge the floating interest rate on $900.0
million notional amount of our outstanding term loan borrowings. We are required to make quarterly payments on the notional
amount at a fixed average interest rate of approximately 1.37%. In exchange, we receive interest on the notional amount at a
variable rate based on three-month LIBOR spot rate, subject to a 1.0% floor.
As a result of the February 2014 amendment to the senior credit facility, we amended the interest rate swap agreements to align
the embedded floors with the amended term loans. As a result of the amendments to the interest rate swap agreements, we will
be required to make quarterly payments on the notional amount at a fixed average interest rate of approximately 1.22%. In
exchange, we will receive interest on the notional amount at a variable rate based on three-month LIBOR spot rate, subject to a
0.75% floor. There was no change to the notional amount of the term loan borrowings being hedged.