Baskin Robbins 2013 Annual Report Download - page 58

-48-
(In millions) Total
Less than
1 year
1-3
years
3-5
years
More than
5 years
Long-term debt(1) $ 2,386.8 68.3 170.6 626.2 1,521.7
Capital lease obligations 12.0 1.0 2.1 2.2 6.7
Operating lease obligations 639.8 52.9 102.3 100.3 384.3
Purchase obligations and guarantees(2)(3) 8.4 7.8 0.6 — —
Short and long-term obligations(4) 1.61.6———
Total(5) $ 3,048.6 131.6 275.6 728.7 1,912.7
(1) Amounts include mandatory principal payments on long-term debt, as well as estimated interest of $64.9 million,
$137.5 million, $161.0 million, and $189.5 million for less than 1 year, 1-3 years, 3-5 years, and more than 5 years,
respectively. Interest on the $1.8 billion of term loans under our senior credit facility is variable, subject to an interest
rate floor for a portion of the term loans, and has been estimated based on a current LIBOR yield curve. Additionally,
estimated interest also reflects the impact of our amended variable-to-fixed interest rate swap agreements. 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 based on our leverage ratio at the end of the fiscal year. If our leverage ratio is less than
4.75x, then no excess cash flow prepayment is required. No excess cash flow payment is required related to fiscal year
2013 based on our current leverage ratio, and therefore no excess cash flow payments have been reflected for any
years in the contractual obligation amounts above.
(2) We have entered into two third-party guarantees with a distribution facility of franchisee products that ensures
franchisees will purchase or sell a certain volume of product. As of December 28, 2013, we were contingently liable
for $5.7 million under one of these guarantees, and are currently obligated to pay $7.5 million in the first quarter of
2014 under the other guarantee. We also have various supply chain contracts that provide for purchase commitments
or exclusivity, the majority of which result in our being contingently liable upon early termination of the agreement or
engaging with another supplier. . As of December 28, 2013, we were contingently liable under such supply chain
agreements for approximately $52.6 million, and considering various factors including internal forecasts, prior history,
and ability to extend contract terms, we have accrued $0.9 million related to these supply chain commitments. Such
amounts, with the exception of the $7.5 million guarantee payment due in the first quarter of 2014 and the supply
chain commitments accrued, are not included in the table above as timing of payment, if any, is uncertain.
(3) We are guarantors of and are contingently liable for certain lease arrangements primarily as the result of our assigning
our interest. As of December 28, 2013, we were contingently liable for $6.4 million under these guarantees, which are
discussed further above in “Off Balance Sheet Obligations.” Additionally, in certain cases, we issue guarantees to
financial institutions so that franchisees can obtain financing. If all outstanding guarantees, which are discussed further
below in “Critical accounting policies,” came due as of December 28, 2013, we would be liable for approximately
$3.0 million. Such amounts are not included in the table above as timing of payment, if any, is uncertain.
(4) Amounts include obligations to former employees under severance agreements. Excluded from these amounts are any
payments that may be required related to pending litigation, such as the Bertico matter more fully described in note 17
(d) to our consolidated financial statements included herein, as the amount and timing of cash requirements, if any, are
uncertain.
(5) Income tax liabilities for uncertain tax positions, gift card/certificate liabilities, and liabilities to various advertising
funds are excluded from the table above as we are not able to make a reasonably reliable estimate of the amount and
period of related future payments. As of December 28, 2013, we had a liability for uncertain tax positions, including
accrued interest and penalties thereon, of $12.4 million. As of December 28, 2013, we had a gift card/certificate
liability of $139.7 million and a gift card breakage liability of $14.1 million (see note 2(v) to our consolidated
financial statements included herein). As of December 28, 2013, we had a net payable of $17.6 million to the various
advertising funds.
Critical accounting policies
Our significant accounting policies are more fully described under the heading “Summary of significant accounting policies” in
Note 2 of the notes to the consolidated financial statements. However, we believe the accounting policies described below are
particularly important to the portrayal and understanding of our financial position and results of operations and require
application of significant judgment by our management. In applying these policies, management uses its judgment in making
certain assumptions and estimates.
These judgments involve estimations of the effect of matters that are inherently uncertain and may have a significant impact on
our quarterly and annual results of operations or financial condition. Changes in estimates and judgments could significantly
affect our result of operations, financial condition, and cash flow in future years. The following is a description of what we
consider to be our most significant critical accounting policies.