Baskin Robbins 2013 Annual Report Download - page 84

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The Company has agreements with each of its derivative counterparties that contain a provision whereby if the Company
defaults on any of its indebtedness, including default where repayment of the indebtedness has not been accelerated by the
lender, then the Company could also be declared in default on its derivative obligations. As of December 28, 2013, the
Company has not posted any collateral related to these agreements. The Company holds one derivative instrument with each of
its derivative counterparties, each of which is settled net with the respective counterparties in accordance with the swap
agreements. There is no offsetting of these financial instruments on the consolidated balance sheets. As of December 28, 2013,
the termination value of derivatives is a net asset position of $9.6 million, which includes accrued interest but excludes any
adjustment for nonperformance risk, related to these agreements.
As a result of the February 2014 amendment to the senior credit facility, the Company 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, the Company will be required to make quarterly payments on the notional amount at a fixed average interest rate
of approximately 1.22%. In exchange, the Company 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.
(10) Other current liabilities
Other current liabilities at December 28, 2013 and December 29, 2012 consisted of the following (in thousands):
December 28,
2013
December 29,
2012
Gift card/certificate liability $ 139,721 145,981
Gift card breakage liability 14,093 —
Accrued salary and benefits 26,713 31,136
Accrued legal liabilities (see note 17(d)) 26,633 27,305
Accrued interest 9,999 13,564
Accrued professional costs 2,938 2,996
Other 28,821 18,949
Total other current liabilities $ 248,918 239,931
(11) Leases
The Company is the lessee on certain land leases (the Company leases the land and erects a building) or improved leases (lessor
owns the land and building) covering restaurants and other properties. In addition, the Company has leased and subleased land
and buildings to others. Many of these leases and subleases provide for future rent escalation and renewal options. In addition,
contingent rentals, determined as a percentage 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 the sublease agreements. The Company
also leases certain office equipment and a fleet of automobiles under noncancelable operating leases. Included in the
Company’s consolidated balance sheets are the following amounts related to capital leases (in thousands):
December 28,
2013
December 29,
2012
Leased property under capital leases (included in property and equipment) $ 7,888 7,902
Accumulated depreciation (2,326)(2,003)
Net leased property under capital leases $ 5,562 5,899
Capital lease obligations:
Current $ 432 371
Long-term 6,996 7,251
Total capital lease obligations $ 7,428 7,622
Capital lease obligations exclude that portion of the minimum lease payments attributable to land, which are classified
separately as operating leases. Interest expense associated with the capital lease obligations is computed using the incremental
borrowing rate at the time the lease is entered into and is based on the amount of the outstanding lease obligation. Depreciation
on capital lease assets is included in depreciation expense in the consolidated statements of operations. Interest expense related
to capital leases for fiscal years 2013, 2012, and 2011 was $618 thousand, $600 thousand, and $481 thousand, respectively.