Dunkin' Donuts 2011 Annual Report Download

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Table of contents

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  • Page 8
    ... 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 Select Market as of July 27, 2011, was approximately $751 million. As of February 17, 2012, 120,153,097 shares of common stock of the registrant were...

  • Page 9
    ... Matters and Issuer Purchases of Equity Securities Item 6. Selected Financial Data Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations Item 7A. Quantitative and Qualitative Disclosures about Market Risk Item 8. Financial Statements and Supplementary Data...

  • Page 10
    ... 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 if our results of...

  • 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
    ... U.S. market positions, for the sixth consecutive year, Dunkin' Donuts was recognized in 2012 by Brand Keys, a customer satisfaction research company, as #1 in the U.S. on its Customer Loyalty Engagement IndexSM in the coffee category. Franchised business model provides a platform for growth Nearly...

  • Page 13
    ... than our other products. We plan to increase our coffee and beverage revenue through continued new product innovations and related marketing, including advertising campaigns such as "America Runs on Dunkin'" and "What are you Drinkin'?" In the summer of 2011, Dunkin' Donuts began offering 14-count...

  • Page 14
    ... popular Dunkin' Donuts flavors, including Original Blend, Dunkin' Decaf, French Vanilla, Hazelnut and Dunkin' Dark®. In addition, participating Dunkin' Donuts restaurants offer, on occasion, Keurig Single-Cup Brewers for sale. We believe this alliance is a significant long-term growth opportunity...

  • Page 15
    ... the cash investment for new stores, increasing beverage sales, lowering supply chain costs and implementing more efficient store management systems. We believe these initiatives have further increased franchisee profitability. For example, we reduced the upfront capital expenditure costs to open an...

  • Page 16
    ... 60% of Dunkin' Donuts' U.S. franchisee-reported sales for fiscal year 2011 generated from coffee and other beverages. We believe QSRs, including Dunkin' Donuts, are positioned to capture additional coffee market share through an increased focus on coffee offerings. Our Baskin-Robbins brand competes...

  • Page 17
    ... renewed excitement for the brand. Baskin-Robbins' "31 flavors", offering consumers a different flavor for each day of the month, is recognized by ice cream consumers nationwide. For fiscal year 2011, the Baskin-Robbins franchise system generated U.S. franchisee-reported sales of $496 million, which...

  • Page 18
    ... a single-branded distribution point or a multibranded distribution point. In addition, and depending upon the market, a franchisee may purchase the right to open a franchised restaurant at one or multiple locations (via a store development agreement, or "SDA"). When granting the right to operate...

  • Page 19
    .... The master franchisee is required to pay an upfront initial franchise fee for each developed restaurant and, for the Dunkin' Donuts brand, royalties. For the Baskin-Robbins brand, the master franchisee is typically required to purchase ice cream from Baskin-Robbins or an approved supplier...

  • Page 20
    Canada Cayman Islands Chile China Colombia Curacao Denmark Dominican Republic Ecuador Egypt England Georgia Germany Honduras India Indonesia Japan Kazakhstan Korea Kuwait Latvia Lebanon Malaysia Maldives Mauritius Mexico Nepal New Zealand Oman Pakistan Panama Peru Philippines Portugal Qatar Russia ...

  • Page 21
    ..., advertising and promotion, including market research, production, advertising costs, public relations and sales promotions. We use no more than 20% of the advertising funds to cover the administrative expenses of the advertising funds and for other strategic initiatives designed to increase sales...

  • Page 22
    ... 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 franchisees...

  • Page 23
    ... supplies the franchisees 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...

  • Page 24
    ... assurance and protection of our intellectual property. Manufacturing of Dunkin' Donuts bakery goods Centralized production is another element of our supply chain that is designed to support growth for the Dunkin' Donuts brand. Centralized manufacturing locations (CMLs) are franchisee-owned and...

  • Page 25
    ... brands attracts new customers, increases comparable store sales and allows franchisees to expand into other dayparts. New product research and development is located in a state-of-the-art facility at our headquarters in Canton, Massachusetts. The facility includes a sensory lab, a quality assurance...

  • Page 26
    ... and regulations on imported commodities and 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...

  • Page 27
    ... our employee count. Additional Information The Company makes available, free of charge, through its internet website www.dunkinbrands.com, its annual report on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, proxy statements and amendments to those reports filed or furnished...

  • Page 28
    ... with required standards, franchise fees paid to us and royalty income will be adversely affected and brand image and reputation could be harmed, which in turn could materially and adversely affect our business and operating results. Although we believe we generally enjoy a positive working...

  • Page 29
    ... our product mix, service offerings and marketing and merchandising initiatives for products and services that address, and anticipate advances in, technology and market trends. If we are not able to successfully respond to these challenges, our business, financial condition and operating results...

  • Page 30
    ... our senior credit facility bear interest at variable rates. Other debt we incur also could be variable rate debt. If market interest rates increase, variable rate debt will create higher debt service requirements, which could adversely affect our cash flow. While we may in the future enter into...

  • Page 31
    ... 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 slogans...

  • Page 32
    ... implement our growth strategy, which includes opening new domestic and international restaurants, our ability to increase our revenues and operating profits could be adversely affected. Our growth strategy relies in part upon new restaurant development by existing and new franchisees. We...

  • 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
    ... liability which could materially affect our results of operations. Interruptions in the supply of product to franchisees and licensees could adversely affect our revenues. In order to maintain quality-control standards and consistency among restaurants, we require through our franchise agreements...

  • Page 35
    ...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 and BaskinRobbins brand as American brands; political and...

  • Page 36
    ... the sale of ice cream to the U.S. military (rather than through royalties) for resale on base locations and in field operations. While revenues derived from arrangements with the U.S. military represented less than 1% of our total revenues and less than 4% of our international revenues for 2011...

  • Page 37
    ... has developed and opened a restaurant but has failed to memorialize the franchisor-franchisee relationship in an executed agreement as of the opening date of such restaurant. In certain other limited instances, we may allow a franchisee in good standing to operate domestically pursuant to franchise...

  • Page 38
    ... affect 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...

  • 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
    ... option, however, is contingent on the franchisee's execution of the then-current form of franchise arrangements (which may include increased royalty payments, advertising fees and other costs), the satisfaction of certain conditions (including modernization of the restaurant and related operations...

  • Page 41
    ... card sales, our franchisees (and we from our company-operated restaurants) transmit confidential credit card information by way of secure private retail networks. Although we use private networks, third parties may have the technology or know-how to breach the security of the customer information...

  • 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
    ... resell their shares in the public market. Any such sales, or anticipation thereof, could cause the market price of our common stock to decline. In addition, we have registered shares of common stock that are reserved for issuance under our 2011 Omnibus Long-Term Incentive Plan. Provisions in...

  • Page 44
    ..., marketing, technology, 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...

  • Page 45
    ...purchase, the real estate. Certain leases 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...

  • Page 46
    ... Purchases of Equity Securities. Our common stock has been listed on the NASDAQ Global Select Market under the symbol "DNKN" since July 27, 2011. Prior to that time, there was no public market for our common stock. The following table sets forth for the periods indicated the high and low sale prices...

  • Page 47
    ... of dividends paid 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...

  • 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
    ... intangible assets, impairment charges, Sponsor 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...

  • 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
    ... our revenue for fiscal year 2011 was derived from royalty income and franchise fees. Sales of ice cream products to Baskin-Robbins franchisees in certain international markets accounted for 16% of our revenue for fiscal year 2011. An additional 15% of our revenue for fiscal year 2011 was generated...

  • Page 53
    ... intangible assets, impairment charges, Sponsor 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...

  • 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
    ... useful information regarding our historical operating results. The following table sets forth the computation of diluted 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...

  • Page 57
    ...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) Fiscal year...

  • Page 58
    ...in the average cost of borrowing due to refinancing and re-pricing transactions, offset by an increase in the weighted average long-term debt outstanding and an extra week of interest expense in fiscal year 2011. As the senior notes were fully repaid upon completion of the initial public offering on...

  • Page 59
    ... tax differences. The increased effective tax rate for fiscal year 2011 primarily resulted from the impairment related to the Korea joint venture investment, which reduced income before income taxes but for which there is no corresponding tax benefit. Operating segments We operate four reportable...

  • 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
    The 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...

  • Page 63
    ... venture income from 2009 were primarily driven by sales growth, as well as favorable impact of foreign exchange. Fiscal year 2009 Increase (Decrease) Fiscal year 2010 $ % (In thousands, except percentages) Interest expense, net ...Loss (gain) on debt extinguishment ...Other gains, net ...Total...

  • 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
    ... year 2011, driven primarily by the repayment of long-term debt, net of proceeds from additional borrowings under the term loans, totaling $404.6 million and costs associated with the term loan re-pricing and upsize transactions of $20.1 million, offset by proceeds from our initial public offering...

  • Page 67
    ... 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 the senior credit facility) for such fiscal year. Under the terms of the senior credit facility, the first excess cash flow payment is due in the first quarter...

  • Page 68
    ... initial public offering in July 2011, and includes $14.7 million in fees related to such termination. (e) Represents gains/losses recorded and related transaction costs associated with the refinancing and repayment of long-term debt, including the write-off of deferred financing costs and original...

  • Page 69
    ... fees associated with entry into new markets, costs associated with various franchisee information technology and one-time market research programs, and the net impact of other non-recurring and individually insignificant adjustments. Based upon our current level of operations and anticipated growth...

  • Page 70
    ...as of December 31, 2011: (In millions) Total Less than 1 year 1-3 years 3-5 years More than 5 years Long-term debt(1) ...Capital lease obligations ...Operating lease obligations ...Purchase obligations(2)(3) ...Short and long-term obligations(4) ...Total(5) ... $1,859.9 9.0 617.2 - 1.3 $2,487.4 76...

  • Page 71
    ... 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. Revenue recognition Initial franchise fee revenue is recognized upon substantial completion of the services required of...

  • Page 72
    ...-line basis over their estimated useful lives or terms of their related agreements. Other intangible assets consist primarily of franchise and international license rights (franchise rights), ice cream manufacturing and territorial franchise agreement license rights (license rights) and operating...

  • Page 73
    ...based on a level of growth in perpetuity. These cash flows were discounted to present value using a weighted average cost of capital ("WACC"), which reflects the time value of money and the appropriate degree of risks inherent in the business. Net debt as of the valuation date was then deducted from...

  • Page 74
    ... at each grant date were as follows: Market approach EBITDA multiples PWERM Common Discount Core Weighted stock Class L Perpetuity rate EBITDA average discount discount growth rate (WACC) multiple years to exit rate rate Discounted cash flow Grant Date(s) Fair value per common share 6/24/2008...

  • Page 75
    ... statements or tax returns. Deferred tax assets and 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...

  • Page 76
    ... Financial Statements and Supplementary Data Report of Independent Registered Public Accounting Firm The Board of Directors and Stockholders Dunkin' Brands Group, Inc.: We have audited the accompanying consolidated balance sheets of Dunkin' Brands Group, Inc. and subsidiaries as of December 31, 2011...

  • Page 77
    ... ...69,068 Total assets ...$3,224,018 Liabilities, Common Stock, and Stockholders' Equity (Deficit) Current liabilities: Current portion of long-term debt ...$ 14,965 Capital lease obligations ...232 Accounts payable ...9,651 Income taxes payable, net ...15,630 Liabilities of advertising funds ...50...

  • Page 78
    ...' BRANDS GROUP, INC. AND SUBSIDIARIES Consolidated Statements of Operations (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...

  • 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
    ... 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 Purchase...

  • Page 82
    ... Financial Statements December 31, 2011 and December 25, 2010 (1) Description of business and organization Dunkin' Brands Group, Inc. ("DBGI") and subsidiaries (collectively, "the Company") is one of the world's largest franchisors of restaurants serving coffee and baked goods as well as ice cream...

  • Page 83
    ... note 8), (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...

  • 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
    ... 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 economic conditions...

  • Page 86
    .... The franchise rights and related tax liabilities are amortized in a manner that reflects the estimated benefits from the use of the intangible asset over a period of 14 years. The franchise rights were valued based on an estimate of future cash flows to be generated from the ongoing management of...

  • Page 87
    ... statements of operations. (o) Revenue recognition Franchise fees and royalty income Domestically, the Company sells individual franchises as well as territory agreements in the form of store development agreements ("SDA agreements") that grant the right to develop restaurants in designated...

  • Page 88
    ... 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 from the sale...

  • Page 89
    ...required repayments, using the effective interest rate method. (u) Concentration of credit risk The Company is subject to credit risk through its accounts receivable consisting primarily of amounts due from franchisees and licensees for franchise fees, royalty income, and sales of ice cream products...

  • 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
    ... statements of cash flows because the Company does not have complete discretion over the usage of the funds. Contributions to these advertising funds are restricted to advertising, product development, public relations, merchandising, and administrative expenses and programs to increase sales...

  • Page 92
    ...Summary financial information for the joint venture operations on an aggregated basis was as follows (in thousands): December 31, 2011 December 25, 2010 Current assets ...Current liabilities ...Working capital ...Property, plant, and equipment, net ...Other assets ...Long-term liabilities ...Joint...

  • Page 93
    ... year: 2012 ...2013 ...2014 ...2015 ...2016 ...(7) Goodwill and other intangible assets The changes and carrying amounts of goodwill by reporting unit were as follows (in thousands): Dunkin' Donuts U.S. Dunkin' Donuts International BaskinRobbins International $710 634 553 467 375 Goodwill Total...

  • Page 94
    Other intangible assets at December 31, 2011 consisted of the 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 ...

  • Page 95
    ... year 2011 excess cash flow, considering all payments made, the excess cash flow payment required in the first quarter of 2012 is $2.9 million, which may be deducted from future minimum required principal payments. Other events and transactions, such as certain asset sales and incurrence of debt...

  • Page 96
    ... 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 $250.0 million of senior notes. Using funds raised by the Company's initial public offering...

  • Page 97
    ...-term debt Excluding the impact of excess cash flow payments required by the senior credit facility as discussed above, the aggregate maturities of long-term debt for each of the next five calendar years are $15.0 million. (9) Other current liabilities Other current liabilities at December 31, 2011...

  • Page 98
    ... are the following amounts related to assets leased to others under operating leases, where the Company is the lessor (in thousands): December 31, 2011 December 25, 2010 Land ...Buildings ...Leasehold improvements ...Store, production, and other equipment ...Construction in progress ...Accumulated...

  • Page 99
    ... license agreement. Baskin-Robbins International primarily derives its revenues from the manufacturing and sales of ice cream products, as well as royalty income, franchise fees, and license fees. The operating results of each segment are regularly reviewed and evaluated separately by the Company...

  • Page 100
    ... with unaffiliated customers and include no intersegment revenues. Revenues reported as "Other" include retail sales for company-owned restaurants, as well as revenue earned through arrangements with third parties in which our brand names are used and revenue generated from online training programs...

  • 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
    ... initial public offering to repay the remaining $375.0 million outstanding under the senior notes, with the remaining net proceeds being used for working capital and general corporate purposes. On November 22, 2011, certain existing stockholders sold 22,000,000 shares of our common stock at a price...

  • Page 103
    ... may be delivered in satisfaction of stock options. The Dunkin' Brands Group, Inc. 2011 Omnibus Long-Term Incentive Plan (the "2011 Plan") was adopted in July 2011, and is the only plan under which the Company currently grants awards. A maximum of 7,000,000 shares of common stock may be delivered in...

  • Page 104
    ... the initial public offering as the requisite service period, which was equivalent to the implicit service period of the performance condition, had been delivered. A summary of the changes in the Company's restricted shares during fiscal year 2011 is presented below: Weighted average grant-date fair...

  • Page 105
    ...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 options to executives to purchase 828...

  • 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
    ... stock options granted during fiscal year 2011 consisted of the following: Number of awards granted Option exercise price Fair value of underlying common stock Grant Date 3/9/2011 ...7/26/2011 ... 637,040 191,000 $ 7.31 $19.00 $ 7.31 $19.00 Prior to the initial public offering, the fair value...

  • Page 108
    ...of the Company's nonexecutive and 2011 Plan options as of December 31, 2011 and changes during fiscal year 2011 is presented below: Weighted average exercise price Weighted average remaining contractual term (years) Aggregate intrinsic value (in millions) Number of shares Share options outstanding...

  • 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
    ... operations differed from the expense computed using the statutory federal income tax rate of 35% due to the following: 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...

  • Page 111
    ...Other ...Valuation allowance ...Total current ...Noncurrent: Capital leases ...Rent ...Property and equipment ...Deferred compensation and long-term incentive accrual ...Deferred revenue ...Real estate reserves ...Franchise rights and other intangibles ...Unused foreign tax credits ...Capital loss...

  • Page 112
    ... impact on the total amount of unrecognized tax benefits cannot be made at this time. For U.S. federal taxes, the Company has open tax years dating back to 2006. In addition, the Internal Revenue Service ( "IRS") is conducting an examination of certain tax positions related to the utilization...

  • Page 113
    ... with terms of approximately five to ten years for various business purposes. Substantially all loan proceeds are used by the franchisees to finance store improvements, new store development, new central production locations, equipment purchases, related business acquisition costs, working capital...

  • Page 114
    ..., as defined. The Company credits the amounts deferred with earnings based on the investment options selected by the participants and holds investments to partially offset the Company's liabilities under the NQDC Plan. The NQDC Plan liability, included in other long-term liabilities -104-

  • 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
    ... included in other 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...

  • Page 118
    ... 2011, 2010, and 2009, respectively, primarily for the purchase 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...

  • Page 119
    ...the results of operations for 13-week periods. The third quarter of fiscal year 2011 includes an expense 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...

  • Page 120
    ... 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. Prior to Papa John's, Mr. Travis was with Blockbuster...

  • Page 121
    ...and Chief Operating Officer. Mr. Travis previously held numerous 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...

  • Page 122
    ... served as Chief Operating Officer for Panera Bread Company. The remaining information required by this item will be contained in our definitive Proxy Statement for our 2012 Annual Meeting of Stockholders, which will be filed not later than 120 days after the close of our fiscal year ended December...

  • Page 123
    ... 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 (incorporated by reference to Exhibit 10.5 to the Company's Registration Statement on Form...

  • Page 124
    ... and Restated Executive Employment Agreement between Dunkin' Brands, Inc., Dunkin' Brands Group, Inc. and Nigel Travis (incorporated by reference to Exhibit 10.10 to the Company's Registration Statement on Form S-1, File No. 333-173898, filed with the SEC on May 4, 2011) Offer Letter to Neil Moses...

  • 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
    ..., thereunto duly 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...

  • Page 127