Dunkin' Donuts 2011 Annual Report Download - page 30

Subject to the limits contained in the credit agreement governing our senior credit facility and our other debt
instruments, we may be able to incur substantial additional debt from time to time to finance working capital,
capital expenditures, investments or acquisitions, or for other purposes. If we do so, the risks related to our high
level of debt could intensify. Specifically, our high level of debt could have important consequences, including:
• limiting our ability to obtain additional financing to fund future working capital, capital expenditures,
acquisitions or other general corporate requirements;
• requiring a substantial portion of our cash flow to be dedicated to debt service payments instead of
other purposes, thereby reducing the amount of cash flow available for working capital, capital
expenditures, acquisitions and other general corporate purposes;
• increasing our vulnerability to adverse changes in general economic, industry and competitive
conditions;
• exposing us to the risk of increased interest rates as certain of our borrowings, including borrowings
under the senior credit facility, are at variable rates of interest;
• limiting our flexibility in planning for and reacting to changes in the industry in which we compete;
• placing us at a disadvantage compared to other, less leveraged competitors or competitors with
comparable debt at more favorable interest rates; and
• increasing our cost of borrowing.
Our variable rate debt exposes us to interest rate risk which could adversely affect our cash flow.
The borrowings under 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 agreements limiting our
exposure to higher interest rates, any such agreements may not offer complete protection from this risk.
The terms of our indebtedness restrict our current and future operations, particularly our ability to respond to
changes or to take certain actions.
The credit agreement governing our senior credit facility contains a number of restrictive covenants that impose
significant operating and financial restrictions on us and may limit our ability to engage in acts that may be in our
long-term best interest, including restrictions on our ability to:
• incur certain liens;
• incur additional indebtedness and guarantee indebtedness;
• pay dividends or make other distributions in respect of, or repurchase or redeem, capital stock;
• prepay, redeem or repurchase certain debt;
• make investments, loans, advances and acquisitions;
• sell or otherwise dispose of assets, including capital stock of our subsidiaries;
• enter into transactions with affiliates;
• alter the businesses we conduct;
• enter into agreements restricting our subsidiaries’ ability to pay dividends; and
• consolidate, merge or sell all or substantially all of our assets.
In addition, the restrictive covenants in the credit agreement governing our senior credit facility require us to
maintain specified financial ratios and satisfy other financial condition tests. Our ability to meet those financial
ratios and tests can be affected by events beyond our control.
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