Dunkin' Donuts 2013 Annual Report Download - page 61

Download and view the complete annual report

Please find page 61 of the 2013 Dunkin' Donuts annual report below. You can navigate through the pages in the report by either clicking on the pages listed below, or by using the keyword search tool below to find specific information within the annual report.

Page out of 116

  • 1
  • 2
  • 3
  • 4
  • 5
  • 6
  • 7
  • 8
  • 9
  • 10
  • 11
  • 12
  • 13
  • 14
  • 15
  • 16
  • 17
  • 18
  • 19
  • 20
  • 21
  • 22
  • 23
  • 24
  • 25
  • 26
  • 27
  • 28
  • 29
  • 30
  • 31
  • 32
  • 33
  • 34
  • 35
  • 36
  • 37
  • 38
  • 39
  • 40
  • 41
  • 42
  • 43
  • 44
  • 45
  • 46
  • 47
  • 48
  • 49
  • 50
  • 51
  • 52
  • 53
  • 54
  • 55
  • 56
  • 57
  • 58
  • 59
  • 60
  • 61
  • 62
  • 63
  • 64
  • 65
  • 66
  • 67
  • 68
  • 69
  • 70
  • 71
  • 72
  • 73
  • 74
  • 75
  • 76
  • 77
  • 78
  • 79
  • 80
  • 81
  • 82
  • 83
  • 84
  • 85
  • 86
  • 87
  • 88
  • 89
  • 90
  • 91
  • 92
  • 93
  • 94
  • 95
  • 96
  • 97
  • 98
  • 99
  • 100
  • 101
  • 102
  • 103
  • 104
  • 105
  • 106
  • 107
  • 108
  • 109
  • 110
  • 111
  • 112
  • 113
  • 114
  • 115
  • 116

-51-
change in foreign currencies as of December 28, 2013 would have had an $8.5 million impact on the carrying value of our
investments in joint ventures. In the future, we may consider the use of derivative financial instruments, such as forward
contracts, to manage foreign currency exchange rate risks.
Interest rate risk
We are subject to interest rate risk in connection with our long-term debt. Our principal interest rate exposure mainly relates to
a portion of the term loans outstanding under our senior credit facility. We have a $1.90 billion term loan facility bearing
interest at variable rates. We have entered into 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. These swaps are scheduled to mature in November
2017. Pursuant to the amendments to the swap agreements as more fully described in Item 7 under "Liquidity and capital
resources," we are required to make quarterly payments on the notional amount at a fixed average interest rate of approximately
1.22%. In exchange, we receive interest on the notional amount at a variable rate based on three-month LIBOR spot rate,
subject to a 0.75% floor. Based on the principal amount of term loan borrowings outstanding at December 28, 2013 and
considering the amended interest rate swaps, each eighth of a percentage point change in interest rates above the minimum
interest rate specified in the senior credit facility would result in a $1.2 million change in annual interest expense on our term
loan facility. We also have a revolving credit facility, which provides for borrowings of up to $100.0 million and bears interest
at variable rates. Assuming the revolver is fully drawn, each eighth of a percentage point change in interest rates above the
minimum interest rate specified in the senior credit facility would result in a $0.1 million change in annual interest expense on
our revolving loan facility. There was no material impact to our interest rate risk above the minimum interest rate specified as a
result of the February 2014 amendment to our senior credit facility.
In the future, we may enter into additional hedging instruments, involving the exchange of floating for fixed rate interest
payments, to reduce interest rate volatility.