Baskin Robbins 2015 Annual Report Download - page 59

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Based upon our current level of operations and anticipated growth, we believe that the cash generated from our operations and
amounts available under our Variable Funding Notes will be adequate to meet our anticipated debt service requirements, capital
expenditures, and working capital needs for at least the next twelve months. We believe that we will be able to meet these
obligations even if we experience no growth in sales or profits. There can be no assurance, however, that our business will
generate sufficient cash flows from operations or that future borrowings will be available under our Variable Funding Notes or
otherwise to enable us to service our indebtedness, including our securitized financing facility, or to make anticipated capital
expenditures. Our future operating performance and our ability to service, extend, or refinance the securitized financing facility
will be subject to future economic conditions and to financial, business, and other factors, many of which are beyond our
control.
Off balance sheet obligations
In limited instances, we issue guarantees to financial institutions so that our franchisees can obtain financing with terms of
approximately three to ten years for various business purposes. We recognize a liability and offsetting asset for the fair value of
such guarantees. The fair value of a guarantee is based on historical default rates of our total guaranteed loan pool. We monitor
the financial condition of our franchisees and record provisions for estimated losses on guaranteed liabilities of our franchisees
if we believe that our franchisees are unable to make their required payments. As of December 26, 2015, if all of our
outstanding guarantees of third-party franchisee financing obligations came due simultaneously, we would be liable for
approximately $2.0 million. As of December 26, 2015, there were no amounts under such guarantees that were due. We
generally have cross-default provisions with these franchisees that would put the franchisee in default of its franchise
agreement in the event of non-payment under such loans. We believe these cross-default provisions significantly reduce the risk
that we would not be able to recover the amount of required payments under these guarantees and, historically, we have not
incurred significant losses under these guarantees due to defaults by our franchisees.
We have various supply chain contracts that provide for purchase commitments or exclusivity, the majority of which result in
us being contingently liable upon early termination of the agreement or engaging with another supplier. As of December 26,
2015, we were contingently liable under such supply chain agreements for approximately $157.8 million. We assess the risk of
performing under each of these guarantees on a quarterly basis, and, based on various factors including internal forecasts, prior
history, and ability to extend contract terms, we have determined no reserves are necessary related to these commitments as of
December 26, 2015.
As a result of assigning our interest in obligations under property leases as a condition of the refranchising of certain
restaurants and the guarantee of certain other leases, we are contingently liable on certain lease agreements. These leases have
varying terms, the latest of which expires in 2024. As of December 26, 2015, the potential amount of undiscounted payments
we could be required to make in the event of nonpayment by the primary lessee was $3.7 million. Our franchisees are the
primary lessees under the majority of these leases. We generally have cross-default provisions with these franchisees that would
put them in default of their franchise agreement in the event of nonpayment under the lease. We believe these cross-default
provisions significantly reduce the risk that we will be required to make payments under these leases, and we have not recorded
a liability for such contingent liabilities.
Contractual obligations
The following table sets forth our contractual obligations as of December 26, 2015:
(In millions) Total
Less than
1 year
1-3
years
3-5
years
More than
5 years
Long-term debt(1) $ 2,982.7 119.2 235.6 896.9 1,731.0
Capital lease obligations 16.4 1.4 2.9 2.4 9.7
Operating lease obligations 678.5 56.8 112.4 104.5 404.8
Short and long-term obligations(2) 0.40.4———
Total(3)(4)(5) $ 3,678.0 177.8 350.9 1,003.8 2,145.5
(1) Amounts include mandatory principal payments on long-term debt, as well as estimated interest of $94.2 million,
$185.6 million, $140.1 million, and $81.6 million for less than 1 year, 1-3 years, 3-5 years, and more than 5 years,
respectively. Amounts due under the Indenture are reflected through the anticipated repayment dates as described
further above in “Liquidity and capital resources.”
(2) 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