2.2.0.7 false Commitments and Contingencies 0215 - Disclosure - Commitments and Contingencies true false false false 1 USD false false USD Standard http://www.xbrl.org/2003/iso4217 USD iso4217 0 USDEPS Divide http://www.xbrl.org/2003/iso4217 USD iso4217 http://www.xbrl.org/2003/instance shares xbrli 0 Shares Standard http://www.xbrl.org/2003/instance shares xbrli 0 $ 2 Commitments and Contingencies [Abstract] 0 bkc_CommitmentsAndContingenciesAbstract bkc false na duration Commitments and Contingencies. false false false false false true false false false false false false 1 false false false false 0 0 false false false xbrli:stringItemType string Commitments and Contingencies. false 3 Commitments and Contingencies 1 us-gaap_CommitmentsAndContingenciesDisclosureTextBlock us-gaap true na duration No definition available. false false false false false false false false false false false verboselabel false 1 false false false false 0 0   <div style="font-family: 'Times New Roman',Times,serif"> <div align="left" style="font-size: 10pt; margin-top: 12pt"><b>Note 15. Commitments and Contingencies</b> </div> <div align="left" style="font-size: 10pt; margin-top: 6pt">     <b><i>Guarantees</i></b> </div> <div align="left" style="font-size: 10pt; margin-top: 6pt">     The Company guarantees certain lease payments of franchisees arising from leases assigned in connection with sales of Company restaurants to franchisees, by remaining secondarily liable for base and contingent rents under the assigned leases of varying terms. The maximum contingent rent amount is not determinable as the amount is based on future revenues. In the event of default by the franchisees, the Company has typically retained the right to acquire possession of the related restaurants, subject to landlord consent. The aggregate contingent obligation arising from these assigned lease guarantees, excluding contingent rents, was $73.2 million as of September 30, 2010, expiring over an average period of seven years. </div> <div align="left" style="font-size: 10pt; margin-top: 6pt">     Other commitments arising from normal business operations were $8.4 million as of September 30, 2010, of which $8.1 million was guaranteed under bank guarantee arrangements. These guarantees are primarily related to restaurant and office leases and future advertising spending. </div> <div align="left" style="font-size: 10pt; margin-top: 6pt">     <b><i>Letters of Credit</i></b> </div> <div align="left" style="font-size: 10pt; margin-top: 6pt">     As of September 30, 2010, the Company had $32.6 million in irrevocable standby letters of credit outstanding, which were issued primarily to certain insurance carriers to guarantee payments of deductibles for various insurance programs, such as health and commercial liability insurance. Such letters of credit are secured by the collateral under the Company’s senior secured credit facility. As of September 30, 2010, no amounts had been drawn on any of these irrevocable standby letters of credit. See Note 17. </div> <div align="left" style="font-size: 10pt; margin-top: 6pt">     As of September 30, 2010, the Company had posted bonds totaling $3.5 million, which related to certain utility deposits and capital projects. </div>   </div>  <div style="font-family: 'Times New Roman',Times,serif"> <div align="left" style="font-size: 10pt; margin-top: 6pt">     <b><i>Vendor Relationships</i></b> </div> <div align="left" style="font-size: 10pt; margin-top: 6pt">     In fiscal 2000, the Company entered into long-term, exclusive contracts with The Coca-Cola Company and with Dr Pepper/Seven Up, Inc. to supply the Company and its franchise restaurants with their products and obligating Burger King<sup style="font-size: 85%; vertical-align: text-top">®</sup> restaurants in the United States to purchase a specified number of gallons of soft drink syrup. These volume commitments are not subject to any time limit. As of September 30, 2010, the Company estimates that it will take approximately 14 years to complete the Coca-Cola and Dr Pepper/Seven Up, Inc. purchase commitments. In the event of early termination of these arrangements, the Company may be required to make termination payments that could be material to the Company’s results of operations and financial position. Additionally, in connection with these contracts, the Company received upfront fees, which are being amortized over the term of the contracts. As of September 30, 2010 and June 30, 2010, the deferred amounts totaled $14.7 million and $14.9 million, respectively. These deferred amounts are amortized as a reduction to food, paper and product costs in the accompanying condensed consolidated statements of income. </div> <div align="left" style="font-size: 10pt; margin-top: 6pt">     As of September 30, 2010, the Company had $6.9 million in aggregate contractual obligations for the year ending June 30, 2011 with vendors providing information technology and telecommunication services under multiple arrangements. These contracts extend up to five years with a termination fee ranging from $0.5 million to $1.9 million during those years. The Company also has separate arrangements for telecommunication services with an aggregate contractual obligation of $11.6 million extending up to four years with no early termination fee. </div> <div align="left" style="font-size: 10pt; margin-top: 6pt">     The Company also enters into commitments to purchase advertising. As of September 30, 2010, commitments to purchase advertising totaled $159.0 million. These commitments run through December 2012. </div> <div align="left" style="font-size: 10pt; margin-top: 6pt">     <b><i>Litigation</i></b> </div> <div align="left" style="font-size: 10pt; margin-top: 6pt">     On July 30, 2008, the Company was sued by four Florida franchisees over its decision to mandate extended operating hours in the United States. The plaintiffs seek damages, declaratory relief and injunctive relief. The court dismissed the plaintiffs’ original complaint in November 2008. In December 2008, the plaintiffs filed an amended complaint. In August 2010, the court entered an order reaffirming the legal bases for dismissal of the original complaint, again holding that BKC had the authority under its franchise agreements to mandate extended operating hours. However, BKC’s motion to dismiss the plaintiff’s amended complaint is still before the court. </div> <div align="left" style="font-size: 10pt; margin-top: 6pt">     On September 10, 2008, a class action lawsuit was filed against the Company in the United States District Court for the Northern District of California. The complaint alleged that all 96 Burger King restaurants in California leased by the Company and operated by franchisees violate accessibility requirements under federal and state law. In September 2009, the court issued a decision on the plaintiffs’ motion for class certification. In its decision, the court limited the class action to the 10 restaurants visited by the named plaintiffs, with a separate class of plaintiffs for each of the 10 restaurants and 10 separate trials. In March 2010, the Company agreed to settle the lawsuit with respect to the 10 restaurants and, in July 2010, the court gave final approval to the settlement. In April 2010, the Company received a demand from the law firm representing the plaintiffs in the class action lawsuit, notifying the Company that the firm was prepared to bring a class action covering the other restaurants. If a lawsuit is filed, the Company intends to vigorously defend against all claims in the lawsuit, but the Company is unable to predict the ultimate outcome of this litigation. </div> <div align="left" style="font-size: 10pt; margin-top: 6pt">     The National Franchisee Association, Inc. and several individual franchisees filed class action lawsuits on November 10, 2009, and June 15, 2010, respectively, claiming to represent Burger King franchisees. The lawsuits seek a judicial declaration that the franchise agreements between BKC and its franchisees do not obligate the franchisees to comply with maximum price points set by BKC for products on the <i>BK<sup style="font-size: 85%; vertical-align: text-top">®</sup> </i>Value Menu sold by the franchisees, specifically the <font style="font-size: 70%"><sup>1</sup></font>/<font style="font-size: 60%">4</font> lb. Double Cheeseburger and the Buck Double. The lawsuit filed by the individual franchisees also seeks monetary damages for financial loss incurred by franchisees who were required to sell those products for no more than $1.00. In June 2010, the court entered an order in the NFA case granting in part BKC’s motion to dismiss. The court held that BKC had the authority under its franchise agreements to set maximum prices but that, for purposes of a motion to dismiss, the NFA had asserted a “plausible” claim that BKC’s decision may not have been made in good faith. Both cases have been consolidated into a single consolidated class action complaint which BKC moved to dismiss on September 22, 2010. While the Company believes its decision to put the <font style="font-size: 70%"><sup>1</sup></font>/<font style="font-size: 60%">4</font> lb. Double Cheeseburger and the Buck Double on the <i>BK<sup style="font-size: 85%; vertical-align: text-top">®</sup> </i>Value Menu was made in good faith, the Company is unable to predict the ultimate outcome of this case. </div> <div align="left" style="font-size: 10pt; margin-top: 6pt">     On September 3, 2010, four purported class action complaints were filed in the Circuit Court for the County of Miami-Dade, Florida by purported stockholders of BKH, in connection with the Merger Agreement. Each of the complaints names as defendants BKH, each member of BKH’s Board and 3G Capital. The suits allege that the directors breached their fiduciary duties to the stockholders of BKH in connection with the sale of BKH and that 3G Capital aided and abetted the purported breaches of fiduciary duties. The court consolidated the four Florida actions. </div> <div align="left" style="font-size: 10pt; margin-top: 6pt">     On September 8, 2010, another putative stockholder class action suit was filed in the Court of Chancery of the State of Delaware against the directors, BKH, 3G Capital, 3G Special Situations Fund II, L.P., Parent and Merger Sub. The complaint generally alleges that the directors breached their fiduciary duty to maximize shareholder value by entering into the proposed transaction via an unfair process and at an unfair price, and that the Merger Agreement contains provisions that unreasonably dissuade potential suitors from making competing offers. The complaint also alleges that BKH and 3G Capital aided and abetted these alleged breaches of fiduciary duty. The complaint seeks class certification, certain forms of injunctive relief, including enjoining the Merger and rescinding the Merger Agreement, unspecified damages, and costs of the action as well as attorneys’ and experts’ fees. BKH filed an answer to the complaint on September 9, 2010, and 3G filed an answer to the complaint to on September 15, 2010, disputing the allegations contained therein. On September 27, 2010, a second complaint was filed in Delaware, with substantially the same allegations as in the first Delaware action, and on September 29, 2010, the court consolidated the two Delaware actions. </div> <div align="left" style="font-size: 10pt; margin-top: 6pt">      The parties in both the Florida actions and the Delaware actions have reached an agreement in principle on a global settlement of the actions, which includes, among other things, the supplemental disclosures the Company made, at the Plaintiffs’ request, to its shareholders in an amendment to its Schedule 14D-9 Statement filed on October 4, 2010. The parties are continuing to negotiate with Plaintiffs’ counsel for a fee award for their efforts in obtaining the supplemental disclosures to shareholders. See Note 17. </div> <div align="left" style="font-size: 10pt; margin-top: 6pt">     From time to time, the Company is involved in other legal proceedings arising in the ordinary course of business relating to matters including, but not limited to, disputes with franchisees, suppliers, employees and customers, as well as disputes over our intellectual property. </div> <div align="left" style="font-size: 10pt; margin-top: 6pt">     <b><i>Other</i></b> </div> <div align="left" style="font-size: 10pt; margin-top: 6pt">     The Company carries insurance programs to cover claims such as workers’ compensation, general liability, automotive liability, executive risk and property and is self-insured for healthcare claims for eligible participating employees. Through the use of insurance program deductibles (ranging from $0.1 million to $2.5 million) and self-insurance, the Company retains a significant portion of the expected losses under these programs. </div> <div align="left" style="font-size: 10pt; margin-top: 6pt">     Insurance reserves have been recorded based on the Company’s estimate of the anticipated ultimate costs to settle all claims, both reported and incurred-but-not-reported (IBNR), and such reserves include judgments and independent actuarial assumptions about economic conditions, the frequency or severity of claims and claim development patterns, and claim reserve, management and settlement practices. As of September 30, 2010 and June 30, 2010, the Company had $33.3 million and $37.1 million in accrued liabilities to cover such claims, respectively. During the three months ended September 30, 2010, the Company made a $1.5 million favorable adjustment to its self insurance reserve to adjust its IBNR confidence level and an additional adjustment of $3.3 million as a result of favorable developments in its claim trends. </div> </div>  <!-- Begin Block Tagged Note false false false us-types:textBlockItemType textblock Includes disclosure of commitments and contingencies. This element may be used as a single block of text to encapsulate the entire disclosure including data and tables. Reference 1: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name FASB Interpretation (FIN) -Number 14 -Paragraph 3 Reference 2: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Statement of Financial Accounting Standard (FAS) -Number 5 -Paragraph 9, 10, 11, 12 false 1 2 false UnKnown UnKnown UnKnown false true