Dunkin Brands, Inc.
DUNKIN' BRANDS GROUP, INC. (Form: 10-K/A, Received: 03/28/2013 06:03:59)


 
U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
____________________________ 
FORM 10-K/A
(Amendment No. 1)
ý
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934.
For the year ended December 29, 2012
OR
¨
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934.
For the transition period from             to
Commission file number 001-35258
____________________________ 
DUNKIN’ BRANDS GROUP, INC.
(Exact name of registrant as specified in its charter)
Delaware
 
20-4145825
(State or other jurisdiction of
incorporation or organization)
 
(I.R.S. Employer
Identification No.)
130 Royall Street
Canton, Massachusetts 02021
(Address of principal executive offices) (zip code)
(781) 737-3000
(Registrants’ telephone number, including area code)
____________________________
Securities registered pursuant to Section 12(b) of the Act:
Title of each class
 
Name of each exchange on which registered
Common Stock, $0.001 par value per share
 
The NASDAQ Global Select Market
Securities registered pursuant to Section 12(g) of the Act: NONE
____________________________ 
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.    Yes   ý     No   ¨
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.    Yes   ¨     No   ý
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes   ý     No   ¨
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).    Yes   ý     No   ¨
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.      ý
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer
ý
  
Accelerated filer
¨
 
 
 
 
Non-accelerated filer
¨
  
Smaller Reporting Company
¨
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes   ¨     No   ý




The aggregate market value of the voting and non-voting stock of the registrant 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 June 30, 2012, was approximately $2.88 billion .
As of February 15, 2013, 106,273,454 shares of common stock of the registrant were outstanding.
____________________________ 
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the registrant’s definitive Proxy Statement for the 2013 Annual Meeting of Stockholders to be filed with the Securities and Exchange Commission pursuant to Regulation 14A not later than 120 days after the end of the fiscal year covered by this Form 10-K, are incorporated by reference in Part III, Items 10-14 of this Form 10-K.
 






EXPLANATORY NOTE
This Amendment No. 1 to Form 10-K (this “Amendment”) amends the Annual Report on Form 10-K for the fiscal year ended December 29, 2012, originally filed on February 22, 2013 (the “Original 10-K”), of Dunkin’ Brands Group, Inc., a Delaware corporation (the “Company”, or “we”). We are filing this Amendment to amend Item 15 to include the separate financial statements of each of BR Korea Co., Ltd. (“BR Korea”) and B-R 31 Ice Cream Co., Ltd. (“BR Japan”) for their fiscal years ended December 31, 2012 as required by Regulation S-X Rule 3-09 (the “Rule 3-09 financial statements”), which were not included in the Original 10-K in reliance on Rule 3-09. The Rule 3-09 financial statements were prepared and provided to the Company by BR Korea and BR Japan, respectively.
This Amendment should be read in conjunction with the Original 10-K and the Company’s other filings made with the Securities and Exchange Commission subsequent to the filing of the Original 10-K on February 22, 2013. The Original 10-K has not been amended or updated to reflect events occurring after February 22, 2013, except as specifically set forth in this Amendment.





Item 15. Exhibits, Financial Statement Schedules
(a)
The following documents are filed as part of this report:
1
Financial statements: All financial statements are included in Part II, Item 8 of this report.
2
Financial statement schedules:
For fiscal year 2010, our joint ventures BR Korea Co., Ltd. and B-R 31 Ice Cream Co., Ltd. were deemed significant to us under Rule 3-09 of Regulation S-X, and as such the financial statements of these joint ventures are required to be filed as financial statement schedules herein within six months of their fiscal year end. Accordingly, the financial statements of these joint ventures are filed herein as Exhibit 99.1 and Exhibit 99.2, respectively.
All other financial statement schedules are omitted because they are not required or are not applicable, or the required information is provided in the consolidated financial statements or notes described in Item 15(a)(1) above.
3
Exhibits:
 
Exhibit
Number
 
Exhibit Title
 
 
 
3.1

 
Form of Second Restated Certificate of Incorporation of Dunkin’ Brands Group, Inc. (incorporated by reference to Exhibit 3.1 to the Company’s Registration Statement on Form S-1, File No. 333-173898, as amended on July 11, 2011)
 
 
 
3.2

 
Form of Second Amended and Restated Bylaws of Dunkin’ Brands Group, Inc. (incorporated by reference to Exhibit 3.2 to the Company’s Registration Statement on Form S-1, File No. 333-173898, as amended on July 11, 2011)
 
 
 
4.2

 
Specimen Common Stock certificate of Dunkin’ Brands Group, Inc. (incorporated by reference to Exhibit 4.6 to the Company’s Registration Statement on Form S-1, File No. 333-173898, as amended on July 11, 2011)
 
 
 
10.1*

 
Dunkin’ Brands Group, Inc. (f/k/a Dunkin’ Brands Group Holdings, Inc.) Amended and Restated 2006 Executive Incentive Plan (incorporated by reference to Exhibit 10.1 to the Company’s Registration Statement on Form S-1, File No. 333-173898, filed with the SEC on May 4, 2011)
 
 
 
10.2*

 
Form of Option Award under 2006 Executive Incentive Plan (incorporated by reference to Exhibit 10.2 to the Company’s Registration Statement on Form S-1, File No. 333-173898, filed with the SEC on May 4, 2011)
 
 
 
10.3*

 
Form of Restricted Stock Award under 2006 Executive Incentive Plan (incorporated by reference to Exhibit 10.3 to the Company’s Registration Statement on Form S-1, File No. 333-173898, filed with the SEC on May 4, 2011)
 
 
 
10.4*

 
Dunkin’ Brands Group, Inc. Amended & Restated 2011 Omnibus Long-Term Incentive Plan (incorporated by reference to Exhibit 10.4 to the Company’s Annual Report on Form 10-K, File No. 001-35258, filed with the SEC on February 22, 2013)
 
 
 
10.5*

 
Form of Amended Option Award under 2011 Omnibus Long-Term Incentive Plan (incorporated by reference to Exhibit 10.5 to the Company’s Annual Report on Form 10-K, File No. 001-35258, filed with the SEC on February 22, 2013)
 
 
 
10.6*

 
Form of Amended Restricted Stock Unit Award under 2011 Omnibus Long-Term Incentive Plan (incorporated by reference to Exhibit 10.6 to the Company’s Annual Report on Form 10-K, File No. 001-35258, filed with the SEC on February 22, 2013)
 
 
 




10.7*

 
Dunkin’ Brands Group, Inc. Annual Incentive Plan (incorporated by reference to Exhibit 10.7 to the Company’s Annual Report on Form 10-K, File No. 001-35258, filed with the SEC on February 22, 2013)
 
 
 
10.8*

 
Amended and Restated Dunkin’ Brands, Inc. Non-Qualified Deferred Compensation Plan (incorporated by reference to Exhibit 10.6 to the Company’s Registration Statement on Form S-1, File No. 333-173898, filed with the SEC on May 4, 2011)
 
 
 
10.9*

 
Amended and Restated Executive Employment Agreement among Dunkin’ Brands, Inc., Dunkin’ Brands Group, Inc. (f/k/a Dunkin’ Brands Group Holdings, Inc.), and Jon Luther, dated as of December 31, 2008 (incorporated by reference to Exhibit 10.8 to the Company’s Registration Statement on Form S-1, File No. 333-173898, filed with the SEC on May 4, 2011)
 
 
 
10.10*

 
Transition Agreement of Jon Luther, dated as of June 30, 2010 (incorporated by reference to Exhibit 10.9 to the Company’s Registration Statement on Form S-1, File No. 333-173898, filed with the SEC on May 4, 2011)
 
 
 
10.11*

 
First Amended 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)
 
 
 
10.12*

 
Amendment No. 1 to First Amended and Restated Executive Employment Agreement between Dunkin’ Brands, Inc., Dunkin’ Brands Group, Inc. and Nigel Travis (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K, File No. 001-35258, filed with the SEC on December 3, 2012)
 
 
 
10.13*

 
Offer Letter to Neil Moses dated September 27, 2010 (incorporated by reference to Exhibit 10.13 to the Company’s Registration Statement on Form S-1, File No. 333-173898, filed with the SEC on May 4, 2011)
 
 
 
10.14*

 
Separation Agreement with Neil Moses dated November 13, 2012 (incorporated by reference to Exhibit 10.14 to the Company’s Annual Report on Form 10-K, File No. 001-35258, filed with the SEC on February 22, 2013)
 
 
 
10.15*

 
Offer Letter to John Costello dated September 30, 2009 (incorporated by reference to Exhibit 10.15 to the Company’s Registration Statement on Form S-1, File No. 333-173898, filed with the SEC on May 4, 2011)
 
 
 
10.16*

 
Form of amendment to Offer Letters (incorporated by reference to Exhibit 10.16(a) to the Company’s Registration Statement on Form S-1, File No. 333-173898, as amended on July 11, 2011)
 
 
 
10.17*

 
Offer Letter to Ginger Gregory dated March 6, 2012 (incorporated by reference to Exhibit 10.17 to the Company’s Annual Report on Form 10-K, File No. 001-35258, filed with the SEC on February 22, 2013)
 
 
 
10.18*

 
Offer Letter to Giorgio Minardi dated February 1, 2012 (incorporated by reference to Exhibit 10.18 to the Company’s Annual Report on Form 10-K, File No. 001-35258, filed with the SEC on February 22, 2013)
 
 
 
10.19*

 
Offer Letter to Paul Carbone dated June 4, 2012 (incorporated by reference to Exhibit 10.19 to the Company’s Annual Report on Form 10-K, File No. 001-35258, filed with the SEC on February 22, 2013)
 
 
 
10.20

 
Form of Non-Competition/Non-Solicitation/Confidentiality Agreement (incorporated by reference to Exhibit 10.17 to the Company’s Registration Statement on Form S-1, File No. 333-173898, filed with the SEC on May 4, 2011)




 
 
 
10.21

 
Credit Agreement among Dunkin’ Finance Corp, Dunkin’ Brands Holdings, Inc., Dunkin’ Brands, Inc., Barclays Bank PLC and the other lenders party thereto, dated as of November 23, 2010 (incorporated by reference to Exhibit 10.20 to the Company’s Registration Statement on Form S-1, File No. 333-173898, as amended on June 7, 2011)
 
 
 
10.22

 
Joinder to Credit Agreement dated as of December 3, 2010 (incorporated by reference to Exhibit 10.21 to the Company’s Registration Statement on Form S-1, File No. 333-173898, filed with the SEC on May 4, 2011)
 
 
 
10.23

 
Amendment 1, dated as of February 18, 2011, to the Credit Agreement among Dunkin’ Brands, Inc., Dunkin’ Brands Holdings, Inc., Barclays Bank PLC and the other lenders party thereto (incorporated by reference to Exhibit 10.22 to the Company’s Registration Statement on Form S-1, File No. 333-173898, filed with the SEC on May 4, 2011)
 
 
 
10.24

 
Amendment 2, dated as of May 25, 2011, to the Credit Agreement among Dunkin’ Brands, Inc., Dunkin’ Brands Holdings, Inc., Barclays Bank PLC and the other lenders party thereto (incorporated by reference to Exhibit 10.29 to the Company’s Registration Statement on Form S-1, File No. 333-173898, as amended on June 7, 2011)
 
 
 
10.25

 
Amendment 3, dated as of August 9, 2012, to the Credit Agreement among Dunkin’ Brands, Inc., Dunkin’ Brands Holdings, Inc., Barclays Bank PLC and the other lenders party thereto (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K, File No. 001-35258, filed with the SEC on August 9, 2012)
 
 
 
10.26

 
Amendment 4, dated as of February 14, 2013, to the Credit Agreement among Dunkin’ Brands, Inc., Dunkin’ Brands Holdings, Inc., Barclays Bank PLC and the other lenders party thereto and Amendment No. 1 to the Guaranty among Dunkin’ Brands Holdings, Inc., the other guarantors named therein and the Administrative Agent (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K, File No. 001-35258, filed with the SEC on February 14, 2013)
 
 
 
10.27

 
Security Agreement among the Grantors identified therein and Barclays Bank PLC, dated as of December 3, 2010 (incorporated by reference to Exhibit 10.23 to the Company’s Registration Statement on Form S-1, File No. 333-173898, filed with the SEC on May 4, 2011)
 
 
 
10.28

 
Form of Director and Officer Indemnification Agreement (incorporated by reference to Exhibit 10.24 to the Company’s Registration Statement on Form S-1, File No. 333-173898, as amended on June 7, 2011)
 
 
 
10.29

 
Lease between LSF3 Royall Street, LLC and Dunkin’ Donuts Incorporated, dated as of October 29, 2003 (incorporated by reference to Exhibit 10.25 to the Company’s Registration Statement on Form S-1, File No. 333-173898, filed with the SEC on May 4, 2011)
 
 
 
10.30

 
Assignment of Lease between Dunkin’ Donuts Incorporated and Dunkin’ Brands, Inc., dated as of July 22, 2005 (incorporated by reference to Exhibit 10.26 to the Company’s Registration Statement on Form S-1, File No. 333-173898, filed with the SEC on May 4, 2011)
 
 
 
10.31

 
Guaranty delivered with LSF3 Royall Street, LLC Lease dated as of October 29, 2003 (incorporated by reference to Exhibit 10.27 to the Company’s Registration Statement on Form S-1, File No. 333-173898, filed with the SEC on May 4, 2011)
 
 
 
10.32

 
Form of Baskin-Robbins Franchise Agreement (incorporated by reference to Exhibit 10.30 to the Company’s Registration Statement on Form S-1, File No. 333-173898, as amended on June 23, 2011)
 
 
 
10.33

 
Form of Dunkin’ Donuts Franchise Agreement (incorporated by reference to Exhibit 10.33 to the Company’s Annual Report on Form 10-K, File No. 001-35258, filed with the SEC on February 22, 2013)




 
 
 
10.34

 
Form of Combined Baskin-Robbins and Dunkin’ Donuts Franchise Agreement (incorporated by reference to Exhibit 10.34 to the Company’s Annual Report on Form 10-K, File No. 001-35258, filed with the SEC on February 22, 2013)
 
 
 
10.35

 
Form of Dunkin’ Donuts Store Development Agreement (incorporated by reference to Exhibit 10.34 to the Company’s Annual Report on Form 10-K, File No. 001-35258, filed with the SEC on February 24, 2012)
 
 
 
10.36

 
Form of Baskin-Robbins Store Development Agreement (incorporated by reference to Exhibit 10.35 to the Company’s Annual Report on Form 10-K, File No. 001-35258, filed with the SEC on February 24, 2012)
 
 
 
21.1

 
Subsidiaries of Dunkin’ Brands Group, Inc. (incorporated by reference to Exhibit 21.1 to the Company’s Annual Report on Form 10-K, File No. 001-35258, filed with the SEC on February 22, 2013)
 
 
 
23.1

 
Consent of KPMG LLP (incorporated by reference to Exhibit 23.1 to the Company’s Annual Report on Form 10-K, File No. 001-35258, filed with the SEC on February 22, 2013)
 
 
 
23.2

 
Consent of Deloitte Anjin LLC
 
 
 
23.3

 
Consent of PricewaterhouseCoopers Aarata
 
 
 
31.1

 
Certification pursuant to Section 302 of Sarbanes Oxley Act of 2002 by Chief Executive Officer
 
 
 
31.2

 
Certification pursuant to Section 302 of Sarbanes Oxley Act of 2002 by Chief Financial Officer
 
 
 
32.1

 
Certification of periodic financial report pursuant to Section 906 of Sarbanes Oxley Act of 2002
 
 
 
32.2

 
Certification of periodic financial report pursuant to Section 906 of Sarbanes Oxley Act of 2002
 
 
 
99.1

 
Financial statements of BR Korea Co., Ltd for the fiscal years ended December 31, 2012 (unaudited), December 31, 2011 (audited) and December 31, 2010 (audited)
 
 
 
99.2

 
Financial statements of B-R 31 Ice Cream Co., Ltd. for the fiscal years ended December 31, 2012 (unaudited), December 31, 2011 (unaudited) and December 31, 2010 (audited)
 
 
 
101

 
The following financial information from the Company’s Annual Report on Form 10-K for the fiscal year ended December 29, 2012, formatted in Extensible Business Reporting Language, (i) the Consolidated Balance Sheets, (ii) the Consolidated Statements of Operations, (iii) the Consolidated Statements of Comprehensive Income, (iv) the Consolidated Statements of Stockholders’ Equity (Deficit), (v) the Consolidated Statements of Cash Flows, and (vi) the Notes to the Consolidated Financial Statements (incorporated by reference to Exhibit 101 to the Company’s Annual Report on Form 10-K, File No. 001-35258, filed with the SEC on February 22, 2013)

*
Management contract or compensatory plan or arrangement





SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
Date: March 27, 2013
 
 
 
 
DUNKIN’ BRANDS GROUP, INC.
 
 
By:
 
/s/ Nigel Travis
Name:
 
Nigel Travis
Title:
 
Chief Executive Officer



Exhibit 23.2
 
CONSENT OF INDEPENDENT AUDITORS

 
We consent to the incorporation by reference in the Registration Statement No. 333-183190 on Form S-3 and No. 333-176246 on Form S-8 of Dunkin’ Brands Group, Inc. of our report dated March 16, 2012 related to the financial statements of BR Korea Co., Ltd. as of December 31, 2011 and 2010, and for each of the two fiscal years ended December 31, 2011 (which report expresses an unqualified opinion on the financial statements and includes an explanatory paragraph referring to the application of Accounting Standards for Non-Public Entities in the Republic of Korea (“KAS-NPE”) as of January 1, 2011 and the nature and effect of differences between Accounting Standards for Non-Public Entities in the Republic of Korea (“KAS-NPE”) and accounting principles generally accepted in the United States of America), appearing in the Amendment No. 1 to the Annual Report on Form 10-K of Dunkin Brands Group, Inc. for the year ended December 29, 2012.

 
/s/ DELOITTE ANJIN LLC
 
March 27, 2013




Exhibit 23.3
 
CONSENT OF INDEPENDENT ACCOUNTANTS
 


We hereby consent to the incorporation by reference in the Registration Statement on Form S-3 (No. 333-183190) and Form S-8 (No. 333-176246) of Dunkin’ Brands Group, Inc. of our report dated April 29, 2011 relating to the financial statements of B-R 31 Ice Cream Co. Ltd. for the fiscal year from January 1, 2010 to December 31, 2010, which appears in this Form 10-K/A.

 
/s/ PricewaterhouseCoopers Aarata
Tokyo, Japan
March 27, 2013




Exhibit 31.1
CERTIFICATION PURSUANT TO
SECURITIES EXCHANGE ACT RULES 13a-14 and 15d-14
AS ADOPTED PURSUANT TO
SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
I, Nigel Travis, Chief Executive Officer, certify that.
1.
I have reviewed this Amendment No. 1 to the Annual Report on Form 10-K of Dunkin’ Brands Group, Inc.;
2.
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3.
Based on my knowledge, the financial statements, and the other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4.
The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal controls over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
a.
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
b.
Designed such internal controls over financial reporting, or caused such internal controls over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
c.
Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures as of the end of the period covered by this report based on such evaluation; and
d.
Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
5.
The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent function):
a.
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
b.
Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.


March 27, 2013
 
/s/ Nigel Travis
Date
 
Nigel Travis
Chief Executive Officer





Exhibit 31.2
CERTIFICATION PURSUANT TO
SECURITIES EXCHANGE ACT RULES 13a-14 and 15d-14
AS ADOPTED PURSUANT TO
SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
I, Paul Carbone, Chief Financial Officer, certify that.
1.
I have reviewed this Amendment No. 1 to the Annual Report on Form 10-K of Dunkin’ Brands Group, Inc.;
2.
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3.
Based on my knowledge, the financial statements, and the other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4.
The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal controls over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
a.
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
b.
Designed such internal controls over financial reporting, or caused such internal controls over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
c.
Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures as of the end of the period covered by this report based on such evaluation; and
d.
Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
5.
The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent function):
a.
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
b.
Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.


March 27, 2013
 
/s/ Paul Carbone
Date
 
Paul Carbone
Chief Financial Officer





Exhibit 32.1
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with Amendment No. 1 to the Annual Report of Dunkin’ Brands Group, Inc. (the “Company”) on Form 10-K for the period ending December 29, 2012 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Nigel Travis, as the Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. 1350, as adopted pursuant to section 906 of the Sarbanes-Oxley Act of 2002, that, to the best of my knowledge:
(1)
The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
(2)
The information contained in the Report fairly presents, in all material respects, the financial condition and result of operations of the Company.
Date: March 27, 2013
 

/s/ Nigel Travis
 
Nigel Travis*
Chief Executive Officer
 
 

*
A signed original of this written statement required by Section 906 has been provided to Dunkin’ Brands Group, Inc. and will be retained by Dunkin’ Brands Group, Inc. and furnished to the Securities and Exchange Commission or its staff upon request.
The foregoing certification is being furnished solely pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (subsections (a) and (b) of Section 1350, Chapter 63 of Title 18, United States Code) and is not being filed as part of the Form 10-K or as a separate disclosure document.




Exhibit 32.2
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with Amendment No. 1 to the Annual Report of Dunkin’ Brands Group, Inc. (the “Company”) on Form 10-K for the period ending December 29, 2012, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Paul Carbone, as the Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. 1350, as adopted pursuant to section 906 of the Sarbanes-Oxley Act of 2002, that, to the best of my knowledge:
(1)
The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
(2)
The information contained in the Report fairly presents, in all material respects, the financial condition and result of operations of the Company.
Date: March 27, 2013
 

/s/ Paul Carbone
 
Paul Carbone*
Chief Financial Officer
 
 

*
A signed original of this written statement required by Section 906 has been provided to Dunkin’ Brands Group, Inc. and will be retained by Dunkin’ Brands Group, Inc. and furnished to the Securities and Exchange Commission or its staff upon request.
The foregoing certification is being furnished solely pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (subsections (a) and (b) of Section 1350, Chapter 63 of Title 18, United States Code) and is not being filed as part of the Form 10-K or as a separate disclosure document.





Independent Auditors’ Report



To the Shareholders and Board of Directors of
BR KOREA CO., LTD.:

We have audited the accompanying statements of financial position of BR KOREA CO., LTD. (the “Company”) as of December 31, 2011 and 2010, and the statements of income, statements of changes in shareholders’ equity, and statements of cash flows for each of the two years in the period ended December 31, 2011. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits.

We conducted our audits in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company's internal control over financial reporting. Accordingly, we express no such opinion. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of BR KOREA CO., LTD. as of December 31, 2011 and 2010, and the results of its operations and its cash flows for each of the two years in the period ended December 31, 2011, in conformity with Accounting Standards for Non-Public Entities in the Republic of Korea (“KAS - NPEs”).

As explained in Note 2 to the accompanying financial statements, the Company has prepared the financial statements in accordance with KAS - NPEs for the reporting periods beginning on or after January 1, 2011. In accordance with the KAS - NPEs ‘Effective date and Transitional Provisions’ paragraph 4 on January 1, 2011, the prior periods’ financial position, results of operations, and cash flows under previous generally accepted accounting principles in the Republic of Korea (“previous K-GAAP”) have been carried over and presented as is, with no retrospective adjustments due to the application of KAS – NPEs. Effects due to the application of KAS - NPEs are further discussed in Note 2.

KAS - NPEs vary in certain significant respects from accounting principles generally accepted in the United States of America. Information relating to the nature and effect of such differences is presented in Note 26 to the financial statements.


    

March 16, 2012
/s/ Deloitte Anjin LLC






BR KOREA CO., LTD.

STATEMENTS OF FINANCIAL POSITION

AS OF DECEMBER 31, 2012 [UNAUDITED] AND 2011
 
[Unaudited]
 
 
ASSETS
2012
 
2011
CURRENT ASSETS:
(In thousands)
   Cash and cash equivalents (Notes 8 and 13)
10,833,298

 
10,187,008

   Short-term financial instruments
69,000,000

 
40,000,000

   Trade accounts receivable, net of allowance for doubtful accounts of
₩243,980 thousand [Unaudited] for 2012 and ₩192,047 thousand for 2011 (Notes 13 and 14)
24,153,993

 
19,012,616

   Inventories (Notes 3 and 8)
39,038,579

 
34,568,962

   Securities (Notes 5 and 8)
4,200

 
4,500

   Deferred income tax assets (Note 18)
110,191

 

   Other current assets (Notes 4 and 14)
18,429,786

 
7,147,794

 
161,570,047

 
110,920,880

NON CURRENT ASSETS:
 
 
 
   Securities under the equity method (Note 6)
677,340

 
677,340

   Securities (Notes 5 and 8)
1,653,545

 
1,354,910

   Other investments
760,275

 
138,855

   Tangible assets, net (Notes 7 and 8)
61,218,671

 
65,962,903

   Intangible assets (Note 9)
6,849,722

 
8,578,563

   Guarantee deposits paid (Note 10)
123,978,573

 
123,590,176

   Membership certificates
2,181,726

 
2,307,877

   Deferred income tax assets (Note 18)
3,850,652

 
1,283,463

 
201,170,504

 
203,894,087

Total Assets
362,740,551

 
314,814,967

 
 
 
 
LIABILITIES AND SHAREHOLDERS’ EQUITY
 
 
 
CURRENT LIABILITIES:
 
 
 
   Trade accounts payable (Note 14)
14,621,188

 
16,444,547

   Accounts payable-other (Note 14)
11,755,304

 
13,588,829

   Income tax payable (Note 18)
9,977,312

 
3,532,886

   Advances from customers (Note 13)
1,965,808

 
2,728,591

   Guarantee deposits received
20,968,265

 
17,685,162

   Deferred income tax liabilities (Note 18)

 
136,978

   Other current liabilities (Notes 11,13, and 14)
10,916,816

 
6,864,380

 
70,204,693

 
60,981,373

NON CURRENT LIABILITIES:
 
 
 
   Accrued severance indemnities, net of benefit plan assets of ₩17,572,740 thousand [Unaudited] for 2012 and ₩13,144,957 thousand for 2011 (Note 12)
3,633,591

 
4,250,472

   Other Allowance (Note 23)
13,606,478

 
2,651,480

 
17,240,069

 
6,901,952

Total Liabilities
87,444,762

 
67,883,325

SHAREHOLDERS’ EQUITY:
 
 
 
   Common stock (Note 15)
6,000,000

 
6,000,000

   Accumulated other comprehensive income (Notes 5 and 16)
529,670

 
300,121

   Appropriated retained earnings (Note 15)
24,234,977

 
24,234,977

   Retained earnings before appropriations
244,531,142

 
216,396,544

 Total Shareholders’ Equity
275,295,789

 
246,931,642

Total Liabilities and Shareholders’ Equity
362,740,551

 
314,814,967

See accompanying notes to financial statements.

2



BR KOREA CO., LTD.

STATEMENTS OF INCOME

FOR THE YEARS ENDED DECEMBER 31, 2012 [UNAUDITED] , 2011 AND 2010

 
[Unaudited]
 
 
 
 
 
2012
 
2011
 
2010
 
(In thousands, except per share amounts)
 
 
 
 
SALES (Notes 14 and 24)
482,923,197

 
452,359,842

 
426,063,145

COST OF SALES (Notes 14 and 21)
231,357,159

 
223,625,882

 
205,865,736

GROSS PROFIT
251,566,038

 
228,733,960

 
220,197,409

SELLING, GENERAL AND ADMINISTRATIVE EXPENSES (Notes 21 and 22)
207,641,185

 
195,163,739

 
181,504,761

OPERATING INCOME
43,924,853

 
33,570,221

 
38,692,648

NON OPERATING INCOME (EXPENSES):
 
 
 
 
 
   Interest income
2,766,346

 
2,150,932

 
2,112,109

   Loss on foreign currency translation, net (Note 13)
(17,032)

 
(2,852)

 
(17,252)

   Gain (Loss) on foreign currency transactions, net
(167,797)

 
(35,493)

 
4,310

   Commission income
4,486,343

 
3,208,904

 
5,199,869

   Gain (Loss) on disposal of tangible assets, net
(355,284)

 
(715,563)

 
17,414

   Gain on disposal of intangible assets
542,167

 
755,000

 
309,350

   Donations (Note 17)
(2,486,160)

 
(2,426,487)

 
(1,983,239)

   Impairment loss of membership certificates
(299,547)

 

 

   Miscellaneous, net (Note 17)
(279,566)

 
(677,804)

 
(336,130)

 
4,189,470

 
2,256,637

 
5,306,431

 
 
 
 
 
 
INCOME BEFORE INCOME TAX
48,114,323

 
35,826,858

 
43,999,079

 
 
 
 
 
 
INCOME TAX EXPENSE (Note 18)
11,147,781

 
8,494,063

 
10,586,975

 
 
 
 
 
 
NET INCOME
36,966,542

 
27,332,795

 
33,412,104

 
 
 
 
 
 
NET INCOME PER SHARE (Note 19)
61,611

 
45,555

 
55,687



See accompanying notes to financial statements.

3



BR KOREA CO., LTD.

STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY

FOR THE YEARS ENDED DECEMBER 31, 2012 [UNAUDITED], 2011 AND 2010

 
 
   Korean Won      
 
 
(In thousands)
 
 
   Common Stock  
 
Accumulated other comprehensive income
 
 Retained Earnings
 
   Total            
Balance at January 1, 2010
 
6,000,000

 

 
200,532,622

 
206,532,622

Annual dividends
 
 
 
 
 
(10,614,000
)
 
(10,614,000
)
Balance after appropriations
 
 
 
 
 
189,918,622

 
195,918,622

Net income
 
      
 
 
 
33,412,104

 
33,412,104

Balance at December 31, 2010
 
6,000,000

 

 
223,330,726

 
229,330,726

Balance at January 1, 2011
 
6,000,000

 

 
223,330,726

 
229,330,726

Annual dividends
 
 
 
 
 
(10,032,000
)
 
(10,032,000
)
Balance after appropriations
 
 
 
 
 
213,298,726

 
219,298,726

Gain on valuation of available-for-sale securities, net of tax
 
 
 
300,121

 

 
300,121

Net income
 
 
 
 
 
27,332,795

 
27,332,795

Balance at December 31, 2011
 
6,000,000

 
300,121

 
240,631,521

 
246,931,642

Balance at January 1, 2012 [Unaudited]
 
6,000,000

 
300,121

 
240,631,521

 
246,931,642

Annual dividends [Unaudited]
 
 
 
 
 
(8,202,000
)
 
(8,202,000
)
Balance after appropriations [Unaudited]
 
 
 
 
 
232,429,521

 
238,729,642

Cumulative effect of a change in accounting principle [Unaudited]
 
 
 
 
 
(629,944)

 
(629,944)

Gain on valuation of available-for-sale securities, net of tax [Unaudited]
 
 
 
229,549

 

 
229,549

Net income [Unaudited]
 
 
 
 
 
36,966,542

 
36,966,542

Balance at December 31, 2012 [Unaudited]
 
6,000,000

 
529,670

 
268,766,119

 
275,295,789


See accompanying notes to financial statements.


4



BR KOREA CO., LTD

STATEMENTS OF CASH FLOWS

FOR THE YEARS ENDED DECEMBER 31, 2012 [UNAUDITED], 2011 AND 2010

 
[Unaudited]
 
 
 
 
 
2012
 
2011
 
2010
 
(In thousands)
CASH FLOWS FROM OPERATING ACTIVITIES:
 
 
 
 
 
Net income
36,966,542

 
27,332,795

 
33,412,104

Adjustments to reconcile net income to net cash provided by operating activities:
 
 
 
 
 
Depreciation
21,380,313

 
20,215,617

 
18,899,166

Provision for severance indemnities
4,888,185

 
5,115,531

 
6,695,012

Amortization of intangible assets
3,328,707

 
3,720,031

 
3,604,761

Provision for doubtful accounts
279,041

 
1,364,490

 
31,982

Loss(Gain) on foreign currency translation
(192)

 
3,415

 

Loss(Gain) on disposal of tangible assets, net
355,284

 
715,563

 
(17,414)

Gain on disposal of intangible assets, net
(542,167)

 
(755,000
)
 
(309,350)

Impairment loss of membership certificates
299,547

 

 

Payment of severance indemnities
(1,254,090)

 
(3,333,628)

 
(4,074,977)

Transfer-in of severance indemnities from affiliates
176,808

 
45,973

 
174,604

Change in trade accounts receivable
(5,193,698)

 
(2,189,751)

 
(463,142)

Change in accounts receivable-other
(2,289,145)

 
(970,223)

 
537,197

Change in accrued income
(142,969)

 
(188,753)

 
17,600

Change in advanced payments
(902,854)

 
642,527

 
(1,030,369)

Change in prepaid expenses
(24,234)

 
(132,630)

 
101,573

Change in inventories
(4,469,617)

 
(6,260,845)

 
1,442,542

Change in deferred income tax assets
(2,549,549)

 
26,766

 
(215,534)

Change in trade accounts payable
(1,822,778)

 
1,132,441

 
866,869

Change in accounts payable-other
(1,833,526)

 
4,745,816

 
1,660,450

Change in withholdings
1,878,693

 
(57,023)

 
(752,033)

Change in accrued expenses
2,046,783

 
(43,370)

 
(2,982,152)

Change in income tax payable
6,444,426

 
(2,379,638)

 
(1,909,418)

Change in deferred income tax liabilities
(136,978)

 
(67,584)

 
1,675

Change in advances from customers
209,194

 
652,134

 
188,042

Change in allowance for unused points
4,313,270

 
1,223,446

 
(735,036)

Change in gift certificate discounts
(4,309)

 
7,700

 
(12,156)

Change in the National Pension Fund
11,571

 
3,198

 
7,208

Change in benefit plan assets
(4,439,355)

 
(1,575,894)

 
(2,623,783)

Net cash provided by operating activities
56,972,903

 
48,993,104

 
52,515,421

 
 
 
 
 
 
(Continued)


5



BR KOREA CO., LTD.

STATEMENTS OF CASH FLOWS (CONTINUED)

FOR THE YEARS ENDED DECEMBER 31, 2012 [UNAUDITED], 2011 AND 2010


 
[Unaudited]
 
 
 
 
 
2012
 
2011
 
2010
 
(In thousands)
CASH FLOWS FROM INVESTING ACTIVITIES:
 
 
 
 
 
Withdrawal of short-term financial instruments
107,300,000

 
117,500,000

 
157,000,000

Proceeds from disposal of securities
4,500

 
5,600

 
4,390

Disposal of tangible assets
438,653

 
375,932

 
327,457

Refund of guarantee deposits paid
14,413,718

 
9,905,072

 
4,752,250

Collection of long-term loans
38,080

 
45,230

 
226,922

Disposal of lease premium
895,000

 
1,010,000

 
352,600

Disposal of membership certificates

 
70,150

 

Acquisition of short-term financial instruments
(136,300,000)

 
(117,000,000)

 
(162,500,000)

Purchase of securities under the equity method

 

 
(677,340)

Purchase of securities

 
(900,486)

 

Payment of guarantee deposits
(16,804,404)

 
(21,898,107)

 
(19,845,301)

Increase of short-term loans
(1,352,649)

 

 

Increase of long-term loans
(484,500)

 

 

Acquisition of tangible assets
(17,430,019)

 
(25,069,389)

 
(17,149,920)

Purchase of membership certificates
(173,396)

 
(100,500)

 
(589,546)

Purchase of trademark
(169,699)

 

 

Payment of lease premium
(1,783,000)

 
(3,464,718)

 
(1,955,074)

Net cash used in investing activities
(51,407,716)

 
(39,521,216)

 
(40,053,562)

 
 
 
 
 
 
CASH FLOWS FROM FINANCING ACTIVITIES:
 
 
 
 
 
Refund of guarantee deposits received
5,576,513

 
23,496,253

 
5,074,855

Dividends paid
(8,202,000)

 
(10,032,000)

 
(10,614,000)

Payment of guarantee deposits received
(2,293,410)

 
(23,184,367)

 
(2,890,568)

Net cash used in financing activities
(4,918,897)

 
(9,720,114)

 
(8,429,713)

 
 
 
 
 
 
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS
646,290

 
(248,226)

 
4,032,146

CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR
10,187,008

 
10,435,234

 
6,403,088

CASH AND CASH EQUIVALENTS, END OF YEAR (Note 25)
10,833,298

 
10,187,008

 
10,435,234



See accompanying notes to financial statements.




6



BR KOREA CO., LTD.

NOTES TO FINANCIAL STATEMENTS

FOR THE YEARS ENDED DECEMBER 31, 2012 [UNAUDITED] AND 2011


1.     GENERAL :

BR KOREA CO., LTD. (the “Company") was incorporated under the laws of the Republic of Korea on June 10, 1985 in accordance with the joint venture agreement dated April 19, 1985 between three Korean shareholders represented by Mr. Young In Hur and Dunkin’ Brands Group, Inc. Under such agreement, the Company engages in the production, distribution and sale of ice cream, ice cream treats, donuts and other related activities. Sales are made through the Company’s distribution network under its direct management and franchise stores under the brand names of Baskin-Robbins and Dunkin' Donuts.

As of December 31, 2012, the Company’s common stock amounts to ₩6,000 million[Unaudited], and the issued and outstanding shares of the Company are owned 66.67% by those Korean shareholders and 33.33% by Dunkin’ Brands Group, Inc.


2.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES :

As explained in Note 2 to the accompanying financial statements, the Company has prepared the financial statements in accordance with Accounting Standards for Non-Public Entities in the Republic of Korea (“KAS – NPEs”) for the reporting periods beginning on or after January 1, 2011. In accordance with the KAS - NPEs ‘Effective date and Transitional Provisions’ paragraph 4 on January 1, 2011, the prior periods’ financial position, results of operations, and cash flows under previous generally accepted accounting principles in the Republic of Korea (“previous K-GAAP”) have been carried over and presented as is, with no retrospective adjustments due to the application of KAS – NPEs.

The Company maintains its official accounting records in Korean won and prepares its statutory financial statements in the Korean language (Hangul) in conformity with Accounting Standards for Non-Public Entities in the Republic of Korea (“KAS – NPEs”). Certain accounting principles applied by the Company that conform with the financial accounting standards and accounting principles in the Republic of Korea may not conform with generally accepted accounting principles in other countries. Accordingly, these financial statements are intended for use by those who are informed about KAS - NPEs and Korean practices.

The accompanying financial statements to be presented at the annual shareholders’ meeting were approved by the board of directors on March 18, 2013.

The Company’s significant accounting policies used for the preparation of the financial statements are as follow.

Application of the New and Revised Accounting Standards

KAS – NPEs No. 21 Employee Benefits

The Company recognizes short term benefit expenses and liabilities when employees have right to claim paid vacation (short-term employee benefits) and if expected to be settled wholly before twelve months after the end of the annual reporting period in which the employees render the related services (Paragraph 21.5 (2)). Paragraph 21.5 (2) states any unrecognized amount of short-term employee benefit expenses and liabilities prior to the adoption of the standards are reflected on the Company’s beginning retained earnings balance. The amendments to KAS – NPEs No. 21 are effective on November 28, 2012 and standards applied for the annual period ending on after the effective date.

Cash and Cash Equivalents

Cash and cash equivalents includes cash, checks issued by others, checking accounts, ordinary deposits and financial instruments, which can be easily converted into cash and whose value changes due to changes in interest

7



rates are not material, with maturities (or date of redemption) of three months or less from acquisition. Credit card sales are recognized as trade accounts receivable.

Revenue Recognition

The Company’s revenue consists of sales of ice cream and donuts to franchisees and to customers (for its retail stores) and others.

The Company sells individual franchise agreements, under which a franchisee pays an initial non-refundable fee (refer to Commission Income) and subsequently purchases ice cream and donuts from the Company. Once the franchisee begins operations, the Company recognizes revenue from the sale of ice cream and donuts to a franchisee as sales during the period. Revenue generated from the sale of ice cream and donuts to franchisees is recognized upon delivery; however, revenue is recognized when the sales terms have been fully met if there are sales terms related with post-delivery. Retail store revenues at company-owned stores are recognized at the point of sale to customers, net of sales tax and other sales-related taxes.

The Company offers customer loyalty programs – bonus points, under which customers can earn from 1% to 5% of any purchase amounts above ₩1,000, as points to use in the future. Such points expire after 18 months from the end of the calendar year of which customer earns points. When a customer earns bonus points under the program, the Company recognizes selling, general and administrative expense in the same amount and a corresponding liability under Allowance for unused points. When points are used, the Company reduces Allowance for unused points and recognizes revenue. At the end of the period, 100% of the unused points are recognized as Allowance for unused points (Note 23) under Other allowance in the Company’s statements of financial position.

Commission Income

The Company sells individual franchise agreements, under which a franchisee pays an initial non-refundable fee. The initial franchise fee is recognized as commission income, upon substantial completion of the services required of the Company as stated in the franchise agreement, which is generally upon the opening of the respective franchise. The Company does not consider its commission income from such initial non-refundable fees as part of its main business operations. Thus, presents the related income as part of non-operating income.

Gift Certificates

Gift certificates are stated at face value, net of any discounts given, at the time of issuance and accounted for as Advances from Customers. The gift certificates generally expire within 5 years of issuance. The redemption of gift certificates is reflected as sales at the time the certificates are redeemed at stores by the portion of advances, net of discounts for the relative amount of redemption. Any expired gift certificates are recognized as non-operating income.

Allowance for Doubtful Accounts

The Company provides an allowance for doubtful accounts to cover estimated losses on receivables, based on collection experience and analysis of the collectability of individual outstanding receivables.

Inventories

Inventories are stated at cost which is determined by using the moving average method excluding materials in transit which is determined by the specific identification method. The Company maintains perpetual inventory, which is adjusted to physical inventory counts performed at year end. When the market value of inventories (net realizable value for finished goods or merchandise and current replacement cost for raw materials) is less than the carrying value, carrying value is stated at the lower of cost or market. The Company applies the lower of cost or market method by each group of inventories and loss on inventory valuation is presented as a deduction from inventories and charged to cost of sales.

Classification of Securities

At acquisition, the Company classifies securities into one of the following categories: trading, available-for-sale, held-to-maturity and securities accounted for under the equity method, depending on marketability, purpose of acquisition and ability to hold. Debt and equity securities that are bought and held for the purpose of selling them in the near term and actively traded are classified as trading securities. Debt securities with fixed and determinable payments and fixed maturity that the Company has the positive intent and ability to hold to maturity are classified as held-to-maturity securities. Investments in equity securities over which the Company exercises significant influence, are accounted for under the equity method. Securities accounted for under the equity method are

8



presented as securities accounted for using the equity method in the statement of financial position. Debt and equity securities not classified as the above are categorized as available-for-sale securities.

Valuation of Securities

For available-for-sale securities, the average method is used to determine the cost of debt and equity securities for the calculation of gain (loss) on disposal of those securities.

Debt securities that have fixed or determinable payments with a fixed maturity are classified as held-to-maturity securities only if the Company has both the positive intent and ability to hold those securities to maturity. However, debt securities, whose maturity dates are due within one year from the period end date, are classified as current assets.

After initial recognition, held-to-maturity securities are stated at amortized cost in the statements of financial position. When held-to-maturity securities are measured at amortized costs, the difference between their acquisition cost and face value is amortized using the effective interest rate method and the amortization is included in the cost and interest income.

When the possibility of not being able to collect the principal and interest of held-to-maturity securities according to the terms of the contracts is highly likely, the difference between the recoverable amount (the present value of expected cash flows using the effective interest rate upon acquisition of the securities) and book value is recorded as loss on impairment of held-to-maturity securities included in the non-operating expense and the held-to-maturity securities are stated at the recoverable amount after impairment loss. If the value of impaired securities subsequently recovers and the recovery can be objectively related to an event occurring after the impairment loss was recognized, the reversal of impairment loss is recorded as reversal of impairment loss on held-to-maturity securities included in non-operating income. However, the resulting carrying amount after the reversal of impairment loss shall not exceed the amortized cost that would have been measured, at the date of the reversal, if no impairment loss was recognized.

Tangible Assets

Property, plant and equipment are stated at cost (acquisition cost or manufacturing cost plus expenditures directly related to preparing the assets ready for use). Assets acquired from investment-in-kind, received through donations or acquired free of charge in other ways are stated at the market value of the item which is considered as the fair value.

Expenditures after acquisition or completion that increase future economic benefit in excess of the most recently assessed capability level of the asset are capitalized and other expenditures are charged to expense as incurred.

In accordance with the Company’s policy, borrowing costs in relation to the manufacture, purchase, construction or development of assets are capitalized as part of the cost of those assets.

When the expected future cash flow from use or disposal of the property, plant and equipment is lower than the carrying amount due to obsolescence, physical damage or other causes, the carrying amount is adjusted to the recoverable amount (the higher of net sales price or value in use) and the difference is recognized as an impairment loss. When the recoverable amount subsequently exceeds the carrying amount of the impaired asset, the excess is recorded as a reversal of impairment loss to the extent that the reversed asset does not exceed the carrying amount before previous impairment as adjusted by depreciation.

Depreciation is computed using the declining-balance method, except for buildings and structures using straight-line method, over the estimated useful lives of the assets as follows:
    
Assets
 
Useful lives (Years)
Buildings
 
30
Structures
 
15
Machinery and equipment
 
8
Vehicles
 
4
Others
 
4


9



Intangible Assets

Intangible assets amount represents lease premiums paid and trademark, which are amortized using the straight-line method over the estimated useful life of 5 years. A lease premium is an amount a lessee pays to the previous lessee related to the property. A long-term lease contract with a contract period of 5 years or more is amortized over the actual contract period. When the leasing right is transferred to a next lessee, the gain or loss on disposal of the lease premium is recognized in the amount of the difference between the unamortized cost of the lease premium previously paid and the lease premium received from the next lessee.

Accrued Severance Indemnities

In accordance with the Company's policy, all employees with more than one year of service are entitled to receive a lump-sum severance payment upon termination of their employment, based on their current salary rate and length of service. The accrual for severance indemnities is computed as if all employees were to terminate at the period end dates and amounted to ₩21,206 million[Unaudited] and ₩17,395 million as of December 31, 2012 and 2011, respectively. In accordance with the National Pension Law of Korea, a portion of its severance indemnities which has been transferred in cash to the National Pension Fund through March 1999 is presented as a deduction from accrued severance indemnities. Additionally, the Company has insured a portion of its obligations for severance indemnities by contributing to benefit plan assets that will be directly paid to employees from Shinhan Bank and others, and records them as plan assets which are directly deducted from accrued severance indemnities. Actual payments for severance indemnities amounted to ₩1,254 million[Unaudited], ₩3,334 million and ₩4,075 million for the years ended December 31, 2012, 2011 and 2010, respectively.

Income Tax Expense

The Company recognizes deferred income tax assets or liabilities for the temporary differences between the carrying amount of an asset and liability and tax base. A deferred tax liability is generally recognized for all taxable temporary differences with some exceptions and a deferred tax asset is recognized to the extent when it is probable that taxable income will be available against which the deductible temporary difference can be utilized in the future. Deferred income tax asset (liability) is classified as current or non-current asset (liability) depending on the classification of related asset (liability) in the statements of financial position. Deferred income tax asset (liability), which does not relate to specific asset (liability) account in the statements of financial position such as deferred income tax asset recognized for tax loss carryforwards, is classified as current or non-current asset (liability) depending on the expected reversal period. Deferred income tax assets and liabilities in the same tax jurisdiction and in the same current or non-current classification are presented on a net basis. Current and deferred income tax expense are included in income tax expense in the statements of income and additional income tax or tax refunds for the prior periods are included in income tax expense for the current period when recognized. However, income tax resulting from transactions or events, which was directly recognized in shareholders’ equity in current or prior periods, or business combinations, is directly adjusted to equity account or goodwill (or negative goodwill).

Accounting for Foreign Currency Translation

The Company maintains its accounts in Korean won. Monetary accounts with balances denominated in foreign currencies are recorded and reported in the accompanying financial statements at the exchange rates prevailing at the period end dates. The balances have been translated using the market exchange rate announced by Seoul Money Brokerage Services Ltd., which is ₩1,017.10 and ₩1,153.30 to US $1.00 at December 31, 2012 and 2011, respectively. The translation gains or losses are reflected in non-operating income (expense).

3.     INVENTORIES :
    
Inventories as of December 31, 2012 [Unaudited] and 2011 consist of the following:
 
Korean Won (In thousands)
 
2012
 
2011
 
[Unaudited]
 
 
Merchandise
6,430,988

 
6,874,214

Finished goods
6,459,038

 
4,412,773

Semi-finished goods
224,536

 
224,481

Raw materials
19,535,182

 
16,712,431

Materials in transit
6,388,835

 
6,345,063

Total
39,038,579

 
34,568,962


10





4.     OTHER CURRENT ASSETS :

Other current assets as of December 31, 2012 [Unaudited] and 2011 consist of the following:

 
      Korean Won (In thousands)
 
2012
 
2011
 
[Unaudited]
 
 
Accounts receivable–other
13,465,545

 
4,431,259

Accrued income
830,565

 
687,597

Advanced payments
2,352,560

 
1,624,706

Prepaid expenses
428,467

 
404,232

Short-term loans
1,352,649

 

Total
18,429,786

 
7,147,794


5.
SECURITIES :
    
(1)
Securities as of December 31, 2012 [Unaudited] and 2011 consist of the following:

 
      Korean Won (In thousands)
 
2012
 
2011
 
[Unaudited]
 
 
Available-for-sale securities
 
 
 
Dunkin' Brands Group, Inc
1,599,260

 
1,296,425

Held-to-maturity securities
 
 
 
Government & public bonds
58,485

 
62,985

Total
1,657,745

 
1,359,410


Held-to-maturity securities whose maturity are within one year from the period end date in the amount of ₩4,200 thousand [Unaudited] and ₩4,500 thousand as of December 31, 2012 and 2011, respectively, are classified as securities in the current assets.

(2)
Details of available-for-sale securities as of December 31, 2012 [Unaudited] and 2011 consist of the following:
 
<2012 [Unaudited]>
 
 
 
 
 
 
Korean Won (In thousands)
 
 
Number of shares
 
Ownership
 
Acquisition
cost
 
Fair value
 
Book value
Dunkin’ Brands Group, Inc.
 
45,000
 
0.2%
 
900,486

 
1,599,260

 
1,599,260



<2011>
 
 
 
 
 
 
Korean Won (In thousands)
 
 
Number of shares
 
Ownership
 
Acquisition
cost
 
Fair value
 
Book value
Dunkin’ Brands Group, Inc.
 
45,000
 
0.2%
 
900,486

 
1,296,425

 
1,296,425


The fair value of available-for-sale securities that are quoted in active markets is determined using the quoted prices and the accumulated unrealized gain on valuation of available-for-sale securities before tax effect is ₩698,774 thousand [Unaudited] and ₩395,939 thousand as of December 31, 2012 and 2011, respectively.

In addition, during the years ended December 31, 2012 [Unaudited] and 2011, no impairment loss or reversal of any previously recognized impairment loss on securities occurred.

11




6.     SECURITIES UNDER THE EQUITY METHOD :

Details of securities accounted for under the equity method as of December 31, 2012 [Unaudited] and 2011 are as follow:

 
 
 
 
 
 
Korean Won (In thousands)
 
 
Number of shares
 
Ownership
 
Acquisition
cost
 
Book value
Nexgen Food Research (NFR)
 
6,000
 
100%
 
677,340

 
677,340


KAS-NPEs do not require the equity method to be applied when both conditions are met; (a) the investee does not require to be audited in accordance with Korean External Audit Laws, and (b) the ownership of investor does not change significantly from previous periods.

As of December 31, 2012 [Unaudited] and 2011, the Company does not reflect its proportionate share of operational results or equity adjustments of NFR as both conditions are met for NFR.

In addition, during the years ended December 31, 2012 [Unaudited] and 2011, no impairment loss or reversal of any previously recognized impairment loss on securities under the equity method occurred.

 
7.      TANGIBLE ASSETS :

(1) Tangible assets as of December 31, 2012 [Unaudited] and 2011 consist of the following:

 
Korean Won (In thousands)
 
2012
 
2011
 
[Unaudited]
 
 
Land
11,732,349

 
11,103,689

Buildings
20,916,402

 
21,867,337

Structures
885,729

 
996,666

Machinery and equipment
6,910,695

 
8,409,626

Vehicles
24,827

 
45,373

Other
20,748,669

 
23,540,212

Total
61,218,671

 
65,962,903


(2) Disclosure of Land Price and Valuation of Land

The Korean government annually announces the public price of domestic land by address and type of purposes pursuant to the laws on Disclosure of Land Price and Valuation of Land. This is determined based on the comprehensive consideration including market price, surrounding road condition, possibility of future development and others. As of December 31, 2012 [Unaudited] and 2011, the public price of the Company-owned land is ₩9,005,254 thousand [Unaudited] and ₩9,720,605 thousand, respectively.

12



(3) Changes in book values of tangible assets for the years ended December 31, 2012 [Unaudited] and 2011 consist of the following:
 
Korean Won (In thousands)
 
2012 [Unaudited]
 
January 1, 2012
 
Acquisition
 
Disposal
 
Depreciation
 
December 31, 2012
Land
11,103,689

 
628,660

 

 

 
11,732,349

Buildings
21,867,337

 
27,812

 

 
978,747

 
20,916,402

Structures
996,666

 
5,500

 

 
116,437

 
885,729

Machinery and equipment
8,409,626

 
1,376,600

 

 
2,875,531

 
6,910,695

Vehicles
45,373

 
6,400

 
279

 
26,667

 
24,827

Others
23,540,212

 
15,385,047

 
793,659

 
17,382,931

 
20,748,669

Total
65,962,903

 
17,430,019

 
793,938

 
21,380,313

 
61,218,671



 
Korean Won (In thousands)
 
2011
 
January 1, 2011
 
   Acquisition
 
      Disposal
 
      Depreciation
 
December 31, 2011
Land
11,103,689

 

 

 

 
11,103,689

Buildings
21,571,820

 
1,576,412

 
327,480

 
953,415

 
21,867,337

Structures
752,500

 
357,064

 

 
112,898

 
996,666

Machinery and equipment
8,080,418

 
3,415,485

 
1

 
3,086,276

 
8,409,626

Vehicles
113,898

 

 
8,330

 
60,195

 
45,373

Others
20,578,300

 
19,720,428

 
755,683

 
16,002,833

 
23,540,212

Total
62,200,625

 
25,069,389

 
1,091,494

 
20,215,617

 
65,962,903


During the years ended December 31, 2012 [Unaudited] and 2011 no impairment loss or reversal of any previously recognized impairment loss on property, plant and equipment occurred.


8.
INSURED ASSETS :

As of December 31, 2012 [Unaudited], the Company's buildings and structures, machinery, equipment and inventories are insured up to ₩222,198,297 thousand [Unaudited] for fire and ₩200,000 thousand [Unaudited] for the theft of securities and cash. In addition, the Company carries general insurance for vehicles, product liability insurance, business liability insurance and workers’ compensation and casualty insurance for employees.


9.
INTANGIBLE ASSETS :

(1) Intangible assets as of December 31, 2012 [Unaudited] and 2011 consist of the following:

 
      Korean Won (In thousands)
 
2012
 
2011
 
[Unaudited]
 
 
Lease premiums
6,696,993

 
8,578,563

Trademark
152,729

 
         -

Total
6,849,722

 
8,578,563




13



(2) Changes in book values of intangible assets for the years ended December 31, 2012 [Unaudited] and 2011 consist of the following:

 
Korean Won (In thousands)
 
2012 [Unaudited]
 
January 1, 2012
 
   Acquisition
 
   Disposal
 
      Amortization
 
December 31,
   2012
Lease premiums
8,578,563

 
1,783,000

 
352,833

 
3,311,737

 
6,696,993

Trademark

 
169,699

 

 
16,970

 
152,729

Total
8,578,563

 
1,952,699

 
352,833

 
3,328,707

 
6,849,722


 
Korean Won (In thousands)
 
2011
 
January 1, 2011
 
Acquisition
 
Disposal
 
      Amortization
 
   Reclassification
 
December 31, 2011
Lease premiums
9,338,876

 
3,464,718

 
255,000

 
3,720,031

 
250,000

 
8,578,563


A lease premium amounting to ₩250,000 thousand paid to the previous lessee was reclassified as rental deposit, included in guarantee deposit, as the property owner rejected the right to transfer the lease premium and terminated the lease agreement during the year ended December 31, 2011.


10.
GUARANTEE DEPOSITS :

Guarantee deposits paid as of December 31, 2012 [Unaudited] and 2011 are as follows:

 
      Korean Won (In thousands)
 
2012
 
2011
 
[Unaudited]
 
 
Rental deposits
123,957,022

 
123,569,697

Other
21,551

 
20,479

Total
123,978,573

 
123,590,176


The Company obtained lien rights for the amount of ₩82,233 million [Unaudited] and ₩80,312 million related to its guarantee deposits as of December 31, 2012 and 2011, respectively.


11.
OTHER CURRENT LIABILITIES :

Other current liabilities as of December 31, 2012 [Unaudited] and 2011 consist of the following:

 
      Korean Won (In thousands)
 
2012
 
2011
 
[Unaudited]
 
 
Withholdings
5,100,940

 
3,222,248

Accrued expenses
5,815,876

 
3,642,132

 
10,916,816

 
6,864,380




14



12. ACCRUED SEVERANCE INDEMNITIES :

(1) The changes in accrued severance indemnities for the years ended December 31, 2012 [Unaudited] and 2011 are as follows:

 
      Korean Won (In thousands)
 
2012
 
2011
 
[Unaudited]
 
 
Beginning accrued severance indemnities
17,395,428

 
15,567,553

Provision for severance indemnities for the period
4,888,185

 
5,115,531

Transferred-in from affiliates
176,808

 
45,973

Severance payment
(1,254,090
)
 
(3,333,629
)
Ending accrued severance indemnities
21,206,331

 
17,395,428

 
 
 
 
Deposits in National Pension Fund
(12,041
)
 
(23,612
)
Deposits in financial institutions
(17,560,699
)
 
(13,121,344
)
Total benefit plan assets
(17,572,740
)
 
(13,144,956
)
 
 
 
 
Accrued severance indemnities, net of benefit plan assets
3,633,591

 
4,250,472


(2) The Company has insured a portion of its obligations for severance indemnities, in order to obtain the related tax benefits by joining retirement pension plan with Shinhan Bank and others. Withdrawal of these retirement pension plan assets, in the amount of ₩17,560,699 thousand [Unaudited] and ₩13,121,345 thousand as of December 31, 2012 and 2011, respectively, is restricted to the payment of severance indemnities. In addition, a part of severance liabilities has been transferred to the National Pension Fund under the relevant regulation, which is no longer effective. The amounts of the National Pension Fund benefit transferred are ₩12,041 thousand [Unaudited] and ₩23,612 thousand as of December 31, 2012 and 2011, respectively. The benefit plan assets and the National Pension Fund benefit transferred and outstanding are presented as a deduction from accrued severance indemnities.


13.
ASSETS AND LIABILITIES IN FOREIGN CURRENCY :

Assets and liabilities denominated in foreign currency as of December 31, 2012 [Unaudited], 2011 and 2010 are as follows:

 
 
   Korean Won (In thousands) and US Dollars
 
 
2012 [Unaudited]
 
2011
 
2010
 
 
Foreign Currency
 
Korean Won Equivalent
 
Foreign Currency
 
Korean Won Equivalent
 
Foreign Currency
 
Korean Won Equivalent
Assets:
 
 
 
 
 
 
 
 
 
 
 
 
Cash and cash equivalents
 
USD
508,553

 
544,711

 
USD
40,543

 
46,758

 
USD
715,149

 
814,483

Trade accounts receivable
 
USD
65,852

 
70,534

 
USD


 

 
USD


 

 
 
 
 
 
 
 
 
 
 
 
 
 
Liabilities:
 
 
 
 
 
 
 
 
 
 
 
 
Accrued expense
 
USD
16,783

 
17,977

 
USD
60,274

 
69,514

 
USD


 

Advance from customers
 
USD
88,112

 
94,377

 
USD
12,656

 
14,597

 
USD


 


The Company recorded ₩(17,032) thousand [Unaudited], ₩(2,852) thousand and ₩(17,252) thousand of loss on foreign currency translation, net in non-operating income(expenses) for the years ended December 31, 2012, 2011 and 2010, respectively.



15



14.
TRANSACTIONS WITH RELATED PARTIES :
    
Dunkin’ Brands Group, Inc. is a significant shareholder of the Company. Nexgen Food Research is a wholly-owned subsidiary of the Company (Note 6). The entities listed below have investment relationships with the Korean shareholders of the Company or the entities which the Korean shareholders invest in.

(1) Transactions with affiliated companies and other related parties in 2012 [Unaudited], 2011 and 2010 are as follows:

 
Korean Won (In thousands)
 
2012 [Unaudited]    
 
2011 
 
2010
 
Revenues and others
 
Purchases and others     
 
Revenues and others
 
Purchases and others   
 
Revenues and others
 
Purchases and others   
Shany Co., Ltd.
29,864

 
48,000

 
29,156

 
1,320,572

 
1,083,848

 
11,853,327

Honam Shany Co., Ltd.

 
136,080

 

 
116,580

 
      -

 
79,844

Paris Croissant Co., Ltd.
283,559

 
7,970,439

 
343,449

 
8,398,987

 
322,424

 
6,969,578

Samlip General Food Co., Ltd.
1,303,611

 
10,522,072

 
2,548,977

 
6,938,463

 
1,250,728

 
3,493,164

SPC Co., Ltd.
2,095,302

 
8,823,719

 
2,083,113

 
5,739,561

 
2,050,502

 
4,409,849

SPC Networks Co., Ltd.
2,329,809

 
3,412,293

 
1,570,524

 
3,243,939

 
2,110,253

 
948,483

Mildawon Co., Ltd.

 
      -

 

 
53,480

 

 
309,236

SPC CAPITAL Co., Ltd.

 
658,349

 

 

 

 

SUNGIL CHEMICAL Co., Ltd.

 
11,979

 

 

 

 

BNS Co., Ltd

 
64,612

 

 

 

 

Nexgen Food Research

 
441,935

 

 
412,457

 

 

Dunkin’ Brands Group, Inc.
2,301,353

 
4,227,700

 
2,639,430

 
3,755,019

 
1,191,083

 
3,448,705

Paris Baguette Bon Doux, Inc.

 
33,804,605

 

 
37,525,091

 

 
23,482,273

SPC Euro

 
8,955,858

 

 
7,000,897

 

 
3,048,417

SPC Japan

 
621,053

 

 
629,860

 

 
5,172,213

 
8,343,498

 
79,698,694

 
9,214,649

 
75,134,906

 
8,008,838

 
63,215,089



16



(2) Related balances of receivables and payables with related parties as of December 31, 2012 [Unaudited] and 2011 are summarized below.
 
Korean Won (In thousands)
 
2012
 
2011
 
[Unaudited]
 
 
Receivables(*1):
 
 
 
Shany Co., Ltd.
9,393

 
20,350

Paris Croissant Co., Ltd.
5,193,430

 
38,847

Samlip General Food Co., Ltd.
338,355

 
208,959

SPC Co., Ltd.
169,794

 
147,500

SPC Networks Co., Ltd.
2,354,888

 
365,230

Dunkin' Brands Group, Inc.
684,625

 
458,905

 
8,750,485

 
1,239,791

 
 
 
 
Allowance for doubtful accounts
87,505

 
12,398

 
 
 
 
Payables (*2):
 
 
 
Honam Shany Co., Ltd.
12,643

 
12,181

Paris Croissant Co., Ltd.
554,769

 
472,507

Samlip General Food Co., Ltd.
2,686,749

 
917,851

SPC Co., Ltd.
978,060

 
476,318

SPC Networks Co., Ltd.
324,405

 
731,846

SUNGIL CHEMICAL Co., Ltd
1,756

 
      - 

BNS Co., Ltd
6,115

 
      - 

Dunkin’ Brands Group, Inc.
1,318,703

 
1,222,819

 
5,883,200

 
3,833,522


(*1) Receivables consist of trade accounts receivable and accounts receivable-other.
(*2) Payables consist of trade accounts payable, accrued expenses and accounts payable-other.

15.
SHAREHOLDERS’ EQUITY :

Capital Stock

As of December 31, 2012,     the Company has 3,000,000 authorized shares of common stock [Unaudited] with a ₩10,000 par value[Unaudited], of which 600,000 shares[Unaudited] were issued and outstanding as of December 31, 2012.

Appropriated Retained Earnings

Appropriated retained earnings as of December 31, 2012 [Unaudited] and 2011, which are maintained by the Company in accordance with tax and other relevant regulations, consist of the following:

 
      Korean Won (In thousands)
 
2012
 
2011
 
[Unaudited]
 
 
Legal reserve (*1)
3,000,000

 
3,000,000

Reserve for business rationalization (*2)
3,493,977

 
3,493,977

Reserve for business development (*3)
17,741,000

 
17,741,000

 
24,234,977

 
24,234,977


(*1) The Korean Business Law requires the Company to appropriate at least 10 percent of the cash dividends paid as legal reserve until such reserve equals 50 percent of its common stock. This reserve is not available for cash dividends and can only be transferred to capital or can be used to reduce deficit.


17



(*2) In accordance with the Tax Exemption and Reduction Control Law, the amount of tax benefit associated with certain tax credits are appropriated as a reserve for business rationalization.

(*3) In order to obtain a tax credit on excess retained earnings’ tax, the Company previously accrued for a reserve for business development. However, as the relevant tax regulation concerning excess retained earnings’ tax was repealed in early 2002, the Company has not accrued for any additional reserve for business development since 2002. The remaining reserve can be used to offset deficit or can be transferred to paid-in capital. However, if this reserve is used for other purposes, the amount used is subjected to additional corporate tax.

Statements of Appropriated Retained Earnings
 
2012
 
2011
 
          2010
 
[Unaudited]
 
 
 
 
 
(In thousands)
RETAINED EARNINGS BEFORE APPROPRIATIONS:
 
 
 
 
 
Unappropriated retained earnings brought forward from prior year
208,194,544

 
189,063,749

 
165,683,645

Cumulative effect of a change in accounting standards (KAS – NPE No. 21)
(629,944)

 

 

 Net income
36,966,542

 
27,332,795

 
33,412,104

 
244,531,142

 
216,396,544

 
199,095,749

APPROPRIATIONS:
 
 
 
 
 
   Dividends calculated (Note 20)
   11,094,000 (*1)

 
8,202,000

 
10,032,000

 
 
 
 
 
 
UNAPPROPRIATED RETAINED EARNINGS TO BE CARRIED FORWARD TO SUBSEQUENT YEAR
233,437,142

 
208,194,544

 
189,063,749


(*1) The amount of dividends calculated as of December 31, 2012 [Unaudited] will be approved by shareholders of the Company on March 26, 2013.

16.
STATEMENTS OF COMPREHENSIVE INCOME :

Statements of comprehensive income for the years ended December 31, 2012 [Unaudited], 2011 and 2010 consist of the following:

 
2012
 
2011
 
          2010
 
[Unaudited]
 
 
 
 
 
(In thousands)
Net income
36,966,542

 
27,332,795

 
33,412,104

Cumulative effect of a change
    in accounting principle
(629,944
)
 

 

Other comprehensive income:
 
 
 
 
 
   Gain on valuation of AFS securities
302,835

 
395,939

 

   Tax effects of gain on valuation of AFS securities
(73,286
)
 
(95,818
)
 

 
229,549

 
300,121

 

Comprehensive income
36,566,147

 
27,632,916

 
33,412,104



17.      DONATIONS AND MISCELLENEOUS INCOME (EXPENSE ):

The Company donates donuts to the Food Bank on a daily basis as part of its Corporate social responsibility.


18



The Company recognized miscellaneous income and expenses, miscellaneous income is netted against miscellaneous expense, which mainly composed of inventory scrap expenses Gross presentation of miscellaneous income and expense is as follows:

 
Korean Won (In thousands)
 
2012
 
2011
 
2010
 
[Unaudited]