Baskin Robbins 2011 Annual Report Download - page 68

and amortization and impairment of long-lived assets, as adjusted, with respect to fiscal year 2011, for the items
summarized in the table below. Adjusted EBITDA is not a presentation made in accordance with GAAP, and our
use of the term adjusted EBITDA varies from others in our industry due to the potential inconsistencies in the
method of calculation and differences due to items subject to interpretation. Adjusted EBITDA should not be
considered as an alternative to net income, operating income or any other performance measures derived in
accordance with GAAP, as a measure of operating performance or as an alternative to cash flows as a measure of
liquidity. Adjusted EBITDA has important limitations as an analytical tool and should not be considered in
isolation or as a substitute for analysis of our results as reported under GAAP. Because of these limitations we
rely primarily on our GAAP results. However, we believe that presenting adjusted EBITDA is appropriate to
provide additional information to investors to demonstrate compliance with our financing covenants. As of
December 31, 2011, we were in compliance with our senior credit facility financial covenants, including a
leverage ratio of 4.37 to 1.00 and an interest coverage ratio of 3.22 to 1.00, which were calculated for fiscal year
2011 based upon the adjustments to EBITDA, as provided for under the terms of our senior credit facility. The
following is a reconciliation of our net income to such adjusted EBITDA for fiscal year 2011 (in thousands):
Fiscal year
2011
Net income ....................................... $ 34,442
Interest expense ................................... 105,072
Income tax expense ................................ 32,371
Depreciation and amortization ........................ 52,522
Impairment charges ................................ 2,060
Korea joint venture impairment, net(a) .................. 18,776
EBITDA ......................................... 245,243
Adjustments:
Non-cash adjustments(b) ............................. 6,260
Transaction costs(c) ................................. 1,407
Sponsor management fees(d) .......................... 16,420
Loss on debt extinguishment and refinancing
transactions(e) ................................... 34,222
Severance charges(f) ................................ 1,204
Other(g) .......................................... 9,307
Total adjustments .................................. 68,820
Adjusted EBITDA ................................. $314,063
(a) Represents an impairment of the investment in the Korea joint venture of $19.8 million, less a reduction in
depreciation and amortization, net of tax, of $1.0 million resulting from the allocation of the impairment
charge to the underlying intangible and long-lived assets of the joint venture.
(b) Represents non-cash adjustments, including stock compensation expense, legal reserves, and other non-cash
gains and losses.
(c) Represents direct and indirect cost and expenses related to the Company’s refinancing, initial public
offering, and secondary offering transactions.
(d) Represents annual fees paid to the Sponsors under a management agreement, which terminated upon the
consummation of the initial public offering in July 2011, and includes $14.7 million in fees related to such
termination.
(e) Represents gains/losses recorded and related transaction costs associated with the refinancing and
repayment of long-term debt, including the write-off of deferred financing costs and original issue discount,
as well as pre-payment premiums.
(f) Represents severance and related benefits costs associated with non-recurring reorganizations.
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