Baskin Robbins 2012 Annual Report Download - page 42

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-32-
million increase in sales of ice cream products. Approximately $8.0 million of the increase in total revenues was attributable to
the extra week in fiscal year 2011, consisting primarily of additional royalty income and sales of ice cream products.
Operating income increased $11.8 million, or 6.1%, for fiscal year 2011 driven by the increase in franchise fees and royalty
income noted above, as well as a $10.3 million reduction in depreciation, amortization, and impairment charges. Offsetting
these increases in operating income was an increase in general and administrative expenses of $17.0 million driven by a $14.7
million expense related to the termination of the Sponsor management agreement upon the Company’s initial public offering in
2011, as well as a $21.3 million reduction in equity in net income of joint ventures driven by an impairment of the investment
in the Korea joint venture.
Adjusted operating income increased $37.7 million, or 16.2%, for fiscal year 2011 driven by the increase in franchise fees and
royalty income.
Net income increased $7.6 million, or 28.2%, for fiscal year 2011 as a result of the $11.8 million increase in operating income,
a $27.7 million decrease in loss on debt extinguishment and refinancing transactions, and a $7.8 million decrease in interest
expense, offset by a $39.8 million increase in income tax expense driven by increased profit before tax and benefits from state
tax rate changes realized in the prior year.
Adjusted net income increased $14.0 million, or 15.9%, for fiscal year 2011 resulting primarily from a $37.7 million increase in
adjusted operating income and a $7.8 million decrease in interest expense, offset by a $31.5 million increase in income tax
expense.
Earnings per share
Earnings per common share and adjusted earnings per pro forma common share were as follows:
Fiscal year
2012 2011 2010
Earnings (loss) per share:
Class L – basic and diluted n/a $ 6.14 4.87
Common – basic $ 0.94 (1.41)(2.04)
Common – diluted 0.93 (1.41)(2.04)
Diluted adjusted earnings per pro forma common share 1.28 0.94 0.90
On August 1, 2011, the Company completed an initial public offering in which 22,250,000 shares of common stock were sold
at an initial public offering price of $19.00 per share. Immediately prior to the offering, each share of the Company’s Class L
common stock converted into 2.4338 shares of common stock. The number of common shares used in the calculation of diluted
adjusted earnings per pro forma common share for fiscal years 2011, 2010, and 2009 give effect to the conversion of all
outstanding shares of Class L common stock at the conversion factor of 2.4338 common shares for each Class L share, as if the
conversion was completed at the beginning of the respective fiscal year. The calculation of diluted adjusted earnings per pro
forma common share also includes the dilutive effect of common restricted shares and stock options, using the treasury stock
method. Shares sold in the offering are included in the diluted adjusted earnings per pro forma common share calculation
beginning on the date that such shares were actually issued. Diluted adjusted earnings per pro forma common share is
calculated using adjusted net income, as defined above.
Diluted adjusted earnings per pro forma common share is not a presentation made in accordance with GAAP, and our use of the
term diluted adjusted earnings per pro forma common share may vary from similar measures reported by others in our industry
due to the potential differences in the method of calculation. Diluted adjusted earnings per pro forma common share should not
be considered as an alternative to earnings (loss) per share derived in accordance with GAAP. Diluted adjusted earnings per pro
forma common share 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 diluted adjusted earnings per pro forma common share is appropriate to provide additional
information to investors to compare our performance prior to and after the completion of our initial public offering and related
conversion of Class L shares into common stock as well as to provide investors with useful information regarding our historical
operating results. The following table sets forth the computation of diluted adjusted earnings per pro forma common share: