Baskin Robbins 2012 Annual Report Download - page 48

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The decrease in Baskin-Robbins International segment profit for fiscal year 2012 resulted primarily from an increase in general
and administrative expenses of $2.0 million driven primarily by investments in personnel and advertising, as well as a $1.6
million decline in net margin on sales of ice cream products due primarily to the one-time delay in revenue recognition and the
extra week in the prior year. Offsetting these declines in segment profit was an increase in income from the South Korea joint
venture of $2.2 million, as well as the increase in royalty income of $0.9 million.
Fiscal year 2011 compared to fiscal year 2010
Consolidated results of operations
Fiscal year Increase (Decrease)
2011 2010 $ %
(In thousands, except percentages)
Franchise fees and royalty income $ 398,474 359,927 38,547 10.7 %
Rental income 92,145 91,102 1,043 1.1 %
Sales of ice cream products 100,068 84,989 15,079 17.7 %
Sales at company-owned restaurants 12,154 17,362 (5,208) (30.0)%
Other revenues 25,357 23,755 1,602 6.7 %
Total revenues $ 628,198 577,135 51,063 8.8 %
The increase in total revenues for fiscal year 2011 of $51.1 million was driven by an increase in royalty income of $30.7
million, or 9.2%, mainly as a result of Dunkin’ Donuts U.S. systemwide sales growth, and a $6.8 million increase in franchise
renewal income. Sales of ice cream products also increased $15.1 million, or 17.7%, driven by strong sales in the Middle East
and Australia, a December 2010 price increase that was implemented to offset higher commodity costs, and an additional week
of sales in fiscal year 2011. These increases in revenue were offset by a decrease in sales at company-owned restaurants of $5.2
million primarily as a result of a decline in the average number of company-owned stores held during fiscal year 2011.
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.
Fiscal year Increase (Decrease)
2011 2010 $ %
(In thousands, except percentages)
Occupancy expenses – franchised restaurants $ 51,878 53,739 (1,861) (3.5)%
Cost of ice cream products 72,329 59,175 13,154 22.2 %
Company-owned restaurant expenses 12,854 17,825 (4,971) (27.9)%
General and administrative expenses, net 227,771 205,795 21,976 10.7 %
Depreciation and amortization 52,522 57,826 (5,304) (9.2)%
Impairment charges 2,060 7,075 (5,015) (70.9)%
Total operating costs and expenses $ 419,414 401,435 17,979 4.5 %
Net income (loss) of equity method investments (3,475) 17,825 (21,300) (119.5)%
Operating income $ 205,309 193,525 11,784 6.1 %
Occupancy expenses for franchised restaurants for fiscal year 2011 decreased $1.9 million resulting primarily from additional
lease reserves recorded in the prior year and a decline in the number of leased properties. Cost of ice cream products increased
22.2% from the prior year, as compared to a 17.7% increase in sales of ice cream products, resulting from unfavorable
commodity prices and foreign exchange, slightly offset by increases in selling prices. Company-owned restaurant expenses
declined $5.0 million in fiscal year 2011 due to a reduction in the average number of company-owned stores.
General and administrative expenses for fiscal year 2011 includes certain expenses related to our initial public offering
completed in August 2011 and a secondary offering completed in December 2011. Upon completion of the initial public
offering, the Sponsor management agreement was terminated resulting in a $13.4 million increase in management fees,
consisting of a $14.7 million expense incurred upon termination offset by no longer incurring the $3.0 million annual
management fee expense post-termination. Additionally, $2.6 million of share-based compensation expense was recorded upon
completion of the initial public offering related to approximately 0.8 million restricted shares granted to employees that were
not eligible to vest until completion of an initial public offering or change of control (performance condition). No future
expense will be recorded related to this tranche of restricted shares. The Company also recorded incremental share-based