Baskin Robbins 2012 Annual Report Download - page 49

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compensation expense of approximately $0.9 million upon completion of the secondary offering in December 2011, related to
approximately 0.3 million stock options granted to employees that were not eligible to vest until the sale or disposition of
shares held by our Sponsors (performance condition). Finally, the Company incurred approximately $1.0 million of transaction
costs related to the secondary offering in fiscal year 2011.
Excluding the offering-related costs above, general and administrative expenses declined $4.0 million, or 2.0%, in fiscal year
2011. This decrease was driven by a decline of $9.1 million in professional fees and legal costs resulting from reduced
information technology expenses and legal settlement reserves, as well as a $0.8 million decline in occupancy costs due to lease
reserves recorded in the prior year. Offsetting these declines was an increase in personnel costs of $12.9 million, of which
approximately $2.4 million was attributable to the extra week in fiscal year 2011, with the remaining increase related to
investment in our Dunkin’ Donuts U.S. contiguous growth strategy and higher projected incentive compensation payouts, offset
by prior year costs associated with our executive chairman transition. Additionally, other general and administrative expenses
increased $1.1 million primarily as a result of expenses incurred related to the roll-out of a new point-of-sale system for
Baskin-Robbins franchisees.
Depreciation and amortization declined $5.3 million in fiscal year 2011 resulting primarily from a license right intangible asset
becoming fully amortized in July 2010, as well as terminations of lease agreements in the normal course of business resulting
in the write-off of favorable lease intangible assets, which thereby reduced future amortization. Additionally, depreciation
declined due to assets becoming fully depreciated and the write-off of leasehold improvements upon terminations of lease
agreements, slightly offset by depreciation on capital purchases.
The decrease in impairment charges in fiscal year 2011 of $5.0 million resulted primarily from the timing of lease terminations
in the ordinary course, which results in the write-off of favorable lease intangible assets and leasehold improvements.
Net income (loss) of equity method investments decreased $21.3 million in fiscal year 2011 primarily as a result of a $19.8
million impairment charge recorded on the investment in our South Korea joint venture, offset by 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. The remaining decline in net income (loss) of equity method investments resulted
from higher expenses for our South Korea joint venture, slightly offset by stronger earnings from our Japan joint venture.
Fiscal year Increase (Decrease)
2011 2010 $ %
(In thousands, except percentages)
Interest expense, net $ 104,449 112,532 (8,083) (7.2)%
Loss on debt extinguishment and refinancing transactions 34,222 61,955 (27,733) (44.8)%
Other gains, net (175)(408) 233 (57.1)%
Total other expense $ 138,496 174,079 (35,583) (20.4)%
The decrease in net interest expense for fiscal year 2011 resulted primarily from reductions in the average cost of borrowing
due to refinancing and re-pricing transactions, offset by an increase in the weighted average long-term debt outstanding and an
extra week of interest expense in fiscal year 2011. As the senior notes were fully repaid upon completion of the initial public
offering on August 1, 2011, interest expense is expected to decrease in the future and remain consistent with the net interest
expense realized in the fourth quarter of 2011 on a 13-week basis.
The loss on debt extinguishment incurred in fiscal year 2010 resulted from the refinancing of existing long-term debt in the
fourth quarter of 2010, which yielded a $58.3 million loss, as well as the voluntary retirement of long-term debt in the second
quarter of 2010, which resulted in a $3.7 million loss. The loss on debt extinguishment and refinancing transactions incurred in
fiscal year 2011 resulted from the completion of the initial public offering and related repayment of senior notes, as well as
term loan re-pricing and upsize transactions completed in the first half of 2011. Loss on debt extinguishment and refinancing
transactions in 2011 totaled $25.9 million related to the retirement of senior notes and $8.3 million related to term loans.
The decline in other gains from fiscal 2010 to fiscal 2011 resulted primarily from reduced net foreign exchange gains.