Baskin Robbins 2012 Annual Report Download - page 50

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-40-
Fiscal year
2011 2010
(In thousands, except percentages)
Income before income taxes $ 66,813 19,446
Provision for income taxes 32,371 (7,415)
Effective tax rate 48.5% (38.1)%
The negative effective tax rate of 38.1% in fiscal year 2010 was primarily attributable to changes in state tax rates, which
resulted in a deferred tax benefit of approximately $5.7 million in fiscal 2010, as well as a benefit of $3.1 million related to
reserves for uncertain tax positions. The effective tax rate for fiscal year 2010 was also impacted by a reduced income before
income taxes, driven by the loss on debt extinguishment, which magnified the impact of permanent and other tax differences.
The increased effective tax rate for fiscal year 2011 primarily resulted from the impairment related to the Korea joint venture
investment, which reduced income before income taxes but for which there is no corresponding tax benefit.
Operating segments
Dunkin’ Donuts U.S.
Fiscal year Increase (Decrease)
2011 2010 $ %
(In thousands, except percentages)
Royalty income $ 317,203 290,187 27,016 9.3 %
Franchise fees 29,905 21,721 8,184 37.7 %
Rental income 86,590 85,311 1,279 1.5 %
Sales at company-owned restaurants 11,764 16,982 (5,218) (30.7)%
Other revenues 4,030 3,118 912 29.2 %
Total revenues $ 449,492 417,319 32,173 7.7 %
Segment profit $ 334,308 293,132 41,176 14.0 %
The increase in Dunkin’ Donuts U.S. revenues for fiscal year 2011 was primarily driven by an increase in royalty income of
$27.0 million as a result of an increase in systemwide sales, as well as increases in franchise fees of $8.2 million as a result of
increased franchise renewal income. Offsetting these increases was 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 $6.4 million of the increase in total revenues was attributable to the extra week in fiscal year 2011.
The increase in Dunkin’ Donuts U.S. segment profit for fiscal year 2011 was primarily driven by the increase in total revenues
of $37.4 million and a decrease in professional fees, legal costs, and other general and administrative expenses of $6.2 million
due to reduced legal settlement costs and reduced bad debt expenses. Also contributing to the increase in segment profit was a
$2.2 million decline in occupancy expenses driven by additional lease reserves recorded in the prior year and a decline in the
number of leased locations. Offsetting these increases in segment profit was an increase in personnel costs of $5.4 million, of
which approximately $0.9 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.