Baskin Robbins 2012 Annual Report Download - page 52

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-42-
Baskin-Robbins International
Fiscal year Increase (Decrease)
2011 2010 $ %
(In thousands, except percentages)
Royalty income $ 8,422 6,191 2,231 36.0 %
Franchise fees 1,593 1,289 304 23.6 %
Rental income 616 572 44 7.7 %
Sales of ice cream products 96,288 80,962 15,326 18.9 %
Other revenues (32) 390 (422) (108.2)%
Total revenues $ 106,887 89,404 17,483 19.6 %
Segment profit $ 42,844 40,757 2,087 5.1 %
The growth in Baskin-Robbins International revenues for fiscal year 2011 resulted from an increase in sales of ice cream
products of $15.3 million, which was primarily 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. Royalty
income also increased $2.2 million primarily as a result of higher sales and additional royalties earned in Australia directly
from franchisees following the termination of a master license agreement in October 2010, as well as higher sales in Japan and
South Korea. Approximately $1.3 million of the increase in total revenues was attributable to the extra week in fiscal year 2011.
The increase in Baskin-Robbins International segment profit for fiscal year 2011 resulted primarily from the increase in royalty
income noted above and a $1.9 million increase in net margin on sales of ice cream products driven by higher sales volume.
Offsetting these increases in segment profit was an increase in personnel costs and travel of $1.9 million.
Liquidity and capital resources
As of December 29, 2012, we held $252.6 million of cash and cash equivalents, which included $125.4 million of cash held for
advertising funds and reserved for gift card/certificate programs. In addition, as of December 29, 2012, we had a borrowing
capacity of $88.5 million under our $100.0 million revolving credit facility. During fiscal year 2012, net cash provided by
operating activities was $154.4 million, as compared to net cash provided by operating activities of $162.7 million for fiscal
year 2011. Net cash provided by operating activities for fiscal years 2012 and 2011 includes net cash inflows of $2.3 million
and $40.9 million, respectively, in cash held for advertising funds and reserved for gift card/certificate programs, which were
primarily driven by timing in the gift card program based on our fiscal year end relative to the Christmas holiday. Excluding
cash held for advertising funds and reserved for gift card/certificate programs, we generated $129.7 million and $103.3 million
of free cash flow during fiscal years 2012 and 2011, respectively. The increase in free cash flow from fiscal year 2011 to 2012
was primarily driven by increased net income, net of non-cash reconciling adjustments, specifically a reduction in losses on
debt extinguishment and refinancing transactions, an increase in net income from equity method investments, and an increase
in deferred tax benefits. Also contributing to the increase in free cash flow was a favorable impact from changes in operating
assets and liabilities, driven by an increase in other current liabilities as a result of the incremental Bertico legal reserve
recorded, offset by a reduction in income taxes payable, net. Free cash flow is calculated as follows (in thousands):
Fiscal year
2012 2011
Net cash provided by operating activities $ 154,420 162,703
Less: Increase in cash held for advertising funds and reserved for gift card/certificate programs (2,315)(40,856)
Less: Additions to property and equipment (22,398)(18,596)
Free cash flow $ 129,707 103,251
Net cash provided by operating activities of $154.4 million during fiscal year 2012 was primarily driven by net income of
$107.6 million, increased by depreciation and amortization of $56.0 million, and dividends received from joint ventures of $6.5
million, offset by $15.1 million of other net non-cash reconciling adjustments, as well as $0.6 million of changes in operating
assets and liabilities. The $15.1 million of other net non-cash reconciling adjustments primarily resulted from net income from
equity method investments and a deferred tax benefit, offset by share-based compensation expense and the amortization of
deferred financing costs and original issue discount. The $0.6 million of changes in operating assets and liabilities was
primarily driven by cash paid for income taxes, offset by the increase in the legal reserve for the Bertico litigation and an
increase in accrued interest based on the timing of interest payments. During fiscal year 2012, we invested $22.4 million in