Baskin Robbins 2013 Annual Report Download - page 44

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-34-
Operating income increased $34.1 million, or 16.6%, for fiscal year 2012 driven by the $20.5 million increase in franchise fees
and royalty income, as well as a $25.8 million increase in income from equity method investments driven by an impairment of
the investment in the Korea joint venture recorded in fiscal year 2011. The increase in operating income was also attributable to
a $14.7 million expense incurred in the prior year related to the termination of the Sponsor management agreement in
connection with the Company's initial public offering, as well as a $4.5 million increase in net rental income. Offsetting these
increases in operating income was a $20.7 million increase in the Bertico litigation legal reserve recorded in the second quarter
of 2012, and an approximately $14.0 million unfavorable impact associated with the closure of our ice cream manufacturing
plant in Peterborough, Ontario, Canada.
Adjusted operating income increased $36.4 million, or 13.5%, for fiscal year 2012 driven by the $20.5 million increase in
franchise fees and royalty income, a $7.1 million increase in income from equity method investments driven by our Korea joint
venture, and a $4.5 million increase in net rental income.
Net income attributable to Dunkin’ Brands increased $73.9 million, or 214.5%, for fiscal year 2012 as a result of the $34.1
million increase in operating income, a $31.0 million decrease in net interest expense, and a $30.3 million decrease in loss on
debt extinguishment and refinancing transactions, offset by a $22.0 million increase in income tax expense driven by increased
profit before tax.
Adjusted net income increased $48.0 million, or 47.1%, for fiscal year 2012 resulting primarily from a $36.4 million increase
in adjusted operating income and a $31.0 million decrease in net interest expense, offset by a $20.0 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
2013 2012 2011
Earnings (loss) per share:
Class L – basic and diluted n/a n/a $ 6.14
Common – basic $ 1.38 0.94 (1.41)
Common – diluted 1.36 0.93 (1.41)
Diluted adjusted earnings per pro forma common share 1.53 1.28 0.94
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 year 2011 gives 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: