Baskin Robbins 2013 Annual Report Download - page 47

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income of equity method investments for the years ended December 28, 2013 and December 29, 2012 also includes an
unfavorable adjustment of $0.7 million and a favorable adjustment of $0.3 million, respectively, related to differences between
local accounting principles applied by our Japan and South Korea joint ventures and U.S. GAAP, which contributed to the
decrease for the year.
Other operating income of $6.3 million in fiscal year 2013 represents the gain, net of transaction costs, recognized on the
Baskin-Robbins Australia sale.
Fiscal year Increase (Decrease)
2013 2012 $ %
(In thousands, except percentages)
Interest expense, net $ 79,831 73,488 6,343 8.6%
Loss on debt extinguishment and refinancing transactions 5,018 3,963 1,055 26.6%
Other losses (gains), net 1,799 (23) 1,822 n/m
Total other expense $ 86,648 77,428 9,220 11.9%
The increase in net interest expense for fiscal year 2013 resulted primarily from incremental interest expense on $400.0 million
of additional term loan borrowings, which were used along with cash on hand to repurchase 15.0 million shares of common
stock from certain shareholders in August 2012. Also contributing to the increase in interest expense was incremental interest
incurred as a result of entering into variable-to-fixed interest rate swap agreements in September 2012 on $900.0 million
notional amount of our outstanding term loan borrowings. Offsetting these increases in interest expense was a reduction in the
interest rate on the term loans by 25 basis points as a result of the February 2013 repricing. Considering the February 2014
amendment of the senior credit facility and amended interest rate swaps agreements more fully described under "Liquidity and
capital resources" contained herein, we expect net interest expense to be approximately $70 million in fiscal year 2014.
The loss on debt extinguishment and refinancing transactions for fiscal year 2013 of $5.0 million resulted from the February
2013 repricing transaction. The loss on debt extinguishment and refinancing transactions for fiscal year 2012 of $4.0 million
related primarily to the $400.0 million of additional term loan borrowings in August 2012.
Other losses (gains), net, for fiscal year 2013 was driven primarily by foreign exchange losses resulting from the Baskin-
Robbins Australia sale due to the strengthening of the U.S. dollar against the Australian dollar, as well as an overall negative
impact of foreign exchange resulting from the general strengthening of the U.S. dollar compared to other currencies.
Fiscal year
2013 2012
(In thousands, except percentages)
Income before income taxes $ 218,088 162,001
Provision for income taxes 71,784 54,377
Effective tax rate 32.9% 33.6%
The reduced effective tax rate for fiscal year 2013 primarily resulted from the net reversal of approximately $8.4 million of
reserves for uncertain tax positions for which settlement with taxing authorities was reached during the year. Additionally, the
effective tax rate for fiscal year 2013 reflects an approximately $3.1 million benefit resulting from a change in mix of income
between domestic and international tax jurisdictions resulting from changes in operations, which we expect to continue to
favorably impact the effective tax rate in future years.
The effective tax rate for fiscal year 2012 reflects the impact of net tax benefits of $10.2 million related to the reversal of
reserves for uncertain tax positions for which settlement with the taxing authorities was reached during the period. Offsetting
these tax benefits was $4.6 million of deferred tax expense recorded in fiscal year 2012 primarily related to an increase in our
overall state tax rate for a shift in the apportionment of income to state jurisdictions, as a result of the closure of the
Peterborough manufacturing plant and transition to Dean Foods.
Operating segments
We operate four reportable operating segments: Dunkin’ Donuts U.S., Dunkin’ Donuts International, Baskin-Robbins U.S., and
Baskin-Robbins International. We evaluate the performance of our segments and allocate resources to them based on earnings
before interest, taxes, depreciation, amortization, impairment charges, loss on debt extinguishment and refinancing transactions,
other gains and losses, and unallocated corporate charges, referred to as segment profit. Segment profit for the Dunkin’ Donuts
International and Baskin-Robbins International segments includes net income (loss) of equity method investments, except for
the impairment charge, net of the related reduction in depreciation and amortization, net of tax, recorded in fiscal year 2011 on