Baskin Robbins 2013 Annual Report Download - page 51

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Excluding the items noted above, general and administrative expenses increased $2.3 million, or 1.1%, in fiscal year 2012. This
increase was driven by a $10.3 million increase in personnel costs related to continued investments in our Dunkin’ Donuts U.S.
contiguous growth strategy and our international brands, additional stock compensation expense, and higher incentive
compensation payouts. Offsetting this increase was additional breakage income recorded in fiscal year 2012 of $5.4 million on
unredeemed gift card and gift certificate balances. The remaining decrease in other general and administrative costs of $2.6
million resulted primarily from costs incurred in the prior year related to the roll-out of a new point-of-sale system for Baskin-
Robbins franchisees and additional contributions made in 2011 to the advertising funds to support brand-building advertising.
Depreciation and amortization increased $3.5 million in fiscal year 2012 resulting primarily from accelerated depreciation
recorded as a result of the announced closure of the ice cream manufacturing plant in Canada, offset by 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.
The Company incurred a $14.0 million reduction to operating income associated with the plant closing and transition in fiscal
year 2012, including $5.0 million of general and administrative costs related to severance and other transition-related costs,
$4.2 million of accelerated depreciation on property, plant, and equipment, $2.7 million of incremental ice cream production
costs, and a one-time delay in revenue recognition, net of related cost of ice cream products, as a result of the change in
shipping terms of $2.1 million. The remaining costs to be incurred associated with the plant closing and transition primarily
consist of a loss of approximately $3 million to $4 million related to the settlement of our Canadian pension plan.
The decrease in impairment charges in fiscal year 2012 of $0.8 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 increased $25.8 million in fiscal year 2012 primarily as a result of a $19.8
million impairment charge recorded in the fourth quarter of 2011 on the investment in our South Korea joint venture.
Additionally, the allocation of the impairment charge to the underlying intangible and long-lived assets of the joint venture
reduced depreciation and amortization, resulting in an increase in income from the joint venture in fiscal year 2012 of $2.6
million. The remaining increase in net income (loss) of equity method investments resulted from stronger sales and earnings
performance at our South Korea joint venture.
Fiscal year Increase (Decrease)
2012 2011 $ %
(In thousands, except percentages)
Interest expense, net $ 73,488 104,449 (30,961) (29.6)%
Loss on debt extinguishment and refinancing transactions 3,963 34,222 (30,259) (88.4)%
Other gains, net (23)(175) 152 (86.9)%
Total other expense $ 77,428 138,496 (61,068) (44.1)%
The decrease in net interest expense for fiscal year 2012 resulted primarily from the repayment of $375.0 million of 9.625%
senior notes with proceeds from the Company’s initial public offering completed in August 2011. Net interest expense for fiscal
year 2012 also benefited from the re-pricing of outstanding term loans in conjunction with additional term loan borrowings in
February and May 2011, the proceeds of which were used to repay the higher rate senior notes, as well as the impact of the
extra week of interest expense in the prior year. Offsetting these decreases was incremental interest expense on $400.0 million
of additional term loan borrowings at an interest rate of 4.0%, which were used to repurchase 15.0 million shares of common
stock from certain shareholders in August 2012.
The loss on debt extinguishment and refinancing transactions for fiscal year 2012 of $4.0 million primarily related to the
$400.0 million of additional term loan borrowings in August 2012. The loss on debt extinguishment and refinancing
transactions of $34.2 million for fiscal year 2011 resulted from the term loan refinancing transactions and related repayments of
senior notes completed in the first and second quarters of 2011, as well as the repayment of senior notes with proceeds from the
Company's initial public offering in the third quarter of 2011.
The decline in other gains from fiscal year 2011 to fiscal year 2012 resulted primarily from reduced net foreign exchange gains.