Baskin Robbins 2015 Annual Report Download - page 48

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(1) Sales of Dunkin’ Donuts products in certain international markets that have historically been included in other revenues are now
included in sales of ice cream and other products. Sales from these transactions for the prior year have been reclassified to conform
to the current year presentation.
Total revenues increased $62.2 million, or 8.3%, in fiscal year 2015, driven by an increase in franchise fees and royalty income
of $30.9 million, or 6.4%, primarily as a result of Dunkin’ Donuts U.S. systemwide sales growth and additional franchise fees
due to favorable development mix and additional gross development, as well as an increase in other revenues of $24.7 million.
The increase in other revenues was driven by licensing fees earned from the Dunkin’ K-Cup® pod licensing agreement and
increased licensing fees earned from ice cream sales by our third-party ice cream manufacturer, as well as a settlement reached
with a master licensee, which resulted in the recovery of prior period royalty income and franchise fees. Also contributing to
the increase in revenues was an increase in sales at company-operated restaurants of $6.1 million driven by a net increase in the
number of company-operated restaurants. An increase in rental income of $2.8 million, driven by increases in average rent per
lease, sales-based rental income, and the number of leases was offset by a decline in sales of ice cream and other products of
$2.2 million.
Fiscal year Increase (Decrease)
2015 2014 $ %
(In thousands, except percentages)
Occupancy expenses – franchised restaurants $ 54,611 53,395 1,216 2.3 %
Cost of ice cream and other products(1) 76,877 83,129 (6,252) (7.5)%
Company-operated restaurant expenses 29,900 22,687 7,213 31.8 %
General and administrative expenses, net(1) 243,796 226,301 17,495 7.7 %
Depreciation and amortization 45,244 45,539 (295) (0.6)%
Long-lived asset impairment charges 623 1,484 (861) (58.0)%
Total operating costs and expenses $ 451,051 432,535 18,516 4.3 %
Net income (loss) of equity method investments (41,745) 14,846 (56,591)n/m
Other operating income, net 1,430 7,838 (6,408) (81.8)%
Operating income $ 319,567 338,858 (19,291) (5.7)%
(1) Costs of Dunkin’ Donuts products sold in certain international markets that have historically been included in general and
administrative expenses, net and are now included in cost of ice cream and other products. Costs from these transactions for the
prior year have been reclassified to conform to the current year presentation.
Occupancy expenses for franchised restaurants for fiscal year 2015 increased $1.2 million, or 2.3%, from the prior fiscal year
driven primarily by an increase in average rent per lease and an increase in sales-based rental expense.
Net margin on ice cream products increased for fiscal year 2015 to $38.4 million as a decrease in commodity costs, increase in
pricing, and favorable foreign exchange rates more than offset the decrease in sales volume.
Company-operated restaurant expenses increased $7.2 million, or 31.8%, from the prior year primarily as a result of a net
increase in the number of company-operated restaurants operating during the year.
General and administrative expenses increased $17.5 million, or 7.7%, in fiscal year 2015 due primarily to an increase in
personnel costs, driven primarily by incremental incentive compensation accruals, an increase in share-based compensation,
and costs incurred related to the final settlement of our Canadian pension plan as a result of the closure of our Canadian ice
cream manufacturing plant in fiscal year 2012. Also contributing to the increase in general and administrative expenses was an
increase in costs incurred to support our consumer packaged goods and international businesses.
Depreciation and amortization decreased $0.3 million in fiscal year 2015 resulting primarily from a decrease in amortization
due to intangible assets becoming fully amortized and favorable lease intangible assets being written-off upon termination of
the related leases, offset by an increase in depreciation due to the addition of depreciable assets.
The decrease in long-lived asset impairment charges in fiscal year 2015 of $0.9 million was driven primarily by the timing of
lease terminations, which resulted in the write-off of favorable lease intangible assets and leasehold improvements.
Net income (loss) of equity method investments decreased $56.6 million in fiscal year 2015 driven by an impairment of our
investment in the Japan JV of $54.3 million. The Japan JV impairment resulted from an other-than-temporary decline in the
value of our investment as a result of various factors including the continued declines in the operating performance of the joint