Baskin Robbins 2015 Annual Report Download - page 49

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venture and reduced future expectations of the Baskin-Robbins business in Japan, as well as an announced reconsideration of
the amount of semi-annual dividend payments by the Japan JV in the fourth quarter (see note 6 to the consolidated financial
statements included herein for further discussion). Also contributing to the decrease were unfavorable results from our Japan JV
compared to the prior fiscal year and the impact of unfavorable foreign exchange rates on net income of our South Korea joint
venture.
Other operating income, net includes gains recognized in connection with the sale of real estate and fluctuates based on the
timing of such transactions. Additionally, other operating income, net of $7.8 million for fiscal year 2014 included a gain
recognized in connection with the sale of the company-operated restaurants in the Atlanta market.
Fiscal year Increase (Decrease)
2015 2014 $ %
(In thousands, except percentages)
Interest expense, net $ 96,341 67,824 28,517 42.0 %
Loss on debt extinguishment and refinancing transactions 20,554 13,735 6,819 49.6 %
Other losses, net 1,084 1,566 (482) (30.8)%
Total other expense $ 117,979 83,125 34,854 41.9 %
The increase in net interest expense for fiscal year 2015 of $28.5 million was driven primarily by the securitization refinancing
transaction that occurred in January 2015, which resulted in additional borrowings and an increase in the weighted average
interest rate, as well as an increase in amortization of capitalized debt issuance costs compared to the prior fiscal year.
The loss on debt extinguishment and refinancing transactions for fiscal year 2015 of $20.6 million resulted from the January
2015 securitization refinancing transaction. The loss on debt extinguishment and refinancing transactions for fiscal year 2014
of $13.7 million resulted from the February 2014 refinancing transaction.
The decrease in other losses, net, for fiscal year 2015 was driven primarily by foreign exchange losses due primarily to
fluctuations in the U.S. dollar against the Australian dollar and the pound sterling.
Fiscal year
2015 2014
(In thousands, except percentages)
Income before income taxes $ 201,588 255,733
Provision for income taxes 96,359 80,170
Effective tax rate 47.8% 31.3%
The increased effective tax rate for fiscal year 2015 resulted primarily from the impairment of our investment in the Japan JV,
which reduced income before income taxes but for which there is no corresponding tax benefit. The impact of the impairment
of our investment in the Japan JV was approximately 10% on the overall effective tax rate for fiscal year 2015.
The effective tax rate for fiscal year 2014 was lower than normal primarily as a result of the net reversal of approximately $7.0
million of reserves for uncertain tax positions for which settlement with taxing authorities was reached during the year or were
otherwise deemed effectively settled. Additionally, the effective tax rate for fiscal year 2014 reflects a net tax benefit of $8.5
million related to the restructuring of our Canadian subsidiaries, which included a legal entity conversion of Dunkin’ Brands
Canada, Ltd. to a British Columbia unlimited liability company.
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 operating
income adjusted for amortization of intangible assets, long-lived asset impairment charges, and other infrequent or unusual
charges, which does not reflect the allocation of any corporate charges. This profitability measure is referred to as segment
profit. Segment profit for the Dunkin’ Donuts International and Baskin-Robbins International segments includes net income of
equity method investments, except for other-than-temporary impairment charges and the related reduction in depreciation, net
of tax, on the underlying long-lived assets.
For reconciliations to total revenues and income before income taxes, see note 12 to our consolidated financial statements
included herein. Revenues for all segments include only transactions with unaffiliated customers and include no intersegment
revenues. Revenues not included in segment revenues include revenue earned through certain licensing arrangements with third