Section 1 Part a: Name of company
The name of the company for this project is Dunkin Donuts.
Part b: Industry
The company is in the industry of franchising quick service restaurants (QSRs). Dunkin Donuts serves hot and cold coffee, baked goods and hard serve ice cream. The company focuses on menu innovation, marketing and franchisee coaching and support. Dunkin Donuts operates in four segments; Dunkin Donuts US, Baskin-Robbins International, Dunkin Donuts International and Baskin-Robbins US (Dunking Donuts Annual Report, 2012, p 1). To add onto this, Dunkin Donuts generates revenue from five main sources. The first source is royalties and fees from franchised restaurants while the second channel is rental income from restaurant properties that have been leased or subleased to franchisees. The third source is sales of ice cream products to franchisees in some international markets. The fourth revenue source is sales at restaurants which are owned by the company itself. The fifth source of revenue includes a number of sources such as licensing of rights in order to manufacture Baskin Robbins ice cream. This is meant for third parties for ice cream and any other related products, re franchising gains and transfer fees from franchisees (Dunking Donuts Annual Report, 2012, p 1).
Part c: Address of the company
Dunkin Donuts is located in Delaware. The address of principal executive offices is 130 Royall Street Canton, Massachusetts. The Zip Code is 02021. The registrant’s telephone number is (781) 737 – 3000 (Dunkin Donuts, 2012).
Part d: Website of the company
The company has a website. The website of Dunkin Donuts is http://www.dunkindonuts.com/dunkindonuts/en.html (Dunkin Donuts, 2012). The copy of Dunkin Donuts website is attached here.
English | EspanolWhite Plains, NY 10601 Change locationClosest StoreA Dunkin' classic gets a touch of spice with our new Spicy Smoked Sausage Breakfast Sandwich.Mocha Lattes & Coffees Black Cocoa Creme Iced CoffeeNew Spicy Breakfast SandwichThis Season's Hottest DrinkNew Holiday Latte FlavorsFor Everyone on Your 'Nice' ListFind a Dunkin'Show Details
Section 2: Basic information on the company Part a: State of incorporation
The state of Dunkin Brands is incorporation. The exact name is Dunkin Brands Group Incorporation. This is the exact name as specified in the charter (Dunking Donuts Annual Report, 2012, p1).
Part b: Fiscal year
The report is for fiscal year ending 12/29/2012 (Dunking Donuts Annual Report, 2012, p1).
Part c: Independent auditor
The independent auditor for Dunkin Donuts is KPMG LLP (Dunking Donuts Annual Report, 2012, p 50).
Part d: Auditor’s opinion
The auditor of the financial report of Dunkin Donuts has expressed an opinion based on audits conducted. In doing the audit, the auditor sought to determine whether the financial statements are free of material misstatement. The auditor examined the amounts in financial statements, accounting principles that were used and disclosures in the financial statements. The auditor is of the opinion that the consolidated financial statements of Dunkin Brands Group represent a fair position of the company and its subsidiaries. This is with regard to all the material respects of the financial statements. However, due to limitations of audit, KPMG may not have detected all misstatements exhaustively (Dunking Donuts Annual Report, 2012, p 50).
Part e: CEO of the company
The CEO of Dunkin Donuts is Nigel Travis. He has served in this position since January 2009 (Dunking Donuts Annual Report, 2012, p 96).
Part f: CFO of the company
The CFO of Dunkin Donuts is Paul Carbone. He was named as the Chief Financial Officer in July 2012 (Dunking Donuts Annual Report, 2012, p 96).
Part g: Chairman of the board
The chairman of the board of directors is Daniel Connelly. He was voted into this position in June 2011 (Ellis, 2011).
Part h: Number of people in the board
The board of Dunkin Donuts has 10 individuals. This number comprises of the chairman, executive and nonexecutive directors (Dunking Donuts Annual Report, 2012, p 96).
Part I: Stock exchange
Dunkin Donuts trades on the NASDAQ Global Select Market (Dunking Donuts Annual Report, 2012, p 1).
Part j: Ticker symbol of the company
The ticker symbol of Dunkin Donuts is DNKN (Dunking Donuts Annual Report, 2012, p 1).
Part k: Highest and Lowest prices for the fiscal year
The lowest price that has been recorded on the NASDAQ market is $ 23.24. It was recorded on December 15th 2011. The highest price that has been recorded in the same market is $ 40.00. The company recorded this price on January 31st 2013. The volatility in the stock market has made the Dunkin Donuts stock volatile (Dunking Donuts Annual Report, 2012, p 20).
Section 3: Income Statement
Part a: Zeros omitted from the numbers
The zeros that have been omitted from the income statement are three. This is because the figures that have been given in the income statement are in thousands (Dunking Donuts Annual Report, 2012, p 25).
Part b: Amount reported in the income statement
The revenue from sales of goods and services is US $ 658,181,000 while the cost of goods sold is US $ 418,752,000. The operating income is US $ 239,429,000 while the income tax expense is US $ 54,377,000. The interest expense is US $ 73,488,000 while total expenses are $ 441,103,000. The net income is US $ 108,308,000. The primary EPS is $ 0.94 (Dunking Donuts Annual Report, 2012, p 25).
Section 4: Balance sheet
Part a: A segregated balance sheet
Dunkin Donuts has a balance sheet that segregates current and long term assets and liabilities (Dunking Donuts Annual Report, 2012, p 51).
Part b: A comparative balance sheet
The annual report includes a comparative balance sheet. The years that have been included in the 2012 annual report are 2011, 2010, 2009 and 2008 (Dunking Donuts Annual Report, 2012, p 51).
Part c: Amount reported in the balance sheet
The current assets amount to US $ 419,780,000 while property, plant and equipment amounts to US $ 181,172,000. Other long term assets amount to US $ 69,687,000 while current liabilities are US $ 353,515. Long term liabilities amount to $ 79,587,000 while common stock has been valued at US $ 106,000. The additional paid in capital amounts to US $ 1,251,498,000 while retained earnings are a deficit of US $ 914,094,000 (Dunking Donuts Annual Report, 2012, p 51).
Section 5: Statement of stockholders equity
Part a: Presence of a statement of stockholders equity
There is a statement of Stockholders equity in this annual report (Dunking Donuts Annual Report, 2012, p 54).
Part b: Beginning amount
The beginning dollar amount of the statement of stockholders equity was $ 745,936,000 (Dunking Donuts Annual Report, 2012, p 54).
Part c: Ending amount
The ending dollar amount of the statement of stockholders’ equity is $ 349,975,000 (Dunking Donuts Annual Report, 2012, p 54).
Part d: Par value of the stock
The par value of common stock and preferred stock of Dunkin Donuts are $ 0.001(Dunking Donuts Annual Report, 2012, p 51).
Part e: Number of shares authorized and outstanding
The number of common shares that are authorized at the end of 2012 financial year is 475,000,000. The common shares that are outstanding are 106,146,984. The authorized preferred shares amount to 25,000,000. There are no outstanding preferred shares for the year under review (Dunking Donuts Annual Report, 2012, p 51).
Part f: Dividends and stock splits during the year
Dunkin Donuts paid cash dividends of $ 0.15 per share in each quarter of fiscal year 2012. The company spent 18 million dollars on this issue. In the second quarter, a total of 18.1 million dollars was spent. Dunkin donuts spent 18.1 million dollars in the third quarter on cash dividends while 15.9 million dollars were spent in the fourth quarter for cash dividends (Dunking Donuts Annual Report, 2012, p 23). There was neither a stock dividend nor a stock split during the year. A cash dividend of $ 0.60 has been declared, and it is to be paid in 2013 fiscal year (Dunking Donuts Annual Report, 2012, p 52).
Section 6: Statement of cash flows
Part a: Beginning cash balance
The beginning cash balance of Dunkin Donuts for fiscal year 2012 was $ 246,715,000(Dunking Donuts Annual Report, 2012, p 55).
Part b: Ending cash balance
The ending cash balance for Dunkin Donuts for the fiscal year 2012 was $ 252,618,000 (Dunking Donuts Annual Report, 2012, p 55).
Part c: Net change in cash
The net change in cash will be computed by deducting the beginning cash balance from the ending cash balance. The change will be $ 252,618,000 - $ 246,715,000 = $ 5,903,000 (Dunking Donuts Annual Report, 2012, p 55). This implies that the net change in cash was an increase.
Part d: Net cash flow from operating activities
The net cash flow from operating activities was $ 154,420,000 (Dunking Donuts Annual Report, 2012, p 55). From these answers, Dunkin Donuts used its cash in a wise manner. This is because there was a net increase in cash in the year 2012. This implies that Dunkin Donuts generated a higher amount of cash from its activities than the amount it invested (Adams & Cole, 2012). The cash, therefore, must have been used in a wise manner.
Section 7: Notes to financial statements
Part a: Notes to financial statements
There are 17 notes to financial statements (Dunking Donuts Annual Report, 2012, p 92).
Part b: Inventory method
The inventory for Dunkin Donuts consists of ice cream products. It is valued at the lower of estimated net value that is realizable or the cost method. The company applies FIFO method in its management of inventories. Inventories are included within prepaid expenses and other current assets in the consolidated balance sheets (Dunking Donuts Annual Report, 2012, p 58).
Part c: Depreciation method
The depreciation method that Dunkin Donuts uses is the straight line method. This is done for property and equipment. Leasehold improvements are depreciated over the shorter of the remaining lease term or estimated useful life. The estimated useful life for is 20 to 25 years and 5 to 20 years for buildings and leasehold improvements respectively. The company sets 3 to 10 years as the estimated useful life for store, production and other equipment. Major improvements or replacements that extend the life or increase the capacity of property are capitalized at cost and depreciated. Any major improvements to leasehold property are capitalized, and leasehold improvements are depreciated. All the interest costs that Dunkin Donuts incurs during the acquisition period of capital assets are capitalized as a crucial part of the asset and depreciated (Dunking Donuts Annual Report, 2012, p 59). The company uses only one depreciation method; the straight line method.
Part d: Stock based compensation
Dunkin Donuts has a stock based compensation. It is measured at fair value on the date of grant for all stock based awards. In addition, the company recognizes the compensation expense over the service period that the awards are expected to vest. In the future, Dunkin Donuts will reorganize its compensation cost. This will be targeted at all graded vesting awards. It will be subjected to all service conditions for the requisite service period in the entire award (Dunking Donuts Annual Report, 2012, p 62).
Part e: Accounting pronouncements
In the fiscal year 2012, there was one accounting pronouncement. The FASB issued guidance which permitted an entity to determine any quantitative factors in order to know whether it is necessary to perform a quantitative impairment test. This is geared towards indefinite lived intangible assets which are likely to be impaired. Dunkin Donuts adopted this guidance, but it did not have a material impact on its consolidated statements (Dunking Donuts Annual Report, 2012, p 63).
Part f: Income taxes note
The number of note that is aligned towards income taxes is 16. The domestic and foreign taxing jurisdictions benefited from Dunkin Donuts’ income taxes. As of December 29th 2012, Dunkin Donuts had income taxes of $ 162,001,000 (Dunking Donuts Annual Report, 2012, p 82).
Part g: Subsequent events
The subsequent events for Dunkin Donuts have been evaluated through the date of compilation of the consolidated financial statements (Dunking Donuts Annual Report, 2012, p 82).
Section 8: Overall opinion
On an overall basis, the annual report contained the required information by investors. It has many sections starting with the background of the company and information on metrics of its financial performance. The annual report had information as required by the Securities Exchange Commission, creditors and investors. The PR material that was included related to regulatory matters. The company has outlined domestic relations such as federal and local laws that require a display of nutritional information and adhering to safety standards. The annual report had information on how negative publicity may reduce its sales. One of the notable ways is a negative change in consumer perceptions by rating the Dunkin Donuts products as harmful to health of consumers (Dunking Donuts Annual Report, 2012, p 11). Investors will be in a position to comprehend the information in the annual report. This is because it is written in a clear and simple financial language. The figures are shown in a clear manner hence the average investor will not have difficulty in synthesizing the information.
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References
Adams, L., & Cole, J. (2012). The Implications of a Cash Flow Statement. Journal of Finance, 37.
Dunkin Donuts . (2012). Our Company. Dunkin Donuts Annual Report, 1.
Dunkin Donuts. (2012, July 19). Smokier, Spicier, Tastier than Ever. Retrieved from http://www.dunkindonuts.com/dunkindonuts/en.html: http://www.dunkindonuts.com
Ellis, M. (2011). Dunkin' Donuts Independent Franchise Owners Association Welcomes New Chairman. PR Web, 3.
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