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STARBUCKS CORP 10-K 11/16/2012 Income Statement (in millions, except per share data) Fiscal Year Ended Sep 30, 2012 Net revenues:

Use the attached spreadsheet to explain the change in ROE from 2011 to 2012 for each SUBX and DNKN and a comparison of the two firms in 2012.
STARBUCKS CORP 10-K 11/16/2012 Income Statement (in mil ions, except per share data) Fiscal Year Ended Sep 30, Oct 2, Oct 3, 2012 2011 2010 Net revenues: Company-operated stores $10,534.50 $9,632.40 $8,963.50 Licensed stores 1,210.30 1,007.50 875.2 CPG, foodservice and other 1,554.70 1,060.50 868.7 Total net revenues 13,299.50 11,700.40 10,707.40 Cost of sales including occupancy costs 5,813.30 4,915.50 4,416.50 Store operating expenses 3,918.10 3,594.90 3,471.90 Other operating expenses 429.9 392.8 279.7 Depreciation and amortization expenses 550.3 523.3 510.4 General and administrative expenses 801.2 749.3 704.6 Restructuring charges 53 Total operating expenses 11,512.80 10,175.80 9,436.10 Gain on sale of properties 30.2 Income from equity investees 210.7 173.7 148.1 Operating income 1,997.40 1,728.50 1,419.40 Interest income and other, net 94.4 115.9 50.3 Interest expense -32.7 -33.3 -32.7 Earnings before income taxes 2,059.10 1,811.10 1,437.00 Income taxes 674.4 563.1 488.7 Net earnings including noncontrolling 1,384.70 1,248.00 948.3 interests Net earnings (loss) attributable to noncontrolling 0.9 2.3 2.7 interests Net earnings attributable to Starbucks $1,383.80 $1,245.70 $945.60 Earnings per share basic $1.83 $1.66 $1.27 Earnings per share diluted $1.79 $1.62 $1.24 Weighted average shares outstanding: Basic 754.4 748.3 744.4 Diluted 773 769.7 764.2 Cash dividends declared per share $0.72 $0.56 $0.36 Balance Sheet (in mil ions, except per share data) Sep 30, Oct 2, Oct 3, 2012 2011 2010 ASSETS Current assets: Cash and cash equivalents $1,188.60 $1,148.10 $1,164.00 Short-term investments 848.4 902.6 285.7 Accounts receivable, net 485.9 386.5 302.7 Inventories 1,241.50 965.8 543.3 Prepaid expenses and other current assets 196.5 161.5 156.5 Deferred income taxes, net 238.7 230.4 304.2 Total current assets 4,199.60 3,794.90 2,756.40 Long-term investments available-for-sale 116 107 191.8 securities Equity and cost investments 459.9 372.3 341.5 Property, plant and equipment, net 2,658.90 2,355.00 2,416.50 Other assets 385.7 409.6 417.3 Goodwill 399.1 321.6 262.4 TOTAL ASSETS $8,219.20 $7,360.40 $6,385.90 LIABILITIES AND EQUITY Current liabilities: Accounts payable $398.10 $540.00 282.6 Accrued liabilities 1,133.80 940.9 936.2 Insurance reserves 167.7 145.6 146.2 Deferred revenue 510.2 449.3 414.1 Total current liabilities 2,209.80 2,075.80 1,779.10 Long-term debt 549.6 549.5 549.4 Other long-term liabilities 345.3 347.8 375.1 Total liabilities 3,104.70 2,973.10 2,703.60 Shareholders equity: Common stock ($0.001 par value) authorized, 0.7 0.7 0.7 1,200.0 shares; issued and outstanding, 749.3 and 744.8 shares, respectively (includes 3.4 common stock units in both periods) Additional paid-in capital 39.4 40.5 145.6 Retained earnings 5,046.20 4,297.40 3,471.20 Accumulated other comprehensive income 22.7 46.3 57.2 Total shareholders equity 5,109.00 4,384.90 3,674.70 Noncontrolling interests 5.5 2.4 7.6 Total equity 5,114.50 4,387.30 3,682.30 TOTAL LIABILITIES AND EQUITY $8,219.20 $7,360.40 $6,385.90 Cash Flows Fiscal Year Ended Sep 30, Oct 2, Oct 3, 2012 2011 2010 OPERATING ACTIVITIES: Net earnings including noncontrolling $1,384.70 $1,248.00 $948.30 interests Adjustments to reconcile net earnings to net cash provided by operating activities: Depreciation and amortization 580.6 550 540.8 Gain on sale of properties -30.2 Deferred income taxes, net 61.1 106.2 -42 Income earned from equity method investees, -49.3 -32.9 -17.2 net of distributions Gain resulting from acquisition of joint -55.2 -23.1 ventures Stock-based compensation 153.6 145.2 113.6 Other 23.6 33.3 75.5 Cash provided/(used) by changes in operating assets and liabilities: Accounts receivable -90.3 -88.7 -33.4 Inventories -273.3 -422.3 123.2 Accounts payable -105.2 227.5 -3.6 Accrued liabilities and insurance reserves 23.7 -81.8 -18.7 Deferred revenue 60.8 35.8 24.2 Prepaid expenses, other current assets -19.7 -22.5 17.3 and other assets Net cash provided by operating activities 1,750.30 1,612.40 1,704.90 INVESTING ACTIVITIES: Purchase of investments -1,748.60 -966 -549 Maturities and calls of investments 1,796.40 430 209.9 Acquisitions, net of cash acquired -129.1 -55.8 -12 Additions to property, plant and equipment -856.2 -531.9 -445.8 Cash proceeds from sale of property, plant, 5.3 117.4 5.1 and equipment Other -41.8 -13.2 2.3 Net cash used by investing activities -974 -1,019.50 -789.5 FINANCING ACTIVITIES: (Payments)/proceeds from short-term -30.8 30.8 borrowings Purchase of noncontrolling interest -27.5 -45.8 Proceeds from issuance of common stock 236.6 250.4 132.8 Excess tax benefit from exercise of stock 169.8 103.9 36.9 options Cash dividends paid -513 -389.5 -171 Repurchase of common stock -549.1 -555.9 -285.6 Minimum tax withholdings on share-based -58.5 -15 -4.9 awards Other -0.5 -5.2 -8.4 Net cash used by financing activities -745.5 -608 -346 9.7 -0.8 -5.2 Net increase (decrease) in cash and cash equivalents 40.5 -15.9 564.2 CASH AND CASH EQUIVALENTS: Beginning of period 1,148.10 1,164.00 599.8 End of period $1,188.60 $1,148.10 $1,164.00 Cash paid during the period for: Interest, net of capitalized interest $34.40 $34.40 $32.00 Income taxes $416.90 $350.10 $527.00 The Dupont Model FY 2012 FY 2011 FY 2010 Net Profit Margin 10.41% 10.67% 8.86% Total Asset Turnover 1.62x 1.59x 1.68x Equity Multiplier 1.61x 1.68x 1.73x ROE 27.07% 28.45% 25.75% The Dupont Model - Required on Question # 1 FY 2012 FY 2011 FY 2010 Net Profit 1,384.70 1,248.00 948.3 Equity 5,114.50 4,387.30 3,682.30 ROE = Net Profit / Equity 27.07% 28.45% 25.75% The Dupont Model - Required on Question # 2 FY 2012 FY 2011 FY 2010 Net Profit $1,384.70 $1,248.00 $948.30 Sales $13,299.50 $11,700.40 $10,707.40 Net Profit / Sales (A) 0.1041166961 0.1066630201 0.088564918 Sales $13,299.50 $11,700.40 $10,707.40 Assets $8,219.20 $7,360.40 $6,385.90 Sales / Assets (B) 1.62 1.59 1.68 Assets $8,219.20 $7,360.40 $6,385.90 Equity $5,114.50 $4,387.30 $3,682.30 Assets / Equity 1.61 $1.68 $1.73 A x B x C 27.07% 28.45% 25.75% Effect of exchange rate changes on cash and cash equivalents SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
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DUNKIN’ BRANDS GROUP, INC. AND SUBSIDIARIES Consolidated Balance Sheets (In thousands, except share data) 2012 2011 As ets Cur ent as ets: Cash and cash equivalents $ 252,618 246,715 Accounts receivable, net 32,407 37,122 Notes and other receivables, net 20,649 21,665 As ets held for sale 2,400 1,266 Defer ed income taxes, net 47,263 48,387 Restricted as ets of advertising funds 31,849 31,017 Prepaid income taxes 10,825 Prepaid expenses and other cur ent as ets 21,769 20,302 Total cur ent as ets 419,780 406,474 Property and equipment, net 181,172 185,360 Equity method investments 174,823 164,636 Goodwil 891,900 890,992 Other intangible as ets, net 1,479,784 1,507,219 Restricted cash 367 269 Other as ets 69,687 69,068 Total as ets $ 3,217,513 3,224,018 Liabilities and Stockholders’ Equity Cur ent liabilities: Cur ent portion of long-term debt $ 26,680 14,965 Capital lease obligations 371 232 Accounts payable 16,256 9,651 Income taxes payable, net 15,630 Liabilities of advertising funds 45,594 50,547 Defer ed income 24,683 24,918 Other cur ent liabilities 239,931 200,597 Total cur ent liabilities 353,515 316,540 Long-term debt, net 1,823,278 1,453,344 Capital lease obligations 7,251 4,928 Unfavorable operating leases acquired 19,061 21,440 Defer ed income 15,720 16,966 Defer ed income taxes, net 569,126 578,660 Other long-term liabilities 79,587 86,204 Total long-term liabilities 2,514,023 2,161,542 Commitments and contingencies (note 17) Stockholders’ equity: 106 119 Additional paid-in capital 1,251,498 1,478,291 Accumulated deficit (914,094 ) (752,075 ) Accumulated other comprehensive income 9,141 19,601 Total stockholders’ equity of Dunkin' Brands 346,651 745,936 Noncontrol ing interests 3,324 Total stockholders' equity 349,975 745,936 Total liabilities and stockholders' equity $ 3,217,513 3,224,018 See accompanying notes to consolidated financial statements. DUNKIN’ BRANDS GROUP, INC. AND SUBSIDIARIES Consolidated Statements of Operations (In thousands, except per share data) Fiscal year ended 2012 2011 2010 Revenues: Franchise fees and royalty income $ 418,940 398,474 359,927 Rental income 96,816 92,145 91,102 Sales of ice cream products 94,659 100,068 84,989 Sales at company-owned restaurants 22,922 12,154 17,362 Other revenues 24,844 25,357 23,755 Total revenues 658,181 628,198 577,135 Operating costs and expenses: Occupancy expenses—franchised restaurants 52,072 51,878 53,739 Cost of ice cream products 69,019 72,329 59,175 Company-owned restaurant expenses 23,133 12,854 17,825 General and administrative expenses, net 239,574 227,771 205,795 Depreciation 29,084 24,497 25,359 Amortization of other intangible as ets 26,943 28,025 32,467 Impairment charges 1,278 2,060 7,075 Total operating costs and expenses 441,103 419,414 401,435 Net income (los ) of equity method investments: Net income, excluding impairment 22,351 16,277 17,825 Impairment charge, net of tax (19,752 ) 22,351 (3,475 ) 17,825 Operating income 239,429 205,309 193,525 Other income (expense): Interest income 543 623 305 Interest expense (74,031 ) (105,072 ) (112,837 ) (3,963 ) (34,222 ) (61,955 ) Other gains, net 23 175 408 Total other expense (77,428 ) (138,496 ) (174,079 ) Income before income taxes 162,001 66,813 19,446 Provision (benefit) for income taxes 54,377 32,371 (7,415 ) 107,624 34,442 26,861 (684 ) Net income at ributable to Dunkin' Brands $ 108,308 34,442 26,861 Earnings (los ) per share: Clas L—basic and diluted n/a $ 6.14 4.87 Common—basic $ 0.94 (1.41 ) (2.04 ) Common—diluted 0.93 (1.41 ) (2.04 ) Cash dividends declared per common share 0.6 See accompanying notes to consolidated financial statements. DUNKIN’ BRANDS GROUP, INC. AND SUBSIDIARIES Consolidated Statements of Cash Flows (In thousands) Fiscal year ended 2012 2011 2010 Cash flows from operating activities: Net income including noncontrol ing interests $ 107,624 34,442 26,861 Depreciation and amortization 56,027 52,522 57,826 5,727 6,278 6,523 3,963 34,222 61,955 Impact of unfavorable operating leases acquired (2,352 ) (3,230 ) (4,320 ) Defer ed income taxes (6,946 ) (11,363 ) (28,389 ) Exces tax benefits from share-based compensation (1,494 ) (1,110 ) Impairment charges 1,278 2,060 7,075 Provision for (recovery of) bad debt (542 ) 2,019 1,505 Share-based compensation expense 6,920 4,632 1,461 Net los (income) of equity method investments (22,351 ) 3,475 (17,825 ) Dividends received from equity method investments 6,497 7,362 6,603 Other, net (845 ) (1,139 ) (137 ) Change in operating as ets and liabilities: Restricted cash 101,675 Accounts, notes, and other receivables, net 6,321 19,123 (11,815 ) Other cur ent as ets (1,480 ) 4,406 6,701 Accounts payable 2,804 85 (1,115 ) Other cur ent liabilities 38,767 17,904 29,384 Liabilities of advertising funds, net (5,688 ) (3,572 ) (346 ) Income taxes payable, net (38,928 ) 473 1,341 Defer ed income (1,491 ) (5,658 ) (12,809 ) Other, net (885 ) 156 (2,040 ) Net cash provided by operating activities 154,420 162,703 229,004 Cash flows from investing activities: Additions to property and equipment (22,398 ) (18,596 ) (15,358 ) Other, net (549 ) (1,211 ) (249 ) Net cash used in investing activities (22,947 ) (19,807 ) (15,607 ) Cash flows from financing activities: Proceeds from is uance of long-term debt 396,000 250,000 1,859,375 Repayment of long-term debt (15,441 ) (654,608 ) ) (5,978 ) (20,087 ) (34,979 ) Proceeds from initial public of ering, net of of ering costs 389,961 Repurchases of common stock (450,369 ) (286 ) (3,890 ) Dividends paid on Clas L common stock (500,002 ) Dividends paid on common stock (70,069 ) Change in restricted cash 218 178 16,144 Exces tax benefits from share-based compensation 11,978 1,494 1,110 Other, net 8,059 3,274 644 Net cash used in financing activities (125,602 ) (30,074 ) (132,583 ) 32 (207 ) 76 Increase in cash and cash equivalents 5,903 112,615 80,890 Cash and cash equivalents, beginning of year 246,715 134,100 53,210 Cash and cash equivalents, end of year $ 252,618 246,715 134,100 Supplemental cash flow information: Cash paid for income taxes $ 90,225 43,143 19,206 Cash paid for interest 54,115 103,147 100,629 5,244 1,641 1,822 2,818 178 See accompanying notes to consolidated financial statements. The Dupont Model FY 2012 FY 2011 Net Profit Margin 16.46% 5.48% Total As et Turnover 0.20x 0.19x Equity Multiplier 9.19x 4.32x ROE 30.95% 4.62% The Dupont Model - Required on Question # 1 FY 2012 FY 2011 Net Profit $108,308.00 $34,442.00 Equity $349,975.00 $745,936.00 ROE = Net Profit / Equity 30.95% 4.62% The Dupont Model - Required on Question # 2 FY 2012 FY 2011 Net Profit $108,308.00 $34,442.00 Sales $658,181.00 $628,198.00 Net Profit / Sales (A) 0.1645565582 0.0548266629 Sales $658,181.00 $628,198.00 As ets $3,217,513.00 $3,224,018.00 Sales / As ets (B) 0.20 0.1948494084 As ets $3,217,513.00 $3,224,018.00 Equity $349,975.00 $745,936.00 As ets / Equity 9.19 4.3221107441 A x B x C 30.95% 4.62% December 29, December 31, Prefer ed stock, $0.001 par value; 25,000,000 shares authorized; no shares is ued and outstanding at December 29, 2012 and December 31, 2011, respectively Common stock, $0.001 par value; 475,000,000 shares authorized; 106,146,984 and 120,136,631 shares is ued and outstanding at December 29, 2012 and December 31, 2011, respectively December 29, December 31, December 25, Total net income (los ) of equity method investments Los on debt extinguishment and refinancing transactions Net income including noncontrol ing interests Net los at ributable to noncontrol ing interests December 29, December 31, December 25, Adjustments to reconcile net income to net cash provided by operating activities: Amortization of defer ed financing costs and original is ue discount Los on debt extinguishment and refinancing transactions (1,470,98 5 Payment of defer ed financing and other debt-related costs Ef ect of exchange rate changes on cash and cash equivalents Noncash investing activities: Property and equipment included in accounts payable and other cur ent liabilities Purchase of leaseholds in exchange for capital lease obligation
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Explain the change in ROE from 2011 to 2012 for each SUBX and DNKN and a
comparison of the two firms in 2012.
Return on Equity is a best measure for profit generation capacity of an...

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