CANTON, Mass., July 24,
2014 /PRNewswire/ --
Second quarter highlights include:
- Dunkin' Donuts U.S. comparable store sales
growth of 1.8%
- Added 151 net new restaurants worldwide
including 75 net new Dunkin' Donuts in the U.S.
- Revenue increased 4.6%
- Adjusted operating income increased 3.3%;
adjusted operating income margin of 49.3%
- Diluted adjusted EPS increased 14.6% to
$0.47
- Board of Directors declares $0.23 third quarter dividend
Dunkin' Brands Group, Inc. (Nasdaq: DNKN), the parent company of
Dunkin' Donuts (DD) and Baskin-Robbins (BR), today reported results
for the second quarter ended June 28, 2014.
"Second quarter sales growth was below our expectations with
Dunkin' Donuts U.S. comparable store sales not accelerating as fast
or to the degree that we anticipated after a difficult first
quarter. We believe this was largely the result of macroeconomic
challenges facing consumers, as evidenced across the retail and the
QSR industries, along with an unseasonably cold, rainy start to the
spring season," said Nigel Travis,
Chairman & CEO, Dunkin' Brands Group, Inc. "Dunkin' Donuts U.S.
transaction growth was encouraging and comparable store sales
gradually improved throughout the quarter with June average weekly
sales reaching the highest volume on record. We
remain confident in our ability to drive long-term
growth through our product and marketing innovation, including our
mobile and loyalty programs. In fact, we're excited to announce
that we recently eclipsed 7.9 million downloads of the Dunkin'
Donuts mobile app, and we are nearing 1.3 million DD Perks Rewards
members."
"In addition to the impact of Dunkin' Donuts U.S. comparable
store sales, our full-year earnings per share target is also being
affected by weak performance by our Baskin-Robbins joint venture in
Japan along with
lower-than-anticipated profit from the sale of ice cream in the
Baskin-Robbins International business," said Paul Carbone, CFO, Dunkin' Brands Group, Inc.
"While we are updating certain 2014 targets, we are maintaining our
long-term growth targets."
SECOND QUARTER
2014 KEY FINANCIAL HIGHLIGHTS
|
|
($ in millions,
except per share data)
|
Three months
ended
|
|
Increase
(Decrease)
|
Amounts and
percentages may not recalculate due to rounding
|
June 28,
2014
|
June 29,
2013
|
|
$ /
#
|
%
|
Franchisee reported
sales
|
$
|
2,536.4
|
|
2,397.6
|
|
|
138.8
|
|
5.8%
|
|
Systemwide sales
growth
|
5.7%
|
|
5.5%
|
|
|
|
|
|
|
Comparable store
sales growth (decline):
|
|
|
|
|
|
|
|
|
|
DD U.S. comparable
store sales growth
|
1.8%
|
|
4.0%
|
|
|
|
|
|
|
BR U.S. comparable
store sales growth
|
4.2%
|
|
1.6%
|
|
|
|
|
|
|
DD International
comparable store sales decline
|
(3.1)%
|
|
(1.7)%
|
|
|
|
|
|
|
BR International
comparable store sales growth (decline)
|
(1.6)%
|
|
2.6%
|
|
|
|
|
|
|
Development
data1:
|
|
|
|
|
|
|
|
|
|
Consolidated global
net POD development
|
151
|
|
151
|
|
|
—
|
|
—%
|
|
DD global PODs at
period end
|
10,993
|
|
10,517
|
|
|
476
|
|
4.5%
|
|
BR global PODs at
period end
|
7,412
|
|
7,110
|
|
|
302
|
|
4.2%
|
|
Consolidated global
PODs at period end
|
18,405
|
|
17,627
|
|
|
778
|
|
4.4%
|
|
Financial
data:
|
|
|
|
|
|
|
|
|
|
Revenues
|
$
|
190.9
|
|
182.5
|
|
|
8.4
|
|
4.6%
|
|
Operating
income
|
87.6
|
|
76.8
|
|
|
10.8
|
|
14.0%
|
|
Operating income
margin
|
45.9%
|
|
42.1%
|
|
|
|
|
|
|
Adjusted operating
income2
|
$
|
94.2
|
|
91.2
|
|
|
3.0
|
|
3.3%
|
|
Adjusted operating
income margin2
|
49.3%
|
|
50.0%
|
|
|
|
|
|
|
Net income
|
$
|
46.2
|
|
40.8
|
|
|
5.4
|
|
13.2%
|
|
Adjusted net
income2
|
50.2
|
|
43.9
|
|
|
6.3
|
|
14.3%
|
|
Earnings per
share:
|
|
|
|
|
|
|
|
|
|
Common–basic
|
0.44
|
|
0.38
|
|
|
0.06
|
|
15.8%
|
|
Common–diluted
|
0.43
|
|
0.38
|
|
|
0.05
|
|
13.2%
|
|
Diluted adjusted
earnings per share2
|
0.47
|
|
0.41
|
|
|
0.06
|
|
14.6%
|
|
Weighted average
number of common shares – diluted (in millions)
|
107.2
|
|
108.2
|
|
|
(1.0)
|
|
(0.9)%
|
|
|
|
1 Prior
year POD counts have been adjusted to reflect the results of an
internal POD count audit.
|
|
|
|
2 Adjusted
operating income, adjusted operating income margin, and adjusted
net income are non-GAAP measures reflecting operating income and
net income adjusted for amortization of intangible assets,
long-lived asset impairments, and other non-recurring, infrequent,
or unusual charges, net of the tax impact of such adjustments in
the case of adjusted net income. Diluted adjusted earnings per
share is a non-GAAP measure calculated using adjusted net income.
Please refer to "Non-GAAP Measures and Statistical Data" and
"Dunkin' Brands Group, Inc. and Subsidiaries Non-GAAP
Reconciliations" for further detail.
|
|
Global systemwide sales growth in the second quarter was
primarily attributable to global store development and Dunkin'
Donuts U.S. comparable store sales growth (which includes stores
open 54 weeks or more).
Dunkin' Donuts U.S. comparable store sales growth in the second
quarter was driven by higher traffic and increased average ticket
resulting from our continued focus on product and marketing
innovation. Growth was driven by beverages, led by Iced
Coffee, Frozen Beverages, and Hot and Iced Espresso; by breakfast
sandwiches and associated add-ons like Hash Browns, led by the
Chicken Apple Sausage Breakfast Sandwich; and by donuts including
the Blueberry Cobbler and flower-shaped donuts and the celebration
of National Donut Day in June. Traffic growth accounted for more
than half of the comparable store sales growth in the second
quarter.
Baskin-Robbins U.S. comparable store sales growth was driven by
sales of Cups & Cones, Cakes, and Beverages as a result
of a new program offering guests a free waffle cone with the
purchase of a second scoop of ice cream, the Mother's and
Father's Day holidays as well as the
launch of online ice cream cake ordering.
In the second quarter, Dunkin' Brands franchisees and licensees
opened 151 net new restaurants around the globe. This includes 75
net new Dunkin' Donuts U.S. locations, 47 net new Baskin-Robbins
International locations, 17 net new Dunkin' Donuts International
locations, and 12 net new Baskin-Robbins U.S. locations.
Additionally, Dunkin' Donuts U.S. franchisees remodeled 94
restaurants during the quarter.
Revenues for the second quarter increased 4.6 percent compared
to the prior year period primarily from increased royalty income
due to systemwide sales growth.
Operating income for the second quarter increased $10.8 million, or 14.0 percent, from the prior
year period primarily as a result of the increase in revenues and a
gain recognized in connection with the sale of all company-owned
restaurants in the Atlanta market.
Additionally, the prior year period included a one-time
$7.5 million charge related to a
third-party product volume guarantee and a $7.0 million gain related to the sale of 80
percent of our Baskin-Robbins Australia business. Adjusted
operating income increased $3.0
million, or 3.3 percent, from the second quarter of 2013 as
a result of the increase in revenues and gain on the sale of
company-owned restaurants in Atlanta, offset by the gain from the sale of
the Baskin-Robbins Australia business recognized in the prior year
period.
Net income for the second quarter increased by $5.4 million, or 13.2 percent, compared to the
prior year period primarily as a result of the increase in
operating income of $10.8 million and
a $3.1 million decrease in interest
expense, offset by a $9.2 million
increase in income tax expense. Adjusted net income increased by
$6.3 million, or 14.3 percent,
compared to the second quarter of 2013, as a result of the increase
in adjusted operating income and decrease in interest expense.
Diluted adjusted earnings per share increased by 14.6 percent to
$0.47 for the second quarter of 2014
compared to the prior year period as a result of the increase in
adjusted net income and a decrease in shares outstanding. The
decrease in shares outstanding from the prior year period is due
primarily to the repurchase of shares, offset by the exercise of
stock options. During the second quarter, the Company repurchased a
total of 1,260,000 shares.
SECOND QUARTER
2014 SEGMENT RESULTS
|
|
Amounts and
percentages may not recalculate due to rounding
|
|
Three months
ended
|
|
Increase
(Decrease)
|
Dunkin' Donuts
U.S.
|
|
June
28, 2014
|
|
|
June
29, 2013
|
|
|
$ /
#
|
%
|
|
($ in thousands
except as otherwise noted)
|
Comparable store
sales growth
|
|
1.8%
|
|
|
4.0%
|
|
|
|
|
|
|
Systemwide sales
growth
|
|
6.3%
|
|
|
8.2%
|
|
|
|
|
|
|
Franchisee reported
sales (in millions)
|
|
$
|
1,813.2
|
|
|
1,704.5
|
|
|
108.7
|
|
6.4%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenues:
|
|
|
|
|
|
|
|
|
|
|
|
Royalty
income
|
|
$
|
98,250
|
|
|
91,954
|
|
|
6,296
|
|
6.8%
|
|
Franchise
fees
|
|
8,430
|
|
|
5,694
|
|
|
2,736
|
|
48.1%
|
|
Rental
income
|
|
24,611
|
|
|
24,042
|
|
|
569
|
|
2.4%
|
|
Sales at
company-owned restaurants
|
|
4,736
|
|
|
6,240
|
|
|
(1,504)
|
|
(24.1)%
|
|
Other
revenues
|
|
423
|
|
|
742
|
|
|
(319)
|
|
(43.0)%
|
|
Total
revenues
|
|
$
|
136,450
|
|
|
128,672
|
|
|
7,778
|
|
6.0%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Segment
profit1
|
|
$
|
100,981
|
|
|
91,302
|
|
|
9,679
|
|
10.6%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Points of
distribution
|
|
7,821
|
|
|
7,447
|
|
|
374
|
|
5.0%
|
|
Gross
openings
|
|
105
|
|
|
87
|
|
|
18
|
|
20.7%
|
|
Net
openings
|
|
75
|
|
|
63
|
|
|
12
|
|
19.0%
|
|
|
|
1 Prior
year amounts reflect change in segment profit measure. Please refer
to "Segment Profit Comparability" for further detail.
|
|
Dunkin' Donuts U.S. revenues of $136.5
million represented an increase of 6.0 percent
year-over-year. The increase was primarily a result of
increased royalty income, as well as franchise fees due primarily
to timing of franchise renewals and an increase in development
year-over-year. The increases were offset by a decline in sales at
company-owned restaurants due to the sale of all company-owned
restaurants in the Atlanta market
early in the second quarter.
Dunkin' Donuts U.S. segment profit in the second quarter
increased $9.7 million over the prior
year period to $101.0 million, which
was driven primarily by revenue growth and a gain recognized in
connection with the sale of the company-owned restaurants in the
Atlanta market.
Amounts and
percentages may not recalculate due to rounding
|
|
Three months
ended
|
|
Increase
(Decrease)
|
Dunkin' Donuts
International
|
|
June 28,
2014
|
|
|
June 29,
2013
|
|
|
$ /
#
|
%
|
|
($ in thousands
except as otherwise noted)
|
Comparable store
sales decline
|
|
(3.1)%
|
|
|
(1.7)%
|
|
|
|
|
|
|
Systemwide sales
growth
|
|
3.5%
|
|
|
3.5%
|
|
|
|
|
|
|
Franchisee reported
sales (in millions)
|
|
$
|
176.7
|
|
|
170.8
|
|
|
5.9
|
|
3.5%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenues:
|
|
|
|
|
|
|
|
|
|
|
|
Royalty
income
|
|
$
|
3,859
|
|
|
3,535
|
|
|
324
|
|
9.2%
|
|
Franchise
fees
|
|
635
|
|
|
342
|
|
|
293
|
|
85.7%
|
|
Rental
income
|
|
49
|
|
|
31
|
|
|
18
|
|
58.1%
|
|
Other
revenues
|
|
(22)
|
|
|
23
|
|
|
(45)
|
|
n/m
|
|
Total
revenues
|
|
$
|
4,521
|
|
|
3,931
|
|
|
590
|
|
15.0%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Segment
profit1
|
|
$
|
3,015
|
|
|
1,581
|
|
|
1,434
|
|
90.7%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Points of
distribution2
|
|
3,172
|
|
|
3,070
|
|
|
102
|
|
3.3%
|
|
Gross
openings
|
|
90
|
|
|
80
|
|
|
10
|
|
12.5%
|
|
Net
openings
|
|
17
|
|
|
33
|
|
|
(16)
|
|
(48.5)%
|
|
|
|
1 Prior
year amounts reflect change in segment profit measure. Please refer
to "Segment Profit Comparability" for further detail.
|
|
|
|
2 Prior
year POD counts have been adjusted to reflect the results of an
internal POD count audit.
|
|
Dunkin' Donuts International second quarter systemwide sales
increased 3.5 percent from the prior year period, driven by sales
growth in the Middle East,
Germany, Spain, and India, offset by a decline in South Korea. The decline in South Korea was partially offset by favorable
foreign exchange. On a constant currency basis, systemwide sales
increased by approximately 2 percent.
Dunkin' Donuts International second quarter revenues of
$4.5 million represented an increase
of 15.0 percent year-over-year. The increase in revenue was
primarily a result of an increase in royalty income and franchise
fees for openings in new international markets.
Segment profit for Dunkin' Donuts International increased
$1.4 million to $3.0 million, primarily due to revenue growth and
a reduction in expenses due to investments in marketing in the
prior year. Also contributing to the increase in segment profit was
a partial recovery of a previously-reserved note receivable related
to our Spain joint venture, as
well as losses incurred from our Spain joint venture in the prior year
period.
Amounts and
percentages may not recalculate due to rounding
|
|
Three months
ended
|
|
Increase
(Decrease)
|
Baskin-Robbins
U.S.
|
|
June 28,
2014
|
|
|
June 29,
2013
|
|
|
$ /
#
|
%
|
|
($ in thousands
except as otherwise noted)
|
Comparable store
sales growth
|
|
4.2%
|
|
|
1.6%
|
|
|
|
|
|
|
Systemwide sales
growth
|
|
4.5%
|
|
|
2.0%
|
|
|
|
|
|
|
Franchisee reported
sales (in millions)
|
|
$
|
169.1
|
|
|
161.9
|
|
|
7.1
|
|
4.4%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenues:
|
|
|
|
|
|
|
|
|
|
|
|
Royalty
income
|
|
$
|
8,410
|
|
|
8,174
|
|
|
236
|
|
2.9%
|
|
Franchise
fees
|
|
222
|
|
|
203
|
|
|
19
|
|
9.4%
|
|
Rental
income
|
|
814
|
|
|
820
|
|
|
(6)
|
|
(0.7)%
|
|
Sales of ice cream
products
|
|
1,104
|
|
|
1,087
|
|
|
17
|
|
1.6%
|
|
Other
revenues
|
|
2,402
|
|
|
2,205
|
|
|
197
|
|
8.9%
|
|
Total
revenues
|
|
$
|
12,952
|
|
|
12,489
|
|
|
463
|
|
3.7%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Segment
profit1
|
|
$
|
9,315
|
|
|
7,856
|
|
|
1,459
|
|
18.6%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Points of
distribution
|
|
2,480
|
|
|
2,470
|
|
|
10
|
|
0.4%
|
|
Gross
openings
|
|
28
|
|
|
19
|
|
|
9
|
|
47.4%
|
|
Net
openings
|
|
12
|
|
|
5
|
|
|
7
|
|
140.0%
|
|
|
|
1 Prior
year amounts reflect change in segment profit measure. Please refer
to "Segment Profit Comparability" for further detail.
|
|
Baskin-Robbins U.S. second quarter revenue increased 3.7 percent
from the prior year period to $13.0
million due primarily to increases in royalty income and
other revenues.
Segment profit for Baskin-Robbins U.S. increased $1.5 million, or 18.6 percent, year-over-year
primarily as a result of the increase in revenues and a reduction
in expenses as the prior year period included investments in
advertising and other brand-building activities.
Amounts and
percentages may not recalculate due to rounding
|
|
Three months
ended
|
|
Increase
(Decrease)
|
Baskin-Robbins
International
|
|
June 28,
2014
|
|
|
June 29,
2013
|
|
|
$ /
#
|
%
|
|
($ in thousands
except as otherwise noted)
|
Comparable store
sales growth (decline)
|
|
(1.6)%
|
|
|
2.6%
|
|
|
|
|
|
|
Systemwide sales
growth (decline)
|
|
4.7%
|
|
|
(3.8)%
|
|
|
|
|
|
|
Franchisee reported
sales (in millions)
|
|
$
|
377.3
|
|
|
360.4
|
|
|
17.0
|
|
4.7%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenues:
|
|
|
|
|
|
|
|
|
|
|
|
Royalty
income
|
|
$
|
2,213
|
|
|
2,591
|
|
|
(378)
|
|
(14.6)%
|
|
Franchise
fees
|
|
248
|
|
|
301
|
|
|
(53)
|
|
(17.6)%
|
|
Rental
income
|
|
139
|
|
|
142
|
|
|
(3)
|
|
(2.1)%
|
|
Sales of ice cream
products
|
|
30,902
|
|
|
31,722
|
|
|
(820)
|
|
(2.6)%
|
|
Other
revenues
|
|
129
|
|
|
161
|
|
|
(32)
|
|
(19.9)%
|
|
Total
revenues
|
|
$
|
33,631
|
|
|
34,917
|
|
|
(1,286)
|
|
(3.7)%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Segment
profit1
|
|
$
|
11,724
|
|
|
19,411
|
|
|
(7,687)
|
|
(39.6)%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Points of
distribution2
|
|
4,932
|
|
|
4,640
|
|
|
292
|
|
6.3%
|
|
Gross
openings
|
|
95
|
|
|
114
|
|
|
(19)
|
|
(16.7)%
|
|
Net
openings
|
|
47
|
|
|
50
|
|
|
(3)
|
|
(6.0)%
|
|
|
|
1 Prior
year amounts reflect change in segment profit measure. Please refer
to "Segment Profit Comparability" for further detail.
|
|
|
|
2 Prior
year POD counts have been adjusted to reflect the results of an
internal POD count audit.
|
|
Baskin-Robbins International systemwide sales increased 4.7
percent from the prior year period driven by increases in sales in
South Korea and the Middle East, offset by a decline in sales in
Japan. On a constant currency
basis, systemwide sales increased by approximately 4 percent.
Baskin-Robbins International second quarter revenues decreased
3.7 percent from the prior year period to $33.6 million due primarily to sales of ice cream
products to our Australian joint venture in the prior year period
in conjunction with the sale of 80 percent of our Baskin-Robbins
Australia business, as well as a decline in royalty income.
Second quarter segment profit decreased 39.6 percent from the
prior year period to $11.7 million
due primarily to a $7.0 million gain
recognized on the sale of the Baskin-Robbins Australia business in
the prior year period and a decrease in income from our
Japan joint venture.
COMPANY UPDATES
- The Company today announced that the Board of Directors
declared a third quarter cash dividend of $0.23 per share, payable on September 3, 2014 to shareholders of record as of
the close of business on August 25,
2014.
FISCAL YEAR 2014 TARGETS
As described below, the Company has updated or reiterated its
performance targets regarding its 2014 expectations.
- The Company now expects Dunkin' Donuts U.S. comparable store
sales growth of 2 to 3 percent (previously it expected 3 to 4
percent comparable store sales growth) and it continues to expect
Baskin-Robbins U.S. comparable store sales growth of 1 to 3
percent.
- The Company continues to expect that Dunkin' Donuts U.S. will
add between 380 and 410 net new restaurants representing greater
than 5 percent net restaurant growth and continues to expect
Baskin-Robbins U.S. will add between 5 and 10 net new
restaurants.
- Internationally, the Company continues to target opening 300 to
400 net new restaurants across the two brands.
- Globally, the Company continues to expect to open between 685
and 800 net new units.
- The Company now expects revenue growth of between 5 and 7
percent (previously it expected 6 to 8 percent revenue growth) and
adjusted operating income growth of between 7 and 9 percent
(previously it expected 10 to 12 percent adjusted operating income
growth).
- The Company now expects adjusted earnings per share of
$1.73 to $1.77 (previously it
expected $1.79 to $1.83), which would
represent approximately 13 percent to 16 percent year-over-year
adjusted earnings-per-share growth. This target is based on diluted
weighted average shares for the full year of 107.4 million.
Conference Call
As previously announced, Dunkin' Brands will be holding a
conference call today at 8:00 am ET
hosted by Nigel Travis, Chairman
& Chief Executive Officer, and Paul
Carbone, Chief Financial Officer. The dial-in number is
(866) 393-1607 or (914) 495-8556, conference number 67461258.
Dunkin' Brands will broadcast the conference call live over the
Internet at http://investor.dunkinbrands.com. A replay of the
conference call will be available on the Company's website at
http://investor.dunkinbrands.com.
The Company's consolidated statements of operations, condensed
consolidated balance sheets, condensed consolidated statements of
cash flows and other additional information have been provided with
this press release. This information should be reviewed in
conjunction with this press release.
Forward-Looking Statements
Certain statements contained herein are not based on historical
fact and are "forward-looking statements" within the meaning of the
applicable securities laws and regulations. Generally, these
statements can be identified by the use of words such as
"anticipate," "believe," "could," "estimate," "expect," "feel,"
"forecast," "intend," "may," "plan," "potential," "project,"
"should," "would," and similar expressions intended to identify
forward-looking statements, although not all forward-looking
statements contain these identifying words. By their
nature, forward-looking statements involve risks and uncertainties
because they relate to events and depend on circumstances that may
or may not occur in the future. These risk and uncertainties
include, but are not limited to: the ongoing level of profitability
of franchisees and licensees; our franchisees' and licensees'
ability to sustain same store sales growth; successful westward
expansion; changes in working relationships with our franchisees
and licensees and the actions of our franchisees and licensees; our
master franchisees' relationships with sub-franchisees; the
strength of our brand in the markets in which we compete; changes
in competition within the quick-service restaurant segment of the
food industry; changes in consumer behavior resulting from changes
in technologies or alternative methods of delivery; economic and
political conditions in the countries where we operate; our
substantial indebtedness; our ability to protect our intellectual
property rights; consumer preferences, spending patterns and
demographic trends; the impact of seasonal changes, including
weather effects, on our business; the success of our growth
strategy and international development; changes in commodity and
food prices, particularly coffee, dairy products and sugar, and
other operating costs; shortages of coffee; failure of our network
and information technology systems; interruptions or shortages in
the supply of products to our franchisees and licensees; the impact
of food borne-illness or food safety issues or adverse public or
media opinions regarding the health effects of consuming our
products; our ability to collect royalty payments from our
franchisees and licensees; the ability of our franchisees and
licensees to open new restaurants and keep existing restaurants in
operation; our ability to retain key personnel; any inability to
protect consumer credit card data and catastrophic events.
Forward-looking statements reflect management's analysis as of
the date of this press release. Important factors that could
cause actual results to differ materially from our expectations are
more fully described in our other filings with the Securities and
Exchange Commission, including under the section headed "Risk
Factors" in our most recent annual report on Form 10-K. Except as
required by applicable law, we do not undertake to publicly update
or revise any of these forward-looking statements, whether as a
result of new information, future events or otherwise.
Non-GAAP Measures and Statistical Data
In addition to the GAAP financial measures set forth in this
press release, the Company has included certain non-GAAP
measurements, adjusted operating income, adjusted operating income
margin, adjusted net income, and diluted adjusted earnings per
share, which present operating results on a basis adjusted for
certain items. The Company uses these non-GAAP measures as key
performance measures for the purpose of evaluating performance
internally. We also believe these non-GAAP measures provide our
investors with useful information regarding our historical
operating results. These non-GAAP measures are not intended to
replace the presentation of our financial results in accordance
with GAAP. Use of the terms adjusted operating income, adjusted
operating income margin, adjusted net income, and diluted adjusted
earnings per share may differ from similar measures reported by
other companies. These non-GAAP measures are reconciled from the
respective measures determined under GAAP in the attached table
"Dunkin' Brands Group, Inc. and Subsidiaries Non-GAAP
Reconciliations."
Additionally, the Company has included metrics such as
systemwide sales growth and comparable store sales growth, which
are commonly used statistical measures in the quick service
restaurant industry and are important to understanding the
Company's performance.
The Company uses "systemwide sales growth" to refer to the
percentage change in sales at both franchisee- and company-owned
restaurants from the comparable period of the prior year. Changes
in systemwide sales are driven by changes in comparable store sales
and changes in the number of restaurants.
The Company uses "DD U.S. comparable store sales growth," "BR
U.S. comparable store sales growth," "DD International comparable
store sales growth," and "BR International comparable store sales
growth," which are calculated by including only sales from
franchisee- and company-owned restaurants that have been open at
least 54 weeks and that have reported sales in the current and
comparable prior year week.
Segment Profit Comparability
Beginning in fiscal year 2014, the key measure used by the
Company to assess the performance of and allocate resources to each
reportable segment, referred to as segment profit, was revised to
better align the segments with our consolidated performance
measures and incentive targets. As a result, segment profit now
reflects operating income adjusted for amortization of intangible
assets, long-lived asset impairments, and other non-recurring,
infrequent, or unusual charges, and does not reflect the allocation
of any corporate charges. Prior to fiscal year 2014, segment profit
was measured based on earnings before interest, taxes,
depreciation, amortization, impairment charges, loss on debt
extinguishment and refinancing transactions, other gains and
losses, and unallocated corporate charges. The segment profit
amounts included herein for the three months ended June 29, 2013 have been restated to reflect this
change to the measurement of segment profit to ensure
comparability.
About Dunkin' Brands Group, Inc.
With more than 18,000 points of distribution in nearly 60
countries worldwide, Dunkin' Brands Group, Inc. (Nasdaq: DNKN) is
one of the world's leading franchisors of quick service restaurants
(QSR) serving hot and cold coffee and baked goods, as well as
hard-serve ice cream. At the end of fiscal 2013, Dunkin'
Brands nearly 100 percent franchised business model included nearly
11,000 Dunkin' Donuts restaurants and 7,300 Baskin-Robbins
restaurants, which are primarily owned and operated by
approximately 2,000 franchisees, licensees and joint venture
partners. For the full-year 2013, the Company had
franchisee-reported sales of approximately $9.3 billion. Dunkin' Brands Group, Inc. is
headquartered in Canton, Mass.
DUNKIN' BRANDS
GROUP, INC. AND SUBSIDIARIES
|
Consolidated
Statements of Operations
|
(In thousands, except
per share data)
|
(Unaudited)
|
|
|
|
Three months
ended
|
|
Six months
ended
|
|
|
June 28,
2014
|
|
June 29,
2013
|
|
June 28,
2014
|
|
June 29,
2013
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenues:
|
|
|
|
|
|
|
|
|
|
|
|
|
Franchise fees and
royalty income
|
|
$
|
122,267
|
|
|
112,794
|
|
|
228,979
|
|
|
216,559
|
|
Rental
income
|
|
25,633
|
|
|
25,055
|
|
|
48,080
|
|
|
47,487
|
|
Sales of ice cream
products
|
|
32,044
|
|
|
32,809
|
|
|
60,715
|
|
|
56,389
|
|
Sales at
company-owned restaurants
|
|
4,736
|
|
|
6,240
|
|
|
11,052
|
|
|
12,011
|
|
Other
revenues
|
|
6,228
|
|
|
5,590
|
|
|
14,030
|
|
|
11,900
|
|
Total
revenues
|
|
190,908
|
|
|
182,488
|
|
|
362,856
|
|
|
344,346
|
|
Operating costs and
expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
Occupancy
expenses—franchised restaurants
|
|
13,560
|
|
|
12,820
|
|
|
26,572
|
|
|
25,596
|
|
Cost of ice cream
products
|
|
22,995
|
|
|
24,302
|
|
|
42,743
|
|
|
40,288
|
|
Company-owned
restaurant expenses
|
|
4,904
|
|
|
5,940
|
|
|
11,267
|
|
|
11,595
|
|
General and
administrative expenses, net(a)
|
|
56,381
|
|
|
62,978
|
|
|
116,095
|
|
|
118,555
|
|
Depreciation
|
|
4,930
|
|
|
5,522
|
|
|
9,843
|
|
|
11,370
|
|
Amortization of other
intangible assets
|
|
6,384
|
|
|
6,565
|
|
|
12,789
|
|
|
13,147
|
|
Long-lived asset
impairment charges
|
|
523
|
|
|
107
|
|
|
646
|
|
|
355
|
|
Total operating costs
and expenses
|
|
109,677
|
|
|
118,234
|
|
|
219,955
|
|
|
220,906
|
|
Net income of equity
method investments
|
|
4,048
|
|
|
4,782
|
|
|
7,148
|
|
|
7,869
|
|
Other operating
income, net(a)
|
|
2,278
|
|
|
7,769
|
|
|
6,605
|
|
|
8,955
|
|
Operating
income
|
|
87,557
|
|
|
76,805
|
|
|
156,654
|
|
|
140,264
|
|
Other income
(expense):
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest
income
|
|
69
|
|
|
91
|
|
|
138
|
|
|
205
|
|
Interest
expense
|
|
(16,823)
|
|
|
(19,886)
|
|
|
(34,764)
|
|
|
(40,718)
|
|
Loss on debt
extinguishment and refinancing transactions
|
|
—
|
|
|
—
|
|
|
(13,735)
|
|
|
(5,018)
|
|
Other losses,
net
|
|
(113)
|
|
|
(813)
|
|
|
(86)
|
|
|
(1,203)
|
|
Total other
expense
|
|
(16,867)
|
|
|
(20,608)
|
|
|
(48,447)
|
|
|
(46,734)
|
|
Income before income
taxes
|
|
70,690
|
|
|
56,197
|
|
|
108,207
|
|
|
93,530
|
|
Provision for income
taxes
|
|
24,719
|
|
|
15,487
|
|
|
39,408
|
|
|
29,159
|
|
Net income including
noncontrolling interests
|
|
45,971
|
|
|
40,710
|
|
|
68,799
|
|
|
64,371
|
|
Net loss attributable
to noncontrolling interests
|
|
(220)
|
|
|
(102)
|
|
|
(348)
|
|
|
(239)
|
|
Net income
attributable to Dunkin' Brands
|
|
$
|
46,191
|
|
|
40,812
|
|
|
69,147
|
|
|
64,610
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings per
share—basic
|
|
$
|
0.44
|
|
|
0.38
|
|
|
0.65
|
|
|
0.61
|
|
Earnings per
share—diluted
|
|
0.43
|
|
|
0.38
|
|
|
0.64
|
|
|
0.60
|
|
|
(a) Amounts for the
three and six months ended June 29, 2013 have been revised to
conform to the current period presentation.
|
DUNKIN' BRANDS
GROUP, INC. AND SUBSIDIARIES
|
Condensed
Consolidated Balance Sheets
|
(In
thousands)
|
(Unaudited)
|
|
|
June 28,
2014
|
|
December 28,
2013
|
Assets
|
|
|
|
|
|
|
Current
assets:
|
|
|
|
|
|
|
Cash and cash
equivalents
|
|
$
|
176,381
|
|
|
256,933
|
|
Accounts, notes, and
other receivables, net
|
|
68,558
|
|
|
79,765
|
|
Other current
assets
|
|
111,256
|
|
|
125,062
|
|
Total current
assets
|
|
356,195
|
|
|
461,760
|
|
Property and
equipment, net
|
|
178,361
|
|
|
182,858
|
|
Equity method
investments
|
|
175,677
|
|
|
170,644
|
|
Goodwill and other
intangible assets, net
|
|
2,329,463
|
|
|
2,343,803
|
|
Other
assets
|
|
64,795
|
|
|
75,625
|
|
Total
assets
|
|
$
|
3,104,491
|
|
|
3,234,690
|
|
Liabilities,
Redeemable Noncontrolling Interests, and Stockholders'
Equity
|
|
|
|
|
|
|
Current
liabilities:
|
|
|
|
|
|
|
Current portion of
long-term debt
|
|
$
|
—
|
|
|
5,000
|
|
Accounts
payable
|
|
12,535
|
|
|
12,445
|
|
Other current
liabilities
|
|
259,345
|
|
|
326,853
|
|
Total current
liabilities
|
|
271,880
|
|
|
344,298
|
|
Long-term debt,
net
|
|
1,808,679
|
|
|
1,818,609
|
|
Deferred income
taxes, net
|
|
550,541
|
|
|
561,714
|
|
Other long-term
liabilities
|
|
103,166
|
|
|
97,781
|
|
Total long-term
liabilities
|
|
2,462,386
|
|
|
2,478,104
|
|
Redeemable
noncontrolling interests
|
|
6,044
|
|
|
4,930
|
|
Total stockholders'
equity
|
|
364,181
|
|
|
407,358
|
|
Total liabilities,
redeemable noncontrolling interests, and stockholders'
equity
|
|
$
|
3,104,491
|
|
|
3,234,690
|
|
DUNKIN' BRANDS
GROUP, INC. AND SUBSIDIARIES
|
Condensed
Consolidated Statements of Cash Flows
|
(In
thousands)
|
(Unaudited)
|
|
|
|
Six months
ended
|
|
|
June 28,
2014
|
|
June 29,
2013
|
|
|
|
|
|
|
|
Net cash provided by
operating activities
|
|
$
|
59,671
|
|
|
9,557
|
|
Cash flows from
investing activities:
|
|
|
|
|
|
|
Additions to property
and equipment
|
|
(10,556)
|
|
|
(12,507)
|
|
Proceeds from sale of
joint venture
|
|
—
|
|
|
7,200
|
|
Proceeds from sale of
real estate and company-owned restaurants
|
|
12,761
|
|
|
—
|
|
Other, net
|
|
(1,520)
|
|
|
(1,522)
|
|
Net cash provided by
(used in) investing activities
|
|
685
|
|
|
(6,829)
|
|
Cash flows from
financing activities:
|
|
|
|
|
|
|
Repayment of
long-term debt
|
|
(15,000)
|
|
|
(19,157)
|
|
Payment of deferred
financing and other debt-related costs
|
|
(8,977)
|
|
|
(6,157)
|
|
Dividends paid on
common stock
|
|
(48,759)
|
|
|
(40,450)
|
|
Repurchases of common
stock
|
|
(81,046)
|
|
|
(16,756)
|
|
Exercise of stock
options
|
|
4,293
|
|
|
4,642
|
|
Other, net
|
|
8,539
|
|
|
(208)
|
|
Net cash used in
financing activities
|
|
(140,950)
|
|
|
(78,086)
|
|
Effect of exchange
rates on cash and cash equivalents
|
|
42
|
|
|
(261)
|
|
Decrease in cash and
cash equivalents
|
|
(80,552)
|
|
|
(75,619)
|
|
Cash and cash
equivalents, beginning of period
|
|
256,933
|
|
|
252,618
|
|
Cash and cash
equivalents, end of period
|
|
$
|
176,381
|
|
|
176,999
|
|
|
|
|
DUNKIN' BRANDS
GROUP, INC. AND SUBSIDIARIES
|
|
|
|
Non-GAAP
Reconciliations
|
|
|
|
(In thousands, except
share and per share data)
|
|
|
|
(Unaudited)
|
|
|
|
|
|
|
Three months
ended
|
|
Six months
ended
|
|
|
June 28,
2014
|
|
|
June 29,
2013
|
|
|
June 28,
2014
|
|
|
June 29,
2013
|
Operating
income
|
|
$
|
87,557
|
|
|
76,805
|
|
|
156,654
|
|
|
140,264
|
Operating income
margin
|
|
45.9%
|
|
|
42.1%
|
|
|
43.2%
|
|
|
40.7%
|
Adjustments:
|
|
|
|
|
|
|
|
|
|
|
|
Amortization of other
intangible assets
|
|
$
|
6,384
|
|
|
6,565
|
|
|
12,789
|
|
|
13,147
|
Long-lived asset
impairment charges
|
|
523
|
|
|
107
|
|
|
646
|
|
|
355
|
Third-party product
volume guarantee
|
|
(300)
|
|
|
7,500
|
|
|
(300)
|
|
|
7,500
|
Peterborough plant
closure(a)
|
|
—
|
|
|
191
|
|
|
—
|
|
|
588
|
Adjusted operating
income
|
|
$
|
94,164
|
|
|
91,168
|
|
|
169,789
|
|
|
161,854
|
Adjusted operating
income margin
|
|
49.3%
|
|
|
50.0%
|
|
|
46.8%
|
|
|
47.0%
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
attributable to Dunkin' Brands
|
|
$
|
46,191
|
|
|
40,812
|
|
|
69,147
|
|
|
64,610
|
Adjustments:
|
|
|
|
|
|
|
|
|
|
|
|
Amortization of other
intangible assets
|
|
6,384
|
|
|
6,565
|
|
|
12,789
|
|
|
13,147
|
Long-lived asset
impairment charges
|
|
523
|
|
|
107
|
|
|
646
|
|
|
355
|
Third-party product
volume guarantee
|
|
(300)
|
|
|
7,500
|
|
|
(300)
|
|
|
7,500
|
Peterborough plant
closure(a)
|
|
—
|
|
|
191
|
|
|
—
|
|
|
588
|
Loss on debt
extinguishment and refinancing transactions
|
|
—
|
|
|
—
|
|
|
13,735
|
|
|
5,018
|
Tax impact of
adjustments(b)
|
|
(2,643)
|
|
|
(5,745)
|
|
|
(10,748)
|
|
|
(10,643)
|
Income tax audit
settlements(c)
|
|
—
|
|
|
(8,417)
|
|
|
—
|
|
|
(8,417)
|
State tax
apportionment(d)
|
|
—
|
|
|
2,868
|
|
|
514
|
|
|
2,868
|
Adjusted net
income
|
|
$
|
50,155
|
|
|
43,881
|
|
|
85,783
|
|
|
75,026
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted net
income
|
|
$
|
50,155
|
|
|
43,881
|
|
|
85,783
|
|
|
75,026
|
Weighted average
number of common shares – diluted
|
|
107,186,360
|
|
|
108,211,994
|
|
|
107,583,260
|
|
|
108,185,485
|
Diluted adjusted
earnings per share
|
|
$
|
0.47
|
|
|
0.41
|
|
|
0.80
|
|
|
0.69
|
|
|
|
|
|
|
|
|
|
|
|
|
(a) For the three and
six months ended June 29, 2013, the adjustments represent
transition-related general and administrative costs incurred
related to the closure of the Baskin-Robbins ice cream
manufacturing plant in Peterborough, Canada, such as information
technology integration, project management, and transportation
costs.
|
(b) Tax impact of
adjustments calculated at a 40% effective tax rate.
|
(c) Represents income
tax benefits resulting from the resolution of historical tax
positions settled during the period.
|
(d) Represents tax
expense recognized due to an increase in our overall state tax rate
for a shift in the apportionment of income to certain state
jurisdictions.
|
Logo -
http://photos.prnewswire.com/prnh/20120516/NE07970LOGO
SOURCE Dunkin' Brands Group, Inc.