CANTON, Mass., Oct. 23, 2014 /PRNewswire/ --
Third quarter highlights include:
- Dunkin' Donuts U.S. comparable store sales
growth of 2.0%; Baskin-Robbins U.S. comparable store sales growth
of 5.8%
- Added 197 net new restaurants worldwide
including 120 net new Dunkin' Donuts in the U.S.
- Revenue increased 3.4%
- Adjusted operating income increased 11.3%;
adjusted operating income margin of 51.6%
- Diluted adjusted EPS increased 19.5% to
$0.49
- Board of Directors declares $0.23 fourth quarter dividend
Dunkin' Brands Group, Inc. (Nasdaq: DNKN), the parent company of
Dunkin' Donuts (DD) and Baskin-Robbins (BR), today reported results
for the third quarter ended September 27, 2014.
"Dunkin' Donuts U.S. third quarter comparable store sales growth
of two percent marked a slight improvement from the second quarter
as we continue to feel the impact from ongoing challenges with the
economy and a highly competitive QSR breakfast and coffee
environment. In the face of these challenges, we are focused
on driving balanced growth by capturing incremental beverage
occasions through new product news, such as the launch of Dark
Roast coffee, targeted discounting and
leveraging innovation to deliver strong morning food results,"
said Nigel Travis, Chairman &
CEO, Dunkin' Brands Group, Inc. "Franchisee restaurant level
economics remain highly-compelling as demonstrated by our strong
third quarter restaurant growth including the addition of 120 net
new Dunkin' Donuts in the U.S. We now believe that we can
ultimately have more than 17,000 Dunkin' Donuts in the U.S., an
increase of 2,000 restaurants over the initial long-term growth
target that we provided at the time of our IPO in 2011."
"It will be a challenge to achieve the low-end of our full-year
Dunkin' Donuts U.S. comparable store sales growth target of two to
three percent, but we remain confident we will achieve our other
development and financial performance targets for 2014," said
Paul Carbone, CFO, Dunkin' Brands
Group, Inc. "Importantly, as we reaffirmed at our Investor &
Analyst Day on September 17, our
long-term expectations remain intact."
THIRD QUARTER 2014
KEY FINANCIAL HIGHLIGHTS
|
|
($ in millions,
except per share data)
|
Three months
ended
|
|
Increase
(Decrease)
|
Amounts and
percentages may not recalculate due to rounding
|
September 27,
2014
|
September 28,
2013
|
|
$ /
#
|
%
|
Franchisee reported
sales
|
$
|
2,576.3
|
|
2,436.7
|
|
|
139.6
|
|
5.7
|
%
|
Systemwide sales
growth
|
5.7
|
%
|
5.8
|
%
|
|
|
|
|
|
Comparable store
sales growth (decline):
|
|
|
|
|
|
|
|
|
|
DD U.S. comparable
store sales growth
|
2.0
|
%
|
4.2
|
%
|
|
|
|
|
|
BR U.S. comparable
store sales growth
|
5.8
|
%
|
3.2
|
%
|
|
|
|
|
|
DD International
comparable store sales decline
|
(2.9)
|
%
|
(1.4)
|
%
|
|
|
|
|
|
BR International
comparable store sales growth (decline)
|
(1.5)
|
%
|
0.7
|
%
|
|
|
|
|
|
Development
data1:
|
|
|
|
|
|
|
|
|
|
Consolidated global
net POD development
|
197
|
|
222
|
|
|
(25)
|
|
(11.3)
|
%
|
DD global PODs at
period end
|
11,123
|
|
10,665
|
|
|
458
|
|
4.3
|
%
|
BR global PODs at
period end
|
7,479
|
|
7,184
|
|
|
295
|
|
4.1
|
%
|
Consolidated global
PODs at period end
|
18,602
|
|
17,849
|
|
|
753
|
|
4.2
|
%
|
Financial
data:
|
|
|
|
|
|
|
|
|
|
Revenues
|
$
|
192.6
|
|
186.3
|
|
|
6.3
|
|
3.4
|
%
|
Operating
income
|
92.5
|
|
82.2
|
|
|
10.2
|
|
12.5
|
%
|
Operating income
margin
|
48.0
|
%
|
44.1
|
%
|
|
|
|
|
|
Adjusted operating
income2
|
$
|
99.4
|
|
89.3
|
|
|
10.1
|
|
11.3
|
%
|
Adjusted operating
income margin2
|
51.6
|
%
|
47.9
|
%
|
|
|
|
|
|
Net income
|
$
|
54.7
|
|
40.2
|
|
|
14.5
|
|
36.0
|
%
|
Adjusted net
income2
|
52.2
|
|
44.5
|
|
|
7.7
|
|
17.3
|
%
|
Earnings per
share:
|
|
|
|
|
|
|
|
|
|
Common–basic
|
0.52
|
|
0.38
|
|
|
0.14
|
|
36.8
|
%
|
Common–diluted
|
0.52
|
|
0.37
|
|
|
0.15
|
|
40.5
|
%
|
Diluted adjusted
earnings per share2
|
0.49
|
|
0.41
|
|
|
0.08
|
|
19.5
|
%
|
Weighted average
number of common shares – diluted (in millions)
|
106.0
|
|
108.2
|
|
|
(2.2)
|
|
(2.0)
|
%
|
|
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 third 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 third
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
return of the Breakfast Burrito and the Spicy Smoked Sausage
Breakfast Sandwich and the launch of the Chicken Biscuit in several
markets; and by donuts including the Coffee Cream and Pumpkin
flavors. Ticket and traffic growth contributed equally to
comparable store sales growth in the third quarter.
Baskin-Robbins U.S. comparable store sales growth was driven by
sales of Cups & Cones, Cakes, and Beverages as a result
of the program offering guests a free waffle cone with the purchase
of a second scoop of ice cream, while online ice cream cake
ordering continues to drive cake sales.
In the third quarter, Dunkin' Brands franchisees and licensees
opened 197 net new restaurants around the globe. This includes 120
net new Dunkin' Donuts U.S. locations, 61 net new Baskin-Robbins
International locations, 10 net new Dunkin' Donuts International
locations, and six net new Baskin-Robbins U.S. locations.
Additionally, Dunkin' Donuts U.S. franchisees remodeled 120
restaurants during the quarter.
Revenues for the third quarter increased 3.4 percent compared to
the prior year period primarily from increased royalty income due
to systemwide sales growth, offset by a decline in sales of ice
cream products.
Operating income for the third quarter increased $10.2 million, or 12.5 percent, from the prior
year period primarily as a result of the increase in revenues, as
well as $3.7 million in write-downs
related to our investments in the Dunkin' Donuts Spain joint
venture recorded in the prior year period. Adjusted operating
income increased $10.1 million, or
11.3 percent, from the third quarter of 2013 as a result of the
increase in revenues and the write-downs related to the
Spain joint venture recorded in
the prior year period.
Net income for the third quarter increased by $14.5 million, or 36.0 percent, compared to the
prior year period primarily as a result of the increase in
operating income of $10.2 million and
decreases in interest expense and income tax expense of
$3.1 million and $1.7 million, respectively. Income tax expense
was favorably impacted by the settlement of certain tax audits.
Adjusted net income increased by $7.7
million, or 17.3 percent, compared to the third quarter of
2013, as a result of the increase in adjusted operating income and
the decrease in interest expense, offset by an increase in income
tax expense.
Diluted adjusted earnings per share increased by 19.5 percent to
$0.49 for the third 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 third quarter, the Company repurchased a
total of 1,139,000 shares.
THIRD QUARTER 2014
SEGMENT RESULTS
|
|
Amounts and
percentages may not recalculate due to rounding
|
Three months
ended
|
|
Increase
(Decrease)
|
Dunkin' Donuts
U.S.
|
September 27,
2014
|
|
September 28,
2013
|
|
$ /
#
|
%
|
|
($ in thousands
except as otherwise noted)
|
Comparable store
sales growth
|
2.0
|
%
|
|
4.2
|
%
|
|
|
|
|
|
Systemwide sales
growth
|
7.0
|
%
|
|
8.6
|
%
|
|
|
|
|
|
Franchisee reported
sales (in millions)
|
$
|
1,840.5
|
|
|
1,719.5
|
|
|
121.0
|
|
7.0
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenues:
|
|
|
|
|
|
|
|
|
|
|
Royalty
income
|
$
|
99,758
|
|
|
92,838
|
|
|
6,920
|
|
7.5
|
%
|
Franchise
fees
|
11,704
|
|
|
9,592
|
|
|
2,112
|
|
22.0
|
%
|
Rental
income
|
24,610
|
|
|
24,455
|
|
|
155
|
|
0.6
|
%
|
Sales at
company-owned restaurants
|
5,267
|
|
|
6,250
|
|
|
(983)
|
|
(15.7)
|
%
|
Other
revenues
|
1,612
|
|
|
1,119
|
|
|
493
|
|
44.1
|
%
|
Total
revenues
|
$
|
142,951
|
|
|
134,254
|
|
|
8,697
|
|
6.5
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
Segment
profit1
|
$
|
106,242
|
|
|
97,109
|
|
|
9,133
|
|
9.4
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
Points of
distribution
|
7,941
|
|
|
7,528
|
|
|
413
|
|
5.5
|
%
|
Gross
openings
|
141
|
|
|
107
|
|
|
34
|
|
31.8
|
%
|
Net
openings
|
120
|
|
|
81
|
|
|
39
|
|
48.1
|
%
|
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 $143.0
million represented an increase of 6.5 percent
year-over-year. The increase was primarily a result of
increased royalty income, as well as franchise fees due primarily
to the 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
in the second quarter of 2014.
Dunkin' Donuts U.S. segment profit in the third quarter
increased $9.1 million over the prior
year period to $106.2 million, which
was driven primarily by the increases in royalty income and
franchise fees, offset by an increase in personnel costs.
Amounts and
percentages may not recalculate due to rounding
|
Three months
ended
|
|
Increase
(Decrease)
|
Dunkin' Donuts
International
|
September 27,
2014
|
|
September 28,
2013
|
|
$ /
#
|
%
|
|
($ in thousands
except as otherwise noted)
|
Comparable store
sales decline
|
(2.9)
|
%
|
|
(1.4)
|
%
|
|
|
|
|
|
Systemwide sales
growth
|
4.3
|
%
|
|
1.4
|
%
|
|
|
|
|
|
Franchisee reported
sales (in millions)
|
$
|
172.8
|
|
|
165.8
|
|
|
7.1
|
|
4.3
|
%
|
|
|
|
|
|
|
|
|
|
|
|
Revenues:
|
|
|
|
|
|
|
|
|
|
|
Royalty
income
|
$
|
3,685
|
|
|
3,342
|
|
|
343
|
|
10.3
|
%
|
Franchise
fees
|
683
|
|
|
770
|
|
|
(87)
|
|
(11.3)
|
%
|
Rental
income
|
18
|
|
|
37
|
|
|
(19)
|
|
(51.4)
|
%
|
Other
revenues
|
(14)
|
|
|
25
|
|
|
(39)
|
|
n/m
|
Total
revenues
|
$
|
4,372
|
|
|
4,174
|
|
|
198
|
|
4.7
|
%
|
|
|
|
|
|
|
|
|
|
|
|
Segment profit
(loss)1
|
$
|
1,885
|
|
|
(1,059)
|
|
|
2,944
|
|
n/m
|
|
|
|
|
|
|
|
|
|
|
|
Points of
distribution2
|
3,182
|
|
|
3,137
|
|
|
45
|
|
1.4
|
%
|
Gross
openings
|
88
|
|
|
128
|
|
|
(40)
|
|
(31.3)
|
%
|
Net
openings
|
10
|
|
|
67
|
|
|
(57)
|
|
(85.1)
|
%
|
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 third quarter systemwide sales
increased 4.3 percent from the prior year period, driven by sales
growth in Germany, Spain, and the
Philippines, 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 1 percent.
Dunkin' Donuts International third quarter revenues of
$4.4 million represented an increase
of 4.7 percent year-over-year. The increase in revenue was
primarily a result of an increase in royalty income, offset by a
decline in franchise fees.
Segment profit for Dunkin' Donuts International increased
$2.9 million to $1.9 million, primarily due to $3.7 million in write-downs related to our
investments in the Dunkin' Donuts Spain joint venture recorded in
the prior year period, as well as revenue growth, offset by
additional investments in marketing.
Amounts and
percentages may not recalculate due to rounding
|
Three months
ended
|
|
Increase
(Decrease)
|
Baskin-Robbins
U.S.
|
September 27,
2014
|
|
September 28,
2013
|
|
$ /
#
|
%
|
|
($ in thousands
except as otherwise noted)
|
Comparable store
sales growth
|
5.8
|
%
|
|
3.2
|
%
|
|
|
|
|
|
Systemwide sales
growth
|
5.9
|
%
|
|
4.2
|
%
|
|
|
|
|
|
Franchisee reported
sales (in millions)
|
$
|
161.0
|
|
|
152.2
|
|
|
8.8
|
|
5.8
|
%
|
|
|
|
|
|
|
|
|
|
|
|
Revenues:
|
|
|
|
|
|
|
|
|
|
|
Royalty
income
|
$
|
7,991
|
|
|
7,595
|
|
|
396
|
|
5.2
|
%
|
Franchise
fees
|
360
|
|
|
305
|
|
|
55
|
|
18.0
|
%
|
Rental
income
|
795
|
|
|
802
|
|
|
(7)
|
|
(0.9)
|
%
|
Sales of ice cream
products
|
1,177
|
|
|
986
|
|
|
191
|
|
19.4
|
%
|
Other
revenues
|
2,293
|
|
|
2,211
|
|
|
82
|
|
3.7
|
%
|
Total
revenues
|
$
|
12,616
|
|
|
11,899
|
|
|
717
|
|
6.0
|
%
|
|
|
|
|
|
|
|
|
|
|
|
Segment
profit1
|
$
|
8,828
|
|
|
8,215
|
|
|
613
|
|
7.5
|
%
|
|
|
|
|
|
|
|
|
|
|
|
Points of
distribution
|
2,486
|
|
|
2,471
|
|
|
15
|
|
0.6
|
%
|
Gross
openings
|
21
|
|
|
20
|
|
|
1
|
|
5.0
|
%
|
Net
openings
|
6
|
|
|
1
|
|
|
5
|
|
500.0
|
%
|
1 Prior
year amounts reflect change in segment profit measure. Please refer
to "Segment Profit Comparability" for further detail.
|
Baskin-Robbins U.S. third quarter revenue increased 6.0 percent
from the prior year period to $12.6
million due primarily to increases in royalty income and
sales of ice cream products.
Segment profit for Baskin-Robbins U.S. increased 7.5 percent
year-over-year to $8.8 million
primarily as a result of the increase in revenues and a reduction
in personnel costs.
Amounts and
percentages may not recalculate due to rounding
|
Three months
ended
|
|
Increase
(Decrease)
|
Baskin-Robbins
International
|
September 27,
2014
|
|
September 28,
2013
|
|
$ /
#
|
%
|
|
($ in thousands
except as otherwise noted)
|
Comparable store
sales growth (decline)
|
(1.5)
|
%
|
|
0.7
|
%
|
|
|
|
|
|
Systemwide sales
growth (decline)
|
0.7
|
%
|
|
(2.6)
|
%
|
|
|
|
|
|
Franchisee reported
sales (in millions)
|
$
|
401.9
|
|
|
399.2
|
|
|
2.7
|
|
0.7
|
%
|
|
|
|
|
|
|
|
|
|
|
|
Revenues:
|
|
|
|
|
|
|
|
|
|
|
Royalty
income
|
$
|
2,180
|
|
|
2,552
|
|
|
(372)
|
|
(14.6)
|
%
|
Franchise
fees
|
398
|
|
|
492
|
|
|
(94)
|
|
(19.1)
|
%
|
Rental
income
|
126
|
|
|
124
|
|
|
2
|
|
1.6
|
%
|
Sales of ice cream
products
|
26,166
|
|
|
29,439
|
|
|
(3,273)
|
|
(11.1)
|
%
|
Other
revenues
|
33
|
|
|
152
|
|
|
(119)
|
|
(78.3)
|
%
|
Total
revenues
|
$
|
28,903
|
|
|
32,759
|
|
|
(3,856)
|
|
(11.8)
|
%
|
|
|
|
|
|
|
|
|
|
|
|
Segment
profit1
|
$
|
12,485
|
|
|
16,775
|
|
|
(4,290)
|
|
(25.6)
|
%
|
|
|
|
|
|
|
|
|
|
|
|
Points of
distribution2
|
4,993
|
|
|
4,713
|
|
|
280
|
|
5.9
|
%
|
Gross
openings
|
116
|
|
|
107
|
|
|
9
|
|
8.4
|
%
|
Net
openings
|
61
|
|
|
73
|
|
|
(12)
|
|
(16.4)
|
%
|
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 0.7
percent from the prior year period driven by favorable foreign
exchange and an increase in sales in South Korea, offset by unfavorable foreign
exchange and a decrease in sales in Japan. On a constant currency basis,
systemwide sales declined slightly from the prior year period.
Baskin-Robbins International third quarter revenues decreased
11.8 percent from the prior year period to $28.9 million due primarily to a decline in sales
of ice cream products as well as a decline in royalty income.
Third quarter segment profit decreased 25.6 percent from the
prior year period to $12.5 million
due primarily to a decrease in net margin on ice cream due to the
decline in sales of ice cream products, as well as a decrease in
income from our Japan and
South Korea joint ventures.
COMPANY UPDATES
- The Company today announced that the Board of Directors
declared a fourth quarter cash dividend of $0.23 per share, payable on December 3, 2014 to shareholders of record as of
the close of business on November 24,
2014.
LONG-TERM EARNINGS TARGETS
- U.S. consolidated comps in the 2 – 4% range
- Total net unit development of approximately 4 – 6% with
opportunity to accelerate
- 6 – 8% revenue growth
- 10 – 12% adjusted operating income growth
- Adjusted operating income margin expansion of 150 – 200 basis
points per year
- 15%+ diluted adjusted EPS growth
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 the Company believes 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 September 28, 2013 have been restated to reflect
this change to the measurement of segment profit to enable
comparability with the three months ended September 27, 2014.
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
|
|
Nine months
ended
|
|
September 27,
2014
|
|
September 28,
2013
|
|
September 27,
2014
|
|
September 28,
2013
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenues:
|
|
|
|
|
|
|
|
|
|
|
|
Franchise fees and
royalty income
|
$
|
126,759
|
|
|
117,486
|
|
|
355,738
|
|
|
334,045
|
|
Rental
income
|
25,570
|
|
|
25,437
|
|
|
73,650
|
|
|
72,924
|
|
Sales of ice cream
products
|
27,357
|
|
|
30,429
|
|
|
88,072
|
|
|
86,818
|
|
Sales at
company-owned restaurants
|
5,267
|
|
|
6,250
|
|
|
16,319
|
|
|
18,261
|
|
Other
revenues
|
7,687
|
|
|
6,715
|
|
|
21,717
|
|
|
18,615
|
|
Total
revenues
|
192,640
|
|
|
186,317
|
|
|
555,496
|
|
|
530,663
|
|
Operating costs and
expenses:
|
|
|
|
|
|
|
|
|
|
|
|
Occupancy
expenses—franchised restaurants
|
13,258
|
|
|
13,445
|
|
|
39,830
|
|
|
39,041
|
|
Cost of ice cream
products
|
19,530
|
|
|
20,899
|
|
|
62,273
|
|
|
61,187
|
|
Company-owned
restaurant expenses
|
5,505
|
|
|
6,222
|
|
|
16,772
|
|
|
17,817
|
|
General and
administrative expenses, net(a)(b)
|
56,311
|
|
|
58,454
|
|
|
172,406
|
|
|
177,009
|
|
Depreciation
|
4,960
|
|
|
5,591
|
|
|
14,803
|
|
|
16,961
|
|
Amortization of other
intangible assets
|
6,333
|
|
|
6,938
|
|
|
19,122
|
|
|
20,085
|
|
Long-lived asset
impairment charges
|
633
|
|
|
92
|
|
|
1,279
|
|
|
447
|
|
Total operating costs
and expenses
|
106,530
|
|
|
111,641
|
|
|
326,485
|
|
|
332,547
|
|
Net income of
equity method investments:
|
|
|
|
|
|
|
|
|
|
|
|
Net income, excluding
impairment
|
5,366
|
|
|
8,201
|
|
|
12,514
|
|
|
16,070
|
|
Impairment
charge(c)
|
—
|
|
|
(873)
|
|
|
—
|
|
|
(873)
|
|
Net
income of equity method investments
|
5,366
|
|
|
7,328
|
|
|
12,514
|
|
|
15,197
|
|
Other operating
income, net(a)
|
1,004
|
|
|
233
|
|
|
7,609
|
|
|
9,188
|
|
Operating
income
|
92,480
|
|
|
82,237
|
|
|
249,134
|
|
|
222,501
|
|
Other income
(expense):
|
|
|
|
|
|
|
|
|
|
|
|
Interest
income
|
63
|
|
|
105
|
|
|
201
|
|
|
310
|
|
Interest
expense
|
(16,680)
|
|
|
(19,805)
|
|
|
(51,444)
|
|
|
(60,523)
|
|
Loss on debt
extinguishment and refinancing transactions
|
—
|
|
|
—
|
|
|
(13,735)
|
|
|
(5,018)
|
|
Other gains (losses),
net
|
(584)
|
|
|
12
|
|
|
(670)
|
|
|
(1,191)
|
|
Total other
expense
|
(17,201)
|
|
|
(19,688)
|
|
|
(65,648)
|
|
|
(66,422)
|
|
Income before income
taxes
|
75,279
|
|
|
62,549
|
|
|
183,486
|
|
|
156,079
|
|
Provision for income
taxes
|
20,855
|
|
|
22,505
|
|
|
60,263
|
|
|
51,664
|
|
Net income including
noncontrolling interests
|
54,424
|
|
|
40,044
|
|
|
123,223
|
|
|
104,415
|
|
Net loss attributable
to noncontrolling interests
|
(273)
|
|
|
(177)
|
|
|
(621)
|
|
|
(416)
|
|
Net income
attributable to Dunkin' Brands
|
$
|
54,697
|
|
|
40,221
|
|
|
123,844
|
|
|
104,831
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings per
share—basic
|
$
|
0.52
|
|
|
0.38
|
|
|
1.17
|
|
|
0.99
|
|
Earnings per
share—diluted
|
0.52
|
|
|
0.37
|
|
|
1.16
|
|
|
0.97
|
|
|
|
(a)
|
Amounts for the three
and nine months ended September 28, 2013 have been revised to
conform to the current period presentation.
|
(b)
|
Amounts for the three
and nine months ended September 28, 2013 include $2.8 million of
reserves on accounts and notes receivable from our Dunkin' Donuts
Spain joint venture.
|
(c)
|
Represents an
impairment of the full carrying value of our investment in Dunkin'
Donuts Spain joint venture.
|
DUNKIN' BRANDS
GROUP, INC. AND SUBSIDIARIES
|
Condensed
Consolidated Balance Sheets
|
(In
thousands)
|
(Unaudited)
|
|
|
|
September 27,
2014
|
|
December 28,
2013
|
Assets
|
|
|
|
|
|
|
Current
assets:
|
|
|
|
|
|
|
Cash and cash
equivalents
|
|
$
|
155,665
|
|
|
256,933
|
|
Accounts, notes, and
other receivables, net
|
|
62,146
|
|
|
79,765
|
|
Other current
assets
|
|
114,051
|
|
|
125,062
|
|
Total current
assets
|
|
331,862
|
|
|
461,760
|
|
Property and
equipment, net
|
|
179,073
|
|
|
182,858
|
|
Equity method
investments
|
|
174,129
|
|
|
170,644
|
|
Goodwill and other
intangible assets, net
|
|
2,323,036
|
|
|
2,343,803
|
|
Other
assets
|
|
67,021
|
|
|
75,625
|
|
Total
assets
|
|
$
|
3,075,121
|
|
|
3,234,690
|
|
Liabilities,
Redeemable Noncontrolling Interests, and Stockholders'
Equity
|
|
|
|
|
|
|
Current
liabilities:
|
|
|
|
|
|
|
Current portion of
long-term debt
|
|
$
|
625
|
|
|
5,000
|
|
Accounts
payable
|
|
12,112
|
|
|
12,445
|
|
Other current
liabilities
|
|
256,097
|
|
|
326,853
|
|
Total current
liabilities
|
|
268,834
|
|
|
344,298
|
|
Long-term debt,
net
|
|
1,808,491
|
|
|
1,818,609
|
|
Deferred income
taxes, net
|
|
547,606
|
|
|
561,714
|
|
Other long-term
liabilities
|
|
95,646
|
|
|
97,781
|
|
Total long-term
liabilities
|
|
2,451,743
|
|
|
2,478,104
|
|
Redeemable
noncontrolling interests
|
|
7,164
|
|
|
4,930
|
|
Total stockholders'
equity
|
|
347,380
|
|
|
407,358
|
|
Total liabilities,
redeemable noncontrolling interests, and stockholders'
equity
|
|
$
|
3,075,121
|
|
|
3,234,690
|
|
DUNKIN' BRANDS
GROUP, INC. AND SUBSIDIARIES
|
Condensed
Consolidated Statements of Cash Flows
|
(In
thousands)
|
(Unaudited)
|
|
|
|
Nine months
ended
|
|
|
September 27,
2014
|
|
September 28,
2013
|
|
|
|
|
|
|
|
Net cash provided by
operating activities
|
|
$
|
115,851
|
|
|
65,315
|
|
Cash flows from
investing activities:
|
|
|
|
|
|
|
Additions to property
and equipment
|
|
(18,324)
|
|
|
(20,930)
|
|
Proceeds from sale of
joint venture
|
|
—
|
|
|
7,200
|
|
Proceeds from sale of
real estate and company-owned restaurants
|
|
14,354
|
|
|
2,776
|
|
Other, net
|
|
(1,734)
|
|
|
(2,021)
|
|
Net cash used in
investing activities
|
|
(5,704)
|
|
|
(12,975)
|
|
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
|
|
(72,756)
|
|
|
(60,707)
|
|
Repurchases of common
stock
|
|
(130,171)
|
|
|
(17,190)
|
|
Exercise of stock
options
|
|
4,847
|
|
|
6,287
|
|
Other, net
|
|
10,861
|
|
|
1,906
|
|
Net cash used in
financing activities
|
|
(211,196)
|
|
|
(95,018)
|
|
Effect of exchange
rates on cash and cash equivalents
|
|
(219)
|
|
|
(140)
|
|
Decrease in cash and
cash equivalents
|
|
(101,268)
|
|
|
(42,818)
|
|
Cash and cash
equivalents, beginning of period
|
|
256,933
|
|
|
252,618
|
|
Cash and cash
equivalents, end of period
|
|
$
|
155,665
|
|
|
209,800
|
|
DUNKIN' BRANDS
GROUP, INC. AND SUBSIDIARIES
|
Non-GAAP
Reconciliations
|
(In thousands, except
share and per share data)
|
(Unaudited)
|
|
|
Three months
ended
|
|
Nine months
ended
|
|
September 27,
2014
|
|
September 28,
2013
|
|
September 27,
2014
|
|
September 28,
2013
|
Operating
income
|
$
|
92,480
|
|
|
82,237
|
|
|
249,134
|
|
|
222,501
|
|
Operating income
margin
|
48.0
|
%
|
|
44.1
|
%
|
|
44.8
|
%
|
|
41.9
|
%
|
Adjustments:
|
|
|
|
|
|
|
|
|
|
|
|
Amortization of other
intangible assets
|
$
|
6,333
|
|
|
6,938
|
|
|
19,122
|
|
|
20,085
|
|
Long-lived asset
impairment charges
|
633
|
|
|
92
|
|
|
1,279
|
|
|
447
|
|
Third-party product
volume guarantee
|
—
|
|
|
—
|
|
|
(300)
|
|
|
7,500
|
|
Peterborough plant
closure(a)
|
—
|
|
|
66
|
|
|
—
|
|
|
654
|
|
Adjusted operating
income
|
$
|
99,446
|
|
|
89,333
|
|
|
269,235
|
|
|
251,187
|
|
Adjusted operating
income margin
|
51.6
|
%
|
|
47.9
|
%
|
|
48.5
|
%
|
|
47.3
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
attributable to Dunkin' Brands
|
$
|
54,697
|
|
|
40,221
|
|
|
123,844
|
|
|
104,831
|
|
Adjustments:
|
|
|
|
|
|
|
|
|
|
|
|
Amortization of other
intangible assets
|
6,333
|
|
|
6,938
|
|
|
19,122
|
|
|
20,085
|
|
Long-lived asset
impairment charges
|
633
|
|
|
92
|
|
|
1,279
|
|
|
447
|
|
Third-party product
volume guarantee
|
—
|
|
|
—
|
|
|
(300)
|
|
|
7,500
|
|
Peterborough plant
closure(a)
|
—
|
|
|
66
|
|
|
—
|
|
|
654
|
|
Loss on debt
extinguishment and refinancing transactions
|
—
|
|
|
—
|
|
|
13,735
|
|
|
5,018
|
|
Tax impact of
adjustments(b)
|
(2,786)
|
|
|
(2,838)
|
|
|
(13,534)
|
|
|
(13,481)
|
|
Income tax audit
settlements(c)
|
(6,717)
|
|
|
—
|
|
|
(6,717)
|
|
|
(8,417)
|
|
State tax
apportionment(d)
|
—
|
|
|
—
|
|
|
514
|
|
|
2,868
|
|
Adjusted net
income
|
$
|
52,160
|
|
|
44,479
|
|
|
137,943
|
|
|
119,505
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted net
income
|
$
|
52,160
|
|
|
44,479
|
|
|
137,943
|
|
|
119,505
|
|
Weighted average
number of common shares – diluted
|
105,969,110
|
|
|
108,164,925
|
|
|
107,045,211
|
|
|
108,178,632
|
|
Diluted adjusted
earnings per share
|
$
|
0.49
|
|
|
0.41
|
|
|
1.29
|
|
|
1.10
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(a) For the three and
nine months ended September 28, 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.
|
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SOURCE Dunkin' Brands Group, Inc.