CANTON, Mass., Oct. 22, 2015 /PRNewswire/ --
Third quarter highlights include:
- Dunkin' Donuts U.S. comparable store sales growth of
1.1%
- Baskin-Robbins U.S. comparable store sales growth of
7.5%
- Added 90 net new restaurants worldwide, including 68 net new
Dunkin' Donuts in the U.S. which reflects the closing of 31
Speedway self-serve coffee stations
- Revenues increased 8.9%
- Diluted EPS decreased 7.7% to $0.48
- Diluted adjusted EPS increased 6.1% to $0.52
Dunkin' Brands Group, Inc. (Nasdaq: DNKN), the parent company of
Dunkin' Donuts (DD) and Baskin-Robbins (BR), today reported results
for the third quarter ended September 26, 2015.
"Our overall financial performance in the third quarter,
including the strong growth in our revenue, operating income and
adjusted earnings per share, demonstrates the benefits and
resiliency of our asset-light franchise business model, and the
solid Dunkin' Donuts U.S. net restaurant growth shows the continued
demand for the brand. While we were disappointed with
our third quarter Dunkin' Donuts U.S. comparable store sales, we
remain on track to deliver our full-year targets, and we are
working closely with our franchisees to regain transaction momentum
through great products, exceptional guest service, and innovative
marketing," said Dunkin' Brands Chairman and Chief Executive
Officer Nigel Travis.
"Dunkin' Brands is a business with tremendous long-term growth
potential. At our recent investor day, we provided targets for our
growth expectations for the next five years which included
mid-to-high single digit revenue growth, 10 percent plus adjusted
operating income growth and up to 15 percent adjusted earnings per
share growth," said Paul Carbone,
Chief Financial Officer, Dunkin' Brands Group, Inc.
THIRD QUARTER 2015
KEY FINANCIAL HIGHLIGHTS
|
|
|
|
|
($ in millions,
except per share data)
|
Three months
ended
|
|
Increase
(Decrease)
|
Amounts and
percentages may not recalculate due to rounding
|
September 26,
2015
|
September 27,
2014
|
|
$ /
#
|
%
|
Franchisee-reported
sales1
|
$
|
2,646.5
|
|
2,576.3
|
|
|
70.2
|
|
2.7%
|
|
Systemwide sales
growth
|
2.8%
|
|
5.7%
|
|
|
|
|
Comparable store
sales growth (decline):
|
|
|
|
|
|
DD
U.S.2
|
1.1%
|
|
2.0%
|
|
|
|
|
BR
U.S.2
|
7.5%
|
|
6.0%
|
|
|
|
|
DD
International
|
0.8%
|
|
(2.9)%
|
|
|
|
|
BR
International
|
(2.4)%
|
|
(1.5)%
|
|
|
|
|
Development
data:
|
|
|
|
|
|
Consolidated global
net POD development3
|
90
|
|
197
|
|
|
(107)
|
|
(54.3)%
|
|
DD global PODs at
period end
|
11,568
|
|
11,123
|
|
|
445
|
|
4.0%
|
|
BR global PODs at
period end
|
7,617
|
|
7,479
|
|
|
138
|
|
1.8%
|
|
Consolidated global
PODs at period end
|
19,185
|
|
18,602
|
|
|
583
|
|
3.1%
|
|
Financial
data:
|
|
|
|
|
|
Revenues
|
$
|
209.8
|
|
192.6
|
|
|
17.2
|
|
8.9%
|
|
Operating
income
|
99.8
|
|
92.5
|
|
|
7.3
|
|
7.9%
|
|
Operating income
margin
|
47.5%
|
|
48.0%
|
|
|
|
|
Adjusted operating
income4
|
$
|
106.0
|
|
99.4
|
|
|
6.5
|
|
6.6%
|
|
Adjusted operating
income margin4
|
50.5%
|
|
51.6%
|
|
|
|
|
Net income
|
$
|
46.2
|
|
54.7
|
|
|
(8.5)
|
|
(15.5)%
|
|
Adjusted net
income4
|
50.2
|
|
52.2
|
|
|
(2.0)
|
|
(3.8)%
|
|
Earnings per
share:
|
|
|
|
|
|
Common–basic
|
0.49
|
|
0.52
|
|
|
(0.03)
|
|
(5.8)%
|
|
Common–diluted
|
0.48
|
|
0.52
|
|
|
(0.04)
|
|
(7.7)%
|
|
Diluted adjusted
earnings per share4
|
0.52
|
|
0.49
|
|
|
0.03
|
|
6.1%
|
|
Weighted average
number of common shares – diluted (in millions)
|
96.0
|
|
106.0
|
|
|
(9.9)
|
|
(9.4)%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1
Franchisee-reported sales include sales at franchisee-operated
restaurants, including joint ventures. While we do not record sales
by franchisees or licensees as revenue and such sales are not
included in our consolidated financial statements, we believe that
this operating measure is important in obtaining an understanding
of our financial performance. We believe franchisee-reported sales
information aids in understanding how we derive royalty revenue and
in evaluating our performance relative to competitors.
|
|
2
Comparable store sales growth for DD U.S. and BR U.S. for the three
months ended September 27, 2014 have been revised to include only
those restaurants that have been open at least 78 weeks
(approximately 18 months) to conform to the current period
calculation, whereas previously reported figures included only
those restaurants that were open at least 54 weeks (approximately
12 months). Please refer to "Non-GAAP Measures and Statistical
Data" for further detail.
|
|
3
Consolidated global net POD development reflects the
previously-announced closing of 31 self-serve coffee stations
within Speedway locations.
|
|
4 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. 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 78 weeks or more).
Dunkin' Donuts U.S. comparable store sales growth in the third
quarter was driven by increased average ticket. Growth was
driven by strong beverage sales, led by total coffee including iced
coffee and espresso-based beverages, and frozen beverages, which
was driven by the launch of blended beverages; and donut category
growth driven by the REESE'S Peanut Butter Square and Pumpkin
Cheesecake squares. The in-restaurant K-Cup and packaged
coffee categories had a negative impact on third quarter comparable
store sales. Traffic declined approximately 70 basis points
in the quarter.
Baskin-Robbins U.S. comparable store sales growth was driven by
increased sales of cups and cones, beverages, desserts, and sundaes
and increased sales of cakes, stimulated by strong year-over-year
growth of online cake ordering. Comparable store sales growth
was driven primarily by traffic.
In the third quarter, Dunkin' Brands franchisees and licensees
opened 90 net new restaurants around the globe. This included 68
net new Dunkin' Donuts U.S. locations, 40 net new Dunkin' Donuts
International locations, 2 net closures for Baskin-Robbins U.S.,
and 16 net closures for Baskin-Robbins International. The Dunkin'
Donuts U.S. net store growth number reflects the
previously-announced closing of 31 self-serve coffee stations
within Speedway locations. Additionally, Dunkin' Donuts U.S.
franchisees remodeled 116 restaurants and Baskin-Robbins U.S.
franchisees remodeled 32 restaurants during the quarter.
Revenues for the third quarter increased 8.9% compared to the
prior year period due primarily to increased royalty income as a
result of systemwide sales growth, an increase in sales at
company-operated restaurants due to a net increase in the number of
company-operated restaurants, increased sales of ice cream and
other products, and licensing fees earned from the sale of Dunkin'
K-Cup® pods.
Operating income and adjusted operating income for the third
quarter increased $7.3 million, or
7.9%, and $6.5 million, or 6.6%,
respectively, from the prior year period primarily as a result of
the increases in royalty income, ice cream margin due primarily to
the increase in sales, and licensing fees earned from the sale of
Dunkin' K-Cup® pods. The increases in revenues were offset by an
increase in general and administrative expenses driven primarily by
an increase in personnel costs and bad debt expense.
Net income for the third quarter decreased by $8.5 million, or 15.5%, compared to the prior
year period primarily as a result of additional interest expense of
$8.1 million, driven by additional
borrowings incurred in conjunction with the securitization
refinancing transaction completed in January
2015, and an increase in income tax expense of $7.5 million as the prior year period was
favorably impacted by the settlement of certain tax audits. These
decreases were offset by the $7.3
million increase in operating income.
Adjusted net income for the third quarter decreased by
$2.0 million, or 3.8%, compared to
the third quarter of 2014 primarily as a result of increases in
interest expense, offset by the $6.5
million increase in adjusted operating income.
Diluted earnings per share decreased by 7.7% to $0.48 for the third quarter of 2015 compared to
the prior year period as a result of the decrease in net income,
offset by a decrease in shares outstanding. Diluted adjusted
earnings per share increased by 6.1% to $0.52 for the third quarter of 2015 compared to
the prior year period as a result of the decrease in shares
outstanding, offset by the decrease in adjusted net income. 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.
THIRD QUARTER 2015
SEGMENT RESULTS
|
|
|
|
|
|
Amounts and
percentages may not recalculate due to rounding
|
|
Three months
ended
|
|
Increase
(Decrease)
|
Dunkin' Donuts
U.S.
|
|
September 26,
2015
|
|
September 27,
2014
|
|
$ /
#
|
%
|
|
($ in thousands
except as otherwise noted)
|
Comparable store
sales growth1
|
|
1.1%
|
|
|
2.0%
|
|
|
|
|
Systemwide sales
growth
|
|
5.7%
|
|
|
7.0%
|
|
|
|
|
Franchisee-reported
sales (in millions)2
|
|
$
|
1,944.7
|
|
|
1,840.5
|
|
|
104.2
|
|
5.7%
|
|
|
|
|
|
|
|
|
|
Revenues:
|
|
|
|
|
|
|
|
Royalty
income
|
|
$
|
105,864
|
|
|
99,758
|
|
|
6,106
|
|
6.1%
|
|
Franchise
fees
|
|
12,666
|
|
|
11,704
|
|
|
962
|
|
8.2%
|
|
Rental
income
|
|
25,290
|
|
|
24,610
|
|
|
680
|
|
2.8%
|
|
Sales at
company-operated restaurants
|
|
7,293
|
|
|
5,267
|
|
|
2,026
|
|
38.5%
|
|
Other
revenues
|
|
3,257
|
|
|
1,612
|
|
|
1,645
|
|
102.0%
|
|
Total
revenues
|
|
$
|
154,370
|
|
|
142,951
|
|
|
11,419
|
|
8.0%
|
|
Segment
profit
|
|
$
|
112,932
|
|
|
106,242
|
|
|
6,690
|
|
6.3%
|
|
|
|
|
|
|
|
|
|
Points of
distribution
|
|
8,308
|
|
|
7,941
|
|
|
367
|
|
4.6%
|
|
Gross
openings
|
|
127
|
|
|
141
|
|
|
(14)
|
|
(9.9)%
|
|
Net
openings
|
|
68
|
|
|
120
|
|
|
(52)
|
|
(43.3)%
|
|
|
1
Comparable store sales growth for the three months ended September
27, 2014 have been revised to include only those restaurants that
have been open at least 78 weeks (approximately 18 months) to
conform to the current period calculation. Please refer to
"Non-GAAP Measures and Statistical Data" for further
detail.
|
|
2
Franchisee-reported sales include sales at franchisee-operated
restaurants, including joint ventures. We do not record sales by
franchisees or licensees as revenue and such sales are not included
in our consolidated financial statements. Please refer to "Non-GAAP
Measures and Statistical Data" for further detail.
|
|
3 Net
openings reflects the previously-announced closing of 31 self-serve
coffee stations within Speedway locations.
|
Dunkin' Donuts U.S. third quarter revenues of $154.4 million represented an increase of 8.0%
over the prior year period. The increase was primarily a result of
increased royalty income due to an increase in systemwide sales, as
well as an increase in sales at company-operated restaurants driven
by a net increase in the number of company-operated restaurants.
Also contributing to revenue growth were increases in other
revenues, driven primarily by income recognized in connection with
the termination of a lease, and franchise fees due primarily to
favorable development mix.
Dunkin' Donuts U.S. segment profit in the third quarter
increased $6.7 million over the prior
year period to $112.9 million, which
was driven primarily by growth in royalty income, other revenues,
and franchise fees. The increases in revenues were offset by an
increase in personnel costs and a decrease in other operating
income as the prior year period included a gain recognized in
connection with the sale of real estate.
Amounts and
percentages may not recalculate due to rounding
|
|
Three months
ended
|
|
Increase
(Decrease)
|
Dunkin' Donuts
International
|
|
September 26,
2015
|
|
September 27,
2014
|
|
$ /
#
|
%
|
|
($ in thousands
except as otherwise noted)
|
Comparable store
sales growth (decline)
|
|
0.8%
|
|
|
(2.9)%
|
|
|
|
|
Systemwide sales
growth (decline)
|
|
(5.0)%
|
|
|
4.3%
|
|
|
|
|
Franchisee-reported
sales (in millions)1
|
|
$
|
164.2
|
|
|
172.8
|
|
|
(8.6)
|
|
(5.0)%
|
|
|
|
|
|
|
|
|
|
Revenues:
|
|
|
|
|
|
|
|
Royalty
income
|
|
$
|
3,762
|
|
|
3,685
|
|
|
77
|
|
2.1%
|
|
Franchise
fees
|
|
850
|
|
|
683
|
|
|
167
|
|
24.5%
|
|
Rental
income
|
|
—
|
|
|
18
|
|
|
(18)
|
|
(100.0)%
|
|
Other
revenues
|
|
14
|
|
|
(14)
|
|
|
28
|
|
n/m
|
|
Total
revenues
|
|
$
|
4,626
|
|
|
4,372
|
|
|
254
|
|
5.8%
|
|
Segment
profit
|
|
$
|
1,618
|
|
|
1,885
|
|
|
(267)
|
|
(14.2)%
|
|
|
|
|
|
|
|
|
|
Points of
distribution
|
|
3,260
|
|
|
3,182
|
|
|
78
|
|
2.5%
|
|
Gross
openings
|
|
104
|
|
|
88
|
|
|
16
|
|
18.2%
|
|
Net
openings
|
|
40
|
|
|
10
|
|
|
30
|
|
300.0%
|
|
|
1
Franchisee-reported sales include sales at franchisee-operated
restaurants, including joint ventures. We do not record sales by
franchisees or licensees as revenue and such sales are not included
in our consolidated financial statements. Please refer to "Non-GAAP
Measures and Statistical Data" for further detail.
|
Dunkin' Donuts International third quarter systemwide sales
decreased 5.0% from the prior year period. Sales declines in
South Korea and South America were offset by sales growth in
the Middle East and Asia. Sales in South
Korea, South America,
Asia, and Europe were negatively impacted by unfavorable
foreign exchange rates. On a constant currency basis, systemwide
sales increased by approximately 7%. Comparable store sales growth
was negatively impacted as a result of the MERS outbreak in
South Korea.
Dunkin' Donuts International third quarter revenues of
$4.6 million represented an increase
of 5.8% over the prior year period. The increases in revenues were
primarily a result of increased franchise fees due to additional
gross development, as well as an increase in royalty income which
was negatively impacted by unfavorable foreign exchange rates.
Segment profit for Dunkin' Donuts International decreased
$0.3 million to $1.6 million in the third quarter primarily as a
result of an increase in general and administrative expenses,
offset by revenue growth. A portion of the increase in general and
administrative expenses can be attributed to increased personnel
costs and other investments in international markets.
Amounts and
percentages may not recalculate due to rounding
|
|
Three months
ended
|
|
Increase
(Decrease)
|
Baskin-Robbins
U.S.
|
|
September 26,
2015
|
|
September 27,
2014
|
|
$ /
#
|
%
|
|
($ in thousands
except as otherwise noted)
|
Comparable store
sales growth1
|
|
7.5%
|
|
|
6.0%
|
|
|
|
|
Systemwide sales
growth
|
|
9.8%
|
|
|
5.9%
|
|
|
|
|
Franchisee-reported
sales (in millions)2
|
|
$
|
176.6
|
|
|
161.0
|
|
|
15.5
|
|
9.6%
|
|
|
|
|
|
|
|
|
|
Revenues:
|
|
|
|
|
|
|
|
Royalty
income
|
|
$
|
8,529
|
|
|
7,991
|
|
|
538
|
|
6.7%
|
|
Franchise
fees
|
|
180
|
|
|
360
|
|
|
(180)
|
|
(50.0)%
|
|
Rental
income
|
|
667
|
|
|
795
|
|
|
(128)
|
|
(16.1)%
|
|
Sales of ice cream
and other products
|
|
206
|
|
|
1,177
|
|
|
(971)
|
|
(82.5)%
|
|
Other
revenues
|
|
3,520
|
|
|
2,293
|
|
|
1,227
|
|
53.5%
|
|
Total
revenues
|
|
$
|
13,102
|
|
|
12,616
|
|
|
486
|
|
3.9%
|
|
Segment
profit
|
|
$
|
9,643
|
|
|
8,828
|
|
|
815
|
|
9.2%
|
|
|
|
|
|
|
|
|
|
Points of
distribution
|
|
2,488
|
|
|
2,486
|
|
|
2
|
|
0.1%
|
|
Gross
openings
|
|
18
|
|
|
21
|
|
|
(3)
|
|
(14.3)%
|
|
Net openings
(closings)
|
|
(2)
|
|
|
6
|
|
|
(8)
|
|
n/m
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1
Comparable store sales growth for the three months ended September
27, 2014 have been revised to include only those restaurants that
have been open at least 78 weeks (approximately 18 months) to
conform to the current period calculation. Please refer to
"Non-GAAP Measures and Statistical Data" for further
detail.
|
|
2
Franchisee-reported sales include sales at franchisee-operated
restaurants, including joint ventures. We do not record sales by
franchisees or licensees as revenue and such sales are not included
in our consolidated financial statements. Please refer to "Non-GAAP
Measures and Statistical Data" for further detail.
|
Baskin-Robbins U.S. third quarter revenue increased 3.9% from
the prior year period to $13.1
million due primarily to an increase in other revenues,
driven by an increase in licensing income, and an increase in
royalty income, offset by a decrease in sales of ice cream and
other products. The fluctuations in licensing income and sales of
ice cream and other products can be attributed to a shift in
certain franchisees now purchasing ice cream from our third party
ice cream manufacturer.
Segment profit for Baskin-Robbins U.S. increased $0.8 million in the third quarter, or 9.2%, over
the prior year period primarily as a result of the increases in
other revenues and royalty income, offset by an increase in general
and administrative expenses due primarily to expenses incurred
related to brand-building activities and increased personnel
costs.
Amounts and
percentages may not recalculate due to rounding
|
|
Three months
ended
|
|
Increase
(Decrease)
|
Baskin-Robbins
International
|
|
September 26,
2015
|
|
September 27,
2014
|
|
$ /
#
|
%
|
|
($ in thousands
except as otherwise noted)
|
Comparable store
sales decline
|
|
(2.4)%
|
|
|
(1.5)%
|
|
|
|
|
Systemwide sales
growth (decline)
|
|
(10.2)%
|
|
|
0.7%
|
|
|
|
|
Franchisee-reported
sales (in millions)1
|
|
$
|
361.0
|
|
|
401.9
|
|
|
(40.9)
|
|
(10.2)%
|
|
|
|
|
|
|
|
|
|
Revenues:
|
|
|
|
|
|
|
|
Royalty
income
|
|
$
|
1,913
|
|
|
2,180
|
|
|
(267)
|
|
(12.2)%
|
|
Franchise
fees
|
|
149
|
|
|
398
|
|
|
(249)
|
|
(62.6)%
|
|
Rental
income
|
|
129
|
|
|
126
|
|
|
3
|
|
2.4%
|
|
Sales of ice cream
and other products
|
|
28,790
|
|
|
26,166
|
|
|
2,624
|
|
10.0%
|
|
Other
revenues
|
|
104
|
|
|
33
|
|
|
71
|
|
215.2%
|
|
Total
revenues
|
|
$
|
31,085
|
|
|
28,903
|
|
|
2,182
|
|
7.5%
|
|
Segment
profit
|
|
$
|
10,276
|
|
|
12,485
|
|
|
(2,209)
|
|
(17.7)%
|
|
|
|
|
|
|
|
|
|
Points of
distribution
|
|
5,129
|
|
|
4,933
|
|
|
196
|
|
4.0%
|
|
Gross
openings
|
|
110
|
|
|
116
|
|
|
(6)
|
|
(5.2)%
|
|
Net openings
(closings)
|
|
(16)
|
|
|
61
|
|
|
(77)
|
|
n/m
|
|
|
1
Franchisee-reported sales include sales at franchisee-operated
restaurants, including joint ventures. We do not record sales by
franchisees or licensees as revenue and such sales are not included
in our consolidated financial statements. Please refer to "Non-GAAP
Measures and Statistical Data" for further detail.
|
Baskin-Robbins International systemwide sales decreased 10.2% in
the third quarter compared to the prior year period driven by sales
declines in Japan, South Korea, and Puerto Rico, offset by sales growth in the
Middle East. Sales in Japan and South
Korea were negatively impacted by unfavorable foreign
exchange rates. On a constant currency basis, systemwide sales
increased by approximately 2%. Comparable store sales growth was
negatively impacted as a result of the MERS outbreak in
South Korea.
Baskin-Robbins International third quarter revenues increased
7.5% over the prior year period to $31.1
million due primarily to an increase in sales of ice cream
and other products in the Middle
East, offset by a decrease in royalty income, which was
negatively impacted by unfavorable foreign exchange rates, and a
decrease in franchise fees.
Third quarter segment profit decreased 17.7% from the prior year
period to $10.3 million as a result
of an increase in bad debt expense and a decrease in net income of
equity method investments driven by unfavorable results from our
Japan joint venture compared to
the prior year period and the impact of unfavorable foreign
exchange rates on net income of our South
Korea and Japan joint
ventures. Also contributing to the decrease in segment profit were
the decreases in royalty income and franchise fees, offset by an
increase in net margin on ice cream driven primarily by the
increase in sales.
COMPANY UPDATES
- The Company today announced that the Board of Directors
declared a fourth quarter cash dividend of $0.265 per share, payable on December 2, 2015 to shareholders of record as of
the close of business on November 23,
2015.
- During the third quarter, the Company repurchased approximately
126,000 shares of common stock in the open market at a weighted
average cost per share of $48.79. The
Company's shares outstanding as of September
26, 2015 were 95,163,689.
FISCAL YEAR 2015 TARGETS
As described below, the Company is reiterating and updating
certain targets regarding its 2015 expectations.
- The Company continues to expect Dunkin' Donuts U.S. comparable
store sales growth of 1 to 3 percent. It now expects Baskin-Robbins
U.S. comparable store sales growth of 3 to 5 percent (previously it
expected 1 to 3 percent comparable store sales growth).
- The Company continues to expect that Dunkin' Donuts U.S. will
add between 410 and 440 net new restaurants, for greater than 5
percent net unit growth, and expects Baskin-Robbins U.S. will add
between 5 and 10 net new restaurants. The Dunkin' Donuts U.S.
net development target excludes the previously-announced closing of
self-serve coffee stations within Speedway locations. The Company
expects approximately 100 of these self-serve coffee stations to
close between 2015 and 2016.
- Internationally, the Company continues to target opening 200 to
300 net new restaurants across the two brands. It continues to
expect net income of equity method investments to be approximately
$13 million.
- Globally, the Company continues to expect to open between 615
and 750 net new restaurants, excluding the closing of the
self-serve coffee stations within Speedway locations.
- The Company continues to expect revenue growth of between 6 and
8 percent; adjusted operating income growth of between 7 and 8
percent; and adjusted earnings per share of $1.87 to $1.91.
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 56471885.
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; 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 such as 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 tables
"Dunkin' Brands Group, Inc. Non-GAAP Reconciliations."
Additionally, the Company has included metrics such as
franchisee-reported sales, 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.
Franchisee-reported sales include sales at franchisee-operated
restaurants, including joint ventures. While we do not record sales
by franchisees or licensees as revenue and such sales are not
included in our consolidated financial statements, we believe that
this operating measure is important in obtaining an understanding
of our financial performance. We believe franchisee-reported sales
information aids in understanding how we derive royalty revenue and
in evaluating our performance relative to competitors.
The Company uses "systemwide sales growth" to refer to the
percentage change in sales at both franchisee- and company-operated
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" and "BR
U.S. comparable store sales growth," which are calculated by
including only sales from franchisee- and company-operated
restaurants that have been open at least 78 weeks and that have
reported sales in the current and comparable prior year week.
Previously, DD U.S. comparable store sales growth and BR U.S.
comparable store sales growth were calculated including only sales
from franchisee- and company-operated restaurants that had been
open at least 54 weeks and that had reported sales in the current
and comparable prior year week. The calculation of this operating
measure was revised in the third quarter of 2015 to more accurately
reflect sales growth at comparable stores by minimizing the impact
of strong new store openings, particularly as we develop in newer
markets. All prior year amounts have been revised to conform to the
78-week calculation. There was no financial statement impact from
revising the calculation of this operating measure.
The Company uses "DD International comparable store sales
growth" and "BR International comparable store sales growth," which
are calculated by including only sales from franchisee- and
company-operated restaurants that have been open at least 54 weeks
and that have reported sales in the current and comparable prior
year week.
About Dunkin' Brands Group, Inc.
With more than 19,000 points of distribution in more than 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 the third quarter 2015, Dunkin'
Brands' nearly 100 percent franchised business model included more
than 11,500 Dunkin' Donuts restaurants and more than 7,600
Baskin-Robbins restaurants. 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 26,
2015
|
|
September 27,
2014
|
|
September 26,
2015
|
|
September 27,
2014
|
|
|
|
|
|
|
|
|
|
Revenues:
|
|
|
|
|
|
|
|
|
Franchise fees and
royalty income
|
|
$
|
133,913
|
|
|
126,759
|
|
|
380,381
|
|
|
355,738
|
|
Rental
income
|
|
26,121
|
|
|
25,570
|
|
|
76,283
|
|
|
73,650
|
|
Sales of ice cream
and other products(1)
|
|
29,554
|
|
|
27,617
|
|
|
88,032
|
|
|
88,678
|
|
Sales at
company-operated restaurants
|
|
7,293
|
|
|
5,267
|
|
|
21,578
|
|
|
16,319
|
|
Other
revenues(1)
|
|
12,926
|
|
|
7,427
|
|
|
40,862
|
|
|
21,111
|
|
Total
revenues
|
|
209,807
|
|
|
192,640
|
|
|
607,136
|
|
|
555,496
|
|
Operating costs and
expenses:
|
|
|
|
|
|
|
|
|
Occupancy
expenses—franchised restaurants
|
|
13,686
|
|
|
13,258
|
|
|
40,921
|
|
|
39,830
|
|
Cost of ice cream and
other products(1)
|
|
19,788
|
|
|
19,802
|
|
|
58,010
|
|
|
62,914
|
|
Company-operated
restaurant expenses
|
|
7,697
|
|
|
5,505
|
|
|
22,312
|
|
|
16,772
|
|
General and
administrative expenses, net(1)
|
|
61,433
|
|
|
56,039
|
|
|
187,622
|
|
|
171,765
|
|
Depreciation
|
|
5,177
|
|
|
4,960
|
|
|
15,278
|
|
|
14,803
|
|
Amortization of other
intangible assets
|
|
6,161
|
|
|
6,333
|
|
|
18,542
|
|
|
19,122
|
|
Long-lived asset
impairment charges
|
|
—
|
|
|
633
|
|
|
264
|
|
|
1,279
|
|
Total operating costs
and expenses
|
|
113,942
|
|
|
106,530
|
|
|
342,949
|
|
|
326,485
|
|
Net income of equity
method investments
|
|
4,059
|
|
|
5,366
|
|
|
10,957
|
|
|
12,514
|
|
Other operating
income (expense), net
|
|
(161)
|
|
|
1,004
|
|
|
947
|
|
|
7,609
|
|
Operating
income
|
|
99,763
|
|
|
92,480
|
|
|
276,091
|
|
|
249,134
|
|
Other income
(expense), net:
|
|
|
|
|
|
|
|
|
Interest
income
|
|
86
|
|
|
63
|
|
|
324
|
|
|
201
|
|
Interest
expense
|
|
(24,786)
|
|
|
(16,680)
|
|
|
(72,045)
|
|
|
(51,444)
|
|
Loss on debt
extinguishment and refinancing transactions
|
|
—
|
|
|
—
|
|
|
(20,554)
|
|
|
(13,735)
|
|
Other losses,
net
|
|
(449)
|
|
|
(584)
|
|
|
(1,006)
|
|
|
(670)
|
|
Total other expense,
net
|
|
(25,149)
|
|
|
(17,201)
|
|
|
(93,281)
|
|
|
(65,648)
|
|
Income before income
taxes
|
|
74,614
|
|
|
75,279
|
|
|
182,810
|
|
|
183,486
|
|
Provision for income
taxes
|
|
28,312
|
|
|
20,855
|
|
|
68,634
|
|
|
60,263
|
|
Net income including
noncontrolling interests
|
|
46,302
|
|
|
54,424
|
|
|
114,176
|
|
|
123,223
|
|
Net income (loss)
attributable to noncontrolling interests
|
|
86
|
|
|
(273)
|
|
|
11
|
|
|
(621)
|
|
Net income
attributable to Dunkin' Brands
|
|
$
|
46,216
|
|
|
54,697
|
|
|
114,165
|
|
|
123,844
|
|
|
|
|
|
|
|
|
|
|
Earnings per
share—basic
|
|
$
|
0.49
|
|
|
0.52
|
|
|
1.18
|
|
|
1.17
|
|
Earnings per
share—diluted
|
|
0.48
|
|
|
0.52
|
|
|
1.16
|
|
|
1.16
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) Sales
of products sold to Dunkin' Donuts International franchisees that
have historically been included in other revenues are now included
in sales of ice cream and other products. The related costs have
historically been included in general and administrative expenses,
net and are now included in cost of ice cream and other products.
Sales and costs from these transactions were reclassified for all
prior periods presented to conform to the current period
presentation.
|
DUNKIN' BRANDS
GROUP, INC. AND SUBSIDIARIES
|
Condensed
Consolidated Balance Sheets
|
(In
thousands)
|
(Unaudited)
|
|
|
September 26,
2015
|
|
December 27,
2014
|
Assets
|
|
|
|
|
Current
assets:
|
|
|
|
|
Cash and cash
equivalents
|
|
$
|
324,530
|
|
|
208,080
|
|
Restricted
cash
|
|
72,131
|
|
|
—
|
|
Accounts, notes, and
other receivables, net
|
|
90,582
|
|
|
105,060
|
|
Other current
assets
|
|
123,929
|
|
|
129,478
|
|
Total current
assets
|
|
611,172
|
|
|
442,618
|
|
Property and
equipment, net
|
|
187,272
|
|
|
182,061
|
|
Equity method
investments
|
|
160,022
|
|
|
164,493
|
|
Goodwill and other
intangible assets, net
|
|
2,299,522
|
|
|
2,317,167
|
|
Other
assets
|
|
90,087
|
|
|
71,044
|
|
Total
assets
|
|
$
|
3,348,075
|
|
|
3,177,383
|
|
Liabilities,
Redeemable Noncontrolling Interests, and Stockholders'
Equity
|
|
|
|
|
Current
liabilities:
|
|
|
|
|
Current portion of
long-term debt
|
|
$
|
25,253
|
|
|
3,852
|
|
Accounts
payable
|
|
14,728
|
|
|
13,814
|
|
Other current
liabilities
|
|
285,476
|
|
|
337,853
|
|
Total current
liabilities
|
|
325,457
|
|
|
355,519
|
|
Long-term debt,
net
|
|
2,463,477
|
|
|
1,807,081
|
|
Deferred income
taxes, net
|
|
522,838
|
|
|
540,339
|
|
Other long-term
liabilities
|
|
102,094
|
|
|
99,494
|
|
Total long-term
liabilities
|
|
3,088,409
|
|
|
2,446,914
|
|
Redeemable
noncontrolling interests
|
|
—
|
|
|
6,991
|
|
Total stockholders'
equity (deficit)
|
|
(65,791)
|
|
|
367,959
|
|
Total liabilities,
redeemable noncontrolling interests, and stockholders'
equity
|
|
$
|
3,348,075
|
|
|
3,177,383
|
|
DUNKIN' BRANDS
GROUP, INC. AND SUBSIDIARIES
|
Condensed
Consolidated Statements of Cash Flows
|
(In
thousands)
|
(Unaudited)
|
|
|
Nine months
ended
|
|
|
September 26,
2015
|
|
September 27,
2014
|
|
|
|
|
|
Net cash provided by
operating activities
|
|
$
|
83,237
|
|
|
115,851
|
|
Cash flows from
investing activities:
|
|
|
|
|
Additions to property
and equipment
|
|
(23,700)
|
|
|
(18,324)
|
|
Proceeds from sale of
real estate and company-operated restaurants
|
|
1,948
|
|
|
14,354
|
|
Other, net
|
|
(3,270)
|
|
|
(1,734)
|
|
Net cash used in
investing activities
|
|
(25,022)
|
|
|
(5,704)
|
|
Cash flows from
financing activities:
|
|
|
|
|
Proceeds from
issuance of long-term debt
|
|
2,500,000
|
|
|
—
|
|
Repayment of
long-term debt
|
|
(1,831,574)
|
|
|
(15,000)
|
|
Payment of deferred
financing and other debt-related costs
|
|
(41,347)
|
|
|
(8,977)
|
|
Dividends paid on
common stock
|
|
(76,013)
|
|
|
(72,756)
|
|
Repurchases of common
stock, including accelerated share repurchase
|
|
(500,037)
|
|
|
(130,171)
|
|
Exercise of stock
options
|
|
10,297
|
|
|
4,847
|
|
Change in restricted
cash
|
|
(6,831)
|
|
|
—
|
|
Other, net
|
|
4,465
|
|
|
10,861
|
|
Net cash provided by
(used in) financing activities
|
|
58,960
|
|
|
(211,196)
|
|
Effect of exchange
rates on cash and cash equivalents
|
|
(725)
|
|
|
(219)
|
|
Increase (decrease)
in cash and cash equivalents
|
|
116,450
|
|
|
(101,268)
|
|
Cash and cash
equivalents, beginning of period
|
|
208,080
|
|
|
256,933
|
|
Cash and cash
equivalents, end of period
|
|
$
|
324,530
|
|
|
155,665
|
|
DUNKIN' BRANDS
GROUP, INC. AND SUBSIDIARIES
|
Non-GAAP
Reconciliations
|
(In thousands, except
per share data)
|
(Unaudited)
|
|
|
|
Three months
ended
|
|
Nine months
ended
|
|
|
September 26,
2015
|
|
September 27,
2014
|
|
September 26,
2015
|
|
September 27,
2014
|
Operating
income
|
|
$
|
99,763
|
|
|
92,480
|
|
|
276,091
|
|
|
249,134
|
|
Operating income
margin
|
|
47.5
|
%
|
|
48.0
|
%
|
|
45.5
|
%
|
|
44.8
|
%
|
Adjustments:
|
|
|
|
|
|
|
|
|
Amortization of other
intangible assets
|
|
$
|
6,161
|
|
|
6,333
|
|
|
18,542
|
|
|
19,122
|
|
Long-lived asset
impairment charges
|
|
—
|
|
|
633
|
|
|
264
|
|
|
1,279
|
|
Third-party product
volume guarantee
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(300)
|
|
Transaction-related
costs(a)
|
|
36
|
|
|
—
|
|
|
317
|
|
|
—
|
|
Bertico and related
litigation(b)
|
|
—
|
|
|
—
|
|
|
(2,753)
|
|
|
—
|
|
Settlement of
Canadian pension plan(c)
|
|
—
|
|
|
—
|
|
|
4,075
|
|
|
—
|
|
Adjusted operating
income
|
|
$
|
105,960
|
|
|
99,446
|
|
|
296,536
|
|
|
269,235
|
|
Adjusted operating
income margin
|
|
50.5
|
%
|
|
51.6
|
%
|
|
48.8
|
%
|
|
48.5
|
%
|
|
|
|
|
|
|
|
|
|
Net income
attributable to Dunkin' Brands
|
|
$
|
46,216
|
|
|
54,697
|
|
|
114,165
|
|
|
123,844
|
|
Adjustments:
|
|
|
|
|
|
|
|
|
Amortization of other
intangible assets
|
|
6,161
|
|
|
6,333
|
|
|
18,542
|
|
|
19,122
|
|
Long-lived asset
impairment charges
|
|
—
|
|
|
633
|
|
|
264
|
|
|
1,279
|
|
Third-party product
volume guarantee
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(300)
|
|
Transaction-related
costs(a)
|
|
36
|
|
|
—
|
|
|
317
|
|
|
—
|
|
Bertico and related
litigation(b)
|
|
—
|
|
|
—
|
|
|
(2,753)
|
|
|
—
|
|
Settlement of
Canadian pension plan(c)
|
|
—
|
|
|
—
|
|
|
4,075
|
|
|
—
|
|
Loss on debt
extinguishment and refinancing transactions
|
|
—
|
|
|
—
|
|
|
20,554
|
|
|
13,735
|
|
Tax impact of
adjustments(d)
|
|
(2,479)
|
|
|
(2,786)
|
|
|
(16,400)
|
|
|
(13,534)
|
|
Tax impact of legal
entity conversion(e)
|
|
246
|
|
|
—
|
|
|
246
|
|
|
—
|
|
Income tax audit
settlements(f)
|
|
—
|
|
|
(6,717)
|
|
|
—
|
|
|
(6,717)
|
|
State tax
apportionment(g)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
514
|
|
Adjusted net
income
|
|
$
|
50,180
|
|
|
52,160
|
|
|
139,010
|
|
|
137,943
|
|
|
|
|
|
|
|
|
|
|
Adjusted net
income
|
|
$
|
50,180
|
|
|
52,160
|
|
|
139,010
|
|
|
137,943
|
|
Weighted average
number of common shares – diluted
|
|
96,023,211
|
|
|
105,969,110
|
|
|
98,134,053
|
|
|
107,045,211
|
|
Diluted adjusted
earnings per share
|
|
$
|
0.52
|
|
|
0.49
|
|
|
1.42
|
|
|
1.29
|
|
|
|
|
|
|
|
|
|
|
(a) Represents
non-capitalizable costs incurred as a result of the new securitized
financing facility, which was completed in January 2015.
|
(b) Represents a net
reduction to legal reserves for the Bertico litigation and related
matters, as a result of the Quebec Court of Appeals (Montreal)
ruling to reduce the damages assessed against the Company in the
Bertico litigation from approximately C$16.4 million to
approximately C$10.9 million, plus costs and interest.
|
(c) Represents costs
incurred related to the final settlement of our Canadian pension
plan as a result of the closure of our Canadian ice cream
manufacturing plant in fiscal year 2012.
|
(d) Tax impact of
adjustments calculated at a 40% effective tax rate.
|
(e) Represents the
net tax impact of converting Dunkin' Brands Canada Ltd. to Dunkin'
Brands Canada ULC.
|
(f) Represents income
tax benefits resulting from the resolution of historical tax
positions settled during the period.
|
(g) 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.