CANTON, Mass., Oct. 20,
2016 /PRNewswire/ --
Third quarter highlights include:
- Dunkin' Donuts U.S. comparable store sales growth of
2.0%
- Baskin-Robbins U.S. comparable store sales decline of
0.9%
- Added 115 net new restaurants worldwide, including 56 net
new Dunkin' Donuts in the U.S.
- Revenues decreased 1.3%
- Diluted EPS increased 18.8% to $0.57
- Diluted adjusted EPS increased 15.4% to $0.60
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 24, 2016.
"Our Dunkin' Donuts U.S. business delivered solid comps for the
quarter, fueled by record-breaking beverage sales, with
double-digit growth in the espresso and iced coffee categories.
Other noteworthy achievements in the quarter included: surpassing 5
million members in our DD Perks® rewards program, which remains one
of the fastest growing loyalty programs in the
quick-service-restaurant industry; the opening of our 12,000th
Dunkin' Donuts restaurant worldwide; the hiring of Dave Hoffmann, a leading restaurant executive,
as our new Dunkin' Donuts U.S. and Canada president; and the announcement that we
will be launching a line of Dunkin' Donuts ready-to-drink iced
coffee beverages nationwide in 2017," said Nigel Travis, Dunkin' Brands Chairman and
CEO. "We are very pleased with the direction of the Company,
and while we have much work to do, we are cautiously optimistic
that our new five-part strategy for Dunkin' Donuts U.S., which
focuses on coffee leadership, faster innovation, targeted value
offers, digital leadership and an improved restaurant experience,
will position the Company to see healthy growth in the months and
years ahead."
"While the sale of our remaining company-operated restaurants
drove a decline in revenues in the quarter, we are pleased to
announce that we are now 100 percent franchised," said Paul Carbone, Dunkin' Brands Chief Financial
Officer. "In regards to restaurant-level economics, we are
particularly encouraged by first-year cash-on-cash returns that
franchisees are experiencing in our high-opportunity West and
Emerging markets. We will continue to focus on driving franchisee
profitability by better serving the customer, building high-margin
beverage sales, lowering store construction costs and simplifying
store operations. Additionally, sales of Dunkin' Donuts- branded
consumer goods through locations outside our restaurants, including
our recently announced ready-to-drink iced coffee line, should
drive Brand awareness, provide more opportunities for consumers to
drink our coffee every day, and deliver profit-sharing income for
our franchisees, including in our newest markets."
THIRD QUARTER 2016
KEY FINANCIAL HIGHLIGHTS
|
|
|
|
|
|
|
($ in millions,
except per share data)
|
Three months
ended
|
|
Increase
(Decrease)
|
Amounts and
percentages may not recalculate due to rounding
|
September 24,
2016
|
September 26,
2015
|
|
$ /
#
|
|
%
|
Systemwide
sales1
|
$
|
2,821.0
|
|
2,653.8
|
|
|
167.2
|
|
6.3
|
%
|
Comparable store
sales growth (decline):
|
|
|
|
|
|
|
DD U.S.
|
2.0
|
%
|
1.1
|
%
|
|
|
|
|
BR U.S.
|
(0.9)
|
%
|
7.5
|
%
|
|
|
|
|
DD
International
|
(1.4)
|
%
|
0.8
|
%
|
|
|
|
|
BR
International
|
(2.9)
|
%
|
(2.4)
|
%
|
|
|
|
|
Development
data:
|
|
|
|
|
|
|
Consolidated global
net POD development2
|
115
|
|
90
|
|
|
25
|
|
27.8
|
%
|
DD global PODs at
period end
|
12,008
|
|
11,568
|
|
|
440
|
|
3.8
|
%
|
BR global PODs at
period end
|
7,776
|
|
7,617
|
|
|
159
|
|
2.1
|
%
|
Consolidated global
PODs at period end
|
19,784
|
|
19,185
|
|
|
599
|
|
3.1
|
%
|
Financial
data:
|
|
|
|
|
|
|
Revenues
|
$
|
207.1
|
|
209.8
|
|
|
(2.7)
|
|
(1.3)
|
%
|
Operating
income
|
109.4
|
|
99.8
|
|
|
9.6
|
|
9.6
|
%
|
Operating income
margin
|
52.8
|
%
|
47.5
|
%
|
|
|
|
|
Adjusted operating
income3
|
$
|
114.8
|
|
106.0
|
|
|
8.8
|
|
8.3
|
%
|
Adjusted operating
income margin3
|
55.4
|
%
|
50.5
|
%
|
|
|
|
|
Net income
|
$
|
52.7
|
|
46.2
|
|
|
6.5
|
|
14.1
|
%
|
Adjusted net
income3
|
56.0
|
|
50.2
|
|
|
5.8
|
|
11.5
|
%
|
Earnings per
share:
|
|
|
|
|
|
|
Common–basic
|
0.58
|
|
0.49
|
|
|
0.09
|
|
18.4
|
%
|
Common–diluted
|
0.57
|
|
0.48
|
|
|
0.09
|
|
18.8
|
%
|
Diluted adjusted
earnings per share3
|
0.60
|
|
0.52
|
|
|
0.08
|
|
15.4
|
%
|
Weighted average
number of common shares – diluted (in millions)
|
92.6
|
|
96.0
|
|
|
(3.5)
|
|
(3.6)
|
%
|
|
1
Systemwide sales include sales at franchisee- and company-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 systemwide sales
information aids in understanding how we derive royalty revenue and
in evaluating our performance relative to competitors. Beginning in
the first quarter of fiscal year 2016, we began presenting
systemwide sales rather than franchisee-reported sales, which
excludes sales of company-operated restaurants, as we believe the
systemwide sales information is a more complete metric in obtaining
an understanding of our financial performance.
|
|
2
Consolidated global net POD development for the three months ended
September 24, 2016 and September 26, 2015 reflects the
previously-announced closing of 5 and 31 self-serve coffee stations
within Speedway locations, respectively.
|
|
3 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 certain other items, 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 offset by a decline
in traffic. Growth was driven by strong beverage sales, led by iced
coffee, including Cold Brew, and hot and iced espresso-based
beverages, as well as breakfast sandwiches, led by the Maple
Sausage and the Belgian Waffle breakfast sandwiches.
Baskin-Robbins U.S. comparable store sales were negative during
the third quarter driven by a decline in traffic offset by
increased average ticket. Growth in sales of cups and cones led by
Warm Cookie and Donut Ice Cream Sandwiches was more than offset by
declines in beverages and sundaes.
In the third quarter, Dunkin' Brands franchisees and licensees
opened 115 net new restaurants around the globe. This included 56
net new Dunkin' Donuts U.S. locations (including the closing of 5
Speedway self-serve coffee stations), 45 net new Baskin-Robbins
International locations, 11 net new Dunkin' Donuts International
locations, and 3 net new Baskin-Robbins U.S. locations.
Additionally, Dunkin' Donuts U.S. franchisees remodeled 127
restaurants and Baskin-Robbins U.S. franchisees remodeled 18
restaurants during the quarter.
Revenues for the third quarter decreased $2.7 million, or 1.3%, compared to the prior year
period due primarily to a decrease in sales at company-operated
restaurants driven by a net decrease in the number of
company-operated restaurants, a decrease in franchise fees driven
by declines in gross openings and renewal income, as well as a
decrease in sales of ice cream and other products primarily to the
Middle East. As of
September 24, 2016, there were six points of distribution that
were company-operated, all of which were sold subsequent to quarter
end. These decreases in revenues were offset by increased royalty
income as a result of systemwide sales growth. Also offsetting the
decrease in total revenues were increased license fees related to
the Dunkin' K-Cup® pod licensing agreement.
Operating income and adjusted operating income for the third
quarter increased $9.6 million, or
9.6%, and $8.8 million, or 8.3%,
respectively, from the prior year period primarily as a result of
the increase in royalty income, as well as gains recognized in
connection with the sale of company-operated restaurants and a
reduction in general and administrative expenses driven primarily
by a decrease in bad debt expense, offset by the decrease in
franchise fees.
Net income and adjusted net income for the third quarter
increased by $6.5 million, or 14.1%,
and $5.8 million, or 11.5%,
respectively, compared to the prior year period primarily as a
result of the increases in operating income and adjusted operating
income of $9.6 million and
$8.8 million, respectively, offset by
an increase in income tax expense.
Diluted earnings per share and diluted adjusted earnings per
share increased by 18.8% to $0.57 and
15.4% to $0.60, respectively, for the
third quarter compared to the prior year period as a result of the
increases in net income and adjusted net income, respectively, as
well as a decrease in shares outstanding. The decrease in shares
outstanding from the prior year period was due primarily to the
repurchase of shares since the third quarter of 2015, offset by the
exercise of stock options.
THIRD QUARTER 2016 SEGMENT RESULTS
Beginning in the first quarter of fiscal year 2016, certain
segment profit amounts in the tables below have been reclassified
as a result of the realignment of our organizational structure to
better support our segment operations, including the allocation of
previously unallocated costs. Additionally, revenues, segment
profit, points of distribution information, and systemwide sales
related to restaurants located in Puerto
Rico were previously included in the Baskin-Robbins
International segment, but are now included in the Baskin-Robbins
U.S. segment based on functional responsibility. Prior period
amounts in the tables below have been revised to reflect these
changes for all periods presented.
Amounts and
percentages may not recalculate due to rounding
|
|
Three months
ended
|
|
Increase
(Decrease)
|
Dunkin' Donuts
U.S.
|
|
September 24,
2016
|
|
September 26,
2015
|
|
$ /
#
|
|
%
|
|
($ in thousands
except as otherwise noted)
|
Comparable store
sales growth
|
|
2.0
|
%
|
|
1.1
|
%
|
|
|
|
|
Systemwide sales (in
millions)1
|
|
$
|
2,075.3
|
|
|
1,951.5
|
|
|
123.8
|
|
6.3
|
%
|
|
|
|
|
|
|
|
|
|
Revenues:
|
|
|
|
|
|
|
|
|
Royalty
income
|
|
$
|
113,281
|
|
|
105,864
|
|
|
7,417
|
|
7.0
|
%
|
Franchise
fees
|
|
9,852
|
|
|
12,666
|
|
|
(2,814)
|
|
(22.2)
|
%
|
Rental
income
|
|
25,972
|
|
|
25,290
|
|
|
682
|
|
2.7
|
%
|
Sales at
company-operated restaurants
|
|
1,611
|
|
|
7,293
|
|
|
(5,682)
|
|
(77.9)
|
%
|
Other
revenues
|
|
1,709
|
|
|
3,257
|
|
|
(1,548)
|
|
(47.5)
|
%
|
Total
revenues
|
|
$
|
152,425
|
|
|
154,370
|
|
|
(1,945)
|
|
(1.3)
|
%
|
|
|
|
|
|
|
|
|
Segment
profit
|
|
$
|
119,434
|
|
|
113,197
|
|
|
6,237
|
|
5.5
|
%
|
|
|
|
|
|
|
|
|
|
Points of
distribution
|
|
8,629
|
|
|
8,308
|
|
|
321
|
|
3.9
|
%
|
Gross
openings
|
|
97
|
|
|
127
|
|
|
(30)
|
|
(23.6)
|
%
|
Net
openings2
|
|
56
|
|
|
68
|
|
|
(12)
|
|
(17.6)
|
%
|
|
1
Systemwide sales include sales at franchisee- and company-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. Beginning in the
first quarter of fiscal year 2016, we began presenting systemwide
sales rather than franchisee-reported sales, which excludes sales
of company-operated restaurants.
|
|
2 Net
openings for the three months ended September 24, 2016 and
September 26, 2015 reflect the previously-announced closing of 5
and 31 self-serve coffee stations within Speedway locations,
respectively.
|
Dunkin' Donuts U.S. third quarter revenues of $152.4 million represented a decrease of 1.3%
compared to the prior year period. The decrease was primarily a
result of a decline in sales at company-operated restaurants driven
by a net decrease in the number of company-operated restaurants, as
well as a decrease in franchise fees due to declines in renewal
income and gross openings, and a decrease in other revenues driven
primarily by a decline in refranchising gains. These decreases in
revenues were offset by increased royalty income due to an increase
in systemwide sales.
Dunkin' Donuts U.S. segment profit in the third quarter
increased $6.2 million over the prior
year period to $119.4 million, which
was driven primarily by the increase in royalty income and an
increase in other operating income due primarily to gains
recognized in connection with the sale of company-operated
restaurants, as well as a reduction in general and administrative
expenses. These increases in segment profit were offset by the
decreases in franchise fees and other revenues, as well as expenses
incurred to record lease-related liabilities as a result of lease
terminations.
Amounts and
percentages may not recalculate due to rounding
|
|
Three months
ended
|
|
Increase
(Decrease)
|
Dunkin' Donuts
International
|
|
September 24,
2016
|
|
September 26,
2015
|
|
$ /
#
|
%
|
|
($ in thousands
except as otherwise noted)
|
Comparable store
sales growth (decline)
|
|
(1.4)
|
%
|
|
0.8
|
%
|
|
|
|
Systemwide sales (in
millions)1
|
|
$
|
177.5
|
|
|
164.2
|
|
|
13.2
|
|
8.1
|
%
|
|
|
|
|
|
|
|
|
Revenues:
|
|
|
|
|
|
|
|
Royalty
income
|
|
$
|
4,125
|
|
|
3,762
|
|
|
363
|
|
9.6
|
%
|
Franchise
fees
|
|
323
|
|
|
850
|
|
|
(527)
|
|
(62.0)
|
%
|
Other
revenues
|
|
1
|
|
|
14
|
|
|
(13)
|
|
(92.9)
|
%
|
Total
revenues
|
|
$
|
4,449
|
|
|
4,626
|
|
|
(177)
|
|
(3.8)
|
%
|
|
|
|
|
|
|
|
|
Segment
profit
|
|
$
|
705
|
|
|
1,000
|
|
|
(295)
|
|
(29.5)
|
%
|
|
|
|
|
|
|
|
|
Points of
distribution
|
|
3,379
|
|
|
3,260
|
|
|
119
|
|
3.7
|
%
|
Gross
openings
|
|
83
|
|
|
104
|
|
|
(21)
|
|
(20.2)
|
%
|
Net
openings
|
|
11
|
|
|
40
|
|
|
(29)
|
|
(72.5)
|
%
|
|
1
Systemwide sales include sales at franchisee- and company-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
increased 8.1% from the prior year period driven primarily by sales
growth in the Middle East,
Europe, South America, Asia, and South
Korea. Sales in South Korea
were positively impacted by favorable foreign exchange rates. On a
constant currency basis, systemwide sales increased by
approximately 7%.
Dunkin' Donuts International third quarter revenues of
$4.4 million represented a decrease
of 3.8% from the prior year period. The decrease in revenues was
primarily a result of a decline in franchise fees, offset by an
increase in royalty income.
Segment profit for Dunkin' Donuts International decreased
$0.3 million to $0.7 million in the third quarter primarily as a
result of the decrease in revenues and an increase in general and
administrative expenses driven primarily by an increase in bad debt
expense, offset by an increase in net income from our South Korea joint venture.
Amounts and
percentages may not recalculate due to rounding
|
|
Three months
ended
|
|
Increase
(Decrease)
|
Baskin-Robbins
U.S.
|
|
September 24,
2016
|
|
September 26,
2015
|
|
$ /
#
|
%
|
|
($ in thousands
except as otherwise noted)
|
Comparable store
sales growth (decline)
|
|
(0.9)
|
%
|
|
7.5
|
%
|
|
|
|
Systemwide sales (in
millions)1
|
|
$
|
178.2
|
|
|
179.5
|
|
|
(1.4)
|
|
(0.8)
|
%
|
|
|
|
|
|
|
|
|
Revenues:
|
|
|
|
|
|
|
|
Royalty
income
|
|
$
|
8,499
|
|
|
8,529
|
|
|
(30)
|
|
(0.4)
|
%
|
Franchise
fees
|
|
273
|
|
|
180
|
|
|
93
|
|
51.7
|
%
|
Rental
income
|
|
787
|
|
|
667
|
|
|
120
|
|
18.0
|
%
|
Sales of ice cream
and other products
|
|
805
|
|
|
684
|
|
|
121
|
|
17.7
|
%
|
Other
revenues
|
|
3,417
|
|
|
3,520
|
|
|
(103)
|
|
(2.9)
|
%
|
Total
revenues
|
|
$
|
13,781
|
|
|
13,580
|
|
|
201
|
|
1.5
|
%
|
|
|
|
|
|
|
|
|
Segment
profit
|
|
$
|
11,085
|
|
|
9,774
|
|
|
1,311
|
|
13.4
|
%
|
|
|
|
|
|
|
|
|
Points of
distribution
|
|
2,533
|
|
|
2,515
|
|
|
18
|
|
0.7
|
%
|
Gross
openings
|
|
14
|
|
|
18
|
|
|
(4)
|
|
(22.2)
|
%
|
Net openings
(closings)
|
|
3
|
|
|
(13)
|
|
|
16
|
|
n/m
|
|
|
1
Systemwide sales include sales at franchisee- and company-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. Additionally,
the prior period has been revised to reflect a reclassification of
systemwide sales generated in Puerto Rico from Baskin-Robbins
International to Baskin-Robbins U.S.
|
Baskin-Robbins U.S. third quarter revenue increased 1.5% from
the prior year period to $13.8
million due primarily to increases in rental income, sales
of ice cream and other products, and franchise fees, offset by a
decrease in other revenues driven by a decrease in licensing
income.
Segment profit for Baskin-Robbins U.S. increased $1.3 million in the third quarter, or 13.4%, over
the prior year period primarily as a result of a reduction in
general and administrative expenses, due primarily to expenses
incurred in the prior year period related to brand-building
activities, as well as reductions in bad debt expense and incentive
compensation.
Amounts and
percentages may not recalculate due to rounding
|
|
Three months
ended
|
|
Increase
(Decrease)
|
Baskin-Robbins
International
|
|
September 24,
2016
|
|
September 26,
2015
|
|
$ /
#
|
%
|
|
($ in thousands
except as otherwise noted)
|
Comparable store
sales decline
|
|
(2.9)
|
%
|
|
(2.4)
|
%
|
|
|
|
Systemwide sales (in
millions)1
|
|
$
|
390.0
|
|
|
358.5
|
|
|
31.5
|
|
8.8
|
%
|
|
|
|
|
|
|
|
|
Revenues:
|
|
|
|
|
|
|
|
Royalty
income
|
|
$
|
2,081
|
|
|
1,913
|
|
|
168
|
|
8.8
|
%
|
Franchise
fees
|
|
205
|
|
|
149
|
|
|
56
|
|
37.6
|
%
|
Rental
income
|
|
121
|
|
|
129
|
|
|
(8)
|
|
(6.2)
|
%
|
Sales of ice cream
and other products
|
|
25,340
|
|
|
28,312
|
|
|
(2,972)
|
|
(10.5)
|
%
|
Other
revenues
|
|
157
|
|
|
104
|
|
|
53
|
|
51.0
|
%
|
Total
revenues
|
|
$
|
27,904
|
|
|
30,607
|
|
|
(2,703)
|
|
(8.8)
|
%
|
|
|
|
|
|
|
|
|
Segment
profit
|
|
$
|
11,154
|
|
|
9,416
|
|
|
1,738
|
|
18.5
|
%
|
|
|
|
|
|
|
|
|
Points of
distribution
|
|
5,243
|
|
|
5,102
|
|
|
141
|
|
2.8
|
%
|
Gross
openings
|
|
116
|
|
|
110
|
|
|
6
|
|
5.5
|
%
|
Net openings
(closings)
|
|
45
|
|
|
(5)
|
|
|
50
|
|
n/m
|
|
|
1
Systemwide sales include sales at franchisee- and company-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. Additionally,
the prior period has been revised to reflect a reclassification of
systemwide sales generated in Puerto Rico from Baskin-Robbins
International to Baskin-Robbins U.S.
|
Baskin-Robbins International systemwide sales increased 8.8% in
the third quarter compared to the prior year period driven by sales
growth in Japan and South Korea. Sales in both Japan and South
Korea were positively impacted by favorable foreign exchange
rates. On a constant currency basis, systemwide sales increased by
approximately 2%.
Baskin-Robbins International third quarter revenues decreased
8.8% from the prior year period to $27.9
million due primarily to a decrease in sales of ice cream
products to the Middle East,
partially offset by an increase in royalty income. Systemwide sales
and sales of ice cream products are not directly correlated within
a given period due to the lag between shipment of products to
licensees and retail sales at franchised restaurants, as well as
the overall timing of deliveries between fiscal quarters.
Third quarter segment profit increased 18.5% from the prior year
period to $11.2 million as a result
of a decrease in general and administrative expenses driven by a
reduction in bad debt expense, an increase in net income from our
Japan joint venture, and an
increase in royalty income. These increases in segment profit were
offset by a decrease in net margin on ice cream driven primarily by
a decline in sales volume.
COMPANY UPDATES
- The Company today announced that the Board of Directors
declared a fourth quarter cash dividend of $0.30 per share, payable on November 30,
2016, to shareholders of record as of the close of business on
November 21, 2016.
- The Company announced on September 22,
2016, that David Hoffmann was
named president of Dunkin' Donuts U.S. and Canada, effective October 3, 2016. Mr. Hoffmann joins Dunkin'
Brands after 22 years with McDonald's Corporation, where he most
recently served as President, High Growth Markets, which
included China, South Korea, Russia and several
additional European markets. Mr. Hoffmann replaces Paul Twohig who, as previously announced, is
retiring and will stay with the Company through the end of the
first quarter 2017 to ensure a smooth transition. In his new
position, Mr. Hoffmann is responsible for Dunkin' Donuts operations
and marketing in the U.S. and Canada, as well as global franchising and
store development for both Dunkin' Donuts and Baskin-Robbins.
- The Company announced on September 29,
2016, that it will launch a line of Dunkin' Donuts branded
ready-to-drink (RTD) coffee beverages in the United States in early 2017. The Coca-Cola
Company will manufacture, distribute and sell the product. This
marks Dunkin' Donuts' first entry into the RTD coffee category,
which has enjoyed very strong growth over the past five years and
represents $2.3 billion dollars in
annual sales according to Nielsen.
FISCAL YEAR 2016 TARGETS
As described below, the Company is reiterating and updating
certain targets regarding its 2016 expectations.
- The Company continues to expect Dunkin' Donuts U.S. comparable
store sales growth of 0 to 2 percent. It now expects Baskin-Robbins
U.S. comparable store sales growth to be slightly positive, as
compared to previous guidance of 1 to 3 percent.
- The Company now expects Dunkin' Donuts U.S. net development to
be at the low end of the previously-provided range of 430 to 460
net new restaurants, excluding Speedway self-serve coffee station
closures. The Company continues to expect Baskin-Robbins U.S. will
add between 5 and 10 net new restaurants.
- Internationally, the Company continues to target opening
approximately 200 net new restaurants across the two brands.
- The Company now expects net income of equity method investments
to be slightly higher than 2015 full-year results of $12.6 million, as compared to previous guidance
of slightly lower than 2015 full-year results. The update is
primarily driven by the reduction of depreciation and amortization
of its Japan joint venture as a
result of the impairment charge recorded in fiscal year 2015.
- The Company now expects revenue growth to be approximately 2
percent on a 53-week basis with the last week being worth
approximately 100 basis points. The update is primarily driven by
weaker-than-expected sales of ice cream products related to its
Baskin-Robbins International segment.
- The Company continues to expect GAAP operating income growth of
between 27 and 30 percent and GAAP diluted earnings per share of
$2.02 to $2.08 on a 53-week
basis.
- The Company continues to expect adjusted operating income
growth of between 8 and 10 percent and diluted adjusted earnings
per share of $2.20 to $2.22 on a
53-week basis.
- The Company continues to expect full-year weighted-average
shares outstanding of approximately 93 million and a 38.5 percent
effective tax rate.
- Fiscal year 2016 is a 53-week year for the Company. The target
ranges for GAAP operating income growth and adjusted operating
income growth are applicable on both a 52- and 53-week basis. The
impact of the 53rd week on GAAP diluted earnings per share and
diluted adjusted earnings per share is approximately $0.03.
The foregoing non-GAAP forward-looking financial measures are
reconciled from the respective measures determined under GAAP in
the attached tables "Dunkin' Brands Group, Inc. and Subsidiaries
Non-GAAP Reconciliations."
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 71866621.
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," or "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 operating income growth, 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 operating income growth, 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. and Subsidiaries Non-GAAP
Reconciliations."
Additionally, the Company has included metrics such as
systemwide sales 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.
Systemwide sales include sales at franchisee- and
company-operated restaurants, including joint ventures. While we do
not record sales by franchisees, licensees, or joint ventures 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 systemwide sales information aids in
understanding how we derive royalty revenue and in evaluating our
performance relative to competitors.
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.
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 2016, Dunkin'
Brands' nearly 100 percent franchised business model included more
than 12,000 Dunkin' Donuts restaurants and more than 7,700
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 24,
2016
|
|
September 26,
2015
|
|
September 24,
2016
|
|
September 26,
2015
|
|
|
|
|
|
|
|
|
|
Revenues:
|
|
|
|
|
|
|
|
|
Franchise fees and
royalty income
|
|
$
|
138,639
|
|
|
133,913
|
|
|
399,617
|
|
|
380,381
|
|
Rental
income
|
|
26,880
|
|
|
26,121
|
|
|
75,874
|
|
|
76,283
|
|
Sales of ice cream
and other products
|
|
26,568
|
|
|
29,554
|
|
|
86,425
|
|
|
88,032
|
|
Sales at
company-operated restaurants
|
|
1,611
|
|
|
7,293
|
|
|
11,924
|
|
|
21,578
|
|
Other
revenues
|
|
13,401
|
|
|
12,926
|
|
|
39,344
|
|
|
40,862
|
|
Total
revenues
|
|
207,099
|
|
|
209,807
|
|
|
613,184
|
|
|
607,136
|
|
Operating costs and
expenses:
|
|
|
|
|
|
|
|
|
Occupancy
expenses—franchised restaurants
|
|
15,881
|
|
|
13,686
|
|
|
42,691
|
|
|
40,921
|
|
Cost of ice cream and
other products
|
|
18,384
|
|
|
19,788
|
|
|
58,445
|
|
|
58,010
|
|
Company-operated
restaurant expenses
|
|
1,682
|
|
|
7,697
|
|
|
13,472
|
|
|
22,312
|
|
General and
administrative expenses, net
|
|
59,374
|
|
|
61,433
|
|
|
184,028
|
|
|
187,622
|
|
Depreciation
|
|
5,050
|
|
|
5,177
|
|
|
15,361
|
|
|
15,278
|
|
Amortization of other
intangible assets
|
|
5,397
|
|
|
6,161
|
|
|
16,726
|
|
|
18,542
|
|
Long-lived asset
impairment charges
|
|
7
|
|
|
—
|
|
|
104
|
|
|
264
|
|
Total operating costs
and expenses
|
|
105,775
|
|
|
113,942
|
|
|
330,827
|
|
|
342,949
|
|
Net income of equity
method investments
|
|
5,467
|
|
|
4,059
|
|
|
12,148
|
|
|
10,957
|
|
Other operating
income (loss), net
|
|
2,569
|
|
|
(161)
|
|
|
6,329
|
|
|
947
|
|
Operating
income
|
|
109,360
|
|
|
99,763
|
|
|
300,834
|
|
|
276,091
|
|
Other income
(expense), net:
|
|
|
|
|
|
|
|
|
Interest
income
|
|
161
|
|
|
86
|
|
|
434
|
|
|
324
|
|
Interest
expense
|
|
(24,603)
|
|
|
(24,786)
|
|
|
(74,456)
|
|
|
(72,045)
|
|
Loss on debt
extinguishment and refinancing transactions
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(20,554)
|
|
Other losses,
net
|
|
(124)
|
|
|
(449)
|
|
|
(596)
|
|
|
(1,006)
|
|
Total other expense,
net
|
|
(24,566)
|
|
|
(25,149)
|
|
|
(74,618)
|
|
|
(93,281)
|
|
Income before income
taxes
|
|
84,794
|
|
|
74,614
|
|
|
226,216
|
|
|
182,810
|
|
Provision for income
taxes
|
|
32,082
|
|
|
28,312
|
|
|
86,760
|
|
|
68,634
|
|
Net income including
noncontrolling interests
|
|
52,712
|
|
|
46,302
|
|
|
139,456
|
|
|
114,176
|
|
Net income
attributable to noncontrolling interests
|
|
—
|
|
|
86
|
|
|
—
|
|
|
11
|
|
Net income
attributable to Dunkin' Brands
|
|
$
|
52,712
|
|
|
46,216
|
|
|
139,456
|
|
|
114,165
|
|
|
|
|
|
|
|
|
|
|
Earnings per
share—basic
|
|
$
|
0.58
|
|
|
0.49
|
|
|
1.52
|
|
|
1.18
|
|
Earnings per
share—diluted
|
|
0.57
|
|
|
0.48
|
|
|
1.51
|
|
|
1.16
|
|
DUNKIN' BRANDS
GROUP, INC. AND SUBSIDIARIES
|
Condensed
Consolidated Balance Sheets
|
(In
thousands)
|
(Unaudited)
|
|
|
September 24,
2016
|
|
December 26,
2015
|
Assets
|
|
|
|
|
Current
assets:
|
|
|
|
|
Cash and cash
equivalents
|
|
$
|
270,230
|
|
|
260,430
|
|
Restricted
cash
|
|
70,734
|
|
|
71,917
|
|
Accounts, notes, and
other receivables, net
|
|
83,379
|
|
|
128,360
|
|
Other current
assets
|
|
89,364
|
|
|
97,117
|
|
Total current
assets
|
|
513,707
|
|
|
557,824
|
|
Property and
equipment, net
|
|
177,137
|
|
|
182,614
|
|
Equity method
investments
|
|
123,174
|
|
|
106,878
|
|
Goodwill and other
intangible assets, net
|
|
2,272,405
|
|
|
2,290,796
|
|
Other
assets
|
|
59,172
|
|
|
59,007
|
|
Total
assets
|
|
$
|
3,145,595
|
|
|
3,197,119
|
|
Liabilities and
Stockholders' Deficit
|
|
|
|
|
Current
liabilities:
|
|
|
|
|
Current portion of
long-term debt
|
|
$
|
25,000
|
|
|
25,000
|
|
Accounts
payable
|
|
17,669
|
|
|
18,663
|
|
Other current
liabilities
|
|
289,469
|
|
|
375,129
|
|
Total current
liabilities
|
|
332,138
|
|
|
418,792
|
|
Long-term debt,
net
|
|
2,406,550
|
|
|
2,420,600
|
|
Deferred income
taxes, net
|
|
469,787
|
|
|
476,510
|
|
Other long-term
liabilities
|
|
104,345
|
|
|
101,960
|
|
Total long-term
liabilities
|
|
2,980,682
|
|
|
2,999,070
|
|
Total stockholders'
deficit
|
|
(167,225)
|
|
|
(220,743)
|
|
Total liabilities and
stockholders' deficit
|
|
$
|
3,145,595
|
|
|
3,197,119
|
|
DUNKIN' BRANDS
GROUP, INC. AND SUBSIDIARIES
|
Condensed
Consolidated Statements of Cash Flows
|
(In
thousands)
|
(Unaudited)
|
|
|
Nine months
ended
|
|
|
September 24,
2016
|
|
September 26,
2015
|
|
|
|
|
|
Net cash provided by
operating activities
|
|
$
|
130,336
|
|
|
83,237
|
|
Cash flows from
investing activities:
|
|
|
|
|
Additions to property
and equipment
|
|
(10,358)
|
|
|
(23,700)
|
|
Proceeds from sale of
real estate and company-operated restaurants
|
|
15,479
|
|
|
1,948
|
|
Other, net
|
|
(1,014)
|
|
|
(3,270)
|
|
Net cash provided by
(used in) investing activities
|
|
4,107
|
|
|
(25,022)
|
|
Cash flows from
financing activities:
|
|
|
|
|
Proceeds from
issuance of long-term debt
|
|
—
|
|
|
2,500,000
|
|
Repayment of
long-term debt
|
|
(18,750)
|
|
|
(1,831,574)
|
|
Payment of debt
issuance and other debt-related costs
|
|
—
|
|
|
(41,347)
|
|
Dividends paid on
common stock
|
|
(82,326)
|
|
|
(76,013)
|
|
Repurchases of common
stock, including accelerated share repurchases
|
|
(30,000)
|
|
|
(500,037)
|
|
Exercise of stock
options
|
|
4,937
|
|
|
10,297
|
|
Change in restricted
cash
|
|
73
|
|
|
(6,831)
|
|
Other, net
|
|
1,348
|
|
|
4,465
|
|
Net cash provided by
(used in) financing activities
|
|
(124,718)
|
|
|
58,960
|
|
Effect of exchange
rates on cash and cash equivalents
|
|
75
|
|
|
(725)
|
|
Increase in cash and
cash equivalents
|
|
9,800
|
|
|
116,450
|
|
Cash and cash
equivalents, beginning of period
|
|
260,430
|
|
|
208,080
|
|
Cash and cash
equivalents, end of period
|
|
$
|
270,230
|
|
|
324,530
|
|
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 24,
2016
|
|
September 26,
2015
|
|
September 24,
2016
|
|
September 26,
2015
|
Operating
income
|
|
$
|
109,360
|
|
|
99,763
|
|
|
300,834
|
|
|
276,091
|
|
Operating income
margin
|
|
52.8
|
%
|
|
47.5
|
%
|
|
49.1
|
%
|
|
45.5
|
%
|
Adjustments:
|
|
|
|
|
|
|
|
|
Amortization of other
intangible assets
|
|
$
|
5,397
|
|
|
6,161
|
|
|
16,726
|
|
|
18,542
|
|
Long-lived asset
impairment charges
|
|
7
|
|
|
—
|
|
|
104
|
|
|
264
|
|
Transaction-related
costs(a)
|
|
—
|
|
|
36
|
|
|
64
|
|
|
317
|
|
Bertico and related
litigation(b)
|
|
—
|
|
|
—
|
|
|
(428)
|
|
|
(2,753)
|
|
Settlement of
Canadian pension plan(c)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
4,075
|
|
Adjusted operating
income
|
|
$
|
114,764
|
|
|
105,960
|
|
|
317,300
|
|
|
296,536
|
|
Adjusted operating
income margin
|
|
55.4
|
%
|
|
50.5
|
%
|
|
51.7
|
%
|
|
48.8
|
%
|
|
|
|
|
|
|
|
|
|
Net income
attributable to Dunkin' Brands
|
|
$
|
52,712
|
|
|
46,216
|
|
|
139,456
|
|
|
114,165
|
|
Adjustments:
|
|
|
|
|
|
|
|
|
Amortization of other
intangible assets
|
|
5,397
|
|
|
6,161
|
|
|
16,726
|
|
|
18,542
|
|
Long-lived asset
impairment charges
|
|
7
|
|
|
—
|
|
|
104
|
|
|
264
|
|
Transaction-related
costs(a)
|
|
—
|
|
|
36
|
|
|
64
|
|
|
317
|
|
Bertico and related
litigation(b)
|
|
—
|
|
|
—
|
|
|
(428)
|
|
|
(2,753)
|
|
Settlement of
Canadian pension plan(c)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
4,075
|
|
Loss on debt
extinguishment and refinancing transactions
|
|
—
|
|
|
—
|
|
|
—
|
|
|
20,554
|
|
Tax impact of
adjustments(d)
|
|
(2,161)
|
|
|
(2,479)
|
|
|
(6,586)
|
|
|
(16,400)
|
|
Tax impact of legal
entity conversion(e)
|
|
—
|
|
|
246
|
|
|
—
|
|
|
246
|
|
Adjusted net
income
|
|
$
|
55,955
|
|
|
50,180
|
|
|
149,336
|
|
|
139,010
|
|
|
|
|
|
|
|
|
|
|
Adjusted net
income
|
|
$
|
55,955
|
|
|
50,180
|
|
|
149,336
|
|
|
139,010
|
|
Weighted average
number of common shares – diluted
|
|
92,565,695
|
|
|
96,023,211
|
|
|
92,545,292
|
|
|
98,134,053
|
|
Diluted adjusted
earnings per share
|
|
$
|
0.60
|
|
|
0.52
|
|
|
1.61
|
|
|
1.42
|
|
|
|
|
|
|
|
|
|
|
(a) Represents
non-capitalizable costs incurred as a result of the securitized
financing facility, which was completed in January 2015.
|
(b) Adjustment for
the nine months ended September 24, 2016 represents a net reduction
to legal reserves for the Bertico litigation based upon final
agreement of interest and related costs associated with the
judgment. Adjustment for the nine months ended September 26, 2015
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.
|
DUNKIN' BRANDS
GROUP, INC. AND SUBSIDIARIES
|
Non-GAAP
Reconciliations (continued)
|
(In millions, except
per share data)
|
(Unaudited)
|
|
|
|
Fiscal year
ended
|
|
%
Increase
|
|
|
December 31,
2016
|
|
December 26,
2015
|
|
|
|
Low
|
|
High
|
|
Actual
|
|
Low
|
|
High
|
|
|
(projected,
53 weeks)
|
|
(projected,
53 weeks)
|
|
(as reported,
52 weeks)
|
|
|
|
|
Operating
income
|
|
$
|
406.7
|
|
|
416.4
|
|
|
319.6
|
|
|
27
|
%
|
|
30
|
%
|
Adjustments:
|
|
|
|
|
|
|
|
|
|
|
Amortization of other
intangible assets
|
|
22.7
|
|
|
22.2
|
|
|
24.7
|
|
|
|
|
|
Long-lived asset
impairment charges
|
|
3.5
|
|
|
0.3
|
|
|
0.6
|
|
|
|
|
|
Transaction-related
costs(a)
|
|
0.6
|
|
|
0.1
|
|
|
0.4
|
|
|
|
|
|
Bertico and related
litigation(b)
|
|
(0.4)
|
|
|
(0.4)
|
|
|
(2.8)
|
|
|
|
|
|
Settlement of
Canadian pension plan(c)
|
|
—
|
|
|
—
|
|
|
4.1
|
|
|
|
|
|
Japan joint venture
impairment, net(d)
|
|
—
|
|
|
—
|
|
|
53.9
|
|
|
|
|
|
Adjusted operating
income
|
|
$
|
433.1
|
|
|
438.6
|
|
|
400.5
|
|
|
8
|
%
|
|
10
|
%
|
|
|
|
|
|
|
|
|
|
|
|
(a) Represents
non-capitalizable costs incurred as a result of the securitized
financing facility, which was completed in January 2015.
|
(b) Adjustment for
the fiscal year ended December 31, 2016 represents a net reduction
to legal reserves for the Bertico litigation based upon final
agreement of interest and related costs associated with the
judgment. Adjustment for the fiscal year ended December 26, 2015
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) Amount consists
of an other-than-temporary impairment of the investment in the
Japan joint venture of $54.3 million, less a reduction in
depreciation and amortization of $0.4 million resulting from the
allocation of the impairment charge to the underlying long-lived
assets of the joint venture.
|
|
|
Fiscal year
ended
December 31,
2016
|
|
|
Low
|
|
High
|
|
|
(projected,
53 weeks)
|
|
(projected,
53 weeks)
|
Diluted earnings per
share
|
|
$
|
2.02
|
|
|
2.08
|
|
Adjustments:
|
|
|
|
|
Amortization of other
intangible assets
|
|
0.24
|
|
|
0.24
|
|
Long-lived asset
impairment charges
|
|
0.04
|
|
|
—
|
|
Transaction-related
costs(e)
|
|
0.01
|
|
|
—
|
|
Tax impact of
adjustments(f)
|
|
(0.11)
|
|
|
(0.10)
|
|
Diluted adjusted
earnings per share
|
|
$
|
2.20
|
|
|
2.22
|
|
|
|
|
|
|
(e) Represents
non-capitalizable costs incurred as a result of the securitized
financing facility, which was completed in January 2015.
|
(f) Tax impact of
adjustments calculated at a 40% effective tax rate.
|
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SOURCE Dunkin' Brands Group, Inc.