CANTON, Mass., July 27,
2017 /PRNewswire/ --
Second quarter highlights include:
- Dunkin' Donuts U.S. comparable store sales growth of
0.8%
- Baskin-Robbins U.S. comparable store sales decline of
0.9%
- Added 64 net new Dunkin' Donuts and 12 net new
Baskin-Robbins in the U.S. and 57 net new international
locations
- Revenues increased 1.0%
- Diluted EPS increased by $0.06
to $0.60
- Diluted adjusted EPS increased by $0.07 to $0.64
Dunkin' Brands Group, Inc. (Nasdaq: DNKN), the parent company of
Dunkin' Donuts (DD) and Baskin-Robbins (BR), today reported results
for the second quarter ended July 1, 2017.
"We are excited about the progress we have made on our
multi-year plan to transform Dunkin' Donuts U.S. into a
beverage-led, on-the-go brand. Together with our franchisees, we
are laser-focused on delivering what matters most to consumers,
including: menu innovation; unparalleled convenience driven by
digital leadership; restaurant excellence and simplification; and
broad accessibility to our products through strategic restaurant
development and the sale of our products in other channels," said
Nigel Travis, Dunkin' Brands
Chairman and CEO. "As evidence of our progress, we will be
expanding our menu simplification test to 1,000 locations by
October of this year."
"Our Dunkin' Donuts U.S. franchisees have invested more than
$1 billion into their restaurants
over the past two years and have exceeded our expectations for
renewal fees year-to-date," said Kate
Jaspon, Chief Financial Officer, Dunkin' Brands Group, Inc.
"This demonstrates a commitment to and confidence in the Dunkin'
Donuts brand, but with a new store model on the horizon, a large
number of restaurant remodels due, and more investment required in
equipment and technology, we are working with our franchisees to
plan the most effective use of their capital expenditures so that
we strike the right balance between driving smart growth and
ensuring the current store base meets consumers' changing
needs. As such, while we are not changing 2017 guidance for
revenue, operating income or earnings-per-share, we now expect
Dunkin' Donuts U.S. franchisees to open between 330 to 350 net new
restaurants this year. We still expect to finish the year as
one of the fastest growing brands in the U.S. restaurant industry
both in terms of net store growth and increase in systemwide
sales."
SECOND QUARTER
2017 KEY FINANCIAL HIGHLIGHTS
|
|
|
|
|
($ in millions,
except per share data)
|
Three months
ended
|
|
Increase
(Decrease)
|
Amounts and
percentages may not recalculate due to rounding
|
July 1,
2017
|
June 25,
2016
|
|
$ /
#
|
%
|
Financial
data:
|
|
|
|
|
|
Revenues
|
$
|
218.5
|
|
216.3
|
|
|
2.2
|
|
1.0
|
%
|
Operating
income
|
113.6
|
|
106.1
|
|
|
7.4
|
|
7.0
|
%
|
Operating income
margin
|
52.0
|
%
|
49.1
|
%
|
|
|
|
Adjusted operating
income1
|
$
|
118.9
|
|
111.3
|
|
|
7.6
|
|
6.9
|
%
|
Adjusted operating
income margin1
|
54.4
|
%
|
51.5
|
%
|
|
|
|
Net
income2
|
$
|
55.7
|
|
49.6
|
|
|
6.1
|
|
12.3
|
%
|
Adjusted net
income1
|
58.9
|
|
52.7
|
|
|
6.3
|
|
11.9
|
%
|
Earnings per
share:
|
|
|
|
|
|
Common–basic2
|
0.61
|
|
0.54
|
|
|
0.07
|
|
13.0
|
%
|
Common–diluted2
|
0.60
|
|
0.54
|
|
|
0.06
|
|
11.1
|
%
|
Diluted adjusted
earnings per share1, 2
|
0.64
|
|
0.57
|
|
|
0.07
|
|
12.3
|
%
|
Weighted average
number of common shares – diluted (in
millions)2
|
92.6
|
|
92.5
|
|
|
0.2
|
|
0.2
|
%
|
Systemwide
sales3
|
$
|
2,902.6
|
|
2,774.9
|
|
|
127.7
|
|
4.6
|
%
|
Comparable store
sales growth (decline):
|
|
|
|
|
|
DD U.S.
|
0.8
|
%
|
0.5
|
%
|
|
|
|
BR U.S.
|
(0.9)
|
%
|
0.6
|
%
|
|
|
|
DD
International
|
(2.8)
|
%
|
(3.1)
|
%
|
|
|
|
BR
International
|
3.3
|
%
|
(6.6)
|
%
|
|
|
|
Development
data:
|
|
|
|
|
|
Consolidated global
net POD development4
|
133
|
|
198
|
|
|
(65)
|
|
(32.8)
|
%
|
DD global PODs at
period end
|
12,350
|
|
11,941
|
|
|
409
|
|
3.4
|
%
|
BR global PODs at
period end
|
7,892
|
|
7,728
|
|
|
164
|
|
2.1
|
%
|
Consolidated global
PODs at period end
|
20,242
|
|
19,669
|
|
|
573
|
|
2.9
|
%
|
|
|
|
|
|
|
|
|
|
|
1 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, impairment of our equity method
investments, 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. See "Non-GAAP Measures and Statistical Data" and
"Dunkin' Brands Group, Inc. Non-GAAP Reconciliations" for further
detail.
2 In the
first quarter of 2017, the Company adopted Accounting Standards
Update No. 2016-09, Compensation–Stock Compensation:
Improvements to Employee Share-Based Payment Accounting ("ASU
2016-09"), as issued by the Financial Accounting Standards Board.
As required by the updated accounting standard, excess tax benefits
or deficiencies are now recorded to the provision for income taxes
in the consolidated statements of operations, on a prospective
basis, instead of additional paid-in capital in the consolidated
balance sheets. See "Adoption of New Accounting Standard" for
further detail.
3
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.
4
Consolidated global net POD development for the three months ended
June 25, 2016 reflects the previously-announced closing of 9
self-serve coffee stations within Speedway locations.
|
Global systemwide sales growth in the second quarter was
primarily attributable to global store development and Dunkin'
Donuts U.S. comparable store sales growth (which includes stores
open 78 weeks or more).
Dunkin' Donuts U.S. comparable store sales growth in the second
quarter was driven by increased average ticket offset by a decline
in traffic. Breakfast sandwich sales increased driven by wake-up
wraps and core sandwiches such as egg and cheese. Beverage sales
were driven by the iced coffee category as Cold Brew sales continue
to grow; the iced tea category which was driven by the launch of
Fruited Iced Tea; and the launch of Frozen Dunkin' Coffee.
Baskin-Robbins U.S. comparable store sales were negative during
the second quarter driven by a decline in traffic offset by
increased average ticket. Sales of cups and cones, desserts, and
beverages decreased during the second quarter, offset by increases
in take home sales.
In the second quarter, Dunkin' Brands franchisees and licensees
opened 133 net new restaurants around the globe. This included 64
net new Dunkin' Donuts U.S. locations, 58 net new Baskin-Robbins
International locations, and 12 net new Baskin-Robbins U.S.
locations, offset by the net closure of 1 Dunkin' Donuts
International location. Additionally, Dunkin' Donuts U.S.
franchisees remodeled 114 restaurants and Baskin-Robbins U.S.
franchisees remodeled 19 restaurants during the quarter.
Revenues for the second quarter increased $2.2 million, or 1.0%, compared to the prior year
period due primarily to increased royalty income as a result of
systemwide sales growth, as well as an increase in rental income
due to an increase in the number of leases for franchised
locations. These increases in revenues were offset by a decrease in
sales at company-operated restaurants as there were no
company-operated points of distribution during the second quarter
of 2017 compared to 29 company-operated points of distribution in
the prior year period. Also offsetting the increases in revenues
was a decrease in sales of ice cream and other products primarily
to our licensees in the Middle
East, as well as a decrease in other revenues driven by
transfer fee income and refranchising gains in the prior year
period.
Operating income and adjusted operating income for the second
quarter increased $7.4 million, or
7.0%, and $7.6 million, or 6.9%,
respectively, from the prior year period primarily as a result of
the increase in royalty income, an increase in rental margin, and a
decrease in general and administrative expenses. Additionally, the
prior year period was unfavorably impacted by the operating results
of company-operated restaurants. The increases in operating income
and adjusted operating income were offset by a gain recognized in
connection with the sale of company-operated restaurants in the
prior year period, as well as the decrease in other revenues.
Net income and adjusted net income for the second quarter
increased by $6.1 million, or 12.3%,
and $6.3 million, or 11.9%,
respectively, compared to the prior year period primarily as a
result of the increases in operating income and adjusted operating
income, offset by an increase in income tax expense.
Diluted earnings per share and diluted adjusted earnings per
share for the second quarter increased by 11.1% to $0.60 and 12.3% to $0.64, respectively, compared to the prior year
period as a result of the increases in net income and adjusted net
income, respectively, offset by an increase in shares outstanding.
The increase in shares outstanding from the prior year period was
due primarily to the exercise of stock options and the new
accounting standard adopted in the first quarter of 2017, offset by
repurchases of shares since the second quarter of 2016. Excluding
the impact of excess tax benefits recognized, diluted earnings per
share and diluted adjusted earnings per share would have been
$0.01 lower.
SECOND QUARTER
2017 SEGMENT RESULTS
|
|
|
|
|
|
Amounts and
percentages may not recalculate due to rounding
|
|
Three months
ended
|
|
Increase
(Decrease)
|
Dunkin' Donuts
U.S.
|
|
July 1,
2017
|
|
June 25,
2016
|
|
$ /
#
|
%
|
|
($ in thousands
except as otherwise noted)
|
Revenues:
|
|
|
|
|
|
|
|
Royalty
income
|
|
$
|
119,097
|
|
|
112,031
|
|
|
7,066
|
|
6.3
|
%
|
Franchise
fees
|
|
10,065
|
|
|
9,337
|
|
|
728
|
|
7.8
|
%
|
Rental
income
|
|
26,532
|
|
|
24,928
|
|
|
1,604
|
|
6.4
|
%
|
Sales at
company-operated restaurants
|
|
—
|
|
|
4,643
|
|
|
(4,643)
|
|
(100.0)
|
%
|
Other
revenues
|
|
1,386
|
|
|
2,721
|
|
|
(1,335)
|
|
(49.1)
|
%
|
Total
revenues
|
|
$
|
157,080
|
|
|
153,660
|
|
|
3,420
|
|
2.2
|
%
|
|
|
|
|
|
|
|
|
Segment
profit
|
|
$
|
122,548
|
|
|
116,085
|
|
|
6,463
|
|
5.6
|
%
|
|
|
|
|
|
|
|
|
Comparable store
sales growth
|
|
0.8
|
%
|
|
0.5
|
%
|
|
|
|
Systemwide sales (in
millions)1
|
|
$
|
2,175.0
|
|
|
2,056.9
|
|
|
118.1
|
|
5.7
|
%
|
|
|
|
|
|
|
|
|
Points of
distribution
|
|
8,948
|
|
|
8,573
|
|
|
375
|
|
4.4
|
%
|
Gross
openings
|
|
91
|
|
|
107
|
|
|
(16)
|
|
(15.0)
|
%
|
Net
openings2
|
|
64
|
|
|
73
|
|
|
(9)
|
|
(12.3)
|
%
|
|
1
Systemwide sales include sales at franchisee- and company-operated
restaurants, including joint ventures. We do not record sales by
franchisees, licensees, or joint ventures as revenue and such sales
are not included in our consolidated financial statements. See
"Non-GAAP Measures and Statistical Data" for further
detail.
2 Net
openings for the three months ended June 25, 2016 reflect the
previously-announced closing of 9 self-serve coffee stations within
Speedway locations.
|
Dunkin' Donuts U.S. second quarter revenues of $157.1 million represented an increase of 2.2%
compared to the prior year period. The increase was primarily a
result of an increase in royalty income driven by systemwide sales
growth, as well as an increase in rental income driven by an
increase in the number of leases for franchised locations.
Additionally, franchise fees increased due primarily to an increase
in renewal income, offset by a decrease in gross openings. The
increases in revenues were offset by a decline in sales at
company-operated restaurants as there were no company-operated
points of distribution in the second quarter of 2017, as well as a
decrease in other revenues driven by transfer fee income and
refranchising gains in the prior year period.
Dunkin' Donuts U.S. segment profit in the second quarter
increased to $122.5 million, an
increase of $6.5 million over the
prior year period, driven primarily by increases in royalty income,
franchise fees, and rental margin. The increases in segment profit
were offset by a gain recognized in connection with the sale of
company-operated restaurants in the prior year period.
Amounts and
percentages may not recalculate due to rounding
|
|
Three months
ended
|
|
Increase
(Decrease)
|
Dunkin' Donuts
International
|
|
July 1,
2017
|
|
June 25,
2016
|
|
$ /
#
|
%
|
|
($ in thousands
except as otherwise noted)
|
Revenues:
|
|
|
|
|
|
|
|
Royalty
income
|
|
$
|
4,157
|
|
|
4,218
|
|
|
(61)
|
|
(1.4)
|
%
|
Franchise
fees
|
|
359
|
|
|
643
|
|
|
(284)
|
|
(44.2)
|
%
|
Other
revenues
|
|
(21)
|
|
|
357
|
|
|
(378)
|
|
(105.9)
|
%
|
Total
revenues
|
|
$
|
4,495
|
|
|
5,218
|
|
|
(723)
|
|
(13.9)
|
%
|
|
|
|
|
|
|
|
|
Segment
profit
|
|
$
|
1,454
|
|
|
1,975
|
|
|
(521)
|
|
(26.4)
|
%
|
|
|
|
|
|
|
|
|
Comparable store
sales decline
|
|
(2.8)
|
%
|
|
(3.1)
|
%
|
|
|
|
Systemwide sales (in
millions)1
|
|
$
|
169.4
|
|
|
175.0
|
|
|
(5.6)
|
|
(3.2)
|
%
|
|
|
|
|
|
|
|
|
Points of
distribution
|
|
3,402
|
|
|
3,368
|
|
|
34
|
|
1.0
|
%
|
Gross
openings
|
|
75
|
|
|
100
|
|
|
(25)
|
|
(25.0)
|
%
|
Net openings
(closings)
|
|
(1)
|
|
|
35
|
|
|
(36)
|
|
(102.9)
|
%
|
|
1
Systemwide sales include sales at franchisee- and company-operated
restaurants, including joint ventures. We do not record sales by
franchisees, licensees, or joint ventures as revenue and such sales
are not included in our consolidated financial statements. See
"Non-GAAP Measures and Statistical Data" for further
detail.
|
Dunkin' Donuts International second quarter systemwide sales
decreased 3.2% from the prior year period driven primarily by sales
declines in South Korea,
Southeast Asia, and Europe, offset by sales growth in South America, the Middle East, and China. Sales in South Korea were positively impacted by
foreign exchange rates, while sales in Southeast Asia were negatively impacted by
foreign exchange rates. On a constant currency basis, systemwide
sales decreased by approximately 3%.
Dunkin' Donuts International second quarter revenues of
$4.5 million represented a decrease
of 13.9% from the prior year period. The decrease in revenues was
primarily a result of a decline in franchise fees, as well as a
decrease in other revenues due to a decrease in transfer fee
income.
Segment profit for Dunkin' Donuts International decreased
$0.5 million to $1.5 million in the second quarter primarily as a
result of the decrease in revenues, as well as a decrease in net
income from our South Korea joint
venture, offset by a decrease in general and administrative
expenses.
Amounts and
percentages may not recalculate due to rounding
|
|
Three months
ended
|
|
Increase
(Decrease)
|
Baskin-Robbins
U.S.
|
|
July 1,
2017
|
|
June 25,
2016
|
|
$ /
#
|
%
|
|
($ in thousands
except as otherwise noted)
|
Revenues:
|
|
|
|
|
|
|
|
Royalty
income
|
|
$
|
9,080
|
|
|
8,824
|
|
|
256
|
|
2.9
|
%
|
Franchise
fees
|
|
193
|
|
|
171
|
|
|
22
|
|
12.9
|
%
|
Rental
income
|
|
764
|
|
|
721
|
|
|
43
|
|
6.0
|
%
|
Sales of ice cream
and other products
|
|
882
|
|
|
661
|
|
|
221
|
|
33.4
|
%
|
Other
revenues
|
|
3,428
|
|
|
3,361
|
|
|
67
|
|
2.0
|
%
|
Total
revenues
|
|
$
|
14,347
|
|
|
13,738
|
|
|
609
|
|
4.4
|
%
|
|
|
|
|
|
|
|
|
Segment
profit
|
|
$
|
10,970
|
|
|
10,738
|
|
|
232
|
|
2.2
|
%
|
|
|
|
|
|
|
|
|
Comparable store
sales growth (decline)
|
|
(0.9)
|
%
|
|
0.6
|
%
|
|
|
|
Systemwide sales (in
millions)1
|
|
$
|
187.5
|
|
|
183.0
|
|
|
4.5
|
|
2.5
|
%
|
|
|
|
|
|
|
|
|
Points of
distribution
|
|
2,551
|
|
|
2,530
|
|
|
21
|
|
0.8
|
%
|
Gross
openings
|
|
24
|
|
|
31
|
|
|
(7)
|
|
(22.6)
|
%
|
Net
openings
|
|
12
|
|
|
12
|
|
|
—
|
|
—
|
%
|
|
1
Systemwide sales include sales at franchisee- and company-operated
restaurants, including joint ventures. We do not record sales by
franchisees, licensees, or joint ventures as revenue and such sales
are not included in our consolidated financial statements. See
"Non-GAAP Measures and Statistical Data" for further
detail.
|
Baskin-Robbins U.S. second quarter revenues increased 4.4% from
the prior year period to $14.3
million due primarily to an increase in royalty income and
an increase in sales of ice cream and other products.
Segment profit for Baskin-Robbins U.S. increased 2.2% to
$11.0 million in the second
quarter over the prior year period primarily due to an increase in
revenues, offset by an increase in cost of ice cream and other
products and an increase in general and administrative
expenses.
Amounts and
percentages may not recalculate due to rounding
|
|
Three months
ended
|
|
Increase
(Decrease)
|
Baskin-Robbins
International
|
|
July 1,
2017
|
|
June 25,
2016
|
|
$ /
#
|
%
|
|
($ in thousands
except as otherwise noted)
|
Revenues:
|
|
|
|
|
|
|
|
Royalty
income
|
|
$
|
1,858
|
|
|
1,765
|
|
|
93
|
|
5.3
|
%
|
Franchise
fees
|
|
257
|
|
|
206
|
|
|
51
|
|
24.8
|
%
|
Rental
income
|
|
112
|
|
|
113
|
|
|
(1)
|
|
(0.9)
|
%
|
Sales of ice cream
and other products
|
|
31,686
|
|
|
32,716
|
|
|
(1,030)
|
|
(3.1)
|
%
|
Other
revenues
|
|
65
|
|
|
40
|
|
|
25
|
|
62.5
|
%
|
Total
revenues
|
|
$
|
33,978
|
|
|
34,840
|
|
|
(862)
|
|
(2.5)
|
%
|
|
|
|
|
|
|
|
|
Segment
profit
|
|
$
|
12,501
|
|
|
11,079
|
|
|
1,422
|
|
12.8
|
%
|
|
|
|
|
|
|
|
|
Comparable store
sales growth (decline)
|
|
3.3
|
%
|
|
(6.6)
|
%
|
|
|
|
Systemwide sales (in
millions)1
|
|
$
|
370.7
|
|
|
360.0
|
|
|
10.7
|
|
3.0
|
%
|
|
|
|
|
|
|
|
|
Points of
distribution
|
|
5,341
|
|
|
5,198
|
|
|
143
|
|
2.8
|
%
|
Gross
openings
|
|
129
|
|
|
139
|
|
|
(10)
|
|
(7.2)
|
%
|
Net
openings
|
|
58
|
|
|
78
|
|
|
(20)
|
|
(25.6)
|
%
|
|
1
Systemwide sales include sales at franchisee- and company-operated
restaurants, including joint ventures. We do not record sales by
franchisees, licensees, or joint ventures as revenue and such sales
are not included in our consolidated financial statements. See
"Non-GAAP Measures and Statistical Data" for further
detail.
|
Baskin-Robbins International systemwide sales increased 3.0% in
the second quarter compared to the prior year period driven by
sales growth in South Korea and
Japan, offset by declines in
Europe and the Middle East. Sales in South Korea were positively impacted by
foreign exchange rates, while sales in Japan were negatively impacted by foreign
exchange rates. On a constant currency basis, systemwide sales
increased by approximately 3%.
Baskin-Robbins International second quarter revenues decreased
2.5% from the prior year period to $34.0
million due primarily to a decrease in sales of ice cream
products to our licensees in the Middle
East. 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.
Second quarter segment profit for Baskin-Robbins International
increased 12.8% from the prior year period to $12.5 million as a result of an increase in net
income from our Japan and
South Korea joint ventures, offset
by an increase in general and administrative expenses.
COMPANY UPDATES
- During the second quarter, the Company entered into and
completed an accelerated share repurchase agreement for
$100 million, resulting in the
repurchase of approximately 1.8 million shares at a weighted
average cost per share of $56.90. The
Company's shares outstanding as of July 1,
2017 were 90,485,230.
- The Company today announced that the Board of Directors
declared a cash dividend of $0.3225
per share, payable on September 6, 2017, to shareholders of
record as of the close of business on August 28, 2017.
- The Company announced in May that it had appointed Linda Boff, Chief Marketing Officer for GE to
its Board of Directors. Earlier this month, the Company announced
that it had appointed Roland Smith
to its Board of Directors. He most recently served as the Chairman
and CEO of Office Depot, Inc., and earlier in his career was
President and CEO of The Wendy's Company and CEO of Arby's
Restaurant Group, Inc.
FISCAL YEAR 2017 TARGETS
As described below, the Company is updating and reiterating
certain targets regarding its 2017 performance:
- The Company continues to expect low single digit comparable
store sales growth for Dunkin' Donuts U.S. The Company now expects
slightly negative comparable store sales for Baskin-Robbins U.S.
Previously it expected low single digit growth.
- The Company now expects Dunkin' Donuts U.S. franchisees to add
approximately 330 to 350 net new restaurants. Previously it
expected approximately 385 net new restaurants for Dunkin' Donuts
U.S.
- The Company continues to expect Baskin-Robbins U.S. franchisees
to add approximately 10 net new restaurants.
- Internationally, the Company now expects franchisees and
licensees to add between 50 and 100 net new restaurants across the
two brands. Previously it expected to add approximately 200 net new
restaurants across the two brands internationally.
- The Company continues to expect low-to-mid single digit revenue
growth on both a 52- and 53-week basis (fiscal year 2016 was a
53-week year).
- The Company continues to expect mid-to-high single digit GAAP
operating income growth and adjusted operating income growth on
both a 52- and 53-week basis.
- The Company continues to expect GAAP diluted earnings per share
of $2.22 to $2.30 and diluted
adjusted earnings per share of $2.40 to
$2.43. This guidance excludes any potential future impact
from material excess tax benefits in subsequent quarters of
2017.
- The Company expects full-year weighted-average shares
outstanding of approximately 93 million and a 36.5 percent
effective tax rate, which excludes any potential future impact from
material excess tax benefits in subsequent quarters of 2017.
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."
Adoption of New Accounting Standard
The
Company adopted ASU 2016-09 in the first quarter of 2017,
which simplifies several aspects of accounting for share-based
payment transactions, including excess tax benefits and
classification in the statements of cash flows. The adoption
resulted in a $0.7 million reduction
to the provision for income taxes for the second quarter of 2017,
or a 0.7 percentage point decrease in our effective tax rate for
the second quarter of 2017, due to the recognition of excess tax
benefits related to share-based compensation. Prior year periods
have not been revised to reflect excess tax benefits in earnings,
as only prospective application is permitted. Excess tax benefits
will vary in future periods, as such amounts are dependent on the
number of employee stock options exercised and fluctuations in the
Company's stock price. Additionally, the diluted weighted average
number of common shares outstanding for the second quarter of 2017
excludes excess tax benefits from the assumed proceeds available to
repurchase shares under the treasury stock method, which did not
have a material impact in the second quarter of 2017. The adoption
of ASU 2016-09 had no impact on cash paid for income taxes.
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, Dave Hoffmann, President of
Dunkin' Donuts U.S. & Canada,
and Kate Jaspon, Chief Financial
Officer. The dial-in number is (866) 393-1607 or (914) 495-8556,
conference number 47212994. 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
generally represents the growth in local currency average monthly
sales for franchisee-operated restaurants, including joint
ventures, that have been open at least 13 months and that have
reported sales in the current and comparable prior year month.
About Dunkin' Brands Group, Inc.
With more than 20,000 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 second quarter 2017,
Dunkin' Brands' 100 percent franchised business model included more
than 12,300 Dunkin' Donuts restaurants and more than 7,800
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
|
|
Six months
ended
|
|
|
July 1,
2017
|
|
June 25,
2016
|
|
July 1,
2017
|
|
June 25,
2016
|
|
|
|
|
|
|
|
|
|
Revenues:
|
|
|
|
|
|
|
|
|
Franchise fees and
royalty income
|
|
$
|
145,066
|
|
|
137,195
|
|
|
275,135
|
|
|
260,978
|
|
Rental
income
|
|
27,408
|
|
|
25,769
|
|
|
51,830
|
|
|
48,994
|
|
Sales of ice cream
and other products
|
|
32,862
|
|
|
33,966
|
|
|
58,159
|
|
|
59,857
|
|
Sales at
company-operated restaurants
|
|
—
|
|
|
4,643
|
|
|
—
|
|
|
10,313
|
|
Other
revenues
|
|
13,186
|
|
|
14,736
|
|
|
24,070
|
|
|
25,943
|
|
Total
revenues
|
|
218,522
|
|
|
216,309
|
|
|
409,194
|
|
|
406,085
|
|
Operating costs and
expenses:
|
|
|
|
|
|
|
|
|
Occupancy
expenses—franchised restaurants
|
|
14,287
|
|
|
13,614
|
|
|
28,425
|
|
|
26,810
|
|
Cost of ice cream and
other products
|
|
22,199
|
|
|
22,827
|
|
|
39,121
|
|
|
40,061
|
|
Company-operated
restaurant expenses
|
|
—
|
|
|
5,297
|
|
|
—
|
|
|
11,790
|
|
General and
administrative expenses, net
|
|
62,382
|
|
|
63,459
|
|
|
123,617
|
|
|
124,654
|
|
Depreciation
|
|
5,071
|
|
|
5,178
|
|
|
10,155
|
|
|
10,311
|
|
Amortization of other
intangible assets
|
|
5,333
|
|
|
5,568
|
|
|
10,660
|
|
|
11,329
|
|
Long-lived asset
impairment charges
|
|
60
|
|
|
4
|
|
|
107
|
|
|
97
|
|
Total operating costs
and expenses
|
|
109,332
|
|
|
115,947
|
|
|
212,085
|
|
|
225,052
|
|
Net income of equity
method investments
|
|
4,327
|
|
|
3,717
|
|
|
7,146
|
|
|
6,681
|
|
Other operating
income, net
|
|
33
|
|
|
2,062
|
|
|
588
|
|
|
3,760
|
|
Operating
income
|
|
113,550
|
|
|
106,141
|
|
|
204,843
|
|
|
191,474
|
|
Other income
(expense), net:
|
|
|
|
|
|
|
|
|
Interest
income
|
|
425
|
|
|
124
|
|
|
746
|
|
|
273
|
|
Interest
expense
|
|
(24,885)
|
|
|
(24,972)
|
|
|
(49,756)
|
|
|
(49,853)
|
|
Other income (loss),
net
|
|
28
|
|
|
(102)
|
|
|
215
|
|
|
(472)
|
|
Total other expense,
net
|
|
(24,432)
|
|
|
(24,950)
|
|
|
(48,795)
|
|
|
(50,052)
|
|
Income before income
taxes
|
|
89,118
|
|
|
81,191
|
|
|
156,048
|
|
|
141,422
|
|
Provision for income
taxes(a)
|
|
33,414
|
|
|
31,601
|
|
|
52,877
|
|
|
54,678
|
|
Net income
|
|
$
|
55,704
|
|
|
49,590
|
|
|
103,171
|
|
|
86,744
|
|
|
|
|
|
|
|
|
|
|
Earnings per
share—basic
|
|
$
|
0.61
|
|
|
0.54
|
|
|
1.13
|
|
|
0.95
|
|
Earnings per
share—diluted
|
|
0.60
|
|
|
0.54
|
|
|
1.11
|
|
|
0.94
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(a) In the
first quarter of 2017, the Company adopted ASU 2016-09. As required
by the update, excess tax benefits or deficiencies are now recorded
to the provision for income taxes in the consolidated statements of
operations, on a prospective basis, instead of additional paid-in
capital in the consolidated balance sheets. As a result, the
Company recognized $0.7 million and $6.8 million of excess tax
benefits from share-based compensation in the consolidated
statements of operations during the three and six months ended July
1, 2017, respectively.
|
DUNKIN' BRANDS
GROUP, INC. AND SUBSIDIARIES
|
Condensed
Consolidated Balance Sheets
|
(In
thousands)
|
(Unaudited)
|
|
|
July 1,
2017
|
|
December 31,
2016
|
Assets
|
|
|
|
|
Current
assets:
|
|
|
|
|
Cash and cash
equivalents
|
|
$
|
264,662
|
|
|
361,425
|
|
Restricted
cash
|
|
74,952
|
|
|
69,746
|
|
Accounts, notes, and
other receivables, net
|
|
84,005
|
|
|
85,184
|
|
Other current
assets
|
|
109,954
|
|
|
90,003
|
|
Total current
assets
|
|
533,573
|
|
|
606,358
|
|
Property and
equipment, net
|
|
170,013
|
|
|
176,662
|
|
Equity method
investments
|
|
124,679
|
|
|
114,738
|
|
Goodwill and other
intangible assets, net
|
|
2,256,317
|
|
|
2,266,992
|
|
Other
assets
|
|
63,336
|
|
|
62,632
|
|
Total
assets
|
|
$
|
3,147,918
|
|
|
3,227,382
|
|
Liabilities and
Stockholders' Deficit
|
|
|
|
|
Current
liabilities:
|
|
|
|
|
Current portion of
long-term debt
|
|
$
|
25,000
|
|
|
25,000
|
|
Accounts
payable
|
|
19,414
|
|
|
12,682
|
|
Other current
liabilities
|
|
341,521
|
|
|
386,519
|
|
Total current
liabilities
|
|
385,935
|
|
|
424,201
|
|
Long-term debt,
net
|
|
2,392,732
|
|
|
2,401,998
|
|
Deferred income
taxes, net
|
|
453,511
|
|
|
461,810
|
|
Other long-term
liabilities
|
|
101,141
|
|
|
102,631
|
|
Total long-term
liabilities
|
|
2,947,384
|
|
|
2,966,439
|
|
Total stockholders'
deficit
|
|
(185,401)
|
|
|
(163,258)
|
|
Total liabilities and
stockholders' deficit
|
|
$
|
3,147,918
|
|
|
3,227,382
|
|
DUNKIN' BRANDS
GROUP, INC. AND SUBSIDIARIES
|
Condensed
Consolidated Statements of Cash Flows
|
(In
thousands)
|
(Unaudited)
|
|
|
Six months
ended
|
|
|
July 1,
2017
|
|
June 25,
2016
|
|
|
|
|
|
Net cash provided by
operating activities(a)
|
|
$
|
63,954
|
|
|
82,136
|
|
Cash flows from
investing activities:
|
|
|
|
|
Additions to property
and equipment
|
|
(3,624)
|
|
|
(6,775)
|
|
Proceeds from sale of
real estate and company-operated restaurants
|
|
—
|
|
|
7,427
|
|
Other, net
|
|
(99)
|
|
|
(872)
|
|
Net cash used in
investing activities
|
|
(3,723)
|
|
|
(220)
|
|
Cash flows from
financing activities:
|
|
|
|
|
Repayment of
long-term debt
|
|
(12,500)
|
|
|
(12,500)
|
|
Dividends paid on
common stock
|
|
(58,847)
|
|
|
(54,851)
|
|
Accelerated share
repurchases of common stock
|
|
(100,000)
|
|
|
(30,000)
|
|
Exercise of stock
options
|
|
19,928
|
|
|
3,933
|
|
Other, net
|
|
(799)
|
|
|
(559)
|
|
Net cash used in
financing activities(a)
|
|
(152,218)
|
|
|
(93,977)
|
|
Effect of exchange
rates on cash, cash equivalents, and restricted
cash(a)
|
|
398
|
|
|
27
|
|
Decrease in cash,
cash equivalents, and restricted cash
|
|
(91,589)
|
|
|
(12,034)
|
|
Cash, cash
equivalents, and restricted cash, beginning of
period(a)
|
|
431,832
|
|
|
333,115
|
|
Cash, cash
equivalents, and restricted cash, end of
period(a)
|
|
$
|
340,243
|
|
|
321,081
|
|
|
|
|
|
|
|
|
|
(a)
Changes in restricted cash that have historically been included
within operating and financing activities have been eliminated, and
restricted cash is combined with cash and cash equivalents when
reconciling the beginning and end of period balances. Additionally,
the impact of excess tax benefits from share-based compensation
have been reclassified from financing activities to operating
activities. These changes were made based on the adoption of new
accounting standards. The prior period has been revised to conform
to the current period presentation for all such changes.
|
DUNKIN' BRANDS
GROUP, INC. AND SUBSIDIARIES
|
Non-GAAP
Reconciliations
|
(In thousands, except
share and per share data)
|
(Unaudited)
|
|
|
Three months
ended
|
|
Six months
ended
|
|
|
July 1,
2017
|
|
June 25,
2016
|
|
July 1,
2017
|
|
June
25,
2016
|
|
|
|
|
|
|
|
|
|
Operating
income
|
|
$
|
113,550
|
|
|
106,141
|
|
|
204,843
|
|
|
191,474
|
|
Operating income
margin
|
|
52.0
|
%
|
|
49.1
|
%
|
|
50.1
|
%
|
|
47.2
|
%
|
Adjustments:
|
|
|
|
|
|
|
|
|
Amortization of other
intangible assets
|
|
$
|
5,333
|
|
|
5,568
|
|
|
10,660
|
|
|
11,329
|
|
Long-lived asset
impairment charges
|
|
60
|
|
|
4
|
|
|
107
|
|
|
97
|
|
Transaction-related
costs(a)
|
|
—
|
|
|
9
|
|
|
—
|
|
|
64
|
|
Bertico and related
litigation
|
|
—
|
|
|
(428)
|
|
|
—
|
|
|
(428)
|
|
Adjusted operating
income
|
|
$
|
118,943
|
|
|
111,294
|
|
|
215,610
|
|
|
202,536
|
|
Adjusted operating
income margin
|
|
54.4
|
%
|
|
51.5
|
%
|
|
52.7
|
%
|
|
49.9
|
%
|
|
|
|
|
|
|
|
|
|
Net income
|
|
$
|
55,704
|
|
|
49,590
|
|
|
103,171
|
|
|
86,744
|
|
Adjustments:
|
|
|
|
|
|
|
|
|
Amortization of other
intangible assets
|
|
5,333
|
|
|
5,568
|
|
|
10,660
|
|
|
11,329
|
|
Long-lived asset
impairment charges
|
|
60
|
|
|
4
|
|
|
107
|
|
|
97
|
|
Transaction-related
costs(a)
|
|
—
|
|
|
9
|
|
|
—
|
|
|
64
|
|
Bertico and related
litigation
|
|
—
|
|
|
(428)
|
|
|
—
|
|
|
(428)
|
|
Tax impact of
adjustments(b)
|
|
(2,157)
|
|
|
(2,061)
|
|
|
(4,307)
|
|
|
(4,425)
|
|
Adjusted net
income
|
|
$
|
58,940
|
|
|
52,682
|
|
|
109,631
|
|
|
93,381
|
|
|
|
|
|
|
|
|
|
|
Adjusted net
income
|
|
$
|
58,940
|
|
|
52,682
|
|
|
109,631
|
|
|
93,381
|
|
Weighted average
number of common shares – diluted
|
|
92,606,525
|
|
|
92,451,913
|
|
|
92,863,378
|
|
|
92,535,091
|
|
Diluted adjusted
earnings per share
|
|
$
|
0.64
|
|
|
0.57
|
|
|
1.18
|
|
|
1.01
|
|
|
|
|
|
|
|
|
|
|
(a)
Represents non-capitalizable costs incurred as a result of the
securitized financing facility.
|
(b) Tax
impact of adjustments calculated at a 40% effective tax
rate.
|
DUNKIN' BRANDS GROUP, INC. AND SUBSIDIARIES
|
Non-GAAP
Reconciliations (continued)
|
(Unaudited)
|
|
|
|
|
|
Fiscal year
ended
December 30,
2017
|
|
|
Low
|
|
High
|
Diluted earnings per
share
|
|
$
|
2.22
|
|
|
2.30
|
|
Adjustments:
|
|
|
|
|
Amortization of other
intangible assets
|
|
0.24
|
|
|
0.23
|
|
Long-lived asset
impairment charges
|
|
0.04
|
|
|
—
|
|
Transaction-related
costs(a)
|
|
0.01
|
|
|
—
|
|
Bertico and related
litigation
|
|
0.01
|
|
|
(0.01)
|
|
Tax impact of
adjustments(b)
|
|
(0.12)
|
|
|
(0.09)
|
|
Diluted adjusted
earnings per share
|
|
$
|
2.40
|
|
|
2.43
|
|
|
|
|
|
|
(a)
Represents non-capitalizable costs incurred as a result of the
securitized financing facility.
|
(b) Tax
impact of adjustments calculated at a 40% effective tax
rate.
|
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SOURCE Dunkin' Brands Group, Inc.