CANTON, Mass., Oct. 26,
2017 /PRNewswire/ --
Third quarter highlights include:
- Dunkin' Donuts U.S. comparable store sales growth of
0.6%
- Baskin-Robbins U.S. comparable store sales decline of
0.4%
- Added 137 net new Dunkin' Donuts and Baskin-Robbins
locations globally including 67 net new Dunkin' Donuts in the
U.S.
- Revenues increased 8.2%
- Diluted EPS unchanged at $0.57
- Diluted adjusted EPS increased by $0.01 to $0.61
- Retail sales of ready-to-drink Dunkin' Donuts Iced Coffee
beverages exceeded $100 million since
launch according to IRI* data
- Company entered into debt recapitalization
transaction
Dunkin' Brands Group, Inc. (Nasdaq: DNKN), the parent company of
Dunkin' Donuts (DD) and Baskin-Robbins (BR), today reported results
for the third quarter ended September 30, 2017.
"This past quarter, we demonstrated real progress in the
execution of our multi-year plan to transform Dunkin' Donuts U.S.
into a beverage-led, on-the-go brand. Despite the impact on
comparable store sales as a result of the storms, we are encouraged
that our morning sales grew at a greater rate than our full-day
sales, a direct result of our breakfast value offers and a.m.
product innovation," said Nigel
Travis, Dunkin' Brands Chairman and CEO. "We also ran our
first national 'Sip. Peel. Win.' on-cup promotion, which helped
drive our hot coffee category; increased membership in our Perks
Loyalty program by 39 percent year-over-year; and celebrated the
one-year anniversary of our on-the-go mobile ordering, which now
makes up about three percent of our transactions."
"Our third quarter financial performance included approximately
eight percent revenue growth and greater than 11 percent operating
income growth, although the latter was offset by an increase in tax
expense related to our recent debt refinancing deal that impacted
net income," said Kate Jaspon, Chief
Financial Officer, Dunkin' Brands Group, Inc. "Also, strong cash
flow generation from our 100-percent franchised business model,
coupled with the net proceeds from our recent debt refinancing,
enables us to continue to return cash to shareholders through our
new repurchase authorization while opportunistically investing in
our Dunkin' Donuts U.S. business."
THIRD QUARTER 2017
KEY FINANCIAL HIGHLIGHTS
|
|
($ in millions,
except per share data)
|
Three months
ended
|
|
Increase
(Decrease)
|
Amounts and
percentages may not recalculate due to rounding
|
September 30,
2017
|
September 24,
2016
|
|
$ /
#
|
%
|
Financial
data:
|
|
|
|
|
|
Revenues
|
$
|
224.2
|
|
207.1
|
|
|
17.1
|
|
8.2
|
%
|
Operating
income
|
122.0
|
|
109.4
|
|
|
12.7
|
|
11.6
|
%
|
Operating income
margin
|
54.4
|
%
|
52.8
|
%
|
|
|
|
Adjusted operating
income1
|
$
|
127.9
|
|
114.8
|
|
|
13.1
|
|
11.5
|
%
|
Adjusted operating
income margin1
|
57.1
|
%
|
55.4
|
%
|
|
|
|
Net
income2
|
$
|
52.2
|
|
52.7
|
|
|
(0.5)
|
|
(0.9)
|
%
|
Adjusted net
income1, 2
|
55.8
|
|
56.0
|
|
|
(0.2)
|
|
(0.3)
|
%
|
Earnings per
share:
|
|
|
|
|
|
Common–basic2
|
0.58
|
|
0.58
|
|
|
—
|
|
—
|
%
|
Common–diluted2
|
0.57
|
|
0.57
|
|
|
—
|
|
—
|
%
|
Diluted adjusted
earnings per share1, 2
|
0.61
|
|
0.60
|
|
|
0.01
|
|
1.7
|
%
|
Weighted average
number of common shares – diluted (in
millions)2
|
91.4
|
|
92.6
|
|
|
(1.1)
|
|
(1.2)
|
%
|
Systemwide
sales3
|
$
|
2,914.8
|
|
2,821.0
|
|
|
93.9
|
|
3.3
|
%
|
Comparable store
sales growth (decline):
|
|
|
|
|
|
DD U.S.
|
0.6
|
%
|
2.0
|
%
|
|
|
|
BR U.S.
|
(0.4)
|
%
|
(0.9)
|
%
|
|
|
|
DD
International
|
1.3
|
%
|
(1.4)
|
%
|
|
|
|
BR
International
|
(4.3)
|
%
|
(2.9)
|
%
|
|
|
|
Development
data:
|
|
|
|
|
|
Consolidated global
net POD development4
|
137
|
|
115
|
|
|
22
|
|
19.1
|
%
|
DD global PODs at
period end
|
12,435
|
|
12,008
|
|
|
427
|
|
3.6
|
%
|
BR global PODs at
period end
|
7,944
|
|
7,776
|
|
|
168
|
|
2.2
|
%
|
Consolidated global
PODs at period end
|
20,379
|
|
19,784
|
|
|
595
|
|
3.0
|
%
|
|
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
September 24, 2016 reflects the previously-announced closing of 5
self-serve coffee stations within Speedway locations.
|
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. Breakfast sandwich sales increased driven by value
messaging around wake-up wraps. Beverage sales were driven by
increases in hot coffee and espresso offset by frozen beverage
declines. The Company estimates that weather resulted in
approximately 50 basis points of negative impact to comparable
stores sales primarily attributed to the hurricanes that hit the
U.S. in the third quarter.
Baskin-Robbins U.S. comparable store sales were negative during
the third quarter driven by a decline in traffic offset by
increased average ticket. Sales of sundaes, desserts, and beverages
decreased during the third quarter, offset by increases in take
home sales. The Company estimates that weather resulted in
approximately 120 basis points of negative impact to comparable
stores sales primarily attributed to the cool and wet weather in
the eastern part of the country and the hurricanes that hit the
U.S. in the third quarter.
In the third quarter, Dunkin' Brands franchisees and licensees
opened 137 net new restaurants around the globe. This included 67
net new Dunkin' Donuts U.S. locations, 41 net new Baskin-Robbins
International locations, 18 net new Dunkin' Donuts International
locations, and 11 net new Baskin-Robbins U.S. locations.
Additionally, Dunkin' Donuts U.S. franchisees remodeled 88
restaurants and Baskin-Robbins U.S. franchisees remodeled 24
restaurants during the quarter. The consolidated global restaurant
count at the end of the third quarter was 20,379.
Revenues for the third quarter increased $17.1 million, or 8.2%, compared to the prior
year period due primarily to increased franchise fees driven by
additional renewal income, as well as increased royalty income as a
result of systemwide sales growth. Also contributing to the
increase in revenues was an increase in other revenues driven by
license fees related to Dunkin' Donuts K-Cup® pods and
ready-to-drink bottled iced coffee, as well as increased transfer
fee income.
Operating income and adjusted operating income for the third
quarter increased $12.7 million, or
11.6%, and $13.1 million, or 11.5%,
respectively, from the prior year period primarily as a result of
the increase in revenues. The increase in revenues was offset by an
increase in general and administrative expenses, as well as gains
recognized in connection with the sale of company-operated
restaurants in the prior year period.
Net income and adjusted net income for the third quarter
decreased by $0.5 million, or 0.9%,
and $0.2 million, or 0.3%,
respectively, compared to the prior year period. These decreases
were primarily a result of an increase in income tax expense.
Income tax expense for the third quarter of 2017 included an
$8.9 million write-down of foreign
tax credit carryforwards primarily resulting from expected
incremental interest expense from the debt refinancing transaction
that closed in October 2017
negatively impacting the realizability of such carryforwards. This
increase in income tax expense was offset by the increases in
operating income and adjusted operating income.
Diluted earnings per share for the third quarter remained flat
to the prior year period at $0.57 as
the decrease in net income was offset by a decrease in shares
outstanding. Diluted adjusted earnings per share for the third
quarter increased by 1.7% to $0.61
compared to the prior year period as a result of a decrease in
shares outstanding, offset by the decrease in adjusted net income.
The decrease in shares outstanding from the prior year period was
due primarily to repurchases of shares since the third quarter of
2016, offset by the exercise of stock options and the new
accounting standard adopted in the first quarter of 2017. Excluding
the impact of recognized excess tax benefits, diluted earnings per
share and diluted adjusted earnings per share would have been each
$0.01 lower.
THIRD QUARTER 2017
SEGMENT RESULTS
|
|
Amounts and
percentages may not recalculate due to rounding
|
|
Three months
ended
|
|
Increase
(Decrease)
|
Dunkin' Donuts
U.S.
|
|
September 30,
2017
|
|
September 24,
2016
|
|
$ /
#
|
%
|
|
($ in thousands
except as otherwise noted)
|
Revenues:
|
|
|
|
|
|
|
|
Royalty
income
|
|
$
|
118,831
|
|
|
113,281
|
|
|
5,550
|
|
4.9
|
%
|
Franchise
fees
|
|
16,635
|
|
|
9,852
|
|
|
6,783
|
|
68.8
|
%
|
Rental
income
|
|
26,786
|
|
|
25,972
|
|
|
814
|
|
3.1
|
%
|
Sales at
company-operated restaurants
|
|
—
|
|
|
1,611
|
|
|
(1,611)
|
|
(100.0)
|
%
|
Other
revenues
|
|
2,854
|
|
|
1,709
|
|
|
1,145
|
|
67.0
|
%
|
Total
revenues
|
|
$
|
165,106
|
|
|
152,425
|
|
|
12,681
|
|
8.3
|
%
|
|
|
|
|
|
|
|
|
Segment
profit
|
|
$
|
129,719
|
|
|
119,434
|
|
|
10,285
|
|
8.6
|
%
|
|
|
|
|
|
|
|
|
Comparable store
sales growth
|
|
0.6
|
%
|
|
2.0
|
%
|
|
|
|
Systemwide sales (in
millions)1
|
|
$
|
2,166.3
|
|
|
2,075.3
|
|
|
91.0
|
|
4.4
|
%
|
|
|
|
|
|
|
|
|
Points of
distribution
|
|
9,015
|
|
|
8,629
|
|
|
386
|
|
4.5
|
%
|
Gross
openings
|
|
103
|
|
|
97
|
|
|
6
|
|
6.2
|
%
|
Net
openings2
|
|
67
|
|
|
56
|
|
|
11
|
|
19.6
|
%
|
|
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.
|
|
2 Net
openings for the three months ended September 24, 2016 reflect
the previously-announced closing of 5 self-serve coffee stations
within Speedway locations.
|
Dunkin' Donuts U.S. third quarter revenues of $165.1 million represented an increase of 8.3%
compared to the prior year period. The increase was due primarily
to increased franchise fees driven by additional renewal income,
increased royalty income driven by systemwide sales growth, and
increased other revenues driven by transfer fee income. The
increases in revenues were offset by a decline in sales at
company-operated restaurants as a result of fact that there were no
company-operated points of distribution in the third quarter of
2017.
Dunkin' Donuts U.S. segment profit in the third quarter
increased to $129.7 million, an
increase of $10.3 million over the
prior year period, driven primarily by the increases in franchise
fees, royalty income, and other revenues, as well as lease-related
liabilities recorded in the prior year period as a result of lease
terminations. The increases in segment profit were offset by an
increase in general and administrative expenses, as well as gains
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
|
|
September 30,
2017
|
|
September 24,
2016
|
|
$ /
#
|
%
|
|
($ in thousands
except as otherwise noted)
|
Revenues:
|
|
|
|
|
|
|
|
Royalty
income
|
|
$
|
4,442
|
|
|
4,125
|
|
|
317
|
|
7.7
|
%
|
Franchise
fees
|
|
704
|
|
|
323
|
|
|
381
|
|
118.0
|
%
|
Other
revenues
|
|
11
|
|
|
1
|
|
|
10
|
|
1,000.0
|
%
|
Total
revenues
|
|
$
|
5,157
|
|
|
4,449
|
|
|
708
|
|
15.9
|
%
|
|
|
|
|
|
|
|
|
Segment
profit
|
|
$
|
1,439
|
|
|
705
|
|
|
734
|
|
104.1
|
%
|
|
|
|
|
|
|
|
|
Comparable store
sales growth (decline)
|
|
1.3
|
%
|
|
(1.4)
|
%
|
|
|
|
Systemwide sales (in
millions)1
|
|
$
|
189.3
|
|
|
177.5
|
|
|
11.8
|
|
6.7
|
%
|
|
|
|
|
|
|
|
|
Points of
distribution
|
|
3,420
|
|
|
3,379
|
|
|
41
|
|
1.2
|
%
|
Gross
openings
|
|
102
|
|
|
83
|
|
|
19
|
|
22.9
|
%
|
Net
openings
|
|
18
|
|
|
11
|
|
|
7
|
|
63.6
|
%
|
|
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.
|
Dunkin' Donuts International third quarter systemwide sales
increased 6.7% from the prior year period driven primarily by sales
growth in Southeast Asia, the
Middle East, South America, Europe, and China, offset by a sales decline in
South Korea. Sales in Europe 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 increased by
approximately 7%.
Dunkin' Donuts International third quarter revenues of
$5.2 million represented an increase
of 15.9% from the prior year period. The increase in revenues was
due primarily to increased franchise fees and royalty income.
Segment profit for Dunkin' Donuts International increased
$0.7 million to $1.4 million in the third quarter primarily as a
result of the increase in revenues, as well as a decrease in
general and administrative expenses, offset by a decrease 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 30,
2017
|
|
September 24,
2016
|
|
$ /
#
|
%
|
|
($ in thousands
except as otherwise noted)
|
Revenues:
|
|
|
|
|
|
|
|
Royalty
income
|
|
$
|
8,501
|
|
|
8,499
|
|
|
2
|
|
0.0
|
%
|
Franchise
fees
|
|
557
|
|
|
273
|
|
|
284
|
|
104.0
|
%
|
Rental
income
|
|
798
|
|
|
787
|
|
|
11
|
|
1.4
|
%
|
Sales of ice cream
and other products
|
|
771
|
|
|
805
|
|
|
(34)
|
|
(4.2)
|
%
|
Other
revenues
|
|
3,124
|
|
|
3,417
|
|
|
(293)
|
|
(8.6)
|
%
|
Total
revenues
|
|
$
|
13,751
|
|
|
13,781
|
|
|
(30)
|
|
(0.2)
|
%
|
|
|
|
|
|
|
|
|
Segment
profit
|
|
$
|
10,466
|
|
|
11,085
|
|
|
(619)
|
|
(5.6)
|
%
|
|
|
|
|
|
|
|
|
Comparable store
sales decline
|
|
(0.4)
|
%
|
|
(0.9)
|
%
|
|
|
|
Systemwide sales (in
millions)1
|
|
$
|
177.0
|
|
|
178.2
|
|
|
(1.2)
|
|
(0.7)
|
%
|
|
|
|
|
|
|
|
|
Points of
distribution
|
|
2,562
|
|
|
2,533
|
|
|
29
|
|
1.1
|
%
|
Gross
openings
|
|
26
|
|
|
14
|
|
|
12
|
|
85.7
|
%
|
Net
openings
|
|
11
|
|
|
3
|
|
|
8
|
|
266.7
|
%
|
|
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. third quarter revenues decreased 0.2% from
the prior year period to $13.8
million due primarily to a decrease in other revenues driven
by a decrease in licensing income, offset by an increase in
franchise fees.
Segment profit for Baskin-Robbins U.S. decreased 5.6% to
$10.5 million in the third
quarter over the prior year period primarily due to an increase in
general and administrative expenses.
Amounts and
percentages may not recalculate due to rounding
|
|
Three months
ended
|
|
Increase
(Decrease)
|
Baskin-Robbins
International
|
|
September 30,
2017
|
|
September 24,
2016
|
|
$ /
#
|
%
|
|
($ in thousands
except as otherwise noted)
|
Revenues:
|
|
|
|
|
|
|
|
Royalty
income
|
|
$
|
1,966
|
|
|
2,081
|
|
|
(115)
|
|
(5.5)
|
%
|
Franchise
fees
|
|
173
|
|
|
205
|
|
|
(32)
|
|
(15.6)
|
%
|
Rental
income
|
|
129
|
|
|
121
|
|
|
8
|
|
6.6
|
%
|
Sales of ice cream
and other products
|
|
26,512
|
|
|
25,340
|
|
|
1,172
|
|
4.6
|
%
|
Other
revenues
|
|
30
|
|
|
157
|
|
|
(127)
|
|
(80.9)
|
%
|
Total
revenues
|
|
$
|
28,810
|
|
|
27,904
|
|
|
906
|
|
3.2
|
%
|
|
|
|
|
|
|
|
|
Segment
profit
|
|
$
|
11,420
|
|
|
11,154
|
|
|
266
|
|
2.4
|
%
|
|
|
|
|
|
|
|
|
Comparable store
sales decline
|
|
(4.3)
|
%
|
|
(2.9)
|
%
|
|
|
|
Systemwide sales (in
millions)1
|
|
$
|
382.2
|
|
|
390.0
|
|
|
(7.8)
|
|
(2.0)
|
%
|
|
|
|
|
|
|
|
|
Points of
distribution
|
|
5,382
|
|
|
5,243
|
|
|
139
|
|
2.7
|
%
|
Gross
openings
|
|
95
|
|
|
116
|
|
|
(21)
|
|
(18.1)
|
%
|
Net
openings
|
|
41
|
|
|
45
|
|
|
(4)
|
|
(8.9)
|
%
|
|
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.
|
Baskin-Robbins International systemwide sales decreased 2.0% in
the third quarter compared to the prior year period driven by a
sales decline in Japan and
South Korea, offset by sales
growth in the Middle East and
Southeast Asia. Sales in
Japan were significantly
negatively impacted by foreign exchange rates. On a constant
currency basis, systemwide sales increased by approximately 1%.
Baskin-Robbins International third quarter revenues increased
3.2% from the prior year period to $28.8
million due primarily to an increase in sales of ice cream
products to our licensees in the Middle
East, offset by decreases in royalty income and other
revenues. 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 for Baskin-Robbins International
increased 2.4% from the prior year period to $11.4 million as a result of an increase in net
income from our Japan joint
venture, as well as an increase in net margin on ice cream driven
primarily by an increase in sales volume, offset by the decreases
in royalty income and other revenues.
COMPANY UPDATES
- The Company today announced that the Board of Directors
declared a cash dividend of $0.3225
per share, payable on December 6,
2017, to shareholders of record as of the close of business
on November 27, 2017.
- During the third quarter, the Company repurchased approximately
514,000 shares of common stock in the open market at a weighted
average cost per share of $52.90. The
Company's shares outstanding as of September
30, 2017 were 90,263,851.
- The Company announced today that its Board of Directors
authorized a new share repurchase program for up to an aggregate of
$650 million of its outstanding
common stock. The authorization is valid for a period of two years
and replaces the Company's existing share repurchase program.
- On October 23, 2017, the Company
completed its previously announced debt recapitalization
transaction, with the placement by its special purpose subsidiary
of a new series of $1.55 billion of
securitized notes, consisting of $1.4
billion of senior secured notes with anticipated repayment
dates of seven years ($600 million)
and ten years ($800 million), and a
new variable funding note facility ($150
million), which replaces the Company's existing variable
funding note facility. The proceeds from the placement of the new
notes were used to prepay and retire a portion of the Company's
outstanding fixed rate notes and to pay transaction fees, and the
balance will be used for general corporate purposes, which may
include a return of capital to shareholders. The Company's new
annualized net interest expense is approximately $126 million, based on a blended rate of 3.925
percent, on $3.1 billion in
securitized debt.
- The Company announced today that is hosting an educational
webinar on November 16, 2017 at
4:30 PM Eastern Time regarding the
new accounting guidance issued for revenue recognition which is
effective for the Company in fiscal year 2018. The dial-in number
is (866) 393-1607 or (914) 495-8556, conference number 9698955.
Dunkin' Brands will broadcast the webinar 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.
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 continues to
expect slightly negative comparable store sales for Baskin-Robbins
U.S.
- As a result of the two major hurricanes that made landfall in
the U.S. during the third quarter, the Company now expects Dunkin'
Donuts U.S. franchisees to add approximately 300 to 320 net new
restaurants. Previously it expected approximately 330 to 350 net
new restaurants for Dunkin' Donuts U.S. Approximately 30
restaurants that had been scheduled to open in 2017 will now open
in 2018.
- The Company continues to expect Baskin-Robbins U.S. franchisees
to add approximately 10 net new restaurants.
- Internationally, the Company continues to expect franchisees
and licensees to add between 50 and 100 net new restaurants across
the two brands.
- 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 now expects GAAP diluted earnings per share of
$2.17 to $2.25 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 the fourth quarter of 2017.
- The Company now expects full-year weighted-average shares
outstanding of approximately 92 million and a 39 percent effective
tax rate, which excludes any potential future impact from material
excess tax benefits in the fourth quarter of 2017. The $8.9 million write-down of foreign tax credit
carryforwards recognized in the third quarter increased the
expected full-year effective tax rate by approximately 250 basis
points.
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 reduction to the provision for income taxes of
$0.5 million and $7.3 million for the three and nine months ended
September 30, 2017, respectively.
This reduction to the provision for income taxes resulted in a
decrease in our effective tax rate of 0.5 and 2.9 percentage points
for the three and nine months ended September 30, 2017, respectively, 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 three and nine months ended September 30, 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 for
either of the periods. 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 98772384. 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 third quarter 2017, Dunkin'
Brands' 100 percent franchised business model included more than
12,400 Dunkin' Donuts restaurants and more than 7,900
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 30,
2017
|
|
September 24,
2016
|
|
September 30,
2017
|
|
September 24,
2016
|
|
|
|
|
|
|
|
|
|
Revenues:
|
|
|
|
|
|
|
|
|
Franchise fees and
royalty income
|
|
$
|
151,809
|
|
|
138,639
|
|
|
426,944
|
|
|
399,617
|
|
Rental
income
|
|
27,713
|
|
|
26,880
|
|
|
79,543
|
|
|
75,874
|
|
Sales of ice cream
and other products
|
|
27,551
|
|
|
26,568
|
|
|
85,710
|
|
|
86,425
|
|
Sales at
company-operated restaurants
|
|
—
|
|
|
1,611
|
|
|
—
|
|
|
11,924
|
|
Other
revenues
|
|
17,095
|
|
|
13,401
|
|
|
41,165
|
|
|
39,344
|
|
Total
revenues
|
|
224,168
|
|
|
207,099
|
|
|
633,362
|
|
|
613,184
|
|
Operating costs and
expenses:
|
|
|
|
|
|
|
|
|
Occupancy
expenses—franchised restaurants
|
|
15,333
|
|
|
15,881
|
|
|
43,758
|
|
|
42,691
|
|
Cost of ice cream and
other products
|
|
19,457
|
|
|
18,384
|
|
|
58,578
|
|
|
58,445
|
|
Company-operated
restaurant expenses
|
|
—
|
|
|
1,682
|
|
|
—
|
|
|
13,472
|
|
General and
administrative expenses, net
|
|
61,996
|
|
|
59,374
|
|
|
185,613
|
|
|
184,028
|
|
Depreciation
|
|
4,941
|
|
|
5,050
|
|
|
15,096
|
|
|
15,361
|
|
Amortization of other
intangible assets
|
|
5,341
|
|
|
5,397
|
|
|
16,001
|
|
|
16,726
|
|
Long-lived asset
impairment charges
|
|
536
|
|
|
7
|
|
|
643
|
|
|
104
|
|
Total operating costs
and expenses
|
|
107,604
|
|
|
105,775
|
|
|
319,689
|
|
|
330,827
|
|
Net income of equity
method investments
|
|
5,466
|
|
|
5,467
|
|
|
12,612
|
|
|
12,148
|
|
Other operating
income, net
|
|
3
|
|
|
2,569
|
|
|
591
|
|
|
6,329
|
|
Operating
income
|
|
122,033
|
|
|
109,360
|
|
|
326,876
|
|
|
300,834
|
|
Other income
(expense), net:
|
|
|
|
|
|
|
|
|
Interest
income
|
|
624
|
|
|
161
|
|
|
1,370
|
|
|
434
|
|
Interest
expense
|
|
(24,436)
|
|
|
(24,603)
|
|
|
(74,192)
|
|
|
(74,456)
|
|
Other income (loss),
net
|
|
155
|
|
|
(124)
|
|
|
370
|
|
|
(596)
|
|
Total other expense,
net
|
|
(23,657)
|
|
|
(24,566)
|
|
|
(72,452)
|
|
|
(74,618)
|
|
Income before income
taxes
|
|
98,376
|
|
|
84,794
|
|
|
254,424
|
|
|
226,216
|
|
Provision for income
taxes(a)
|
|
46,130
|
|
|
32,082
|
|
|
99,007
|
|
|
86,760
|
|
Net income
|
|
$
|
52,246
|
|
|
52,712
|
|
|
155,417
|
|
|
139,456
|
|
|
|
|
|
|
|
|
|
|
Earnings per
share—basic
|
|
$
|
0.58
|
|
|
0.58
|
|
|
1.71
|
|
|
1.52
|
|
Earnings per
share—diluted
|
|
0.57
|
|
|
0.57
|
|
|
1.68
|
|
|
1.51
|
|
|
(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 $0.5 million and $7.3 million of excess tax
benefits from share-based compensation in the consolidated
statements of operations during the three and nine months ended
September 30, 2017, respectively.
|
DUNKIN' BRANDS
GROUP, INC. AND SUBSIDIARIES
|
Condensed
Consolidated Balance Sheets
|
(In
thousands)
|
(Unaudited)
|
|
|
September 30,
2017
|
|
December 31,
2016
|
Assets
|
|
|
|
|
Current
assets:
|
|
|
|
|
Cash and cash
equivalents
|
|
$
|
266,981
|
|
|
361,425
|
|
Restricted
cash
|
|
76,141
|
|
|
69,746
|
|
Accounts, notes, and
other receivables, net
|
|
77,410
|
|
|
85,184
|
|
Other current
assets
|
|
101,321
|
|
|
90,003
|
|
Total current
assets
|
|
521,853
|
|
|
606,358
|
|
Property and
equipment, net
|
|
170,269
|
|
|
176,662
|
|
Equity method
investments
|
|
128,633
|
|
|
114,738
|
|
Goodwill and other
intangible assets, net
|
|
2,250,897
|
|
|
2,266,992
|
|
Other
assets
|
|
67,674
|
|
|
62,632
|
|
Total
assets
|
|
$
|
3,139,326
|
|
|
3,227,382
|
|
Liabilities and
Stockholders' Deficit
|
|
|
|
|
Current
liabilities:
|
|
|
|
|
Current portion of
long-term debt
|
|
$
|
25,000
|
|
|
25,000
|
|
Accounts
payable
|
|
12,416
|
|
|
12,682
|
|
Other current
liabilities
|
|
326,601
|
|
|
386,519
|
|
Total current
liabilities
|
|
364,017
|
|
|
424,201
|
|
Long-term debt,
net
|
|
2,388,091
|
|
|
2,401,998
|
|
Deferred income
taxes, net
|
|
459,524
|
|
|
461,810
|
|
Other long-term
liabilities
|
|
101,782
|
|
|
102,631
|
|
Total long-term
liabilities
|
|
2,949,397
|
|
|
2,966,439
|
|
Total stockholders'
deficit
|
|
(174,088)
|
|
|
(163,258)
|
|
Total liabilities and
stockholders' deficit
|
|
$
|
3,139,326
|
|
|
3,227,382
|
|
DUNKIN' BRANDS
GROUP, INC. AND SUBSIDIARIES
|
Condensed
Consolidated Statements of Cash Flows
|
(In
thousands)
|
(Unaudited)
|
|
|
Nine months
ended
|
|
|
September 30,
2017
|
|
September 24,
2016
|
|
|
|
|
|
Net cash provided by
operating activities(a)
|
|
$
|
121,529
|
|
|
131,259
|
|
Cash flows from
investing activities:
|
|
|
|
|
Additions to property
and equipment
|
|
(8,998)
|
|
|
(10,358)
|
|
Proceeds from sale of
real estate and company-operated restaurants
|
|
—
|
|
|
15,479
|
|
Other, net
|
|
(101)
|
|
|
(1,014)
|
|
Net cash (provided
by) used in investing activities
|
|
(9,099)
|
|
|
4,107
|
|
Cash flows from
financing activities:
|
|
|
|
|
Repayment of
long-term debt
|
|
(18,750)
|
|
|
(18,750)
|
|
Payment of debt
issuance and other debt-related costs
|
|
(312)
|
|
|
—
|
|
Dividends paid on
common stock
|
|
(87,911)
|
|
|
(82,326)
|
|
Repurchases of common
stock, including accelerated share repurchases
|
|
(127,186)
|
|
|
(30,000)
|
|
Exercise of stock
options
|
|
33,267
|
|
|
4,937
|
|
Other, net
|
|
(214)
|
|
|
(690)
|
|
Net cash used in
financing activities(a)
|
|
(201,106)
|
|
|
(126,829)
|
|
Effect of exchange
rates on cash, cash equivalents, and restricted
cash(a)
|
|
576
|
|
|
20
|
|
Increase (decrease)
in cash, cash equivalents, and restricted cash
|
|
(88,100)
|
|
|
8,557
|
|
Cash, cash
equivalents, and restricted cash, beginning of
period(a)
|
|
431,832
|
|
|
333,115
|
|
Cash, cash
equivalents, and restricted cash, end of
period(a)
|
|
$
|
343,732
|
|
|
341,672
|
|
|
(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
|
|
Nine months
ended
|
|
|
September 30,
2017
|
|
September 24,
2016
|
|
September 30,
2017
|
|
September 24,
2016
|
|
|
|
|
|
|
|
|
|
Operating
income
|
|
$
|
122,033
|
|
|
109,360
|
|
|
326,876
|
|
|
300,834
|
|
Operating income
margin
|
|
54.4
|
%
|
|
52.8
|
%
|
|
51.6
|
%
|
|
49.1
|
%
|
Adjustments:
|
|
|
|
|
|
|
|
|
Amortization of other
intangible assets
|
|
$
|
5,341
|
|
|
5,397
|
|
|
16,001
|
|
|
16,726
|
|
Long-lived asset
impairment charges
|
|
536
|
|
|
7
|
|
|
643
|
|
|
104
|
|
Transaction-related
costs(a)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
64
|
|
Bertico and related
litigation
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(428)
|
|
Adjusted operating
income
|
|
$
|
127,910
|
|
|
114,764
|
|
|
343,520
|
|
|
317,300
|
|
Adjusted operating
income margin
|
|
57.1
|
%
|
|
55.4
|
%
|
|
54.2
|
%
|
|
51.7
|
%
|
|
|
|
|
|
|
|
|
|
Net income
|
|
$
|
52,246
|
|
|
52,712
|
|
|
155,417
|
|
|
139,456
|
|
Adjustments:
|
|
|
|
|
|
|
|
|
Amortization of other
intangible assets
|
|
5,341
|
|
|
5,397
|
|
|
16,001
|
|
|
16,726
|
|
Long-lived asset
impairment charges
|
|
536
|
|
|
7
|
|
|
643
|
|
|
104
|
|
Transaction-related
costs(a)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
64
|
|
Bertico and related
litigation
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(428)
|
|
Tax impact of
adjustments(b)
|
|
(2,351)
|
|
|
(2,161)
|
|
|
(6,658)
|
|
|
(6,586)
|
|
Adjusted net
income
|
|
$
|
55,772
|
|
|
55,955
|
|
|
165,403
|
|
|
149,336
|
|
|
|
|
|
|
|
|
|
|
Adjusted net
income
|
|
$
|
55,772
|
|
|
55,955
|
|
|
165,403
|
|
|
149,336
|
|
Weighted average
number of common shares – diluted
|
|
91,433,076
|
|
|
92,565,695
|
|
|
92,386,611
|
|
|
92,545,292
|
|
Diluted adjusted
earnings per share
|
|
$
|
0.61
|
|
|
0.60
|
|
|
1.79
|
|
|
1.61
|
|
|
|
|
|
|
|
|
|
|
(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
|
|
|
(projected)
|
|
(projected)
|
Diluted earnings per
share
|
|
$
|
2.17
|
|
|
2.25
|
|
Adjustments:
|
|
|
|
|
Amortization of other
intangible assets
|
|
0.24
|
|
|
0.23
|
|
Long-lived asset
impairment charges
|
|
0.04
|
|
|
0.01
|
|
Transaction-related
costs(a)
|
|
0.01
|
|
|
—
|
|
Bertico and related
litigation
|
|
0.01
|
|
|
(0.01)
|
|
Loss on debt
extinguishment and refinancing transactions
|
|
0.08
|
|
|
0.07
|
|
Tax impact of
adjustments(b)
|
|
(0.15)
|
|
|
(0.12)
|
|
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.