CANTON, Mass., July 23,
2015 /PRNewswire/ --
Second quarter highlights include:
- Dunkin' Donuts U.S. comparable store sales growth of
2.9%
- Baskin-Robbins U.S. comparable store sales growth of
3.4%
- Added 154 net new restaurants worldwide, including 80 net
new Dunkin' Donuts in the U.S., resulting in more than 19,000
restaurants globally
- Revenues increased 10.7%
- Diluted EPS increased 2.3% to $0.44
- Diluted adjusted EPS increased 6.4% to $0.50
Dunkin' Brands Group, Inc. (Nasdaq: DNKN), the parent company of
Dunkin' Donuts (DD) and Baskin-Robbins (BR), today reported results
for the second quarter ended June 27, 2015.
"We had excellent overall second quarter results driven by
strong comparable store sales growth and net store development for
both Dunkin' Donuts and Baskin-Robbins in the U.S., as well as a
faster-than-expected launch of Dunkin' K-Cup® pods into thousands
of retailers nationwide," said Dunkin' Brands Chairman and Chief
Executive Officer Nigel Travis.
"Also significant this quarter, Dunkin' Donuts celebrated its 65th
anniversary making the brand's continued strong growth truly
remarkable. Along with our franchisees, we are extremely proud that
Dunkin' Donuts has become a brand that is experienced by millions
of people around the world on a daily basis, and we remain
steadfastly focused on delivering high-quality beverages and
products to our guests now and in the years ahead."
"We're very pleased with our financial performance through the
first half of 2015 which included nearly ten percent revenue growth
and double-digit operating income growth. We remain on track to
deliver our 2015 targets," said Paul
Carbone, Chief Financial Officer, Dunkin' Brands Group,
Inc.
|
SECOND QUARTER
2015 KEY FINANCIAL HIGHLIGHTS
|
|
($ in millions,
except per share data)
|
Three months
ended
|
|
Increase
(Decrease)
|
Amounts and
percentages may not recalculate due to rounding
|
June 27,
2015
|
June 28,
2014
|
|
$ /
#
|
%
|
Franchisee-reported
sales1
|
$
|
2,664.7
|
|
2,536.4
|
|
|
128.4
|
|
5.1
|
%
|
Systemwide sales
growth
|
5.2
|
%
|
5.7
|
%
|
|
|
|
Comparable store
sales growth (decline):
|
|
|
|
|
|
DD U.S.
|
2.9
|
%
|
1.8
|
%
|
|
|
|
BR U.S.
|
3.4
|
%
|
4.2
|
%
|
|
|
|
DD
International
|
(0.1)
|
%
|
(3.1)
|
%
|
|
|
|
BR
International
|
(2.5)
|
%
|
(1.6)
|
%
|
|
|
|
Development
data:
|
|
|
|
|
|
Consolidated global
net POD development
|
154
|
|
151
|
|
|
3
|
|
2.0
|
%
|
DD global PODs at
period end
|
11,460
|
|
10,993
|
|
|
467
|
|
4.2
|
%
|
BR global PODs at
period end
|
7,635
|
|
7,412
|
|
|
223
|
|
3.0
|
%
|
Consolidated global
PODs at period end
|
19,095
|
|
18,405
|
|
|
690
|
|
3.7
|
%
|
Financial
data:
|
|
|
|
|
|
Revenues
|
$
|
211.4
|
|
190.9
|
|
|
20.5
|
|
10.7
|
%
|
Operating
income
|
92.6
|
|
87.6
|
|
|
5.0
|
|
5.7
|
%
|
Operating income
margin
|
43.8
|
%
|
45.9
|
%
|
|
|
|
Adjusted operating
income2
|
$
|
103.0
|
|
94.2
|
|
|
8.8
|
|
9.4
|
%
|
Adjusted operating
income margin2
|
48.7
|
%
|
49.3
|
%
|
|
|
|
Net income
|
$
|
42.3
|
|
46.2
|
|
|
(3.9)
|
|
(8.4)
|
%
|
Adjusted net
income2
|
48.5
|
|
50.2
|
|
|
(1.6)
|
|
(3.2)
|
%
|
Earnings per
share:
|
|
|
|
|
|
Common–basic
|
0.44
|
|
0.44
|
|
|
—
|
|
—
|
%
|
Common–diluted
|
0.44
|
|
0.43
|
|
|
0.01
|
|
2.3
|
%
|
Diluted adjusted
earnings per share2
|
0.50
|
|
0.47
|
|
|
0.03
|
|
6.4
|
%
|
Weighted average
number of common shares – diluted (in millions)
|
96.9
|
|
107.2
|
|
|
(10.3)
|
|
(9.6)
|
%
|
|
|
|
1
Franchisee-reported sales include sales at franchisee-operated
restaurants, including joint ventures. While we do not record sales
by franchisees or licensees as revenue and such sales are not
included in our consolidated financial statements, we believe that
this operating measure is important in obtaining an understanding
of our financial performance. We believe franchisee-reported sales
information aids in understanding how we derive royalty revenue and
in evaluating our performance relative to competitors.
|
|
|
|
2 Adjusted
operating income, adjusted operating income margin, and adjusted
net income are non-GAAP measures reflecting operating income and
net income adjusted for amortization of intangible assets,
long-lived asset impairments, and other non-recurring, infrequent,
or unusual charges, net of the tax impact of such adjustments in
the case of adjusted net income. Diluted adjusted earnings per
share is a non-GAAP measure calculated using adjusted net income.
Please refer to "Non-GAAP Measures and Statistical Data" and
"Dunkin' Brands Group, Inc. Non-GAAP Reconciliations" for further
detail.
|
|
|
|
Global systemwide sales growth in the second quarter was
primarily attributable to global store development and Dunkin'
Donuts U.S. comparable store sales growth (which includes stores
open 54 weeks or more).
Dunkin' Donuts U.S. comparable store sales growth in the second
quarter was driven by increased average ticket and higher traffic
resulting from our focus on operational excellence and product and
marketing innovation. Product and marketing innovations resulted in
strong beverage sales growth, led by hot and iced coffee and
espresso-based beverages; continued breakfast sandwich momentum
across core and limited time offer sandwiches including the Bacon
Guacamole Flatbread sandwich; and donut category growth driven by
the Croissant Donut, Cheesecake Squares, and limited-time-offer
OREO® and Chips Ahoy!® donuts. The in-restaurant K-Cup and packaged
coffee categories had a significant negative impact on second
quarter comparable store sales. Traffic accounted for
approximately 60 basis points of the comparable store sales growth
in the quarter.
Baskin-Robbins U.S. comparable store sales growth was driven by
increased sales of cups and cones, beverages, desserts, and sundaes
and increased sales of cakes, stimulated by strong year-over-year
growth of online cake ordering.
In the second quarter, Dunkin' Brands franchisees and licensees
opened 154 net new restaurants around the globe. This included 80
net new Dunkin' Donuts U.S. locations, 55 net new Baskin-Robbins
International locations, 13 net new Dunkin' Donuts International
locations, and 6 net new Baskin-Robbins U.S. locations.
Additionally, Dunkin' Donuts U.S. franchisees remodeled 127
restaurants and Baskin-Robbins U.S. franchisees remodeled 41
restaurants during the quarter.
Revenues for the second quarter increased 10.7 percent compared
to the prior year period due primarily to increased royalty income
as a result of systemwide sales growth, an increase in sales at
company-operated restaurants due to a net increase in the number of
company-operated restaurants, increased sales of ice cream and
other products, and licensing fees earned from the sale of Dunkin'
K-Cup® pods.
Operating income and adjusted operating income for the second
quarter increased $5.0 million, or
5.7 percent, and $8.8 million, or 9.4
percent, respectively, from the prior year period primarily as a
result of the increases in royalty income, ice cream margin due
primarily to the increase in sales, and licensing fees earned from
the sale of Dunkin' K-Cup® pods. The increases in revenues were
offset by an increase in personnel costs driven by incremental
incentive compensation accruals and a decrease in other operating
income as the prior year period included a gain recognized in
connection with the sale of the company-operated restaurants in the
Atlanta market. Additionally,
operating income for the second quarter was unfavorably impacted by
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.
Net income for the second quarter decreased by $3.9 million, or 8.4 percent, compared to the
prior year period primarily as a result of additional interest
expense of $8.3 million driven by
additional borrowings incurred in conjunction with the
securitization refinancing transaction completed in January 2015, offset by the $5.0 million increase in operating income.
Adjusted net income for the second quarter decreased by
$1.6 million, or 3.2 percent,
compared to the second quarter of 2014 primarily as a result of
increases in interest expense and income tax expense, offset by the
$8.8 million increase in adjusted
operating income.
Diluted earnings per share increased by 2.3% to $0.44 for the second quarter of 2015 compared to
the prior year period as a result of a decrease in shares
outstanding, offset by the decrease in net income. Diluted adjusted
earnings per share increased by 6.4 percent to $0.50 for the second quarter of 2015 compared to
the prior year period as a result of the decrease in shares
outstanding, offset by the decrease in adjusted net income. The
decrease in shares outstanding from the prior year period is due
primarily to the repurchase of shares, offset by the exercise of
stock options.
|
SECOND QUARTER
2015 SEGMENT RESULTS
|
|
Amounts and
percentages may not recalculate due to rounding
|
|
Three months
ended
|
|
Increase
(Decrease)
|
Dunkin' Donuts
U.S.
|
|
June 27,
2015
|
|
June 28,
2014
|
|
$ /
#
|
%
|
|
($ in thousands
except as otherwise noted)
|
Comparable store
sales growth
|
|
2.9
|
%
|
|
1.8
|
%
|
|
|
|
Systemwide sales
growth
|
|
7.9
|
%
|
|
6.3
|
%
|
|
|
|
Franchisee-reported
sales (in millions)1
|
|
$
|
1,954.4
|
|
|
1,813.2
|
|
|
141.1
|
|
7.8
|
%
|
|
|
|
|
|
|
|
|
Revenues:
|
|
|
|
|
|
|
|
Royalty
income
|
|
$
|
106,343
|
|
|
98,250
|
|
|
8,093
|
|
8.2
|
%
|
Franchise
fees
|
|
8,661
|
|
|
8,430
|
|
|
231
|
|
2.7
|
%
|
Rental
income
|
|
25,613
|
|
|
24,611
|
|
|
1,002
|
|
4.1
|
%
|
Sales at
company-operated restaurants
|
|
7,727
|
|
|
4,736
|
|
|
2,991
|
|
63.2
|
%
|
Other
revenues
|
|
1,424
|
|
|
423
|
|
|
1,001
|
|
236.6
|
%
|
Total
revenues
|
|
$
|
149,768
|
|
|
136,450
|
|
|
13,318
|
|
9.8
|
%
|
|
|
|
|
|
|
|
|
Segment
profit
|
|
$
|
108,127
|
|
|
100,981
|
|
|
7,146
|
|
7.1
|
%
|
|
|
|
|
|
|
|
|
Points of
distribution
|
|
8,240
|
|
|
7,821
|
|
|
419
|
|
5.4
|
%
|
Gross
openings
|
|
115
|
|
|
105
|
|
|
10
|
|
9.5
|
%
|
Net
openings
|
|
80
|
|
|
75
|
|
|
5
|
|
6.7
|
%
|
|
1
Franchisee-reported sales include sales at franchisee-operated
restaurants, including joint ventures. We do not record sales by
franchisees or licensees as revenue and such sales are not included
in our consolidated financial statements. Please refer to "Non-GAAP
Measures and Statistical Data" for further detail.
|
|
Dunkin' Donuts U.S. second quarter revenues of $149.8 million represented an increase of 9.8
percent over the prior year period. The increase was primarily a
result of increased royalty income due to an increase in systemwide
sales, as well as an increase in sales at company-operated
restaurants driven by a net increase in the number of
company-operated restaurants. Also contributing to revenue growth
was an increase in rental income due primarily to increases in the
number of leases and average rent per lease, and an increase in
other revenues driven by transfer fee income and gains from
refranchising transactions.
Dunkin' Donuts U.S. segment profit in the second quarter
increased $7.1 million over the prior
year period to $108.1 million, which
was driven primarily by growth in royalty income and other
revenues. The increases in revenues were offset by an increase in
personnel costs driven by incremental incentive compensation
accruals and a decrease in other operating income as the prior year
period included a gain recognized in connection with the sale of
the company-operated restaurants in the Atlanta market.
|
Amounts and
percentages may not recalculate due to rounding
|
|
Three months
ended
|
|
Increase
(Decrease)
|
Dunkin' Donuts
International
|
|
June 27,
2015
|
|
June 28,
2014
|
|
$ /
#
|
%
|
|
($ in thousands
except as otherwise noted)
|
Comparable store
sales decline
|
|
(0.1)
|
%
|
|
(3.1)
|
%
|
|
|
|
Systemwide sales
growth (decline)
|
|
(1.8)
|
%
|
|
3.5
|
%
|
|
|
|
Franchisee-reported
sales (in millions)1
|
|
$
|
173.6
|
|
|
176.7
|
|
|
(3.2)
|
|
(1.8)
|
%
|
|
|
|
|
|
|
|
|
Revenues:
|
|
|
|
|
|
|
|
Royalty
income
|
|
$
|
4,087
|
|
|
3,859
|
|
|
228
|
|
5.9
|
%
|
Franchise
fees
|
|
1,334
|
|
|
635
|
|
|
699
|
|
110.1
|
%
|
Rental
income
|
|
5
|
|
|
49
|
|
|
(44)
|
|
(89.8)
|
%
|
Other
revenues
|
|
(5)
|
|
|
(22)
|
|
|
17
|
|
(77.3)
|
%
|
Total
revenues
|
|
$
|
5,421
|
|
|
4,521
|
|
|
900
|
|
19.9
|
%
|
|
|
|
|
|
|
|
|
Segment
profit
|
|
$
|
3,218
|
|
|
3,015
|
|
|
203
|
|
6.7
|
%
|
|
|
|
|
|
|
|
|
Points of
distribution
|
|
3,220
|
|
|
3,172
|
|
|
48
|
|
1.5
|
%
|
Gross
openings
|
|
126
|
|
|
90
|
|
|
36
|
|
40.0
|
%
|
Net
openings
|
|
13
|
|
|
17
|
|
|
(4)
|
|
(23.5)
|
%
|
|
1
Franchisee-reported sales include sales at franchisee-operated
restaurants, including joint ventures. We do not record sales by
franchisees or licensees as revenue and such sales are not included
in our consolidated financial statements. Please refer to "Non-GAAP
Measures and Statistical Data" for further detail.
|
Dunkin' Donuts International second quarter systemwide sales
decreased 1.8 percent from the prior year period. Sales declines in
South Korea and South America were offset by sales growth in
Asia and the Middle East. Sales in South Korea, Europe, South
America, and Asia were
negatively impacted by unfavorable foreign exchange rates. On a
constant currency basis, systemwide sales increased by
approximately 6 percent. Comparable store sales were negatively
impacted as a result of the MERS outbreak in South Korea and a shift in the timing of
Ramadan, which impacted the
Middle East and some Southeast Asia markets.
Dunkin' Donuts International second quarter revenues of
$5.4 million represented an increase
of 19.9% over the prior year period. The increase in revenues was
primarily a result of increased franchise fees due to additional
gross development, as well as an increase in royalty income.
Segment profit for Dunkin' Donuts International increased
$0.2 million to $3.2 million in the second quarter primarily as a
result of revenue growth, offset by an increase in general and
administrative expenses and a decrease in income from our
South Korea joint venture. A
portion of the increase in general and administrative expenses can
be attributed to an increase in bad debt expense.
|
Amounts and
percentages may not recalculate due to rounding
|
|
Three months
ended
|
|
Increase
(Decrease)
|
Baskin-Robbins
U.S.
|
|
June 27,
2015
|
|
June 28,
2014
|
|
$ /
#
|
%
|
|
($ in thousands
except as otherwise noted)
|
Comparable store
sales growth
|
|
3.4
|
%
|
|
4.2
|
%
|
|
|
|
Systemwide sales
growth
|
|
5.0
|
%
|
|
4.5
|
%
|
|
|
|
Franchisee-reported
sales (in millions)1
|
|
$
|
177.3
|
|
|
169.1
|
|
|
8.2
|
|
4.8
|
%
|
|
|
|
|
|
|
|
|
Revenues:
|
|
|
|
|
|
|
|
Royalty
income
|
|
$
|
8,682
|
|
|
8,410
|
|
|
272
|
|
3.2
|
%
|
Franchise
fees
|
|
148
|
|
|
222
|
|
|
(74)
|
|
(33.3)
|
%
|
Rental
income
|
|
778
|
|
|
814
|
|
|
(36)
|
|
(4.4)
|
%
|
Sales of ice cream
and other products
|
|
660
|
|
|
1,104
|
|
|
(444)
|
|
(40.2)
|
%
|
Other
revenues
|
|
3,251
|
|
|
2,402
|
|
|
849
|
|
35.3
|
%
|
Total
revenues
|
|
$
|
13,519
|
|
|
12,952
|
|
|
567
|
|
4.4
|
%
|
|
|
|
|
|
|
|
|
Segment
profit
|
|
$
|
9,381
|
|
|
9,315
|
|
|
66
|
|
0.7
|
%
|
|
|
|
|
|
|
|
|
Points of
distribution
|
|
2,490
|
|
|
2,480
|
|
|
10
|
|
0.4
|
%
|
Gross
openings
|
|
22
|
|
|
28
|
|
|
(6)
|
|
(21.4)
|
%
|
Net
openings
|
|
6
|
|
|
12
|
|
|
(6)
|
|
(50.0)
|
%
|
|
1
Franchisee-reported sales include sales at franchisee-operated
restaurants, including joint ventures. We do not record sales by
franchisees or licensees as revenue and such sales are not included
in our consolidated financial statements. Please refer to "Non-GAAP
Measures and Statistical Data" for further detail.
|
|
Baskin-Robbins U.S. second quarter revenue increased 4.4 percent
from the prior year period to $13.5
million due primarily to an increase in other revenues
driven by an increase in licensing income and an increase in
royalty income, offset by a decrease in sales of ice cream and
other products which can be attributed to a shift in certain
franchisees now purchasing ice cream from our third party ice cream
manufacturer.
Segment profit for Baskin-Robbins U.S. increased $0.1 million in the second quarter, or 0.7
percent, over the prior year period primarily as a result of the
increases in other revenues and royalty income, offset by an
increase in general and administrative expenses due primarily to
expenses incurred related to brand-building activities and
incentive compensation accruals.
|
Amounts and
percentages may not recalculate due to rounding
|
|
Three months
ended
|
|
Increase
(Decrease)
|
Baskin-Robbins
International
|
|
June 27,
2015
|
|
June 28,
2014
|
|
$ /
#
|
%
|
|
($ in thousands
except as otherwise noted)
|
|
|
|
|
|
Comparable store
sales decline
|
|
(2.5)
|
%
|
|
(1.6)
|
%
|
|
|
|
Systemwide sales
growth (decline)
|
|
(4.7)
|
%
|
|
4.7
|
%
|
|
|
|
Franchisee-reported
sales (in millions)1
|
|
$
|
359.5
|
|
|
377.3
|
|
|
(17.8)
|
|
(4.7)
|
%
|
|
|
|
|
|
|
|
|
Revenues:
|
|
|
|
|
|
|
|
Royalty
income
|
|
$
|
1,645
|
|
|
2,213
|
|
|
(568)
|
|
(25.7)
|
%
|
Franchise
fees
|
|
243
|
|
|
248
|
|
|
(5)
|
|
(2.0)
|
%
|
Rental
income
|
|
119
|
|
|
139
|
|
|
(20)
|
|
(14.4)
|
%
|
Sales of ice cream
and other products
|
|
34,094
|
|
|
30,902
|
|
|
3,192
|
|
10.3
|
%
|
Other
revenues
|
|
103
|
|
|
129
|
|
|
(26)
|
|
(20.2)
|
%
|
Total
revenues
|
|
$
|
36,204
|
|
|
33,631
|
|
|
2,573
|
|
7.7
|
%
|
|
|
|
|
|
|
|
|
Segment
profit
|
|
$
|
12,797
|
|
|
11,724
|
|
|
1,073
|
|
9.2
|
%
|
|
|
|
|
|
|
|
|
Points of
distribution
|
|
5,145
|
|
|
4,932
|
|
|
213
|
|
4.3
|
%
|
Gross
openings
|
|
123
|
|
|
95
|
|
|
28
|
|
29.5
|
%
|
Net
openings
|
|
55
|
|
|
47
|
|
|
8
|
|
17.0
|
%
|
|
1
Franchisee-reported sales include sales at franchisee-operated
restaurants, including joint ventures. We do not record sales by
franchisees or licensees as revenue and such sales are not included
in our consolidated financial statements. Please refer to "Non-GAAP
Measures and Statistical Data" for further detail.
|
|
Baskin-Robbins International systemwide sales decreased 4.7
percent in the second quarter compared to the prior year period
driven by unfavorable foreign exchange in Japan and South
Korea, offset by increases in sales in Asia, the Middle
East, and South Korea. On a
constant currency basis, systemwide sales increased by
approximately 4 percent. Comparable store sales were negatively
impacted as a result of the MERS outbreak in South Korea and a shift in the timing of
Ramadan, which impacted the
Middle East and some Southeast Asia markets.
Baskin-Robbins International second quarter revenues increased
7.7 percent over the prior year period to $36.2 million due primarily to an increase in
sales of ice cream and other products in the Middle East driven primarily by timing of
orders, offset by a decrease in royalty income.
Second quarter segment profit increased 9.2 percent from the
prior year period to $12.8 million as
a result of an increase in net margin on ice cream driven primarily
by the increase in sales, as well as favorable results from our
Japan joint venture compared to
the prior year, offset by an increase in general and administrative
expenses and a decrease in royalty income.
COMPANY UPDATES
- The Company today announced that the Board of Directors
declared a third quarter cash dividend of $0.265 per share, payable on September 2, 2015 to shareholders of record as of
the close of business on August 24,
2015.
- During the second quarter, the Company completed its
$400 million accelerated share
repurchase agreement that it entered into in February 2015. At settlement, in June 2015, the Company received 1.3 million
shares. Under the agreement, the Company repurchased a total of
approximately 8.2 million shares at a weighted average cost per
share of $48.62. Additionally, the
Company repurchased approximately 590,000 shares of common stock in
the open market during the quarter at a weighted average cost per
share of $47.95. The Company's shares
outstanding as of June 27, 2015 were
95,021,111.
FISCAL YEAR 2015 TARGETS
As described below, the Company is reiterating certain targets
regarding its 2015 expectations.
- The Company continues to expect Dunkin' Donuts U.S. comparable
store sales growth of 1 to 3 percent and Baskin-Robbins U.S.
comparable store sales growth of 1 to 3 percent.
- The Company continues to expect that Dunkin' Donuts U.S. will
add between 410 and 440 net new restaurants, for greater than 5
percent net unit growth, and expects Baskin-Robbins U.S. will add
between 5 and 10 net new restaurants.
- Internationally, the Company continues to target opening 200 to
300 net new restaurants across the two brands. It continues to
expect net income of equity method investments to be approximately
$13 million.
- Globally, the Company continues to expect to open between 615
and 750 net new restaurants.
- The Company continues to expect revenue growth of between 6 and
8 percent; adjusted operating income growth of between 7 and 8
percent; and adjusted earnings per share of $1.87 to $1.91.
Conference Call
As previously announced, Dunkin' Brands will be holding a
conference call today at 8:00 am ET
hosted by Nigel Travis, Chairman
& Chief Executive Officer, and Paul
Carbone, Chief Financial Officer. The dial-in number is
(866) 393-1607 or (914) 495-8556, conference number 71102518.
Dunkin' Brands will broadcast the conference call live over the
Internet at http://investor.dunkinbrands.com. A replay of the
conference call will be available on the Company's website at
http://investor.dunkinbrands.com.
The Company's consolidated statements of operations, condensed
consolidated balance sheets, condensed consolidated statements of
cash flows and other additional information have been provided with
this press release. This information should be reviewed in
conjunction with this press release.
Forward-Looking Statements
Certain statements contained herein are not based on historical
fact and are "forward-looking statements" within the meaning of the
applicable securities laws and regulations. Generally, these
statements can be identified by the use of words such as
"anticipate," "believe," "could," "estimate," "expect," "feel,"
"forecast," "intend," "may," "plan," "potential," "project,"
"should," "would," and similar expressions intended to identify
forward-looking statements, although not all forward-looking
statements contain these identifying words. By their
nature, forward-looking statements involve risks and uncertainties
because they relate to events and depend on circumstances that may
or may not occur in the future. These risk and uncertainties
include, but are not limited to: the ongoing level of profitability
of franchisees and licensees; our franchisees' and licensees'
ability to sustain same store sales growth; changes in
working relationships with our franchisees and licensees and the
actions of our franchisees and licensees; our master franchisees'
relationships with sub-franchisees; the strength of our brand in
the markets in which we compete; changes in competition within the
quick-service restaurant segment of the food industry; changes in
consumer behavior resulting from changes in technologies or
alternative methods of delivery; economic and political conditions
in the countries where we operate; our substantial indebtedness;
our ability to protect our intellectual property rights; consumer
preferences, spending patterns and demographic trends; the impact
of seasonal changes, including weather effects, on our business;
the success of our growth strategy and international development;
changes in commodity and food prices, particularly coffee, dairy
products and sugar, and other operating costs; shortages of coffee;
failure of our network and information technology systems;
interruptions or shortages in the supply of products to our
franchisees and licensees; the impact of food borne-illness or food
safety issues or adverse public or media opinions regarding the
health effects of consuming our products; our ability to collect
royalty payments from our franchisees and licensees; the ability of
our franchisees and licensees to open new restaurants and keep
existing restaurants in operation; our ability to retain key
personnel; any inability to protect consumer credit card data and
catastrophic events.
Forward-looking statements reflect management's analysis as of
the date of this press release. Important factors that could
cause actual results to differ materially from our expectations are
more fully described in our other filings with the Securities and
Exchange Commission, including under the section headed "Risk
Factors" in our most recent annual report on Form 10-K. Except as
required by applicable law, we do not undertake to publicly update
or revise any of these forward-looking statements, whether as a
result of new information, future events or otherwise.
Non-GAAP Measures and Statistical Data
In addition to the GAAP financial measures set forth in this
press release, the Company has included certain non-GAAP
measurements such as adjusted operating income, adjusted operating
income margin, adjusted net income, and diluted adjusted earnings
per share, which present operating results on a basis adjusted for
certain items. The Company uses these non-GAAP measures as key
performance measures for the purpose of evaluating performance
internally. We also believe these non-GAAP measures provide our
investors with useful information regarding our historical
operating results. These non-GAAP measures are not intended to
replace the presentation of our financial results in accordance
with GAAP. Use of the terms adjusted operating income, adjusted
operating income margin, adjusted net income, and diluted adjusted
earnings per share may differ from similar measures reported by
other companies. These non-GAAP measures are reconciled from the
respective measures determined under GAAP in the attached tables
"Dunkin' Brands Group, Inc. Non-GAAP Reconciliations."
Additionally, the Company has included metrics such as
franchisee-reported sales, systemwide sales growth, and comparable
store sales growth, which are commonly used statistical measures in
the quick service restaurant industry and are important to
understanding the Company's performance.
Franchisee-reported sales include sales at franchisee-operated
restaurants, including joint ventures. While we do not record sales
by franchisees or licensees as revenue and such sales are not
included in our consolidated financial statements, we believe that
this operating measure is important in obtaining an understanding
of our financial performance. We believe franchisee-reported sales
information aids in understanding how we derive royalty revenue and
in evaluating our performance relative to competitors.
The Company uses "systemwide sales growth" to refer to the
percentage change in sales at both franchisee- and company-operated
restaurants from the comparable period of the prior year. Changes
in systemwide sales are driven by changes in comparable store sales
and changes in the number of restaurants.
The Company uses "DD U.S. comparable store sales growth," "BR
U.S. comparable store sales growth," "DD International comparable
store sales growth," and "BR International comparable store sales
growth," which are calculated by including only sales from
franchisee- and company-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 nearly 60
countries worldwide, Dunkin' Brands Group, Inc. (Nasdaq: DNKN) is
one of the world's leading franchisors of quick service restaurants
(QSR) serving hot and cold coffee and baked goods, as well as
hard-serve ice cream. At the end of the second quarter 2015,
Dunkin' Brands' nearly 100 percent franchised business model
included more than 11,400 Dunkin' Donuts restaurants and more than
7,600 Baskin-Robbins restaurants. Dunkin' Brands Group, Inc. is
headquartered in Canton, Mass.
DUNKIN' BRANDS
GROUP, INC. AND SUBSIDIARIES
|
Consolidated
Statements of Operations
|
(In thousands, except
per share data)
|
(Unaudited)
|
|
|
Three months
ended
|
|
Six months
ended
|
|
|
June 27,
2015
|
|
June 28,
2014
|
|
June 27,
2015
|
|
June 28,
2014
|
|
|
|
|
|
|
|
|
|
Revenues:
|
|
|
|
|
|
|
|
|
Franchise fees and
royalty income
|
|
$
|
131,143
|
|
|
122,267
|
|
|
246,468
|
|
|
228,979
|
|
Rental
income
|
|
26,535
|
|
|
25,633
|
|
|
50,162
|
|
|
48,080
|
|
Sales of ice cream
and other products(1)
|
|
35,410
|
|
|
32,220
|
|
|
58,478
|
|
|
61,061
|
|
Sales at
company-operated restaurants
|
|
7,727
|
|
|
4,736
|
|
|
14,285
|
|
|
11,052
|
|
Other
revenues(1)
|
|
10,609
|
|
|
6,052
|
|
|
27,936
|
|
|
13,684
|
|
Total
revenues
|
|
211,424
|
|
|
190,908
|
|
|
397,329
|
|
|
362,856
|
|
Operating costs and
expenses:
|
|
|
|
|
|
|
|
|
Occupancy
expenses—franchised restaurants
|
|
13,717
|
|
|
13,560
|
|
|
27,235
|
|
|
26,572
|
|
Cost of ice cream and
other products(1)
|
|
22,876
|
|
|
23,181
|
|
|
38,222
|
|
|
43,112
|
|
Company-operated
restaurant expenses
|
|
7,757
|
|
|
4,904
|
|
|
14,615
|
|
|
11,267
|
|
General and
administrative expenses, net(1)
|
|
68,349
|
|
|
56,195
|
|
|
126,189
|
|
|
115,726
|
|
Depreciation
|
|
4,991
|
|
|
4,930
|
|
|
10,101
|
|
|
9,843
|
|
Amortization of other
intangible assets
|
|
6,181
|
|
|
6,384
|
|
|
12,381
|
|
|
12,789
|
|
Long-lived asset
impairment charges
|
|
—
|
|
|
523
|
|
|
264
|
|
|
646
|
|
Total operating costs
and expenses
|
|
123,871
|
|
|
109,677
|
|
|
229,007
|
|
|
219,955
|
|
Net income of equity
method investments
|
|
3,951
|
|
|
4,048
|
|
|
6,898
|
|
|
7,148
|
|
Other operating
income, net
|
|
1,084
|
|
|
2,278
|
|
|
1,108
|
|
|
6,605
|
|
Operating
income
|
|
92,588
|
|
|
87,557
|
|
|
176,328
|
|
|
156,654
|
|
Other income
(expense):
|
|
|
|
|
|
|
|
|
Interest
income
|
|
116
|
|
|
69
|
|
|
238
|
|
|
138
|
|
Interest
expense
|
|
(25,095)
|
|
|
(16,823)
|
|
|
(47,259)
|
|
|
(34,764)
|
|
Loss on debt
extinguishment and refinancing transactions
|
|
—
|
|
|
—
|
|
|
(20,554)
|
|
|
(13,735)
|
|
Other losses,
net
|
|
(12)
|
|
|
(113)
|
|
|
(557)
|
|
|
(86)
|
|
Total other
expense
|
|
(24,991)
|
|
|
(16,867)
|
|
|
(68,132)
|
|
|
(48,447)
|
|
Income before income
taxes
|
|
67,597
|
|
|
70,690
|
|
|
108,196
|
|
|
108,207
|
|
Provision for income
taxes
|
|
25,148
|
|
|
24,719
|
|
|
40,322
|
|
|
39,408
|
|
Net income including
noncontrolling interests
|
|
42,449
|
|
|
45,971
|
|
|
67,874
|
|
|
68,799
|
|
Net income (loss)
attributable to noncontrolling interests
|
|
131
|
|
|
(220)
|
|
|
(75)
|
|
|
(348)
|
|
Net income
attributable to Dunkin' Brands
|
|
$
|
42,318
|
|
|
46,191
|
|
|
67,949
|
|
|
69,147
|
|
|
|
|
|
|
|
|
|
|
Earnings per
share—basic
|
|
$
|
0.44
|
|
|
0.44
|
|
|
0.69
|
|
|
0.65
|
|
Earnings per
share—diluted
|
|
0.44
|
|
|
0.43
|
|
|
0.69
|
|
|
0.64
|
|
|
(1) Sales
of products sold to Dunkin' Donuts International franchisees that
have historically been included in other revenues are now included
in sales of ice cream and other products. The related costs have
historically been included in general and administrative expenses,
net and are now included in cost of ice cream and other products.
Sales and costs from these transactions were reclassified for all
prior periods presented to conform to the current period
presentation.
|
DUNKIN' BRANDS
GROUP, INC. AND SUBSIDIARIES
|
Condensed
Consolidated Balance Sheets
|
(In
thousands)
|
(Unaudited)
|
|
|
June 27,
2015
|
|
December 27,
2014
|
Assets
|
|
|
|
|
Current
assets:
|
|
|
|
|
Cash and cash
equivalents
|
|
$
|
328,596
|
|
|
208,080
|
|
Restricted
cash
|
|
71,191
|
|
|
—
|
|
Accounts, notes, and
other receivables, net
|
|
92,692
|
|
|
105,060
|
|
Other current
assets
|
|
123,457
|
|
|
129,478
|
|
Total current
assets
|
|
615,936
|
|
|
442,618
|
|
Property and
equipment, net
|
|
183,422
|
|
|
182,061
|
|
Equity method
investments
|
|
162,396
|
|
|
164,493
|
|
Goodwill and other
intangible assets, net
|
|
2,305,773
|
|
|
2,317,167
|
|
Other
assets
|
|
91,197
|
|
|
71,044
|
|
Total
assets
|
|
$
|
3,358,724
|
|
|
3,177,383
|
|
Liabilities,
Redeemable Noncontrolling Interests, and Stockholders'
Equity
|
|
|
|
|
Current
liabilities:
|
|
|
|
|
Current portion of
long-term debt
|
|
$
|
25,253
|
|
|
3,852
|
|
Accounts
payable
|
|
13,324
|
|
|
13,814
|
|
Other current
liabilities
|
|
307,869
|
|
|
337,853
|
|
Total current
liabilities
|
|
346,446
|
|
|
355,519
|
|
Long-term debt,
net
|
|
2,469,778
|
|
|
1,807,081
|
|
Deferred income
taxes, net
|
|
527,708
|
|
|
540,339
|
|
Other long-term
liabilities
|
|
102,679
|
|
|
99,494
|
|
Total long-term
liabilities
|
|
3,100,165
|
|
|
2,446,914
|
|
Redeemable
noncontrolling interests
|
|
—
|
|
|
6,991
|
|
Total stockholders'
equity (deficit)
|
|
(87,887)
|
|
|
367,959
|
|
Total liabilities,
redeemable noncontrolling interests, and stockholders'
equity
|
|
$
|
3,358,724
|
|
|
3,177,383
|
|
DUNKIN' BRANDS
GROUP, INC. AND SUBSIDIARIES
|
Condensed
Consolidated Statements of Cash Flows
|
(In
thousands)
|
(Unaudited)
|
|
|
Six months
ended
|
|
|
June 27,
2015
|
|
June 28,
2014
|
|
|
|
|
|
Net cash provided by
operating activities
|
|
$
|
47,677
|
|
|
59,671
|
|
Cash flows from
investing activities:
|
|
|
|
|
Additions to property
and equipment
|
|
(14,362)
|
|
|
(10,556)
|
|
Proceeds from sale of
real estate and company-operated restaurants
|
|
1,586
|
|
|
12,761
|
|
Other, net
|
|
(2,887)
|
|
|
(1,520)
|
|
Net cash provided by
(used in) investing activities
|
|
(15,663)
|
|
|
685
|
|
Cash flows from
financing activities:
|
|
|
|
|
Proceeds from
issuance of long-term debt
|
|
2,500,000
|
|
|
—
|
|
Repayment of
long-term debt
|
|
(1,825,273)
|
|
|
(15,000)
|
|
Payment of deferred
financing and other debt-related costs
|
|
(41,301)
|
|
|
(8,977)
|
|
Dividends paid on
common stock
|
|
(50,815)
|
|
|
(48,759)
|
|
Repurchases of common
stock, including accelerated share repurchase
|
|
(493,869)
|
|
|
(81,046)
|
|
Exercise of stock
options
|
|
6,364
|
|
|
4,293
|
|
Change in restricted
cash
|
|
(6,866)
|
|
|
—
|
|
Other, net
|
|
613
|
|
|
8,539
|
|
Net cash provided by
(used in) financing activities
|
|
88,853
|
|
|
(140,950)
|
|
Effect of exchange
rates on cash and cash equivalents
|
|
(351)
|
|
|
42
|
|
Increase (decrease)
in cash and cash equivalents
|
|
120,516
|
|
|
(80,552)
|
|
Cash and cash
equivalents, beginning of period
|
|
208,080
|
|
|
256,933
|
|
Cash and cash
equivalents, end of period
|
|
$
|
328,596
|
|
|
176,381
|
|
DUNKIN' BRANDS
GROUP, INC. AND SUBSIDIARIES
|
Non-GAAP
Reconciliations
|
(In thousands, except
per share data)
|
(Unaudited)
|
|
|
Three months
ended
|
|
Six months
ended
|
|
|
June 27,
2015
|
|
June 28,
2014
|
|
June 27,
2015
|
|
June 28,
2014
|
Operating
income
|
|
$
|
92,588
|
|
|
87,557
|
|
|
176,328
|
|
|
156,654
|
|
Operating income
margin
|
|
43.8
|
%
|
|
45.9
|
%
|
|
44.4
|
%
|
|
43.2
|
%
|
Adjustments:
|
|
|
|
|
|
|
|
|
Amortization of other
intangible assets
|
|
$
|
6,181
|
|
|
6,384
|
|
|
12,381
|
|
|
12,789
|
|
Long-lived asset
impairment charges
|
|
—
|
|
|
523
|
|
|
264
|
|
|
646
|
|
Third-party product
volume guarantee
|
|
—
|
|
|
(300)
|
|
|
—
|
|
|
(300)
|
|
Transaction-related
costs(a)
|
|
127
|
|
|
—
|
|
|
281
|
|
|
—
|
|
Bertico and related
litigation(b)
|
|
—
|
|
|
—
|
|
|
(2,753)
|
|
|
—
|
|
Settlement of
Canadian pension plan(c)
|
|
4,075
|
|
|
—
|
|
|
4,075
|
|
|
—
|
|
Adjusted operating
income
|
|
$
|
102,971
|
|
|
94,164
|
|
|
190,576
|
|
|
169,789
|
|
Adjusted operating
income margin
|
|
48.7
|
%
|
|
49.3
|
%
|
|
48.0
|
%
|
|
46.8
|
%
|
|
|
|
|
|
|
|
|
|
Net income
attributable to Dunkin' Brands
|
|
$
|
42,318
|
|
|
46,191
|
|
|
67,949
|
|
|
69,147
|
|
Adjustments:
|
|
|
|
|
|
|
|
|
Amortization of other
intangible assets
|
|
6,181
|
|
|
6,384
|
|
|
12,381
|
|
|
12,789
|
|
Long-lived asset
impairment charges
|
|
—
|
|
|
523
|
|
|
264
|
|
|
646
|
|
Third-party product
volume guarantee
|
|
—
|
|
|
(300)
|
|
|
—
|
|
|
(300)
|
|
Transaction-related
costs(a)
|
|
127
|
|
|
—
|
|
|
281
|
|
|
—
|
|
Bertico and related
litigation(b)
|
|
—
|
|
|
—
|
|
|
(2,753)
|
|
|
—
|
|
Settlement of
Canadian pension plan(c)
|
|
4,075
|
|
|
—
|
|
|
4,075
|
|
|
—
|
|
Loss on debt
extinguishment and refinancing transactions
|
|
—
|
|
|
—
|
|
|
20,554
|
|
|
13,735
|
|
Tax impact of
adjustments(d)
|
|
(4,153)
|
|
|
(2,643)
|
|
|
(13,921)
|
|
|
(10,748)
|
|
State tax
apportionment(e)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
514
|
|
Adjusted net
income
|
|
$
|
48,548
|
|
|
50,155
|
|
|
88,830
|
|
|
85,783
|
|
|
|
|
|
|
|
|
|
|
Adjusted net
income
|
|
$
|
48,548
|
|
|
50,155
|
|
|
88,830
|
|
|
85,783
|
|
Weighted average
number of common shares – diluted
|
|
96,876,510
|
|
|
107,186,360
|
|
|
99,189,474
|
|
|
107,583,260
|
|
Diluted adjusted
earnings per share
|
|
$
|
0.50
|
|
|
0.47
|
|
|
0.90
|
|
|
0.80
|
|
|
|
|
|
|
|
|
|
|
(a) Represents
non-capitalizable costs incurred as a result of the new securitized
financing facility, which was completed in January 2015.
|
(b) Represents a net
reduction to legal reserves for the Bertico litigation and related
matters, as a result of the Quebec Court of Appeals (Montreal)
ruling to reduce the damages assessed against the Company in the
Bertico litigation from approximately C$16.4 million to
approximately C$10.9 million, plus costs and interest.
|
(c) Represents costs
incurred related to the final settlement of our Canadian pension
plan as a result of the closure of our Canadian ice cream
manufacturing plant in fiscal year 2012.
|
(d) Tax impact of
adjustments calculated at a 40% effective tax rate.
|
(e) Represents tax
expense recognized due to an increase in our overall state tax rate
for a shift in the apportionment of income to certain state
jurisdictions.
|
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SOURCE Dunkin' Brands Group, Inc.