Dunkin' Brands Reports First Quarter 2012 Results

CANTON, Mass., April 26, 2012 /PRNewswire/ -- Dunkin' Brands Group, Inc. (Nasdaq: DNKN), the parent company of Dunkin' Donuts (DD) and Baskin-Robbins (BR), today reported results for the first quarter ended March 31, 2012. "We're pleased with the performance of the business in the first quarter during which we had continued strong revenue and operating income growth. Our core Dunkin' Donuts U.S. segment is thriving with 7.2 percent comp store sales growth and accelerating net development compared to the first quarter of 2011," said Nigel Travis, Chief Executive Officer, Dunkin' Brands Group, Inc., and President, Dunkin' Donuts U.S. "We also recently announced several exciting strategic developments including an agreement with The Coca-Cola Company to serve its products in Dunkin' Donuts and Baskin-Robbins restaurants in the U.S., an agreement with NBA star LeBron James to serve as a brand ambassador in select Southeast Asia markets for both brands, and signing a partnership with Dallas Cowboys Owner Jerry Jones and Hall of Fame quarterback Troy Aikman to develop Dunkin' Donuts restaurants in the Dallas/Fort Worth region."

 

Consolidated Key
Highlights

($ in millions, except per share data)		Quarter 1			Increase (Decrease)
		2012	2011		$/#	%
System-wide Sales Growth		10.9%	5.4%
DD U.S. Comparable Store Sales Growth		7.2%	2.8%
BR U.S. Comparable Store Sales Growth		9.4%	0.5%
DD International Comparable Store Sales Growth		2.3%
BR International Comparable Store Sales Growth		7.6%
Consolidated Net POD Development1		82	94		(12)	-12.8%
DD Global PODs at period end		10,121	9,805		316	3.2%
BR Global PODs at period end		6,755	6,482		273	4.2%
Consolidated Global PODs at period end		16,876	16,287		589	3.6%
Revenues		$152.4	139.2		13.2	9.5%
Operating Income		55.2	44.8		10.4	23.1%
Adjusted Operating Income2		63.0	52.6		10.4	19.8%
Net Income (Loss)		26.0	(1.7)		27.7	n/a
Adjusted Net Income2		30.6	9.5		21.1	221.6%
Earnings (Loss) Per Share - Basic and Diluted
Class L - basic and diluted		n/a	$  0.85		n/a	n/a
Common - basic		$  0.22	(0.51)		0.73	n/a
Common - diluted		0.21	(0.51)		0.72	n/a
Diluted Adjusted Earnings per Pro Forma Common
Share2		$  0.25	0.10		0.15	150.0%
Pro Forma Weighted Average Number of Common
Shares — Diluted (in millions)		121.3	97.4		23.9	24.6%
(amounts and percentages may not recalculate due to rounding)

1 Total DD U.S net development for the quarter was 45; total BR International net development for the quarter was 49; DD International and BR U.S. had declining store bases during the quarter. 2 Adjusted operating income and adjusted net income are non-GAAP measures reflecting operating income and net income adjusted for amortization of intangible assets, impairment charges, and other non-recurring charges, net of the tax impact of such adjustments in the case of adjusted net income. Diluted adjusted earnings per pro forma common share is a non-GAAP measure, calculated using adjusted net income, and gives effect to the conversion of Class L common stock as if the conversion were completed at the beginning of the respective fiscal period. Please refer to "Non-GAAP Measures and Statistical Data," "Dunkin' Brands Group, Inc. Non-GAAP Reconciliations," and " Dunkin' Brands Group, Inc. Diluted Adjusted Earnings per Pro Forma Common Share" for further detail.

 

Worldwide system-wide sales growth in the first quarter was primarily attributable to Dunkin' Donuts U.S. comparable store sales growth (which includes stores open 54 weeks or more), global store development, and growth in Baskin-Robbins international sales.

Dunkin' Donuts U.S. comparable store sales gains in the first quarter were driven by increased average ticket and higher traffic resulting from strong beverage sales growth including gains across all cold beverages; differentiated breakfast and afternoon sandwich offerings such as the Angus Steak, Egg and Cheese Breakfast Sandwich and the Turkey, Bacon and Cheddar, and Ham and Cheese Bakery Sandwiches; sales of Dunkin' Donuts K-Cup portion packs; and the "What Are You Drinkin'" marketing campaign.  

Baskin-Robbins U.S. comparable store sales growth was driven by new product news around Valentine's Day Cake Bites, a new "More Flavors, More Fun" advertising campaign, and improved operational execution.

In the first quarter, Dunkin' Brands franchisees and licensees opened 82 net new restaurants across the globe. This includes 45 net new Dunkin' Donuts U.S. locations and 49 net new Baskin-Robbins International locations. Both Baskin-Robbins U.S. and Dunkin' Donuts International experienced declining store counts in the first quarter. Additionally, Dunkin' Donuts U.S. franchisees remodeled 108 restaurants during the quarter.

Revenues grew by 9.5 percent compared to the first quarter of 2011, primarily from increased royalty income driven by the increase in system-wide sales.

Operating income and adjusted operating income increased $10.4 million, or 23.1 percent, and $10.4 million, or 19.8 percent, respectively, from the first quarter of 2011 primarily as a result of the increase in revenues and higher income from our joint ventures.

Net income and adjusted net income increased by $27.7 million and $21.1 million, respectively, compared to the first quarter of 2011 as a result of the increase in operating income and a decrease in interest expense associated with the refinancings completed last year and the repayment of our debt with the proceeds from our initial public offering.

Company Updates & Fiscal Year 2012 Targets

On March 5, 2012, the Company's Board of Directors approved the initiation of a quarterly cash dividend with the first quarter cash dividend of $0.15 per share paid on March 28, 2012 to shareholders of record as of the close of business on March 19, 2012. The Company today announced that the Board of Directors declared a second quarter cash dividend of $0.15 per share, payable on May 16, 2012 to shareholders of record as of the close of business on May 7, 2012.

Additionally, as described below, the Company is increasing certain targets and reaffirming others that it has previously provided regarding its 2012 performance.

• It expects Dunkin' Donuts U.S. comparable store sales growth to be in the range of 4 to 5 percent and Baskin-Robbins U.S. comparable store sales growth to be in the range of 2 to 4 percent.
• The Company continues to target opening 550 to 650 net new units globally. It expects that Dunkin' Donuts U.S. will add between 260 and 280 net new restaurants and Baskin-Robbins U.S. will close between 60 and 80 restaurants.  Internationally, the Company continues to target 350 to 450 net new units between the two brands.
• The Company is increasing its range for revenue growth to between 7 and 8 percent with adjusted operating income growth of between 12 and 14 percent. The targets for revenue and adjusted operating income growth are based on a 52-week year in 2011.
• The Company is increasing its range for adjusted earnings per share to $1.21 to $1.24 which would represent 29 to 32 percent growth over $0.94 adjusted earnings per share in 2011.

"The fundamentals of the business are extremely strong, and we remain laser-focused on our strategic imperatives -- operational excellence, brand-differentiating product innovation and world-class marketing," said Neil Moses, Dunkin' Brands Chief Financial Officer. "We remain committed to delivering on our financial targets for the year and to enhancing shareholder value."

Conference Call

As previously announced, Dunkin' Brands will be holding a conference call today at 8:00 am ET hosted by Chief Executive Officer, Nigel Travis, and Chief Financial Officer, Neil Moses. The dial-in number is (866) 393-1607 or (914) 495-8556, conference number 70918022.  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; 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 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, adjusted operating income, adjusted net income, and diluted adjusted earnings per pro forma common share, which present operating results on a basis adjusted for certain items and/or reflecting the conversion of our previously outstanding Class L common stock into shares of common stock. 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 net income, and diluted adjusted earnings per pro forma common share may differ from similar measures reported by other companies.  Adjusted operating income and adjusted net income are reconciled from the respective measures determined under GAAP in the attached table "Dunkin' Brands Group, Inc. Non-GAAP Reconciliation."

On August 1, 2011, the Company completed an initial public offering in which the Company sold 22,250,000 shares of common stock at an initial public offering price of $19.00 per share. Immediately prior to the offering, each share of the Company's Class L common stock converted into 2.4338 shares of common stock. The number of common shares used in the calculation of diluted adjusted earnings per pro forma common share for the three months ended March 26, 2011 gives effect to the conversion of all outstanding shares of Class L common stock at the conversion factor of 2.4338 common shares for each Class L share, as if the conversion was completed at the beginning of the fiscal period. The calculation of diluted adjusted earnings per pro forma common share also includes the dilutive effect of common restricted shares and stock options, using the treasury stock method. Diluted adjusted earnings per pro forma common share is calculated using adjusted net income, as defined above. See the attached table "Dunkin' Brands Group, Inc. Diluted Adjusted Earnings per Pro Forma Common Share" for further detail.

Additionally, the Company has included metrics such as system-wide sales growth and comparable store sales growth, which are commonly used statistical measures in the quick-service restaurant industry and are important to understanding Company performance.

The Company uses "System-wide sales growth" to refer to the percentage change in sales at both franchisee- and company-owned restaurants from the comparable period of the prior year. Changes in system-wide sales are driven by changes in average 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" and "International comparable store sales growth," which are calculated by including only sales from franchisee- and company-owned 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

With more than 16,800 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 2011, Dunkin' Brands' nearly 100 percent franchised business model included more than 10,000 Dunkin' Donuts restaurants and more than 6,700 Baskin-Robbins restaurants. For the full-year 2011, the company had franchisee-reported sales of approximately $8.3 billion. Dunkin' Brands Group, Inc. is headquartered in Canton, Mass.

  

  

 

 

 

 

 

  

  

 

 

SOURCE Dunkin' Brands Group, Inc.