Apr 26, 2018

Dunkin' Brands Reports First Quarter 2018 Results

CANTON, Mass., April 26, 2018 /PRNewswire/ --

First quarter highlights include:

  • Dunkin' Donuts completed the roll out of menu simplification across 100% of the U.S. system
  • Dunkin' Donuts U.S. comparable store sales decline of 0.5%
  • Baskin-Robbins U.S. comparable store sales decline of 1.0%
  • Added 71 net new Dunkin' Donuts and Baskin-Robbins locations globally including 56 net new Dunkin' Donuts in the U.S.
  • Revenues increased 1.7%
  • Diluted EPS increased by $0.09 to $0.57
  • Diluted adjusted EPS increased by $0.11 to $0.62
  • Company entered into $650 million accelerated share repurchase agreement

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, 2018.

"In the first quarter of 2018, we made great headway with numerous strategic growth initiatives, including opening 56 net new Dunkin' Donuts in the U.S., continuing our trend as one of the nation's fastest growing retail brands by unit count; the unveiling of our next-generation Dunkin' Donuts store design; and surpassing $220 million in retail sales of CPG products across both brands," said Nigel Travis, Chairman and Chief Executive Officer, Dunkin' Brands Group, Inc. "These accomplishments were achieved against a tough backdrop of intense competitive activity and adverse weather, which, along with the national roll-out of menu simplification, negatively impacted Dunkin' Donuts U.S. comparable store sales. Going forward we believe we have the right plans in place, as well as the full alignment of our franchisees, to position ourselves for growth both now and for the long-term."

"We are pleased with the progress we made in the first quarter with our plan to transform Dunkin' Donuts U.S. into a beverage-led, on-the-go brand," said Dave Hoffmann, President of Dunkin' Donuts U.S. "Not only did we complete the national roll out of menu simplification, which should improve customer service and franchisees' profitability, but we also had record-breaking breakfast sandwich sales, saw an improvement in our afternoon traffic as a result of our PM beverage break offers, conducted successful value menu tests leading to a national launch in April, and drove flavored coffee and espresso sales with our innovative Girl Scout partnership."

"We are pleased to have entered into a $650 million accelerated share repurchase program during the first quarter," said Kate Jaspon, Dunkin' Brands Chief Financial Officer. "The accelerated share repurchase illustrates our continued commitment to utilize our strong balance sheet to return capital to shareholders."

FIRST QUARTER 2018 KEY FINANCIAL HIGHLIGHTS











(Unaudited, $ in millions, except per share data)

Three months ended


Increase (Decrease)

Amounts and percentages may not recalculate due to rounding

March 31,
 2018

April 1,

 2017(1)


$ / #

%

Financial data:






     Revenues

$

301.3

296.4


5.0

1.7%

     Operating income

89.8

86.8


3.1

3.5%

     Operating income margin

29.8%

29.3%




     Adjusted operating income(2)

$

95.7

92.1


3.6

3.9%

     Adjusted operating income margin(2)

31.8%

31.1%




     Net income

$

50.2

44.3


5.9

13.2%

     Adjusted net income(2)

54.4

47.5


6.9

14.4%

     Earnings per share:






         Common–basic

0.58

0.48


0.10

20.8%

         Common–diluted

0.57

0.48


0.09

18.8%

         Diluted adjusted earnings per share(2)

0.62

0.51


0.11

21.6%

         Weighted average number of common shares – diluted (in millions)

87.9

93.1


(5.2)

(5.6)%

Systemwide sales(3)

$

2,660.0

2,529.9


130.0

5.1%

Comparable store sales growth (decline):






     DD U.S.

(0.5)%




     BR U.S.

(1.0)%

(2.4)%




     DD International

2.1%

(0.2)%




     BR International

10.0%

(2.0)%




Development data:






     Consolidated global net POD development

71

29


42

144.8%

     DD global PODs at period end

12,598

12,287


311

2.5%

     BR global PODs at period end

7,993

7,822


171

2.2%

     Consolidated global PODs at period end

20,591

20,109


482

2.4%



(1)

Prior period amounts have been restated to reflect the adoption of new revenue recognition guidance. See "Adoption of New Accounting Standard" for further detail.

(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 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.

(3)

Systemwide sales include sales at franchisee-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.

Global systemwide sales growth of 5.1% in the first quarter was primarily attributable to global store development and Baskin-Robbins International comparable store sales growth.

Dunkin' Donuts U.S. comparable store sales in the first quarter declined 0.5% as an increase in average ticket was offset by a decline in traffic. From a category standpoint, beverage sales growth was driven by the introduction of Girl Scout cookie-inspired coffee flavors and afternoon break value offers which helped grow total espresso and iced coffee sales. Breakfast sandwich sales were driven by successful value menu tests.

Baskin-Robbins U.S. comparable store sales declined 1.0% during the first quarter as an increase in average ticket was offset by a decline in traffic. Beverage sales were up during the quarter driven by shakes, smoothies and Cappuccino Blast.

In the first quarter, Dunkin' Brands franchisees and licensees opened 71 net new restaurants globally. This included 56 net new Dunkin' Donuts U.S. locations, 6 net new Baskin-Robbins U.S. locations, 5 net new Baskin-Robbins International locations and 4 net new Dunkin' Donuts International locations. Additionally, Dunkin' Donuts U.S. franchisees remodeled 55 restaurants and Baskin-Robbins U.S. franchisees remodeled 26 restaurants during the quarter.

Revenues for the first quarter increased $5.0 million, or 1.7%, compared to the prior year period due primarily to increased royalty income as a result of systemwide sales growth, as well as an increase in advertising fees and related income, offset by a decrease in sales of ice cream and other products.

Operating income and adjusted operating income for the first quarter increased $3.1 million, or 3.5%, and $3.6 million, or 3.9%, respectively, from the prior year period primarily as a result of the increase in royalty income and a reduction of general and administrative expenses. These increases in operating income and adjusted operating income were offset by a decrease in net income from our South Korea joint venture, a decrease in net margin on ice cream due primarily to an increase in commodity costs, and a gain recognized in connection with the sale of real estate in the prior year period.

Net income and adjusted net income for the first quarter increased by $5.9 million, or 13.2%, and $6.9 million, or 14.4%, respectively, compared to the prior year period primarily as a result of a decrease in income tax expense and the increases in operating income and adjusted operating income. The decrease in income tax expense was driven by a lower tax rate due to the enactment of the Tax Cuts and Jobs Act in the fourth quarter of fiscal year 2017 and excess tax benefits from share-based compensation of $7.6 million compared to $6.1 million in the prior year period. The increases in net income and adjusted net income were offset by an increase in net interest expense driven by additional borrowings incurred in conjunction with the refinancing transaction completed during the fourth quarter of fiscal year 2017.

Diluted earnings per share and diluted adjusted earnings per share for the first quarter increased by 18.8% to $0.57 and 21.6% to $0.62, respectively, compared to the prior year period as a result of the increases in net income and adjusted net income, respectively, as well as a decrease in shares outstanding. The decrease in shares outstanding from the prior year period was due primarily to the repurchase of shares since the first quarter of fiscal year 2017, offset by the exercise of stock options. Excluding the impact of recognized excess tax benefits, diluted earnings per share and diluted adjusted earnings per share for the first quarter of fiscal years 2018 and 2017 would have been lower by approximately $0.09 and $0.06, respectively.

FIRST QUARTER 2018 SEGMENT RESULTS


Amounts and percentages may not recalculate due to rounding


Three months ended


Increase (Decrease)

Dunkin' Donuts U.S.


March 31,
 2018


April 1,
 2017(1)


$ / #


%


(Unaudited, $ in thousands except as otherwise noted)

Revenues:









Royalty income


$

110,833


107,175


3,658


3.4%

Franchise fees


4,707


4,298


409


9.5%

Rental income


23,591


23,524


67


0.3%

Other revenues


780


1,043


(263)


(25.2)%

Total revenues


$

139,911


136,040


3,871


2.8%










Segment profit


$

105,063


101,694


3,369


3.3%










Comparable store sales growth (decline)


(0.5)%


—%





Systemwide sales (in millions)(2)


$

2,015.9


1,957.1


58.8


3.0%










Points of distribution


9,197


8,884


313


3.5%

Gross openings


93


84


9


10.7%

Net openings


56


56



—%



(1)

Prior period amounts have been restated to reflect the adoption of new revenue recognition guidance. See "Adoption of New Accounting Standard" for further detail.

(2)

Systemwide sales include sales at franchisee-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 U.S. first quarter revenues of $139.9 million represented an increase of 2.8% compared to the prior year period. The increase was primarily a result of an increase in royalty income driven by systemwide sales growth, as well as an increase in franchise fees due primarily to net development and the recognition of revenue upon the closure of restaurants, offset by a decrease in other revenues.

Dunkin' Donuts U.S. segment profit in the first quarter increased to $105.1 million, an increase of $3.4 million over the prior year period, driven primarily by the increase in royalty income, offset by a gain recognized in connection with the sale of real estate in the prior year period.

Amounts and percentages may not recalculate due to rounding


Three months ended


Increase (Decrease)

Dunkin' Donuts International


March 31,
 2018


April 1,
 2017(1)


$ / #

%


(Unaudited, $ in thousands except as otherwise noted)

Revenues:








Royalty income


$

4,938


4,412


526

11.9%

Franchise fees


448


433


15

3.5%

Other revenues


(21)


(12)


(9)

75.0%

Total revenues


$

5,365


4,833


532

11.0%









Segment profit


$

3,206


1,427


1,779

124.7%









Comparable store sales growth (decline)


2.1%


(0.2)%




Systemwide sales (in millions)(2)


$

190.2


174.9


15.4

8.8%









Points of distribution


3,401


3,403


(2)

(0.1)%

Gross openings


86


82


4

4.9%

Net openings (closings)


4


(27)


31

n/m



(1)

Prior period amounts have been restated to reflect the adoption of new revenue recognition guidance. See "Adoption of New Accounting Standard" for further detail.

(2)

Systemwide sales include sales at franchisee-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 first quarter systemwide sales increased 8.8% from the prior year period driven primarily by sales growth in Europe, the Middle East, South Korea, and Latin America. Sales in South Korea, Europe, and Latin America were positively impacted by favorable foreign exchange rates. On a constant currency basis, systemwide sales increased by approximately 4%.

Dunkin' Donuts International first quarter revenues of $5.4 million represented an increase of 11.0% from the prior year period. The increase in revenues was primarily a result of an increase in royalty income driven by systemwide sales growth.

Segment profit for Dunkin' Donuts International increased $1.8 million to $3.2 million in the first quarter primarily as a result of a decrease in general and administrative expenses and the increase in revenues, offset by an increase in the net loss from our South Korea joint venture.

Amounts and percentages may not recalculate due to rounding


Three months ended


Increase (Decrease)

Baskin-Robbins U.S.


March 31,
 2018


April 1,
 2017(1)


$ / #

%


(Unaudited, $ in thousands except as otherwise noted)

Revenues:








Royalty income


$

6,409


6,684


(275)

(4.1)%

Franchise fees


289


206


83

40.3%

Rental income


767


784


(17)

(2.2)%

Sales of ice cream and other products


678


526


152

28.9%

Other revenues


2,370


2,377


(7)

(0.3)%

Total revenues


$

10,513


10,577


(64)

(0.6)%









Segment profit


$

7,235


7,383


(148)

(2.0)%









Comparable store sales decline


(1.0)%


(2.4)%




Systemwide sales (in millions)(2)


$

132.7


129.1


3.6

2.8%









Points of distribution


2,566


2,539


27

1.1%

Gross openings


16


13


3

23.1%

Net openings


6


1


5

500.0%



(1)

Prior period amounts have been restated to reflect the adoption of new revenue recognition guidance. See "Adoption of New Accounting Standard" for further detail.

(2)

Systemwide sales include sales at franchisee-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. first quarter revenues decreased 0.6% from the prior year period to $10.5 million due primarily to a decrease in royalty income, offset by an increase in sales of ice cream and other products.

Segment profit for Baskin-Robbins U.S. decreased to $7.2 million in the first quarter, a decrease of 2.0%, primarily as a result of the decrease in royalty income, offset by an increase in net margin on ice cream driven by an increase in sales volume.

Amounts and percentages may not recalculate due to rounding


Three months ended


Increase (Decrease)

Baskin-Robbins International


March 31,
 2018


April 1,
 2017(1)


$ / #

%


(Unaudited, $ in thousands except as otherwise noted)

Revenues:








Royalty income


$

1,543


1,431


112

7.8%

Franchise fees


206


285


(79)

(27.7)%

Rental income


120


114


6

5.3%

Sales of ice cream and other products


23,972


24,404


(432)

(1.8)%

Other revenues


47


46


1

2.2%

Total revenues


$

25,888


26,280


(392)

(1.5)%









Segment profit


$

7,441


8,171


(730)

(8.9)%









Comparable store sales growth (decline)


10.0%


(2.0)%




Systemwide sales (in millions)(2)


$

321.2


268.8


52.4

19.5%









Points of distribution


5,427


5,283


144

2.7%

Gross openings


87


104


(17)

(16.3)%

Net openings (closings)


5


(1)


6

n/m



(1)

Prior period amounts have been restated to reflect the adoption of new revenue recognition guidance. See "Adoption of New Accounting Standard" for further detail.

(2)

Systemwide sales include sales at franchisee-operated restaurants, including joint ventures. We do not record sales by franchisees, licensees, or joint ventures as revenue and such sales are not included in our consolidated financial statements. See "Non-GAAP Measures and Statistical Data" for further detail.

Baskin-Robbins International systemwide sales increased 19.5% in the first quarter compared to the prior year period driven by sales growth in South Korea, Japan, and the Middle East. Sales in South Korea and Japan were positively impacted by favorable foreign exchange rates. On a constant currency basis, systemwide sales increased by approximately 13%.

Baskin-Robbins International first quarter revenues decreased 1.5% from the prior year period to $25.9 million due primarily to a decrease in sales of ice cream and other products. Systemwide sales and sales of ice cream products are not directly correlated within a given period due to certain licensees sourcing their own ice cream products, the lag between shipment of products to licensees and retail sales at franchised restaurants, and the overall timing of deliveries between fiscal quarters.

First quarter segment profit decreased 8.9% from the prior year period to $7.4 million as a result of a decrease in net margin on ice cream driven by an increase in commodity costs. Also contributing to the decrease in segment profit was a decrease in net income from our South Korea joint venture, offset by a decrease in general and administrative expenses.



Three months ended


Increase (Decrease)

U.S. Advertising Funds


March 31,
 2018


April 1,
 2017(1)


$ / #

%


(Unaudited, $ in thousands)

Revenues:








Advertising fees and related income


$

104,167


102,321


1,846

1.8%

Total revenues


$

104,167


102,321


1,846

1.8%









Segment profit


$



—%



(1)

Prior period amounts have been restated to reflect the adoption of new revenue recognition guidance. See "Adoption of New Accounting Standard" for further detail.

U.S. Advertising Funds first quarter revenues of $104.2 million represented an increase of 1.8% compared to the prior year period driven primarily by Dunkin' Donuts U.S. systemwide sales growth. Expenses for the U.S. Advertising Funds were equivalent to revenues in each period, resulting in no segment profit.

COMPANY UPDATES

  • The Company today announced that the Board of Directors declared a cash dividend of $0.3475 per share, payable on June 6, 2018, to shareholders of record as of the close of business on May 29, 2018.

FISCAL YEAR 2018 TARGETS

As described below, the Company is updating and reiterating certain targets regarding its 2018 performance. The 2018 guidance does not include any impact from the $100 million investment in the Blueprint for Dunkin' Donuts U.S. Growth that the Company previously announced:

  • The Company continues to expect approximately one percent comparable store sales growth for Dunkin' Donuts U.S.
  • The Company continues to expect Dunkin' Donuts U.S. franchisees to add greater than 275 net new restaurants. In addition, the Company continues to expect to open approximately 50 NextGen restaurants, including both new and remodeled stores.
  • The Company continues to expect low-to-mid single digit revenue growth.
  • The Company continues to expect high-single digit percent other revenue growth driven by consumer packaged goods.
  • The Company continues to expect mid-to-high single digit operating and adjusted operating income growth.
  • The Company continues to expect ice cream margin dollars to be flat compared to 2017 from a profit dollar standpoint.
  • The Company continues to expect a five percent reduction to G&A expense.
  • The Company now expects full-year weighted-average shares outstanding of approximately 85 million and an effective tax rate of 25 percent, which is inclusive of the share repurchase entered in the first quarter and impact of the excess tax benefit recognized. The $7.6 million excess tax benefit recognized in the first quarter reduced the expected full-year effective tax rate by approximately 300 basis points. This guidance excludes any potential future impact from material excess tax benefits in subsequent quarters of 2018.
  • The Company now expects GAAP diluted earnings per share of $2.49 to $2.58 (previously it expected $2.20 to $2.29) and diluted adjusted earnings per share of $2.69 to $2.74 (previously it expected $2.40 to $2.45), which reflects the impact from the above revised share count and full-year effective tax rate and excludes any impact of the $100 million investment in the Blueprint for Dunkin' Donuts U.S. Growth.

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
In May 2014, the Financial Accounting Standards Board issued new guidance for revenue recognition related to contracts with customers, except for contracts within the scope of other standards, which supersedes nearly all existing revenue recognition guidance. The new guidance was effective for the Company beginning in fiscal year 2018. The Company adopted this new guidance in fiscal year 2018 using the full retrospective transition method, which results in restating each prior reporting period presented in the year of adoption, including the three months ended April 1, 2017, included herein. As a result of adopting this new guidance in the first quarter of fiscal year 2018, we identified an additional operating segment consisting of the Dunkin' Donuts U.S. and Baskin-Robbins U.S. advertising funds. Additional information regarding the Company's adoption of the new revenue recognition guidance and the impact to historical financial results is contained in Exhibit 99.2 to the Company's filing on Form 8-K, filed with the Securities and Exchange Commission on February 6, 2018.

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 Kate Jaspon, Chief Financial Officer. The dial-in number is (866) 393-1607 or (914) 495-8556, conference number 6069449. 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-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-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 first quarter 2018, Dunkin' Brands' 100 percent franchised business model included more than 12,500 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



March 31,
 2018


April 1,
 2017(1)

Revenues:





Franchise fees and royalty income(2)


$

132,507


127,715

Advertising fees and related income


111,007


110,203

Rental income


24,478


24,422

Sales of ice cream and other products(2)


21,777


22,506

Other revenues


11,573


11,512

Total revenues


301,342


296,358

Operating costs and expenses:





Occupancy expenses—franchised restaurants


13,980


14,138

Cost of ice cream and other products


16,864


16,922

Advertising expenses


111,972


111,072

General and administrative expenses, net


59,824


60,369

Depreciation


5,033


5,084

Amortization of other intangible assets


5,375


5,327

Long-lived asset impairment charges


501


47

Total operating costs and expenses


213,549


212,959

Net income of equity method investments


2,033


2,819

Other operating income, net


5


555

Operating income


89,831


86,773

Other income (expense), net:





Interest income


1,642


321

Interest expense


(32,477)


(24,871)

Other income (loss), net


(327)


187

Total other expense, net


(31,162)


(24,363)

Income before income taxes


58,669


62,410

Provision for income taxes


8,517


18,117

Net income


$

50,152


44,293






Earnings per share—basic


$

0.58


0.48

Earnings per share—diluted


0.57


0.48



(1)

Prior period amounts have been restated to reflect the adoption of new revenue recognition guidance. See "Adoption of New Accounting Standard" for further detail.

(2)

For the three months ended March 31, 2018 and April 1, 2017, $3.1 million and $2.8 million, respectively, of sales of ice cream and other products have been allocated to franchise fees and royalty income as consideration for the use of the franchise license.

 


DUNKIN' BRANDS GROUP, INC. AND SUBSIDIARIES

Condensed Consolidated Balance Sheets

(In thousands)

(Unaudited)



March 31,
 2018


December 30,

 2017(1)

Assets





Current assets:





Cash and cash equivalents


$

338,461


1,018,317

Restricted cash


82,605


94,047

Accounts, notes, and other receivables, net


106,336


121,849

Other current assets


88,440


70,120

Total current assets


615,842


1,304,333

Property and equipment, net


180,959


181,542

Equity method investments


140,944


140,615

Goodwill and other intangible assets, net


2,239,565


2,245,465

Other assets


66,798


65,478

Total assets


$

3,244,108


3,937,433

Liabilities and Stockholders' Deficit





Current liabilities:





Current portion of long-term debt


$

31,500


31,500

Accounts payable


60,851


53,417

Deferred revenue


43,935


44,876

Other current liabilities


273,004


355,706

Total current liabilities


409,290


485,499

Long-term debt, net


3,029,232


3,035,857

Deferred revenue


362,125


361,458

Deferred income taxes, net


210,090


214,345

Other long-term liabilities


93,652


94,813

Total long-term liabilities


3,695,099


3,706,473

Total stockholders' deficit


(860,281)


(254,539)

Total liabilities and stockholders' deficit


$

3,244,108


3,937,433



(1)

Prior period amounts have been restated to reflect the adoption of new revenue
recognition guidance. See "Adoption of New Accounting Standard" for further detail.

 


DUNKIN' BRANDS GROUP, INC. AND SUBSIDIARIES

Condensed Consolidated Statements of Cash Flows

(In thousands)

(Unaudited)



Three months ended



March 31,
 2018


April 1,

 2017(1)






Net cash used in operating activities


$

(16,203)


(8,500)

Cash flows from investing activities:






Additions to property and equipment


(5,803)


(3,581)

Other, net



(98)

Net cash used in investing activities


(5,803)


(3,679)

Cash flows from financing activities:





Repayment of long-term debt


(7,875)


(6,250)

Dividends paid on common stock


(28,639)


(29,621)

Repurchases of common stock, including accelerated share repurchases


(650,368)


Exercise of stock options


18,175


14,807

Other, net


(731)


(645)

Net cash used in financing activities


(669,438)


(21,709)

Effect of exchange rates on cash, cash equivalents, and restricted cash

64


219

Decrease in cash, cash equivalents, and restricted cash


(691,380)


(33,669)

Cash, cash equivalents, and restricted cash, beginning of period


1,114,099


431,832

Cash, cash equivalents, and restricted cash, end of period


$

422,719


398,163



(1)

Prior period amounts have been restated to reflect the adoption of new revenue recognition guidance. See "Adoption of New Accounting Standard" for further detail.


               

DUNKIN' BRANDS GROUP, INC. AND SUBSIDIARIES

Non-GAAP Reconciliations

(In thousands, except share and per share data)

(Unaudited)



Three months ended



March 31,
 2018


April 1,

 2017(1)






Operating income


$

89,831


86,773

Operating income margin


29.8%


29.3%

Adjustments:





Amortization of other intangible assets


$

5,375


5,327

Long-lived asset impairment charges


501


47

Adjusted operating income


$

95,707


92,147

Adjusted operating income margin


31.8%


31.1%






Net income


$

50,152


44,293

Adjustments:





Amortization of other intangible assets


5,375


5,327

Long-lived asset impairment charges


501


47

Tax impact of adjustments(2)


(1,645)


(2,150)

Adjusted net income


$

54,383


47,517






Adjusted net income


$

54,383


47,517

Weighted average number of common shares – diluted



87,877,254



93,120,231

Diluted adjusted earnings per share


$

0.62


0.51







(1) Prior period amounts have been restated to reflect the adoption of new revenue recognition guidance.
See "Adoption of New Accounting Standard" for further detail.

(2) Tax impact of adjustments calculated at effective tax rates of 28% and 40% for the three months ended
March 31, 2018 and April 1, 2017, respectively.

 

DUNKIN' BRANDS GROUP, INC. AND SUBSIDIARIES
Non-GAAP Reconciliations (continued)

(Unaudited)








Fiscal year ended

December 29, 2018



Low


High



(projected)


(projected)

Diluted earnings per share


$

2.49


2.58

Adjustments:





Amortization of other intangible assets


0.24


0.23

Long-lived asset impairment charges


0.04


Tax impact of adjustments(1)


(0.08)


(0.07)

Diluted adjusted earnings per share


$

2.69


2.74






(1) Tax impact of adjustments calculated at a 28% effective tax rate.

 

 

Cision View original content:http://www.prnewswire.com/news-releases/dunkin-brands-reports-first-quarter-2018-results-300636784.html

SOURCE Dunkin' Brands Group, Inc.

Stacey Caravella (Investors), Sr. Director, IR & Market Intelligence, Dunkin' Brands Group, Inc., investor.relations@dunkinbrands.com, 781-737-3200, or Karen Raskopf (Media), SVP, Corporate Communications, Dunkin' Brands Group, Inc., karen.raskopf@dunkinbrands.com, 781-737-5200

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