Document
Table of Contents

 
 
 
 
 
FORM 10-Q 
 
 
 
U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
 
 
 

x
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934.
For the quarterly period ended June 30, 2018
OR
¨
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934.
For the transition period from              to             
Commission file number 001-35258 
 
 
 
DUNKIN’ BRANDS GROUP, INC.
(Exact name of registrant as specified in its charter) 
 
 
 
Delaware
 
20-4145825
(State or other jurisdiction of
incorporation or organization)
 
(I.R.S. Employer
Identification No.)
130 Royall Street
Canton, Massachusetts 02021
(Address of principal executive offices) (zip code)
(781) 737-3000
(Registrants’ telephone number, including area code)
(Former name, former address and former fiscal year, if changed since last report.)
 
 
 
 
Indicate by check mark whether the registrant has (1) filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    YES  x    NO  ¨
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).    YES  x    NO  ¨
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer
 
x
  
Accelerated filer
 
¨
 
 
 
 
Non-accelerated filer
 
¨
  
Smaller reporting company
 
¨
 
 
 
 
 
 
 
 
Emerging growth company
 
¨
If an emerging growth company, indicated by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ¨
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).     YES  ¨    NO  x
As of August 3, 2018, 83,776,757 shares of common stock of the registrant were outstanding.


Table of Contents

DUNKIN’ BRANDS GROUP, INC. AND SUBSIDIARIES

TABLE OF CONTENTS
 
 
 
 
 
 
Page    
 
Part I. – Financial Information
 
 
 
Item 1.
Item 2.
Item 3.
Item 4.
 
Part II. – Other Information
 
 
 
Item 1.
Item 1A.
Item 2.
Item 3.
Item 4.
Item 5.
Item 6.
 


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Part I.        Financial Information
Item 1.       Financial Statements
DUNKIN’ BRANDS GROUP, INC. AND SUBSIDIARIES
Consolidated Balance Sheets
(In thousands, except share data)
(Unaudited)
 
June 30,
2018
 
December 30,
2017
Assets
 
 
 
Current assets:
 
 
 
Cash and cash equivalents
$
367,940

 
1,018,317

Restricted cash
84,970

 
94,047

Accounts receivable, net of allowance for doubtful accounts of $3,855 and $4,390 as of June 30, 2018 and December 30, 2017, respectively
88,790

 
69,517

Notes and other receivables, net of allowance for doubtful accounts of $1,043 and $600 as of June 30, 2018 and December 30, 2017, respectively
40,117

 
52,332

Prepaid income taxes
17,754

 
21,927

Prepaid expenses and other current assets
56,906

 
48,193

Total current assets
656,477

 
1,304,333

Property, equipment, and software, net of accumulated depreciation of $151,483 and $143,319 as of June 30, 2018 and December 30, 2017, respectively
204,011

 
181,542

Equity method investments
137,910

 
140,615

Goodwill
888,284

 
888,308

Other intangible assets, net of accumulated amortization of $257,930 and $250,142 as of June 30, 2018 and December 30, 2017, respectively
1,345,309

 
1,357,157

Other assets
66,737

 
65,478

Total assets
$
3,298,728

 
3,937,433

Liabilities and Stockholders’ Deficit
 
Current liabilities:
 
 
 
Current portion of long-term debt
$
31,650

 
31,500

Capital lease obligations
631

 
596

Accounts payable
68,783

 
53,417

Deferred revenue
44,175

 
44,876

Other current liabilities
284,768

 
355,110

Total current liabilities
430,007

 
485,499

Long-term debt, net
3,023,955

 
3,035,857

Capital lease obligations
6,851

 
7,180

Unfavorable operating leases acquired
9,033

 
9,780

Deferred revenue
366,246

 
361,458

Deferred income taxes, net
205,859

 
214,345

Other long-term liabilities
74,582

 
77,853

Total long-term liabilities
3,686,526

 
3,706,473

Commitments and contingencies (note 9)

 

Stockholders’ deficit:
 
 
 
Preferred stock, $0.001 par value; 25,000,000 shares authorized; no shares issued and outstanding

 

Common stock, $0.001 par value; 475,000,000 shares authorized; 83,069,682 shares issued and 83,042,905 shares outstanding as of June 30, 2018; 90,404,022 shares issued and 90,377,245 shares outstanding as of December 30, 2017
83

 
90

Additional paid-in capital
511,379

 
724,114

Treasury stock, at cost; 26,777 shares as of June 30, 2018 and December 30, 2017
(1,060
)
 
(1,060
)
Accumulated deficit
(1,313,498
)
 
(968,148
)
Accumulated other comprehensive loss
(14,709
)
 
(9,535
)
Total stockholders’ deficit
(817,805
)
 
(254,539
)
Total liabilities and stockholders’ deficit
$
3,298,728

 
3,937,433


See accompanying notes to unaudited consolidated financial statements.

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DUNKIN’ BRANDS GROUP, INC. AND SUBSIDIARIES
Consolidated Statements of Operations
(In thousands, except per share data)
(Unaudited)

 
Three months ended
 
Six months ended
 
June 30,
2018
 
July 1,
2017
 
June 30,
2018
 
July 1,
2017
Revenues:
 
 
 
 
 
 
 
Franchise fees and royalty income
$
151,242

 
143,894

 
283,749

 
271,609

Advertising fees and related income
131,539

 
122,361

 
242,546

 
232,564

Rental income
27,400

 
27,408

 
51,878

 
51,830

Sales of ice cream and other products
28,140

 
28,679

 
49,917

 
51,185

Other revenues
12,319

 
11,834

 
23,892

 
23,346

Total revenues
350,640

 
334,176

 
651,982

 
630,534

Operating costs and expenses:
 
 
 
 
 
 
 
Occupancy expenses—franchised restaurants
14,314

 
14,287

 
28,294

 
28,425

Cost of ice cream and other products
22,781

 
22,199

 
39,645

 
39,121

Advertising expenses
132,579

 
123,676

 
244,551

 
234,748

General and administrative expenses, net
59,301

 
61,074

 
119,125

 
121,443

Depreciation
5,125

 
5,071

 
10,158

 
10,155

Amortization of other intangible assets
5,307

 
5,333

 
10,682

 
10,660

Long-lived asset impairment charges
653

 
60

 
1,154

 
107

Total operating costs and expenses
240,060

 
231,700

 
453,609

 
444,659

Net income of equity method investments
3,845

 
4,327

 
5,878

 
7,146

Other operating income (loss), net
(575
)
 
33

 
(570
)
 
588

Operating income
113,850

 
106,836

 
203,681

 
193,609

Other income (expense), net:
 
 
 
 
 
 
 
Interest income
1,516

 
425

 
3,158

 
746

Interest expense
(32,538
)
 
(24,885
)
 
(65,015
)
 
(49,756
)
Other income (losses), net
(272
)
 
28

 
(599
)
 
215

Total other expense, net
(31,294
)
 
(24,432
)
 
(62,456
)
 
(48,795
)
Income before income taxes
82,556

 
82,404

 
141,225

 
144,814

Provision for income taxes
22,058

 
31,312

 
30,575

 
49,429

Net income
$
60,498

 
51,092

 
110,650

 
95,385

Earnings per share:
 
 
 
 
 
 
 
Common—basic
$
0.73

 
0.56

 
1.31

 
1.04

Common—diluted
0.72

 
0.55

 
1.29

 
1.03

Cash dividends declared per common share
0.35

 
0.32

 
0.70

 
0.65

See accompanying notes to unaudited consolidated financial statements.

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DUNKIN’ BRANDS GROUP, INC. AND SUBSIDIARIES
Consolidated Statements of Comprehensive Income
(In thousands)
(Unaudited)

 
Three months ended
 
Six months ended
 
June 30,
2018
 
July 1,
2017
 
June 30,
2018
 
July 1,
2017
Net income
$
60,498

 
51,092

 
110,650

 
95,385

Other comprehensive income (loss), net:
 
 
 
 
 
 
 
Effect of foreign currency translation, net of deferred tax expense (benefit) of $(66) and $36 for the three months ended June 30, 2018 and July 1, 2017, respectively, and $(46) and $573 for the six months ended June 30, 2018 and July 1, 2017, respectively
(7,291
)
 
(2,749
)
 
(5,744
)
 
5,991

Effect of interest rate swaps, net of deferred tax benefit of $217 and $434 for the three and six months ended July 1, 2017

 
(318
)
 

 
(636
)
Other, net
(58
)
 
(1
)
 
570

 
653

Total other comprehensive income (loss), net
(7,349
)
 
(3,068
)
 
(5,174
)
 
6,008

Comprehensive income
$
53,149

 
48,024

 
105,476

 
101,393

See accompanying notes to unaudited consolidated financial statements.

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DUNKIN’ BRANDS GROUP, INC. AND SUBSIDIARIES
Consolidated Statements of Cash Flows
(In thousands)
(Unaudited)

 
Six months ended
 
June 30,
2018
 
July 1,
2017
Cash flows from operating activities:
 
 
 
Net income
$
110,650

 
95,385

Adjustments to reconcile net income to net cash provided by operating activities:
 
 
 
Depreciation and amortization
20,840

 
20,815

Amortization of debt issuance costs
2,511

 
3,234

Deferred income taxes
(8,425
)
 
(11,781
)
Provision for bad debt
333

 
100

Share-based compensation expense
6,949

 
7,247

Net income of equity method investments
(5,878
)
 
(7,146
)
Dividends received from equity method investments
3,947

 
3,950

Other, net
3,150

 
(55
)
Change in operating assets and liabilities:
 
 
 
Accounts, notes, and other receivables, net
(7,459
)
 
(6,592
)
Prepaid income taxes, net
4,208

 
7,621

Prepaid expenses and other current assets
(8,866
)
 
(18,305
)
Accounts payable
15,940

 
24,660

Other current liabilities
(71,323
)
 
(65,832
)
Deferred revenue
3,902

 
13,531

Other, net
(2,740
)
 
228

Net cash provided by operating activities
67,739

 
67,060

Cash flows from investing activities:
 
 
 
Additions to property, equipment, and software
(32,902
)
 
(6,730
)
Other, net

 
(99
)
Net cash used in investing activities
(32,902
)
 
(6,829
)
Cash flows from financing activities:
 
 
 
Repayment of long-term debt
(15,750
)
 
(12,500
)
Dividends paid on common stock
(57,439
)
 
(58,847
)
Accelerated share repurchases of common stock
(650,368
)

(100,000
)
Exercise of stock options
30,433

 
19,928

Other, net
(901
)
 
(799
)
Net cash used in financing activities
(694,025
)
 
(152,218
)
Effect of exchange rates on cash, cash equivalents, and restricted cash
(228
)
 
398

Decrease in cash, cash equivalents, and restricted cash
(659,416
)
 
(91,589
)
Cash, cash equivalents, and restricted cash, beginning of period
1,114,099

 
431,832

Cash, cash equivalents, and restricted cash, end of period
$
454,683

 
340,243

Supplemental cash flow information:
 
 
 
Cash paid for income taxes
$
35,044

 
53,736

Cash paid for interest
65,633

 
46,751

Noncash investing activities:
 
 
 
Property, equipment, and software included in accounts payable and other current liabilities
3,219

 
1,942

Purchase of property, equipment, and software in exchange for note payable
1,486

 

See accompanying notes to unaudited consolidated financial statements.

6


DUNKIN’ BRANDS GROUP, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(Unaudited)
(1) Description of business and organization
Dunkin’ Brands Group, Inc. (“DBGI”), together with its consolidated subsidiaries, is one of the world’s leading franchisors of restaurants serving coffee and baked goods, as well as ice cream, within the quick service restaurant segment of the restaurant industry. We franchise and license a system of both traditional and nontraditional quick service restaurants and, in limited circumstances, have owned and operated locations. Through our Dunkin’ Donuts brand, we franchise restaurants featuring coffee, donuts, bagels, breakfast sandwiches, and related products. Additionally, we license Dunkin’ Donuts brand products sold in certain retail outlets such as retail packaged coffee, Dunkin’ K-Cup® pods, and ready-to-drink bottled iced coffee. Through our Baskin-Robbins brand, we franchise restaurants featuring ice cream, frozen beverages, and related products. Additionally, we distribute Baskin-Robbins ice cream products to Baskin-Robbins franchisees and licensees in certain international markets.
Throughout these unaudited consolidated financial statements, “Dunkin’ Brands,” “the Company,” “we,” “us,” “our,” and “management” refer to DBGI and its consolidated subsidiaries taken as a whole.
(2) Summary of significant accounting policies
(a) Unaudited consolidated financial statements
The consolidated balance sheet as of June 30, 2018, the consolidated statements of operations and comprehensive income for the three and six months ended June 30, 2018 and July 1, 2017, and the consolidated statements of cash flows for the six months ended June 30, 2018 and July 1, 2017 are unaudited.
The accompanying unaudited consolidated financial statements include the accounts of DBGI and its consolidated subsidiaries and have been prepared in accordance with the rules and regulations of the Securities and Exchange Commission (“SEC”) for interim financial information. Accordingly, they do not include all of the information and footnotes required in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) for complete financial statements. All significant transactions and balances between subsidiaries and affiliates have been eliminated in consolidation. In the opinion of management, all adjustments necessary for a fair presentation of such financial statements in accordance with U.S. GAAP have been recorded. Such adjustments consisted only of normal recurring items. These unaudited consolidated financial statements should be read in conjunction with the consolidated financial statements and notes thereto for the fiscal year ended December 30, 2017, included in the Company’s Annual Report on Form 10-K.
(b) Fiscal year
The Company operates and reports financial information on a 52- or 53-week year on a 13-week quarter basis with the fiscal year ending on the last Saturday in December and fiscal quarters ending on the 13th Saturday of each quarter (or 14th Saturday when applicable with respect to the fourth fiscal quarter). The data periods contained within the three- and six-month periods ended June 30, 2018 and July 1, 2017 reflect the results of operations for the 13-week and 26-week periods ended on those dates, respectively. Operating results for the three- and six-month periods ended June 30, 2018 are not necessarily indicative of the results that may be expected for the fiscal year ending December 29, 2018.
(c) Cash, cash equivalents, and restricted cash
In accordance with the Company’s securitized financing facility, certain cash accounts have been established in the name of Citibank, N.A. (the “Trustee”) for the benefit of the Trustee and the noteholders, and are restricted in their use. The Company holds restricted cash which primarily represents (i) cash collections held by the Trustee, (ii) interest, principal, and commitment fee reserves held by the Trustee related to the Company’s notes (see note 4), and (iii) real estate reserves used to pay real estate obligations.

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Cash, cash equivalents, and restricted cash within the consolidated balance sheets that are included in the consolidated statements of cash flows as of June 30, 2018 and December 30, 2017 were as follows (in thousands):
 
June 30,
2018
 
December 30,
2017
Cash and cash equivalents
$
367,940

 
1,018,317

Restricted cash
84,970

 
94,047

Restricted cash, included in Other assets
1,773

 
1,735

Total cash, cash equivalents, and restricted cash
$
454,683

 
1,114,099

(d) Fair value of financial instruments
Financial assets and liabilities are categorized, based on the inputs to the valuation technique, into a three-level fair value hierarchy. The fair value hierarchy gives the highest priority to the quoted prices in active markets for identical assets and liabilities and lowest priority to unobservable inputs. Observable market data, when available, is required to be used in making fair value measurements. When inputs used to measure fair value fall within different levels of the hierarchy, the level within which the fair value measurement is categorized is based on the lowest level input that is significant to the fair value measurement.
Financial assets and liabilities measured at fair value on a recurring basis as of June 30, 2018 and December 30, 2017 are summarized as follows (in thousands):
 
June 30, 2018
 
December 30, 2017
 
Significant other observable inputs (Level 2)
 
Total
 
Significant other observable inputs (Level 2)
 
Total
Assets:
 
 
 
 
 
 
 
Company-owned life insurance
$
11,033

 
11,033

 
10,836

 
10,836

Total assets
$
11,033

 
11,033

 
10,836

 
10,836

Liabilities:
 
 
 
 
 
 
 
Deferred compensation liabilities
$
11,448

 
11,448

 
13,543

 
13,543

Total liabilities
$
11,448

 
11,448

 
13,543

 
13,543

The deferred compensation liabilities relate to the Dunkin’ Brands, Inc. non-qualified deferred compensation plans (“NQDC Plans”), which allow for pre-tax deferral of compensation for certain qualifying employees and directors. Changes in the fair value of the deferred compensation liabilities are derived using quoted prices in active markets of the asset selections made by the participants. The deferred compensation liabilities are classified within Level 2, as defined under U.S. GAAP, because their inputs are derived principally from observable market data by correlation to hypothetical investments. The Company holds company-owned life insurance policies to partially offset the Company’s liabilities under the NQDC Plans. The changes in the fair value of any company-owned life insurance policies are derived using determinable cash surrender value. As such, the company-owned life insurance policies are classified within Level 2, as defined under U.S. GAAP.
The carrying value and estimated fair value of long-term debt as of June 30, 2018 and December 30, 2017 were as follows (in thousands):
 
June 30, 2018
 
December 30, 2017
 
Carrying value
 
Estimated fair value
 
Carrying value
 
Estimated fair value
Financial liabilities
 
 
 
 
 
 
 
Long-term debt
$
3,055,605

 
3,068,647

 
3,067,357

 
3,156,099

The estimated fair value of our long-term debt is estimated primarily based on current market rates for debt with similar terms and remaining maturities or current bid prices for our long-term debt. Judgment is required to develop these estimates. As such, the fair value of our long-term debt is classified within Level 2, as defined under U.S. GAAP.
(e) Concentration of credit risk
The Company is subject to credit risk through its accounts receivable consisting primarily of amounts due from franchisees and licensees for franchise fees, royalty income, advertising fees, and sales of ice cream and other products. In addition, we have

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note and lease receivables from certain of our franchisees and licensees. The financial condition of these franchisees and licensees is largely dependent upon the underlying business trends of our brands and market conditions within the quick service restaurant industry. This concentration of credit risk is mitigated, in part, by the large number of franchisees and licensees of each brand and the short-term nature of the franchise and license fee and lease receivables. As of June 30, 2018 and December 30, 2017, one master licensee, including its majority-owned subsidiaries, accounted for approximately 20% and 11%, respectively, of total accounts and notes receivable. No individual franchisee or master licensee accounted for more than 10% of total revenues for any of the three and six month periods ended June 30, 2018 and July 1, 2017.
(f) Advertising expenses
Advertising expenses in the consolidated statements of operations includes advertising expenses incurred by the Company, including those expenses incurred by the advertising funds and for the administration of the gift card program. The Company expenses production costs of commercial advertising upon first airing and expenses the costs of communicating the advertising in the period in which the advertising occurs. Costs of print advertising and certain promotion-related items are deferred and expensed the first time the advertising is displayed. Prepaid expenses and other current assets in the consolidated balance sheets include $17.3 million and $15.5 million at June 30, 2018 and December 30, 2017, respectively, that was related to advertising. Advertising expenses are allocated to interim periods in relation to the related revenues. When revenues of the advertising fund exceed the related advertising expenses, advertising costs are accrued up to the amount of revenues.
(g) Recent accounting pronouncements
Recently adopted accounting pronouncements
In February 2018, the Financial Accounting Standards Board (the “FASB”) issued new guidance allowing companies the option to reclassify from accumulated other comprehensive loss to accumulated deficit the stranded income tax effects resulting from the Tax Cuts and Jobs Act that was enacted on December 22, 2017. The Company early adopted this standard during the first quarter of fiscal year 2018 and has elected to present the change in the period of adoption. The adoption of this guidance did not have a material impact on the Company's consolidated financial statements.
In May 2014, the FASB issued new guidance for revenue recognition related to contracts with customers (“ASC 606”), except for contracts within the scope of other standards, which supersedes nearly all existing revenue recognition guidance. We adopted this new guidance in fiscal year 2018. See note 3 for further disclosure of the impact of the new guidance.
Recent accounting pronouncements not yet adopted
In February 2016, the FASB issued new guidance for lease accounting, which replaces existing lease accounting guidance. The new guidance aims to increase transparency and comparability among organizations by requiring lessees to recognize lease assets and lease liabilities on the balance sheet and requiring disclosure of key information about leasing arrangements. This guidance is effective for the Company in fiscal year 2019 with early adoption permitted, and modified retrospective application is required with an option to not restate comparative periods in the period of adoption. The Company expects to adopt this new guidance in fiscal year 2019 without restating comparative periods, and expects that substantially all of its operating lease commitments will be subject to the new guidance and will be recognized as operating lease liabilities and right-of-use assets upon adoption, thereby having a material impact to its consolidated balance sheet.
Though the majority of the assessment phase is complete, the Company continues to evaluate the impact the adoption of this new guidance will have on the Company's consolidated financial statements, as well as the impact on accounting policies and related disclosures. Additionally, the Company is in the process of implementing new accounting systems, business processes, and internal controls related to lease accounting to assist in the application of the new guidance.
(h) Subsequent events
Subsequent events have been evaluated through the date these consolidated financial statements were filed.

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(3) Revenue recognition
(a) Updated revenue recognition policies
Franchise fees and royalty income
Domestically, the Company sells individual franchises as well as territory agreements in the form of store development agreements (“SDAs”) that grant the right to develop restaurants in designated areas. The franchise agreements and SDAs typically require the franchisee to pay initial nonrefundable franchise fees prior to opening the respective restaurants and continuing fees, or royalty income, on a weekly basis based upon a percentage of franchisee gross sales. The initial term of domestic franchise agreements is typically 20 years. Prior to the end of the franchise term or as otherwise provided by the Company, a franchisee may elect to renew the term of a franchise agreement, and, if approved, will typically pay a renewal fee upon execution of the renewal term. If approved, a franchisee may transfer a franchise agreement or SDA to a new or existing franchisee, at which point a transfer fee is paid. Occasionally, the Company offers incentive programs to franchisees in conjunction with a franchise/license agreement, territory agreement, or renewal agreement.
Internationally, the Company sells master franchise agreements that grant the master franchisee the right to develop and operate, and in some instances sub-franchise, a certain number of restaurants within a particular geographic area. The master franchisee is typically required to pay an upfront market entry fee upon entering into the master franchise agreement and an upfront initial franchise fee for each developed restaurant prior to each respective opening. For the Dunkin’ Donuts brand and in certain Baskin-Robbins international markets, the master franchisee will also pay continuing fees, or royalty income, generally on a monthly basis based upon a percentage of sales. Generally, the master franchise agreement serves as the franchise agreement for the underlying restaurants, and the initial franchise term provided for each restaurant typically ranges between 10 and 20 years.
Generally, the franchise license granted for each individual restaurant within an arrangement represents a single performance obligation. Therefore, initial franchise fees and market entry fees for each arrangement are allocated to each individual restaurant and recognized over the term of the respective franchise agreement from the date of the restaurant opening. Royalty income is also recognized over the term of the respective franchise agreement based on the royalties earned each period as the underlying sales occur. Renewal fees are generally recognized over the renewal term for the respective restaurant from the start of the renewal period. Transfer fees are recognized over the remaining term of the franchise agreement beginning at the time of transfer. Additionally, for Baskin-Robbins international markets that do not pay a royalty, a portion of the consideration from sales of ice cream and other products is allocated to royalty income as consideration for the use of the franchise license, which is recognized when the related sales occur and is estimated based on royalty rates in effect for markets where the franchise license is sold on a standalone basis. Fees received or receivable that are expected to be recognized as revenue within one year are classified as current deferred revenue in the consolidated balance sheets.
Advertising fees and related income
Domestically and in limited international markets, franchise agreements typically require the franchisee to pay continuing advertising fees on a weekly basis based on a percentage of franchisee gross sales, which are recognized over the term of the respective franchise agreement based on the fees earned each period as the underlying sales occur.
The Company and its franchisees sell gift cards that are redeemable for products in our Dunkin’ Donuts and Baskin-Robbins restaurants. The Company manages the gift card program, and therefore collects all funds from the activation of gift cards and reimburses franchisees for the redemption of gift cards in their restaurants. A liability for unredeemed gift cards, as well as historical gift certificates sold, is included in other current liabilities in the consolidated balance sheets.
There are no expiration dates or service fees charged on the gift cards. While the franchisees continue to honor all gift cards presented for payment, the likelihood of redemption may be determined to be remote for certain cards due to long periods of inactivity. In these circumstances, the Company may recognize revenue from unredeemed gift cards (“breakage revenue”) if they are not subject to unclaimed property laws. For Dunkin’ Donuts gift cards enrolled in the DD Perks® Rewards loyalty program and other cards with expected similar redemption behavior, breakage is estimated and recognized at the point in time when the likelihood of redemption of any remaining card balance becomes remote, generally after a period of sufficient inactivity. Breakage on all other Dunkin’ Donuts gift cards and all Baskin-Robbins gift cards is estimated and recognized over time in proportion to actual gift card redemptions, based on historical redemption rates.
The Company also collects gift card program service fees from franchisees to offset the costs to administer the gift card program. The gift card program service fees are based on the volume of gift card transactions processed and are recognized as the underlying transactions occur.

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Rental income
Rental income for base rentals is recorded on a straight-line basis over the lease term, including the amortization of any tenant improvement dollars paid. The differences between the straight-line rent amounts and amounts receivable under the leases are recorded as deferred rent assets in current or long-term assets, as appropriate. Contingent rental income is recognized as earned, and any amounts received from lessees in advance of achieving stipulated thresholds are deferred until such thresholds are actually achieved. Deferred contingent rentals are recorded as deferred revenue in current liabilities in the consolidated balance sheets.
Sales of ice cream and other products
We distribute Baskin-Robbins ice cream products and, in limited cases, Dunkin’ Donuts products to franchisees in certain international locations. Revenue from the sale of ice cream and other products is recognized when title and risk of loss transfers to the buyer, which is generally upon delivery. Payment for ice cream and other products is generally due within a relatively short period of time subsequent to delivery.
Other revenues
Other revenues include fees generated by licensing our brand names and other intellectual property, as well as gains, net of losses and transactions costs, from the sales of restaurants that were not company-operated to new or existing franchisees. Licensing fees are recognized over the term of the expected license agreement, with sales-based license fees being recognized based on the amount earned each period as the underlying sales occur. Gains on the refranchise or sale of a restaurant are recognized over the term of the related agreement.

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(b) Disaggregation of revenue
Revenues are disaggregated by timing of revenue recognition and reconciled to reportable segment revenues as follows (in thousands):
 
Three months ended June 30, 2018
 
Dunkin' Donuts U.S.
 
Baskin-Robbins U.S.
 
Dunkin' Donuts International
 
Baskin-Robbins International
 
U.S. Advertising Funds
 
Total reportable segment revenues
 
Other(a)
 
Total revenues
Revenues recognized under ASC 606
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Revenues recognized over time:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Royalty income
$
125,221

 
9,005

 
4,732

 
2,154

 

 
141,112

 
4,276

 
145,388

Franchise fees
4,765

 
303

 
535

 
251

 

 
5,854

 

 
5,854

Advertising fees and related income

 

 

 

 
119,174

 
119,174

 
8,491

 
127,665

Other revenues
588

 
3,129

 

 
1

 

 
3,718

 
7,969

 
11,687

Total revenues recognized over time
130,574

 
12,437

 
5,267

 
2,406

 
119,174

 
269,858

 
20,736

 
290,594

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Revenues recognized at a point in time:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Sales of ice cream and other products

 
842

 

 
31,409

 

 
32,251

 
(4,111
)
 
28,140

Other revenues
310

 
57

 
(9
)
 
72

 

 
430

 
202

 
632

Total revenues recognized at a point in time
310

 
899

 
(9
)
 
31,481

 

 
32,681

 
(3,909
)
 
28,772

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Total revenues recognized under ASC 606
130,884

 
13,336

 
5,258

 
33,887

 
119,174

 
302,539

 
16,827

 
319,366

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Revenues not subject to ASC 606
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Advertising fees and related income

 

 

 

 

 

 
3,874

 
3,874

Rental income
26,506

 
763

 

 
131

 

 
27,400

 

 
27,400

Total revenues not subject to ASC 606
26,506

 
763

 

 
131

 

 
27,400

 
3,874

 
31,274

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Total revenues
$
157,390

 
14,099

 
5,258

 
34,018

 
119,174

 
329,939

 
20,701

 
350,640

(a) Revenues reported as “Other” include revenues earned through certain licensing revenues, revenues generated from online training programs for franchisees, advertising fees and related income from international advertising funds, and breakage and other revenue related to the gift card program, all of which are not allocated to a specific segment. Additionally, the allocation of royalty income from sales of ice cream and other products is reported as "Other."

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Three months ended July 1, 2017
 
Dunkin' Donuts U.S.
 
Baskin-Robbins U.S.
 
Dunkin' Donuts International
 
Baskin-Robbins International
 
U.S. Advertising Funds
 
Total reportable segment revenues
 
Other(a)
 
Total revenues
Revenues recognized under ASC 606
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Revenues recognized over time:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Royalty income
$
119,096

 
9,080

 
4,157

 
1,858

 

 
134,191

 
4,183

 
138,374

Franchise fees
4,564

 
193

 
475

 
288

 

 
5,520

 

 
5,520

Advertising fees and related income

 

 

 

 
113,824

 
113,824

 
668

 
114,492

Other revenues
577

 
3,187

 

 
1

 

 
3,765

 
7,506

 
11,271

Total revenues recognized over time
124,237

 
12,460

 
4,632

 
2,147

 
113,824

 
257,300

 
12,357

 
269,657

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Revenues recognized at a point in time:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Sales of ice cream and other products

 
883

 

 
31,685

 

 
32,568

 
(3,889
)
 
28,679

Other revenues
221

 
150

 
(20
)
 
63

 

 
414

 
149

 
563

Total revenues recognized at a point in time
221

 
1,033

 
(20
)
 
31,748

 

 
32,982

 
(3,740
)
 
29,242

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Total revenues recognized under ASC 606
124,458

 
13,493

 
4,612

 
33,895

 
113,824

 
290,282

 
8,617

 
298,899

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Revenues not subject to ASC 606
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Advertising fees and related income

 

 

 

 

 

 
7,869

 
7,869

Rental income
26,533

 
763

 

 
112

 

 
27,408

 

 
27,408

Total revenues not subject to ASC 606
26,533

 
763

 

 
112

 

 
27,408

 
7,869

 
35,277

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Total revenues
$
150,991

 
14,256

 
4,612

 
34,007

 
113,824

 
317,690

 
16,486

 
334,176

(a) Revenues reported as “Other” include revenues earned through certain licensing revenues, revenues generated from online training programs for franchisees, advertising fees and related income from international advertising funds, and breakage and other revenue related to the gift card program, all of which are not allocated to a specific segment. Additionally, the allocation of royalty income from sales of ice cream and other products is reported as "Other."

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Six months ended June 30, 2018
 
Dunkin' Donuts U.S.
 
Baskin-Robbins U.S.
 
Dunkin' Donuts International
 
Baskin-Robbins International
 
U.S. Advertising Funds
 
Total reportable segment revenues
 
Other(a)
 
Total revenues
Revenues recognized under ASC 606
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Revenues recognized over time:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Royalty income
$
236,054

 
15,414

 
9,670

 
3,697

 

 
264,835

 
7,410

 
272,245

Franchise fees
9,472

 
592

 
983

 
457

 

 
11,504

 

 
11,504

Advertising fees and related income

 

 

 

 
223,341

 
223,341

 
8,750

 
232,091

Other revenues
1,123

 
5,406

 
2

 
1

 

 
6,532

 
16,123

 
22,655

Total revenues recognized over time
246,649

 
21,412

 
10,655

 
4,155

 
223,341

 
506,212

 
32,283

 
538,495

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Revenues recognized at a point in time:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Sales of ice cream and other products

 
1,520

 

 
55,381

 

 
56,901

 
(6,984
)
 
49,917

Other revenues
555

 
150

 
(32
)
 
119

 

 
792

 
445

 
1,237

Total revenues recognized at a point in time
555

 
1,670

 
(32
)
 
55,500

 

 
57,693

 
(6,539
)
 
51,154

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Total revenues recognized under ASC 606
247,204

 
23,082

 
10,623

 
59,655

 
223,341

 
563,905

 
25,744

 
589,649

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Revenues not subject to ASC 606
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Advertising fees and related income

 

 

 

 

 

 
10,455

 
10,455

Rental income
50,097

 
1,530

 

 
251

 

 
51,878

 

 
51,878

Total revenues not subject to ASC 606
50,097

 
1,530

 

 
251

 

 
51,878

 
10,455

 
62,333

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Total revenues
$
297,301

 
24,612

 
10,623

 
59,906

 
223,341

 
615,783

 
36,199

 
651,982

(a) Revenues reported as “Other” include revenues earned through certain licensing revenues, revenues generated from online training programs for franchisees, advertising fees and related income from international advertising funds, and breakage and other revenue related to the gift card program, all of which are not allocated to a specific segment. Additionally, the allocation of royalty income from sales of ice cream and other products is reported as "Other."


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Six months ended July 1, 2017
 
Dunkin' Donuts U.S.
 
Baskin-Robbins U.S.
 
Dunkin' Donuts International
 
Baskin-Robbins International
 
U.S. Advertising Funds
 
Total reportable segment revenues
 
Other(a)
 
Total revenues
Revenues recognized under ASC 606
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Revenues recognized over time:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Royalty income
$
226,271

 
15,764

 
8,569

 
3,289

 

 
253,893

 
6,974

 
260,867

Franchise fees
8,862

 
399

 
908

 
573

 

 
10,742

 

 
10,742

Advertising fees and related income

 

 

 

 
216,145

 
216,145

 
723

 
216,868

Other revenues
1,117

 
5,500

 
4

 
1

 

 
6,622

 
15,415

 
22,037

Total revenues recognized over time
236,250

 
21,663

 
9,481

 
3,863

 
216,145

 
487,402

 
23,112

 
510,514

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Revenues recognized at a point in time:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Sales of ice cream and other products

 
1,409

 

 
56,089

 

 
57,498

 
(6,313
)
 
51,185

Other revenues
724

 
214

 
(36
)
 
109

 

 
1,011

 
298

 
1,309

Total revenues recognized at a point in time
724

 
1,623

 
(36
)
 
56,198

 

 
58,509

 
(6,015
)
 
52,494

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Total revenues recognized under ASC 606
236,974

 
23,286

 
9,445

 
60,061

 
216,145

 
545,911

 
17,097

 
563,008

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Revenues not subject to ASC 606
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Advertising fees and related income

 

 

 

 

 

 
15,696

 
15,696

Rental income
50,057

 
1,547

 

 
226

 

 
51,830

 

 
51,830

Total revenues not subject to ASC 606
50,057

 
1,547

 

 
226

 

 
51,830

 
15,696

 
67,526

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Total revenues
$
287,031

 
24,833

 
9,445

 
60,287

 
216,145

 
597,741

 
32,793

 
630,534

(a) Revenues reported as “Other” include revenues earned through certain licensing revenues, revenues generated from online training programs for franchisees, advertising fees and related income from international advertising funds, and breakage and other revenue related to the gift card program, all of which are not allocated to a specific segment. Additionally, the allocation of royalty income from sales of ice cream and other products is reported as "Other."

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(c) Contract balances
Information about receivables and deferred revenue subject to ASC 606 is as follows (in thousands):
 
June 30,
2018
 
December 30,
2017
 
Balance Sheet Classification
Receivables
$
99,950

 
76,455

 
Accounts receivable, net and Notes and other receivables, net
 
 
 
 
 
 
Deferred revenue:
 
 
 
 
 
Current
$
30,550

 
27,724

 
Deferred revenue—current
Long-term
366,246

 
361,458

 
Deferred revenue—long term
Total
$
396,796

 
389,182

 
 
Receivables relate primarily to payments due for royalties, franchise fees, advertising fees, sales of ice cream and other products, and licensing fees. Deferred revenue primarily represents the Company’s remaining performance obligations under its franchise and license agreements for which consideration has been received or is receivable, and is generally recognized on a straight-line basis over the remaining term of the related agreement.
The increase in the deferred revenue balance for the six months ended June 30, 2018 is primarily driven by cash payments received or due in advance of satisfying our performance obligations, offset by $16.7 million of revenues recognized that were included in the deferred revenue balance as of December 30, 2017.
As of June 30, 2018 and December 30, 2017, there were no contract assets from contracts with customers.
(d) Transaction price allocated to remaining performance obligations
Estimated revenue expected to be recognized in the future related to performance obligations that are either unsatisfied or partially satisfied at June 30, 2018 is as follows (in thousands):
Fiscal year:
 
2018(a)
$
16,541

2019
25,091

2020
23,851

2021
23,614

2022
23,341

Thereafter
247,568

Total
$
360,006

 
 
(a) Represents the estimate for remainder of fiscal year 2018 which excludes the six months ended June 30, 2018.
The estimated revenue in the table above does not contemplate future franchise renewals or new franchise agreements for restaurants for which a franchise agreement or SDA does not exist at June 30, 2018. Additionally, the table above excludes $61.9 million of consideration allocated to restaurants that are not yet open as of June 30, 2018. The Company has applied the sales-based royalty exemption which permits exclusion of variable consideration in the form of sales-based royalties from the disclosure of remaining performance obligations in the table above. Additionally, the Company has applied the transition practical expedient that allows the Company to omit the above disclosures for the fiscal year ended December 30, 2017.
(e) Change in accounting principle
In fiscal year 2018, the Company adopted new revenue recognition guidance which provides a single framework in which revenue is required to be recognized to depict the transfer of goods or services to customers in amounts that reflect the consideration to which a company expects to be entitled in exchange for those goods or services. The Company adopted the guidance using the full retrospective transition method which results in restating each prior reporting period presented. The restated amounts include the application of a practical expedient that permitted the Company to reflect the aggregate effect of all modifications that occurred prior to fiscal year 2016 when identifying the satisfied and unsatisfied performance obligations, determining the transaction price, and allocating the transaction price to the satisfied and unsatisfied performance obligations.

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The Company implemented new business processes, internal controls, and modified information technology systems to assist in the ongoing application of the new guidance.
Franchise Fees
The adoption of the new guidance changed the timing of recognition of initial franchise fees, including master license and territory fees for our international business, and renewal and transfer fees. Previously, these fees were generally recognized upfront upon either opening of the respective restaurant, when a renewal agreement became effective, or upon transfer of a franchise agreement. The new guidance generally requires these fees to be recognized over the term of the related franchise license for the respective restaurant. Additionally, transfer fees were previously included within other revenues, but are now included within franchise fees and royalty income in the consolidated statements of operations. The new guidance did not materially impact the recognition of royalty income.
Advertising
The adoption of the new guidance changed the reporting of advertising fund contributions from franchisees and the related advertising fund expenditures, which were not previously included in the consolidated statements of operations. The new guidance requires these advertising fund contributions and expenditures to be reported on a gross basis in the consolidated statements of operations. The assets and liabilities held by the advertising funds, which were previously reported as restricted assets and liabilities of advertising funds, respectively, are now included within the respective balance sheet caption to which the assets and liabilities relate. Additionally, advertising costs that have been incurred by the Company outside of the advertising funds were previously included within general and administrative expenses, net, but are now included within advertising expenses in the consolidated statements of operations.
Previously, breakage from Dunkin’ Donuts and Baskin-Robbins gift cards was recorded as a reduction to general and administrative expenses, net, to offset the related gift card program costs. In accordance with the new guidance, breakage revenue is now reported on a gross basis in the consolidated statements of operations within advertising fees and related income, and the related gift card program costs are included in advertising expenses.
Ice Cream Royalty Allocation
The adoption of the new guidance requires a portion of sales of ice cream products to be allocated to royalty income as consideration for the use of the franchise license. As such, a portion of sales of ice cream and other products has been reclassified to franchise fees and royalty income in the consolidated statements of operations under the new guidance. This allocation has no impact on the timing of recognition of the related sales of ice cream products or royalty income.
Other Revenue Transactions
The adoption of the new guidance requires certain fees generated by licensing of our brand names and other intellectual property to be recognized over the term of the related agreement, including a one-time upfront license fee recognized in connection with the Dunkin’ K-Cup® pod licensing agreement in fiscal year 2015. Additionally, gains associated with the refranchise, sale, or transfer of restaurants that were not company-operated to new or existing franchisees are recognized over the term of the related agreement under the new guidance, instead of upon closing of the sale transaction or transfer.

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Impacts to Prior Period Information
The new guidance for revenue recognition impacted the Company's previously reported financial statements as follows:
Consolidated Balance Sheets
December 30, 2017
(In thousands)
 
 
 
 
Adjustments for new revenue recognition guidance
 
 
 
 
Previously reported
 
Franchise fees
 
Advertising
 
Other revenue transactions
 
Restated
 
 
 
 
 
 
 
 
 
 
 
Assets
 
 
 
 
 
 
 
 
 
 
Current assets:
 
 
 
 
 
 
 
 
 
 
Cash and cash equivalents
 
$
1,018,317

 

 
—   

 

 
1,018,317

Restricted cash
 
94,047

 

 
—   

 

 
94,047

Accounts receivables, net
 
51,442

 

 
18,075

 

 
69,517

Notes and other receivables, net
 
51,082

 

 
1,250

 

 
52,332

Restricted assets of advertising funds
 
47,373

 

 
(47,373
)
 

 

Prepaid income taxes
 
21,879

 

 
48

 

 
21,927

Prepaid expenses and other current assets
 
32,695

 

 
15,498

 

 
48,193

Total current assets
 
1,316,835

 

 
(12,502
)
 

 
1,304,333

Property and equipment, net
 
169,005

 

 
12,537

 

 
181,542

Equity method investments
 
140,615

 

 
—   

 

 
140,615

Goodwill
 
888,308

 

 
—   

 

 
888,308

Other intangibles assets, net
 
1,357,157

 

 
—   

 

 
1,357,157

Other assets
 
65,464

 

 
14

 

 
65,478

Total assets
 
$
3,937,384

 

 
49

 

 
3,937,433

Liabilities and Stockholders’ Equity (Deficit)
 
 
 
 
 
 
 
 
 
 
Current liabilities:
 
 
 
 
 
 
 
 
 
 
Current portion of long-term debt
 
$
31,500

 
—   

 
—   

 
—   

 
31,500

Capital lease obligations
 
596

 
—   

 
—   

 
—   

 
596

Accounts payable
 
16,307

 
—   

 
37,110

 
—   

 
53,417

Liabilities of advertising funds
 
58,014

 
—   

 
(58,014
)
 
—   

 

Deferred revenue
 
39,395

 
1,502

 
(550
)
 
4,529

 
44,876

Other current liabilities
 
326,078

 
—   

 
29,032

 
—   

 
355,110

Total current liabilities
 
471,890

 
1,502

 
7,578

 
4,529

 
485,499

Long-term debt, net
 
3,035,857

 
—   

 
—   

 
—   

 
3,035,857

Capital lease obligations
 
7,180

 
—   

 
—   

 
—   

 
7,180

Unfavorable operating leases acquired
 
9,780

 
—   

 
—   

 
—   

 
9,780

Deferred revenue
 
11,158

 
328,183

 
(7,518
)
 
29,635

 
361,458

Deferred income taxes, net
 
315,249

 
(91,488
)
 
—   

 
(9,416
)
 
214,345

Other long-term liabilities
 
77,823

 
—   

 
30

 
—   

 
77,853

Total long-term liabilities
 
3,457,047

 
236,695

 
(7,488
)
 
20,219

 
3,706,473

Stockholders’ equity (deficit)
 
 
 
 
 
 
 
 
 
 
Preferred stock
 

 
—   

 
—   

 
—   

 

Common stock
 
90

 
—   

 
—   

 
—   

 
90

Additional paid-in-capital
 
724,114

 
—   

 
—   

 
—   

 
724,114

Treasury stock, at cost
 
(1,060
)
 
—   

 
—   

 
—   

 
(1,060
)
Accumulated deficit
 
(705,007
)
 
(238,197
)
 
(196
)
 
(24,748
)
 
(968,148
)
Accumulated other comprehensive loss
 
(9,690
)
 
—   

 
155

 
—   

 
(9,535
)
Stockholders’ equity (deficit)
 
8,447

 
(238,197
)
 
(41
)
 
(24,748
)
 
(254,539
)
Total liabilities and stockholders’ equity (deficit)
 
$
3,937,384

 

 
49

 

 
3,937,433



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Consolidated Statements of Operations
Three months ended July 1, 2017
(In thousands, except per share data)
 
 
 
 
Adjustments for new revenue recognition guidance
 
 
 
 
Previously reported
 
Franchise fees
 
Advertising
 
Ice cream royalty allocation
 
Other revenue transactions
 
Restated
 
 
 
 
 
 
 
 
 
 
 
 
 
Revenues:
 
 
 
 
 
 
 
 
 
 
 
 
Franchise fees and royalty income
 
$
145,066

 
(5,355
)
 

 
4,183

 

 
143,894

Advertising fees and related income
 

 

 
122,361

 

 

 
122,361

Rental income
 
27,408

 

 

 

 

 
27,408

Sales of ice cream and other products
 
32,862

 

 

 
(4,183
)
 

 
28,679

Other revenues
 
13,186

 
(1,033
)
 

 

 
(319
)
 
11,834

Total revenues
 
218,522

 
(6,388
)
 
122,361

 

 
(319
)
 
334,176

Operating costs and expenses:
 
 
 
 
 
 
 
 
 
 
 
 
Occupancy expenses—franchised restaurants
 
14,287

 

 

 

 

 
14,287

Cost of ice cream and other products
 
22,199

 

 

 

 

 
22,199

Advertising expenses
 

 

 
123,676

 

 

 
123,676

General and administrative expenses, net
 
62,382

 

 
(1,308
)
 

 

 
61,074

Depreciation
 
5,071

 

 

 

 

 
5,071

Amortization of other intangible assets
 
5,333

 

 

 

 

 
5,333

Long-lived asset impairment charges
 
60

 

 

 

 

 
60

Total operating costs and expenses
 
109,332

 

 
122,368

 

 

 
231,700

Net income of equity method investments
 
4,327

 

 

 

 

 
4,327

Other operating income, net
 
33

 

 

 

 

 
33

Operating income
 
113,550

 
(6,388
)
 
(7
)
 

 
(319
)