Dunkin Brands, Inc.
Aug 3, 2011

Dunkin' Brands Reports Second Quarter 2011 Results

CANTON, Mass., Aug. 3, 2011 /PRNewswire/ -- Dunkin' Brands Group, Inc. (Nasdaq: DNKN), the parent company of Dunkin' Donuts (DD) and Baskin-Robbins (BR), today reported results for the quarter ended June 25, 2011.  "We delivered strong results for the quarter as a result of our continued focus on driving comparable store sales, expanding contiguously in the U.S., and accelerating international growth across both brands," said Nigel Travis, Chief Executive Officer, Dunkin' Brands, Inc. and President, Dunkin' Donuts. "Our emphasis on operational excellence and exciting product innovations, supported by great marketing, produced strong global system-wide sales and comparable store sales growth for Dunkin' Donuts U.S., while our franchisees and licensees continued to drive new store growth, both domestically and internationally."

(Logo: http://photos.prnewswire.com/prnh/20110317/NY67297LOGO )








($ in millions)


Quarter 2


Increase (Decrease)



2011

2010


$/#

%

Revenues


$                157.0

$                150.4


$                    6.6

4.4%

Operating Income


61.8

57.9


3.9

6.8%

Net Income


17.2

17.3


(0.2)

(1.0)%

Adjusted Net Income*


24.7

25.6


(0.8)

(3.3)%








System-wide Sales Growth






6.9%

Consolidated US Comparable Store Sales Growth






3.2%

DD Domestic Comparable Store Sales Growth






3.8%

BR Domestic Comparable Store Sales Growth






(2.8)%

DD Global Points of Distribution


9,867

9,524


343

3.6%

BR Global Points of Distribution


6,560

6,309


251

4.0%

(amounts and percentages may not re-calculate due to rounding)














Consolidated Key Highlights

Second quarter 2011 financial highlights included:

  • Global system-wide sales increased approximately 6.9 percent over second quarter 2010.
  • Consolidated U.S. comparable store sales increased 3.2 percent. Dunkin' Donuts U.S. comparable store sales increased 3.8 percent while Baskin-Robbins U.S. comparable store sales decreased 2.8 percent.
  • Dunkin' Brands' franchisees and licensees opened 140 net new Dunkin' Donuts and Baskin-Robbins locations on a global basis during the quarter, and 234 during the first six months of 2011, increasing Dunkin' Brands total points of distribution to 16,427 at the end of the second quarter.
  • Revenues increased by more than 4 percent, to $157.0 million for the second quarter of 2011, compared to $150.4 million for the same period in 2010. The Company re-franchised 13 stores between the second quarter of 2010 and the second quarter of 2011. Excluding company-owned stores for both periods, revenues grew approximately 6 percent.
  • Operating income was $61.8 million compared to $57.9 million for the second quarter of 2010, representing a 6.8 percent year-over-year increase. Operating income growth over the prior period was impacted by higher ice cream costs due to rising commodity prices.
  • Net income was $17.2 million compared to $17.3 million for the second quarter of 2010.
  • Adjusted net income* for the quarter was $24.7 million compared to $25.6 million for the second quarter of 2010.

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

"Since the first of the year, we have significantly increased the strength of our balance sheet, and after the completion of our initial public offering, have reduced our annual interest expense by 50 percent to approximately $60 million through a combination of debt retirement, restructuring, and repricing. This financing activity resulted in non-recurring charges which impacted year-to-date net income," said Chief Financial Officer Neil Moses. "The performance of the business in the second quarter demonstrates the strength of our business model and the integrity of our platform for future growth."

"It's an exciting time for Dunkin' Brands as a new public company," said Travis. "We are pleased with our second quarter results and look forward to sharing our longer term growth opportunities and financial goals in the near future."

* Adjusted net income is a non-GAAP measure reflecting net income adjusted for amortization of intangible assets, impairment charges, and loss on debt extinguishment and refinancing transactions, net of the tax impact of such adjustments.

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 82802192.  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.  These forward-looking statements include all matters that are not historical facts.  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 relationship 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 the 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; inability to recover our capital costs; changes in political, legal, economic or other factors in international markets; termination of a master franchise agreement or contracts with the U.S. military; currency exchange rates; the impact of food borne-illness or food safety issues or adverse public or medial opinions regarding the health effects of consuming our products; our ability to collect royalty payments from our franchisees and licensees; uncertainties relating to litigation; changes in regulatory requirements to our and our franchisees and licensees ability to comply with current or future regulatory requirements; review and audit of certain of our tax returns; 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 prospectus filed with the Securities and Exchange Commission on July 27, 2011. 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 results provided in accordance with U.S. generally accepted accounting principles ("GAAP") throughout this document, the Company has provided a non-GAAP measurement, adjusted net income, which presents operating results on a basis before certain adjustments. The Company uses adjusted net income as a key performance measure for the purpose of evaluating performance internally. We also believe adjusted net income provides our investors with useful information regarding our historical operating results. This non-GAAP measurement is not intended to replace the presentation of our financial results in accordance with GAAP. Use of the term adjusted net income may differ from similar measures reported by other companies.  Adjusted net income is reconciled from net income determined under GAAP in the attached table " Dunkin' Brands Group, Inc. Non-GAAP Reconciliation."

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 "Consolidated US comparable store sales," "DD domestic comparable store sales" and "BR domestic comparable store sales," 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 Group, Inc.

With more than 16,000 points of distribution in 56 countries worldwide, Dunkin' Brands Group, Inc. (Nasdaq: DNKN), is the world's leading franchisor of quick service restaurants (QSR) serving hot and cold coffee and baked goods, as well as hardserve ice cream. At the end of 2010, Dunkin' Brands' nearly 100 percent franchised business model included 9,760 Dunkin' Donuts restaurants and 6,433 Baskin-Robbins restaurants, and the company had system-wide sales of approximately $7.7 billion. Dunkin' Brands Group, Inc. is headquartered in Canton, Mass. The Company's website is located at www.dunkinbrands.com.

Contact(s):




Stacey Caravella (Investors)

Michelle King (Media)

Director, Investor Relations

Director, Global Media Relations

Dunkin' Brands, Inc.

Dunkin' Brands, Inc.

investor.relations@dunkinbrands.com

michelle.king@dunkinbrands.com

781-737-3200

781-737-5200



SEGMENT RESULTS



Three months ended







June 25,


June 26,


Increase (Decrease)

Dunkin' Donuts U.S.


2011


2010


$/#


%



($ in millions)

Systemwide sales growth








6.0%

Revenues


$          107.4


$          101.0


$       6.4


6.3%

Segment profit


$            82.6


$            77.7


$       4.9


6.4%

Points of distribution


6,838


6,641


197


3.0%

Gross openings


71


70


1


1.4%

Net openings


39


42


(3)


(7.1)%





















Three months ended







June 25,


June 26,


Increase (Decrease)

Dunkin' Donuts International


2011


2010


$/#


%



($ in millions)

Systemwide sales








10.3%

Revenues


$              3.8


$              3.3


$       0.6


17.3%

Segment profit


$              3.2


$              3.5


$      (0.4)


(10.9)%

Points of distribution


3,029


2,883


146


5.1%

Gross openings


82


268


(186)


(69.4)%

Net openings


23


198


(175)


(88.4)%





















Three months ended







June 25,


June 26,


Increase (Decrease)

Baskin Robbins U.S.


2011


2010


$/#


%



($ in millions)

Systemwide sales








(5.1)%

Revenues


$            12.4


$            13.1


$      (0.8)


(5.8)%

Segment profit


$              6.9


$              9.4


$      (2.5)


(26.3)%

Points of distribution


2,510


2,572


(62)


(2.4)%

Gross openings


13


16


(3)


(18.8)%

Net closings


(13)


-


(13)


n/a





















Three months ended







June 25,


June 26,


Increase (Decrease)

Baskin Robbins International


2011


2010


$/#


%



($ in millions)

Systemwide sales








15.3%

Revenues


$            27.4


$            25.4


$       2.0


8.0%

Segment profit


$            10.5


$            12.4


$      (2.0)


(16.0)%

Points of distribution


4,050


3,737


313


8.4%

Gross openings


148


125


23


18.4%

Net openings


91


87


4


4.6%












DUNKIN' BRANDS GROUP, INC. AND SUBSIDIARIES

Consolidated Statements of Operations

(In thousands)

(Unaudited)



Three months ended


Six months ended



June 25,


June 26,


June 25,


June 26,



2011


2010


2011


2010





(As Adjusted)




(As Adjusted)

Revenues:











Franchise fees and royalty income

$

98,139


90,730


184,098


170,895


Rental income


24,143


24,316


46,274


46,432


Sales of ice cream products


25,225


23,908


47,941


41,701


Other revenues


9,465


11,462


17,872


18,800


Total revenues


156,972


150,416


296,185


277,828

Operating costs and expenses:










Occupancy expenses - franchised restaurants


12,917


12,334


25,205


26,490


Cost of ice cream products


18,696


15,927


33,820


28,149


General and administrative expenses, net


54,057


52,618


107,943


103,863


Depreciation and amortization


13,119


15,169


26,327


30,501


Impairment charges


404


1,276


1,057


2,690


Total operating costs and expenses


99,193


97,324


194,352


191,693


Equity in net income of joint ventures


4,015


4,794


4,797


8,436


Operating income


61,794


57,886


106,630


94,571

Other income (expense):










Interest income


150


15


265


86


Interest expense


(28,958)


(27,482)


(62,840)


(55,073)


Loss on debt extinguishment and refinancing transactions


(5,165)


(3,693)


(16,172)


(3,693)


Other gains, net


(64)


(274)


412


(29)


Total other expense


(34,037)


(31,434)


(78,335)


(58,709)


Income before income taxes


27,757


26,452


28,295


35,862

Provision for income taxes


10,595


9,115


12,856


12,587


Net income

$

17,162


17,337


15,439


23,275




DUNKIN' BRANDS GROUP, INC. AND SUBSIDIARIES

Condensed Consolidated Balance Sheets

(In thousands)

(Unaudited)



June 25,


December 25,

Assets


2011


2010

Current assets:






Cash and cash equivalents

$

145,614


134,100


Accounts, notes, and other receivable, net


53,688


79,943


Other current assets


65,727


70,334


Total current assets


265,029


284,377

Property and equipment, net


187,981


193,273

Investments in joint ventures


177,224


169,276

Goodwill and other intangible assets, net


2,410,206


2,424,312

Other assets



83,895


76,050


Total assets

$

3,124,335


3,147,288


Liabilities, Common Stock, and Stockholders' Equity (Deficit)





Current liabilities:






Current portion of long-term debt

$

14,965


12,500


Accounts payable


11,510


9,822


Other current liabilities


224,866


258,233


Total current liabilities


251,341


280,555

Long-term debt, net


1,845,539


1,847,016

Deferred income taxes, net


568,053


586,337

Other long-term liabilities


126,240


127,139


Total long-term liabilities


2,539,832


2,560,492

Common stock, Class L*


881,054


840,582

Stockholders' equity (deficit):






Total stockholders' equity (deficit)*


(547,892)


(534,341)


Total liabilities, common stock, and stockholders' equity (deficit)

$

3,124,335


3,147,288




* Prior to filing a registration statement with the Securities and Exchange Commission ("SEC") related to our initial public offering, Class L common stock was classified within stockholders' equity (deficit). In order to comply with SEC requirements as a public company, we reclassified Class L common stock outside of permanent equity for all periods presented. For further discussion on Class L common stock, see the consolidated financial statements and notes thereto for the fiscal year ended December 25, 2010, included in the Company's Prospectus filed pursuant to Rule 424(b) under the Securities Act of 1933, as amended, with the SEC on July 27, 2011.

DUNKIN' BRANDS GROUP, INC. AND SUBSIDIARIES

Condensed Consolidated Statements of Cash Flows

(In thousands)

(Unaudited)



Six months ended



June 25,


June 26,



2011


2010

Cash flows from operating activities:






Net income

$

15,439


23,275


Adjustments to reconcile net income to net cash provided by operating






activities:






Depreciation and amortization


26,327


30,501


Loss on debt extinguishment and refinancing transactions


16,172


3,693


Deferred income taxes


726


(5,644)


Equity in net income of joint ventures


(4,797)


(8,436)


Dividends received from joint ventures


5,237


4,869


Other non-cash adjustments, net


2,714


5,555


Change in operating assets and liabilities:






Restricted cash



11,193


Accounts, notes, and other receivables, net


26,567


17,867


Other current liabilities


(48,764)


(44,062)


Liabilities of advertising funds, net


(1,801)


2,341


Other, net


675


8,366


Net cash provided by operating activities


38,495


49,518

Cash flows from investing activities:






Additions to property and equipment


(9,136)


(7,371)


Other, net



913



Net cash used in investing activities


(8,223)


(7,371)

Cash flows from financing activities:






Repayment of long-term debt, net


(4,750)


(100,765)


Proceeds from short-term debt



27,501


Proceeds from issuance of common stock


3,213



Repurchases of common stock


(286)


(3,114)


Deferred financing and other debt-related costs


(16,951)



Change in restricted cash


73


748


Other, net



(92)


(142)


Net cash used in financing activities


(18,793)


(75,772)

Effect of exchange rates on cash and cash equivalents


35


(20)


Increase (decrease) in cash and cash equivalents


11,514


(33,645)

Cash and cash equivalents, beginning of period


134,100


53,210

Cash and cash equivalents, end of period

$

145,614


19,565




DUNKIN' BRANDS GROUP, INC. AND SUBSIDIARIES

Non-GAAP Reconciliation

(In thousands)


Three months ended


Six months ended


June 25,


June 26,


June 25,


June 26,


2011


2010


2011


2010

Net income

$

17,162


17,337

$

15,439


23,275

Adjustments:










Amortization of intangible assets


7,023


8,730


14,105


17,553


Impairment charges


404


1,276


1,057


2,690


Loss on debt extinguishment and refinancing transactions


5,165


3,693


16,172


3,693


Tax impact of adjustments (a)


(5,037)


(5,480)


(12,534)


(9,574)

Adjusted net income

$

24,717


25,556

$

34,239


37,637


(a) Tax impact of adjustments calculated at a 40% effective tax rate for each period presented.



SOURCE Dunkin' Brands Group, Inc.

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