Dunkin Brands, Inc.
Feb 9, 2012

Dunkin' Brands Reports Fourth Quarter and Full Year 2011 Results

Strong finish to 2011 with fourth quarter adjusted net income* up 36.6% driven by 7.4% Dunkin' Donuts U.S. comp store sales increase

CANTON, Mass., Feb. 9, 2012 /PRNewswire/ -- Dunkin' Brands Group, Inc. (Nasdaq: DNKN), the parent company of Dunkin' Donuts (DD) and Baskin-Robbins (BR), today reported results for the fourth quarter and fiscal year ended December 31, 2011, periods that included 14 weeks and 53 weeks, respectively.

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

"We had a strong finish to the year. Our operational execution, innovative product introductions, and break-through marketing are differentiating us competitively and delivering results," said Nigel Travis, Chief Executive Officer, Dunkin' Brands Group, Inc., and President, Dunkin' Donuts U.S. "We continue to grow our brands globally, adding more than 600 net new Dunkin' Donuts and Baskin-Robbins locations last year.  The long-term agreement we signed with our Dunkin' Donuts franchisee-owned procurement and distribution cooperative was a significant step forward in support of our goal to accelerate the growth of the brand across the U.S.  In 2011, we executed our strategy, remained laser-focused on our priorities, and we believe we have positioned the Company to deliver sustainable long-term growth."      

Fourth quarter highlights include:

  • Worldwide system-wide sales grew 15.0% over the fourth quarter of 2010 (system-wide sales grew 8.1% on a 13-week basis)
  • Dunkin' Donuts U.S. comparable store sales were up 7.4% and Baskin-Robbins U.S. comparable store sales were up 5.8%
  • 269 net new Dunkin' Donuts and Baskin-Robbins locations globally
  • Revenues increased 12.5% over the fourth quarter of 2010 to $168.5 million; on a 13-week basis, revenues increased 7.2% to $160.5 million
  • Operating income increased 0.4% over the fourth quarter of 2010 to $44.6 million; adjusted operating income* increased 31.2% to $73.0 million with adjusted operating income margin* expanding 620 basis points to 43.3%
  • Net income increased $26.8 million over the fourth quarter of 2010 to $11.6 million; adjusted net income increased 36.6% to $36.2 million
  • Diluted earnings per pro forma common share* was $0.10; diluted adjusted earnings per pro forma common share* was $0.30; on a 13-week basis, diluted adjusted earnings per pro forma common share was $0.28

Fiscal year 2011 highlights include:

  • Worldwide system-wide sales grew 9.1% over fiscal year 2010 (system-wide sales grew 7.4% on a 52-week basis)
  • Dunkin' Donuts U.S. comparable store sales were up 5.1% and Baskin-Robbins U.S. comparable store sales were up 0.5%
  • 601 net new Dunkin' Donuts and Baskin-Robbins locations globally bringing Dunkin' Brands total points of distribution to 16,794 as of year end
  • Revenues increased 8.8% to $628.2 million from $577.1 million in fiscal year 2010 (revenues increased 7.5% on a 52-week basis)
  • Operating income increased 6.1% to $205.3 million; adjusted operating income increased 16.2% to $270.7 million with adjusted operating income margin expanding 270 basis points to 43.1%
  • Net income increased 28.2% to $34.4 million; adjusted net income increased 15.9% to $101.7 million
  • Diluted earnings per pro forma common share was $0.32; diluted adjusted earnings per pro forma common share was $0.94; on a 52-week basis, diluted adjusted earnings per pro forma common share was $0.93

Worldwide system-wide sales growth in the fourth quarter was primarily attributable to Dunkin' Donuts U.S. comparable store sales growth (which includes stores open 54 weeks or more), global store development, growth in Baskin-Robbins international sales, and the impact of the extra week in 2011.

Dunkin' Donuts U.S. comparable store sales gains in the fourth quarter were driven by increased average ticket and higher traffic resulting from strong beverage sales growth; differentiated breakfast sandwich limited time offers, including the Smoked Sausage Breakfast Sandwich; sales of Dunkin' Donuts K-Cup portion packs; and the "What Are You Drinkin'" marketing campaign.  Baskin-Robbins U.S. comparable store sales growth was driven by new product news around holiday cakes and cake bites as well as improvements in operational execution.

In the fourth quarter, Dunkin' Brands franchisees and licensees opened 120 net new Dunkin' Donuts locations in the U.S. -- with more than 80 percent of net openings located outside of the brand's core markets — and 184 net Dunkin' Donuts and Baskin-Robbins locations outside the U.S.  Additionally, Dunkin' Donuts U.S. franchisees remodeled 248 restaurants during the quarter and 636 during fiscal year 2011.

Revenues grew by 12.5 percent, or 7.2 percent on a 13-week basis, in the fourth quarter compared to the fourth quarter of 2010, primarily from increased royalty income driven by the increase in system-wide sales, as well as sales of ice cream products.

Operating income was modestly favorable over the fourth quarter of 2010 as a result of the increase in revenues offset by an $18.8 million net non-cash impairment charge related to the Company's investment in the South Korean joint venture, driven by the performance of the Dunkin' Donuts business in that country. Adjusted operating income grew 31.2 percent as a result of the leverage enabled by 12.5 percent revenue growth and minimal expense growth.

Net income increased by $26.8 million compared to the fourth quarter of 2010 as a result of a decrease in loss on debt extinguishment and costs associated with the Company's refinancing in November 2010, offset by an increase in tax expense. Adjusted net income increased $9.7 million, or 36.6 percent, resulting primarily from increased adjusted operating income and a decrease in interest expense, partially offset by an increase in tax expense.

"We had an outstanding 2011, delivering full-year results which exceeded our long-term targets for both revenue and adjusted operating income," said Neil Moses, Dunkin' Brands Chief Financial Officer. "Our asset-light franchised business model produced significant revenue growth, high margins and strong free cash flow — as evidenced by the more than $100 million in cash we generated in 2011. We are excited about our prospects and remain focused on executing our growth strategies and delivering shareholder value."    

*Adjusted operating income, adjusted operating income margin, and adjusted net income are non-GAAP measures reflecting operating income, operating income margin, and net income, determined in accordance with GAAP, as adjusted for certain items. Diluted earnings and adjusted earnings per pro forma common share are also non-GAAP measures reflecting the conversion of Class L common stock as if the conversion were completed at the beginning of the respective fiscal periods. These non-GAAP measures are more fully described below our key financial highlights.



FOURTH QUARTER 2011 KEY FINANCIAL HIGHLIGHTS


($ in millions, except per share data)

Quarter 4


Increase (Decrease)


2011

2010


$/#

%


(14 weeks)

(13 weeks)




Systemwide Sales Growth

15.0%

8.2%




DD U.S. Comparable Store Sales Growth

7.4%

4.7%




BR U.S. Comparable Store Sales Growth

5.8%

-0.8%




Consolidated Net POD Development

269

146


123

84.2%

DD Global PODs at period end

10,083

9,760


323

3.3%

BR Global PODs at period end

6,711

6,433


278

4.3%

Consolidated Global PODs at period end

16,794

16,193


601

3.7%







Revenues

$       168.5

149.8


18.7

12.5%

Operating Income

44.6

44.4


0.2

0.4%

Adjusted Operating Income*

73.0

55.7


17.3

31.2%

Net Income (Loss)

11.6

(15.3)


26.8

n/a

Adjusted Net Income*

36.2

26.5


9.7

36.6%

Earnings (Loss) Per Share - Basic and Diluted






Class L

n/a

$         1.18


n/a

n/a

Common

$         0.10

(1.02)


1.12

n/a

Diluted Adjusted Earnings per Pro Forma Common






   Share*

$         0.30

0.27


0.03

11.1%

Pro Forma Weighted Average Number of Common






   Shares — Diluted (in millions)

121.0

97.2


23.80

24.5%

(amounts and percentages may not recalculate due to rounding)








FISCAL YEAR 2011 KEY FINANCIAL HIGHLIGHTS


($ in millions, except per share data)

Fiscal Year


Increase (Decrease)


2011

2010


$/#

%


(53 weeks)

(52 weeks)




Systemwide Sales Growth

9.1%

6.7%




DD U.S. Comparable Store Sales Growth

5.1%

2.3%




BR U.S. Comparable Store Sales Growth

0.5%

-5.2%




Consolidated Net POD Development

601

800


(199)

-24.9%

DD Global PODs at period end

10,083

9,760


323

3.3%

BR Global PODs at period end

6,711

6,433


278

4.3%

Consolidated Global PODs at period end

16,794

16,193


601

3.7%







Revenues

$       628.2

577.1


51.1

8.8%

Operating Income

205.3

193.5


11.8

6.1%

Adjusted Operating Income*

270.7

233.1


37.7

16.2%

Net Income

34.4

26.9


7.6

28.2%

Adjusted Net Income*

101.7

87.8


14.0

15.9%

Earnings (Loss) Per Share - Basic and Diluted






Class L

$         6.14

4.87


1.27

26.1%

Common

$       (1.41)

(2.04)


0.63

30.9%

Diluted Adjusted Earnings per Pro Forma Common






   Share*

$         0.94

0.90


0.04

4.4%

Pro Forma Weighted Average Number of Common






   Shares — Diluted (in millions)

107.7

97.1


10.60

10.9%

(amounts and percentages may not recalculate due to rounding)








* Adjusted operating income, adjusted operating income margin, and adjusted net income are non-GAAP measures reflecting operating income, operating income margin, and net income, determined in accordance with GAAP, further adjusted for amortization of intangible assets, impairment charges, and other non-recurring items, net of the tax impact of such adjustments. Diluted earnings per pro forma common share and diluted adjusted earnings per pro forma common share are non-GAAP measures, calculated using net income and adjusted net income, respectively, and give effect to the conversion of Class L common stock as if the conversion were completed at the beginning of the respective fiscal period. Please refer to "Non-GAAP Measures and Statistical Data," "Dunkin' Brands Group, Inc. Non-GAAP Reconciliations," and "Dunkin' Brands Group, Inc. Diluted Earnings and Adjusted Earnings per Pro Forma Common Share" for further detail.



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 45920513.  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 November 17, 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 GAAP financial measures set forth in this press release, the Company has provided certain non-GAAP measurements, adjusted operating income, adjusted operating income margin, adjusted net income, diluted earnings per pro forma common share, and diluted adjusted earnings per pro forma common share which present operating results on a basis adjusted for certain items and/or reflecting the conversion of Class L common stock into common. 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 measurements are not intended to replace the presentation of our financial results in accordance with GAAP. Use of the terms adjusted operating income, adjusted operating income margin, adjusted net income, and diluted earnings per pro forma common share, diluted adjusted earnings per pro forma common share may differ from similar measures reported by other companies.  Adjusted operating income, adjusted operating income margin, and adjusted net income are reconciled from the respective measures determined under GAAP in the attached table "Dunkin' Brands Group, Inc. Non-GAAP Reconciliation."

On August 1, 2011, the Company completed an initial public offering in which 22,250,000 shares of common stock were sold at an initial public offering price of $19.00 per share. Immediately prior to the offering, each share of the Company's Class L common stock converted into 2.4338 shares of common stock. The number of common shares used in the calculations of diluted earnings per pro forma common share and diluted adjusted earnings per pro forma common share for the fiscal year ended December 31, 2011 and the three months and fiscal year ended December 25, 2010 give effect to the conversion of all outstanding shares of Class L common stock at the conversion factor of 2.4338 common shares for each Class L share, as if the conversion was completed at the beginning of the respective fiscal period. The calculations of diluted earnings per pro forma common share and diluted adjusted earnings per pro forma common share also include the dilutive effect of common restricted shares and stock options, using the treasury stock method. Shares sold in the offering are included in the diluted earnings per pro forma common share and diluted adjusted earnings per pro forma common share calculations beginning on the date that such shares were actually issued. Diluted adjusted earnings per pro forma common share is calculated using adjusted net income, as defined above. See the attached table "Dunkin' Brands Group, Inc. Diluted Earnings and Adjusted Earnings per Pro Forma Common Share" for further detail.

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

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

The Company uses "DD U.S. comparable store sales growth" and "BR U.S. comparable store sales growth," which are calculated by including only sales from franchisee- and company-owned restaurants that have been open at least 54 weeks and that have reported sales in the current and comparable prior year week.  

Fiscal year 2011 and the fourth quarter of 2011 include 53 weeks and 14 weeks, respectively. Certain financial measures and other metrics in this release have been presented on a 52-week and 13-week basis for fiscal year 2011 and the fourth quarter of 2011, respectively, to provide improved comparability to the respective prior year periods. Such financial measures and metrics reflect our estimate of the impact of the additional week on system-wide sales, revenues, and expenses.

About Dunkin' Brands

With more than 16,500 points of distribution in nearly 60 countries worldwide, Dunkin' Brands Group, Inc. (Nasdaq: DNKN) is one of the world's leading franchisors of quick service restaurants (QSR) serving hot and cold coffee and baked goods, as well as hard-serve ice cream. At the end of 2011, Dunkin' Brands' nearly 100 percent franchised business model included more than 10,000 Dunkin' Donuts restaurants and more than 6,500 Baskin-Robbins restaurants. For the full-year 2011, the company had system-wide sales of approximately $8.4 billion. Dunkin' Brands Group, Inc. is headquartered in Canton, Mass.

Contact(s):




Stacey Caravella (Investors)

Karen Raskopf (Media)

Director, Investor Relations

SVP, Corporate Communications

Dunkin' Brands, Inc.

Dunkin' Brands, Inc.

investor.relations@dunkinbrands.com

karen.raskopf@dunkinbrands.com

781-737-3200

781-737-5200



FISCAL YEAR 2011 SEGMENT RESULTS BY QUARTER


Fiscal year totals may not recalculate due to rounding








Q1

Q2

Q3

Q4

Fiscal Year

Dunkin' Donuts U.S.

2011

2011

2011

2011

2011


($ in thousands except as otherwise noted)

Comparable store sales growth

2.8%

3.8%

6.0%

7.4%

5.1%

Systemwide sales growth

5.3%

6.0%

8.3%

17.4%

9.4%

Franchisee reported sales (in millions)

$         1,299.0

1,463.0

1,501.4

1,655.4

5,918.8







Revenues:






Royalty income

$          69,305

78,321

80,659

88,918

317,203

Franchise fees

5,210

5,580

9,653

9,462

29,905

Rental income

20,664

22,665

22,259

21,002

86,590

Other revenues

1,045

817

1,327

841

4,030

Total revenues

$          96,224

107,383

113,898

120,223

437,728







Segment profit

$          70,708

82,605

88,992

92,003

334,308







Points of distribution

6,799

6,838

6,895

7,015

7,015

Gross openings

52

71

91

160

374

Net openings

27

39

57

120

243








Q1

Q2

Q3

Q4

Fiscal Year

Dunkin' Donuts International

2011

2011

2011

2011

2011


($ in thousands except as otherwise noted)

Systemwide sales growth

10.0%

10.3%

13.7%

2.9%

9.1%

Franchisee reported sales (in millions)

$            153.1

162.4

161.5

159.6

636.7







Revenues:






Royalty income

$            3,106

3,191

3,175

3,185

12,657

Franchise fees

673

567

405

649

2,294

Rental income

85

79

49

45

258

Other revenues

6

(7)

40

5

44

Total revenues

$            3,870

3,830

3,669

3,884

15,253







Segment profit

$            3,180

3,150

2,496

2,702

11,528







Points of distribution

3,006

3,029

3,005

3,068

3,068

Gross openings

84

82

70

105

341

Net openings

18

23

(24)

63

80








Q1

Q2

Q3

Q4

Fiscal Year

Baskin Robbins U.S.

2011

2011

2011

2011

2011


($ in thousands except as otherwise noted)

Comparable store sales growth

0.5%

-2.8%

1.7%

5.8%

0.5%

Systemwide sales growth

0.2%

-5.1%

-0.1%

11.1%

0.4%

Franchisee reported sales (in millions)

$            101.8

148.7

148.1

97.2

495.9







Revenues:






Royalty income

$            5,108

7,509

7,488

5,072

25,177

Franchise fees

376

299

357

239

1,271

Rental income

1,218

1,184

1,180

962

4,544

Sales of ice cream products

542

586

566

529

2,223

Other revenues

1,801

2,786

2,412

1,549

8,548

Total revenues

$            9,045

12,364

12,003

8,351

41,763







Segment profit

$            4,299

6,927

6,963

2,715

20,904







Points of distribution

2,523

2,510

2,492

2,457

2,457

Gross openings

10

13

12

14

49

Net openings

(24)

(13)

(18)

(35)

(90)








Q1

Q2

Q3

Q4

Fiscal Year

Baskin Robbins International

2011

2011

2011

2011

2011


($ in thousands except as otherwise noted)

Systemwide sales growth

5.2%

15.3%

13.0%

10.9%

11.6%

Franchisee reported sales (in millions)

$            236.9

354.0

390.7

310.5

1,292.1







Revenues:






Royalty income

$            1,836

2,292

2,489

1,805

8,422

Franchise fees

345

380

336

532

1,593

Rental income

151

153

157

155

616

Sales of ice cream products

22,174

24,639

25,025

26,007

97,845

Other revenues

156

(67)

83

(69)

103

Total revenues

$          24,662

27,397

28,090

28,430

108,579







Segment profit

$            8,163

10,453

14,453

10,464

43,533







Points of distribution

3,959

4,050

4,133

4,254

4,254

Gross openings

135

148

126

162

571

Net openings

73

91

83

121

368



DUNKIN' BRANDS GROUP, INC. AND SUBSIDIARIES

Consolidated Statements of Operations

(In thousands)

(Unaudited)




Three months ended


Fiscal year ended



December 31,


December 25,


December 31,


December 25,








2011


2010


2011


2010















Revenues:












Franchise fees and royalty income

$

109,814


96,907


398,474


359,927


Rental income


22,195


21,295


92,145


91,102


Sales of ice cream products


26,536


19,873


100,068


84,989


Other revenues


9,960


11,701


37,511


41,117






Total revenues


168,505


149,776


628,198


577,135

Operating costs and expenses:










Occupancy expenses - franchised restaurants


13,600


14,592


51,878


53,739


Cost of ice cream products


19,534


14,607


72,329


59,175


General and administrative expenses, net


61,217


60,537


240,625


223,620


Depreciation


6,147


6,200


24,497


25,359


Amortization of other intangible assets


6,919


7,152


28,025


32,467


Impairment charges


840


4,120


2,060


7,075






Total operating costs and expenses


108,257


107,208


419,414


401,435

Equity in net income (loss) of joint ventures:










Net income, excluding impairment


4,071


1,812


16,277


17,825


Impairment charge, net of tax (a)


(19,752)



(19,752)




Total equity in net income (loss) of joint ventures


(15,681)


1,812


(3,475)


17,825






Operating income


44,567


44,380


205,309


193,525

Other income (expense):










Interest income


220


182


623


305


Interest expense


(18,167)


(32,116)


(105,072)


(112,837)


Loss on debt extinguishment and refinancing transactions



(58,262)


(34,222)


(61,955)


Other gains, net


186


441


175


408






Total other expense


(17,761)


(89,755)


(138,496)


(174,079)






Income (loss) before income taxes


26,806


(45,375)


66,813


19,446

Provision (benefit) for income taxes


15,215


(30,119)


32,371


(7,415)






Net income (loss)

$

11,591


(15,256)


34,442


26,861















Earnings (loss) per share:










Class L - basic and diluted


n/a  

$

1.18


6.14


4.87


Common - basic and diluted

$

0.10


(1.02)


(1.41)


(2.04)















(a) The $19.8 million impairment charge recorded in the fourth quarter of 2011 relates to our investment in the South Korea joint venture, and resulted from declines in operating performance in the Dunkin' Donuts business in that country. The impairment charge was allocated to the underlying intangible and long-lived assets of the joint venture, which resulted in a reduction in depreciation and amortization, net of tax, (and a reduction in the equity in net loss of joint ventures) of $1.0 million in the fourth quarter of 2011.



DUNKIN' BRANDS GROUP, INC. AND SUBSIDIARIES

Condensed Consolidated Balance Sheets

(In thousands)

(Unaudited)




December 31,


December 25,

Assets


2011


2010

Current assets:






Cash and cash equivalents

$

246,715


134,100


Accounts, notes, and other receivable, net


58,787


79,943


Other current assets


100,972


70,334






Total current assets


406,474


284,377

Property and equipment, net


185,360


193,273

Investments in joint ventures


164,636


169,276

Goodwill and other intangible assets, net


2,398,211


2,424,312

Other assets



69,337


76,050






Total assets

$

3,224,018


3,147,288

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





Current liabilities:






Current portion of long-term debt

$

14,965


12,500


Accounts payable


9,651


9,822


Other current liabilities


291,924


258,233






Total current liabilities


316,540


280,555

Long-term debt, net


1,453,344


1,847,016

Deferred income taxes, net


578,660


586,337

Other long-term liabilities


129,538


127,139






Total long-term liabilities


2,161,542


2,560,492

Common stock, Class L



840,582

Total stockholders' equity (deficit)


745,936


(534,341)






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

$

3,224,018


3,147,288



DUNKIN' BRANDS GROUP, INC. AND SUBSIDIARIES

Condensed Consolidated Statements of Cash Flows

(In thousands)

(Unaudited)






Fiscal year ended



December 31,


December 25,








2011


2010

Cash flows from operating activities:






Net income


$

34,442


26,861


Adjustments to reconcile net income to net cash provided by operating







activities:








Depreciation and amortization


52,522


57,826




Loss on debt extinguishment and refinancing transactions


34,222


61,955




Deferred income taxes


(11,363)


(28,389)




Equity in net loss (income) of joint ventures


3,475


(17,825)




Dividends received from joint ventures


7,362


6,603




Other non-cash adjustments, net


9,126


10,997




Change in operating assets and liabilities:









Restricted cash



101,675





Accounts, notes, and other receivables, net


19,123


(11,815)





Other current liabilities


17,904


29,384





Liabilities of advertising funds, net


(3,572)


(346)





Other, net


(538)


(7,922)






Net cash provided by operating activities


162,703


229,004

Cash flows from investing activities:






Additions to property and equipment


(18,596)


(15,358)


Other, net



(1,211)


(249)






Net cash used in investing activities


(19,807)


(15,607)

Cash flows from financing activities:






Proceeds from (repayment of) long-term debt, net


(404,608)


388,390


Payment of deferred financing and other debt-related costs


(20,087)


(34,979)


Proceeds from initial public offering, net of offering costs


389,961



Proceeds from issuance of common stock, net


3,213


895


Repurchases of common stock


(286)


(3,890)


Dividends paid on Class L common stock



(500,002)


Change in restricted cash



16,144


Other, net


1,733


859






Net cash used in financing activities


(30,074)


(132,583)

Effect of exchange rates on cash and cash equivalents


(207)


76






Increase in cash and cash equivalents


112,615


80,890

Cash and cash equivalents, beginning of period


134,100


53,210

Cash and cash equivalents, end of period

$

246,715


134,100




DUNKIN' BRANDS GROUP, INC.


Diluted Earnings and Adjusted Earnings per Pro Forma Common Share


(Unaudited)





Three months ended


Fiscal year ended





December 31,


December 25,


December 31,


December 25,





2011


2010


2011


2010

Diluted earnings per pro forma common share:










Net income (in thousands)

$

11,591


(15,256)


34,442


26,861













Pro forma weighted average number of common shares — diluted:










Weighted average number of Class L shares over period in which Class L shares were outstanding (a)


-


22,804,162


22,845,378


22,806,796


Adjustment to weight Class L shares over respective fiscal period (a)


-


-


(9,790,933)


-


Weighted average number of Class L shares over respective fiscal period


-


22,804,162


13,054,445


22,806,796


Class L conversion factor


2.4338


2.4338


2.4338


2.4338


Weighted average number of converted Class L shares


-


55,501,357


31,772,244


55,507,768


Weighted average number of common shares


119,486,311


41,318,442


74,835,697


41,295,866


Pro forma weighted average number of common shares — basic


119,486,311


96,819,799


106,607,941


96,803,634


Incremental dilutive common shares (b)


1,551,701


387,139


1,064,587


275,844


Pro forma weighted average number of common shares — diluted


121,038,012


97,206,938


107,672,528


97,079,478


Diluted earnings per pro forma common share

$

0.10


(0.16)


0.32


0.28












Diluted adjusted earnings per pro forma common share:










Adjusted net income (in thousands)

$

36,162


26,464


101,744


87,759


Pro forma weighted average number of common shares — diluted


121,038,012


97,206,938


107,672,528


97,079,478


Diluted adjusted earnings per pro forma common share

$

0.30


0.27


0.94


0.90


Impact of extra week (c)


(0.02)


-


(0.01)


-


Diluted adjusted earnings per pro forma common share, 13-week / 52-week basis

$

0.28


0.27


0.93


0.90













(a)


The weighted average number of Class L shares in the actual Class L earnings per share calculation for the fiscal year ended December 31, 2011 represents the weighted average from the beginning of the period up through the date of conversion of the Class L shares into common shares. As such, the pro forma weighted average number of common shares includes an adjustment to the weighted average number of Class L shares outstanding to reflect the length of time the Class L shares were outstanding prior to conversion relative to the twelve month period.  The converted Class L shares are already included in the weighted average number of common shares outstanding for the period after their conversion.


(b)


Represents the dilutive effect of restricted shares and stock options, using the treasury stock method.


(c)


The three months and fiscal year ended December 31, 2011 include 14 weeks and 53 weeks, respectively, as compared to 13 weeks and 52 weeks for the three months and fiscal year ended December 25, 2010, respectively. The impact of the extra week in the three months and fiscal year ended December 31, 2011 reflects our estimate of the additional week in those fiscal periods on certain revenues and expenses, net of tax.



DUNKIN' BRANDS GROUP, INC.

Non-GAAP Reconciliations

(In thousands)

(Unaudited)




Three months ended


Fiscal year ended



December 31,


December 25,


December 31,


December 25,





2011


2010


2011


2010

Total revenues

$

168,505


149,776


628,198


577,135


Impact of extra week (a)


(8,005)



(8,005)


Total revenues, 13-week / 52-week basis

$

160,500


149,776


620,193


577,135












Operating income

$

44,567


44,380


205,309


193,525


Operating income margin


26.4%


29.6%


32.7%


33.5%

Adjustments:










Sponsor termination fee




14,671



Amortization of other intangible assets


6,919


7,152


28,025


32,467


Impairment charges


840


4,120


2,060


7,075


Korea joint venture impairment, net (b)


18,776



18,776



Secondary offering costs


1,899



1,899


Adjusted operating income

$

73,001


55,652


270,740


233,067


Adjusted operating income margin


43.3%


37.2%


43.1%


40.4%












Net income (loss)

$

11,591


(15,256)


34,442


26,861

Adjustments:










Sponsor termination fee




14,671



Amortization of other intangible assets


6,919


7,152


28,025


32,467


Impairment charges


840


4,120


2,060


7,075


Korea joint venture impairment, net (b)


18,776



18,776



Secondary offering costs


1,899



1,899



Loss on debt extinguishment and refinancing transactions



58,262


34,222


61,955


Tax impact of adjustments (c)


(3,863)


(27,814)


(32,351)


(40,599)

Adjusted net income

$

36,162


26,464


101,744


87,759












(a)


The three months and fiscal year ended December 31, 2011 include 14 weeks and 53 weeks, respectively, as compared to 13 weeks and 52 weeks for the three months and fiscal year ended December 25, 2010, respectively. The impact of the extra week in the three months and fiscal year ended December 31, 2011 reflects our estimate of the additional week in those fiscal periods on certain revenues.

(b)


Amount consists of an impairment of the investment in the Korea joint venture of $19.8 million, less a reduction in depreciation and amortization, net of tax, of $1.0 million resulting from the allocation of the impairment charge to the underlying intangible and long-lived assets of the joint venture.

(c)


Tax impact of adjustments calculated at a 40% effective tax rate for each period presented, excluding the Korea joint venture impairment charge in fiscal year 2011 as there was no tax impact related to that charge.



SOURCE Dunkin' Brands Group, Inc.

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