July 25, 2013

Dunkin' Brands Reports Second Quarter 2013 Results

CANTON, Mass., July 25, 2013 /PRNewswire/ -- 

Second quarter highlights include:

  • Dunkin' Donuts U.S. comparable store sales growth of 4.0%
  • Added 151 net new restaurants worldwide including 63 net new Dunkin' Donuts in the U.S.
  • Adjusted operating income increased 15.5%
  • Adjusted operating income margin expanded 420 basis points to 50.0%
  • Adjusted EPS increased approximately 24% to $0.41
  • Company returned nearly $40 million to shareholders through share repurchases and dividends

Dunkin' Brands Group, Inc. (Nasdaq: DNKN), the parent company of Dunkin' Donuts (DD) and Baskin-Robbins (BR), today reported results for the second quarter ended June 29, 2013.

(Logo: http://photos.prnewswire.com/prnh/20120516/NE07970LOGO )

"We are pleased with our performance in the second quarter which was driven by strong comparable store sales and net unit development for Dunkin' Donuts U.S.," said Nigel Travis, Chairman and Chief Executive Officer, Dunkin' Brands Group, Inc. "Innovative marketing and new product introductions, as well as a focus on delivering a great customer experience, continue to deliver attractive franchisee returns and exceptional results for Dunkin' Donuts in the U.S. Additionally, we continue to see significant interest in restaurant development for Dunkin' Donuts in this country, and for the second consecutive quarter, Baskin-Robbins U.S. experienced positive net growth. On the international front, we continue to build the foundation for the long-term growth of both brands. Going into the second half of the year, we are confident about our business prospects and are steadfastly focused on delivering profitable growth for our franchisees and shareholders."

"For the quarter, our franchised business model continues to generate consistent revenue growth and high-margins resulting in a 24 percent adjusted earnings per share growth," said Paul Carbone, Chief Financial Officer, Dunkin' Brands Group, Inc. "Our business is strong, and we remain confident with our full-year financial targets for 2013."

SECOND QUARTER 2013 KEY FINANCIAL HIGHLIGHTS

($ in millions, except per share data)

Three months ended


Increase (Decrease)


June 29, 2013

June 30, 2012


$ / #

%







Franchisee reported sales

$                    2,397.6

2,273.0


124.6

5.5 %

Systemwide sales growth

5.5 %

6.9 %




Comparable store sales growth (decline):






DD U.S. comparable store sales growth

4.0 %

4.0 %




BR U.S. comparable store sales growth

1.6 %

4.6 %




DD International comparable store sales growth (decline)

(1.7)%

3.5 %




BR International comparable store sales growth

2.6 %

1.5 %




Development data:






Consolidated global net POD development

151

140


11

7.9 %

DD global PODs at period end

10,647

10,169


478

4.7 %

BR global PODs at period end

7,071

6,847


224

3.3 %

Consolidated global PODs at period end

17,718

17,016


702

4.1 %







Financial data:






Revenues

$                       182.5

172.4


10.1

5.9 %

Operating income

76.8

46.1


30.7

66.5 %

Operating income margin

42.1 %

26.8 %




Adjusted operating income1

$                          91.2

78.9


12.2

15.5 %

Adjusted operating income margin1

50.0 %

45.8 %




Net income

$                          40.8

18.5


22.3

120.6 %

Adjusted net income1

43.9

40.3


3.6

8.8 %

Earnings per share:






          Common — basic and diluted

0.38

0.15


0.23

153.3 %

          Diluted adjusted earnings per share1

0.41

0.33


0.08

24.2 %

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

108.2

122.0


(13.8)

(11.3)%


(amounts and percentages may not recalculate due to rounding)


1 Adjusted operating income, adjusted operating income margin, and adjusted net income are non-GAAP measures reflecting operating income and net income adjusted for amortization of intangible assets, impairment charges, and other non-recurring, infrequent, or unusual charges, net of the tax impact of such adjustments in the case of adjusted net income. Diluted adjusted earnings per share is a non-GAAP measure calculated using adjusted net income. Please refer to "Non-GAAP Measures and Statistical Data" and "Dunkin' Brands Group, Inc. Non-GAAP Reconciliations" for further detail.

Global systemwide sales growth in the second quarter was primarily attributable to global store development and Dunkin' Donuts U.S. comparable store sales growth (which includes stores open 54 weeks or more).

Dunkin' Donuts U.S. comparable store sales growth in the second quarter was driven by increased average ticket and higher traffic resulting from our continued product and marketing innovation. This includes strong beverage growth, led by cold beverage news such as the introduction of Iced Coffee flavors inspired by Baskin-Robbins Ice Cream as well as Berry Blast, Minute Maid® and Hot Chocolate Coolatta flavors; continued momentum across the breakfast sandwich platform highlighted by the national expansion of the Turkey Sausage Breakfast Sandwich in May; growth in donut sales led by a successful National Donut Day program; and growth in afternoon products including new Chicken and Tuna Salad Wraps and new Chicken Sandwiches.

Baskin-Robbins U.S. comparable store sales growth was driven by sales of Flavors of the Month, including Jamoca Heath, Blueberry Shortbread, and Triple Vanilla; increased sales of cakes around Mother's Day, Father's Day and graduation season; and limited time offers on take-home ice cream quarts.

In the second quarter, Dunkin' Brands franchisees and licensees opened 151 net new restaurants around the globe. This includes 63 net new Dunkin' Donuts U.S. locations, 50 net new Baskin-Robbins International locations, 33 net new Dunkin' Donuts International locations, and five net new Baskin-Robbins U.S. locations. Additionally, Dunkin' Donuts U.S. franchisees remodeled 141 restaurants during the quarter.

Revenues for the second quarter increased 5.9 percent compared to the prior year primarily from increased royalty income from the increase in systemwide sales, as well as increased sales of ice cream products.

Operating income for the second quarter increased $30.7 million, or 66.5 percent, from the prior year primarily as a result of a $20.7 million increase in the Bertico litigation reserve in the prior year, the increase in royalty income, and a gain recognized on the sale of 80 percent of our Baskin-Robbins Australia business, offset by a one-time $7.5 million charge related to a third-party product volume guarantee. Adjusted operating income increased $12.2 million, or 15.5 percent, from the second quarter of 2012 also as a result of the increase in royalty income and the gain from the Baskin-Robbins Australia sale.

Net income for the second quarter increased by $22.3 million, or 120.6 percent, compared to the prior year primarily as a result of the $30.7 million increase in operating income, offset by a $4.4 million increase in income tax expense and a $3.2 million increase in interest expense. Adjusted net income increased by $3.6 million, or 8.8 percent, compared to the second quarter of 2012 as a result of the increase in adjusted operating income, offset by increases in interest expense and income tax expense.

Diluted adjusted earnings per share increased by 24.2 percent to $0.41 for the second quarter of 2013, as a result of the increase in adjusted net income, as well as a decline in shares outstanding due to the repurchase of 15 million shares in August 2012 and approximately 400,000 shares repurchased under previous authorizations during the second quarter of 2013.

SECOND QUARTER 2013 SEGMENT RESULTS

Amounts and percentages may not recalculate due to rounding











Three months ended


Increase (Decrease)

Dunkin' Donuts U.S.


June 29, 2013


June 30, 2012


$ / #

%


($ in thousands except as otherwise noted)

Comparable store sales growth


4.0 %


4.0 %




Systemwide sales growth


8.2 %


7.8 %




Franchisee reported sales (in millions)


$               1,704.5


1,574.9


129.6

8.2 %









Revenues:








Royalty income


$                91,954


84,897


7,057

8.3 %

Franchise fees


5,694


6,363


(669)

(10.5)%

Rental income


24,042


24,789


(747)

(3.0)%

Sales at company-owned restaurants


6,240


5,894


346

5.9 %

Other revenues


742


663


79

11.9 %

Total revenues


$              128,672


122,606


6,066

4.9 %









Segment profit


$                87,055


89,918


(2,863)

(3.2)%









Points of distribution


7,447


7,079


368

5.2 %

Gross openings


87


71


16

22.5 %

Net openings


63


19


44

231.6 %

Dunkin' Donuts U.S. revenues of $128.7 million represented an increase of 4.9 percent year-over-year.  The increase in revenue was primarily a result of increased royalty income, offset by a decrease in rental income and franchise renewal fees.

Dunkin' Donuts U.S. segment profit in the second quarter decreased $2.9 million over the prior year to $87.1 million. This decrease was driven by a one-time $7.5 million charge related to a volume guarantee with the franchisee-owned supply chain cooperative regarding sales of cooler beverages in our restaurants, offset by revenue growth.

Amounts and percentages may not recalculate due to rounding




Three months ended


Increase (Decrease)

Dunkin' Donuts International


June 29, 2013


June 30, 2012


$ / #

%


($ in thousands except as otherwise noted)

Comparable store sales growth (decline)


(1.7)%


3.5 %




Systemwide sales growth


3.5 %


1.5 %




Franchisee reported sales (in millions)


$                  170.8


164.9


5.8

3.5 %









Revenues:








Royalty income


$                  3,535


3,266


269

8.2 %

Franchise fees


342


595


(253)

(42.5)%

Rental income


31


36


(5)

(13.9)%

Other revenues


23


(27)


50

n/m

Total revenues


$                  3,931


3,870


61

1.6 %









Segment profit


$                  1,587


1,933


(346)

(17.9)%









Points of distribution


3,200


3,090


110

3.6 %

Gross openings


80


70


10

14.3 %

Net openings


33


29


4

13.8 %

Dunkin' Donuts International systemwide sales increased 3.5 percent from the prior year period, driven by sales growth in Germany and Southeast Asia, offset by a decline in sales in South Korea.  On a constant currency basis, systemwide sales increased by approximately 2 percent.

Dunkin' Donuts International revenues were consistent with the prior year period at $3.9 million, as the increase in royalty income driven by the increase in systemwide sales was offset by a decline in franchise fees.

Segment profit for Dunkin' Donuts International declined 17.9 percent to $1.6 million, primarily from investments in personnel and marketing for the Dunkin' Donuts International business, as well as losses realized from our new joint venture in Spain.

Amounts and percentages may not recalculate due to rounding











Three months ended


Increase (Decrease)

Baskin Robbins U.S.


June 29, 2013


June 30, 2012


$ / #

%


($ in thousands except as otherwise noted)

Comparable store sales growth


1.6 %


4.6 %




Systemwide sales growth


2.0 %


5.5 %




Franchisee reported sales (in millions)


$                  161.9


158.7


3.2

2.0 %









Revenues:








Royalty income


$                  8,174


7,999


175

2.2 %

Franchise fees


203


195


8

4.1 %

Rental income


820


1,024


(204)

(19.9)%

Sales of ice cream products


1,087


1,155


(68)

(5.9)%

Sales at company-owned restaurants



72


(72)

(100.0)%

Other revenues


2,205


2,295


(90)

(3.9)%

Total revenues


$                12,489


12,740


(251)

(2.0)%









Segment profit


$                  7,955


8,860


(905)

(10.2)%








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