February 6, 2014

Dunkin' Brands Reports Fourth Quarter & Fiscal Year 2013 Results

CANTON, Mass., Feb. 6, 2014 /PRNewswire/ -- 

Fourth quarter highlights include:

  • Dunkin' Donuts U.S. comparable store sales growth of 3.5%
  • Added 309 net new restaurants worldwide including 149 net new Dunkin' Donuts in the U.S.
  • Revenue increased 13.3%
  • Adjusted operating income increased 11.8%; adjusted operating income margin of 48.7%
  • Diluted adjusted EPS increased 26.5% to $0.43

Fiscal year 2013 highlights include:

  • Dunkin' Donuts U.S. comparable store sales growth of 3.4%
  • Added 790 net new restaurants worldwide including 371 net new Dunkin' Donuts in the U.S.
  • Positive Baskin-Robbins U.S. store growth
  • Revenue increased 8.5%
  • Adjusted operating income increased 10.8%; adjusted operating income margin of 47.7%
  • Diluted adjusted EPS increased 19.5% to $1.53

Company news:

  • Board of Directors declares $0.23 first quarter dividend representing a 21% increase over the Company's fourth quarter 2013 dividend
  • Board of Directors authorized new $125 million share repurchase program

Dunkin' Brands Group, Inc. (Nasdaq: DNKN), the parent company of Dunkin' Donuts (DD) and Baskin-Robbins (BR), today reported results for the fourth quarter ended December 28, 2013. 

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

"Our fourth quarter was strong, capping off a great year in which we set records and achieved major milestones for both Dunkin' Donuts and Baskin-Robbins," said Nigel Travis, Chairman and Chief Executive Officer, Dunkin' Brands Group Inc. "The Dunkin' Donuts U.S. annual net development growth rate exceeded five percent, and Baskin-Robbins had positive net development for the first time since 2006. Dunkin' Donuts U.S. had 3.4 percent comparable store sales growth in 2013, demonstrating the brand's continued relevance and resiliency in a challenging year for the QSR industry in general, and Baskin-Robbins U.S. had 0.8 percent comparable store sales growth, marking the third straight year of sales growth for the brand. Internationally we added 415 net new restaurants for both brands, and importantly, we made significant progress with our development goals to focus on higher profit-opportunity markets and globalizing our U.S. disciplines. Going into 2014, we look to drive growth by strengthening worldwide awareness of our two brands through global marketing initiatives, such as our recently announced partnership with Liverpool Football Club. We are also working to make our brands more accessible to consumers through programs like our DD Mobile initiative and DD Perks Rewards, which launched nationally on January 27."

"We are steadfastly committed to driving profitable growth for both our franchisees and our shareholders, a commitment we delivered on yet again in our second full year as a public company," said Paul Carbone, Chief Financial Officer, Dunkin' Brands Group, Inc. "As a result of strong topline sales growth and our intense focus on restaurant-level returns, franchisee profitability for both brands is healthier than it's ever been.  Additionally, our nearly 100 percent franchised, asset-light business model enabled us to return more than $100 million to shareholders in 2013 through our quarterly dividends and ongoing share repurchases. We're also excited to announce the Board of Directors' decision to increase our first quarter dividend more than 20 percent over our fourth quarter 2013 dividend."

FISCAL YEAR 2013 KEY FINANCIAL HIGHLIGHTS

 

($ in millions, except per share data)

Fiscal year ended


Increase (Decrease)

Amounts and percentages may not recalculate due to rounding

December 28,
 2013

December 29,
 2012


$ / #

%

Franchisee reported sales

$

9,276.4


8,771.3



505.0


5.8

%

Systemwide sales growth

5.8

%

5.2

%






Comparable store sales growth (decline):










DD U.S. comparable store sales growth

3.4

%

4.2

%






BR U.S. comparable store sales growth

0.8

%

3.8

%






DD International comparable store sales growth (decline)

(0.4)

%

2.0

%






BR International comparable store sales growth

1.9

%

2.8

%






Development data1:










Consolidated global net POD development

790


772



18


2.3

%

DD global PODs at period end

10,858


10,349



509


4.9

%

BR global PODs at period end

7,300


7,019



281


4.0

%

Consolidated global PODs at period end

18,158


17,368



790


4.5

%











Financial data:










Revenues

$

713.8


658.2



55.7


8.5

%

Operating income

304.7


239.4



65.3


27.3

%

Operating income margin

42.7

%

36.4

%






Adjusted operating income2

$

340.4


307.2



33.2


10.8

%

Adjusted operating income margin2

47.7

%

46.3

%






Net income

$

146.9


108.3



38.6


35.6

%

Adjusted net income2

165.8


149.7



16.1


10.7

%

Earnings per share:










Common-basic

1.38


0.94



0.44


46.8

%

Common-diluted

1.36


0.93



0.43


46.2

%

Diluted adjusted earnings per share2

1.53


1.28



0.25


19.5

%

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

108.2


116.6



(8.4)


(7.2)

%











1 Prior year POD counts have been adjusted to reflect the results of an internal POD count audit.











2 Adjusted operating income, adjusted operating income margin, and adjusted net income are non-GAAP measures reflecting operating income and net income adjusted for amortization of intangible assets, long-lived asset impairments, and 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.

 

FOURTH QUARTER 2013 KEY FINANCIAL HIGHLIGHTS

 

($ in millions, except per share data)

Three months ended


Increase (Decrease)

Amounts and percentages may not recalculate due to rounding

December 28,
2013

December 29,
 2012


$ / #

%

Franchisee reported sales

$

2,355.6


2,212.2



143.4


6.5

%

Systemwide sales growth (decline)

6.5

%

(0.4)

%






Comparable store sales growth (decline):










DD U.S. comparable store sales growth

3.5

%

3.2

%






BR U.S. comparable store sales growth

2.2

%

1.5

%






DD International comparable store sales decline

(0.3)

%

%






BR International comparable store sales growth

1.6

%

%






Development data1:










Consolidated global net POD development

309


262



47


17.9

%

DD global PODs at period end

10,858


10,349



509


4.9

%

BR global PODs at period end

7,300


7,019



281


4.0

%

Consolidated global PODs at period end

18,158


17,368



790


4.5

%

Financial data:









Revenues

$

183.2


161.7



21.5


13.3

%

Operating income

82.2


67.8



14.5


21.4

%

Operating income margin

44.9

%

41.9

%






Adjusted operating income2

$

89.2


79.8



9.4


11.8

%

Adjusted operating income margin2

48.7

%

47.6

%






Net income

$

42.1


34.3



7.7


22.5

%

Adjusted net income2

46.3


36.6



9.6


26.3

%

Earnings per share:










Common-basic

0.39


0.32



0.07


21.9

%

Common-diluted

0.39


0.32



0.07


21.9

%

Diluted adjusted earnings per share2

0.43


0.34



0.09


26.5

%

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

108.3


107.9



0.4


0.4

%











1 Prior year POD counts have been adjusted to reflect the results of an internal POD count audit.











2 Adjusted operating income, adjusted operating income margin, and adjusted net income are non-GAAP measures reflecting operating income and net income adjusted for amortization of intangible assets, long-lived asset impairments, and 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 fourth 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 fourth quarter was driven by increased average ticket and higher traffic resulting from our focus on operational excellence and product and marketing innovation. These product and marketing innovations resulted in strong beverage growth, led by Iced Coffee and Hot and Iced Espresso, driven by flavor news including Pumpkin; increases in Hot Chocolate, driven by the introduction of the Salted Caramel flavor; continued breakfast sandwich momentum across core sandwiches, the limited time offer Hot & Spicy Breakfast Sandwich, and incremental gains in the Turkey Sausage Breakfast Sandwich; growth in afternoon products including Chicken Sandwiches, Deluxe Grilled Cheese, and Wraps; growth in donut sales led by the introduction of the Pumpkin Pie donut; and increased sales of Dunkin' Donuts K-Cup® portion packs driven by a $7.99 National Coffee Day offer and a two-packs-for-$19.99 offer.

Baskin-Robbins U.S. comparable store sales growth was driven by sales of Cups & Cones, Beverages and Cakes as a result of news around favorite holiday flavors such as Gingerbread Junction and Winter White Chocolate, and a new flavor, Peppermint Bark in the Dark as well as increased sales of cakes driven by new cake designs and take-home ice cream quarts.

In the fourth quarter, Dunkin' Brands franchisees and licensees opened 309 net new restaurants around the globe. This includes 149 net new Dunkin' Donuts U.S. locations, 120 net new Baskin-Robbins International locations, 44 net new Dunkin' Donuts International locations, and four net closures for Baskin-Robbins U.S. Additionally, Dunkin' Donuts U.S. franchisees remodeled 169 restaurants during the quarter.

Revenues for the fourth quarter increased 13.3 percent compared to the prior year period primarily from increased royalty income due to systemwide sales growth, increased franchise fees due to favorable development mix and incremental franchise renewals, and increased sales of ice cream products. The increase in sales of ice cream products was partially the result of a one-time delay in revenue recognition related to the shift in manufacturing to Dean Foods that negatively impacted fourth quarter sales of ice cream products in 2012.

Operating income for the fourth quarter increased $14.5 million, or 21.4 percent, from the prior year primarily as a result of the increases in royalty income, franchise fees, and margin on sales of ice cream products.  Adjusted operating income increased $9.4 million, or 11.8 percent, from the fourth quarter of 2012 as a result of the increases in royalty income and franchise fees, offset by a decrease in net income of equity method investments.

Net income for the fourth quarter increased by $7.7 million, or 22.5 percent, compared to the prior year period primarily as a result of the $14.5 million increase in operating income and a $2.0 million decrease in interest expense. This was offset by a $7.6 million increase in income tax expense and greater losses on foreign currency due to exchange rate fluctuations. Adjusted net income increased by $9.6 million, or 26.3 percent, compared to the fourth quarter of 2012, as a result of the increase in adjusted operating income and a decrease in interest expense, offset by greater losses on foreign currency.

Diluted adjusted earnings per share increased by 26.5 percent to $0.43 for the fourth quarter of 2013 compared to the prior year period as a result of the increase in adjusted net income, offset by an increase in shares outstanding. The increase in shares outstanding is due primarily to the exercise of stock options, offset by the repurchase of 648,000 shares during 2013 (230,700 shares repurchased during the fourth quarter).

FOURTH QUARTER 2013 SEGMENT RESULTS

 

Amounts and percentages may not recalculate due to rounding


Three months ended


Increase (Decrease)

Dunkin' Donuts U.S.


December 28,
2013


December 29,
2012


$ / #

%



($ in thousands except as otherwise noted)

Comparable store sales growth


3.5

%


3.2

%






Systemwide sales growth (decline)


7.9

%


(0.9)

%






Franchisee reported sales (in millions)


$

1,767.5



1,637.6



129.8


7.9

%













Revenues:












Royalty income


$

95,468



89,093



6,375

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