Dunkin Brands, Inc.
Feb 5, 2015

Dunkin' Brands Reports Fourth Quarter & Fiscal Year 2014 Results

CANTON, Mass., Feb. 5, 2015 /PRNewswire/ --

Fourth quarter highlights include:

  • Dunkin' Donuts U.S. comparable store sales growth of 1.4%
  • Added 260 net new restaurants worldwide including 141 net new Dunkin' Donuts in the U.S.
  • Revenue increased 5.5%
  • Adjusted operating income increased 8.4%; adjusted operating income margin of 50.1%
  • Diluted adjusted EPS increased 7.0% to $0.46

Fiscal year 2014 highlights include:

  • Dunkin' Donuts U.S. comparable store sales growth of 1.6%
  • Added 704 net new restaurants worldwide including 405 net new Dunkin' Donuts in the U.S.
  • Positive Baskin-Robbins U.S. net store growth
  • Continued challenges facing the Company's Joint Venture in Japan
  • Revenue increased 4.9%
  • Adjusted operating income increased 7.5%; adjusted operating income margin of 48.9%
  • Diluted adjusted EPS increased 13.7% to $1.74

Company news:

  • Board of Directors declares $0.265 first quarter dividend representing a 15% increase over the Company's fourth quarter 2014 dividend
  • Board of Directors authorized new $700 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 27, 2014.

DUNKIN' BRANDS, INC. LOGO.

"Highlights from our performance in 2014 included: strong domestic restaurant level unit economics;  robust U.S. restaurant development for both brands, including the opening of our first traditional Dunkin' Donuts restaurants in California; growing transactions in the Dunkin' Donuts U.S. business in the face of macroeconomic and competitive headwinds; the launch of both the DD Perks loyalty program, which now has more than 2.5 million members, and Baskin-Robbins online cake ordering; and progress with the retooling of our international businesses as demonstrated by the signing of significant international development agreements in Sweden, Austria, and China," said Nigel Travis, Chairman & CEO, Dunkin' Brands Group, Inc.  "Our nearly 100-percent franchised business model delivered another year of double-digit adjusted earnings per share growth, and most notably, more than 50 percent free cash flow growth. While our earnings growth expectations for 2015 are below our longer-term targets, we are committed to returning to double-digit growth in subsequent years."

"We are very pleased with our recently completed debt refinancing which increases our financial flexibility and provides us with the stability of fixed rate interest over the next several years," said Paul Carbone, Chief Financial Officer, Dunkin' Brands Group, Inc.  "As a demonstration of our commitment to returning capital to our shareholders, our Board of Directors authorized a new share repurchase program of up to an aggregate of $700 million and increased our quarterly dividend by 15 percent over the prior quarter."

FISCAL YEAR 2014 KEY FINANCIAL HIGHLIGHTS


($ in millions, except per share data)

Fiscal year ended


Increase (Decrease)

Amounts and percentages may not recalculate due to rounding

December 27,
 2014

December 28,
 2013


$ / #

%

Franchisee reported sales

$

9,751.3


9,276.4



474.9


5.1

%

Systemwide sales growth

5.1

%

5.8

%






Comparable store sales growth (decline):










DD U.S. comparable store sales growth

1.6

%

3.4

%






BR U.S. comparable store sales growth

4.7

%

0.8

%






DD International comparable store sales decline

(2.0)

%

(0.4)

%






BR International comparable store sales growth (decline)

(1.2)

%

1.9

%






Development data:










Consolidated global net POD development

704


790



(86)


(10.9)

%

DD global PODs at period end

11,310


10,858



452


4.2

%

BR global PODs at period end

7,552


7,300



252


3.5

%

Consolidated global PODs at period end

18,862


18,158



704


3.9

%











Financial data:










Revenues

$

748.7


713.8



34.9


4.9

%

Operating income

338.9


304.7



34.1


11.2

%

Operating income margin

45.3

%

42.7

%






Adjusted operating income1

$

366.0


340.4



25.6


7.5

%

Adjusted operating income margin1

48.9

%

47.7

%






Net income

$

176.4


146.9



29.5


20.0

%

Adjusted net income1

186.1


165.8



20.4


12.3

%

Earnings per share:










Common-basic

1.67


1.38



0.29


21.0

%

Common-diluted

1.65


1.36



0.29


21.3

%

Diluted adjusted earnings per share1

1.74


1.53



0.21


13.7

%

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

106.7


108.2



(1.5)


(1.4)

%











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, 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 2014 KEY FINANCIAL HIGHLIGHTS


($ in millions, except per share data)

Three months ended


Increase (Decrease)

Amounts and percentages may not recalculate due to rounding

December 27,
 2014

December 28,
 2013


$ / #

%

Franchisee reported sales

$

2,463.1


2,355.6



107.5


4.6

%

Systemwide sales growth

4.5

%

6.5

%






Comparable store sales growth (decline):










DD U.S. comparable store sales growth

1.4

%

3.5

%






BR U.S. comparable store sales growth

9.3

%

2.2

%






DD International comparable store sales growth (decline)

0.3

%

(0.3)

%






BR International comparable store sales growth (decline)

(2.2)

%

1.6

%






Development data:










Consolidated global net POD development

260


309



(49)


(15.9)

%

DD global PODs at period end

11,310


10,858



452


4.2

%

BR global PODs at period end

7,552


7,300



252


3.5

%

Consolidated global PODs at period end

18,862


18,158



704


3.9

%

Financial data:










Revenues

$

193.2


183.2



10.0


5.5

%

Operating income

89.7


82.2



7.5


9.1

%

Operating income margin

46.4

%

44.9

%






Adjusted operating income1

$

96.7


89.2



7.5


8.4

%

Adjusted operating income margin1

50.1

%

48.7

%






Net income

$

52.5


42.1



10.4


24.8

%

Adjusted net income1

48.2


46.3



1.9


4.1

%

Earnings per share:










Common-basic

0.50


0.39



0.11


28.2

%

Common-diluted

0.50


0.39



0.11


28.2

%

Diluted adjusted earnings per share1

0.46


0.43



0.03


7.0

%

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

105.7


108.3



(2.6)


(2.4)

%











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, 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. Ticket and traffic growth were balanced in the fourth quarter.  Product and marketing innovations resulted in strong beverage growth, led by Iced Coffee, the launch of Dark Roast Coffee, Hot and Iced Espresso, and record seasonal results from Frozen Beverages and Iced Tea; continued breakfast sandwich momentum across core and limited time offer sandwiches including the national return of Spicy Smoked Sausage and the Breakfast Burrito and Chicken Biscuit in select markets; and donut category growth driven by the launch of the Croissant Donut. The K-Cup and packaged coffee categories had a significant negative impact on fourth quarter comparable store sales. There are now more than 2.5 million members in the DD Perks Rewards program, which will be discussed in greater detail on the Company's earnings call.

Baskin-Robbins U.S. comparable store sales growth was driven by sales of Cups & Cones, Beverages, Desserts and Take-Home as a result of news on flavors, increased sales of cakes, driven by online cake ordering, and take-home ice cream quarts.

In the fourth quarter, Dunkin' Brands franchisees and licensees opened 260 net new restaurants around the globe. This includes 141 net new Dunkin' Donuts U.S. locations, 75 net new Baskin-Robbins International locations, 46 net new Dunkin' Donuts International locations, and two net closures for Baskin-Robbins U.S. Additionally, Dunkin' Donuts U.S. franchisees remodeled 172 restaurants during the quarter.

Revenues for the fourth quarter increased 5.5 percent compared to the prior year period due primarily to increased royalty income as a result of systemwide sales growth, as well as increased sales of ice cream products.

Operating income and adjusted operating income for the fourth quarter increased $7.5 million, or 9.1 percent, and $7.5 million, or 8.4 percent, respectively, from the prior year period primarily as a result of increases in royalty income and margin on sales of ice cream products.

Net income for the fourth quarter increased by $10.4 million, or 24.8 percent, compared to the prior year period primarily as a result of the $7.5 million increase in operating income and a $3.1 million decrease in interest expense. Income tax expense for the fourth quarter remained consistent with the prior year period despite the increase in income before income taxes, as the effective tax rate for the fourth quarter of 2014 was favorably impacted by tax benefits resulting from a restructuring of our Canadian subsidiaries.

Adjusted net income for the fourth quarter increased by $1.9 million, or 4.1 percent, compared to the fourth quarter of 2013 primarily as a result of the $7.5 million increase in adjusted operating income and a $3.1 million decrease in interest expense, offset by an $8.3 million increase in income tax expense.

Diluted adjusted earnings per share increased by 7.0 percent to $0.46 for the fourth quarter of 2014 compared to the prior year period as a result of the increase in adjusted net income and a decrease in shares outstanding. The decrease in shares outstanding from the prior year period is due primarily to the repurchase of shares, offset by the exercise of stock options.

 

FOURTH QUARTER 2014 SEGMENT RESULTS


Amounts and percentages may not recalculate due to rounding


Three months ended


Increase (Decrease)

Dunkin' Donuts U.S.


December 27,
2014


December 28,
2013


$ / #

%


($ in thousands except as otherwise noted)

Comparable store sales growth


1.4

%


3.5

%






Systemwide sales growth


6.6

%


7.9

%






Franchisee reported sales (in millions)


$

1,885.5



1,767.5



118.0


6.7

%













Revenues:












Royalty income


$

102,181



95,468



6,713


7.0

%

Franchise fees


10,254



11,534



(1,280)


(11.1)

%

Rental income


23,036



22,112



924


4.2

%

Sales at company-owned restaurants


5,887



6,715



(828)


(12.3)

%

Other revenues


2,719



2,790



(71)


(2.5)

%

Total revenues


$

144,077



138,619



5,458


3.9

%













Segment profit1


$

106,536



102,469



4,067


4.0

%













Points of distribution


8,082



7,677



405


5.3

%

Gross openings


179



187



(8)


(4.3)

%

Net openings


141



149



(8)


(5.4)

%













1 Prior year amounts reflect change in segment profit measure. Please refer to "Segment Profit Comparability" for further detail.

Dunkin' Donuts U.S. fourth quarter revenues of $144.1 million represented an increase of 3.9 percent year-over-year.  The increase was primarily a result of increased royalty income, offset by a decrease in franchise fees due primarily to the timing of franchise renewals.

Dunkin' Donuts U.S. segment profit in the fourth quarter increased $4.1 million over the prior year period to $106.5 million, which was driven primarily by revenue growth, offset by the impact of reserves, including the reversal of reserves in the prior year period.

 

Amounts and percentages may not recalculate due to rounding


Three months ended


Increase (Decrease)

Dunkin' Donuts International


December 27,
2014


December 28,
2013


$ / #

%


($ in thousands except as otherwise noted)

Comparable store sales growth (decline)


0.3

%


(0.3)

%






Systemwide sales growth


2.5

%


2.7

%






Franchisee reported sales (in millions)


$

183.6



179.0



4.5


2.5

%













Revenues:












Royalty income


$

4,144



3,879



265


6.8

%

Franchise fees


2,553



1,714



839


48.9

%

Rental income


8



37



(29)


(78.4)

%

Other revenues


(16)



(42)



26


(61.9)

%

Total revenues


$

6,689



5,588



1,101


19.7

%













Segment profit1


$

4,346



4,379



(33)


(0.8)

%













Points of distribution


3,228



3,181



47


1.5

%

Gross openings


140



105



35


33.3

%

Net openings


46



44



2


4.5

%













1 Prior year amounts reflect change in segment profit measure. Please refer to "Segment Profit Comparability" for further detail.

Dunkin' Donuts International fourth quarter systemwide sales increased 2.5 percent from the prior year period, driven by sales growth in the Middle East and Europe, offset by a decline in South Korea.  On a constant currency basis, systemwide sales increased by approximately 6 percent.

Dunkin' Donuts International fourth quarter revenues of $6.7 million represented an increase of 19.7% year-over-year. The increase in revenue was primarily a result of an increase in franchise fees due to openings in existing and new international markets and additional franchise renewals, offset by income recognized in connection with the termination of development agreements in Asia in the prior year period. Also contributing to the increase in revenues was an increase in royalty income.

Segment profit for Dunkin' Donuts International of $4.3 million in the fourth quarter remained consistent with the prior year period, as revenue growth was offset by increases in general and administrative expenses and a decrease in income from our South Korea joint venture.

Amounts and percentages may not recalculate due to rounding


Three months ended


Increase (Decrease)

Baskin-Robbins U.S.


December 27,
2014


December 28,
2013


$ / #

%


($ in thousands except as otherwise noted)

Comparable store sales growth


9.3

%


2.2

%






Systemwide sales growth


12.7

%


0.9

%






Franchisee reported sales (in millions)


$

103.1



91.5



11.6


12.7

%













Revenues:












Royalty income


$

5,090



4,577



513


11.2

%

Franchise fees


178



383



(205)


(53.5)

%

Rental income


815



866



(51)


(5.9)

%

Sales of ice cream products


801



774



27


3.5

%

Other revenues


1,585



1,552



33


2.1

%

Total revenues


$

8,469



8,152



317


3.9

%













Segment profit1


$

4,485



4,944



(459)


(9.3)

%













Points of distribution


2,484



2,467



17


0.7

%

Gross openings


26



19



7


36.8

%

Net closings


(2)



(4)



2


(50.0)

%













1 Prior year amounts reflect change in segment profit measure. Please refer to "Segment Profit Comparability" for further detail.

Baskin-Robbins U.S. fourth quarter revenue increased 3.9 percent from the prior year period to $8.5 million due primarily to increased royalty income, offset by a decrease in franchise fees driven primarily by timing of franchise renewals.

Segment profit for Baskin-Robbins U.S. decreased $0.5 million in the fourth quarter, or 9.3 percent, year-over-year primarily as a result of increases in general and administrative expenses, including investments in advertising and other brand-building activities and an increase in personnel costs, offset by the increase in revenues.

 

Amounts and percentages may not recalculate due to rounding


Three months ended


Increase (Decrease)

Baskin-Robbins International


December 27,
2014


December 28,
2013


$ / #

%


($ in thousands except as otherwise noted)

Comparable store sales growth (decline)


(2.2)

%


1.6

%






Systemwide sales growth (decline)


(8.4)

%


2.6

%






Franchisee reported sales (in millions)


$

290.9



317.6



(26.7)


(8.4)

%













Revenues:












Royalty income


$

1,714



1,701



13


0.8

%

Franchise fees


477



675



(198)


(29.3)

%

Rental income


133



123



10


8.1

%

Sales of ice cream products


27,409



24,655



2,754


11.2

%

Other revenues


178



75



103


137.3

%

Total revenues


$

29,911



27,229



2,682


9.8

%













Segment profit1


$

9,084



8,753



331


3.8

%













Points of distribution


5,068



4,833



235


4.9

%

Gross openings


153



178



(25)


(14.0)

%

Net openings


75



120



(45)


(37.5)

%













1 Prior year amounts reflect change in segment profit measure. Please refer to "Segment Profit Comparability" for further detail.

Baskin-Robbins International systemwide sales decreased 8.4 percent in the fourth quarter compared to the prior year period driven by a sales decline in Japan, primarily as a result of unfavorable exchange rates, as well as a sales decline in the Middle East. On a constant currency basis, systemwide sales decreased by approximately 3 percent.

Baskin-Robbins International fourth quarter revenues increased 9.8 percent year-over-year to $29.9 million due primarily to increases in sales of ice cream products in the Middle East and Asia, offset by a decline in franchise fees.

Fourth quarter segment profit increased 3.8 percent year-over-year to $9.1 million, resulting from an increase in net margin on ice cream driven by the increase in sales, as well as an increase in income from our South Korea joint venture, offset by a $0.5 million decrease in income from our Japan joint venture and increases in advertising and personnel costs.

COMPANY UPDATES

  • The Company announced on January 26, 2015 that it completed a refinancing of its senior secured credit facility with the placement by its subsidiary of a $2.6 billion securitized debt facility. The securitized debt facility includes $2.5 billion Class A-2 Senior Secured Notes ("Notes"), which consist of two tranches with anticipated repayment dates of four years ($750 million) and seven years ($1.75 billion), respectively. The Notes will bear interest at a rate of 3.262 percent per annum for the four year tranche and 3.980 percent per annum for the seven year tranche, resulting in a weighted-average effective interest rate of 3.765 percent per annum, payable quarterly.  As a result, the Company expects its 2015 annual interest expense to be approximately $96.5 million.
  • The Company announced on January 26, 2015 that the Board of Directors authorized a new program to repurchase up to an aggregate of $700 million of its outstanding common stock over the next two years.
  • The Company today announced that the Board of Directors declared a first quarter cash dividend of $0.265 per share, payable on March 18, 2015 to shareholders of record as of the close of business on March 9, 2015. This represents a 15 percent increase over the Company's fourth quarter 2014 dividend.

FISCAL YEAR 2015 TARGETS

As described below, the Company is reiterating certain targets regarding its 2015 expectations.

  • The Company expects Dunkin' Donuts U.S. comparable store sales growth of 1 to 3 percent and Baskin-Robbins U.S. comparable store sales growth of 1 to 3 percent.
  • The Company expects that Dunkin' Donuts U.S. will add between 410 and 440 net new restaurants, for greater than 5 percent net unit growth, and expects Baskin-Robbins U.S. will add between 5 and 10 net new restaurants.   
  • Internationally, the Company is targeting opening 200 to 300 net new restaurants across the two brands. It expects net income of equity method investments to be approximately $13 million.
  • Globally, the Company expects to open between 615 and 750 net new units.  
  • The Company expects revenue growth of between 5 and 7 percent and adjusted operating income growth of between 6 and 8 percent. 
  • The Company expects adjusted earnings per share of $1.83 to $1.87.

Conference Call

As previously announced, Dunkin' Brands will be holding a conference call today at 8:00 am ET hosted by Nigel Travis, Chairman & Chief Executive Officer, and Paul Carbone, Chief Financial Officer. The dial-in number is (866) 393-1607 or (914) 495-8556, conference number 63732202.  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.   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; our franchisees' and licensees' ability to sustain same store sales growth;  changes in working relationships 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 impact of seasonal changes, including weather effects, on our business; the success of our growth strategy and international development; changes in commodity and food prices, particularly coffee, dairy products and sugar, and 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; the impact of food borne-illness or food safety issues or adverse public or media opinions regarding the health effects of consuming our products; our ability to collect royalty payments from our franchisees and licensees; 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 most recent annual report on Form 10-K. 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 included certain non-GAAP measurements, adjusted operating income, adjusted operating income margin, adjusted net income, and diluted adjusted earnings per share, which present operating results on a basis adjusted for certain items. Additionally, the Company has included growth in free cash flow, which is a non-GAAP measurement reflecting net cash provided by operating and investing activities, excluding the impact of changes in cash held for advertising funds and gift card/certificate programs. The Company uses all of these non-GAAP measures as key performance measures for the purpose of evaluating performance internally and our ability to generate cash. We also believe these non-GAAP measures provide our investors with useful information regarding our historical operating and cash flow results. These non-GAAP measures 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, diluted adjusted earnings per share, and free cash flow may differ from similar measures reported by other companies.  Adjusted operating income, adjusted net income, and free cash flow are reconciled from the respective measures determined under GAAP in the attached tables "Dunkin' Brands Group, Inc. Non-GAAP Reconciliations."

Additionally, the Company has included metrics such as systemwide sales growth and comparable store sales growth, which are commonly used statistical measures in the quick service restaurant industry and are important to understanding the Company's performance.

The Company uses "systemwide 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 systemwide sales are driven by changes in comparable store sales and changes in the number of restaurants.

The Company uses "DD U.S. comparable store sales growth," "BR U.S. comparable store sales growth," "DD International comparable store sales growth," and "BR International 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.

Segment Profit Comparability

Beginning in fiscal year 2014, the key measure used by the Company to assess the performance of and allocate resources to each reportable segment, referred to as segment profit, was revised to better align the segments with our consolidated performance measures and incentive targets. As a result, segment profit now reflects operating income adjusted for amortization of intangible assets, long-lived asset impairments, and other non-recurring, infrequent, or unusual charges, and does not reflect the allocation of any corporate charges. Prior to fiscal year 2014, segment profit was measured based on earnings before interest, taxes, depreciation, amortization, impairment charges, loss on debt extinguishment and refinancing transactions, other gains and losses, and unallocated corporate charges. The segment profit amounts included herein for the three months ended December 28, 2013 have been restated to reflect this change to the measurement of segment profit to enable comparability with the three months ended December 27, 2014.

About Dunkin' Brands Group, Inc.

With more than 18,800 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 fiscal 2014, Dunkin' Brands' nearly 100 percent franchised business model included more than 11,300 Dunkin' Donuts restaurants and more than 7,500 Baskin-Robbins restaurants. Dunkin' Brands Group, Inc. is headquartered in Canton, Mass.

 



DUNKIN' BRANDS GROUP, INC. AND SUBSIDIARIES

Consolidated Statements of Operations

(In thousands, except per share data)

(Unaudited)



Three months ended


Fiscal year ended



December 27,
2014


December 28,
2013


December 27,
2014


December 28,
2013














Revenues:













Franchise fees and royalty income


$

126,591



119,931



482,329



453,976


Rental income


24,013



23,158



97,663



96,082


Sales of ice cream products


28,248



25,458



116,320



112,276


Sales at company-owned restaurants


5,887



6,715



22,206



24,976


Other revenues


8,474



7,915



30,191



26,530


Total revenues


193,213



183,177



748,709



713,840


Operating costs and expenses:













Occupancy expenses—franchised restaurants


13,565



13,056



53,395



52,097


Cost of ice cream products


19,623



18,091



81,896



79,278


Company-owned restaurant expenses


5,915



6,663



22,687



24,480


General and administrative expenses, net


55,128



53,838



227,534



230,847


Depreciation


4,976



5,462



19,779



22,423


Amortization of other intangible assets


6,638



6,858



25,760



26,943


Long-lived asset impairment charges


205



116



1,484



563


Total operating costs and expenses


106,050



104,084



432,535



436,631


Net income of equity method investments:













Net income, excluding impairment


2,332



3,173



14,846



19,243


Impairment charge








(873)


Net income of equity method investments


2,332



3,173



14,846



18,370


Other operating income (expense), net


229



(31)



7,838



9,157


Operating income


89,724



82,235



338,858



304,736


Other income (expense):













Interest income


73



94



274



404


Interest expense


(16,654)



(19,712)



(68,098)



(80,235)


Loss on debt extinguishment and refinancing transactions






(13,735)



(5,018)


Other losses, net


(896)



(608)



(1,566)



(1,799)


Total other expense


(17,477)



(20,226)



(83,125)



(86,648)


Income before income taxes


72,247



62,009



255,733



218,088


Provision for income taxes


19,907



20,120



80,170



71,784


Net income including noncontrolling interests


52,340



41,889



175,563



146,304


Net loss attributable to noncontrolling interests


(173)



(183)



(794)



(599)


Net income attributable to Dunkin' Brands


$

52,513



42,072



176,357



146,903















Earnings per share—basic


$

0.50



0.39



1.67



1.38


Earnings per share—diluted


0.50



0.39



1.65



1.36


 

 

DUNKIN' BRANDS GROUP, INC. AND SUBSIDIARIES

Condensed Consolidated Balance Sheets

(In thousands)

(Unaudited)



December 27,
2014


December 28,
2013

Assets







Current assets:







Cash and cash equivalents


$

208,080



256,933


Accounts, notes, and other receivables, net


105,060



79,765


Other current assets


129,478



125,062


Total current assets


442,618



461,760


Property and equipment, net


182,061



182,858


Equity method investments


164,493



170,644


Goodwill and other intangible assets, net


2,317,167



2,343,803


Other assets


71,044



75,625


Total assets


$

3,177,383



3,234,690


Liabilities, Redeemable Noncontrolling Interests, and Stockholders' Equity







Current liabilities:







Current portion of long-term debt


$

3,852



5,000


Accounts payable


13,814



12,445


Other current liabilities


337,853



326,853


Total current liabilities


355,519



344,298


Long-term debt, net


1,807,081



1,818,609


Deferred income taxes, net


540,339



561,714


Other long-term liabilities


99,494



97,781


Total long-term liabilities


2,446,914



2,478,104


Redeemable noncontrolling interests


6,991



4,930


Total stockholders' equity


367,959



407,358


Total liabilities, redeemable noncontrolling interests, and stockholders' equity


$

3,177,383



3,234,690


 

 

DUNKIN' BRANDS GROUP, INC. AND SUBSIDIARIES

Condensed Consolidated Statements of Cash Flows

(In thousands)

(Unaudited)



Fiscal year ended



December 27,
2014


December 28,
2013








Net cash provided by operating activities


$

199,323



141,799


Cash flows from investing activities:







Additions to property and equipment


(23,638)



(31,099)


Proceeds from sale of joint venture




6,682


Proceeds from sale of real estate and company-owned restaurants


14,361



5,387


Other, net


(4,827)



(3,876)


Net cash used in investing activities


(14,104)



(22,906)


Cash flows from financing activities:







Repayment of long-term debt, net


(15,000)



(24,157)


Payment of deferred financing and other debt-related costs


(9,213)



(6,157)


Dividends paid on common stock


(96,775)



(81,008)


Repurchases of common stock


(130,171)



(27,963)


Exercise of stock options


5,120



7,963


Other, net


12,682



17,148


Net cash used in financing activities


(233,357)



(114,174)


Effect of exchange rates on cash and cash equivalents


(715)



(404)


Increase (decrease) in cash and cash equivalents


(48,853)



4,315


Cash and cash equivalents, beginning of period


256,933



252,618


Cash and cash equivalents, end of period


$

208,080



256,933


 

 

DUNKIN' BRANDS GROUP, INC. AND SUBSIDIARIES

Non-GAAP Reconciliations

(In thousands, except per share data)

(Unaudited)



Three months ended


Fiscal year ended



December 27,
2014


December 28,
2013


December 27,
2014


December 28,
2013

Operating income


$

89,724



82,235



338,858



304,736


Operating income margin


46.4

%


44.9

%


45.3

%


42.7

%

Adjustments:













Amortization of other intangible assets


$

6,638



6,858



25,760



26,943


Long-lived asset impairment charges


205



116



1,484



563


Third-party product volume guarantee






(300)



7,500


Peterborough plant closure(a)








654


Transaction costs(b)


154





154




Adjusted operating income


$

96,721



89,209



365,956



340,396


Adjusted operating income margin


50.1

%


48.7

%


48.9

%


47.7

%














Net income attributable to Dunkin' Brands


$

52,513



42,072



176,357



146,903


Adjustments:













Amortization of other intangible assets


6,638



6,858



25,760



26,943


Long-lived asset impairment charges


205



116



1,484



563


Third-party product volume guarantee






(300)



7,500


Peterborough plant closure(a)








654


Transaction costs(b)


154





154




Loss on debt extinguishment and refinancing transactions






13,735



5,018


Tax impact of adjustments(c)


(2,799)



(2,790)



(16,333)



(16,271)


Income tax audit settlements(d)






(6,717)



(8,417)


Tax impact of legal entity conversion(e)


(8,541)





(8,541)




State tax apportionment(f)






514



2,868


Adjusted net income


$

48,170



46,256



186,113



165,761















Adjusted net income


$

48,170



46,256



186,113



165,761


Weighted average number of common shares - diluted


105,687,479



108,332,148



106,705,778



108,217,011


Diluted adjusted earnings per share


$

0.46



0.43



1.74



1.53















(a) For the fiscal year ended December 28, 2013, the adjustment represents transition-related general and administrative costs incurred related to the closure of the Baskin-Robbins ice cream manufacturing plant in Peterborough, Canada, such as information technology integration, project management, and transportation costs.

(b) Represents costs incurred in connection with obtaining a new securitized financing facility, which was completed in January 2015.

(c) Tax impact of adjustments calculated at a 40% effective tax rate.

(d) Represents income tax benefits resulting from the resolution of historical tax positions settled during the period.

(e) Represents the net tax impact of converting Dunkin' Brands Canada Ltd. to Dunkin' Brands Canada ULC.

(f) Represents tax expense recognized due to an increase in our overall state tax rate for a shift in the apportionment of income to certain state jurisdictions.

 

DUNKIN' BRANDS GROUP, INC. AND SUBSIDIARIES 

Non-GAAP Reconciliations (continued) 

(In thousands) 

(Unaudited) 


Fiscal year ended


December 27,
2014


December 28,
2013


Change
%

Net cash provided by operating activities

$

199,323



141,799




Less: Increase in cash held for advertising funds and gift card/certificate programs

(8,781)



(2,006)




Less: Net cash used in investing activities

(14,104)



(22,906)




Free cash flow, excluding cash held for advertising funds and gift card/certificate programs

$

176,438



116,887


50.9%

 

 

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SOURCE Dunkin' Brands Group, Inc.

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