Document
false0001357204 0001357204 2020-02-06 2020-02-06

 
 
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
 

FORM 8-K
 

CURRENT REPORT
Pursuant to Section 13 or 15(d) of
The Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): February 6, 2020
 

DUNKIN’ BRANDS GROUP, INC.
(Exact name of registrant as specified in its charter)
 

Delaware
(State or Other Jurisdiction of Incorporation)
 
 
001-35258
20-4145825
(Commission
File Number)
(IRS Employer
Identification Number)
130 Royall Street
Canton, Massachusetts 02021
(Address of registrant’s principal executive office)
(781) 737-3000 ;
(Registrant’s telephone number)


 Securities registered pursuant to Section 12(b) of the Act:
Title of each class
Trading Symbol(s)
Name of each exchange on which registered
Common Stock, $0.001 par value per share
DNKN
Nasdaq Global Select Market
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))
Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (17 CFR 230.405) or Rule 12b-2 of the Securities Exchange Act of 1934 (17 CFR 240.12b-2).
Emerging Growth Company   
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Selection 13(a) of the Exchange Act.  




Item 2.02 Results of Operations and Financial Condition.
On February 6, 2020, Dunkin’ Brands Group, Inc. (the “Company”) issued a press release announcing its financial results for the fiscal quarter and year ended December 28, 2019. A copy of the press release is furnished as Exhibit 99.1 hereto and has been incorporated herein by reference.
The information contained in this Item, including Exhibit 99.1 attached hereto, is being furnished and shall not be deemed “filed” for any purpose, and shall not be deemed incorporated by reference in any filing under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended, regardless of any general incorporation language in any such filing.
Item 8.01 Other Events.
On February 6, 2020, the Company also announced that its Board of Directors has declared a $0.4025 per common share quarterly cash dividend. The dividend is payable on March 18, 2020 to shareholders of record as of the close of business on March 9, 2020. The declaration of any future dividends is subject to the Board’s discretion. The full text of the Company’s press release issued today regarding this dividend is attached hereto as Exhibit 99.2.
Item 9.01 Financial Statements and Exhibits.
(d) Exhibits
 
Press Release of Dunkin' Brands Group, Inc. dated February 6, 2020 regarding the release of quarterly and annual financial results and other information.
 
 
Press Release of Dunkin' Brands Group, Inc. dated February 6, 2020 announcing the declaration of a $0.4025 quarterly cash dividend.
 
 
104
Cover Page Interactive Data File (embedded within the Inline XBRL document)




SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
 
 
 
DUNKIN’ BRANDS GROUP, INC.
 
 
By:
/s/ David Hoffmann
 
David Hoffmann
 
Chief Executive Officer
Date: February 6, 2020
 



Exhibit


Exhibit 99.1
https://cdn.kscope.io/9e7d5233ab0ab56cc7454dc00ba9f0a9-logonovember2019a.jpg


Dunkin' Brands Reports Fourth Quarter and Fiscal Year 2019 Results

Fiscal year 2019 highlights include:
Dunkin' U.S. comparable store sales growth of 2.1%
Baskin-Robbins U.S. comparable store sales growth of 0.8%
Added 385 net new Dunkin' and Baskin-Robbins locations globally, including 211 net new Dunkin' locations in the U.S.
Revenues increased 3.7%
Diluted EPS increased by 6.6% to $2.89
Diluted adjusted EPS increased by 9.3% to $3.17

Fourth quarter highlights include:
Dunkin' U.S. comparable store sales growth of 2.8%
Baskin-Robbins U.S. comparable store sales growth of 4.1%
Added 146 net new Dunkin' and Baskin-Robbins locations globally, including 76 net new Dunkin' locations in the U.S.
Revenues increased 5.1%
Diluted EPS increased by 7.8% to $0.69
Diluted adjusted EPS increased by 7.4% to $0.73
    
CANTON, Mass. (February 6, 2020) - Dunkin' Brands Group, Inc. (Nasdaq: DNKN), the parent company of Dunkin' and Baskin-Robbins (BR), today reported results for the fourth quarter and fiscal year ended December 28, 2019.
“Our strong performance in 2019 is indicative of the progress we’re making to transform our two beloved brands around the world. All business segments delivered positive comparable store sales growth in the fourth quarter and for the fiscal year, reflecting broad-based momentum across the system,” said Dave Hoffmann, Dunkin’ Brands Chief Executive Officer. “We had a strong finish to the year, led by Dunkin’ U.S. comparable store sales growth of 2.8 percent in the fourth quarter, the highest quarterly comparable sales growth in six years, fueled by espresso and cold brew sales, coupled with the successful launch of the Beyond Sausage® Sandwich, and sustained performance of our national value platforms. Better quality food and beverage enabled by better equipment is a cornerstone of the Dunkin’ Blueprint for Growth, which is the reason we are investing $60 million in high-volume brewers for our franchisees' restaurants in 2020 as part of our commitment to beverage leadership.”
     “We are pleased to have delivered on our revenue, operating income, and earnings per share targets for 2019. We also achieved our Dunkin' U.S. net development goal for the year, exceeded our first-year sales goals for new restaurants, and ended the year with more than 500 new and remodeled NextGen restaurants," said Kate Jaspon, Dunkin' Brands Chief Financial Officer. “We will be exiting 450 limited-menu Dunkin’ Speedway owned and operated locations throughout 2020, closing under a termination agreement entered into with Speedway.  These limited-menu locations are lower volume units, in total representing less than 0.5 percent of Dunkin’ U.S. annual systemwide sales.  By exiting these sites, with minimal financial impact, we’re confident we’ll be better positioned to serve many of these trade areas in the coming years with new Dunkin’ NextGen restaurants that offer a broader menu.”





FISCAL YEAR 2019 KEY FINANCIAL HIGHLIGHTS
(Unaudited, $ in millions, except per share data)
Fiscal year ended
 
Increase (Decrease)
Amounts and percentages may not recalculate due to rounding
December 28,
2019
December 29,
2018
 
$ / #
%
Financial data:
 
 
 
 
 
Revenues
$
1,370.2

1,321.6

 
48.6

3.7
 %
Operating income
451.1

411.8

 
39.2

9.5
 %
Operating income margin
32.9
%
31.2
 %
 
 
 
Adjusted operating income(1)
$
470.1

434.6

 
35.5

8.2
 %
Adjusted operating income margin(1)
34.3
%
32.9
 %
 
 
 
Net income
$
242.0

229.9

 
12.1

5.3
 %
Adjusted net income(1)
265.1

246.3

 
18.8

7.6
 %
Earnings per share:
 
 
 
 
 
Common–basic
2.92

2.75

 
0.17

6.2
 %
Common–diluted
2.89

2.71

 
0.18

6.6
 %
Diluted adjusted earnings per share(1)
3.17

2.90

 
0.27

9.3
 %
Weighted-average number of common shares – diluted (in millions)
83.7

85.0

 
(1.3
)
(1.5
)%
Systemwide sales(2)
$
12,174.9

11,634.0

 
540.9

4.6
 %
Comparable store sales growth (decline):
 
 
 
 
 
Dunkin' U.S.
2.1
%
0.6
 %
 
 
 
BR U.S.
0.8
%
(0.6
)%
 
 
 
Dunkin' International
5.7
%
2.2
 %
 
 
 
BR International
1.9
%
3.8
 %
 
 
 
Development data:
 
 
 
 
 
Consolidated global net POD development
385

392

 
(7
)
(1.8
)%
Dunkin' global PODs at period end
13,137

12,871

 
266

2.1
 %
BR global PODs at period end
8,160

8,041

 
119

1.5
 %
Consolidated global PODs at period end
21,297

20,912

 
385

1.8
 %
(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 certain other items, 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. See “Non-GAAP Measures and Statistical Data” and “Dunkin' Brands Group, Inc. Non-GAAP Reconciliations” for further detail.
(2) Systemwide sales include sales at franchisee-operated restaurants, including joint ventures. While we do not record sales by franchisees, licensees, or joint ventures as revenue, and such sales are not included in our consolidated financial statements, we believe that this operating measure is important in obtaining an understanding of our financial performance. We believe systemwide sales information aids in understanding how we derive royalty revenue and in evaluating our performance relative to competitors.






FOURTH QUARTER 2019 KEY FINANCIAL HIGHLIGHTS
(Unaudited, $ in millions, except per share data)
Three months ended
 
Increase (Decrease)
Amounts and percentages may not recalculate due to rounding
December 28,
2019
December 29,
2018
 
$ / #
%
Financial data:
 
 
 
 
 
Revenues
$
335.9

319.6

 
16.3

5.1
 %
Operating income
105.7

96.6

 
9.1

9.4
 %
Operating income margin
31.5
%
30.2
 %
 
 
 
Adjusted operating income(1)
$
110.5

102.2

 
8.3

8.1
 %
Adjusted operating income margin(1)
32.9
%
32.0
 %
 
 
 
Net income
$
57.7

53.2

 
4.5

8.5
 %
Adjusted net income(1)
61.2

57.3

 
3.9

6.8
 %
Earnings per share:
 
 
 


 
Common–basic
0.70

0.64

 
0.06

9.4
 %
Common–diluted
0.69

0.64

 
0.05

7.8
 %
Diluted adjusted earnings per share(1)
0.73

0.68

 
0.05

7.4
 %
Weighted-average number of common shares – diluted (in millions)
83.7

83.7

 
0.0

(0.1
)%
Systemwide sales(2)
$
3,049.2

2,876.2

 
173.0

6.0
 %
Comparable store sales growth (decline):
 
 
 
 
 
Dunkin' U.S.
2.8
%
0.0
 %
 
 
 
BR U.S.
4.1
%
(3.7
)%
 
 
 
Dunkin' International
6.9
%
1.1
 %
 
 
 
BR International
3.2
%
1.5
 %
 
 
 
Development data:
 
 
 
 
 
Consolidated global net POD development
146

148

 
(2
)
(1.4
)%
Dunkin' global PODs at period end
13,137

12,871

 
266

2.1
 %
BR global PODs at period end
8,160

8,041

 
119

1.5
 %
Consolidated global PODs at period end
21,297

20,912

 
385

1.8
 %
(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 certain other items, 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. See “Non-GAAP Measures and Statistical Data” and “Dunkin' Brands Group, Inc. Non-GAAP Reconciliations” for further detail.
(2) Systemwide sales include sales at franchisee-operated restaurants, including joint ventures. While we do not record sales by franchisees, licensees, or joint ventures as revenue, and such sales are not included in our consolidated financial statements, we believe that this operating measure is important in obtaining an understanding of our financial performance. We believe systemwide sales information aids in understanding how we derive royalty revenue and in evaluating our performance relative to competitors.
Global systemwide sales growth of 6.0% in the fourth quarter was primarily attributable to global comparable store sales growth and global store development.
Dunkin' U.S. comparable store sales grew 2.8% in the fourth quarter as an increase in average ticket was partially offset by a decrease in traffic. The increase in average ticket was driven by favorable mix shift to premium priced espresso and cold brew beverages, as well as the successful launch of the Beyond Sausage Sandwich, an addition to the high end of our breakfast sandwich barbell strategy, coupled with strategic pricing increases which were partially offset by discounting driven by national value platforms.
Baskin-Robbins U.S. comparable store sales grew 4.1% in the fourth quarter driven by an increase in average ticket and an increase in traffic. Comparable store sales growth was led by the strong performance of cups and cones, beverages, take home, and sundaes.





In the fourth quarter, Dunkin' Brands franchisees and licensees opened 146 net new restaurants globally. This included 76 net new Dunkin' U.S. locations, 62 Baskin-Robbins International locations, and 26 Dunkin' International locations, offset by net closures of 18 Baskin-Robbins U.S. locations. Additionally, Dunkin' U.S. franchisees remodeled 40 restaurants and Baskin-Robbins U.S. franchisees remodeled 11 restaurants during the quarter.
Revenues for the fourth quarter increased $16.3 million, or 5.1%, compared to the prior year period due primarily to increases in royalty income and advertising fees and related income as a result of Dunkin' U.S. systemwide sales growth, as well as an increase in rental income, offset by decreases in franchise fees and sales of ice cream and other products. The increase in rental income resulted from the adoption of the new lease accounting standard in the first quarter of fiscal year 2019, which requires gross presentation of certain lease costs that the Company passes through to franchisees. See "Adoption of New Accounting Standard" for further detail. The decrease in franchise fees was due primarily to additional franchisee incentives, including investments to support the Dunkin' U.S. Blueprint for Growth which are being recognized over the remaining term of each respective franchise agreement.
Operating income and adjusted operating income for the fourth quarter increased $9.1 million, or 9.4%, and $8.3 million, or 8.1%, respectively, compared to the prior year period primarily as a result of the increase in royalty income and a decrease in general and administrative expenses, offset by the decrease in franchise fees.
Net income and adjusted net income for the fourth quarter increased by $4.5 million, or 8.5%, and $3.9 million, or 6.8%, respectively, compared to the prior year period primarily as a result of the increases in operating income and adjusted operating income, respectively, offset by an increase in income tax expense. The increase in income tax expense was driven primarily by the increase in income in the current year period and excess tax benefits of $3.2 million in the prior year period compared to an immaterial amount recognized in the current year period, offset by a valuation allowance recorded on foreign tax credit carryforwards of $1.8 million in the prior year period.
Diluted earnings per share and diluted adjusted earnings per share for the fourth quarter increased by 7.8% to $0.69 and 7.4% to $0.73, respectively, compared to the prior year period as a result of the increases in net income and adjusted net income, respectively. Excluding the impact of recognized excess tax benefits, both diluted earnings per share and diluted adjusted earnings per share would have been lower by approximately $0.04 for the fourth quarter of fiscal year 2018. Recognized excess tax benefits had no per share impact on diluted earnings per share and diluted adjusted earnings per share for the fourth quarter of fiscal year 2019.






FOURTH QUARTER 2019 SEGMENT RESULTS
Amounts and percentages may not recalculate due to rounding
 
Three months ended
 
Increase (Decrease)
Dunkin' U.S.
 
December 28,
2019
 
December 29,
2018
 
$ / #
%
 
(Unaudited, $ in thousands except as otherwise noted)
Revenues:
 
 
 
 
 
 
 
Royalty income
 
$
130,606

 
123,024

 
7,582

6.2
 %
Franchise fees
 
2,779

 
3,717

 
(938
)
(25.2
)%
Rental income
 
29,064

 
24,179

 
4,885

20.2
 %
Other revenues
 
919

 
1,305

 
(386
)
(29.6
)%
Total revenues
 
$
163,368

 
152,225

 
11,143

7.3
 %
 
 
 
 
 
 
 
 
Segment profit
 
$
124,305

 
119,802

 
4,503

3.8
 %
 
 
 
 
 
 
 
 
Comparable store sales growth
 
2.8
%
 
0.0
%
 
 
 
Systemwide sales (in millions)(1)
 
$
2,353.7

 
2,228.3

 
125.3

5.6
 %
 
 
 
 
 
 
 
 
Points of distribution
 
9,630

 
9,419

 
211

2.2
 %
Gross openings
 
123

 
142

 
(19
)
(13.4
)%
Net openings
 
76

 
106

 
(30
)
(28.3
)%
(1) Systemwide sales include sales at franchisee-operated restaurants, including joint ventures. We do not record sales by franchisees, licensees, or joint ventures as revenue and such sales are not included in our consolidated financial statements. See “Non-GAAP Measures and Statistical Data” for further detail.
Dunkin' U.S. fourth quarter revenues of $163.4 million represented an increase of 7.3% compared to the prior year period. The increase was primarily a result of an increase in royalty income driven by systemwide sales growth, as well as an increase in rental income, offset by a decrease in franchise fees due primarily to additional franchisee incentives, including investments to support the Dunkin' U.S. Blueprint for Growth which are being recognized over the remaining term of each respective franchise agreement. The increase in rental income resulted from the adoption of the new lease accounting standard in the first quarter of fiscal year 2019. See "Adoption of New Accounting Standard" for further detail.
Dunkin' U.S. segment profit in the fourth quarter increased to $124.3 million, an increase of $4.5 million over the prior year period, driven primarily by the increase in royalty income, offset by an increase in general and administrative expenses and the decrease in franchise fees.






Amounts and percentages may not recalculate due to rounding
 
Three months ended
 
Increase (Decrease)
Dunkin' International
 
December 28,
2019
 
December 29,
2018
 
$ / #
%
 
(Unaudited, $ in thousands except as otherwise noted)
Revenues:
 
 
 
 
 
 
 
Royalty income
 
$
5,949

 
5,249

 
700

13.3
 %
Franchise fees
 
(385
)
 
159

 
(544
)
(342.1
)%
Other revenues
 
114

 
54

 
60

111.1
 %
Total revenues
 
$
5,678

 
5,462

 
216

4.0
 %
 
 
 
 
 
 
 
 
Segment profit
 
$
2,852

 
3,140

 
(288
)
(9.2
)%
 
 
 
 
 
 
 
 
Comparable store sales growth
 
6.9
%
 
1.1
%
 
 
 
Systemwide sales (in millions)(1)
 
$
225.1

 
206.9

 
18.1

8.8
 %
 
 
 
 
 
 
 
 
Points of distribution
 
3,507

 
3,452

 
55

1.6
 %
Gross openings
 
94

 
99

 
(5
)
(5.1
)%
Net openings
 
26

 
25

 
1

4.0
 %
(1) Systemwide sales include sales at franchisee-operated restaurants, including joint ventures. We do not record sales by franchisees, licensees, or joint ventures as revenue and such sales are not included in our consolidated financial statements. See “Non-GAAP Measures and Statistical Data” for further detail.
Dunkin' International fourth quarter systemwide sales increased 8.8% from the prior year period driven by sales growth in the Middle East, Asia, and Europe, offset by a sales decline in South Korea. Sales in South Korea and Latin America were negatively impacted by unfavorable foreign exchange rates, while sales in Asia were positively impacted by favorable foreign exchange rates. On a constant currency basis, systemwide sales increased by approximately 10%.
Dunkin' International fourth quarter revenues of $5.7 million represented an increase of 4.0% from the prior year period. The increase in revenues was primarily a result of an increase in royalty income driven by systemwide sales growth, offset by a decrease in franchise fees due primarily to additional franchisee incentives to support brand-building activities in certain international markets.
Segment profit for Dunkin' International decreased $0.3 million to $2.9 million in the fourth quarter primarily as a result of an increase in general and administrative expenses driven primarily by an increase in bad debt expense, offset by the increase in revenues.





Amounts and percentages may not recalculate due to rounding
 
Three months ended
 
Increase (Decrease)
Baskin-Robbins U.S.
 
December 28,
2019
 
December 29,
2018
 
$ / #
%
 
(Unaudited, $ in thousands except as otherwise noted)
Revenues:
 
 
 
 
 
 
 
Royalty income
 
$
5,482

 
5,335

 
147

2.8
 %
Franchise fees
 
373

 
365

 
8

2.2
 %
Rental income
 
689

 
668

 
21

3.1
 %
Sales of ice cream and other products
 
771

 
835

 
(64
)
(7.7
)%
Other revenues
 
1,927

 
1,922

 
5

0.3
 %
Total revenues
 
$
9,242

 
9,125

 
117

1.3
 %
 
 
 
 
 
 
 
 
Segment profit
 
$
3,822

 
3,918

 
(96
)
(2.5
)%
 
 
 
 
 
 
 
 
Comparable store sales growth (decline)
 
4.1
%
 
(3.7
)%
 
 
 
Systemwide sales (in millions)(1)
 
$
115.7

 
110.9

 
4.9

4.4
 %
 
 
 
 
 
 
 
 
Points of distribution
 
2,524

 
2,550

 
(26
)
(1.0
)%
Gross openings
 
19

 
24

 
(5
)
(20.8
)%
Net closings
 
(18
)
 
(8
)
 
(10
)
n/m

(1) Systemwide sales include sales at franchisee-operated restaurants, including joint ventures. We do not record sales by franchisees, licensees, or joint ventures as revenue and such sales are not included in our consolidated financial statements. See “Non-GAAP Measures and Statistical Data” for further detail.
Baskin-Robbins U.S. fourth quarter revenues increased 1.3% from the prior year period to $9.2 million due primarily to an increase in royalty income driven by systemwide sales growth, offset by a decrease in sales of ice cream and other products.
Segment profit for Baskin-Robbins U.S. decreased to $3.8 million in the fourth quarter, a decrease of 2.5%, primarily as a result of an increase in general and administrative expenses, offset by the increase in royalty income.






Amounts and percentages may not recalculate due to rounding
 
Three months ended
 
Increase (Decrease)
Baskin-Robbins International
 
December 28,
2019
 
December 29,
2018
 
$ / #
%
 
(Unaudited, $ in thousands except as otherwise noted)
Revenues:
 
 
 
 
 
 
 
Royalty income
 
$
1,603

 
1,695

 
(92
)
(5.4
)%
Franchise fees
 
151

 
184

 
(33
)
(17.9
)%
Rental income
 
227

 
141

 
86

61.0
 %
Sales of ice cream and other products
 
21,165

 
22,278

 
(1,113
)
(5.0
)%
Other revenues
 
(37
)
 
6

 
(43
)
(716.7
)%
Total revenues
 
$
23,109

 
24,304

 
(1,195
)
(4.9
)%
 
 
 
 
 
 
 
 
Segment profit
 
$
7,158

 
5,213

 
1,945

37.3
 %
 
 
 
 
 
 
 
 
Comparable store sales growth
 
3.2
%
 
1.5
%
 
 
 
Systemwide sales (in millions)(1)
 
$
354.8

 
330.0

 
24.7

7.5
 %
 
 
 
 
 
 
 
 
Points of distribution
 
5,636

 
5,491

 
145

2.6
 %
Gross openings
 
123

 
81

 
42

51.9
 %
Net openings
 
62

 
25

 
37

148.0
 %
(1) Systemwide sales include sales at franchisee-operated restaurants, including joint ventures. We do not record sales by franchisees, licensees, or joint ventures as revenue and such sales are not included in our consolidated financial statements. See “Non-GAAP Measures and Statistical Data” for further detail.
Baskin-Robbins International systemwide sales increased 7.5% in the fourth quarter compared to the prior year period driven by sales growth in South Korea, the Middle East, Europe, and Japan. Sales in South Korea were negatively impacted by unfavorable foreign exchange rates, while sales in Japan were positively impacted by favorable foreign exchange rates. On a constant currency basis, systemwide sales increased by approximately 8%.
Baskin-Robbins International fourth quarter revenues of $23.1 million represented a decrease of 4.9% from the prior year period due primarily to a decrease in sales of ice cream and other products. Systemwide sales and sales of ice cream products are not directly correlated within a given period due to certain licensees sourcing their own ice cream products, the lag between shipment of products to licensees and retail sales at franchised restaurants, and the overall timing of deliveries between fiscal quarters.
Fourth quarter segment profit increased 37.3% from the prior year period to $7.2 million primarily as a result of a decrease in general and administrative expenses due primarily to a decrease in consulting fees, as well as an increase in net income from our South Korea joint venture.






 
 
Three months ended
 
Increase (Decrease)
U.S. Advertising Funds
 
December 28,
2019
 
December 29,
2018
 
$ / #
%
 
(Unaudited, $ in thousands)
Revenues:
 
 
 
 
 
 
 
Advertising fees and related income
 
$
118,595

 
113,059

 
5,536

4.9
%
Total revenues
 
$
118,595

 
113,059

 
5,536

4.9
%
 
 
 
 
 
 
 
 
Segment profit
 
$

 

 

%
U.S. Advertising Funds fourth quarter revenues of $118.6 million represented an increase of 4.9% compared to the prior year period driven primarily by Dunkin' U.S. systemwide sales growth. Expenses for the U.S. Advertising Funds were equivalent to revenues in each period, resulting in no segment profit.

COMPANY UPDATES
During the fourth quarter, the Company returned $36.0 million to shareholders, including $31.1 million in dividends and $4.9 million through open market repurchases of approximately 65,000 shares. The Company's shares outstanding as of December 28, 2019 were 82,834,830.
The Company today announced that the Board of Directors declared a cash dividend of $0.4025 per share, payable on March 18, 2020, to shareholders of record as of the close of business on March 9, 2020. This represents a 7.3 percent increase over the prior quarter's dividend.
The Company today announced that the Board of Directors approved a new program for the repurchase of up to $250 million of the Company's common stock. The authorization is good for a period of two years.


FISCAL YEAR 2020 TARGETS
The Company is providing the following fiscal year 2020 performance targets:
The Company expects low-single digit comparable store sales growth for Dunkin' U.S. and low-single digit comparable store sales growth for Baskin-Robbins U.S.
The Company expects to open between 200 to 250 net new Dunkin' U.S. units, excluding approximately 450 limited menu Dunkin’ Speedway locations which are closing under a termination agreement entered into with Speedway and are expected to close by fiscal year end 2020.  These locations represented less than 0.5% of Dunkin’ U.S. annual systemwide sales in 2019. As a result of this strategic decision, in 2020 the Company will report development results both with and without the Speedway closures included until the exit is completed.
The Company expects new Dunkin' U.S. restaurants opened in 2020 will contribute greater than $140 million in systemwide sales in 2020.
The Company expects Baskin-Robbins U.S. franchisees to close approximately 25 net units.
The Company expects low-to-mid single digit percent revenue growth.
The Company expects ice cream margin dollars to be flat compared to 2019.
The Company expects net income of equity method investments (JV net income) to be flat compared to 2019.





The Company expects low-single digit percent growth to general and administrative expenses.
The Company expects mid-single digit percent operating and adjusted operating income growth, reflecting an approximately $60 million strategic investment for continued beverage leadership.
The Company expects its full-year effective tax rate to be approximately 27% and expects net interest expense to be approximately $121 million.
The Company expects full-year weighted-average shares outstanding of approximately 84 million.
The Company expects GAAP diluted earnings per share of $2.96 to $3.05 and diluted adjusted earnings per share of $3.16 to $3.21.
The Company expects capital expenditures to be approximately $40 million.
LONG-TERM TARGETS*
The Company reiterates its previously announced long-term targets through fiscal year 2021:
The Company expects low-single digit percent comparable store sales growth for Dunkin' U.S.
The Company expects Dunkin' U.S. franchisees to open between 200 and 250 net new units annually.
The Company expects low-to-mid single digit percent revenue growth.
The Company expects low-single digit percent general and administrative expense growth.
The Company expects mid-to-high single digit percent operating and adjusted operating income growth (in 2021).

*Dunkin' Brands announced its long-term targets on February 7, 2019.

The foregoing non-GAAP forward-looking financial measures are reconciled from the respective measures determined under GAAP in the attached tables “Dunkin' Brands Group, Inc. and Subsidiaries Non-GAAP Reconciliations.”

Adoption of New Accounting Standard
In February 2016, the Financial Accounting Standards Board issued new guidance for lease accounting, which replaces existing lease accounting guidance. The Company adopted this new guidance in fiscal year 2019 using the modified retrospective transition method, and elected the option to not restate comparative periods in the year of adoption, including amounts as of December 29, 2018 and for the three months and fiscal year ended December 29, 2018. As a result of adopting this new guidance in the first quarter of fiscal year 2019, the Company recognized operating lease assets and liabilities of $388.8 million and $435.1 million, respectively, as of the first day of fiscal year 2019. The adoption of this new guidance also resulted in the recognition of additional rental income and occupancy expenses–franchised restaurants of $5.1 million and $19.2 million for the three months and fiscal year ended December 28, 2019, respectively, related to certain lease costs that the Company passes through to franchisees. Additionally, amortization of certain lease intangible assets, previously recorded within amortization of other intangible assets, is now recorded as part of the amortization of operating lease assets within occupancy





expenses–franchised restaurants. Amortization of other intangible assets for the three months and fiscal year ended December 29, 2018 includes $0.6 million and $2.5 million, respectively, of amortization expense related to these lease intangible assets. Additional information regarding the Company's adoption of the new lease accounting guidance is contained in our most recent Form 10-Q, filed with the Securities and Exchange Commission on November 6, 2019.






Conference Call
As previously announced, Dunkin' Brands will be holding a conference call today at 10:00 am ET hosted by Dave Hoffmann, Chief Executive Officer, Scott Murphy, President of Dunkin' Americas, and Kate Jaspon, Chief Financial Officer. The dial-in number is (866) 393-1607 or (914) 495-8556, conference number 7086909. 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 unaudited 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,” or “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 risks 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 success of our investments in the Dunkin' U.S. Blueprint for Growth; 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 failure to protect consumer payment card data or other personally identifiable information; 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 such as adjusted operating income, adjusted operating income margin, adjusted operating income growth, adjusted net income, and diluted adjusted earnings per share, which present operating results on a basis adjusted for certain items. 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 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 operating income growth, adjusted net income, and diluted adjusted earnings per share may differ from similar measures reported by other companies. These non-GAAP





measures are reconciled from the respective measures determined under GAAP in the attached tables “Dunkin' Brands Group, Inc. and Subsidiaries Non-GAAP Reconciliations.”

Additionally, the Company has included metrics such as systemwide sales 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.

Systemwide sales include sales at franchisee-operated restaurants, including joint ventures. While we do not record sales by franchisees, licensees, or joint ventures as revenue, and such sales are not included in our consolidated financial statements, we believe that this operating measure is important in obtaining an understanding of our financial performance. We believe systemwide sales information aids in understanding how we derive royalty revenue and in evaluating our performance relative to competitors.

The Company uses “Dunkin' U.S. comparable store sales growth (decline)” and “BR U.S. comparable store sales growth (decline),” which are calculated by including only sales from franchisee-operated restaurants that have been open at least 78 weeks and that have reported sales in the current and comparable prior year week.

The Company uses “Dunkin' International comparable store sales growth (decline)” and "BR International comparable store sales growth (decline)," which generally represents the growth in local currency average monthly sales for franchisee-operated restaurants, including joint ventures, that have been open at least 13 months and that have reported sales in the current and comparable prior year month.

About Dunkin' Brands Group, Inc.

With more than 21,000 points of distribution in more than 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 the fourth quarter 2019, Dunkin' Brands' 100 percent franchised business model included over 13,000 Dunkin' restaurants and more than 8,000 Baskin-Robbins restaurants. Dunkin' Brands Group, Inc. is headquartered in Canton, Mass.





Contact(s):
Stacey Caravella (Investors)
 
Karen Raskopf (Media)
Senior Director, Investor Relations
 
SVP, Corporate Communications
Dunkin’ Brands Group, Inc.
 
Dunkin’ Brands Group, Inc.
investor.relations@dunkinbrands.com
 
karen.raskopf@dunkinbrands.com
781-737-3200
 
781-737-5200






DUNKIN’ BRANDS GROUP, INC. AND SUBSIDIARIES
Consolidated Statements of Operations
(In thousands, except per share data)
(Unaudited)
 
 
Three months ended
 
Fiscal year ended
 
 
December 28, 2019
 
December 29, 2018
 
December 28, 2019
 
December 29, 2018
Revenues:
 
 
 
 
 
 
 
 
Franchise fees and royalty income(1)
 
$
149,621

 
142,602

 
604,431

 
578,342

Advertising fees and related income
 
124,171

 
118,573

 
499,303

 
493,590

Rental income(2)
 
29,980

 
24,988

 
122,671

 
104,413

Sales of ice cream and other products(1)
 
18,962

 
20,413

 
91,362

 
95,197

Other revenues
 
13,183

 
13,048

 
52,460

 
50,075

Total revenues
 
335,917

 
319,624

 
1,370,227

 
1,321,617

Operating costs and expenses:
 
 
 
 
 
 
 
 
Occupancy expenses—franchised restaurants(2)
 
20,249

 
15,043

 
79,244

 
58,102

Cost of ice cream and other products
 
16,047

 
16,456

 
75,771

 
77,412

Advertising expenses
 
126,857

 
119,736

 
506,755

 
498,019

General and administrative expenses
 
62,220

 
63,670

 
238,678

 
246,792

Depreciation
 
4,513

 
4,837

 
18,429

 
19,932

Amortization of other intangible assets(2)
 
4,596

 
5,201

 
18,454

 
21,113

Long-lived asset impairment charges
 
190

 
439

 
551

 
1,648

Total operating costs and expenses
 
234,672

 
225,382

 
937,882

 
923,018

Net income of equity method investments
 
4,193

 
3,238

 
17,517

 
14,903

Other operating income (loss), net
 
245

 
(921
)
 
1,188

 
(1,670
)
Operating income
 
105,683

 
96,559

 
451,050

 
411,832

Other income (expense), net:
 
 
 
 
 


 
 
Interest income
 
2,028

 
2,112

 
9,934

 
7,200

Interest expense
 
(31,653
)
 
(31,801
)
 
(128,411
)
 
(128,748
)
Loss on debt extinguishment
 

 

 
(13,076
)
 

Other income (loss), net
 
73

 
(383
)
 
(235
)
 
(1,083
)
Total other expense, net
 
(29,552
)
 
(30,072
)
 
(131,788
)
 
(122,631
)
Income before income taxes
 
76,131

 
66,487

 
319,262

 
289,201

Provision for income taxes
 
18,417

 
13,298

 
77,238

 
59,295

Net income
 
$
57,714

 
53,189

 
242,024

 
229,906

 
 
 
 
 
 
 
 
 
Earnings per share—basic
 
$
0.70

 
0.64

 
2.92

 
2.75

Earnings per share—diluted
 
0.69

 
0.64

 
2.89

 
2.71

(1) For the three months ended December 28, 2019 and December 29, 2018, $3.2 million and $2.9 million, respectively, and for the fiscal years ended December 28, 2019 and December 29, 2018, $15.7 million and $15.1 million, respectively, of sales of ice cream and other products have been allocated to franchise fees and royalty income as consideration for the use of the franchise license.
(2) The Company adopted new guidance for lease accounting in the first quarter of fiscal year 2019 on a modified retrospective transition method and elected the option to not restate comparative periods. See "Adoption of New Accounting Standard" for further detail.






DUNKIN’ BRANDS GROUP, INC. AND SUBSIDIARIES
Consolidated Balance Sheets
(In thousands)
(Unaudited)
 
 
December 28,
2019
 
December 29,
 2018
Assets
 
 
 
 
Current assets:
 
 
 
 
Cash and cash equivalents
 
$
621,152

 
517,594

Restricted cash
 
85,644

 
79,008

Accounts receivable, net
 
76,019

 
75,963

Notes and other receivables, net
 
57,174

 
64,412

Prepaid income taxes
 
16,701

 
27,005

Prepaid expenses and other current assets
 
50,611

 
49,491

Total current assets
 
907,301

 
813,473

Property, equipment, and software, net
 
223,120

 
209,202

Operating lease assets(1)
 
371,264

 

Equity method investments
 
154,812

 
146,395

Goodwill
 
888,286

 
888,265

Other intangible assets, net
 
1,302,721

 
1,334,767

Other assets
 
72,520

 
64,479

Total assets
 
$
3,920,024

 
3,456,581

Liabilities and Stockholders’ Deficit
 
 
 
 
Current liabilities:
 
 
 
 
Current portion of long-term debt
 
$
31,150

 
31,650

Operating lease liabilities(1)
 
35,863

 

Accounts payable
 
89,413

 
80,037

Deferred revenue
 
39,950

 
38,541

Other current liabilities
 
386,050

 
389,353

Total current liabilities
 
582,426

 
539,581

Long-term debt, net
 
3,004,216

 
3,010,626

Operating lease liabilities(1)
 
380,647

 

Deferred revenue
 
324,854

 
331,980

Deferred income taxes, net
 
197,673

 
204,027

Other long-term liabilities
 
18,218

 
83,164

Total long-term liabilities
 
3,925,608

 
3,629,797

Stockholders' deficit:
 
 
 
 
Common stock
 
83

 
82

Additional paid-in capital
 
561,345

 
642,017

Treasury stock, at cost
 
(64
)
 
(1,060
)
Accumulated deficit
 
(1,129,565
)
 
(1,338,709
)
Accumulated other comprehensive loss
 
(19,809
)
 
(15,127
)
Total stockholders’ deficit
 
(588,010
)
 
(712,797
)
Total liabilities and stockholders’ deficit
 
$
3,920,024

 
3,456,581

(1) The Company adopted new guidance for lease accounting in the first quarter of fiscal year 2019 on a modified retrospective transition method and elected the option to not restate comparative periods. See "Adoption of New Accounting Standard" for further detail.






DUNKIN’ BRANDS GROUP, INC. AND SUBSIDIARIES
Condensed Consolidated Statements of Cash Flows
(In thousands)
(Unaudited)
 
 
Fiscal year ended
 
 
December 28, 2019
 
December 29, 2018
 
 
 
 
 
Net cash provided by operating activities
 
$
297,734

 
268,955

Cash flows from investing activities:
 
 
 
 
Additions to property, equipment, and software
 
(36,762
)
 
(51,855
)
Other, net
 
1,270

 
20

Net cash used in investing activities
 
(35,492
)
 
(51,835
)
Cash flows from financing activities:
 
 
 
 
Proceeds from issuance of long-term debt
 
1,700,000

 

Repayment of long-term debt
 
(1,707,025
)
 
(31,600
)
Payment of debt issuance and other debt-related costs
 
(17,937
)
 

Dividends paid on common stock
 
(124,089
)
 
(114,828
)
Repurchases of common stock, including accelerated share repurchases
 
(29,715
)
 
(680,368
)
Exercise of stock options
 
30,729

 
95,331

Other, net
 
(4,611
)
 
(895
)
Net cash used in financing activities
 
(152,648
)
 
(732,360
)
Effect of exchange rates on cash, cash equivalents, and restricted cash
 
62

 
(538
)
Increase (decrease) in cash, cash equivalents, and restricted cash
 
109,656

 
(515,778
)
Cash, cash equivalents, and restricted cash, beginning of period
 
598,321

 
1,114,099

Cash, cash equivalents, and restricted cash, end of period
 
$
707,977

 
598,321






DUNKIN’ BRANDS GROUP, INC. AND SUBSIDIARIES
Non-GAAP Reconciliations
(In thousands, except share and per share data)
(Unaudited)
 
 
Three months ended
 
Fiscal year ended
 
 
December 28, 2019
 
December 29, 2018
 
December 28, 2019
 
December 29, 2018
 
 
 
 
 
 
 
 
 
Operating income
 
$
105,683

 
96,559

 
451,050

 
411,832

Operating income margin
 
31.5
%
 
30.2
%
 
32.9
%
 
31.2
%
Adjustments:
 


 


 
 
 
 
Amortization of other intangible assets
 
$
4,596

 
5,201

 
18,454

 
21,113

Long-lived asset impairment charges
 
190

 
439

 
551

 
1,648

Adjusted operating income
 
$
110,469

 
102,199

 
470,055

 
434,593

Adjusted operating income margin
 
32.9
%
 
32.0
%
 
34.3
%
 
32.9
%
 
 


 


 
 
 
 
Net income
 
$
57,714

 
53,189

 
242,024

 
229,906

Adjustments:
 
 
 
 
 
 
 
 
Amortization of other intangible assets
 
4,596

 
5,201

 
18,454

 
21,113

Long-lived asset impairment charges
 
190

 
439

 
551

 
1,648

Loss on debt extinguishment
 

 

 
13,076

 

Tax impact of adjustments(1)
 
(1,340
)
 
(1,579
)
 
(8,983
)
 
(6,373
)
Adjusted net income
 
$
61,160

 
57,250

 
265,122

 
246,294

 
 
 
 
 
 
 
 
 
Adjusted net income
 
$
61,160

 
57,250

 
265,122

 
246,294

Weighted-average number of common shares – diluted
 
83,702,261

 
83,744,361

 
83,674,613

 
84,960,791

Diluted adjusted earnings per share
 
$
0.73

 
0.68

 
3.17

 
2.90

 
 
 
 
 
 
 
 
 
(1) Tax impact of adjustments calculated at a 28% effective tax rate.






DUNKIN’ BRANDS GROUP, INC. AND SUBSIDIARIES
Non-GAAP Reconciliations (continued)
(Unaudited)
 
 
Fiscal year ended
December 26, 2020
 
 
Low
 
High
 
 
(projected)
 
(projected)
Diluted earnings per share
 
$
2.96

 
3.05

Adjustments:
 
 
 
 
Amortization of other intangible assets
 
0.23

 
0.22

Long-lived asset impairment charges
 
0.04

 

Tax impact of adjustments(1)
 
(0.07
)
 
(0.06
)
Diluted adjusted earnings per share
 
$
3.16

 
3.21

 
 
 
 
 
(1) Tax impact of adjustments calculated at a 28% effective tax rate.



Exhibit
Exhibit 99.2
https://cdn.kscope.io/9e7d5233ab0ab56cc7454dc00ba9f0a9-logonovember2019a.jpg




Dunkin’ Brands Announces Increased Cash Dividend
  
CANTON, Mass. (February 6, 2020) – Dunkin’ Brands Group, Inc. (Nasdaq: DNKN), the parent company of Dunkin’ and Baskin-Robbins, today announced that its Board of Directors has declared a quarterly cash dividend to shareholders. The dividend of $0.4025 per share of common stock is payable on March 18, 2020 to shareholders of record as of the close of business on March 9, 2020. This represents a 7.3 percent increase over the prior quarter's dividend.

# # #
 
About Dunkin' Brands Group, Inc.

With more than 21,000 points of distribution in more than 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 the fourth quarter 2019, Dunkin' Brands' 100 percent franchised business model included over 13,000 Dunkin' restaurants and more than 8,000 Baskin-Robbins restaurants. Dunkin' Brands Group, Inc. is headquartered in Canton, Mass.



Contact(s):

Stacey Caravella (Investors)
 
Michelle King (Media)
Sr. Director, Investor Relations
 
Sr. Director, Global Public Relations
Dunkin’ Brands Group, Inc.
 
Dunkin’ Brands Group, Inc.
investor.relations@dunkinbrands.com
 
michelle.king@dunkinbrands.com
781-737-3200
 
781-737-5200