CANTON, Mass., July 21,
2016 /PRNewswire/ --
Second quarter highlights include:
- Dunkin' Donuts U.S. comparable store sales growth of
0.5%
- Baskin-Robbins U.S. comparable store sales growth of
0.6%
- Added 198 net new restaurants worldwide, including 73 net
new Dunkin' Donuts in the U.S.
- Revenues increased 2.3%
- Diluted EPS increased 22.7% to $0.54
- Diluted adjusted EPS increased 14.0% to $0.57
- Dunkin' Donuts K-Cup® pods named one of the top new consumer
packaged goods products by IRI Market Advantage
Dunkin' Brands Group, Inc. (Nasdaq: DNKN), the parent company of
Dunkin' Donuts (DD) and Baskin-Robbins (BR), today reported results
for the second quarter ended June 25, 2016.
"We are pleased that we were able to grow both operating income
and earnings per share at a significantly faster pace than revenue
in the second quarter," said Dunkin' Brands Chairman and Chief
Executive Officer Nigel Travis. "As
for our five-part plan designed to drive Dunkin' Donuts U.S.
comparable store sales growth, while we are still in the early
phases of implementation and have not yet seen an acceleration of
top-line sales, we are making significant progress with our
initiatives. We are especially delighted with our efforts to
continue to build our coffee authority, as evidenced by the second
quarter growth in our espresso category and the launch of our Cold
Brew coffee, and we continue to improve the guest experience
through digital technologies like On-The-Go mobile ordering that
enables DD Perks members to order in advance and skip to the front
of the line."
"Consistent with our asset light-business model we are selling
many of our company-owned stores, the majority of which are in the
Dallas market, and as a result,
are updating our revenue growth target for 2016 to three to five
percent from four to six percent. We're pleased to have new and
existing franchisees taking over this important market and look
forward to the next phase of growth in Texas. We anticipate that by the end of the
year, we will have fewer than 5 company-owned stores remaining,"
said Paul Carbone, Chief Financial
Officer, Dunkin' Brands Group, Inc. "While the sale of these stores
impacts our revenue growth, we do not anticipate that there will be
a material impact to our profits. Therefore, we are reaffirming all
of our other targets for our 2016 performance."
SECOND QUARTER 2016 KEY FINANCIAL HIGHLIGHTS
($ in millions,
except per share data)
|
Three months
ended
|
|
Increase
(Decrease)
|
Amounts and
percentages may not recalculate due to rounding
|
June
25, 2016
|
|
June
27, 2015
|
|
$ /
#
|
|
%
|
|
Systemwide
sales1
|
$
|
2,774.9
|
|
2,672.4
|
|
|
102.4
|
|
3.8
|
%
|
Comparable store
sales growth (decline):
|
|
|
|
|
|
|
|
|
|
|
DD
U.S.2
|
|
0.5
|
%
|
2.8
|
%
|
|
|
|
|
|
BR
U.S.2
|
|
0.6
|
%
|
4.1
|
%
|
|
|
|
|
|
DD
International
|
|
(3.1)
|
%
|
(0.1)
|
%
|
|
|
|
|
|
BR
International
|
|
(6.6)
|
%
|
(2.5)
|
%
|
|
|
|
|
|
Development
data:
|
|
|
|
|
|
|
|
|
|
|
Consolidated global
net POD development3
|
|
198
|
|
154
|
|
|
44
|
|
28.6
|
%
|
DD global PODs at
period end
|
|
11,941
|
|
11,460
|
|
|
481
|
|
4.2
|
%
|
BR global PODs at
period end
|
|
7,728
|
|
7,635
|
|
|
93
|
|
1.2
|
%
|
Consolidated global
PODs at period end
|
|
19,669
|
|
19,095
|
|
|
574
|
|
3.0
|
%
|
Financial
data:
|
|
|
|
|
|
|
|
|
|
|
Revenues
|
$
|
216.3
|
|
211.4
|
|
|
4.9
|
|
2.3
|
%
|
Operating
income
|
|
106.1
|
|
92.6
|
|
|
13.6
|
|
14.6
|
%
|
Operating income
margin
|
|
49.1
|
%
|
43.8
|
%
|
|
|
|
|
|
Adjusted operating
income4
|
$
|
111.3
|
|
103.0
|
|
|
8.3
|
|
8.1
|
%
|
Adjusted operating
income margin4
|
|
51.5
|
%
|
48.7
|
%
|
|
|
|
|
|
Net income
|
$
|
49.6
|
|
42.3
|
|
|
7.3
|
|
17.2
|
%
|
Adjusted net
income4
|
|
52.7
|
|
48.5
|
|
|
4.1
|
|
8.5
|
%
|
Earnings per
share:
|
|
|
|
|
|
|
|
|
|
|
Common–basic
|
|
0.54
|
|
0.44
|
|
|
0.10
|
|
22.7
|
%
|
Common–diluted
|
|
0.54
|
|
0.44
|
|
|
0.10
|
|
22.7
|
%
|
Diluted adjusted
earnings per share4
|
|
0.57
|
|
0.50
|
|
|
0.07
|
|
14.0
|
%
|
Weighted average
number of common shares – diluted (in millions)
|
|
92.5
|
|
96.9
|
|
|
(4.4)
|
|
(4.6)
|
%
|
|
1
Systemwide sales include sales at franchisee- and company-operated
restaurants, including joint ventures. While we do not record sales
by franchisees or licensees
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. Beginning in the first quarter
of fiscal year 2016, we began presenting systemwide sales rather
than franchisee-reported sales,
which excludes sales of company-operated restaurants, as we believe
the systemwide sales information is a more complete metric in
obtaining an understanding of
our financial performance.
|
|
2
Comparable store sales growth for DD U.S. and BR U.S. for the three
months ended June 27, 2015 have been revised to include only those
restaurants that have been open at least 78 weeks (approximately 18
months) to conform to the current period calculation, whereas
previously reported figures included only those restaurants that
were open at least 54 weeks (approximately 12 months). Please refer
to "Non-GAAP Measures and Statistical Data" for further
detail.
|
|
3
Consolidated global net POD development for the three months ended
June 25, 2016 reflects the previously-announced closing of 9
self-serve coffee stations within Speedway locations.
|
|
4 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. Please refer to
"Non-GAAP Measures and Statistical
Data" and "Dunkin' Brands Group, Inc. Non-GAAP Reconciliations" for
further detail.
|
Global systemwide sales growth in the second quarter was
primarily attributable to global store development and Dunkin'
Donuts U.S. comparable store sales growth (which includes stores
open 78 weeks or more).
Dunkin' Donuts U.S. comparable store sales growth in the second
quarter was driven by increased average ticket offset by a decline
in traffic. Growth was driven by strong beverage sales, led
by iced coffee and hot and iced espresso-based beverages, and
breakfast sandwiches, led by the GranDDe Burrito and the Bacon
Supreme Omelet breakfast sandwich.
Baskin-Robbins U.S. comparable store sales growth was driven by
increased average ticket offset by a decline in traffic. Growth was
driven by sales of cups and cones led by the new Warm Cookie Ice
Cream Sandwich.
In the second quarter, Dunkin' Brands franchisees and licensees
opened 198 net new restaurants around the globe. This included 78
net new Baskin-Robbins International locations, 73 net new Dunkin'
Donuts U.S. locations (including the closing of 9 Speedway
self-serve coffee stations), 35 net new Dunkin' Donuts
International locations, and 12 net new Baskin-Robbins U.S.
locations. Additionally, Dunkin' Donuts U.S. franchisees
remodeled 107 restaurants and Baskin-Robbins U.S. franchisees
remodeled 36 restaurants during the quarter.
Revenues for the second quarter increased 2.3% compared to the
prior year period due primarily to increased royalty income as a
result of systemwide sales growth and an increase in other revenues
due primarily to increased license fees recognized in connection
with the Dunkin' K-Cup® pod licensing agreement and an increase in
transfer fee income. These increases in revenues were offset by a
decrease in sales at company-operated restaurants driven by a net
decrease in the number of company-operated restaurants, as well as
a decrease in sales of ice cream and other products. As of
June 25, 2016, there were 29 points of distribution that were
company-operated.
Operating income and adjusted operating income for the second
quarter increased $13.6 million, or
14.6%, and $8.3 million, or 8.1%,
respectively, from the prior year period primarily as a result of
the increases in royalty income and other revenues, offset by a
decrease in net margin on ice cream and other products from
international markets. Additionally, operating income in the prior
year period was unfavorably impacted by costs incurred related to
the final settlement of our Canadian pension plan as a result of
the closure of our Canadian ice cream manufacturing plant in fiscal
year 2012.
Net income and adjusted net income for the second quarter
increased by $7.3 million, or 17.2%,
and $4.1 million, or 8.5%,
respectively, compared to the prior year period primarily as a
result of the increases in operating income and adjusted operating
income of $13.6 million and
$8.3 million, respectively, offset by
an increase in income tax expense.
Diluted earnings per share and diluted adjusted earnings per
share increased by 22.7% to $0.54 and
14.0% to $0.57, respectively, for the
second quarter compared to the prior year period as a result of the
increases in net income and adjusted net income, respectively, as
well as a decrease in shares outstanding. The decrease in shares
outstanding from the prior year period was due primarily to the
repurchase of shares since the second quarter of 2015, offset by
the exercise of stock options.
SECOND QUARTER 2016 SEGMENT RESULTS
Beginning in the first quarter of fiscal year 2016, certain
segment profit amounts in the tables below have been reclassified
as a result of the realignment of our organizational structure to
better support our segment operations, including the allocation of
previously unallocated costs. Additionally, revenues, segment
profit, points of distribution information, and systemwide sales
related to restaurants located in Puerto
Rico were previously included in the Baskin-Robbins
International segment, but are now included in the Baskin-Robbins
U.S. segment based on functional responsibility. Prior period
amounts in the tables below have been revised to reflect these
changes for all periods presented.
Amounts and
percentages may not recalculate due to rounding
|
|
Three months
ended
|
|
Increase
(Decrease)
|
Dunkin' Donuts
U.S.
|
|
June 25,
2016
|
|
June 27,
2015
|
|
$ /
#
|
%
|
|
($ in thousands
except as otherwise noted)
|
Comparable store
sales growth1
|
|
|
0.5
|
%
|
|
2.8
|
%
|
|
|
|
Systemwide sales (in
millions)2
|
|
$
|
2,056.9
|
|
|
1,961.6
|
|
|
95.2
|
|
4.9
|
%
|
|
|
|
|
|
|
|
|
Revenues:
|
|
|
|
|
|
|
|
Royalty
income
|
|
$
|
112,031
|
|
|
106,343
|
|
|
5,688
|
|
5.3
|
%
|
Franchise
fees
|
|
9,337
|
|
|
8,661
|
|
|
676
|
|
7.8
|
%
|
Rental
income
|
|
24,928
|
|
|
25,613
|
|
|
(685)
|
|
(2.7)
|
%
|
Sales at
company-operated restaurants
|
|
4,643
|
|
|
7,727
|
|
|
(3,084)
|
|
(39.9)
|
%
|
Other
revenues
|
|
2,721
|
|
|
1,424
|
|
|
1,297
|
|
91.1
|
%
|
Total
revenues
|
|
$
|
153,660
|
|
|
149,768
|
|
|
3,892
|
|
2.6
|
%
|
|
|
|
|
|
|
|
|
Segment
profit
|
|
$
|
116,085
|
|
|
108,308
|
|
|
7,777
|
|
7.2
|
%
|
|
|
|
|
|
|
|
|
Points of
distribution
|
|
8,573
|
|
|
8,240
|
|
|
333
|
|
4.0
|
%
|
Gross
openings
|
|
107
|
|
|
115
|
|
|
(8)
|
|
(7.0)
|
%
|
Net
openings3
|
|
73
|
|
|
80
|
|
|
(7)
|
|
(8.8)
|
%
|
|
1
Comparable store sales growth for the three months ended June 27,
2015 have been revised to include only those restaurants that have
been open at least 78 weeks (approximately 18 months) to conform to
the current period calculation. Please refer to "Non-GAAP Measures
and Statistical Data" for further detail.
|
|
2
Systemwide sales include sales at franchisee- and company-operated
restaurants, including joint ventures. We do not record sales by
franchisees or licensees as
revenue and such sales are not included in our consolidated
financial statements. Please refer to "Non-GAAP Measures and
Statistical Data" for further detail.
Beginning in the first quarter of fiscal year 2016, we began
presenting systemwide sales rather than franchisee-reported sales,
which excludes sales of company-
operated restaurants.
|
|
3 Net
openings reflects the previously-announced closing of 9 self-serve
coffee stations within Speedway locations.
|
Dunkin' Donuts U.S. second quarter revenues of $153.7 million represented an increase of 2.6%
over the prior year period. The increase was primarily a result of
increased royalty income due to an increase in systemwide sales, as
well as an increase in other revenues driven primarily by increases
in transfer fee income and refranchising gains, offset by a
decrease in sales at company-operated restaurants due to a net
decrease in the number of company-operated restaurants.
Dunkin' Donuts U.S. segment profit in the second quarter
increased $7.8 million over the prior
year period to $116.1 million, which
was driven primarily by the increases in royalty income and other
revenues, as well as an increase in other operating income due
primarily to a gain recognized in connection with the sale of
company-operated restaurants.
Amounts and
percentages may not recalculate due to rounding
|
|
Three months
ended
|
|
Increase
(Decrease)
|
Dunkin' Donuts
International
|
|
June 25,
2016
|
|
June 27,
2015
|
|
$ /
#
|
%
|
|
($ in thousands
except as otherwise noted)
|
Comparable store
sales decline
|
|
(3.1)%
|
|
|
(0.1)%
|
|
|
|
|
Systemwide sales (in
millions)1
|
|
$
|
175.0
|
|
|
173.6
|
|
|
1.4
|
|
0.8
|
%
|
|
|
|
|
|
|
|
|
Revenues:
|
|
|
|
|
|
|
|
Royalty
income
|
|
$
|
4,218
|
|
|
4,087
|
|
|
131
|
|
3.2
|
%
|
Franchise
fees
|
|
643
|
|
|
1,334
|
|
|
(691)
|
|
(51.8)
|
%
|
Rental
income
|
|
—
|
|
|
5
|
|
|
(5)
|
|
(100.0)
|
%
|
Other
revenues
|
|
357
|
|
|
(5)
|
|
|
362
|
|
n/m
|
Total
revenues
|
|
$
|
5,218
|
|
|
5,421
|
|
|
(203)
|
|
(3.7)
|
%
|
|
|
|
|
|
|
|
|
Segment
profit
|
|
$
|
1,975
|
|
|
2,543
|
|
|
(568)
|
|
(22.3)
|
%
|
|
|
|
|
|
|
|
|
Points of
distribution
|
|
3,368
|
|
|
3,220
|
|
|
148
|
|
4.6
|
%
|
Gross
openings
|
|
100
|
|
|
126
|
|
|
(26)
|
|
(20.6)
|
%
|
Net
openings
|
|
35
|
|
|
13
|
|
|
22
|
|
169.2
|
%
|
|
1
Systemwide sales include sales at franchisee- and company-operated
restaurants, including joint ventures. We do not record sales by
franchisees or licensees as
revenue and such sales are not included in our consolidated
financial statements. Please refer to "Non-GAAP Measures and
Statistical Data" for further detail.
|
Dunkin' Donuts International second quarter systemwide sales
increased 0.8% from the prior year period. Sales growth in
Asia and Europe was offset by a decline in South Korea. Sales in South Korea, South
America, and Asia were
negatively impacted by unfavorable foreign exchange rates. On a
constant currency basis, systemwide sales increased by
approximately 5%.
Dunkin' Donuts International second quarter revenues of
$5.2 million represented a decrease
of 3.7% from the prior year period. The decrease in revenues was
primarily a result of a decline in franchise fees, offset by an
increase in other revenues due to an increase in transfer fee
income, as well as an increase in royalty income.
Segment profit for Dunkin' Donuts International decreased
$0.6 million to $2.0 million in the second quarter primarily as a
result of a decrease in net income from our South Korea joint venture, as well as the
decrease in revenues.
Amounts and
percentages may not recalculate due to rounding
|
|
Three months
ended
|
|
Increase
(Decrease)
|
Baskin-Robbins
U.S.
|
|
June 25,
2016
|
|
June 27,
2015
|
|
$ /
#
|
%
|
|
($ in thousands
except as otherwise noted)
|
Comparable store
sales growth1
|
|
|
0.6
|
%
|
|
4.1
|
%
|
|
|
|
Systemwide sales (in
millions)2
|
|
$
|
183.0
|
|
|
181.2
|
|
|
1.8
|
|
1.0
|
%
|
|
|
|
|
|
|
|
|
Revenues:
|
|
|
|
|
|
|
|
Royalty
income
|
|
$
|
8,824
|
|
|
8,682
|
|
|
142
|
|
1.6
|
%
|
Franchise
fees
|
|
171
|
|
|
148
|
|
|
23
|
|
15.5
|
%
|
Rental
income
|
|
721
|
|
|
778
|
|
|
(57)
|
|
(7.3)
|
%
|
Sales of ice cream
and other products
|
|
661
|
|
|
1,293
|
|
|
(632)
|
|
(48.9)
|
%
|
Other
revenues
|
|
3,361
|
|
|
3,251
|
|
|
110
|
|
3.4
|
%
|
Total
revenues
|
|
$
|
13,738
|
|
|
14,152
|
|
|
(414)
|
|
(2.9)
|
%
|
|
|
|
|
|
|
|
|
Segment
profit
|
|
$
|
10,738
|
|
|
9,590
|
|
|
1,148
|
|
12.0
|
%
|
|
|
|
|
|
|
|
|
Points of
distribution
|
|
2,530
|
|
|
2,528
|
|
|
2
|
|
0.1
|
%
|
Gross
openings
|
|
31
|
|
|
22
|
|
|
9
|
|
40.9
|
%
|
Net
openings
|
|
12
|
|
|
2
|
|
|
10
|
|
500.0
|
%
|
|
1
Comparable store sales growth for the three months ended June 27,
2015 have been revised to include only those restaurants that have
been open at least 78
weeks (approximately 18 months) to conform to the current period
calculation. Please refer to "Non-GAAP Measures and Statistical
Data" for further detail.
|
|
2
Systemwide sales include sales at franchisee- and company-operated
restaurants, including joint ventures. We do not record sales by
franchisees or licensees as
revenue and such sales are not included in our consolidated
financial statements. Please refer to "Non-GAAP Measures and
Statistical Data" for further detail.
Additionally, the prior period has been revised to reflect a
reclassification of systemwide sales generated in Puerto Rico from
Baskin-Robbins International to Baskin-
Robbins U.S.
|
Baskin-Robbins U.S. second quarter revenue decreased 2.9% from
the prior year period to $13.7
million due primarily to a decrease in sales of ice cream
and other products, offset by an increase in royalty income and an
increase in other revenues driven by an increase in licensing
income. A portion of the fluctuations in licensing income and sales
of ice cream and other products can be attributed to a shift in
certain franchisees that previously purchased ice cream from the
Company are now purchasing ice cream directly from our third-party
ice cream manufacturer through which we earn a licensing fee.
Segment profit for Baskin-Robbins U.S. increased $1.1 million in the second quarter, or 12.0%,
over the prior year period primarily as a result of a reduction in
general and administrative expenses, due primarily to expenses
incurred in the prior year period related to brand-building
activities and incentive compensation, as well as the increases in
other revenues and royalty income.
Amounts and
percentages may not recalculate due to rounding
|
|
Three months
ended
|
|
Increase
(Decrease)
|
Baskin-Robbins
International
|
|
June 25,
2016
|
|
June 27,
2015
|
|
$ /
#
|
%
|
|
($ in thousands
except as otherwise noted)
|
Comparable store
sales decline
|
|
(6.6)%
|
|
|
(2.5)%
|
|
|
|
|
Systemwide sales (in
millions)1
|
|
$
|
360.0
|
|
|
356.1
|
|
|
4.0
|
|
1.1
|
%
|
|
|
|
|
|
|
|
|
Revenues:
|
|
|
|
|
|
|
|
Royalty
income
|
|
$
|
1,765
|
|
|
1,645
|
|
|
120
|
|
7.3
|
%
|
Franchise
fees
|
|
206
|
|
|
243
|
|
|
(37)
|
|
(15.2)
|
%
|
Rental
income
|
|
113
|
|
|
119
|
|
|
(6)
|
|
(5.0)
|
%
|
Sales of ice cream
and other products
|
|
32,716
|
|
|
33,462
|
|
|
(746)
|
|
(2.2)
|
%
|
Other
revenues
|
|
40
|
|
|
103
|
|
|
(63)
|
|
(61.2)
|
%
|
Total
revenues
|
|
$
|
34,840
|
|
|
35,572
|
|
|
(732)
|
|
(2.1)
|
%
|
|
|
|
|
|
|
|
|
Segment
profit
|
|
$
|
11,079
|
|
|
11,764
|
|
|
(685)
|
|
(5.8)
|
%
|
|
|
|
|
|
|
|
|
Points of
distribution
|
|
5,198
|
|
|
5,107
|
|
|
91
|
|
1.8
|
%
|
Gross
openings
|
|
139
|
|
|
123
|
|
|
16
|
|
13.0
|
%
|
Net
openings
|
|
78
|
|
|
59
|
|
|
19
|
|
32.2
|
%
|
|
1
Systemwide sales include sales at franchisee- and company-operated
restaurants, including joint ventures. We do not record sales by
franchisees or licensees as
revenue and such sales are not included in our consolidated
financial statements. Please refer to "Non-GAAP Measures and
Statistical Data" for further detail. The
prior period has been revised to reflect a reclassification of
systemwide sales generated in Puerto Rico from Baskin-Robbins
International to Baskin-Robbins U.S.
|
Baskin-Robbins International systemwide sales increased 1.1% in
the second quarter compared to the prior year period driven by
sales growth in Japan and the
Middle East, offset by sales
declines in South Korea and
Europe. Sales in Japan were positively impacted by favorable
foreign exchange rates while sales in South Korea, Europe, and Asia were negatively impacted by unfavorable
foreign exchange rates. On a constant currency basis, systemwide
sales increased by approximately 1%.
Baskin-Robbins International second quarter revenues decreased
2.1% from the prior year period to $34.8
million due primarily to a decrease in sales of ice cream
products. Systemwide sales and sales of ice cream products are not
directly correlated within a given period due to the lag between
shipment of products to licensees and retail sales at franchised
restaurants, as well as the overall timing of deliveries between
fiscal quarters.
Second quarter segment profit decreased 5.8% from the prior year
period to $11.1 million as a result
of a decrease in net income from our South Korea joint venture and a decrease in
net margin on ice cream driven primarily by a decline in sales
volume and an increase in commodity costs, offset by a reduction in
bad debt expense and other general and administrative expenses.
COMPANY UPDATES
- The Company today announced that the Board of Directors
declared a third quarter cash dividend of $0.30 per share, payable on August 31, 2016 to shareholders of record as of
the close of business on August 22,
2016.
- Earlier this week the Company announced that in the first year
since Dunkin' K-Cup® pods were made available at retail outlets
nationwide through partners The J.M. Smucker Company (NYSE: SJM)
and Keurig Green Mountain, Inc. (NASDAQ: GMCR), more than 300
million of Dunkin' K-Cup Pods were sold with retail sales totaling
nearly $220 million. IRI Market
Advantage, a market research company focused on the consumer
packaged goods industry, reported the results and included Dunkin'
K-Cup pods on its list of Rising Stars in Food &
Beverage.
FISCAL YEAR 2016 TARGETS
As described below, the Company is reiterating and updating
certain targets regarding its 2016 expectations. The Company is now
also including GAAP targets for operating income and diluted
earnings per share.
- The Company continues to expect Dunkin' Donuts U.S. comparable
store sales growth of 0 to 2 percent and Baskin-Robbins U.S.
comparable store sales growth of 1 to 3 percent.
- The Company continues to expect that Dunkin' Donuts U.S. will
add between 430 and 460 net new restaurants, excluding the closure
of approximately 30 Speedway self-serve coffee stations. The
Company continues to expect Baskin-Robbins U.S. will add between 5
and 10 net new restaurants.
- Internationally, the Company continues to target opening
approximately 200 net new restaurants across the two brands. It
continues to expect net income of equity method investments to be
slightly less than 2015 full-year results.
- The Company now expects revenue growth of between 3 and 5
percent as a result of the sale of company-owned stores in the
second quarter as well as anticipated future sales of company-owned
stores in 2016.
- The Company expects GAAP operating income growth of between 27
and 30 percent and GAAP diluted earnings per share of $2.02 to $2.08 on a 53-week basis.
- The Company continues to expect adjusted operating income
growth of between 8 and 10 percent and diluted adjusted earnings
per share of $2.20 to $2.22 on a
53-week basis.
- The Company is updating its full-year share count guidance to
93,000,0000 (previously it was 94,000,000). It continues to expect
a 38.5 percent tax rate.
- Fiscal year 2016 is a 53-week year for the Company. The target
ranges for revenue, GAAP operating income growth, and adjusted
operating income growth are applicable on both a 52- and 53-week
basis. The impact of the 53rd week on GAAP diluted earnings per
share and diluted adjusted earnings per share is approximately
$0.03.
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. Non-GAAP
Reconciliations."
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 38608255.
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," 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 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 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. 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- and
company-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 "DD U.S. comparable store sales growth" and "BR
U.S. comparable store sales growth," which are calculated by
including only sales from franchisee- and company-operated
restaurants that have been open at least 78 weeks and that have
reported sales in the current and comparable prior year week.
Previously, DD U.S. comparable store sales growth and BR U.S.
comparable store sales growth were calculated including only sales
from franchisee- and company-operated restaurants that had been
open at least 54 weeks and that had reported sales in the current
and comparable prior year week. The calculation of this operating
measure was revised in the third quarter of 2015 to more accurately
reflect sales growth at comparable stores by minimizing the impact
of strong new store openings, particularly as we develop in newer
markets. All prior year amounts have been revised to conform to the
78-week calculation. There was no financial statement impact from
revising the calculation of this operating measure.
The Company uses "DD International comparable store sales
growth" and "BR International comparable store sales growth," which
are calculated by including only sales from franchisee- and
company-operated restaurants that have been open at least 54 weeks
and that have reported sales in the current and comparable prior
year week.
About Dunkin' Brands Group, Inc.
With more than 19,000 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 second quarter 2016,
Dunkin' Brands' nearly 100 percent franchised business model
included more than 11,900 Dunkin' Donuts restaurants and more than
7,700 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
|
|
Six months
ended
|
|
|
June 25,
2016
|
|
June 27,
2015
|
|
June 25,
2016
|
|
June 27,
2015
|
|
|
|
|
|
|
|
|
|
Revenues:
|
|
|
|
|
|
|
|
|
Franchise fees and
royalty income
|
|
$
|
137,195
|
|
|
131,143
|
|
|
260,978
|
|
|
246,468
|
|
Rental
income
|
|
25,769
|
|
|
26,535
|
|
|
48,994
|
|
|
50,162
|
|
Sales of ice cream
and other products
|
|
33,966
|
|
|
35,410
|
|
|
59,857
|
|
|
58,478
|
|
Sales at
company-operated restaurants
|
|
4,643
|
|
|
7,727
|
|
|
10,313
|
|
|
14,285
|
|
Other
revenues
|
|
14,736
|
|
|
10,609
|
|
|
25,943
|
|
|
27,936
|
|
Total
revenues
|
|
216,309
|
|
|
211,424
|
|
|
406,085
|
|
|
397,329
|
|
Operating costs and
expenses:
|
|
|
|
|
|
|
|
|
Occupancy
expenses—franchised restaurants
|
|
13,614
|
|
|
13,717
|
|
|
26,810
|
|
|
27,235
|
|
Cost of ice cream and
other products
|
|
22,827
|
|
|
22,876
|
|
|
40,061
|
|
|
38,222
|
|
Company-operated
restaurant expenses
|
|
5,297
|
|
|
7,757
|
|
|
11,790
|
|
|
14,615
|
|
General and
administrative expenses, net
|
|
63,459
|
|
|
68,349
|
|
|
124,654
|
|
|
126,189
|
|
Depreciation
|
|
5,178
|
|
|
4,991
|
|
|
10,311
|
|
|
10,101
|
|
Amortization of other
intangible assets
|
|
5,568
|
|
|
6,181
|
|
|
11,329
|
|
|
12,381
|
|
Long-lived asset
impairment charges
|
|
4
|
|
|
—
|
|
|
97
|
|
|
264
|
|
Total operating costs
and expenses
|
|
115,947
|
|
|
123,871
|
|
|
225,052
|
|
|
229,007
|
|
Net income of equity
method investments
|
|
3,717
|
|
|
3,951
|
|
|
6,681
|
|
|
6,898
|
|
Other operating
income, net
|
|
2,062
|
|
|
1,084
|
|
|
3,760
|
|
|
1,108
|
|
Operating
income
|
|
106,141
|
|
|
92,588
|
|
|
191,474
|
|
|
176,328
|
|
Other income
(expense), net:
|
|
|
|
|
|
|
|
|
Interest
income
|
|
124
|
|
|
116
|
|
|
273
|
|
|
238
|
|
Interest
expense
|
|
(24,972)
|
|
|
(25,095)
|
|
|
(49,853)
|
|
|
(47,259)
|
|
Loss on debt
extinguishment and refinancing transactions
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(20,554)
|
|
Other losses,
net
|
|
(102)
|
|
|
(12)
|
|
|
(472)
|
|
|
(557)
|
|
Total other expense,
net
|
|
(24,950)
|
|
|
(24,991)
|
|
|
(50,052)
|
|
|
(68,132)
|
|
Income before income
taxes
|
|
81,191
|
|
|
67,597
|
|
|
141,422
|
|
|
108,196
|
|
Provision for income
taxes
|
|
31,601
|
|
|
25,148
|
|
|
54,678
|
|
|
40,322
|
|
Net income including
noncontrolling interests
|
|
49,590
|
|
|
42,449
|
|
|
86,744
|
|
|
67,874
|
|
Net income (loss)
attributable to noncontrolling interests
|
|
—
|
|
|
131
|
|
|
—
|
|
|
(75)
|
|
Net income
attributable to Dunkin' Brands
|
|
$
|
49,590
|
|
|
42,318
|
|
|
86,744
|
|
|
67,949
|
|
|
|
|
|
|
|
|
|
|
Earnings per
share—basic
|
|
$
|
0.54
|
|
|
0.44
|
|
|
0.95
|
|
|
0.69
|
|
Earnings per
share—diluted
|
|
0.54
|
|
|
0.44
|
|
|
0.94
|
|
|
0.69
|
|
DUNKIN' BRANDS
GROUP, INC. AND SUBSIDIARIES
|
Condensed
Consolidated Balance Sheets
|
(In
thousands)
|
(Unaudited)
|
|
|
June 25,
2016
|
|
December 26,
2015
|
Assets
|
|
|
|
|
Current
assets:
|
|
|
|
|
Cash and cash
equivalents
|
|
$
|
248,206
|
|
|
260,430
|
|
Restricted
cash
|
|
72,150
|
|
|
71,917
|
|
Accounts, notes, and
other receivables, net
|
|
88,023
|
|
|
128,360
|
|
Other current
assets
|
|
92,285
|
|
|
97,117
|
|
Total current
assets
|
|
500,664
|
|
|
557,824
|
|
Property and
equipment, net
|
|
179,349
|
|
|
182,614
|
|
Equity method
investments
|
|
112,274
|
|
|
106,878
|
|
Goodwill and other
intangible assets, net
|
|
2,278,963
|
|
|
2,290,796
|
|
Other
assets
|
|
59,145
|
|
|
59,007
|
|
Total
assets
|
|
$
|
3,130,395
|
|
|
3,197,119
|
|
Liabilities and
Stockholders' Deficit
|
|
|
|
|
Current
liabilities:
|
|
|
|
|
Current portion of
long-term debt
|
|
$
|
25,000
|
|
|
25,000
|
|
Accounts
payable
|
|
18,061
|
|
|
18,663
|
|
Other current
liabilities
|
|
310,482
|
|
|
375,129
|
|
Total current
liabilities
|
|
353,543
|
|
|
418,792
|
|
Long-term debt,
net
|
|
2,411,234
|
|
|
2,420,600
|
|
Deferred income
taxes, net
|
|
468,139
|
|
|
476,510
|
|
Other long-term
liabilities
|
|
101,173
|
|
|
101,960
|
|
Total long-term
liabilities
|
|
2,980,546
|
|
|
2,999,070
|
|
Total stockholders'
deficit
|
|
(203,694)
|
|
|
(220,743)
|
|
Total liabilities and
stockholders' deficit
|
|
$
|
3,130,395
|
|
|
3,197,119
|
|
DUNKIN' BRANDS
GROUP, INC. AND SUBSIDIARIES
|
Condensed
Consolidated Statements of Cash Flows
|
(In
thousands)
|
(Unaudited)
|
|
|
Six months
ended
|
|
|
June 25,
2016
|
|
June 27,
2015
|
|
|
|
|
|
Net cash provided by
operating activities
|
|
$
|
80,043
|
|
|
47,677
|
|
Cash flows from
investing activities:
|
|
|
|
|
Additions to property
and equipment
|
|
(6,775)
|
|
|
(14,362)
|
|
Proceeds from sale of
real estate and company-operated restaurants
|
|
7,427
|
|
|
1,586
|
|
Other, net
|
|
(872)
|
|
|
(2,887)
|
|
Net cash used in
investing activities
|
|
(220)
|
|
|
(15,663)
|
|
Cash flows from
financing activities:
|
|
|
|
|
Proceeds from
issuance of long-term debt
|
|
—
|
|
|
2,500,000
|
|
Repayment of
long-term debt
|
|
(12,500)
|
|
|
(1,825,273)
|
|
Payment of debt
issuance and other debt-related costs
|
|
—
|
|
|
(41,301)
|
|
Dividends paid on
common stock
|
|
(54,851)
|
|
|
(50,815)
|
|
Repurchases of common
stock, including accelerated share repurchases
|
|
(30,000)
|
|
|
(493,869)
|
|
Exercise of stock
options
|
|
3,933
|
|
|
6,364
|
|
Change in restricted
cash
|
|
50
|
|
|
(6,866)
|
|
Other, net
|
|
1,245
|
|
|
613
|
|
Net cash provided by
(used in) financing activities
|
|
(92,123)
|
|
|
88,853
|
|
Effect of exchange
rates on cash and cash equivalents
|
|
76
|
|
|
(351)
|
|
Increase (decrease)
in cash and cash equivalents
|
|
(12,224)
|
|
|
120,516
|
|
Cash and cash
equivalents, beginning of period
|
|
260,430
|
|
|
208,080
|
|
Cash and cash
equivalents, end of period
|
|
$
|
248,206
|
|
|
328,596
|
|
DUNKIN' BRANDS
GROUP, INC. AND SUBSIDIARIES
|
Non-GAAP
Reconciliations
|
(In thousands, except
share and per share data)
|
(Unaudited)
|
|
|
|
Three months
ended
|
|
Six months
ended
|
|
|
June 25,
2016
|
|
June 27,
2015
|
|
June 25,
2016
|
|
June 27,
2015
|
Operating
income
|
|
$
|
106,141
|
|
|
92,588
|
|
|
191,474
|
|
|
176,328
|
|
Operating income
margin
|
|
49.1
|
%
|
|
43.8
|
%
|
|
47.2
|
%
|
|
44.4
|
%
|
Adjustments:
|
|
|
|
|
|
|
|
|
Amortization of other
intangible assets
|
|
$
|
5,568
|
|
|
6,181
|
|
|
11,329
|
|
|
12,381
|
|
Long-lived asset
impairment charges
|
|
4
|
|
|
—
|
|
|
97
|
|
|
264
|
|
Transaction-related
costs(a)
|
|
9
|
|
|
127
|
|
|
64
|
|
|
281
|
|
Bertico and related
litigation(b)
|
|
(428)
|
|
|
—
|
|
|
(428)
|
|
|
(2,753)
|
|
Settlement of
Canadian pension plan(c)
|
|
—
|
|
|
4,075
|
|
|
—
|
|
|
4,075
|
|
Adjusted operating
income
|
|
$
|
111,294
|
|
|
102,971
|
|
|
202,536
|
|
|
190,576
|
|
Adjusted operating
income margin
|
|
51.5
|
%
|
|
48.7
|
%
|
|
49.9
|
%
|
|
48.0
|
%
|
|
|
|
|
|
|
|
|
|
Net income
attributable to Dunkin' Brands
|
|
$
|
49,590
|
|
|
42,318
|
|
|
86,744
|
|
|
67,949
|
|
Adjustments:
|
|
|
|
|
|
|
|
|
Amortization of other
intangible assets
|
|
5,568
|
|
|
6,181
|
|
|
11,329
|
|
|
12,381
|
|
Long-lived asset
impairment charges
|
|
4
|
|
|
—
|
|
|
97
|
|
|
264
|
|
Transaction-related
costs(a)
|
|
9
|
|
|
127
|
|
|
64
|
|
|
281
|
|
Bertico and related
litigation(b)
|
|
(428)
|
|
|
—
|
|
|
(428)
|
|
|
(2,753)
|
|
Settlement of
Canadian pension plan(c)
|
|
—
|
|
|
4,075
|
|
|
—
|
|
|
4,075
|
|
Loss on debt
extinguishment and refinancing transactions
|
|
—
|
|
|
—
|
|
|
—
|
|
|
20,554
|
|
Tax impact of
adjustments(d)
|
|
(2,061)
|
|
|
(4,153)
|
|
|
(4,425)
|
|
|
(13,921)
|
|
Adjusted net
income
|
|
$
|
52,682
|
|
|
48,548
|
|
|
93,381
|
|
|
88,830
|
|
|
|
|
|
|
|
|
|
|
Adjusted net
income
|
|
$
|
52,682
|
|
|
48,548
|
|
|
93,381
|
|
|
88,830
|
|
Weighted average
number of common shares – diluted
|
|
92,451,913
|
|
|
96,876,510
|
|
|
92,535,091
|
|
|
99,189,474
|
|
Diluted adjusted
earnings per share
|
|
$
|
0.57
|
|
|
0.50
|
|
|
1.01
|
|
|
0.90
|
|
|
|
|
|
|
|
|
|
|
(a) Represents
non-capitalizable costs incurred as a result of the securitized
financing facility, which was completed in January 2015.
|
(b) Adjustment for
the three and six months ended June 25, 2016 represents a net
reduction to legal reserves for the Bertico litigation based upon
final agreement of
interest and related costs associated with the judgment. Adjustment
for the six months ended June 27, 2015 represents a net reduction
to legal reserves for
the Bertico litigation and related matters, as a result of the
Quebec Court of Appeals (Montreal) ruling to reduce the damages
assessed against the Company in the
Bertico litigation from approximately C$16.4 million to
approximately C$10.9 million, plus costs and interest.
|
(c) Represents costs
incurred related to the final settlement of our Canadian pension
plan as a result of the closure of our Canadian ice cream
manufacturing plant in
fiscal year 2012.
|
(d) Tax impact of
adjustments calculated at a 40% effective tax rate.
|
DUNKIN' BRANDS
GROUP, INC. AND SUBSIDIARIES
|
Non-GAAP
Reconciliations (continued)
|
(In millions, except
per share data)
|
(Unaudited)
|
|
|
|
Fiscal year
ended
|
|
%
Increase
|
|
|
December 31,
2016
|
|
December
26,
2015
|
|
|
|
Low
|
|
High
|
|
Actual
|
|
Low
|
|
High
|
|
|
(projected,
53 weeks)
|
|
(projected,
53 weeks)
|
|
(as reported,
52 weeks)
|
|
|
|
|
Operating
income
|
|
$
|
406.7
|
|
|
416.4
|
|
|
319.6
|
|
|
27
|
%
|
|
30
|
%
|
Adjustments:
|
|
|
|
|
|
|
|
|
|
|
Amortization of other
intangible assets
|
|
22.7
|
|
|
22.2
|
|
|
24.7
|
|
|
|
|
|
Long-lived asset
impairment charges
|
|
3.5
|
|
|
0.3
|
|
|
0.6
|
|
|
|
|
|
Transaction-related
costs(a)
|
|
0.6
|
|
|
0.1
|
|
|
0.4
|
|
|
|
|
|
Bertico and related
litigation(b)
|
|
(0.4)
|
|
|
(0.4)
|
|
|
(2.8)
|
|
|
|
|
|
Settlement of
Canadian pension plan(c)
|
|
—
|
|
|
—
|
|
|
4.1
|
|
|
|
|
|
Japan joint venture
impairment, net(d)
|
|
—
|
|
|
—
|
|
|
53.9
|
|
|
|
|
|
Adjusted operating
income
|
|
$
|
433.1
|
|
|
438.6
|
|
|
400.5
|
|
|
8
|
%
|
|
10
|
%
|
|
|
|
|
|
|
|
|
|
|
|
(a) Represents
non-capitalizable costs incurred as a result of the securitized
financing facility, which was completed in January 2015.
|
(b) Adjustment for
the fiscal year ended December 31, 2016 represents a net reduction
to legal reserves for the Bertico litigation based upon final
agreement of
interest and related costs associated with the judgment. Adjustment
for the fiscal year ended December 26, 2015 represents a net
reduction to legal reserves for the
Bertico litigation and related matters, as a result of the Quebec
Court of Appeals (Montreal) ruling to reduce the damages assessed
against the Company in the
Bertico litigation from approximately C$16.4 million to
approximately C$10.9 million, plus costs and interest.
|
(c) Represents costs
incurred related to the final settlement of our Canadian pension
plan as a result of the closure of our Canadian ice cream
manufacturing plant in fiscal year 2012.
|
(d) Amount consists
of an other-than-temporary impairment of the investment in the
Japan joint venture of $54.3 million, less a reduction in
depreciation and amortization of $0.4 million resulting from the
allocation of the impairment charge to the underlying long-lived
assets of the joint venture.
|
|
|
Fiscal year
ended
December 31,
2016
|
|
|
Low
|
|
High
|
|
|
(projected,
53 weeks)
|
|
(projected,
53 weeks)
|
Diluted earnings per
share
|
|
$
|
2.02
|
|
|
2.08
|
|
Adjustments:
|
|
|
|
|
Amortization of other
intangible assets
|
|
0.24
|
|
|
0.24
|
|
Long-lived asset
impairment charges
|
|
0.04
|
|
|
—
|
|
Transaction-related
costs(e)
|
|
0.01
|
|
|
—
|
|
Tax impact of
adjustments(f)
|
|
(0.11)
|
|
|
(0.10)
|
|
Diluted adjusted
earnings per share
|
|
$
|
2.20
|
|
|
2.22
|
|
|
|
|
|
|
(e) Represents
non-capitalizable costs incurred as a result of the securitized
financing facility, which was completed in January 2015.
|
(f) Tax impact of
adjustments calculated at a 40% effective tax rate.
|
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SOURCE Dunkin' Brands Group, Inc.