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8-K - FORM 8-K - DUNKIN' BRANDS GROUP, INC.d8k.htm

Exhibit 99.1

LOGO

FOR IMMEDIATE RELEASE

Dunkin’ Brands Reports Second Quarter 2011 Results

CANTON, Mass. (August 3, 2011)—Dunkin’ Brands Group, Inc. (Nasdaq: DNKN), the parent company of Dunkin’ Donuts (DD) and Baskin-Robbins (BR), today reported results for the quarter ended June 25, 2011. “We delivered strong results for the quarter as a result of our continued focus on driving comparable store sales, expanding contiguously in the U.S., and accelerating international growth across both brands,” said Nigel Travis, Chief Executive Officer, Dunkin’ Brands, Inc. and President, Dunkin’ Donuts. “Our emphasis on operational excellence and exciting product innovations, supported by great marketing, produced strong global system-wide sales and comparable store sales growth for Dunkin’ Donuts U.S., while our franchisees and licensees continued to drive new store growth, both domestically and internationally.”

 

($ in millions)    Quarter 2      Increase (Decrease)  
     2011      2010      $/#     %  

Revenues

   $ 157.0       $ 150.4       $ 6.6        4.4

Operating Income

     61.8         57.9         3.9        6.8

Net Income

     17.2         17.3         (0.2     (1.0 )% 

Adjusted Net Income*

     24.7         25.6         (0.8     (3.3 )% 

System-wide Sales Growth

             6.9

Consolidated US Comparable Store Sales Growth

             3.2

DD Domestic Comparable Store Sales Growth

             3.8

BR Domestic Comparable Store Sales Growth

             (2.8 )% 

DD Global Points of Distribution

     9,867         9,524         343        3.6

BR Global Points of Distribution

     6,560         6,309         251        4.0

(amounts and percentages may not re-calculate due to rounding)

          

Consolidated Key Highlights

Second quarter 2011 financial highlights included:

 

   

Global system-wide sales increased approximately 6.9 percent over second quarter 2010.

 

   

Consolidated U.S. comparable store sales increased 3.2 percent. Dunkin’ Donuts U.S comparable store sales increased 3.8 percent while Baskin-Robbins U.S. comparable store sales decreased 2.8 percent.

 

   

Dunkin’ Brands’ franchisees and licensees opened 140 net new Dunkin’ Donuts and Baskin-Robbins locations on a global basis during the quarter, and 234 during the first six months of 2011, increasing Dunkin’ Brands total points of distribution to 16,427 at the end of the second quarter.


   

Revenues increased by more than 4 percent, to $157.0 million for the second quarter of 2011, compared to $150.4 million for the same period in 2010. The Company re-franchised 13 stores between the second quarter of 2010 and the second quarter of 2011. Excluding company-owned stores for both periods, revenues grew approximately 6 percent.

 

   

Operating income was $61.8 million compared to $57.9 million for the second quarter of 2010, representing a 6.8 percent year-over-year increase. Operating income growth over the prior period was impacted by higher ice cream costs due to rising commodity prices.

 

   

Net income was $17.2 million compared to $17.3 million for the second quarter of 2010.

 

   

Adjusted net income* for the quarter was $24.7 million compared to $25.6 million for the second quarter of 2010.

The global system-wide sales growth for the second quarter was primarily attributable to Dunkin’ Donuts U.S. comparable store sales growth (which includes stores open 54 weeks or more), growth in Dunkin’ Donuts and Baskin-Robbins international sales, and global store development.

“Since the first of the year, we have significantly increased the strength of our balance sheet, and after the completion of our initial public offering, have reduced our annual interest expense by 50 percent to approximately $60 million through a combination of debt retirement, restructuring, and repricing. This financing activity resulted in non-recurring charges which impacted year-to-date net income,” said Chief Financial Officer Neil Moses. “The performance of the business in the second quarter demonstrates the strength of our business model and the integrity of our platform for future growth.”

“It’s an exciting time for Dunkin’ Brands as a new public company,” said Travis. “We are pleased with our second quarter results and look forward to sharing our longer term growth opportunities and financial goals in the near future.”

 

* 

Adjusted net income is a non-GAAP measure reflecting net income adjusted for amortization of intangible assets, impairment charges, and loss on debt extinguishment and refinancing transactions, net of the tax impact of such adjustments.

###

Conference Call

As previously announced, Dunkin’ Brands will be holding a conference call today at 8:00 am ET hosted by Chief Executive Officer, Nigel Travis, and Chief Financial Officer, Neil Moses. The dial-in number is (866) 393-1607 or (914) 495-8556, conference number 82802192. 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. These forward-looking statements include all matters that are not historical facts. 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; changes in working relationship 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 success of our growth strategy and international development; changes in commodity and food prices, particularly coffee, dairy products and sugar, and the 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; inability to recover our capital costs; changes in political, legal, economic or other factors in international markets; termination of a master franchise agreement or contracts with the U.S. military; currency exchange rates; the impact of food borne-illness or food safety issues or adverse public or medial opinions regarding the health effects of consuming our products; our ability to collect royalty payments from our franchisees and licensees; uncertainties relating to litigation; changes in regulatory requirements to our and our franchisees and licensees ability to comply with current or future regulatory requirements; review and audit of certain of our tax returns; 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 prospectus filed with the Securities and Exchange Commission on July 27, 2011. 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 results provided in accordance with U.S. generally accepted accounting principles (“GAAP”) throughout this document, the Company has provided a non-GAAP measurement, adjusted net income, which presents operating results on a basis before certain adjustments. The Company uses adjusted net income as a key performance measure for the purpose of evaluating performance internally. We also believe adjusted net income provides our investors with useful information regarding our historical operating results. This non-GAAP measurement is not intended to replace the presentation of our financial results in accordance with GAAP. Use of the term adjusted net income may differ from similar measures reported by other companies. Adjusted net income is reconciled from net income determined under GAAP in the attached table “Dunkin’ Brands Group, Inc. Non-GAAP Reconciliation.”


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

The Company uses “System-wide 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 system-wide sales are driven by changes in average comparable store sales and changes in the number of restaurants.

The Company uses “Consolidated US comparable store sales,” “DD domestic comparable store sales” and “BR domestic comparable store sales,” 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.

About Dunkin’ Brands, Inc.

With more than 16,000 points of distribution in 56 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 hardserve ice cream. At the end of 2010, Dunkin’ Brands’ nearly 100 percent franchised business model included 9,760 Dunkin’ Donuts restaurants and 6,433 Baskin-Robbins restaurants, and the company had system-wide sales of approximately $7.7 billion. Dunkin’ Brands Group, Inc. is headquartered in Canton, Mass. The Company’s website is located at www.dunkinbrands.com.

Contact(s):

 

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


SEGMENT RESULTS

 

     Three months ended         
   June 25,     June 26,      Increase (Decrease)  

Dunkin’ Donuts U.S.

   2011     2010      $/#     %  
     ($ in millions)  

Systemwide sales growth

            6.0

Revenues

   $ 107.4      $ 101.0       $ 6.4        6.3

Segment profit

   $ 82.6      $ 77.7       $ 4.9        6.4

Points of distribution

     6,838        6,641         197        3.0

Gross openings

     71        70         1        1.4

Net openings

     39        42         (3     (7.1 )% 
     Three months ended         
   June 25,     June 26,      Increase (Decrease)  

Dunkin’ Donuts International

   2011     2010      $/#     %  
     ($ in millions)  

Systemwide sales

            10.3

Revenues

   $ 3.8      $ 3.3       $ 0.6        17.3

Segment profit

   $ 3.2      $ 3.5       $ (0.4     (10.9 )% 

Points of distribution

     3,029        2,883         146        5.1

Gross openings

     82        268         (186     (69.4 )% 

Net openings

     23        198         (175     (88.4 )% 
     Three months ended         
   June 25,     June 26,      Increase (Decrease)  

Baskin Robbins U.S.

   2011     2010      $/#     %  
     ($ in millions)  

Systemwide sales

            (5.1 )% 

Revenues

   $ 12.4      $ 13.1       $ (0.8     (5.8 )% 

Segment profit

   $ 6.9      $ 9.4       $ (2.5     (26.3 )% 

Points of distribution

     2,510        2,572         (62     (2.4 )% 

Gross openings

     13        16         (3     (18.8 )% 

Net closings

     (13     —           (13     n/a   
     Three months ended         
   June 25,     June 26,      Increase (Decrease)  

Baskin Robbins International

   2011     2010      $/#     %  
     ($ in millions)  

Systemwide sales

            15.3

Revenues

   $ 27.4      $ 25.4       $ 2.0        8.0

Segment profit

   $ 10.5      $ 12.4       $ (2.0     (16.0 )% 

Points of distribution

     4,050        3,737         313        8.4

Gross openings

     148        125         23        18.4

Net openings

     91        87         4        4.6


DUNKIN’ BRANDS GROUP, INC. AND SUBSIDIARIES

Consolidated Statements of Operations

(In thousands)

(Unaudited)

 

     Three months ended     Six months ended  
   June 25,
2011
    June 26,
2010
    June 25,
2011
    June 26,
2010
 
         (As Adjusted)           (As Adjusted)  

Revenues:

        

Franchise fees and royalty income

   $ 98,139       90,730       184,098       170,895  

Rental income

     24,143       24,316       46,274       46,432  

Sales of ice cream products

     25,225       23,908       47,941       41,701  

Other revenues

     9,465       11,462       17,872       18,800  
  

 

 

   

 

 

   

 

 

   

 

 

 

Total revenues

     156,972       150,416       296,185       277,828  
  

 

 

   

 

 

   

 

 

   

 

 

 

Operating costs and expenses:

        

Occupancy expenses—franchised restaurants

     12,917       12,334       25,205       26,490  

Cost of ice cream products

     18,696       15,927       33,820       28,149  

General and administrative expenses, net

     54,057       52,618       107,943       103,863  

Depreciation and amortization

     13,119       15,169       26,327       30,501  

Impairment charges

     404       1,276       1,057       2,690  
  

 

 

   

 

 

   

 

 

   

 

 

 

Total operating costs and expenses

     99,193       97,324       194,352       191,693  

Equity in net income of joint ventures

     4,015       4,794       4,797       8,436  
  

 

 

   

 

 

   

 

 

   

 

 

 

Operating income

     61,794       57,886       106,630       94,571  
  

 

 

   

 

 

   

 

 

   

 

 

 

Other income (expense):

        

Interest income

     150       15       265       86  

Interest expense

     (28,958     (27,482     (62,840     (55,073

Loss on debt extinguishment and refinancing transactions

     (5,165     (3,693     (16,172     (3,693

Other gains, net

     (64     (274     412       (29
  

 

 

   

 

 

   

 

 

   

 

 

 

Total other expense

     (34,037     (31,434     (78,335     (58,709
  

 

 

   

 

 

   

 

 

   

 

 

 

Income before income taxes

     27,757       26,452       28,295       35,862  

Provision for income taxes

     10,595       9,115       12,856       12,587  
  

 

 

   

 

 

   

 

 

   

 

 

 

Net income

   $ 17,162       17,337       15,439       23,275  
  

 

 

   

 

 

   

 

 

   

 

 

 


DUNKIN’ BRANDS GROUP, INC. AND SUBSIDIARIES

Condensed Consolidated Balance Sheets

(In thousands)

(Unaudited)

 

     June 25,
2011
    December 25,
2010
 
Assets     

Current assets:

    

Cash and cash equivalents

   $ 145,614       134,100  

Accounts, notes, and other receivable, net

     53,688       79,943  

Other current assets

     65,727       70,334  
  

 

 

   

 

 

 

Total current assets

     265,029       284,377  

Property and equipment, net

     187,981       193,273  

Investments in joint ventures

     177,224       169,276  

Goodwill and other intangible assets, net

     2,410,206       2,424,312  

Other assets

     83,895       76,050  
  

 

 

   

 

 

 

Total assets

   $ 3,124,335       3,147,288  
  

 

 

   

 

 

 
Liabilities, Common Stock, and Stockholders’ Equity (Deficit)     

Current liabilities:

    

Current portion of long-term debt

   $ 14,965       12,500  

Accounts payable

     11,510       9,822  

Other current liabilities

     224,866       258,233  
  

 

 

   

 

 

 

Total current liabilities

     251,341       280,555  
  

 

 

   

 

 

 

Long-term debt, net

     1,845,539       1,847,016  

Deferred income taxes, net

     568,053       586,337  

Other long-term liabilities

     126,240       127,139  
  

 

 

   

 

 

 

Total long-term liabilities

     2,539,832       2,560,492  
  

 

 

   

 

 

 

Common stock, Class L*

     881,054       840,582  

Stockholders’ equity (deficit):

    

Total stockholders’ equity (deficit)*

     (547,892     (534,341
  

 

 

   

 

 

 

Total liabilities, common stock, and stockholders’ equity (deficit)

   $ 3,124,335       3,147,288  
  

 

 

   

 

 

 

 

* Prior to filing a registration statement with the Securities and Exchange Commission (“SEC”) related to our initial public offering, Class L common stock was classified within stockholders’ equity (deficit). In order to comply with SEC requirements as a public company, we reclassified Class L common stock outside of permanent equity for all periods presented. For further discussion on Class L common stock, see the consolidated financial statements and notes thereto for the fiscal year ended December 25, 2010, included in the Company’s Prospectus filed pursuant to Rule 424(b) under the Securities Act of 1933, as amended, with the SEC on July 27, 2011.


DUNKIN’ BRANDS GROUP, INC. AND SUBSIDIARIES

Condensed Consolidated Statements of Cash Flows

(In thousands)

(Unaudited)

 

     Six months ended  
     June 25,
2011
    June 26,
2010
 

Cash flows from operating activities:

    

Net income

   $ 15,439       23,275  

Adjustments to reconcile net income to net cash provided by operating activities:

    

Depreciation and amortization

     26,327       30,501  

Loss on debt extinguishment and refinancing transactions

     16,172       3,693  

Deferred income taxes

     726       (5,644

Equity in net income of joint ventures

     (4,797     (8,436

Dividends received from joint ventures

     5,237       4,869  

Other non-cash adjustments, net

     2,714       5,555  

Change in operating assets and liabilities:

    

Restricted cash

     —          11,193  

Accounts, notes, and other receivables, net

     26,567       17,867  

Other current liabilities

     (48,764     (44,062

Liabilities of advertising funds, net

     (1,801     2,341  

Other, net

     675       8,366  
  

 

 

   

 

 

 

Net cash provided by operating activities

     38,495       49,518  
  

 

 

   

 

 

 

Cash flows from investing activities:

    

Additions to property and equipment

     (9,136     (7,371

Other, net

     913       —     
  

 

 

   

 

 

 

Net cash used in investing activities

     (8,223     (7,371
  

 

 

   

 

 

 

Cash flows from financing activities:

    

Repayment of long-term debt, net

     (4,750     (100,765

Proceeds from short-term debt

     —          27,501  

Proceeds from issuance of common stock

     3,213       —     

Repurchases of common stock

     (286     (3,114

Deferred financing and other debt-related costs

     (16,951     —     

Change in restricted cash

     73       748  

Other, net

     (92     (142
  

 

 

   

 

 

 

Net cash used in financing activities

     (18,793     (75,772
  

 

 

   

 

 

 

Effect of exchange rates on cash and cash equivalents

     35       (20
  

 

 

   

 

 

 

Increase (decrease) in cash and cash equivalents

     11,514       (33,645

Cash and cash equivalents, beginning of period

     134,100       53,210  
  

 

 

   

 

 

 

Cash and cash equivalents, end of period

   $ 145,614       19,565  
  

 

 

   

 

 

 


DUNKIN’ BRANDS GROUP, INC. AND SUBSIDIARIES

Non-GAAP Reconciliation

(In thousands)

 

     Three months ended     Six months ended  
     June 25,
2011
    June 26,
2010
    June 25,
2011
    June 26,
2010
 

Net income

   $ 17,162       17,337     $ 15,439       23,275  

Adjustments:

        

Amortization of intangible assets

     7,023       8,730       14,105       17,553  

Impairment charges

     404       1,276       1,057       2,690  

Loss on debt extinguishment and refinancing transactions

     5,165       3,693       16,172       3,693  

Tax impact of adjustments (a)

     (5,037     (5,480     (12,534     (9,574
  

 

 

   

 

 

   

 

 

   

 

 

 

Adjusted net income

   $ 24,717       25,556     $ 34,239       37,637  
  

 

 

   

 

 

   

 

 

   

 

 

 

 

(a) 

Tax impact of adjustments calculated at a 40% effective tax rate for each period presented.