CANTON, Mass., Jan. 31, 2013 // PRNewswire // --
Dunkin' Brands Group, Inc. (Nasdaq: DNKN), the parent company of Dunkin' Donuts (DD) and Baskin-Robbins (BR), today reported results for the fourth quarter and fiscal year ended December 29, 2012.
"The fourth quarter was strong, and we finished 2012 delivering 15 percent plus adjusted operating income growth and nearly 40 percent adjusted earnings per share growth year-over-year," said Nigel Travis, Chief Executive Officer, Dunkin' Brands Group, Inc., and President, Dunkin' Donuts U.S. "We have the unique combination of strong brand heritage and significant U.S. and global restaurant expansion opportunities, which we are capitalizing on to drive profitable growth for both our franchisees and shareholders. Our contiguous, strategic development approach is working, and we're excited to begin selling Dunkin' Donuts franchises in California. Despite macro-economic instability and a tough competitive environment, consumer and franchisee demand for Dunkin' Donuts is high, our franchisee relationships are strong, and we continue to leverage our asset-light business model giving us confidence to target 15 percent plus adjusted earnings per share growth in 2013."
FISCAL YEAR 2012 KEY FINANCIAL HIGHLIGHTS
FOURTH QUARTER 2012 KEY FINANCIAL HIGHLIGHTS
On a 13-week basis, global systemwide sales growth in the fourth quarter was primarily attributable to Dunkin' Donuts U.S. comparable store sales growth (which includes stores open 54 weeks or more) and global store development, and growth in Baskin-Robbins International sales.
Dunkin' Donuts U.S. comparable store sales growth in the fourth quarter was driven by increased average ticket and higher traffic resulting from our continued focus on product and marketing innovation. This includes strong total coffee sales growth, led by flavored hot and iced espresso beverages; continued momentum across the core breakfast sandwich platform and strong sales of November's limited time offer Smoked Sausage breakfast sandwich; continued growth in Bakery Sandwiches; and sales of limited time offer Dunkin' Donuts K-Cup® portion packs in Pumpkin, Peppermint Mocha, and Hot Cocoa flavors.
Baskin-Robbins U.S. comparable store sales growth was driven by sales of Flavors of the Month, including holiday-inspired flavors such as Pumpkin Pie, Peppermint, and Winter White Chocolate; limited time offer sundaes such as the Warm Belgian Waffle sundae with Pralines n' Cream ice cream; and Take Home pints and quarts.
In the fourth quarter, Dunkin' Brands franchisees and licensees opened 256 net new restaurants across the globe. This includes 149 net new Dunkin' Donuts U.S. locations, 89 net new Baskin-Robbins International locations, 47 net new Dunkin' Donuts International locations, and 29 net closures for Baskin-Robbins U.S. Additionally, Dunkin' Donuts U.S. franchisees remodeled 205 restaurants during the quarter.
Revenues for the fourth quarter declined 4.0 percent compared to the prior year, primarily from the extra week in the fourth quarter of 2011 and a one-time delay in revenue recognition related to the shift in manufacturing to Dean Foods that impacted fourth quarter sales of ice cream products in 2012. Without the effect of these two items, revenues would have increased by $7.0 million, or 4.4 percent, driven by increased royalty income from the increase in systemwide sales (both on a 13-week basis).
Operating income for the fourth quarter increased $23.2 million, or 52.0 percent, from the prior year primarily as a result of an $18.8 million net non-cash impairment charge incurred in the prior year related to the Company's investment in its South Korean joint venture, as well as the increase in royalty income on a 13-week basis, offset by the impact of the extra week in the fourth quarter of 2011. Adjusted operating income increased $6.8 million, or 9.3 percent, from the fourth quarter of 2011 primarily as a result of the increase in royalty income on a 13-week basis and an increase in income from joint ventures, offset by the impact of the extra week in the fourth quarter of 2011.
Net income for the fourth quarter increased by $22.7 million, or 196.2 percent, compared to the prior year as a result of the $23.2 million increase in operating income, offset by an increase in interest expense. Adjusted net income increased by $0.5 million, or 1.3 percent, compared to the fourth quarter of 2011 as a result of the increase in adjusted operating income, offset by increases in interest expense and income tax expense.
Adjusted earnings per pro forma common share increased by 13.3 percent on a diluted basis to $0.34 for the fourth quarter of 2012, as a result of a decline in shares outstanding due to the repurchase of 15 million shares in August 2012 from the Company's former private equity owners, as well as the increase in adjusted net income.
FOURTH QUARTER 2012 SEGMENT RESULTS
The information below reflects operating segment results for the 13-weeks ended December 29, 2012 and the 14-weeks ended December 31, 2011.
Dunkin' Donuts U.S. revenues of $128.1 million represented an increase of 3.4 percent year-over-year. The increase in revenue was driven primarily by increased royalty income on a 13-week basis, additional sales at company-owned restaurants (35 stores versus 31 stores in the prior year), and an increase in other revenues. These increases in revenue were offset by the impact of the extra week in the fourth quarter of 2011.
Dunkin' Donuts U.S. segment profit increased to $94.3 million, an increase of 2.5 percent over the prior year. The increase was driven by revenue growth, partially offset by costs related to additional company-owned stores.
Dunkin' Donuts International systemwide sales increased 9.3 percent from the prior year, driven by sales growth in South Korea and the Middle East. On a constant currency basis, systemwide sales increased by approximately 6 percent.
Dunkin' Donuts International revenues increased 2.9 percent from the prior year to $4.0 million, primarily resulting from an increase in royalty income driven by an increase in systemwide sales.
Segment profit for Dunkin' Donuts International declined 19.5 percent to $2.2 million, driven primarily by continued investments in marketing for theDunkin' Donuts International business, offset by an increase in income from our South Korean joint venture.
Baskin-Robbins U.S. revenue declined 10.8 percent from the prior year to $7.8 million driven primarily by declines in royalty and licensing income, which were due to an 8.3 percent decrease in systemwide sales as a result of the extra week in the fourth quarter of 2011 and net closings.
Segment profit for the Baskin-Robbins U.S. segment increased $1.0 million, or 35.1 percent, year-over-year primarily as a result of non-recurring prior year investments, as well as reserves recorded on leased locations.
Baskin-Robbins International systemwide sales increased 0.2 percent from the prior year, as sales growth in South Korea was offset by sales declines in Japan and Afghanistan. On a constant currency basis, systemwide sales increased by approximately 1 percent.
Baskin-Robbins International revenues declined 35.9 percent year-over-year to $18.0 million, due to a one-time delay in revenue recognition related to the shift in manufacturing to Dean Foods that impacted fourth quarter sales of ice cream products. Also contributing to the decline in revenues was a decline in sales of ice cream resulting from the Afghanistan border being closed earlier in 2012, as well as the extra week in the fourth quarter of 2011.
Segment profit decreased 33.7 percent year-over-year to $6.8 million, resulting from a decrease in net margin on ice cream due to the one-time delay in revenue recognition in the fourth quarter of 2012, the impact of the Afghanistan border being closed earlier in 2012, and the extra week in the fourth quarter of 2011.
COMPANY UPDATES
FISCAL YEAR 2013 TARGETS
As described below, the Company is providing certain targets regarding its 2013 expectations.
"Our nearly 100-percent, asset-light franchised business model enables us to accelerate our strong restaurant growth rate, while simultaneously returning cash to shareholders," said Paul Carbone, Chief Financial Officer. "The Board's decision to increase our dividend 27 percent in just our second year as a public company further underscores our commitment to delivering shareholder value."
As previously announced, Dunkin' Brands will be holding a conference call today at 8:00 am ET hosted by Nigel Travis, Chief Executive Officer, and Paul Carbone, Chief Financial Officer. The dial-in number is (866) 393-1607 or (914) 495-8556, conference number 87704796. 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.
Certain statements contained herein are not based on historical fact and are "forward-looking statements" within the meaning of the applicable securities laws and regulations. Generally, these statements can be identified by the use of words such as "anticipate," "believe," "could," "estimate," "expect," "feel," "forecast," "intend," "may," "plan," "potential," "project," "should," "would," and similar expressions intended to identify forward-looking statements, although not all forward-looking statements contain these identifying words. By their nature, forward-looking statements involve risks and uncertainties because they relate to events and depend on circumstances that may or may not occur in the future. These risk and uncertainties include, but are not limited to: the ongoing level of profitability of franchisees and licensees; our franchisees' and licensees' ability to sustain same store sales growth; changes in working relationships with our franchisees and licensees and the actions of our franchisees and licensees; our master franchisees' relationships with sub-franchisees; the strength of our brand in the markets in which we compete; changes in competition within the quick-service restaurant segment of the food industry; changes in consumer behavior resulting from changes in technologies or alternative methods of delivery; economic and political conditions in the countries where we operate; our substantial indebtedness; our ability to protect our intellectual property rights; consumer preferences, spending patterns and demographic trends; the 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 and in our quarterly report on Form 10-Q for the quarter ended June 30, 2012. 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.
In addition to the GAAP financial measures set forth in this press release, the Company has included certain non-GAAP measurements, adjusted operating income, adjusted operating income margin, adjusted net income, and diluted adjusted earnings per pro forma common share, which present operating results on a basis adjusted for certain items and/or reflecting the conversion of our previously outstanding Class L common stock into shares of common stock. 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 net income, and diluted adjusted earnings per pro forma common share may differ from similar measures reported by other companies. Adjusted operating income and adjusted net income are reconciled from the respective measures determined under GAAP in the attached table "Dunkin' Brands Group, Inc. Non-GAAP Reconciliation."
On August 1, 2011, the Company completed its initial public offering. Immediately prior to the offering, each share of the Company's Class L common stock converted into 2.4338 shares of common stock. The number of common shares used in the calculation of diluted adjusted earnings per pro forma common share for the fiscal year ended December 31, 2011 gives effect to the conversion of all outstanding shares of Class L common stock at the conversion factor of 2.4338 common shares for each Class L share, as if the conversion was completed at the beginning of the fiscal period. The calculation of diluted adjusted earnings per pro forma common share also includes the dilutive effect of common restricted shares and stock options, using the treasury stock method. Diluted adjusted earnings per pro forma common share is calculated using adjusted net income, as defined above. See the attached table "Dunkin' Brands Group, Inc. Diluted Adjusted Earnings per Pro Forma Common Share" for further detail.
Additionally, the Company has included metrics such as systemwide sales growth and comparable store sales growth, which are commonly used statistical measures in the quick-service restaurant industry and are important to understanding the Company's performance.
The Company uses "systemwide sales growth" to refer to the percentage change in sales at both franchisee- and company-owned restaurants from the comparable period of the prior year. Changes in systemwide sales are driven by changes in comparable store sales and changes in the number of restaurants.
The Company uses "DD U.S. comparable store sales growth," "BR U.S. comparable store sales growth," "DD International comparable store sales growth," and "BR International comparable store sales growth," which are calculated by including only sales from franchisee- and company-owned restaurants that have been open at least 54 weeks and that have reported sales in the current and comparable prior year week.
Fiscal year 2011 and the fourth quarter of 2011 include 53 weeks and 14 weeks, respectively. Certain financial measures and other metrics in this release have been presented on a 52-week and 13-week basis for fiscal year 2011 and the fourth quarter of 2011, respectively, to provide improved comparability to the respective 2012 periods. Such financial measures and metrics reflect our estimate of the impact of the additional week on systemwide sales growth, revenues, and expenses.
With more than 17,400 points of distribution in nearly 60 countries worldwide, Dunkin' Brands Group, Inc. (Nasdaq: DNKN) is one of the world's leading franchisors of quick service restaurants (QSR) serving hot and cold coffee and baked goods, as well as hard-serve ice cream. At the end of fiscal year 2012, Dunkin' Brands' nearly 100 percent franchised business model included more than 10,400 Dunkin' Donuts restaurants and nearly 7,000 Baskin-Robbins restaurants. For the full-year 2012, the company had franchisee-reported sales of approximately $8.8 billion. Dunkin' Brands Group, Inc. is headquartered in Canton, Mass.
SOURCE Dunkin' Brands Group, Inc.
Dunkin' Brands Group, Inc. is a franchisor of quick service restaurants (QSR) serving hot and cold coffee and baked goods, as well as hard-serve ice cream.