CANTON, Mass., Oct. 24, 2013 // PRNewswire // --
Dunkin' Brands Group, Inc. (Nasdaq: DNKN), the parent company of Dunkin' Donuts (DD) and Baskin-Robbins (BR), today reported results for the third quarter ended September 28, 2013.
"Both Dunkin' Donuts and Baskin Robbins U.S. continue to have excellent momentum and delivered another quarter of strong comparable store sales and net new restaurant growth," said Nigel Travis, Chairman and Chief Executive Officer, Dunkin' Brands Group, Inc. "With 222 net new openings year-to-date, we now have 7,500 Dunkin' Donuts restaurants in the U.S and the demand by existing and prospective franchisees to grow with us has never been stronger. We continue to believe that we can have 15,000 Dunkin' Donuts restaurants in the U.S., including approximately an additional 3,000 east of the Mississippi and 5,000 in the western part of the country. Notably this quarter, we opened our first restaurants in Denver, Colorado, and sold additional store development agreements in Southern California bringing the total to 70 restaurants planned for the Southern California region. Additionally, just last week we announced that we have begun to sell store development agreements for the central part of the state, including the Fresno, Bakersfield, Sacramento, and Santa Barbara areas."
"We had another strong quarterly performance with nearly 9 percent revenue growth, nearly 48 percent adjusted operating income margin, and double-digit adjusted earnings per share growth," said Paul Carbone, Chief Financial Officer, Dunkin' Brands Group, Inc. "Based on our ongoing strong performance, we feel confident in our ability to deliver on our full-year comparable store sales and net development growth targets. Because of the impact of write-downs related to our prior investments in the Dunkin' Donuts joint venture in Spain, we believe we will be at the low-end of our $1.50 to $1.53 diluted adjusted earnings per share target for 2013."
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Global systemwide sales growth in the third quarter was primarily attributable to global store development and Dunkin' Donuts U.S. comparable store sales growth (which includes stores open 54 weeks or more).
Dunkin' Donuts U.S. comparable store sales growth in the third quarter was driven by increased average ticket and higher traffic resulting from our continued product and marketing innovation. This includes strong beverage growth, led by cold beverages and hot and iced espresso driven by the continuation of Iced Coffee flavors inspired by Baskin-Robbins Ice Cream as well as the introduction of Caramel and the return of Pumpkin across the beverage portfolio; continued breakfast sandwich momentum highlighted by the limited time offer Hot & Spicy Breakfast Sandwich and incremental gains in the Turkey Sausage Breakfast Sandwich; growth in donut sales led by the introduction of Lemonade, Key Lime and Pumpkin Pie flavors as well as bulk offers in select markets; and growth in afternoon products including the limited time offer Pretzel Roll Roast Beef Sandwich and incremental gains in Chicken and Tuna Salad Wraps and Chicken Sandwiches.
Baskin-Robbins U.S. comparable store sales growth was driven by sales of Cups, Cones and Beverages led by news around Flavors of the Month, OREO® n' Chocolate and OREO® Nutty Salted Caramel; increased sales of cakes; and take-home ice cream quarts.
In the third quarter, Dunkin' Brands franchisees and licensees opened 222 net new restaurants around the globe. This includes 81 net new Dunkin' Donuts U.S. locations, 73 net new Baskin-Robbins International locations, 67 net new Dunkin' Donuts International locations, and one net new Baskin-Robbins U.S. location. Additionally, Dunkin' Donuts U.S. franchisees remodeled 98 restaurants during the quarter.
Revenues for the third quarter increased 8.5 percent compared to the prior year primarily from increased royalty income due to the increase in systemwide sales, increased franchise fees due to favorable development mix and incremental franchise renewals, and increased sales of ice cream products.
Operating income for the third quarter increased $11.9 million, or 16.9 percent, from the prior year primarily as a result of the increases in royalty income and franchise fees, as well as the impact of the additional depreciation and costs incurred in the prior year related to the closure of our ice cream manufacturing plant in Canada. The increases were offset by $3.7 million in write-downs related to our investments in the Dunkin' Donuts Spain joint venture2. Adjusted operating income increased $3.9 million, or 4.6 percent, from the third quarter of 2012 as a result of the increases in royalty income and franchise fees, offset by the write-downs related to the Spain joint venture and incremental general and administrative costs.
Net income for the third quarter increased by $10.7 million, or 36.2 percent, compared to the prior year primarily as a result of the $11.9 million increase in operating income as well as the $4.0 million loss on debt extinguishment and refinancing transactions incurred in the third quarter of 2012, offset by a $4.5 million increase in income tax expense and a $0.9 million increase in interest expense. Adjusted net income increased by $2.4 million, or 5.6 percent, compared to the third quarter of 2012, as a result of the increase in adjusted operating income, offset by increases in interest expense and income tax expense.
Diluted adjusted earnings per share increased by 10.8 percent to $0.41 for the third quarter of 2013, as a result of the increase in adjusted net income, as well as a decline in shares outstanding due to the repurchase of 15 million shares in August 2012 and approximately 400,000 shares repurchased under previous authorizations during 2013.
2 See the attached consolidated statements of operations for further information regarding the $3.7 million in write-downs related to our investments in the Dunkin' Donuts Spain joint venture.
Dunkin' Donuts U.S. revenues of $134.3 million represented an increase of 8.6 percent year-over-year. The increase in revenue was primarily a result of increased royalty income, as well as increased franchise fees due to favorable development mix and incremental franchise renewals.
Dunkin' Donuts U.S. segment profit in the third quarter increased $9.2 million over the prior year to $100.3 million. This increase was driven primarily by revenue growth, partially offset by increased personnel costs related to continued investments in our Dunkin' Donuts U.S. contiguous growth strategy.
Dunkin' Donuts International systemwide sales increased 1.4 percent from the prior year period, driven by sales growth inGermany and the Middle East. On a constant currency basis, systemwide sales increased by approximately 2 percent.
Dunkin' Donuts International revenues of $4.2 million represented an increase of 13.7% year-over-year. The increase in revenue was primarily a result of increased franchise fees driven by additional gross development and increased royalty income.
Segment profit (loss) for Dunkin' Donuts International declined $3.5 million to a loss of $1.1 million, primarily due to $3.7 million in write-downs related to our investments in the Dunkin' Donuts Spain joint venture, offset by revenue growth.
Baskin-Robbins U.S. revenue increased 2.0 percent from the prior year period to $11.9 million due primarily to increased royalty income driven by a 4.2 percent increase in systemwide sales as a result of comparable store sales growth of 3.2 percent, offset by a decline in rental income due to a decline in the number of leased locations.
Segment profit for the Baskin-Robbins U.S. segment increased $0.3 million, or 3.2 percent, year-over-year primarily as a result of increased revenues.
Baskin-Robbins International systemwide sales decreased 2.6 percent from the prior year period driven by an unfavorable impact of exchange rates on sales in Japan, offset by sales growth in South Korea and the Middle East. On a constant currency basis, systemwide sales increased by approximately 7 percent.
Baskin-Robbins International revenues increased 10.5 percent year-over-year to $32.8 million primarily from increased sales of ice cream products to the Middle East and an increase in distribution costs billed to customers, offset by a decline in sales of ice cream products to Australia due to timing of shipments.
Segment profit increased 4.7 percent year-over-year to $16.8 million, resulting from an increase in net margin on ice cream driven by the increase in sales to the Middle East and reduced cost of ice cream products primarily resulting from the shift in manufacturing to Dean Foods, offset by $0.5 million of additional costs associated with the Baskin-Robbins Australia sale transaction.
The Company today announced that the Board of Directors declared a fourth quarter cash dividend of $0.19 per share, payable on November 26, 2013 to shareholders of record as of the close of business on November 18, 2013.
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 76546192. 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 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.
In addition to the GAAP financial measures set forth in this press release, the Company has included certain non-GAAP measurements, adjusted operating income, adjusted operating income margin, adjusted net income, and diluted adjusted earnings per share, which present operating results on a basis adjusted for certain items. 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 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 Reconciliations."
Additionally, the Company has included metrics such as systemwide sales growth and comparable store sales growth, which are commonly used statistical measures in the quick service restaurant industry and are important to understanding the Company's performance.
The Company uses "systemwide sales growth" to refer to the percentage change in sales at both franchisee- and company-owned restaurants from the comparable period of the prior year. Changes in systemwide sales are driven by changes in comparable store sales and changes in the number of restaurants.
The Company uses "DD U.S. comparable store sales growth," "BR U.S. comparable store sales growth," "DD International comparable store sales growth," and "BR International comparable store sales growth," which are calculated by including only sales from franchisee- and company-owned restaurants that have been open at least 54 weeks and that have reported sales in the current and comparable prior year week.
With more than 17,900 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 third quarter 2013, Dunkin' Brands' nearly 100 percent franchised business model included nearly 10,800 Dunkin' Donuts restaurants and more than 7,100 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
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.