CANTON, Mass., Feb. 6, 2014 // PRNewswire // --
Fourth quarter highlights include:
Fiscal year 2013 highlights include:
Company news:
Dunkin' Brands Group, Inc. (Nasdaq: DNKN), the parent company of Dunkin' Donuts (DD) and Baskin-Robbins (BR), today reported results for the fourth quarter ended December 28, 2013.
"Our fourth quarter was strong, capping off a great year in which we set records and achieved major milestones for both Dunkin' Donuts and Baskin-Robbins," said Nigel Travis, Chairman and Chief Executive Officer, Dunkin' Brands Group Inc. "The Dunkin' Donuts U.S. annual net development growth rate exceeded five percent, and Baskin-Robbins had positive net development for the first time since 2006. Dunkin' Donuts U.S. had 3.4 percent comparable store sales growth in 2013, demonstrating the brand's continued relevance and resiliency in a challenging year for the QSR industry in general, and Baskin-Robbins U.S. had 0.8 percent comparable store sales growth, marking the third straight year of sales growth for the brand. Internationally we added 415 net new restaurants for both brands, and importantly, we made significant progress with our development goals to focus on higher profit-opportunity markets and globalizing our U.S. disciplines. Going into 2014, we look to drive growth by strengthening worldwide awareness of our two brands through global marketing initiatives, such as our recently announced partnership with Liverpool Football Club. We are also working to make our brands more accessible to consumers through programs like our DD Mobile initiative and DD Perks Rewards, which launched nationally on January 27."
"We are steadfastly committed to driving profitable growth for both our franchisees and our shareholders, a commitment we delivered on yet again in our second full year as a public company," said Paul Carbone, Chief Financial Officer, Dunkin' Brands Group, Inc. "As a result of strong topline sales growth and our intense focus on restaurant-level returns, franchisee profitability for both brands is healthier than it's ever been. Additionally, our nearly 100 percent franchised, asset-light business model enabled us to return more than $100 million to shareholders in 2013 through our quarterly dividends and ongoing share repurchases. We're also excited to announce the Board of Directors' decision to increase our first quarter dividend more than 20 percent over our fourth quarter 2013 dividend."
FISCAL YEAR 2013 KEY FINANCIAL HIGHLIGHTS
FOURTH QUARTER 2013 KEY FINANCIAL HIGHLIGHTS
Global systemwide sales growth in the fourth 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 fourth quarter was driven by increased average ticket and higher traffic resulting from our focus on operational excellence and product and marketing innovation. These product and marketing innovations resulted in strong beverage growth, led by Iced Coffee and Hot and Iced Espresso, driven by flavor news including Pumpkin; increases in Hot Chocolate, driven by the introduction of the Salted Caramel flavor; continued breakfast sandwich momentum across core sandwiches, the limited time offer Hot & Spicy Breakfast Sandwich, and incremental gains in the Turkey Sausage Breakfast Sandwich; growth in afternoon products including Chicken Sandwiches, Deluxe Grilled Cheese, and Wraps; growth in donut sales led by the introduction of the Pumpkin Pie donut; and increased sales of Dunkin' Donuts K-Cup® portion packs driven by a $7.99 National Coffee Day offer and a two-packs-for-$19.99 offer.
Baskin-Robbins U.S. comparable store sales growth was driven by sales of Cups & Cones, Beverages and Cakes as a result of news around favorite holiday flavors such as Gingerbread Junction and Winter White Chocolate, and a new flavor, Peppermint Bark in the Dark as well as increased sales of cakes driven by new cake designs and take-home ice cream quarts.
In the fourth quarter, Dunkin' Brands franchisees and licensees opened 309 net new restaurants around the globe. This includes 149 net new Dunkin' Donuts U.S. locations, 120 net new Baskin-Robbins International locations, 44 net new Dunkin' Donuts International locations, and four net closures for Baskin-Robbins U.S. Additionally, Dunkin' Donuts U.S. franchisees remodeled 169 restaurants during the quarter.
Revenues for the fourth quarter increased 13.3 percent compared to the prior year period primarily from increased royalty income due to systemwide sales growth, increased franchise fees due to favorable development mix and incremental franchise renewals, and increased sales of ice cream products. The increase in sales of ice cream products was partially the result of a one-time delay in revenue recognition related to the shift in manufacturing to Dean Foods that negatively impacted fourth quarter sales of ice cream products in 2012.
Operating income for the fourth quarter increased $14.5 million, or 21.4 percent, from the prior year primarily as a result of the increases in royalty income, franchise fees, and margin on sales of ice cream products. Adjusted operating income increased $9.4 million, or 11.8 percent, from the fourth quarter of 2012 as a result of the increases in royalty income and franchise fees, offset by a decrease in net income of equity method investments.
Net income for the fourth quarter increased by $7.7 million, or 22.5 percent, compared to the prior year period primarily as a result of the $14.5 millionincrease in operating income and a $2.0 million decrease in interest expense. This was offset by a $7.6 million increase in income tax expense and greater losses on foreign currency due to exchange rate fluctuations. Adjusted net income increased by $9.6 million, or 26.3 percent, compared to the fourth quarter of 2012, as a result of the increase in adjusted operating income and a decrease in interest expense, offset by greater losses on foreign currency.
Diluted adjusted earnings per share increased by 26.5 percent to $0.43 for the fourth quarter of 2013 compared to the prior year period as a result of the increase in adjusted net income, offset by an increase in shares outstanding. The increase in shares outstanding is due primarily to the exercise of stock options, offset by the repurchase of 648,000 shares during 2013 (230,700 shares repurchased during the fourth quarter).
FOURTH QUARTER 2013 SEGMENT RESULTS
Dunkin' Donuts U.S. revenues of $138.6 million represented an increase of 8.2 percent year-over-year. The increase was primarily a result of increased royalty income, as well as increased franchise fees due to favorable development mix and incremental franchise renewals. The increase in revenues was also driven by an increase in gains from refranchising transactions.
Dunkin' Donuts U.S. segment profit in the fourth quarter increased $11.3 million over the prior year period to $105.6 million, which was driven primarily by revenue growth.
Dunkin' Donuts International fourth quarter systemwide sales increased 2.7 percent from the prior year period, driven by sales growth in Indonesia,Germany, and the Middle East. On a constant currency basis, systemwide sales increased by approximately 3 percent.
Dunkin' Donuts International fourth quarter revenues of $5.6 million represented an increase of 39.8% year-over-year. The increase in revenue was primarily a result of an increase in franchise fees due to income recognized in connection with the termination of development agreements in Asia and franchise fees for openings in new international markets, as well as increased royalty income.
Segment profit for Dunkin' Donuts International increased $2.2 million to $4.4 million, primarily due to revenue growth, as well as a decrease in advertising expenses.
Baskin-Robbins U.S. fourth quarter revenue increased 4.3 percent from the prior year period to $8.2 million due primarily to increased franchise fees driven by incremental franchise renewals, as well as an increase in other revenues mainly as a result of refranchising gains and transfer fees. The increase in revenues was offset by a decline in sales of ice cream products.
Segment profit for Baskin-Robbins U.S. increased $1.1 million in the fourth quarter, or 29.4 percent, year-over-year primarily as a result of reductions in general and administrative expenses, including a reduction in incentive compensation and the fact that the prior year included expenses for reserves on leased locations, as well as the increase in revenues.
Baskin-Robbins International systemwide sales increased 2.6 percent in the fourth quarter from the prior year period driven by sales growth in theMiddle East and South Korea, offset by unfavorable exchange rates on sales in Japan. On a constant currency basis, systemwide sales increased by approximately 11 percent.
Baskin-Robbins International fourth quarter revenues increased 51.5 percent year-over-year to $27.2 million primarily due to increases in sales of ice cream products in the Middle East and an increase in distribution costs billed to customers, as well as 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 the prior year.
Fourth quarter segment profit increased 28.4 percent year-over-year to $8.8 million, resulting from an increase in net margin on ice cream driven by the increase in sales, as well as a reduced cost of ice cream products primarily resulting from the shift in manufacturing to Dean Foods. The increase was offset by a decrease in net income of equity method investments due to decreases in net income in Japan and Korea.
COMPANY UPDATES
FISCAL YEAR 2014 TARGETS
As described below, the Company is providing certain targets regarding its 2014 expectations.
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 31241808. 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 18,000 point 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 2013, Dunkin' Brands nearly 100 percent franchised business model included nearly 11,000 Dunkin' Donuts restaurants and 7,300 Baskin-Robbins restaurants, which are primarily owned and operated by approximately 2,000 franchisees, licensees and joint venture partners. For the full-year 2013, the company had franchisee-reported sales of approximately $9.3 billion. Dunkin' Brands Group, Inc. is headquartered in Canton, Mass.
Stacey Caravella (Investors)
Director, Investor Relations
Dunkin' Brands, Inc.
investor.relations@dunkinbrands.com
781-737-3200
Karen Raskopf (Media)
SVP, Corporate Communications
Dunkin' Brands, Inc.
karen.raskopf@dunkinbrands.com
781-737-5200
SOURCE Dunkin' Brands Group, Inc.
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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.