CANTON, Mass., April 28, 2016 // PRNewswire // --
First quarter highlights include:
Dunkin' Brands Group, Inc. (Nasdaq: DNKN), the parent company of Dunkin' Donuts (DD) and Baskin-Robbins (BR), today reported results for the first quarter ended March 26, 2016.
"We are encouraged by the first quarter Dunkin' Donuts U.S. comparable store sales performance which was driven by growth in beverages and breakfast sandwiches, along with price and favorable weather," said Dunkin' Brands Chairman and Chief Executive Officer Nigel Travis. "Admittedly we are still in the early days of our five-part plan to drive positive Dunkin' Donutssame-store sales, but as evidenced by the first quarter results we are beginning to make progress with our strategy which includes driving coffee innovation and culture; faster-to-market product innovation; targeted value offerings and smart pricing; increased use of digital technologies and an improved restaurant experience."
"During the first quarter we continued to expand the national presence of the Dunkin' Donuts brand through the addition of 69 net new restaurants in the U.S. as well as through the continued growth in sales of Dunkin' K-Cup pods in the retail channel," said Paul Carbone, Chief Financial Officer, Dunkin' Brands Group, Inc. "As we approach the first anniversary of the launch of Dunkin' K-Cup pods into the retail channel, we expect that Dunkin' Donuts K-Cup pods will be one of the most successful new grocery products in recent history and we have now exceeded the half-billion dollar annual retail sales threshold for Dunkin' Donuts coffee products in total."
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Global systemwide sales growth in the first quarter was primarily attributable to global store development and Dunkin' DonutsU.S. comparable store sales growth (which includes stores open 78 weeks or more).
Dunkin' Donuts U.S. comparable store sales growth in the first quarter was driven by increased average ticket and 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 limited-time-offer GranDDe Burrito and the return of the Chicken Apple Sausage breakfast sandwich. The in-restaurant K-Cup and packaged coffee categories had a negative 80 basis point impact on first quarter comparable store sales. We estimate that weather resulted in approximately 90 basis points of positive impact in the quarter.
Baskin-Robbins U.S. comparable store sales growth was driven by increased sales of cups and cones, beverages, desserts, sundaes, and cakes. Comparable store sales growth was driven primarily by traffic. We estimate that weather resulted in approximately 300 basis points of positive impact in the quarter.
In the first quarter, Dunkin' Brands franchisees and licensees opened 114 net new restaurants around the globe. This included 69 net new Dunkin' Donuts U.S. locations (including the closing of 2 Speedway self-serve coffee stations), 42 net new Baskin-Robbins International locations, 14 net new Dunkin' Donuts International locations, and 11 net closures for Baskin-Robbins U.S. Additionally, Dunkin' Donuts U.S. franchisees remodeled 90 restaurants and Baskin-Robbins U.S. franchisees remodeled 35 restaurants during the quarter.
Revenues for the first quarter increased 2.1% compared to the prior year period due primarily to increased royalty income as a result of systemwide sales growth and an increase in sales of ice cream and other products. These increases in revenues were offset by a decrease in other revenues due primarily to a one-time upfront license fee recognized in connection with the Dunkin' K-Cup® pod licensing agreement in the first quarter of 2015.
Operating income and adjusted operating income for the first quarter increased $1.6 million, or 1.9%, and $3.6 million, or 4.2%, respectively, from the prior year period primarily as a result of the increase in royalty income, as well as an increase in franchise income and a gain recognized in connection with the sale of real estate, offset by the decrease in other revenues due primarily to a one-time upfront license fee recognized in connection with the Dunkin' K-Cup® pod licensing agreement in the first quarter of 2015. Operating income in the prior year period was also favorably impacted by a reduction in legal reserves.
Net income for the first quarter increased by $11.5 million, or 45.0%, compared to the prior year period primarily as a result of the $20.6 million loss on debt extinguishment and refinancing transactions recorded in the prior year period, as well as the$1.6 million increase in operating income, offset by a $7.9 million increase in income tax expense and additional interest expense of $2.7 million, driven by additional borrowings incurred in conjunction with the securitization refinancing transaction completed in January 2015.
Adjusted net income for the first quarter increased by $0.4 million, or 1.0%, compared to the prior year period primarily as a result of the $3.6 million increase in adjusted operating income, offset by increases in interest expense and income tax expense.
Diluted earnings per share increased by 60.0% to $0.40 for the first quarter compared to the prior year period as a result of the increase in net income, as well as a decrease in shares outstanding. Diluted adjusted earnings per share increased by 10.0% to $0.44 for the first quarter compared to the prior year period as a result of the decrease in shares outstanding, as well as the increase in adjusted net income. The decrease in shares outstanding from the prior year period is due primarily to the repurchase of shares, offset by the exercise of stock options.
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.
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Dunkin' Donuts U.S. first quarter revenues of $138.8 million represented an increase of 3.7% 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 an increase in transfer fee income. These increases in revenues were offset by a decrease in franchise fees due to a decrease in gross openings and unfavorable development mix, as well as a decrease in renewal income. Also offsetting the increases in revenues was a decrease in sales at company-operated restaurants driven by a net decrease in the number of company-operated restaurants.
Dunkin' Donuts U.S. segment profit in the first quarter increased $6.7 million over the prior year period to $100.4 million, which was driven primarily by growth in royalty income, an increase in other operating income due to a gain recognized in connection with the sale of real estate, and an increase in other revenues. These increases were offset by a decrease in franchise fees and a recovery of bad debt in the prior year period.
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Dunkin' Donuts International first quarter systemwide sales decreased 0.4% from the prior year period. Sales declines inSouth Korea were offset by sales growth in Europe and the Middle East. Sales in South Korea, Asia, and South America were negatively impacted by unfavorable foreign exchange rates. On a constant currency basis, systemwide sales increased by approximately 7%.
Dunkin' Donuts International first quarter revenues of $7.3 million represented an increase of 10.2% over the prior year period. The increase in revenues were primarily a result of increased franchise fees due to development in new markets, as well as an increase in royalty income, offset by a decline in other revenues due to revenue recorded in the prior year period in connection with a settlement reached with a master licensee.
Segment profit for Dunkin' Donuts International increased $0.1 million to $3.8 million in the first quarter primarily as a result of revenue growth, offset by an increase in general and administrative expenses driven primarily by increased personnel costs and an increase in bad debt expense.
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Baskin-Robbins U.S. first quarter revenue increased 2.4% from the prior year period to $10.6 million due primarily to an increase in other revenues, driven by an increase in licensing income, and increases in royalty income and franchise fees, offset by a decrease in sales of ice cream and other products. The fluctuations in licensing income and sales of ice cream and other products can be attributed to a shift in certain franchisees now purchasing ice cream directly from our third-party ice cream manufacturer.
Segment profit for Baskin-Robbins U.S. increased $1.2 million in the first quarter, or 19.9%, over the prior year period primarily as a result of the increases in other revenues, royalty income, and franchise fees.
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Baskin-Robbins International systemwide sales decreased 7.1% in the first quarter compared to the prior year period driven by sales declines in South Korea and the Middle East, offset by sales growth in Japan and Europe. Sales in South Korea were also negatively impacted by unfavorable foreign exchange rates. On a constant currency basis, systemwide sales decreased by approximately 3%.
Baskin-Robbins International first quarter revenues increased 16.0% over the prior year period to $26.8 million due primarily to an increase in sales of ice cream and other products to the Middle East. Systemwide sales and sales of ice cream and other 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.
First quarter segment profit increased 18.8% from the prior year period to $8.4 million as a result of an increase in net margin on ice cream driven primarily by increases in sales volume and pricing, as well as a decrease in bad debt expense. These increases in segment profit were offset by a decrease in net income from our South Korea joint venture.
As described below, the Company is reiterating each of its targets regarding 2016 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 91087454. Dunkin' Brands will broadcast the conference call live over the Internet athttp://investor.dunkinbrands.com. A replay of the conference call will be available on the Company's website athttp://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," 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.
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 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. 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.
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 first quarter 2016, Dunkin' Brands' nearly 100 percent franchised business model included more than 11,800 Dunkin' Donuts restaurants and more than 7,600 Baskin-Robbins restaurants.Dunkin' Brands Group, Inc. is headquartered in Canton, Mass.
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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.