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8-K - FORM 8-K - DUNKIN' BRANDS GROUP, INC.d297853d8k.htm

Exhibit 99.1

 

LOGO

FOR IMMEDIATE RELEASE

Dunkin’ Brands Reports Fourth Quarter and Full Year 2011 Results

Strong finish to 2011 with fourth quarter adjusted net income* up 36.6% driven by 7.4% Dunkin' Donuts U.S. comp store sales increase

CANTON, Mass. (February 9, 2012) – 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 31, 2011, periods that included 14 weeks and 53 weeks, respectively.

“We had a strong finish to the year. Our operational execution, innovative product introductions, and break-through marketing are differentiating us competitively and delivering results,” said Nigel Travis, Chief Executive Officer, Dunkin’ Brands Group, Inc., and President, Dunkin’ Donuts U.S. “We continue to grow our brands globally, adding more than 600 net new Dunkin’ Donuts and Baskin-Robbins locations last year. The long-term agreement we signed with our Dunkin’ Donuts franchisee-owned procurement and distribution cooperative was a significant step forward in support of our goal to accelerate the growth of the brand across the U.S. In 2011, we executed our strategy, remained laser-focused on our priorities, and we believe we have positioned the Company to deliver sustainable long-term growth.”

Fourth quarter highlights include:

 

 

Worldwide system-wide sales grew 15.0% over the fourth quarter of 2010 (system-wide sales grew 8.1% on a 13-week basis)

 

 

Dunkin’ Donuts U.S. comparable store sales were up 7.4% and Baskin-Robbins U.S. comparable store sales were up 5.8%

 

 

269 net new Dunkin’ Donuts and Baskin-Robbins locations globally

 

 

Revenues increased 12.5% over the fourth quarter of 2010 to $168.5 million; on a 13-week basis, revenues increased 7.2% to $160.5 million

 

 

Operating income increased 0.4% over the fourth quarter of 2010 to $44.6 million; adjusted operating income* increased 31.2% to $73.0 million with adjusted operating income margin* expanding 620 basis points to 43.3%

 

 

Net income increased $26.8 million over the fourth quarter of 2010 to $11.6 million; adjusted net income increased 36.6% to $36.2 million

 

 

Diluted earnings per pro forma common share* was $0.10; diluted adjusted earnings per pro forma common share* was $0.30; on a 13-week basis, diluted adjusted earnings per pro forma common share was $0.28

Fiscal year 2011 highlights include:

 

 

Worldwide system-wide sales grew 9.1% over fiscal year 2010 (system-wide sales grew 7.4% on a 52-week basis)

 

 

Dunkin’ Donuts U.S. comparable store sales were up 5.1% and Baskin-Robbins U.S. comparable store sales were up 0.5%

 

 

601 net new Dunkin’ Donuts and Baskin-Robbins locations globally bringing Dunkin’ Brands total points of distribution to 16,794 as of year end

 

 

Revenues increased 8.8% to $628.2 million from $577.1 million in fiscal year 2010 (revenues increased 7.5% on a 52-week basis)

 

 

Operating income increased 6.1% to $205.3 million; adjusted operating income increased 16.2% to $270.7 million with adjusted operating income margin expanding 270 basis points to 43.1%

 

 

Net income increased 28.2% to $34.4 million; adjusted net income increased 15.9% to $101.7 million


 

Diluted earnings per pro forma common share was $0.32; diluted adjusted earnings per pro forma common share was $0.94; on a 52-week basis, diluted adjusted earnings per pro forma common share was $0.93

 

* Adjusted operating income, adjusted operating income margin, and adjusted net income are non-GAAP measures reflecting operating income, operating income margin, and net income, determined in accordance with GAAP, as adjusted for certain items. Diluted earnings and adjusted earnings per pro forma common share are also non-GAAP measures reflecting the conversion of Class L common stock as if the conversion were completed at the beginning of the respective fiscal periods. These non-GAAP measures are more fully described below our key financial highlights.

Worldwide system-wide 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), global store development, growth in Baskin-Robbins international sales, and the impact of the extra week in 2011.

Dunkin’ Donuts U.S. comparable store sales gains in the fourth quarter were driven by increased average ticket and higher traffic resulting from strong beverage sales growth; differentiated breakfast sandwich limited time offers, including the Smoked Sausage Breakfast Sandwich; sales of Dunkin’ Donuts K-Cup portion packs; and the “What Are You Drinkin’” marketing campaign. Baskin-Robbins U.S. comparable store sales growth was driven by new product news around holiday cakes and cake bites as well as improvements in operational execution.

In the fourth quarter, Dunkin’ Brands franchisees and licensees opened 120 net new Dunkin’ Donuts locations in the U.S. – with more than 80 percent of net openings located outside of the brand’s core markets – and 184 net Dunkin’ Donuts and Baskin-Robbins locations outside the U.S. Additionally, Dunkin’ Donuts U.S. franchisees remodeled 248 restaurants during the quarter and 636 during fiscal year 2011.

Revenues grew by 12.5 percent, or 7.2 percent on a 13-week basis, in the fourth quarter compared to the fourth quarter of 2010, primarily from increased royalty income driven by the increase in system-wide sales, as well as sales of ice cream products.

Operating income was modestly favorable over the fourth quarter of 2010 as a result of the increase in revenues offset by an $18.8 million net non-cash impairment charge related to the Company’s investment in the South Korean joint venture, driven by the performance of the Dunkin’ Donuts business in that country. Adjusted operating income grew 31.2 percent as a result of the leverage enabled by 12.5 percent revenue growth and minimal expense growth.

Net income increased by $26.8 million compared to the fourth quarter of 2010 as a result of a decrease in loss on debt extinguishment and costs associated with the Company’s refinancing in November 2010, offset by an increase in tax expense. Adjusted net income increased $9.7 million, or 36.6 percent, resulting primarily from increased adjusted operating income and a decrease in interest expense, partially offset by an increase in tax expense.

“We had an outstanding 2011, delivering full-year results which exceeded our long-term targets for both revenue and adjusted operating income,” said Neil Moses, Dunkin’ Brands Chief Financial Officer. “Our asset-light franchised business model produced significant revenue growth, high margins and strong free cash flow – as evidenced by the more than $100 million in cash we generated in 2011. We are excited about our prospects and remain focused on executing our growth strategies and delivering shareholder value.”


FOURTH QUARTER 2011 KEY FINANCIAL HIGHLIGHTS

 

($ in millions, except per share data)    Quarter 4     Increase
(Decrease)
 
     2011     2010     $/#      %  
     (14 weeks)     (13 weeks)               

Systemwide Sales Growth

     15.0     8.2     

DD U.S. Comparable Store Sales Growth

     7.4     4.7     

BR U.S. Comparable Store Sales Growth

     5.8     -0.8     

Consolidated Net POD Development

     269        146        123         84.2

DD Global PODs at period end

     10,083        9,760        323         3.3

BR Global PODs at period end

     6,711        6,433        278         4.3

Consolidated Global PODs at period end

     16,794        16,193        601         3.7

Revenues

   $ 168.5        149.8        18.7         12.5

Operating Income

     44.6        44.4        0.2         0.4

Adjusted Operating Income*

     73.0        55.7        17.3         31.2

Net Income (Loss)

     11.6        (15.3     26.8         n/a   

Adjusted Net Income*

     36.2        26.5        9.7         36.6

Earnings (Loss) Per Share – Basic and Diluted

         

Class L

     n/a      $ 1.18        n/a         n/a   

Common

   $ 0.10        (1.02     1.12         n/a   

Diluted Adjusted Earnings per Pro Forma Common Share*

   $ 0.30        0.27        0.03         11.1

Pro Forma Weighted Average Number of Common Shares – Diluted (in millions)

     121.0        97.2        23.80         24.5

(amounts and percentages may not recalculate due to rounding)


FISCAL YEAR 2011 KEY FINANCIAL HIGHLIGHTS

 

($ in millions, except per share data)    Fiscal Year     Increase
(Decrease)
 
     2011     2010     $/#     %  
     (53 weeks)     (52 weeks)              

Systemwide Sales Growth

     9.1     6.7    

DD U.S. Comparable Store Sales Growth

     5.1     2.3    

BR U.S. Comparable Store Sales Growth

     0.5     -5.2    

Consolidated Net POD Development

     601        800        (199     -24.9

DD Global PODs at period end

     10,083        9,760        323        3.3

BR Global PODs at period end

     6,711        6,433        278        4.3

Consolidated Global PODs at period end

     16,794        16,193        601        3.7

Revenues

   $ 628.2        577.1        51.1        8.8

Operating Income

     205.3        193.5        11.8        6.1

Adjusted Operating Income*

     270.7        233.1        37.7        16.2

Net Income

     34.4        26.9        7.6        28.2

Adjusted Net Income*

     101.7        87.8        14.0        15.9

Earnings (Loss) Per Share – Basic and Diluted

        

Class L

   $ 6.14        4.87        1.27        26.1

Common

   $ (1.41     (2.04     0.63        30.9

Diluted Adjusted Earnings per Pro Forma Common Share*

   $ 0.94        0.90        0.04        4.4

Pro Forma Weighted Average Number of Common Shares – Diluted (in millions)

     107.7        97.1        10.60        10.9

(amounts and percentages may not recalculate due to rounding)

 

* Adjusted operating income, adjusted operating income margin, and adjusted net income are non-GAAP measures reflecting operating income, operating income margin, and net income, determined in accordance with GAAP, further adjusted for amortization of intangible assets, impairment charges, and other non-recurring items, net of the tax impact of such adjustments. Diluted earnings per pro forma common share and diluted adjusted earnings per pro forma common share are non-GAAP measures, calculated using net income and adjusted net income, respectively, and give effect to the conversion of Class L common stock as if the conversion were completed at the beginning of the respective fiscal period. Please refer to “Non-GAAP Measures and Statistical Data,” “Dunkin’ Brands Group, Inc. Non-GAAP Reconciliations,” and “Dunkin’ Brands Group, Inc. Diluted Earnings and Adjusted Earnings per Pro Forma Common Share” for further detail.

###

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 45920513. 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 November 17, 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 GAAP financial measures set forth in this press release, the Company has provided certain non-GAAP measurements, adjusted operating income, adjusted operating income margin, adjusted net income, diluted earnings per pro forma common share, 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 Class L common stock into common. 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 measurements 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 earnings per pro forma common share, diluted adjusted earnings per pro forma common share may differ from similar measures reported by other companies. Adjusted operating income, adjusted operating income margin, 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 an initial public offering in which 22,250,000 shares of common stock were sold at an initial public offering price of $19.00 per share. 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 calculations of diluted earnings per pro forma common share and diluted adjusted earnings per pro forma common share for the fiscal year ended December 31, 2011 and the three months and fiscal year ended December 25, 2010 give 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 respective fiscal period. The calculations of diluted earnings per pro forma common share and diluted adjusted earnings per pro forma common share also include the dilutive effect of common restricted shares and stock options, using the treasury stock method. Shares sold in the offering are included in the diluted earnings per pro forma common share and diluted adjusted earnings per pro forma common share calculations beginning on the date that such shares were actually issued. 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 Earnings and Adjusted Earnings per Pro Forma Common Share” for further detail.

Additionally, the Company has included metrics such as worldwide 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 “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-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 prior year periods. Such financial measures and metrics reflect our estimate of the impact of the additional week on system-wide sales, revenues, and expenses.

About Dunkin’ Brands

With more than 16,500 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 2011, Dunkin’ Brands’ nearly 100 percent franchised business model included more than 10,000 Dunkin’ Donuts restaurants and more than 6,500 Baskin-Robbins restaurants. For the full-year 2011, the company had system-wide sales of approximately $8.4 billion. Dunkin’ Brands Group, Inc. is headquartered in Canton, Mass.

Contact(s):

 

Stacey Caravella (Investors)   Karen Raskopf (Media)
Director, Investor Relations   SVP, Corporate Communications
Dunkin’ Brands, Inc.   Dunkin’ Brands, Inc.
investor.relations@dunkinbrands.com   karen.raskopf@dunkinbrands.com
781-737-3200   781-737-5200


FISCAL YEAR 2011 SEGMENT RESULTS BY QUARTER

 

Dunkin’ Donuts U.S.

   Q1 2011     Q2 2011     Q3 2011     Q4 2011     Fiscal
Year
2011
 
     ($ in thousands except as otherwise noted)  

Comparable store sales growth

     2.8     3.8     6.0     7.4     5.1

Systemwide sales growth

     5.3     6.0     8.3     17.4     9.4

Franchisee reported sales (in millions)

   $ 1,299.0        1,463.0        1,501.4        1,655.4        5,918.8   

Revenues:

          

Royalty income

   $ 69,305        78,321        80,659        88,918        317,203   

Franchise fees

     5,210        5,580        9,653        9,462        29,905   

Rental income

     20,664        22,665        22,259        21,002        86,590   

Other revenues

     1,045        817        1,327        841        4,030   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total revenues

   $ 96,224        107,383        113,898        120,223        437,728   

Segment profit

   $ 70,708        82,605        88,992        92,003        334,308   

Points of distribution

     6,799        6,838        6,895        7,015        7,015   

Gross openings

     52        71        91        160        374   

Net openings

     27        39        57        120        243   

Dunkin’ Donuts International

   Q1 2011     Q2 2011     Q3 2011     Q4 2011     Fiscal
Year
2011
 
     ($ in thousands except as otherwise noted)  

Systemwide sales growth

     10.0     10.3     13.7     2.9     9.1

Franchisee reported sales (in millions)

   $ 153.1        162.4        161.5        159.6        636.7   

Revenues:

          

Royalty income

   $ 3,106        3,191        3,175        3,185        12,657   

Franchise fees

     673        567        405        649        2,294   

Rental income

     85        79        49        45        258   

Other revenues

     6        (7     40        5        44   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total revenues

   $ 3,870        3,830        3,669        3,884        15,253   

Segment profit

   $ 3,180        3,150        2,496        2,702        11,528   

Points of distribution

     3,006        3,029        3,005        3,068        3,068   

Gross openings

     84        82        70        105        341   

Net openings

     18        23        (24     63        80   

Baskin Robbins U.S.

   Q1 2011     Q2 2011     Q3 2011     Q4 2011     Fiscal
Year
2011
 
     ($ in thousands except as otherwise noted)  

Comparable store sales growth

     0.5     -2.8     1.7     5.8     0.5

Systemwide sales growth

     0.2     -5.1     -0.1     11.1     0.4

Franchisee reported sales (in millions)

   $ 101.8        148.7        148.1        97.2        495.9   

Revenues:

          

Royalty income

   $ 5,108        7,509        7,488        5,072        25,177   

Franchise fees

     376        299        357        239        1,271   

Rental income

     1,218        1,184        1,180        962        4,544   

Sales of ice cream products

     542        586        566        529        2,223   

Other revenues

     1,801        2,786        2,412        1,549        8,548   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total revenues

   $ 9,045        12,364        12,003        8,351        41,763   

Segment profit

   $ 4,299        6,927        6,963        2,715        20,904   

Points of distribution

     2,523        2,510        2,492        2,457        2,457   

Gross openings

     10        13        12        14        49   

Net openings

     (24     (13     (18     (35     (90

Baskin Robbins International

   Q1 2011     Q2 2011     Q3 2011     Q4 2011     Fiscal
Year
2011
 
     ($ in thousands except as otherwise noted)  

Systemwide sales growth

     5.2     15.3     13.0     10.9     11.6

Franchisee reported sales (in millions)

   $ 236.9        354.0        390.7        310.5        1,292.1   

Revenues:

          

Royalty income

   $ 1,836        2,292        2,489        1,805        8,422   

Franchise fees

     345        380        336        532        1,593   

Rental income

     151        153        157        155        616   

Sales of ice cream products

     22,174        24,639        25,025        26,007        97,845   

Other revenues

     156        (67     83        (69     103   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total revenues

   $ 24,662        27,397        28,090        28,430        108,579   

Segment profit

   $ 8,163        10,453        14,453        10,464        43,533   

Points of distribution

     3,959        4,050        4,133        4,254        4,254   

Gross openings

     135        148        126        162        571   

Net openings

     73        91        83        121        368   

Fiscal year totals may not recalculate due to rounding


DUNKIN’ BRANDS GROUP, INC. AND SUBSIDIARIES

Consolidated Statements of Operations

(In thousands)

(Unaudited)

 

     Three months ended     Fiscal year ended  
     December 31,
2011
    December 25,
2010
    December 31,
2011
    December 25,
2010
 

Revenues:

        

Franchise fees and royalty income

   $ 109,814       96,907       398,474       359,927  

Rental income

     22,195       21,295       92,145       91,102  

Sales of ice cream products

     26,536       19,873       100,068       84,989  

Other revenues

     9,960       11,701       37,511       41,117  
  

 

 

   

 

 

   

 

 

   

 

 

 

Total revenues

     168,505       149,776       628,198       577,135  
  

 

 

   

 

 

   

 

 

   

 

 

 

Operating costs and expenses:

        

Occupancy expenses - franchised restaurants

     13,600       14,592       51,878       53,739  

Cost of ice cream products

     19,534       14,607       72,329       59,175  

General and administrative expenses, net

     61,217       60,537       240,625       223,620  

Depreciation

     6,147       6,200       24,497       25,359  

Amortization of other intangible assets

     6,919       7,152       28,025       32,467  

Impairment charges

     840       4,120       2,060       7,075  
  

 

 

   

 

 

   

 

 

   

 

 

 

Total operating costs and expenses

     108,257       107,208       419,414       401,435  

Equity in net income (loss) of joint ventures:

        

Net income, excluding impairment

     4,071       1,812       16,277       17,825  

Impairment charge, net of tax (a)

     (19,752     —          (19,752     —     
  

 

 

   

 

 

   

 

 

   

 

 

 

Total equity in net income (loss) of joint ventures

     (15,681     1,812       (3,475     17,825  
  

 

 

   

 

 

   

 

 

   

 

 

 

Operating income

     44,567       44,380       205,309       193,525  
  

 

 

   

 

 

   

 

 

   

 

 

 

Other income (expense):

        

Interest income

     220       182       623       305  

Interest expense

     (18,167     (32,116     (105,072     (112,837

Loss on debt extinguishment and refinancing transactions

     —          (58,262     (34,222     (61,955

Other gains, net

     186       441       175       408  
  

 

 

   

 

 

   

 

 

   

 

 

 

Total other expense

     (17,761     (89,755     (138,496     (174,079
  

 

 

   

 

 

   

 

 

   

 

 

 

Income (loss) before income taxes

     26,806       (45,375     66,813       19,446  

Provision (benefit) for income taxes

     15,215       (30,119     32,371       (7,415
  

 

 

   

 

 

   

 

 

   

 

 

 

Net income (loss)

   $ 11,591       (15,256     34,442       26,861  
  

 

 

   

 

 

   

 

 

   

 

 

 

Earnings (loss) per share:

        

Class L - basic and diluted

     n/a      $ 1.18       6.14       4.87  

Common - basic and diluted

   $ 0.10       (1.02     (1.41     (2.04

 

(a) 

The $19.8 million impairment charge recorded in the fourth quarter of 2011 relates to our investment in the South Korea joint venture, and resulted from declines in operating performance in the Dunkin’ Donuts business in that country. The impairment charge was allocated to the underlying intangible and long-lived assets of the joint venture, which resulted in a reduction in depreciation and amortization, net of tax, (and a reduction in the equity in net loss of joint ventures) of $1.0 million in the fourth quarter of 2011.


DUNKIN’ BRANDS GROUP, INC. AND SUBSIDIARIES

Condensed Consolidated Balance Sheets

(In thousands)

(Unaudited)

 

     December 31,
2011
     December 25,
2010
 
Assets      

Current assets:

     

Cash and cash equivalents

   $ 246,715        134,100  

Accounts, notes, and other receivable, net

     58,787        79,943  

Other current assets

     100,972        70,334  
  

 

 

    

 

 

 

Total current assets

     406,474        284,377  

Property and equipment, net

     185,360        193,273  

Investments in joint ventures

     164,636        169,276  

Goodwill and other intangible assets, net

     2,398,211        2,424,312  

Other assets

     69,337        76,050  
  

 

 

    

 

 

 

Total assets

   $ 3,224,018        3,147,288  
  

 

 

    

 

 

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

Current liabilities:

     

Current portion of long-term debt

   $ 14,965        12,500  

Accounts payable

     9,651        9,822  

Other current liabilities

     291,924        258,233  
  

 

 

    

 

 

 

Total current liabilities

     316,540        280,555  
  

 

 

    

 

 

 

Long-term debt, net

     1,453,344        1,847,016  

Deferred income taxes, net

     578,660        586,337  

Other long-term liabilities

     129,538        127,139  
  

 

 

    

 

 

 

Total long-term liabilities

     2,161,542        2,560,492  
  

 

 

    

 

 

 

Common stock, Class L

     —           840,582  

Total stockholders’ equity (deficit)

     745,936        (534,341
  

 

 

    

 

 

 

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

   $ 3,224,018        3,147,288  
  

 

 

    

 

 

 


DUNKIN’ BRANDS GROUP, INC. AND SUBSIDIARIES

Condensed Consolidated Statements of Cash Flows

(In thousands)

(Unaudited)

 

     Fiscal year ended  
     December 31,
2011
    December 25,
2010
 

Cash flows from operating activities:

    

Net income

   $ 34,442       26,861  

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

    

Depreciation and amortization

     52,522       57,826  

Loss on debt extinguishment and refinancing transactions

     34,222       61,955  

Deferred income taxes

     (11,363     (28,389

Equity in net loss (income) of joint ventures

     3,475       (17,825

Dividends received from joint ventures

     7,362       6,603  

Other non-cash adjustments, net

     9,126       10,997  

Change in operating assets and liabilities:

    

Restricted cash

     —          101,675  

Accounts, notes, and other receivables, net

     19,123       (11,815

Other current liabilities

     17,904       29,384  

Liabilities of advertising funds, net

     (3,572     (346

Other, net

     (538     (7,922
  

 

 

   

 

 

 

Net cash provided by operating activities

     162,703       229,004  
  

 

 

   

 

 

 

Cash flows from investing activities:

    

Additions to property and equipment

     (18,596     (15,358

Other, net

     (1,211     (249
  

 

 

   

 

 

 

Net cash used in investing activities

     (19,807     (15,607
  

 

 

   

 

 

 

Cash flows from financing activities:

    

Proceeds from (repayment of) long-term debt, net

     (404,608     388,390  

Payment of deferred financing and other debt-related costs

     (20,087     (34,979

Proceeds from initial public offering, net of offering costs

     389,961       —     

Proceeds from issuance of common stock, net

     3,213       895  

Repurchases of common stock

     (286     (3,890

Dividends paid on Class L common stock

     —          (500,002

Change in restricted cash

     —          16,144  

Other, net

     1,733       859  
  

 

 

   

 

 

 

Net cash used in financing activities

     (30,074     (132,583
  

 

 

   

 

 

 

Effect of exchange rates on cash and cash equivalents

     (207     76  
  

 

 

   

 

 

 

Increase in cash and cash equivalents

     112,615       80,890  

Cash and cash equivalents, beginning of period

     134,100       53,210  
  

 

 

   

 

 

 

Cash and cash equivalents, end of period

   $ 246,715       134,100  
  

 

 

   

 

 

 


DUNKIN’ BRANDS GROUP, INC.

Diluted Earnings and Adjusted Earnings per Pro Forma Common Share

(Unaudited)

 

     Three months ended     Fiscal year ended  
     December 31,
2011
    December 25,
2010
    December 31,
2011
    December 25,
2010
 

Diluted earnings per pro forma common share:

        

Net income (in thousands)

   $ 11,591        (15,256     34,442        26,861   

Pro forma weighted average number of common shares – diluted:

        

Weighted average number of Class L shares over period in which Class L shares were outstanding (a)

     —          22,804,162        22,845,378        22,806,796   

Adjustment to weight Class L shares over respective fiscal period (a)

     —          —          (9,790,933     —     
  

 

 

   

 

 

   

 

 

   

 

 

 

Weighted average number of Class L shares over respective fiscal period

     —          22,804,162        13,054,445        22,806,796   

Class L conversion factor

     2.4338        2.4338        2.4338        2.4338   
  

 

 

   

 

 

   

 

 

   

 

 

 

Weighted average number of converted Class L shares

     —          55,501,357        31,772,244        55,507,768   

Weighted average number of common shares

     119,486,311        41,318,442        74,835,697        41,295,866   
  

 

 

   

 

 

   

 

 

   

 

 

 

Pro forma weighted average number of common shares – basic

     119,486,311        96,819,799        106,607,941        96,803,634   

Incremental dilutive common shares (b)

     1,551,701        387,139        1,064,587        275,844   
  

 

 

   

 

 

   

 

 

   

 

 

 

Pro forma weighted average number of common shares – diluted

     121,038,012        97,206,938        107,672,528        97,079,478   
  

 

 

   

 

 

   

 

 

   

 

 

 

Diluted earnings per pro forma common share

   $ 0.10        (0.16     0.32        0.28   
  

 

 

   

 

 

   

 

 

   

 

 

 

Diluted adjusted earnings per pro forma common share:

        

Adjusted net income (in thousands)

   $ 36,162        26,464        101,744        87,759   

Pro forma weighted average number of common shares – diluted

     121,038,012        97,206,938        107,672,528        97,079,478   
  

 

 

   

 

 

   

 

 

   

 

 

 

Diluted adjusted earnings per pro forma common share

   $ 0.30        0.27        0.94        0.90   
  

 

 

   

 

 

   

 

 

   

 

 

 

Impact of extra week (c)

     (0.02     —          (0.01     —     
  

 

 

   

 

 

   

 

 

   

 

 

 

Diluted adjusted earnings per pro forma common share, 13-week / 52-week basis

   $ 0.28        0.27        0.93        0.90   
  

 

 

   

 

 

   

 

 

   

 

 

 

 

(a) 

The weighted average number of Class L shares in the actual Class L earnings per share calculation for the fiscal year ended December 31, 2011 represents the weighted average from the beginning of the period up through the date of conversion of the Class L shares into common shares. As such, the pro forma weighted average number of common shares includes an adjustment to the weighted average number of Class L shares outstanding to reflect the length of time the Class L shares were outstanding prior to conversion relative to the twelve month period. The converted Class L shares are already included in the weighted average number of common shares outstanding for the period after their conversion.

(b) 

Represents the dilutive effect of restricted shares and stock options, using the treasury stock method.

(c) 

The three months and fiscal year ended December 31, 2011 include 14 weeks and 53 weeks, respectively, as compared to 13 weeks and 52 weeks for the three months and fiscal year ended December 25, 2010, respectively. The impact of the extra week in the three months and fiscal year ended December 31, 2011 reflects our estimate of the additional week in those fiscal periods on certain revenues and expenses, net of tax.


DUNKIN’ BRANDS GROUP, INC.

Non-GAAP Reconciliations

(In thousands)

(Unaudited)

 

     Three months ended     Fiscal year ended  
     December 31,
2011
    December 25,
2010
    December 31,
2011
    December 25,
2010
 

Total revenues

   $ 168,505       149,776       628,198       577,135  

Impact of extra week (a)

     (8,005     —          (8,005     —     
  

 

 

   

 

 

   

 

 

   

 

 

 

Total revenues, 13-week / 52-week basis

   $ 160,500       149,776       620,193       577,135  
  

 

 

   

 

 

   

 

 

   

 

 

 

Operating income

   $ 44,567       44,380       205,309       193,525  

Operating income margin

     26.4     29.6     32.7     33.5

Adjustments:

        

Sponsor termination fee

     —          —          14,671       —     

Amortization of other intangible assets

     6,919       7,152       28,025       32,467  

Impairment charges

     840       4,120       2,060       7,075  

Korea joint venture impairment, net (b)

     18,776       —          18,776       —     

Secondary offering costs

     1,899       —          1,899       —     
  

 

 

   

 

 

   

 

 

   

 

 

 

Adjusted operating income

   $ 73,001       55,652       270,740       233,067  
  

 

 

   

 

 

   

 

 

   

 

 

 

Adjusted operating income margin

     43.3     37.2     43.1     40.4

Net income (loss)

   $ 11,591       (15,256     34,442       26,861  

Adjustments:

        

Sponsor termination fee

     —          —          14,671       —     

Amortization of other intangible assets

     6,919       7,152       28,025       32,467  

Impairment charges

     840       4,120       2,060       7,075  

Korea joint venture impairment, net (b)

     18,776       —          18,776       —     

Secondary offering costs

     1,899       —          1,899       —     

Loss on debt extinguishment and refinancing transactions

     —          58,262       34,222       61,955  

Tax impact of adjustments (c)

     (3,863     (27,814     (32,351     (40,599
  

 

 

   

 

 

   

 

 

   

 

 

 

Adjusted net income

   $ 36,162       26,464       101,744       87,759  
  

 

 

   

 

 

   

 

 

   

 

 

 

 

(a) 

The three months and fiscal year ended December 31, 2011 include 14 weeks and 53 weeks, respectively, as compared to 13 weeks and 52 weeks for the three months and fiscal year ended December 25, 2010, respectively. The impact of the extra week in the three months and fiscal year ended December 31, 2011 reflects our estimate of the additional week in those fiscal periods on certain revenues.

(b) 

Amount consists of an impairment of the investment in the Korea joint venture of $19.8 million, less a reduction in depreciation and amortization, net of tax, of $1.0 million resulting from the allocation of the impairment charge to the underlying intangible and long-lived assets of the joint venture.

(c) 

Tax impact of adjustments calculated at a 40% effective tax rate for each period presented, excluding the Korea joint venture impairment charge in fiscal year 2011 as there was no tax impact related to that charge.