Attached files

file filename
EX-99.2 - PRESS RELEASE - DUNKIN' BRANDS GROUP, INC.d426553dex992.htm
8-K - FORM 8-K - DUNKIN' BRANDS GROUP, INC.d426553d8k.htm

Exhibit 99.1

 

LOGO

Dunkin’ Brands Reports Third Quarter 2012 Results

 

   

Revenue up 5% and adjusted operating income up 12.5%

 

   

Adjusted operating income margin at approximately 50%

 

   

Adjusted net income up 34.4%

 

   

Comparable store sales growth across all four business segments including 2.8 percent in Dunkin’ Donuts U.S.

 

   

Company returned nearly $470 million to shareholders through share repurchases and dividends

CANTON, Mass. (October 25, 2012) – 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 29, 2012.

“The third quarter marked our fifth quarter as a public company, and our fifth consecutive quarter with double-digit adjusted earnings per share growth. We continue to leverage our asset-light, nearly 100-percent franchised model to drive strong shareholder returns,” said Nigel Travis, Chief Executive Officer, Dunkin’ Brands Group, Inc., and President, Dunkin’ Donuts U.S. “With the exceptional growth of the Dunkin’ Donuts brand over the past two years and our intense focus on franchisee profitability, our franchisees are seeing very strong unit economics and in turn are driving our robust restaurant expansion across the U.S. Together, we are delivering on our core strategies as well as utilizing new operational and marketing tactics to compete and grow in today’s challenging environment.”

Consolidated Key Highlights

 

($ in millions, except per share data)    Quarter 3     Increase (Decrease)  
     2012     2011     $/#      %  

System-wide Sales Growth

     4.7     8.9     

DD U.S. Comparable Store Sales Growth

     2.8     6.0     

BR U.S. Comparable Store Sales Growth

     1.1     1.7     

DD International Comparable Store Sales Growth

     2.1       

BR International Comparable Store Sales Growth

     3.0       

Consolidated Net POD Development

     187        98        89         90.8

DD Global PODs at period end

     10,283        9,900        383         3.9

BR Global PODs at period end

     6,920        6,625        295         4.5

Consolidated Global PODs at period end

     17,203        16,525        678         4.1

Revenues

   $ 171.7        163.5        8.2         5.0

Operating Income 1

     70.3        54.1        16.2         30.0

Operating Income Margin 1

     41.0     33.1     

Adjusted Operating Income 2

   $ 85.4        75.9        9.5         12.5

Adjusted Operating Income Margin 2

     49.7     46.4     

Net Income

   $ 29.5        7.4        22.1         298.4

Adjusted Net Income 2

     42.1        31.3        10.8         34.4

Earnings (Loss) Per Share - Basic and Diluted

         

Class L - basic and diluted

   $ n/a        4.46        n/a         n/a   

Common - basic and diluted

     0.26        (1.01     1.27         n/a   

Diluted Adjusted Earnings per Pro Forma Common Share 2

     0.37        0.28        0.09         32.1

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

     115.1        113.3        1.8         1.6

(amounts and percentages may not recalculate due to rounding)

 

1 

Operating income for Q3 2011 includes a $14.7 million expense related to the termination of the Sponsor management agreement upon completion of the Company’s initial public offering.

2 

Adjusted operating income and adjusted net income are non-GAAP measures reflecting operating income and net income adjusted for amortization of intangible assets, impairment charges, and other non-recurring, infrequent, or unusual charges (including the expense referred to above in footnote 1), net of the tax impact of such adjustments in the case of adjusted net income. Diluted adjusted earnings per pro forma common share is a non-GAAP measure, calculated using adjusted net income, and gives effect to the conversion of Class L common stock as if the conversion were completed at the beginning of the respective fiscal period for which such shares were outstanding. Please refer to “Non-GAAP Measures and Statistical Data,” “Dunkin’ Brands Group, Inc. Non-GAAP Reconciliations,” and “Dunkin’ Brands Group, Inc. Diluted Adjusted Earnings per Pro Forma Common Share” for further detail.

Global system-wide sales growth in the third quarter was primarily attributable to Dunkin’ Donuts U.S. comparable store sales growth (which includes stores open 54 weeks or more), global store development, and growth in Baskin-Robbins International sales.

 

1


Dunkin’ Donuts U.S. comparable store sales growth in the third quarter was driven by increased average ticket and higher traffic despite a challenging consumer and competitive environment. The growth resulted from our continued focus on product and marketing innovation with strong beverage sales growth led by cold beverages; strong breakfast sandwich sales across both core offerings and differentiated breakfast sandwiches; continued growth in Bakery Sandwiches; and sales of Dunkin’ Donuts K-Cup® portion packs.

 

2


Baskin-Robbins U.S. comparable store sales growth was driven by new Flavors of the Month; new signature cake merchandising; and new beverage messaging around Flavors of the Month being available as milk shakes.

In the third quarter, Dunkin’ Brands franchisees and licensees opened 187 net new restaurants across the globe. This includes 78 net new Dunkin’ Donuts U.S. locations, 74 net new Baskin-Robbins International locations, 36 net new Dunkin’ Donuts International locations, and one net closure for Baskin-Robbins U.S. Additionally, Dunkin’ Donuts U.S. franchisees remodeled 144 restaurants during the quarter.

Revenues grew by 5.0 percent compared to the third quarter of 2011, primarily from increased royalty income driven by the increase in system-wide sales, and additional company-owned restaurants.

Operating income increased $16.2 million, or 30.0 percent, from the third quarter of 2011 primarily as a result of $14.7 million of one-time expenses incurred in connection with the Company’s IPO last year, as well as the increase in royalty income. Adjusted operating income increased $9.5 million, or 12.5 percent, from the third quarter of 2011 primarily as a result of the increase in revenues and continued general and administrative expense leverage.

Net income increased by $22.1 million, or 298.4 percent, compared to the third quarter of 2011 as a result of the $16.2 million increase in operating income and a $14.1 million decline in debt refinancing charges, offset by a corresponding increase in tax expense. Adjusted net income increased by $10.8 million, or 34.4 percent, compared to the third quarter of 2011 as a result of the increase in adjusted operating income and a $5.1 million decrease in interest expense, offset by an increase in tax expense.

Company Updates

 

   

As previously announced, the Company repurchased 15 million shares of common stock from its former private equity owners during the quarter. It used $400 million from its recently upsized term loan facility and $50 million in cash on hand to fund the repurchase. The purchase was made concurrently with the closing of a registered offering of shares by those former stockholders that, together with the repurchase, eliminated their ownership in the Company.

 

   

The Company executed a 5-year interest rate swap at 4.37 percent for $900 million of its $1.8 billion in outstanding long-term debt (inclusive of the additional $400 million upsize).

 

   

The Company today announced that the Board of Directors declared a fourth quarter cash dividend of $0.15 per share, payable on November 14, 2012 to shareholders of record as of the close of business on November 5, 2012.

 

3


Fiscal Year 2012 Targets

As described below, the Company is updating certain targets and reaffirming others that it has previously provided regarding its 2012 performance.

 

   

The Company expects Dunkin’ Donuts U.S. comparable store sales growth to be at the low-end of its 4 to 5 percent target range and Baskin-Robbins U.S. comparable store sales growth to be in the middle of its 2 to 4 percent range.

 

   

The Company now expects that Dunkin’ Donuts U.S. will add between 280 and 300 net new restaurants (previously the range was 260 to 280 net openings) and it continues to expect Baskin-Robbins U.S. will close between 40 and 60 restaurants net. Internationally, the Company continues to target opening 400 to 450 net new units across the two brands. The Company expects to open 620 to 710 net new units globally.

 

   

The Company now expects revenue growth of between 6 and 7 percent (previously the range was 7 to 8 percent). This is a result of a change in ice cream shipping terms related to the manufacturing shift to Dean Foods that was announced in July 2012, and as a result of expecting to be at the low end of the targeted range for Dunkin’ Donuts U.S. comparable store sales growth. The change in shipping terms will result in a one-time delay in revenue recognition that will impact Q4 sales of ice cream products. It continues to expect adjusted operating income growth of between 12 and 14 percent. The targets for revenue and adjusted operating income growth are based on a 52-week year in 2011.

 

   

The Company is increasing its range for adjusted earnings per share to $1.25 to $1.27 which represents 33 to 35 percent growth over its $0.94 adjusted earnings per share in 2011 and is an increase from the previous target of to $1.22 to $1.25.

“We are pleased to continue to deliver such strong shareholder value,” said Paul Carbone, Dunkin’ Brands Chief Financial Officer. “Importantly, by locking in an attractive interest rate for a portion of our outstanding debt, we’ve added stability to our already resilient and strong cash flow-generating business model.”

###

Conference Call

As previously announced, Dunkin’ Brands will be holding a conference call today at 8:00 am ET hosted by Nigel Travis, Chief Executive Officer, Neil Moses, Chief Global Strategy Officer, and Paul Carbone, Chief Financial Officer. The dial-in number is (866) 393-1607 or (914) 495-8556, conference number 39794496. 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

 

4


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.

Non-GAAP Measures and Statistical Data

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 three months ended September 24, 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 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.

 

5


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,” “BR U.S. comparable store sales growth” and “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.

About Dunkin’ Brands Group, Inc.

With more than 17,000 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 the third quarter 2012, Dunkin’ Brands’ nearly 100 percent franchised business model included more than 10,000 Dunkin’ Donuts restaurants and nearly 7,000 Baskin-Robbins restaurants. For the full-year 2011, the company had franchisee-reported sales of approximately $8.3 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  

 

6


Amounts and percentages may not recalculate due to rounding

 

     Three months ended        

Dunkin’ Donuts U.S.

   September  29,
2012
    September  24,
2011
    Increase (Decrease)  
       $     %  
     ($ in thousands except as otherwise noted)  

Comparable store sales growth

     2.8     6.0    

Systemwide sales growth

     5.6     8.3    

Franchisee reported sales (in millions)

   $ 1,583.3        1,501.5        81.8        5.4

Revenues:

        

Royalty income

   $ 85,328      $ 80,659        4,669        5.8

Franchise fees

     7,913        9,653        (1,740     -18.0

Rental income

     23,720        22,259        1,461        6.6

Sales at company-owned restaurants

     5,913        2,969        2,944        99.2

Other revenues

     748        1,326        (578     -43.6
  

 

 

   

 

 

   

 

 

   

 

 

 

Total revenues

   $ 123,622      $ 116,866        6,756        5.8

Segment profit

   $ 91,122      $ 88,992        2,130        2.4

Points of distribution

     7,157        6,895        262        3.8

Gross openings

     108        91        17        18.7

Net openings

     78        57        21        36.8
     Three months ended              

Dunkin’ Donuts International

   September 29,
2012
    September 24,
2011
    Increase (Decrease)  
       $     %  
     ($ in thousands except as otherwise noted)  

Comparable store sales growth

     2.1      

Systemwide sales growth

     1.2     13.7    

Franchisee reported sales (in millions)

   $ 163.4        161.5        1.9        1.2

Revenues:

        

Royalty income

   $ 3,224      $ 3,175        49        1.5

Franchise fees

     379        405        (26     -6.4

Rental income

     69        49        20        40.8

Other revenues

     (1     40        (41     n/m   
  

 

 

   

 

 

   

 

 

   

 

 

 

Total revenues

   $ 3,671      $ 3,669        2        0.1

Segment profit

   $ 2,402      $ 2,496        (94     -3.8

Points of distribution

     3,126        3,005        121        4.0

Gross openings

     71        70        1        1.4

Net openings (closings)

     36        (24     60        n/m   
     Three months ended              

Baskin Robbins U.S.

   September 29,
2012
    September 24,
2011
    Increase (Decrease)  
       $     %  
     ($ in thousands except as otherwise noted)  

Comparable store sales growth

     1.1     1.7    

Systemwide sales growth

     -2.2     -0.5    

Franchisee reported sales (in millions)

   $ 145.9        149.3        (3.4     -2.2

Revenues:

        

Royalty income

   $ 7,381      $ 7,488        (107     -1.4

Franchise fees

     262        357        (95     -26.6

Rental income

     969        1,180        (211     -17.9

Sales of ice cream products

     908        947        (39     -4.1

Sales at company-owned restaurants

     —          104        (104     n/m   

Other revenues

     2,147        2,347        (200     -8.5
  

 

 

   

 

 

   

 

 

   

 

 

 

Total revenues

   $ 11,667      $ 12,423        (756     -6.1

Segment profit

   $ 8,069      $ 7,140        929        13.0

Points of distribution

     2,492        2,528        (36     -1.4

Gross openings

     11        12        (1     -8.3

Net closings

     (1     (18     17        -94.4
     Three months ended              

Baskin Robbins International

   September 29,
2012
    September 24,
2011
    Increase (Decrease)  
       $     %  
     ($ in thousands except as otherwise noted)  

Comparable store sales growth

     3.0      

Systemwide sales growth

     5.2     13.2    

Franchisee reported sales (in millions)

   $ 409.8        389.5        20.3        5.2

Revenues:

        

Royalty income

   $ 2,925      $ 2,489        436        17.5

Franchise fees

     435        336        99        29.5

Rental income

     143        157        (14     -8.9

Sales of ice cream products

     26,210        24,644        1,566        6.4

Other revenues

     (56     44        (100     n/m   
  

 

 

   

 

 

   

 

 

   

 

 

 

Total revenues

   $ 29,657      $ 27,670        1,987        7.2

Segment profit

   $ 16,047      $ 14,276        1,771        12.4

Points of distribution

     4,428        4,097        331        8.1

Gross openings

     121        126        (5     -4.0

Net openings

     74        83        (9     -10.8

 

7


DUNKIN’ BRANDS GROUP, INC. AND SUBSIDIARIES

Consolidated Statements of Operations

(In thousands, except per share data)

(Unaudited)

 

     Three months ended     Nine months ended  
     September 29,
2012
    September 24,
2011
    September 29,
2012
    September 24,
2011
 

Revenues:

        

Franchise fees and royalty income

   $ 107,847       104,562       309,819       288,660  

Rental income

     24,918       23,676       73,859       69,950  

Sales of ice cream products

     27,118       25,591       78,283       73,532  

Sales at company-owned restaurants

     5,913       3,073       16,706       8,409  

Other revenues

     5,923       6,606       17,811       19,142  
  

 

 

   

 

 

   

 

 

   

 

 

 

Total revenues

     171,719       163,508       496,478       459,693  
  

 

 

   

 

 

   

 

 

   

 

 

 

Operating costs and expenses:

        

Occupancy expenses - franchised restaurants

     12,965       13,073       38,797       38,278  

Cost of ice cream products

     19,211       18,975       56,000       52,795  

Company-owned restaurant expenses

     6,021       3,125       16,967       8,900  

General and administrative expenses, net

     55,630       68,340       186,550       170,508  

Depreciation

     9,011       6,128       22,533       18,350  

Amortization of other intangible assets

     6,669       7,001       20,317       21,106  

Impairment charges

     564       163       950       1,220  
  

 

 

   

 

 

   

 

 

   

 

 

 

Total operating costs and expenses

     110,071       116,805       342,114       311,157  

Equity in net income of joint ventures:

     8,697       7,409       17,314       12,206  
  

 

 

   

 

 

   

 

 

   

 

 

 

Operating income

     70,345       54,112       171,678       160,742  
  

 

 

   

 

 

   

 

 

   

 

 

 

Other income (expense):

        

Interest income

     126       138       383       403  

Interest expense

     (18,920     (24,065     (52,306     (86,905

Loss on debt extinguishment and refinancing transactions

     (3,963     (18,050     (3,963     (34,222

Other gains (losses), net

     (265     (423     (472     (11
  

 

 

   

 

 

   

 

 

   

 

 

 

Total other expense

     (23,022     (42,400     (56,358     (120,735
  

 

 

   

 

 

   

 

 

   

 

 

 

Income before income taxes

     47,323       11,712       115,320       40,007  

Provision for income taxes

     18,022       4,300       41,886       17,156  
  

 

 

   

 

 

   

 

 

   

 

 

 

Net income including noncontrolling interests

     29,301       7,412       73,434       22,851  

Net loss attributable to noncontrolling interests

     (225     —          (539     —     
  

 

 

   

 

 

   

 

 

   

 

 

 

Net income attributable to Dunkin’ Brands

   $ 29,526       7,412       73,973       22,851  
  

 

 

   

 

 

   

 

 

   

 

 

 

Earnings (loss) per share:

        

Class L - basic and diluted

   $ n/a        4.46       n/a        6.14  

Common - basic

     0.26       (1.01     0.63       (2.00

Common - diluted

     0.26       (1.01     0.62       (2.00

 

8


DUNKIN’ BRANDS GROUP, INC. AND SUBSIDIARIES

Condensed Consolidated Balance Sheets

(In thousands)

(Unaudited)

 

     September 29,
2012
     December 31,
2011
 
Assets      

Current assets:

     

Cash and cash equivalents

   $ 165,642        246,715  

Accounts, notes, and other receivables, net

     50,049        58,787  

Other current assets

     102,022        100,972  
  

 

 

    

 

 

 

Total current assets

     317,713        406,474  
  

 

 

    

 

 

 

Property and equipment, net

     176,231        185,360  

Investments in joint ventures

     175,902        164,636  

Goodwill and other intangible assets, net

     2,378,699        2,398,211  

Other assets

     70,156        69,337  
  

 

 

    

 

 

 

Total assets

   $ 3,118,701        3,224,018  
  

 

 

    

 

 

 
Liabilities and Stockholders’ Equity      

Current liabilities:

     

Current portion of long-term debt

   $ 20,000        14,965  

Accounts payable

     8,231        9,651  

Other current liabilities

     243,392        291,924  
  

 

 

    

 

 

 

Total current liabilities

     271,623        316,540  
  

 

 

    

 

 

 

Long-term debt, net

     1,829,573        1,453,344  

Deferred income taxes, net

     566,027        578,660  

Other long-term liabilities

     130,016        129,538  
  

 

 

    

 

 

 

Total long-term liabilities

     2,525,616        2,161,542  
  

 

 

    

 

 

 

Total stockholders’ equity

     321,462        745,936  
  

 

 

    

 

 

 

Total liabilities and stockholders’ equity

   $ 3,118,701        3,224,018  
  

 

 

    

 

 

 

 

9


DUNKIN’ BRANDS GROUP, INC. AND SUBSIDIARIES

Condensed Consolidated Statements of Cash Flows

(In thousands)

(Unaudited)

 

     Nine months ended  
     September 29,
2012
    September 24,
2011
 

Cash flows from operating activities:

    

Net income including noncontrolling interests

   $ 73,434        22,851  

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

    

Depreciation and amortization

     42,850        39,456  

Loss on debt extinguishment and refinancing transactions

     3,963        34,222  

Deferred income taxes

     (12,901     488  

Equity in net income of joint ventures

     (17,314     (12,206

Dividends received from joint ventures

     6,497        7,362  

Other non-cash adjustments, net

     8,058        6,837  

Change in operating assets and liabilities:

    

Accounts, notes, and other receivables, net

     9,401        32,047  

Other current liabilities

     (37,796     (48,420

Liabilities of advertising funds, net

     (2,222     (1,645

Other, net

     (16,540     (9,951
  

 

 

   

 

 

 

Net cash provided by operating activities

     57,430        71,041  
  

 

 

   

 

 

 

Cash flows from investing activities:

    

Additions to property and equipment

     (13,379     (12,800

Other, net

     (925     2,115  
  

 

 

   

 

 

 

Net cash used in investing activities

     (14,304     (10,685
  

 

 

   

 

 

 

Cash flows from financing activities:

    

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

     380,559        (385,366

Repurchases of common stock

     (450,343     (286

Payment of deferred financing and other debt-related costs

     (5,773     (20,087

Proceeds from initial public offering, net of offering costs

            390,091  

Dividends paid on common stock

     (54,189      

Other, net

     5,188        3,416  
  

 

 

   

 

 

 

Net cash used in financing activities

     (124,558     (12,232
  

 

 

   

 

 

 

Effect of exchange rates on cash and cash equivalents

     359        (375
  

 

 

   

 

 

 

Increase (decrease) in cash and cash equivalents

     (81,073     47,749  

Cash and cash equivalents, beginning of period

     246,715        134,100  
  

 

 

   

 

 

 

Cash and cash equivalents, end of period

   $ 165,642        181,849  
  

 

 

   

 

 

 

 

10


DUNKIN’ BRANDS GROUP, INC. AND SUBSIDIARIES

Diluted Adjusted Earnings per Pro Forma Common Share

(In thousands, except share and per share data)

(Unaudited)

 

     Three months ended     Nine months ended  
     September 29,     September 24,     September 29,     September 24,  
     2012     2011     2012     2011  

Adjusted net income available to common shareholders:

        

Adjusted net income

   $ 42,118        31,343        113,066        65,582   

Less: Adjusted net income allocated to participating securities

     (36     (26     (178     (354
  

 

 

   

 

 

   

 

 

   

 

 

 

Adjusted net income available to common shareholders

   $ 42,082        31,317        112,888        65,228   

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)

     —          22,866,379        —          22,845,378   

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

     —          (15,328,012     —          (5,104,722
  

 

 

   

 

 

   

 

 

   

 

 

 

Weighted average number of Class L shares

     —          7,538,367        —          17,740,656   

Class L conversion factor

     —          2.4338        —          2.4338   
  

 

 

   

 

 

   

 

 

   

 

 

 

Weighted average number of converted Class L shares

     —          18,347,071        —          43,177,665   

Weighted average number of common shares

     112,720,961        93,529,128        117,499,678        58,807,271   
  

 

 

   

 

 

   

 

 

   

 

 

 

Pro forma weighted average number of common shares - basic

     112,720,961        111,876,199        117,499,678        101,984,936   

Incremental dilutive common shares (b)

     2,354,039        1,401,643        1,959,476        735,242   
  

 

 

   

 

 

   

 

 

   

 

 

 

Pro forma weighted average number of common shares - diluted

     115,075,000        113,277,842        119,459,154        102,720,178   
  

 

 

   

 

 

   

 

 

   

 

 

 

Diluted adjusted earnings per pro forma common share

   $ 0.37        0.28        0.94        0.64   
  

 

 

   

 

 

   

 

 

   

 

 

 

 

(a) 

The weighted average number of Class L shares in the actual Class L earnings per share calculation for the three and nine months ended September 24, 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 respective three and nine month periods. 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.

 

11


DUNKIN’ BRANDS GROUP, INC. AND SUBSIDIARIES

Non-GAAP Reconciliations

(In thousands)

(Unaudited)

 

     Three months ended     Nine months ended  
     September 29,     September 24,     September 29,     September 24,  
     2012     2011     2012     2011  

Total revenues

   $ 171,719       163,508       496,478       459,693  

Operating income

   $ 70,345       54,112       171,678       160,742  

Operating income margin

     41.0     33.1     34.6     35.0

Adjustments:

        

Amortization of other intangible assets

     6,669       7,001       20,317       21,106  

Impairment charges

     564       163       950       1,220  

Sponsor termination fee

     —          14,671       —          14,671  

Secondary offering costs

     2,579       —          4,774       —     

Peterborough plant closure costs (a)

     5,271       —          8,949       —     

Bertico litigation (b)

     —          —          20,680       —     
  

 

 

   

 

 

   

 

 

   

 

 

 

Adjusted operating income

   $ 85,428       75,947       227,348       197,739  
  

 

 

   

 

 

   

 

 

   

 

 

 

Adjusted operating income margin

     49.7     46.4     45.8     43.0

Net income attributable to Dunkin’ Brands

   $ 29,526       7,412       73,973       22,851  

Adjustments:

        

Amortization of other intangible assets

     6,669       7,001       20,317       21,106  

Impairment charges

     564       163       950       1,220  

Sponsor termination fee

     —          14,671       —          14,671  

Secondary offering costs

     2,579       —          4,774       —     

Loss on debt extinguishment and refinancing transactions

     3,963       18,050       3,963       34,222  

Peterborough plant closure costs (a)

     5,271       —          8,949       —     

Bertico litigation (b)

     —          —          20,680       —     

Tax impact of adjustments, excluding Bertico litigation (c)

     (7,618     (15,954     (15,581     (28,488

Tax impact of Bertico adjustment (d)

     1,164       —          (4,959     —     
  

 

 

   

 

 

   

 

 

   

 

 

 

Adjusted net income

   $ 42,118       31,343       113,066       65,582  
  

 

 

   

 

 

   

 

 

   

 

 

 

 

(a) 

Represents costs incurred related to the announced closure of the Baskin-Robbins ice cream manufacturing plant in Peterborough, Canada, including $1.0 million and $2.9 million of severance-related charges for the three and nine months ended September 29, 2012, respectively, $2.6 million and $3.7 million of accelerated depreciation for the three and nine months ended September 29, 2012, respectively, and other transition-related costs.

(b) 

Represents the incremental legal reserve recorded in the second quarter of 2012 related to the Quebec Superior Court’s ruling in the Bertico litigation, in which the Court found for the Plaintiffs and issued a judgment against Dunkin’ Brands in the amount of approximately $C16.4 million, plus costs and interest.

(c) 

Tax impact of adjustments, excluding the Bertico litigation, calculated at a 40% effective tax rate.

(d) 

Tax impact of Bertico litigation adjustment calculated as if the incremental reserve had not been recorded. The tax impact recorded in the second quarter of 2012 was a $3.9 million tax benefit representing the actual direct tax benefit expected to be realized, as well as a $2.2 million tax benefit recorded that will fully reverse in the third and fourth quarters of 2012 based on interim tax provision requirements. The tax impact for the three months ended September 29, 2012 represents $1.2 million of the tax benefit that was expected to reverse.

 

12