Dunkin' Brands Reports First Quarter 2011 Results

CANTON, Mass., April 28, 2011 /PRNewswire/ -- Dunkin' Brands, Inc., the parent company of Dunkin' Donuts (DD) and Baskin-Robbins (BR), today reported results for the quarter ended March 26, 2011.  "We delivered a strong first quarter with solid gains in system-wide sales, domestic comparable store sales growth and revenues, which built on the momentum we established in 2010. These results were driven by our focus on operational excellence and successful new product introductions, supported by brand-differentiating marketing," said Nigel Travis, Chief Executive Officer, Dunkin' Brands, Inc. and President, Dunkin' Donuts. "During the quarter, we also announced several key strategic developments, including the announcement that our franchisees will begin selling Dunkin' Donuts coffee in single-serve K-Cup® portion packs for use with Keurig® single cup brewers this summer; the opening of Dunkin' Donuts' 3,000th international location; and the signing of a development agreement with Jubilant FoodWorks to develop up to 500 Dunkin' Donuts restaurants in India over the next 15 years."

(Logo: http://photos.prnewswire.com/prnh/20110317/NY67297LOGO )

Consolidated Key Highlights


($ in millions)

Quarter 1


Increase (Decrease)


2011

2010


$

%







System-wide Sales

$ 1,793.1

$ 1,701.7


$ 91.4

5.4%

Consolidated US Comparable Store Sales





2.7%

DD Domestic Comparable Store Sales





2.8%

BR Domestic Comparable Store Sales





0.5%

DD Global Points of Distribution

9,805

9,284


521

5.6%

BR Global Points of Distribution

6,482

6,222


260

4.2%













Revenues

$    139.2

$    127.4


$ 11.8

9.3%

Operating Income

44.1

33.0


11.0

33.3%

Net Income (Loss)

(1.7)

5.9


(7.7)

(129.0)

Adjusted EBITDA*

62.7

57.4


5.3

9.2%

(amounts and percentages may not re-calculate due to rounding)



First quarter 2011 financial highlights included:

  • Global system-wide sales were approximately $1.8 billion compared to $1.7 billion for the first quarter of 2010, representing a 5.4 percent year-over-year increase.
  • Consolidated U.S. comparable store sales increased 2.7 percent.
  • Dunkin' Brands' franchisees and licensees opened 94 net new Dunkin' Donuts and Baskin-Robbins locations on a global basis during the quarter.
  • Revenues increased by more than 9 percent, to $139.2 million for the first quarter of 2011, compared to $127.4 million for the same period in 2010.  
  • Operating income was $44.1 million compared to $33.0 million for the first quarter of 2010, representing a more than 33 percent year-over-year increase.
  • As a result of a non-recurring pre-tax charge of $11 million related to the Company's debt re-pricing (which is expected to result in an approximately $26 million reduction in cash interest expense annually), net loss was $1.7 million compared to net income of $5.9 million in the first quarter of 2010.
  • Adjusted EBITDA* for the quarter increased more than 9 percent to $62.7 million, from $57.4 million for the same period in 2010.

The increase in global system-wide sales for the first quarter was primarily attributable to Dunkin' Donuts U.S. comparable store sales growth (which includes stores open 54 weeks or more), growth in Dunkin' Donuts and Baskin-Robbins international sales, and global store development.  

First quarter comparable store sales for Dunkin' Donuts U.S., which represents more than 70 percent of Dunkin' Brands' system-wide sales, increased 2.8 percent over first quarter of 2010, primarily driven by increased average ticket which is believed to be attributable to product innovation and differentiated marketing.  

"We are very pleased with the results of the quarter, which we believe speak to the strength of our brands, our strategic plan and our franchised business model," said Chief Financial Officer Neil Moses. "Most notably, our adjusted EBITDA growth was more than nine percent year-over-year for the first quarter, and while net income was impacted by the re-pricing and reallocation of our debt, our debt optimization efforts are expected to result in an approximately $26 million reduction in cash interest expense annually."

"Our strategy of driving comparable store sales growth in our core U.S. markets, expanding contiguously in the U.S., and driving accelerated international growth across both brands continues to deliver strong results," said Travis. "We're pleased with our momentum, particularly as we head into key beverage and ice cream selling seasons."

* EBITDA is earnings before interest, taxes, depreciation, amortization and non-cash impairment of long-lived assets.  Adjusted EBITDA represents EBITDA adjusted for non-cash and non-recurring items, as well as other adjustments as defined in our credit agreement.  

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 (877) 533-8179 or (970) 315-0543, conference number 57831473.  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 information in this press release, particularly information regarding future economic performance, finances, and expectations and objectives of management constitute forward-looking statements.  Forward-looking statements can be identified by the fact that they do not relate strictly to historical or current facts and are generally contain words such as "believes," "expects," "may," "will," "should," "seeks," "approximately," "intends," "plans," "estimates," "anticipates," or similar expressions. Our forward-looking statements are subject to risks and uncertainties, which may cause actual results to differ materially from those projected or implied by the forward-looking statement.

Forward-looking statements are based on current expectations and assumptions and currently available data and are neither predictions nor guarantees of future events or performance. You should not place undue reliance on forward-looking statements, which speak only as of the date hereof.  We do not undertake to publicly update or revise any forward-looking statements after they are made, whether as a result of new information, future events, or otherwise, except as required by applicable law.

Non-GAAP Measures

In addition to the results provided in accordance with U.S. generally accepted accounting principles ("GAAP") throughout this document, the Company has provided non-GAAP measurements, including EBITDA and Adjusted EBITDA, which present operating results on a basis before certain adjustments. The Company uses Adjusted EBITDA to track compliance with its debt covenants as well as a key performance measure for the purpose of evaluating performance internally. We also believe EBITDA and Adjusted EBITDA 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 EBITDA and Adjusted EBITDA may differ from similar measures reported by other companies.  EBITDA and Adjusted EBITDA are reconciled from net income (loss) determined under GAAP in the attached table "Dunkin' Brands, Inc. Non-GAAP Reconciliation."

About Dunkin' Brands, Inc.

With more than 16,000 points of distribution in 57 countries worldwide, Dunkin' Brands, Inc. is renowned for its leadership in the quick quality category. At the end of 2010, Dunkin' Brands' nearly 100 percent franchised business model included 9,760 Dunkin' Donuts restaurants and 6,433 Baskin-Robbins restaurants, and the Company had system-wide sales of approximately $7.7 billion. Dunkin' Brands, Inc. is headquartered in Canton, Mass. For more information, visit www.dunkinbrands.com.

Contact(s):




Stacey Caravella (Investors)

Michelle King (Media)

Investor Relations

Director, Global Media Relations

Dunkin' Brands, Inc.

Dunkin' Brands, Inc.

investor.relations@dunkinbrands.com

michelle.king@dunkinbrands.com

781-737-3200

781-737-5200



DUNKIN’ BRANDS, INC. AND SUBSIDIARIES

Consolidated Statements of Operations

(In thousands)

(Unaudited)



Three months ended



March 26,


March 27,








2011


2010

Revenues:








Franchise fees and royalty income

$

85,959


80,165


Rental income


22,131


22,116


Sales of ice cream products


22,716


17,793


Other revenues


8,407


7,338






Total revenues


139,213


127,412

Operating costs and expenses:






Occupancy expenses - franchised restaurants


12,288


14,156


Cost of ice cream products


15,124


12,222


General and administrative expenses, net


53,886


51,245


Depreciation and amortization


13,208


15,332


Impairment charges


653


1,414






Total operating costs and expenses


95,159


94,369






Operating income


44,054


33,043

Other income (expense):






Interest income


115


71


Interest expense


(33,882)


(27,591)


Equity in net income of joint ventures


782


3,642


Loss on debt extinguishment and refinancing transaction


(11,007)



Other gains, net


476


245






Total other expense


(43,516)


(23,633)






Income before income taxes


538


9,410

Provision for income taxes


2,261


3,472






Net income (loss)

$

(1,723)


5,938



DUNKIN’ BRANDS, INC. AND SUBSIDIARIES

Condensed Consolidated Balance Sheets

(In thousands)



March 26,


December 25,

Assets


2011


2010

Current assets:






Cash and cash equivalents

$

120,508


134,100


Accounts, notes, and other receivable, net


47,921


79,943


Other current assets


79,751


70,334






Total current assets


248,180


284,377

Property and equipment, net


189,693


193,273

Investments in joint ventures


175,107


169,276

Goodwill and other intangible assets, net


2,417,427


2,424,312

Other assets


84,770


76,050






Total assets

$

3,115,177


3,147,288

Liabilities and Stockholders’ Equity





Current liabilities:






Current portion of long-term debt

$

14,000


12,500


Accounts payable


9,478


9,822


Other current liabilities


215,916


258,233






Total current liabilities


239,394


280,555

Long-term debt, net


1,848,218


1,847,016

Deferred income taxes, net


587,124


586,337

Other long-term liabilities


127,624


127,139






Total long-term liabilities


2,562,966


2,560,492

Stockholders’ equity:










Total stockholders’ equity


312,817


306,241






Total liabilities and stockholders’ equity

$

3,115,177


3,147,288



DUNKIN’ BRANDS, INC. AND SUBSIDIARIES

Condensed Consolidated Statements of Cash Flows

(In thousands)



Three months ended



March 26,


March 27,



2011


2010

Cash flows from operating activities:






Net income (loss)

$

(1,723)


5,938


Adjustments to reconcile net income (loss) to net cash provided by operating







activities:








Depreciation and amortization


13,208


15,332




Loss on debt extinguishment


11,007





Deferred income taxes


726


(1,887)




Equity in net income of joint ventures


(782)


(3,642)




Other non-cash adjustments, net


2,108


4,039




Change in operating assets and liabilities:









Restricted cash



22,661





Accounts, notes, and other receivables, net


31,480


25,594





Other current liabilities


(41,696)


(41,117)





Liabilities of advertising funds, net


(6,926)


(3,783)





Other, net


(3,808)


1,458






Net cash provided by operating activities


3,594


24,593

Cash flows from investing activities:






Additions to property and equipment


(3,734)


(3,465)


Other, net


301







Net cash used in investing activities


(3,433)


(3,465)

Cash flows from financing activities:






Proceeds from and repayment of debt, net


(750)


34,564


Deferred financing and other debt-related costs


(16,209)



Cash dividends (to) from parent, net


3,101


(2,959)


Change in restricted cash


73


420


Other, net


(49)


(54)






Net cash provided by (used in) financing activities


(13,834)


31,971

Effect of exchange rate changes on cash


81


9






Increase (decrease) in cash and cash equivalents


(13,592)


53,108

Cash and cash equivalents, beginning of period


134,100


53,210

Cash and cash equivalents, end of period

$

120,508


106,318



Dunkin' Brands, Inc.

Non-GAAP Reconciliation

($ in thousands)


Three months ended


March 26,


March 27,


2011


2010

Net income (loss)

$   (1,723)


$     5,938

Interest expense

33,882


27,591

Income tax expense

2,261


3,472

Depreciation and amortization

13,208


15,332

Impairment charges

653


1,414

EBITDA

$   48,281


$   53,747

Adjustments:




Non-cash adjustments (a)

$        588


$        586

Loss on debt extinguishment and refinancing transaction (b)

11,007


-

Restructuring (c)

273


797

Other (d)

2,557


2,269

Total adjustments

$   14,425


$     3,652

Adjusted EBITDA

$   62,706


$   57,399







Additional Disclosures:

(a) - Represents non-cash adjustments, including stock compensation expense, litigation reserves, and other non-cash gains and losses.

(b) - Represents gains/losses recorded and related transaction costs associated with the refinancing of long-term debt, including the write-off of deferred financing costs and original issue discount, as well as pre-payment premiums.

(c) - Represents costs associated with non-recurring internal and franchise restructuring programs.

(d) - Represents management fees paid to our owners, costs for various one-time franchise information technology and market research programs and the net impact of other non-recurring and individually insignificant adjustments.

SOURCE Dunkin' Brands, Inc.



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