Dunkin' Brands Reports Fiscal Year 2010 Results

CANTON, Mass., March 23, 2011 /PRNewswire/ -- Dunkin' Brands, Inc., the parent company of Dunkin' Donuts (DD) and Baskin-Robbins (BR), today reported results for the year ended December 25, 2010. "As a result of a disciplined, operations-focused approach, Dunkin' Brands had strong system-wide sales and revenue growth as well as industry-leading new store development in 2010," said Nigel Travis, Chief Executive Officer, Dunkin' Brands, Inc. and President, Dunkin' Donuts. "Our brand-differentiating marketing and product innovations, continued growth in U.S. beverage sales, and strong international sales were all key contributors to our success."

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

Consolidated Key Highlights

($ in millions except in PODs)

Fiscal Year


Increase (Decrease)


2010

2009


$

%







System Wide Sales

$ 7,656.5

$ 7,178.0


$ 478.5

6.7%

Consolidated US Comparable Store Sales





1.6%

DD US Comparable Store Sales





2.3%

BR US Comparable Store Sales





-5.2%

DD Global Points of Distribution (POD)

9,760

9,186


574

6.2%

BR Global Points of Distribution

6,433

6,207


226

3.6%













Revenues

$    577.1

$    538.1


$   39.0

7.2%

Operating Income

175.7

170.2


5.5

3.2%

Net Income

26.9

35.0


(8.1)

-23.1%

Adjusted EBITDA*

282.0

279.2


2.8

1.0%



Full year 2010 financial highlights included:

  • Global system-wide sales were approximately $7.7 billion compared to $7.2 billion for fiscal 2009, representing approximately a seven percent year-over-year increase.
  • Consolidated U.S. comparable store sales were 1.6 percent.
  • Dunkin' Brands franchisees and licensees opened 800 global net new Dunkin' Donuts and Baskin-Robbins locations, bringing total points of distribution to 16,193 in 52 countries.
  • Total revenues were $577.1 million compared to $538.1 million for fiscal 2009, an increase of approximately seven percent.
  • Net income for fiscal 2010 was $26.9 million as compared to $35.0 million in fiscal 2009 representing approximately a 23 percent decrease, primarily impacted by non-recurring pre-tax expenses of $62.0 million related to debt extinguishment, partially offset by a decrease in the Company's effective tax rate.
  • Adjusted EBITDA* was $282.0 million, up slightly compared with $279.2 million in 2009.

Increases in both global system-wide sales and Dunkin' Brands revenues for fiscal 2010 are primarily attributable to Dunkin' Donuts U.S. comparable store sales growth (which includes stores open for 54 weeks or more), growth in Dunkin' Donuts and Baskin-Robbins international sales and global store development.

Comparable store sales growth for Dunkin' Donuts U.S., which represented more than 70 percent of Dunkin' Brands' system-wide sales, increased 2.3 percent for fiscal 2010 compared to fiscal 2009. Comparable store sales growth improved throughout the year with fourth quarter comparable store sales growth of 4.7 percent. This improvement was due to product and marketing innovation, increased operational focus on the guest experience and an improved economic environment.

In November 2010, Dunkin' Brands completed a refinancing comprised of a $1.25 billion term loan and $625 million of senior notes.  The proceeds raised were used to repay in full Dunkin' Brands' outstanding securitization debt and related refinancing expenses, as well as a cash dividend to Dunkin' Brands' shareholders.

In February 2011, the Company completed a re-pricing of its outstanding $1.25 billion term loan. Additionally, the Company increased the size of its term loan from $1.25 billion to $1.4 billion, with the incremental proceeds being used to repay an equal amount of the Company's senior notes, leaving the Company's total debt unchanged. The new interest rate on the term loan is LIBOR plus 3.00% with a LIBOR floor of 1.25% versus the previous interest rate of LIBOR plus 4.25% with a LIBOR floor of 1.50%.

"The re-pricing and reallocation of debt will save the Company approximately $26 million in cash interest annually," said Chief Financial Officer Neil Moses. "Overall it was a strong year for Dunkin' Brands; we continued to enhance the guest experience with operational improvements and to demonstrate the strength of our franchise business model with solid financial results."

"As a result of our business fundamentals, we delivered a strong performance with resilient comparable store sales and excellent store development, not only in 2010, but throughout the economic downturn," said Travis. "Our strategy has been to drive comparable store sales growth in our core U.S. markets, expand contiguously in the U.S. with a replicable business model, and drive accelerated international growth across both brands. This strategy will continue to guide us for the next several years."

* 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 within 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 (970) 315-0543 or (877) 533-8179, conference number 51870063.  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 through April 23, 2011, and can be accessed 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 generally contain words such as "believes," expects," "may," "will," "should," "seeks," "approximately," "intends," "plans," "estimates" or "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, for fiscal 2010 and 2009 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 in respect to 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 determined under GAAP in the attached table "Dunkin' Brands Inc. Non-GAAP Reconciliation."

About Dunkin' Brands, Inc.

With 16,193 points of distribution in 52 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)
Investor Relations
Dunkin' Brands, Inc.
investor.relations@dunkinbrands.com
781-737-3200

Michelle King (Media)
Director, Global Media Relations
Dunkin' Brands, Inc.
michelle.king@dunkinbrands.com
781-737-5200

DUNKIN’ BRANDS, INC. AND SUBSIDIARIES

Consolidated Statements of Operations

($ in thousands)

(unaudited)


Fiscal year ended


December 25,


December 26,


2010


2009





Revenues:




   Franchise fees and royalty income

$       359,927


344,020

   Rental income

91,102


93,651

   Sales of ice cream products

84,989


75,256

   Other revenues

41,117


25,146

        Total revenues

577,135


538,073

Operating costs and expenses:




   Occupancy expenses - franchised restaurants

53,739


51,964

   Cost of ice cream products

59,175


47,432

   General and administrative expenses, net

223,620


197,005

   Depreciation and amortization

57,826


62,911

   Other impairment charges

7,075


8,517

        Total operating costs and expenses

401,435


367,829

        Operating income

175,700


170,244

Other income (expense):




   Interest income

305


386

   Interest expense

(112,837)


(115,405)

   Equity in net income of joint ventures

17,825


14,301

   Gain (loss) on debt extinguishment

(61,955)


3,684

   Other gains, net

408


1,066

        Total other expense

(156,254)


(95,968)

        Income before income taxes

19,446


74,276

Provision (benefit) for income taxes

(7,415)


39,268

        Net income

$        26,861


35,008



DUNKIN' BRANDS, INC. AND SUBSIDIARIES

Condensed Consolidated Balance Sheets

($ in thousands)

(unaudited)








December 25,


December 26,

Assets


2010


2009

Current assets:





   Cash and cash equivalents

$

134,100


53,210

   Restricted cash



109,799

   Accounts, notes, and other receivables, net


79,943


70,923

   Other current assets


70,334


88,173

        Total current assets


284,377


322,105

Property and equipment, net


193,273


209,659

Investments in joint ventures


169,276


147,902

Goodwill and other intangible assets, net


2,424,312


2,458,026

Other assets


76,050


87,025

        Total assets

$

3,147,288


3,224,717

Liabilities and Stockholders’ Equity





Current liabilities:





   Current portion of long-term debt

$

12,500


   Accounts payable


9,822


10,716

   Other current liabilities


258,233


233,855

        Total current liabilities


280,555


244,571

Long-term debt, net


1,847,016


1,446,319

Deferred income taxes, net


586,337


618,324

Other long-term liabilities


127,139


144,895

        Total long-term liabilities


2,560,492


2,209,538






Total stockholders’ equity


306,241


770,608

        Total liabilities and stockholders’ equity

$

3,147,288


3,224,717



DUNKIN’ BRANDS, INC. AND SUBSIDIARIES

Condensed Consolidated Statements of Cash Flows

($ in thousands)

(unaudited)





Fiscal year ended



December 25,


December 26,




2010


2009

Cash flows from operating activities:





   Net income

$

26,861


35,008

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





       Depreciation and amortization


57,826


62,911

       Loss (gain) on debt extinguishment


61,955


(3,684)

       Deferred income taxes


(28,389)


18,301

       Equity in net income of joint ventures


(17,825)


(14,301)

       Other non-cash adjustments, net


10,997


20,115

       Dividends received from joint ventures, net


6,603


5,010

       Change in operating assets and liabilities:





           Restricted cash


101,675


(32,520)

           Accounts, notes, and other receivables, net


(11,815)


(17,509)

           Other current liabilities


29,384


16,698

           Liabilities of advertising funds, net


(346)


19,681

           Other, net


(7,922)


6,369

               Net cash provided by operating activities


229,004


116,079

Cash flows from investing activities:





   Additions to property and equipment


(15,358)


(18,012)

   Other, net


(249)


               Net cash used in investing activities


(15,607)


(18,012)

Cash flows from financing activities:





   Proceeds from and repayment of debt, net


388,390


(209,373)

   Deferred financing costs


(34,979)


(613)

   Change in restricted cash


16,144


2,276

   Cash dividends to parent, net


(502,997)


(572)

   Other, net


859


(183)

               Net cash used in financing activities


(132,583)


(208,465)

Effect of exchange rate changes on cash


76


(29)

               Increase (decrease) in cash and cash equivalents


80,890


(110,427)

Cash and cash equivalents, beginning of year


53,210


163,637

Cash and cash equivalents, end of year

$

134,100


53,210



DUNKIN’ BRANDS, INC. AND SUBSIDIARIES

Non-GAAP Reconciliation

($ in thousands)

(unaudited)


Fiscal year ended


December 25,


December 26,


2010


2009





Net income

$        26,861


$           35,008

Interest expense

112,837


115,405

Income tax expense (benefit)

(7,415)


39,268

Depreciation and amortization

57,826


62,911

Impairment of long-lived assets

7,075


8,517

EBITDA

$      197,184


$         261,109

Adjustments:




Non-cash adjustments (a)

$          6,764


$           (1,588)

Transaction costs (b)

1,083


-

Loss (gain) on debt extinguishment (c)

61,955


(3,684)

Restructuring (d)

7,054


16,069

Other (e)

7,927


7,249

Total adjustments

$        84,783


$          18,046

Adjusted EBITDA

$      281,967


$        279,155





Additional Disclosures:


(a) - Represents certain non-cash adjustments, including stock compensation expense, litigation reserves,
breakage income related to historical gift card balances, and other non-cash gains and losses.


(b) - Represents cost and expenses related to the Company's refinancing transaction, including the
dividend distribution.


(c) - Represents gains/losses recorded on repurchases of long-term debt, including the write-off of deferred
financing costs, pre-payment premiums, and transaction costs.


(d) - Represents costs associated with non-recurring internal and franchisee-related restructuring
programs.


(e) - Represents management fees paid to our majority shareholders, certain costs associated with entry
into new markets, costs for various one-time franchisee 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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