Dunkin' Brands Reports Second Quarter 2013 Results

Jul 25, 2013, 06:00 ET from Dunkin' Brands Group, Inc.

CANTON, Mass., July 25, 2013 /PRNewswire/ -- 

Second quarter highlights include:

  • Dunkin' Donuts U.S. comparable store sales growth of 4.0%
  • Added 151 net new restaurants worldwide including 63 net new Dunkin' Donuts in the U.S.
  • Adjusted operating income increased 15.5%
  • Adjusted operating income margin expanded 420 basis points to 50.0%
  • Adjusted EPS increased approximately 24% to $0.41
  • Company returned nearly $40 million to shareholders through share repurchases and dividends

Dunkin' Brands Group, Inc. (Nasdaq: DNKN), the parent company of Dunkin' Donuts (DD) and Baskin-Robbins (BR), today reported results for the second quarter ended June 29, 2013.

(Logo: http://photos.prnewswire.com/prnh/20120516/NE07970LOGO )

"We are pleased with our performance in the second quarter which was driven by strong comparable store sales and net unit development for Dunkin' Donuts U.S.," said Nigel Travis, Chairman and Chief Executive Officer, Dunkin' Brands Group, Inc. "Innovative marketing and new product introductions, as well as a focus on delivering a great customer experience, continue to deliver attractive franchisee returns and exceptional results for Dunkin' Donuts in the U.S. Additionally, we continue to see significant interest in restaurant development for Dunkin' Donuts in this country, and for the second consecutive quarter, Baskin-Robbins U.S. experienced positive net growth. On the international front, we continue to build the foundation for the long-term growth of both brands. Going into the second half of the year, we are confident about our business prospects and are steadfastly focused on delivering profitable growth for our franchisees and shareholders."

"For the quarter, our franchised business model continues to generate consistent revenue growth and high-margins resulting in a 24 percent adjusted earnings per share growth," said Paul Carbone, Chief Financial Officer, Dunkin' Brands Group, Inc. "Our business is strong, and we remain confident with our full-year financial targets for 2013."

SECOND QUARTER 2013 KEY FINANCIAL HIGHLIGHTS

($ in millions, except per share data)

Three months ended

Increase (Decrease)

June 29, 2013

June 30, 2012

$ / #

%

Franchisee reported sales

$                    2,397.6

2,273.0

124.6

5.5 %

Systemwide sales growth

5.5 %

6.9 %

Comparable store sales growth (decline):

DD U.S. comparable store sales growth

4.0 %

4.0 %

BR U.S. comparable store sales growth

1.6 %

4.6 %

DD International comparable store sales growth (decline)

(1.7)%

3.5 %

BR International comparable store sales growth

2.6 %

1.5 %

Development data:

Consolidated global net POD development

151

140

11

7.9 %

DD global PODs at period end

10,647

10,169

478

4.7 %

BR global PODs at period end

7,071

6,847

224

3.3 %

Consolidated global PODs at period end

17,718

17,016

702

4.1 %

Financial data:

Revenues

$                       182.5

172.4

10.1

5.9 %

Operating income

76.8

46.1

30.7

66.5 %

Operating income margin

42.1 %

26.8 %

Adjusted operating income1

$                          91.2

78.9

12.2

15.5 %

Adjusted operating income margin1

50.0 %

45.8 %

Net income

$                          40.8

18.5

22.3

120.6 %

Adjusted net income1

43.9

40.3

3.6

8.8 %

Earnings per share:

          Common – basic and diluted

0.38

0.15

0.23

153.3 %

          Diluted adjusted earnings per share1

0.41

0.33

0.08

24.2 %

          Weighted average number of common shares – diluted (in millions)

108.2

122.0

(13.8)

(11.3)%

(amounts and percentages may not recalculate due to rounding)

1 Adjusted operating income, adjusted operating income margin, 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, net of the tax impact of such adjustments in the case of adjusted net income. Diluted adjusted earnings per share is a non-GAAP measure calculated using adjusted net income. Please refer to "Non-GAAP Measures and Statistical Data" and "Dunkin' Brands Group, Inc. Non-GAAP Reconciliations" for further detail.

Global systemwide sales growth in the second quarter was primarily attributable to global store development and Dunkin' Donuts U.S. comparable store sales growth (which includes stores open 54 weeks or more).

Dunkin' Donuts U.S. comparable store sales growth in the second quarter was driven by increased average ticket and higher traffic resulting from our continued product and marketing innovation. This includes strong beverage growth, led by cold beverage news such as the introduction of Iced Coffee flavors inspired by Baskin-Robbins Ice Cream as well as Berry Blast, Minute Maid® and Hot Chocolate Coolatta flavors; continued momentum across the breakfast sandwich platform highlighted by the national expansion of the Turkey Sausage Breakfast Sandwich in May; growth in donut sales led by a successful National Donut Day program; and growth in afternoon products including new Chicken and Tuna Salad Wraps and new Chicken Sandwiches.

Baskin-Robbins U.S. comparable store sales growth was driven by sales of Flavors of the Month, including Jamoca Heath, Blueberry Shortbread, and Triple Vanilla; increased sales of cakes around Mother's Day, Father's Day and graduation season; and limited time offers on take-home ice cream quarts.

In the second quarter, Dunkin' Brands franchisees and licensees opened 151 net new restaurants around the globe. This includes 63 net new Dunkin' Donuts U.S. locations, 50 net new Baskin-Robbins International locations, 33 net new Dunkin' Donuts International locations, and five net new Baskin-Robbins U.S. locations. Additionally, Dunkin' Donuts U.S. franchisees remodeled 141 restaurants during the quarter.

Revenues for the second quarter increased 5.9 percent compared to the prior year primarily from increased royalty income from the increase in systemwide sales, as well as increased sales of ice cream products.

Operating income for the second quarter increased $30.7 million, or 66.5 percent, from the prior year primarily as a result of a $20.7 million increase in the Bertico litigation reserve in the prior year, the increase in royalty income, and a gain recognized on the sale of 80 percent of our Baskin-Robbins Australia business, offset by a one-time $7.5 million charge related to a third-party product volume guarantee. Adjusted operating income increased $12.2 million, or 15.5 percent, from the second quarter of 2012 also as a result of the increase in royalty income and the gain from the Baskin-Robbins Australia sale.

Net income for the second quarter increased by $22.3 million, or 120.6 percent, compared to the prior year primarily as a result of the $30.7 million increase in operating income, offset by a $4.4 million increase in income tax expense and a $3.2 million increase in interest expense. Adjusted net income increased by $3.6 million, or 8.8 percent, compared to the second quarter of 2012 as a result of the increase in adjusted operating income, offset by increases in interest expense and income tax expense.

Diluted adjusted earnings per share increased by 24.2 percent to $0.41 for the second quarter of 2013, as a result of the increase in adjusted net income, as well as a decline in shares outstanding due to the repurchase of 15 million shares in August 2012 and approximately 400,000 shares repurchased under previous authorizations during the second quarter of 2013.

SECOND QUARTER 2013 SEGMENT RESULTS

Amounts and percentages may not recalculate due to rounding

Three months ended

Increase (Decrease)

Dunkin' Donuts U.S.

June 29, 2013

June 30, 2012

$ / #

%

($ in thousands except as otherwise noted)

Comparable store sales growth

4.0 %

4.0 %

Systemwide sales growth

8.2 %

7.8 %

Franchisee reported sales (in millions)

$               1,704.5

1,574.9

129.6

8.2 %

Revenues:

Royalty income

$                91,954

84,897

7,057

8.3 %

Franchise fees

5,694

6,363

(669)

(10.5)%

Rental income

24,042

24,789

(747)

(3.0)%

Sales at company-owned restaurants

6,240

5,894

346

5.9 %

Other revenues

742

663

79

11.9 %

Total revenues

$              128,672

122,606

6,066

4.9 %

Segment profit

$                87,055

89,918

(2,863)

(3.2)%

Points of distribution

7,447

7,079

368

5.2 %

Gross openings

87

71

16

22.5 %

Net openings

63

19

44

231.6 %

Dunkin' Donuts U.S. revenues of $128.7 million represented an increase of 4.9 percent year-over-year.  The increase in revenue was primarily a result of increased royalty income, offset by a decrease in rental income and franchise renewal fees.

Dunkin' Donuts U.S. segment profit in the second quarter decreased $2.9 million over the prior year to $87.1 million. This decrease was driven by a one-time $7.5 million charge related to a volume guarantee with the franchisee-owned supply chain cooperative regarding sales of cooler beverages in our restaurants, offset by revenue growth.

Amounts and percentages may not recalculate due to rounding

Three months ended

Increase (Decrease)

Dunkin' Donuts International

June 29, 2013

June 30, 2012

$ / #

%

($ in thousands except as otherwise noted)

Comparable store sales growth (decline)

(1.7)%

3.5 %

Systemwide sales growth

3.5 %

1.5 %

Franchisee reported sales (in millions)

$                  170.8

164.9

5.8

3.5 %

Revenues:

Royalty income

$                  3,535

3,266

269

8.2 %

Franchise fees

342

595

(253)

(42.5)%

Rental income

31

36

(5)

(13.9)%

Other revenues

23

(27)

50

n/m

Total revenues

$                  3,931

3,870

61

1.6 %

Segment profit

$                  1,587

1,933

(346)

(17.9)%

Points of distribution

3,200

3,090

110

3.6 %

Gross openings

80

70

10

14.3 %

Net openings

33

29

4

13.8 %

Dunkin' Donuts International systemwide sales increased 3.5 percent from the prior year period, driven by sales growth in Germany and Southeast Asia, offset by a decline in sales in South Korea.  On a constant currency basis, systemwide sales increased by approximately 2 percent.

Dunkin' Donuts International revenues were consistent with the prior year period at $3.9 million, as the increase in royalty income driven by the increase in systemwide sales was offset by a decline in franchise fees.

Segment profit for Dunkin' Donuts International declined 17.9 percent to $1.6 million, primarily from investments in personnel and marketing for the Dunkin' Donuts International business, as well as losses realized from our new joint venture in Spain.

Amounts and percentages may not recalculate due to rounding

Three months ended

Increase (Decrease)

Baskin Robbins U.S.

June 29, 2013

June 30, 2012

$ / #

%

($ in thousands except as otherwise noted)

Comparable store sales growth

1.6 %

4.6 %

Systemwide sales growth

2.0 %

5.5 %

Franchisee reported sales (in millions)

$                  161.9

158.7

3.2

2.0 %

Revenues:

Royalty income

$                  8,174

7,999

175

2.2 %

Franchise fees

203

195

8

4.1 %

Rental income

820

1,024

(204)

(19.9)%

Sales of ice cream products

1,087

1,155

(68)

(5.9)%

Sales at company-owned restaurants

72

(72)

(100.0)%

Other revenues

2,205

2,295

(90)

(3.9)%

Total revenues

$                12,489

12,740

(251)

(2.0)%

Segment profit

$                  7,955

8,860

(905)

(10.2)%

Points of distribution

2,470

2,493

(23)

(0.9)%

Gross openings

19

19

—%

Net openings

5

5

—%

Baskin-Robbins U.S. revenue declined 2.0 percent from the prior year period to $12.5 million primarily from a decline in rental income due to a decline in the number of leased locations and a decline in refranchising gains, offset by an increase in royalty income driven by a 2.0 percent increase in systemwide sales as a result of comparable store sales growth of 1.6 percent.

Segment profit for the Baskin-Robbins U.S. segment decreased $0.9 million, or 10.2 percent, year-over-year primarily as a result of investments in advertising and other brand-building activities, as well as the decline in total revenues, offset by a decrease in occupancy expense for franchised restaurants consistent with the decline in rental income.

Amounts and percentages may not recalculate due to rounding

Three months ended

Increase (Decrease)

Baskin Robbins International

June 29, 2013

June 30, 2012

$ / #

%

($ in thousands except as otherwise noted)

Comparable store sales growth

2.6 %

1.5 %

Systemwide sales growth (decline)

(3.8)%

6.3 %

Franchisee reported sales (in millions)

$                360.4

374.5

(14.1)

(3.8)%

Revenues:

Royalty income

$                  2,591

2,336

255

10.9 %

Franchise fees

301

277

24

8.7 %

Rental income

142

136

6

4.4 %

Sales of ice cream products

31,722

27,287

4,435

16.3 %

Other revenues

161

70

91

130.0 %

Total revenues

$                34,917

30,106

4,811

16.0 %

Segment profit

$                19,434

11,842

7,592

64.1 %

Points of distribution

4,601

4,354

247

5.7 %

Gross openings

114

131

(17)

(13.0)%

Net openings

50

87

(37)

(42.5)%

Baskin-Robbins International systemwide sales decreased 3.8 percent from the prior year period driven by an unfavorable impact of exchange rates on sales in Japan, offset by sales growth in South Korea. On a constant currency basis, systemwide sales increased by approximately 4 percent.

Baskin-Robbins International revenues increased 16.0 percent year-over-year to $34.9 million primarily from the sale of ice cream and related products to our new Australian joint venture in conjunction with the sale of 80 percent of our Baskin-Robbins Australia business, as well as increased sales of ice cream products to the Middle East.

Segment profit increased 64.1 percent year-over-year to $19.4 million, primarily resulting from the gain recognized on the sale of the Baskin-Robbins Australia business and an increase in net margin on ice cream driven by the increase in sales, as well as an increase in income from our South Korean joint venture.

COMPANY UPDATES

  • The Company has extended its promotion, manufacturing and distribution agreement with Green Mountain Coffee Roasters, Inc. (GMCR) through February 2016. GMCR exclusively packages Dunkin'® K-Cup® packs using coffee sourced and roasted to Dunkin' Donuts' exacting specifications. The Companies first entered into the agreement in February 2011. Dunkin' Donuts began offering 14-count boxes of Dunkin'® K-Cup® packs exclusively at its restaurants in the U.S. and Canada in the summer of 2011. Today, Dunkin'® K-Cup® packs are available in five popular Dunkin' Donuts flavors, including Original Blend, Dunkin' Decaf, French Vanilla, Hazelnut and Dunkin' Dark® as well as limited time offer varieties.
  • The Company today announced that the Board of Directors declared a third quarter cash dividend of $0.19 per share, payable on September 4, 2013 to shareholders of record as of the close of business on August 26, 2013.
  • The Company announced on July 10, 2013 that it elected Carl Sparks to its Board of Directors effective on July 26, 2013.  Mr. Sparks is the President and Chief Executive Officer of Travelocity Global.
  • The Company repurchased approximately 400,000 shares of common stock during the second quarter; approximately $33 million remains available for purchase under previous authorizations.

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, and Paul Carbone, Chief Financial Officer. The dial-in number is (866) 393-1607 or (914) 495-8556, conference number 14995517.  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.   By their nature, forward-looking statements involve risks and uncertainties because they relate to events and depend on circumstances that may or may not occur in the future.  These risk and uncertainties include, but are not limited to: the ongoing level of profitability of franchisees and licensees; our franchisees' and licensees' ability to sustain same store sales growth;  changes in working relationships with our franchisees and licensees and the actions of our franchisees and licensees; our master franchisees' relationships with sub-franchisees; the strength of our brand in the markets in which we compete; changes in competition within the quick-service restaurant segment of the food industry; changes in consumer behavior resulting from changes in technologies or alternative methods of delivery; economic and political conditions in the countries where we operate; our substantial indebtedness; our ability to protect our intellectual property rights; consumer preferences, spending patterns and demographic trends; the impact of seasonal changes, including weather effects, on our business; the success of our growth strategy and international development; changes in commodity and food prices, particularly coffee, dairy products and sugar, and other operating costs; shortages of coffee; failure of our network and information technology systems; interruptions or shortages in the supply of products to our franchisees and licensees; the impact of food borne-illness or food safety issues or adverse public or media opinions regarding the health effects of consuming our products; our ability to collect royalty payments from our franchisees and licensees; the ability of our franchisees and licensees to open new restaurants and keep existing restaurants in operation; our ability to retain key personnel; any inability to protect consumer credit card data and catastrophic events.

Forward-looking statements reflect management's analysis as of the date of this press release.  Important factors that could cause actual results to differ materially from our expectations are more fully described in our other filings with the Securities and Exchange Commission, including under the section headed "Risk Factors" in our most recent annual report on Form 10-K. Except as required by applicable law, we do not undertake to publicly update or revise any of these forward-looking statements, whether as a result of new information, future events or otherwise.

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 share, which present operating results on a basis adjusted for certain items. The Company uses these non-GAAP measures as key performance measures for the purpose of evaluating performance internally. We also believe these non-GAAP measures provide our investors with useful information regarding our historical operating results. These non-GAAP measures are not intended to replace the presentation of our financial results in accordance with GAAP. Use of the terms adjusted operating income, adjusted operating income margin, adjusted net income, and diluted adjusted earnings per share may differ from similar measures reported by other companies.  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."

Additionally, the Company has included metrics such as systemwide sales growth and comparable store sales growth, which are commonly used statistical measures in the quick-service restaurant industry and are important to understanding the Company's performance.

The Company uses "systemwide 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 systemwide sales are driven by changes in 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," "DD International comparable store sales growth," and "BR 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 17,700 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 second quarter 2013, Dunkin' Brands' nearly 100 percent franchised business model included more than 10,600 Dunkin' Donuts restaurants and more than 7,000 Baskin-Robbins restaurants. For the full-year 2012, the company had franchisee-reported sales of approximately $8.8 billion. Dunkin' Brands Group, Inc. is headquartered in Canton, Mass.

DUNKIN' BRANDS GROUP, INC. AND SUBSIDIARIES

Consolidated Statements of Operations

(In thousands, except per share data)

(Unaudited)

Three months ended

Six months ended

June 29, 

June 30,

June 29, 

June 30,

2013

2012

2013

2012

Revenues:

Franchise fees and royalty income

$            112,794

105,928

216,559

201,972

Rental income

25,055

26,002

47,487

48,941

Sales of ice cream products

32,809

28,442

56,389

51,165

Sales at company-owned restaurants

6,240

5,966

12,011

10,793

Other revenues

5,590

6,049

11,900

11,888

          Total revenues

182,488

172,387

344,346

324,759

Operating costs and expenses:

Occupancy expenses–franchised restaurants

12,820

12,912

25,596

25,832

Cost of ice cream products

24,302

19,971

40,288

36,789

Company-owned restaurant expenses

5,940

6,130

11,595

10,946

General and administrative expenses, net

62,193

77,896

116,584

130,920

Depreciation

5,522

7,333

11,370

13,522

Amortization of other intangible assets

6,565

6,783

13,147

13,648

Impairment charges

107

377

355

386

          Total operating costs and expenses

117,449

131,402

218,935

232,043

Net income of equity method investments

4,782

5,153

7,869

8,617

Other operating income

6,984

6,984

          Operating income

76,805

46,138

140,264

101,333

Other income (expense):

Interest income

91

139

205

257

Interest expense

(19,886)

(16,690)

(40,718)

(33,386)

Loss on debt extinguishment and refinancing transactions

(5,018)

Other losses, net

(813)

(267)

(1,203)

(207)

          Total other expense

(20,608)

(16,818)

(46,734)

(33,336)

          Income before income taxes

56,197

29,320

93,530

67,997

Provision for income taxes

15,487

11,101

29,159

23,864

          Net income including noncontrolling interests

40,710

18,219

64,371

44,133

          Net loss attributable to noncontrolling interests

(102)

(278)

(239)

(314)

          Net income attributable to Dunkin' Brands

$              40,812

18,497

64,610

44,447

Earnings per share – basic

$                   0.38

0.15

0.61

0.37

Earnings per share – diluted

0.38

0.15

0.60

0.36

 

DUNKIN' BRANDS GROUP, INC. AND SUBSIDIARIES

Condensed Consolidated Balance Sheets

(In thousands)

(Unaudited)

June 29,

December 29,

Assets

2013

2012

Current assets:

     Cash and cash equivalents

$                     176,999

252,618

     Accounts, notes, and other receivables, net

59,225

53,056

     Other current assets

108,429

114,106

          Total current assets

344,653

419,780

Property and equipment, net

178,027

181,172

Equity method investments

159,786

174,823

Goodwill and other intangible assets, net

2,358,067

2,371,684

Other assets

80,003

70,054

          Total assets

$                  3,120,536

3,217,513

Liabilities and Stockholders' Equity

Current liabilities:

     Current portion of long-term debt

$                                 -

26,680

     Accounts payable

12,118

16,256

     Other current liabilities

246,122

310,579

          Total current liabilities

258,240

353,515

Long-term debt, net

1,827,845

1,823,278

Deferred income taxes, net

570,168

569,126

Other long-term liabilities

106,250

121,619

          Total long-term liabilities

2,504,263

2,514,023

Total stockholders' equity

358,033

349,975

          Total liabilities and stockholders' equity

$                  3,120,536

3,217,513

 

DUNKIN' BRANDS GROUP, INC. AND SUBSIDIARIES

Condensed Consolidated Statements of Cash Flows

(In thousands)

(Unaudited)

Six months ended

June 29,

June 30,

2013

2012

Net cash provided by operating activities

$                       9,557

26,908

Cash flows from investing activities:

    Additions to property and equipment

(12,507)

(9,748)

    Proceeds from sale of joint venture

7,200

    Other, net

(1,522)

(1,745)

Net cash used in investing activity

(6,829)

(11,493)

Cash flows from financing activities:

    Repayment of long-term debt

(19,157)

(10,441)

    Payment of deferred financing and other debt-related costs

(6,157)

    Dividends paid on common stock

(40,450)

(36,114)

    Repurchases of common stock

(16,756)

(25)

    Exercise of stock options

4,642

1,265

    Other, net

(208)

1,900

Net cash used in financing activities

(78,086)

(43,415)

    Effect of exchange rates on cash and cash equivalents

(261)

(30)

Decrease in cash and cash equivalents

(75,619)

(28,030)

Cash and cash equivalents, beginning of year

252,618

246,715

Cash and cash equivalents, end of year

$                  176,999

218,685

 

DUNKIN' BRANDS GROUP, INC. AND SUBSIDIARIES

Non-GAAP Reconciliations

(In thousands, except per share data)

(Unaudited)

Three months ended

Six months ended

June 29, 

June 30,

June 29, 

June 30,

2013

2012

2013

2012

Operating income

$                 76,805

46,138

140,264

101,333

    Operating income margin

42.1 %

26.8 %

40.7 %

31.2 %

Adjustments:

    Amortization of other intangible assets

6,565

6,783

13,147

13,648

    Impairment charges

107

377

355

386

    Third-party product volume obligation

7,500

7,500

    Secondary offering costs

1,281

2,195

    Peterborough plant closure (a)

191

3,678

588

3,678

    Bertico litigation (b)

20,680

20,680

Adjusted operating income

$                 91,168

78,937

161,854

141,920

    Adjusted operating income margin

50.0 %

45.8 %

47.0 %

43.7 %

Net income attributable to Dunkin' Brands

$                 40,812

18,497

64,610

44,447

Adjustments:

    Amortization of other intangible assets

6,565

6,783

13,147

13,648

    Impairment charges

107

377

355

386

    Third-party product volume obligation

7,500

7,500

    Secondary offering costs

1,281

2,195

   Peterborough plant closure(a)

191

3,678

588

3,678

    Loss on debt extinguishment and refinancing transactions

5,018

    Bertico litigation (b)

20,680

20,680

    Tax impact of adjustments, excluding Bertico litigation (c)

(5,745)

(4,848)

(10,643)

(7,963)

    Tax impact of Bertico adjustments (d)

(6,123)

(6,123)

    Income tax audit settlements (e)

(8,417)

(8,417)

    State tax apportionment (f)

2,868

2,868

Adjusted net income

$                 43,881

40,325

75,026

70,948

Adjusted net income

$                 43,881

40,325

75,026

70,948

Less: Adjusted net income allocated to participating securities

(71)

(142)

    Adjusted net income available to common shareholders

$                 43,881

40,254

75,026

70,806

Weighted average number of common shares – diluted

108,212

121,986

108,185

121,651

Diluted adjusted earnings per share

$                     0.41

0.33

0.69

0.58

(a) Represents transition-related general and administrative costs incurred related to the closure of the Baskin-Robbins ice cream manufacturing plant in Peterborough, Canada, such as information technology integration, project management, and transportation costs.

(b) Represents the incremental legal reserve recorded 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 includes $3.9 million representing the actual direct tax benefit expected to be realized, as well as a $2.2 million tax benefit recorded in the second quarter of 2012 that fully reversed in the third and fourth quarters of 2012 based on interim tax provision requirements. 

(e) Represents income tax benefits resulting from the resolution of historical tax positions settled during the period.

(f) Primarily represents deferred tax expense recognized due to an increase in our overall state tax rate resulting from a shift in estimated apportionment of income within state jurisdictions.

 

SOURCE Dunkin' Brands Group, Inc.



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