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., Oct. 25, 2012 /PRNewswire/ -- 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.

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

"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 Income1


70.3

54.1


16.2

30.0%

Operating Income Margin1


41.0%

33.1%




Adjusted Operating Income2

$

85.4

75.9


9.5

12.5%

Adjusted Operating Income Margin2


49.7%

46.4%




Net Income

$

29.5

7.4


22.1

298.4%

Adjusted Net Income2


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







    Share2


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)












 

1Operating 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.

 

2Adjusted 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.

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.  

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.

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 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.

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.

 


Amounts and percentages may not recalculate due to rounding











Three months ended






September 29,


September 24,


Increase (Decrease)

Dunkin' Donuts U.S.


2012


2011


$

%


($ 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






September 29,


September 24,


Increase (Decrease)

Dunkin' Donuts International


2012


2011


$

%


($ 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






September 29,


September 24,


Increase (Decrease)

Baskin Robbins U.S.


2012


2011


$

%


($ 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






September 29,


September 24,


Increase (Decrease)

Baskin Robbins International


2012


2011


$

%


($ 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%









 

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,


September 24,


September 29,


September 24,









2012


2011


2012


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 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)


 

DUNKIN' BRANDS GROUP, INC. AND SUBSIDIARIES

Condensed Consolidated Balance Sheets

(In thousands)

(Unaudited)

 









September 29,


December 31,

Assets


2012


2011

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

 

DUNKIN' BRANDS GROUP, INC. AND SUBSIDIARIES

Condensed Consolidated Statements of Cash Flows

(In thousands)

(Unaudited)









Nine months ended









September 29,


September 24,









2012


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

 

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.

 

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, $1.1 million of incremental costs of ice cream products for the three and nine months ended September 29, 2012, 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.

















SOURCE Dunkin' Brands Group, Inc.



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