Financial

Dunkin' Brands Reports Second Quarter 2018 Results

Dunkin' Donuts U.S. comparable store sales increase of 1.4% - Baskin-Robbins U.S. comparable store sales decline of 0.4%

Dunkin' Brands

Second quarter highlights include:

  • Dunkin' Donuts U.S. comparable store sales increase of 1.4%
  • Baskin-Robbins U.S. comparable store sales decline of 0.4%
  • Added 96 net new Dunkin' Donuts and Baskin-Robbins locations globally including 64 net new Dunkin' Donuts in the U.S.
  • Revenues increased 4.9%
  • Diluted EPS increased by 30.9% to $0.72
  • Diluted adjusted EPS increased by 30.5% to $0.77

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 30, 2018.

"Our second quarter 2018 Dunkin' Donuts U.S. comparable store sales growth is an early sign of the progress we are making with our Blueprint for Growth," said David Hoffmann, Chief Executive Officer and President of Dunkin' Donuts U.S. "Our highest quarterly beverages sales on record underscored that we're on track towards our goal to be the nation's leading beverage-led, on-the-go brand. Along with our franchisees, we leveraged national marketing to launch the most comprehensive value program in the brand's history driving breakfast sandwich sales, which more than offset the impact of menu simplification. We have strong alignment with our franchisees on the brand's strategy and remain on track to open 50 NextGen new and remodeled restaurants this year with Dunkin' Donuts U.S. again expected to be one of the fastest-growing QSR brands by unit count in the country for 2018."

"We are delighted with our results for the quarter and are excited to provide additional clarity regarding our investments to support the Dunkin' Donuts U.S. Blueprint for Growth," said Kate Jaspon, Dunkin' Brands Chief Financial Officer. "We continue to expect our total investment to be approximately $100 million, allocated between equipment to support the brand's beverage-led, on-the-go strategy and technology infrastructure.  We expect minimal impact to our 2018 financial growth targets and are maintaining our revenue growth guidance. We are also refining our operating income and earnings per share guidance to reflect slightly increased expenses related to the testing, training and roll-out of Blueprint initiatives. We believe that by making these investments, we, along with our franchisees, will be able to implement certain Blueprint initiatives more quickly."

SECOND QUARTER 2018 KEY FINANCIAL HIGHLIGHTS

(Unaudited, $ in millions, except per share data)

Three months ended

Increase (Decrease)

Amounts and percentages may not recalculate due to rounding

June 30,

 2018

July 1,

 2017(1)

$ / #

%

Financial data:

Revenues

$

350.6

334.2

16.5

4.9

%

Operating income

113.9

106.8

7.0

6.6

%

Operating income margin

32.5

%

32.0

%

Adjusted operating income(2)

$

119.8

112.2

7.6

6.8

%

Adjusted operating income margin(2)

34.2

%

33.6

%

Net income

$

60.5

51.1

9.4

18.4

%

Adjusted net income(2)

64.8

54.3

10.5

19.3

%

Earnings per share:

Common–basic

0.73

0.56

0.17

30.4

%

Common–diluted

0.72

0.55

0.17

30.9

%

Diluted adjusted earnings per share(2)

0.77

0.59

0.18

30.5

%

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

84.1

92.6

(8.5)

(9.2)

%

Systemwide sales(3)

$

3,030.0

2,902.6

127.4

4.4

%

Comparable store sales growth (decline):

DD U.S.

1.4

%

0.8

%

BR U.S.

(0.4)

%

(0.9)

%

DD International

4.0

%

(2.8)

%

BR International

(2.5)

%

3.3

%

Development data:

Consolidated global net POD development

96

133

(37)

(27.8)

%

DD global PODs at period end

12,676

12,350

326

2.6

%

BR global PODs at period end

8,011

7,892

119

1.5

%

Consolidated global PODs at period end

20,687

20,242

445

2.2

%

(1) Prior period amounts have been restated to reflect the adoption of new revenue recognition guidance. See "Adoption of New Accounting Standard" for further detail.

(2) 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, long-lived asset impairments, and certain other items, 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. See "Non-GAAP Measures and Statistical Data" and "Dunkin' Brands Group, Inc. Non-GAAP Reconciliations" for further detail.

(3) Systemwide sales include sales at franchisee-operated restaurants, including joint ventures. While we do not record sales by franchisees, licensees, or joint ventures as revenue, and such sales are not included in our consolidated financial statements, we believe that this operating measure is important in obtaining an understanding of our financial performance. We believe systemwide sales information aids in understanding how we derive royalty revenue and in evaluating our performance relative to competitors.

Global systemwide sales growth of 4.4% in the second quarter was primarily attributable to global store development and Dunkin' Donuts U.S. comparable store sales growth (which includes stores open 78 weeks or more).

Dunkin' Donuts U.S. comparable store sales grew 1.4% in the second quarter as an increase in average ticket was partially offset by a decrease in traffic. Growth was driven primarily by breakfast sandwich sales and frozen beverages.

Baskin-Robbins U.S. comparable store sales declined 0.4% during the second quarter as a decrease in traffic was partially offset by an increase in average ticket. Sales of beverages including shakes, smoothies, as well as the take-home category grew during the quarter.

In the second quarter, Dunkin' Brands franchisees and licensees opened 96 net new restaurants globally. This included 64 net new Dunkin' Donuts U.S. locations, 23 net new Baskin-Robbins International locations, and 14 net new Dunkin' Donuts International locations, offset by net closures of 5 Baskin-Robbins U.S. locations. Additionally, Dunkin' Donuts U.S. franchisees remodeled 40 restaurants and Baskin-Robbins U.S. franchisees remodeled 19 restaurants during the quarter.

Revenues for the second quarter increased $16.5 million, or 4.9%, compared to the prior year period due primarily to increased advertising fees and related income, as well as an increase in royalty income as a result of systemwide sales growth.

Operating income and adjusted operating income for the second quarter increased $7.0 million, or 6.6%, and $7.6 million, or 6.8%, respectively, from the prior year period primarily as a result of the increase in royalty income and a reduction of general and administrative expenses, offset by a decrease in net margin on ice cream due primarily to an increase in commodity costs.

Net income and adjusted net income for the second quarter increased by $9.4 million, or 18.4%, and $10.5 million, or 19.3%, respectively, compared to the prior year period primarily as a result of a decrease in income tax expense and the increases in operating income and adjusted operating income, respectively. The decrease in income tax expense was primarily driven by a lower tax rate due to the enactment of the Tax Cuts and Jobs Act in the fourth quarter of fiscal year 2017. The increases in net income and adjusted net income were offset by an increase in net interest expense driven by additional borrowings incurred in conjunction with the refinancing transaction completed during the fourth quarter of fiscal year 2017.

Diluted earnings per share and diluted adjusted earnings per share for the first quarter increased by 30.9% to $0.72 and 30.5% to $0.77, respectively, compared to the prior year period as a result of the increases in net income and adjusted net income, respectively, as well as a decrease in shares outstanding. The decrease in shares outstanding from the prior year period was due primarily to the repurchase of shares since the first quarter of fiscal year 2017, offset by the exercise of stock options. Excluding the impact of recognized excess tax benefits, diluted earnings per share and diluted adjusted earnings per share for the second quarter of fiscal years 2018 and 2017 would have been lower by approximately $0.02 and $0.01, respectively.

SECOND QUARTER 2018 SEGMENT RESULTS

Amounts and percentages may not recalculate due to rounding

Three months ended

Increase (Decrease)

Dunkin' Donuts U.S.

June 30,

 2018

July 1,

 2017(1)

$ / #

%

(Unaudited, $ in thousands except as otherwise noted)

Revenues:

Royalty income

$

125,221

119,096

6,125

5.1

%

Franchise fees

4,765

4,564

201

4.4

%

Rental income

26,506

26,533

(27)

(0.1)

%

Other revenues

898

798

100

12.5

%

   Total revenues

$

157,390

150,991

6,399

4.2

%

Segment profit

$

119,562

116,113

3,449

3.0

%

Comparable store sales growth

1.4

%

0.8

%

Systemwide sales (in millions)(2)

$

2,275.6

2,175.0

100.6

4.6

%

Points of distribution

9,261

8,948

313

3.5

%

Gross openings

99

91

8

8.8

%

Net openings

64

64

%

(1) Prior period amounts have been restated to reflect the adoption of new revenue recognition guidance. See "Adoption of New Accounting Standard" for further detail.

(2) Systemwide sales include sales at franchisee-operated restaurants, including joint ventures. We do not record sales by franchisees, licensees, or joint ventures as revenue and such sales are not included in our consolidated financial statements. See "Non-GAAP Measures and Statistical Data" for further detail.

Dunkin' Donuts U.S. second quarter revenues of $157.4 million represented an increase of 4.2% compared to the prior year period. The increase was primarily a result of an increase in royalty income driven by systemwide sales growth.

Dunkin' Donuts U.S. segment profit in the second quarter increased to $119.6 million, an increase of $3.4 million over the prior year period, driven primarily by the increase in royalty income, offset by an increase in general and administrative expenses, due primarily to expenses incurred in the second quarter of fiscal year 2018 to support the Blueprint for Growth initiatives.

Amounts and percentages may not recalculate due to rounding

Three months ended

Increase (Decrease)

Dunkin' Donuts International

June 30,

 2018

July 1,

 2017(1)

$ / #

%

(Unaudited, $ in thousands except as otherwise noted)

Revenues:

Royalty income

$

4,732

4,157

575

13.8

%

Franchise fees

535

475

60

12.6

%

Other revenues

(9)

(20)

11

n/m

   Total revenues

$

5,258

4,612

646

14.0

%

Segment profit

$

3,503

1,571

1,932

123.0

%

Comparable store sales growth (decline)

4.0

%

(2.8)

%

Systemwide sales (in millions)(2)

$

183.5

169.4

14.1

8.3

%

Points of distribution

3,415

3,402

13

0.4

%

Gross openings

86

75

11

14.7

%

Net openings (closings)

14

(1)

15

n/m

(1) Prior period amounts have been restated to reflect the adoption of new revenue recognition guidance. See "Adoption of New Accounting Standard" for further detail.

(2) Systemwide sales include sales at franchisee-operated restaurants, including joint ventures. We do not record sales by franchisees, licensees, or joint ventures as revenue and such sales are not included in our consolidated financial statements. See "Non-GAAP Measures and Statistical Data" for further detail.

Dunkin' Donuts International second quarter systemwide sales increased 8.3% from the prior year period driven by sales growth across all regions. Sales in South Korea and Europe were positively impacted by favorable foreign exchange rates. On a constant currency basis, systemwide sales increased by approximately 6%.

Dunkin' Donuts International second quarter revenues of $5.3 million represented an increase of 14.0% from the prior year period. The increase in revenues was primarily a result of an increase in royalty income driven by systemwide sales growth.

Segment profit for Dunkin' Donuts International increased $1.9 million to $3.5 million in the second quarter primarily as a result of the increase in revenues, as well as decreases in both general and administrative expenses and advertising expenses.

Amounts and percentages may not recalculate due to rounding

Three months ended

Increase (Decrease)

Baskin-Robbins U.S.

June 30,

 2018

July 1,

 2017(1)

$ / #

%

(Unaudited, $ in thousands except as otherwise noted)

Revenues:

Royalty income

$

9,005

9,080

(75)

(0.8)

%

Franchise fees

303

193

110

57.0

%

Rental income

763

763

%

Sales of ice cream and other products

842

883

(41)

(4.6)

%

Other revenues

3,186

3,337

(151)

(4.5)

%

   Total revenues

$

14,099

14,256

(157)

(1.1)

%

Segment profit

$

10,622

10,865

(243)

(2.2)

%

Comparable store sales decline

(0.4)

%

(0.9)

%

Systemwide sales (in millions)(2)

$

187.7

187.5

0.2

0.1

%

Points of distribution

2,561

2,551

10

0.4

%

Gross openings

13

24

(11)

(45.8)

%

Net openings (closings)

(5)

12

(17)

(141.7)

%

(1) Prior period amounts have been restated to reflect the adoption of new revenue recognition guidance. See "Adoption of New Accounting Standard" for further detail.

(2) Systemwide sales include sales at franchisee-operated restaurants, including joint ventures. We do not record sales by franchisees, licensees, or joint ventures as revenue and such sales are not included in our consolidated financial statements. See "Non-GAAP Measures and Statistical Data" for further detail.

Baskin-Robbins U.S. second quarter revenues decreased 1.1% from the prior year period to $14.1 million due primarily to decreases in other revenues and royalty income, offset by an increase in franchise fees.

Segment profit for Baskin-Robbins U.S. decreased to $10.6 million in the second quarter, a decrease of 2.2%, primarily as a result of the decrease in revenues, as well as an increase in general and administrative expenses.

Amounts and percentages may not recalculate due to rounding

Three months ended

Increase (Decrease)

Baskin-Robbins International

June 30,

 2018

July 1,

 2017(1)

$ / #

%

(Unaudited, $ in thousands except as otherwise noted)

Revenues:

Royalty income

$

2,154

1,858

296

15.9

%

Franchise fees

251

288

(37)

(12.8)

%

Rental income

131

112

19

17.0

%

Sales of ice cream and other products

31,409

31,685

(276)

(0.9)

%

Other revenues

73

64

9

14.1

%

   Total revenues

$

34,018

34,007

11

%

Segment profit

$

11,526

12,530

(1,004)

(8.0)

%

Comparable store sales growth (decline)

(2.5)

%

3.3

%

Systemwide sales (in millions)(2)

$

383.3

370.7

12.5

3.4

%

Points of distribution

5,450

5,341

109

2.0

%

Gross openings

98

129

(31)

(24.0)

%

Net openings

23

58

(35)

(60.3)

%

(1) Prior period amounts have been restated to reflect the adoption of new revenue recognition guidance. See "Adoption of New Accounting Standard" for further detail.

(2) Systemwide sales include sales at franchisee-operated restaurants, including joint ventures. We do not record sales by franchisees, licensees, or joint ventures as revenue and such sales are not included in our consolidated financial statements. See "Non-GAAP Measures and Statistical Data" for further detail.

Baskin-Robbins International systemwide sales increased 3.4% in the second quarter compared to the prior year period driven by sales growth in South Korea, Asia, and Canada, offset by sales declines in Japan and the Middle East. Sales in South Korea and Japan were positively impacted by favorable foreign exchange rates. On a constant currency basis, systemwide sales increased by approximately 1%.

Baskin-Robbins International second quarter revenues were consistent with the prior year period at $34.0 million, as an increase in royalty income was offset by a decrease in sales of ice cream and other products. Systemwide sales and sales of ice cream products are not directly correlated within a given period due to certain licensees sourcing their own ice cream products, the lag between shipment of products to licensees and retail sales at franchised restaurants, and the overall timing of deliveries between fiscal quarters.

Second quarter segment profit decreased 8.0% from the prior year period to $11.5 million as a result of a decrease in net margin on ice cream driven primarily by an increase in commodity costs, offset by the increase in royalty income.

Three months ended

Increase (Decrease)

U.S. Advertising Funds

June 30,

 2018

July 1,

 2017(1)

$ / #

%

(Unaudited, $ in thousands)

Revenues:

Advertising fees and related income

$

119,174

113,824

5,350

4.7

%

   Total revenues

$

119,174

113,824

5,350

4.7

%

Segment profit

$

%

(1) Prior period amounts have been restated to reflect the adoption of new revenue recognition guidance. See "Adoption of New Accounting Standard" for further detail.

U.S. Advertising Funds second quarter revenues of $119.2 million represented an increase of 4.7% compared to the prior year period driven primarily by Dunkin' Donuts U.S. systemwide sales growth. Expenses for the U.S. Advertising Funds were equivalent to revenues in each period, resulting in no segment profit.

COMPANY UPDATES

  • The Company today announced that the Board of Directors declared a cash dividend of $0.3475 per share, payable on September 5, 2018, to shareholders of record as of the close of business on August 27, 2018.
  • The Company announced today that it had entered into an agreement to extend its relationship with CardFree, Inc., which will allow the Company to take greater control over the technology enabling its mobile payments and On-the-Go Mobile ordering through the Dunkin' Mobile App.

FISCAL YEAR 2018 TARGETS

As described below, the Company is updating and reiterating certain targets regarding its 2018 performance. The 2018 guidance now reflects the expected impact from the approximately $100 million investment in the Dunkin' Donuts U.S. Blueprint for Growth. This investment is expected to be allocated across three areas: first, in equipment to support the brand's beverage-led, on-the-go strategy; second, in technology infrastructure to support digital leadership; and, third, in general and administrative expense to support the training, testing and roll-out of Blueprint initiatives. The Company expects the majority of the cash associated with these investments to be deployed in 2018, with the remainder likely to be spent in 2019.

  • The Company continues to expect approximately one percent comparable store sales growth for Dunkin' Donuts U.S. and low-single digit comparable sales growth for Baskin-Robbins U.S.
  • The Company continues to expect Dunkin' Donuts U.S. franchisees to add greater than 275 net new restaurants. In addition, the Company continues to expect Dunkin' Donuts U.S. franchisees to open approximately 50 NextGen restaurants, including both new and remodeled stores.
  • The Company continues to expect high-single digit percent growth in Other Revenue driven by consumer packaged goods.
  • The Company continues to expect low-to-mid single digit revenue growth.
  • The Company continues to expect ice cream margin dollars to be flat compared to 2017 from a profit dollar standpoint.
  • The Company now expects a low-single digit reduction to general and administrative expense (previously it expected a five percent reduction to general and administrative expense), which reflects investments to support the testing, training and roll-out of Dunkin' Donuts U.S. Blueprint for Growth initiatives.
  • The Company now expects mid-single digit operating and adjusted operating income growth (previously it expected mid-to-high single digit operating and adjusted operating income growth), which reflects the revised general and administrative expense guidance.
  • The Company continues to expect full-year weighted-average shares outstanding of approximately 85 million and an effective tax rate of 25 percent.
  • The Company now expects GAAP diluted earnings per share of $2.48 to $2.56 (previously it expected $2.49 to $2.58) and diluted adjusted earnings per share of $2.68 to $2.72 (previously it expected $2.69 to $2.74), which reflects the impact from the approximate $100 million investment in the Dunkin' Donuts U.S. Blueprint for U.S. Growth.
  • The Company now expects capital expenditures to be approximately $45 to $50 million (previously it expected capital expenditures to be approximately $25 million).

The foregoing non-GAAP forward-looking financial measures are reconciled from the respective measures determined under GAAP in the attached tables "Dunkin' Brands Group, Inc. and Subsidiaries Non-GAAP Reconciliations."

Adoption of New Accounting Standard

In May 2014, the Financial Accounting Standards Board issued new guidance for revenue recognition related to contracts with customers, except for contracts within the scope of other standards, which supersedes nearly all existing revenue recognition guidance. The new guidance was effective for the Company beginning in fiscal year 2018. The Company adopted this new guidance in fiscal year 2018 using the full retrospective transition method, which results in restating each prior reporting period presented in the year of adoption, including the three and six months ended July 1, 2017, included herein. As a result of adopting this new guidance in the first quarter of fiscal year 2018, we identified an additional operating segment consisting of the Dunkin' Donuts U.S. and Baskin-Robbins U.S. advertising funds. Additional information regarding the Company's adoption of the new revenue recognition guidance and the impact to historical financial results is contained in Exhibit 99.2 to the Company's filing on Form 8-K, filed with the Securities and Exchange Commission on February 6, 2018.

C

About Dunkin' Brands Group, Inc.

With more than 20,600 points of distribution in more than 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 second quarter 2018, Dunkin' Brands' 100 percent franchised business model included more than 12,600 Dunkin' Donuts restaurants and more than 8,000 Baskin-Robbins restaurants. 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 30,

 2018

July 1,

 2017(1)

June 30,

2018

July 1,

 2017(1)

Revenues:

Franchise fees and royalty income(2)

$

151,242

143,894

283,749

271,609

Advertising fees and related income

131,539

122,361

242,546

232,564

Rental income

27,400

27,408

51,878

51,830

Sales of ice cream and other products(2)

28,140

28,679

49,917

51,185

Other revenues

12,319

11,834

23,892

23,346

Total revenues

350,640

334,176

651,982

630,534

Operating costs and expenses:

Occupancy expenses—franchised restaurants

14,314

14,287

28,294

28,425

Cost of ice cream and other products

22,781

22,199

39,645

39,121

Advertising expenses

132,579

123,676

244,551

234,748

General and administrative expenses, net

59,301

61,074

119,125

121,443

Depreciation

5,125

5,071

10,158

10,155

Amortization of other intangible assets

5,307

5,333

10,682

10,660

Long-lived asset impairment charges

653

60

1,154

107

Total operating costs and expenses

240,060

231,700

453,609

444,659

Net income of equity method investments

3,845

4,327

5,878

7,146

Other operating income (loss), net

(575)

33

(570)

588

Operating income

113,850

106,836

203,681

193,609

Other income (expense), net:

Interest income

1,516

425

3,158

746

Interest expense

(32,538)

(24,885)

(65,015)

(49,756)

Other income (loss), net

(272)

28

(599)

215

Total other expense, net

(31,294)

(24,432)

(62,456)

(48,795)

Income before income taxes

82,556

82,404

141,225

144,814

Provision for income taxes

22,058

31,312

30,575

49,429

Net income

$

60,498

51,092

110,650

95,385

Earnings per share—basic

$

0.73

0.56

1.31

1.04

Earnings per share—diluted

0.72

0.55

1.29

1.03

(1) Prior period amounts have been restated to reflect the adoption of new revenue recognition guidance. See "Adoption of New Accounting Standard" for further detail.

(2) For the three months ended June 30, 2018 and July 1, 2017, $4.3 million and $4.2 million, respectively, and for the six months ended June 30, 2018 and July 1, 2017, $7.4 million and $7.0 million, respectively, of sales of ice cream and other products have been allocated to franchise fees and royalty income as consideration for the use of the franchise license.

DUNKIN' BRANDS GROUP, INC. AND SUBSIDIARIES

Condensed Consolidated Balance Sheets

(In thousands)

(Unaudited)

June 30,

 2018

December 30,

 2017(1)

Assets

Current assets:

Cash and cash equivalents

$

367,940

1,018,317

Restricted cash

84,970

94,047

Accounts, notes, and other receivables, net

128,907

121,849

Other current assets

74,660

70,120

Total current assets

656,477

1,304,333

Property and equipment, net

204,011

181,542

Equity method investments

137,910

140,615

Goodwill and other intangible assets, net

2,233,593

2,245,465

Other assets

66,737

65,478

Total assets

$

3,298,728

3,937,433

Liabilities and Stockholders' Deficit

Current liabilities:

Current portion of long-term debt

$

31,650

31,500

Accounts payable

68,783

53,417

Deferred revenue

44,175

44,876

Other current liabilities

285,399

355,706

Total current liabilities

430,007

485,499

Long-term debt, net

3,023,955

3,035,857

Deferred revenue

366,246

361,458

Deferred income taxes, net

205,859

214,345

Other long-term liabilities

90,466

94,813

Total long-term liabilities

3,686,526

3,706,473

Total stockholders' deficit

(817,805)

(254,539)

Total liabilities and stockholders' deficit

$

3,298,728

3,937,433

(1) Prior period amounts have been restated to reflect the adoption of new revenue recognition guidance. See "Adoption of New Accounting Standard" for further detail.

DUNKIN' BRANDS GROUP, INC. AND SUBSIDIARIES

Condensed Consolidated Statements of Cash Flows

(In thousands)

(Unaudited)

Six months ended

June 30,

 2018

July 1,

 2017(1)

Net cash provided by operating activities

$

67,739

67,060

Cash flows from investing activities:

Additions to property and equipment

(32,902)

(6,730)

Other, net

(99)

Net cash used in investing activities

(32,902)

(6,829)

Cash flows from financing activities:

Repayment of long-term debt

(15,750)

(12,500)

Dividends paid on common stock

(57,439)

(58,847)

Accelerated share repurchases of common stock

(650,368)

(100,000)

Exercise of stock options

30,433

19,928

Other, net

(901)

(799)

Net cash used in financing activities

(694,025)

(152,218)

Effect of exchange rates on cash, cash equivalents, and restricted cash

(228)

398

Decrease in cash, cash equivalents, and restricted cash

(659,416)

(91,589)

Cash, cash equivalents, and restricted cash, beginning of period

1,114,099

431,832

Cash, cash equivalents, and restricted cash, end of period

$

454,683

340,243

(1) Prior period amounts have been restated to reflect the adoption of new revenue recognition guidance. See "Adoption of New Accounting Standard" for further detail.

DUNKIN' BRANDS GROUP, INC. AND SUBSIDIARIES

Non-GAAP Reconciliations

(In thousands, except share and per share data)

(Unaudited)

Three months ended

Six months ended

June 30,

 2018

July 1,

 2017(1)

June 30,

2018

July 1,

 2017(1)

Operating income

$

113,850

106,836

203,681

193,609

Operating income margin

32.5

%

32.0

%

31.2

%

30.7

%

Adjustments:

Amortization of other intangible assets

$

5,307

5,333

10,682

10,660

Long-lived asset impairment charges

653

60

1,154

107

Adjusted operating income

$

119,810

112,229

215,517

204,376

Adjusted operating income margin

34.2

%

33.6

%

33.1

%

32.4

%

Net income

$

60,498

51,092

110,650

95,385

Adjustments:

Amortization of other intangible assets

5,307

5,333

10,682

10,660

Long-lived asset impairment charges

653

60

1,154

107

Tax impact of adjustments(2)

(1,669)

(2,157)

(3,314)

(4,307)

Adjusted net income

$

64,789

54,328

119,172

101,845

Adjusted net income

$

64,789

54,328

119,172

101,845

Weighted average number of common shares – diluted

84,113,681

92,606,525

85,995,475

92,863,378

Diluted adjusted earnings per share

$

0.77

0.59

1.39

1.10

(1) Prior period amounts have been restated to reflect the adoption of new revenue recognition guidance. See "Adoption of New Accounting Standard" for further detail.

(2) Tax impact of adjustments calculated at effective tax rates of 28% for the three and six months ended June 30, 2018 and 40% for the three and six months ended July 1, 2017.

DUNKIN' BRANDS GROUP, INC. AND SUBSIDIARIES

Non-GAAP Reconciliations (continued)

(Unaudited)

Fiscal year ended

December 29, 2018

Low

High

(projected)

(projected)

Diluted earnings per share

$

2.48

2.56

Adjustments:

Amortization of other intangible assets

0.24

0.23

Long-lived asset impairment charges

0.04

Tax impact of adjustments(1)

(0.08)

(0.07)

Diluted adjusted earnings per share

$

2.68

2.72

(1) Tax impact of adjustments calculated at a 28% effective tax rate.

SOURCE Dunkin' Brands Group, Inc.



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