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%
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.
