Dunkin' Brands Results

Dunkin' Brands Reports Third Quarter 2019 Results

Third quarter highlights include:

  • Dunkin' U.S. comparable store sales growth of 1.5%
  • Baskin-Robbins U.S. comparable store sales growth of 3.6%
  • Added 55 net new Dunkin' locations in the U.S.; total of 122 net new Dunkin' and Baskin-Robbins locations globally
  • Revenues increased 1.7%
  • Diluted EPS increased by 8.9% to $0.86
  • Diluted adjusted EPS increased by 8.4% to $0.90

Dunkin' Brands Group, Inc. (Nasdaq: DNKN), the parent company of Dunkin' and Baskin-Robbins (BR), today reported results for the third quarter ended September 28, 2019.

"We delivered a strong third quarter with positive comparable store sales growth across all four of our business segments, including Baskin-Robbins best quarterly sales results in the U.S. since the fourth quarter of 2017. Dunkin' U.S. performance was led by strength in premium beverages such as espresso and cold brew, along with sales of breakfast sandwiches driven by the success of our national Go2s value platform. We also rolled out two new features in our Dunkin' U.S. digital and loyalty platform - guest ordering for Mobile On-The-Go and multi-tender payment flexibility for the DD Perks program - unlocking more choice and convenience for Dunkin's most loyal and on-the-go guests," said David Hoffmann, Dunkin' Brands Chief Executive Officer and President Dunkin' U.S. "We believe these results demonstrate that our Dunkin' U.S. Blueprint for Growth is working and the strategic investments made into the Dunkin' business last year are enabling us to drive topline results and deliver a better guest experience."

"With one quarter remaining in 2019, we are reiterating our guidance for revenue and operating income growth," said Kate Jaspon, Chief Financial Officer, Dunkin' Brands Group, Inc. "In addition to other updates to our 2019 targets, we are raising and tightening our guidance for earnings per share."

THIRD QUARTER 2019 KEY FINANCIAL HIGHLIGHTS

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

Three months ended

Increase (Decrease)

Amounts and percentages may not recalculate due to rounding

September 28,

 2019

September 29,

 2018

$ / #

%

Financial data:

Revenues

$

355.9

350.0

5.9

1.7

%

Operating income

121.3

111.6

9.8

8.7

%

Operating income margin

34.1

%

31.9

%

Adjusted operating income(1)

$

126.0

116.9

9.1

7.8

%

Adjusted operating income margin(1)

35.4

%

33.4

%

Net income

$

72.4

66.1

6.3

9.5

%

Adjusted net income(1)

75.7

69.9

5.8

8.3

%

Earnings per share:

Common–basic

0.87

0.80

0.07

8.8

%

Common–diluted

0.86

0.79

0.07

8.9

%

Diluted adjusted earnings per share(1)

0.90

0.83

0.07

8.4

%

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

83.9

84.1

(0.2)

(0.3)

%

Systemwide sales(2)

$

3,212.9

3,067.8

145.1

4.7

%

Comparable store sales growth (decline):

Dunkin' U.S.

1.5

%

1.3

%

BR U.S.

3.6

%

1.8

%

Dunkin' International

7.3

%

2.5

%

BR International

3.0

%

7.5

%

Development data:

Consolidated global net POD development

122

77

45

58.4

%

Dunkin' global PODs at period end

13,035

12,740

295

2.3

%

BR global PODs at period end

8,116

8,024

92

1.1

%

Consolidated global PODs at period end

21,151

20,764

387

1.9

%

(1) Adjusted operating income, adjusted operating income margin, and adjusted net income are non-GAAP measures reflecting operating income and net income adjusted for amortization of intangible assets, 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.

(2) 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 4.7% in the third quarter was primarily attributable to global store development and global comparable store sales growth.

Dunkin' U.S. comparable store sales grew 1.5% in the third quarter as an increase in average ticket was partially offset by a decrease in traffic. The increase in average ticket was driven by favorable mix shift to premium priced espresso and cold brew beverages coupled with strategic pricing increases, partially offset by discounting driven by national value platforms, Go2s and PM Beverage Break.

Baskin-Robbins U.S. comparable store sales grew 3.6% in the third quarter driven by an increase in average ticket and flat traffic. The increase in average ticket was driven by strategic pricing increases coupled with strong performance of cups and cones, and take home, as well as Stranger Things merchandise.

In the third quarter, Dunkin' Brands franchisees and licensees opened 122 net new restaurants globally. This included 55 net new Dunkin' U.S. locations, 58 Baskin-Robbins International locations, and 23 Dunkin' International locations, offset by net closures of 14 Baskin-Robbins U.S. locations. Additionally, Dunkin' U.S. franchisees remodeled 22 restaurants and Baskin-Robbins U.S. franchisees remodeled 12 restaurants during the quarter.

Revenues for the third quarter increased $5.9 million, or 1.7%, compared to the prior year period due primarily to an increase in royalty income as a result of Dunkin' U.S. systemwide sales growth, as well as an increase in rental income, offset by decreases in advertising fees and related income and franchise fees. The increase in rental income resulted from the adoption of the new lease accounting standard in the first quarter of fiscal year 2019, which requires gross presentation of certain lease costs that the Company passes through to franchisees. See "Adoption of New Accounting Standard" for further detail. The decrease in advertising fees and related income was due primarily to a decrease in gift card program service fees, offset by an increase in advertising fees as a result of systemwide sales growth. The decrease in franchise fees was due primarily to franchisee incentives, including investments to support the Dunkin' U.S. Blueprint for Growth, which are being recognized over the remaining term of each respective franchise agreement.

Operating income and adjusted operating income for the third quarter increased $9.8 million, or 8.7%, and $9.1 million, or 7.8%, respectively, compared to the prior year period primarily as a result of the increase in royalty income, a decrease in general and administrative expenses, and an increase in net income from our South Korea joint venture, offset by the decrease in franchise fees.

Net income and adjusted net income for the third quarter increased by $6.3 million, or 9.5%, and $5.8 million, or 8.3%, respectively, compared to the prior year period primarily as a result of the increases in operating income and adjusted operating income, respectively, and an increase in interest income earned on our cash balances, offset by an increase in income tax expense. The increase in income tax expense was driven primarily by excess tax benefits from share-based compensation of $1.8 million compared to $7.4 million in the prior year period and the increase in income in the current year period, offset by a tax benefit of $2.0 million in the current year period related to the ability to utilize additional foreign tax credit carryforwards.

Diluted earnings per share and diluted adjusted earnings per share for the third quarter increased by 8.9% to $0.86 and 8.4% to $0.90, respectively, compared to the prior year period as a result of the increases in net income and adjusted net income, respectively. Excluding the impact of recognized excess tax benefits, both diluted earnings per share and diluted adjusted earnings per share would have been lower by approximately $0.02 and $0.09 for the third quarter of fiscal years 2019 and 2018, respectively.

THIRD QUARTER 2019 SEGMENT RESULTS

Amounts and percentages may not recalculate due to rounding

Three months ended

Increase (Decrease)

Dunkin' U.S.

September 28,

 2019

September 29,

 2018

$ / #

%

(Unaudited, $ in thousands except as otherwise noted)

Revenues:

Royalty income

$

130,993

124,805

6,188

5.0

%

Franchise fees

3,675

4,840

(1,165)

(24.1)

%

Rental income

30,824

26,637

4,187

15.7

%

Other revenues

912

1,002

(90)

(9.0)

%

Total revenues

$

166,404

157,284

9,120

5.8

%

Segment profit

$

127,755

121,667

6,088

5.0

%

Comparable store sales growth

1.5

%

1.3

%

Systemwide sales (in millions)(1)

$

2,365.9

2,266.9

99.0

4.4

%

Points of distribution

9,554

9,313

241

2.6

%

Gross openings

82

95

(13)

(13.7)

%

Net openings

55

52

3

5.8

%

(1) 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' U.S. third quarter revenues of $166.4 million represented an increase of 5.8% compared to the prior year period. The increase was primarily a result of an increase in royalty income driven by systemwide sales growth, as well as an increase in rental income, offset by a decrease in franchise fees due primarily to franchisee incentives provided as part of the investments to support the Dunkin' U.S. Blueprint for Growth, which are being recognized over the remaining term of each respective franchise agreement. The increase in rental income resulted from the adoption of the new lease accounting standard in the first quarter of fiscal year 2019. See "Adoption of New Accounting Standard" for further detail.

Dunkin' U.S. segment profit in the third quarter increased to $127.8 million, an increase of $6.1 million over the prior year period, driven primarily by the increase in royalty income and a decrease in general and administrative expenses, offset by decreases in franchise fees and rental margin. The decrease in general and administrative expenses was due primarily to expenses incurred in the third quarter of fiscal year 2018 to support the Dunkin' U.S. Blueprint for Growth investments, as well as a decrease in personnel costs. The decrease in rental margin was due primarily to amortization of certain lease intangible assets, previously recorded within amortization, now included within occupancy expenses—franchised restaurants.  See "Adoption of New Accounting Standard" for further detail.

Amounts and percentages may not recalculate due to rounding

Three months ended

Increase (Decrease)

Dunkin' International

September 28,

 2019

September 29,

 2018

$ / #

%

(Unaudited, $ in thousands except as otherwise noted)

Revenues:

Royalty income

$

5,769

5,192

577

11.1

%

Franchise fees

792

1,054

(262)

(24.9)

%

Other revenues

188

10

178

1,780.0

%

Total revenues

$

6,749

6,256

493

7.9

%

Segment profit

$

4,898

4,549

349

7.7

%

Comparable store sales growth

7.3

%

2.5

%

Systemwide sales (in millions)(1)

$

210.9

194.9

16.1

8.2

%

Points of distribution

3,481

3,427

54

1.6

%

Gross openings

87

95

(8)

(8.4)

%

Net openings

23

12

11

91.7

%

(1) 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' International third quarter systemwide sales increased 8.2% from the prior year period driven by sales growth across all regions. Sales in South Korea, Latin America, and Europe were negatively impacted by unfavorable foreign exchange rates, while sales in Asia were positively impacted by favorable foreign exchange rates. On a constant currency basis, systemwide sales increased by approximately 11%.

Dunkin' International third quarter revenues of $6.7 million represented an increase of 7.9% from the prior year period. The increase in revenues was primarily a result of an increase in royalty income driven by systemwide sales growth, as well as an increase in other revenues, offset by a decrease in franchise fees due primarily to additional deferred revenue recognized in the prior year period upon closure of certain international markets.

Segment profit for Dunkin' International increased $0.3 million to $4.9 million in the third quarter primarily as a result of the increase in revenues, offset by an increase in general and administrative expenses.

Amounts and percentages may not recalculate due to rounding

Three months ended

Increase (Decrease)

Baskin-Robbins U.S.

September 28,

 2019

September 29,

 2018

$ / #

%

(Unaudited, $ in thousands except as otherwise noted)

Revenues:

Royalty income

$

8,973

8,626

347

4.0

%

Franchise fees

374

319

55

17.2

%

Rental income

942

773

169

21.9

%

Sales of ice cream and other products

1,021

906

115

12.7

%

Other revenues

3,014

3,057

(43)

(1.4)

%

Total revenues

$

14,324

13,681

643

4.7

%

Segment profit

$

9,711

10,183

(472)

(4.6)

%

Comparable store sales growth

3.6

%

1.8

%

Systemwide sales (in millions)(1)

$

186.3

180.6

5.7

3.1

%

Points of distribution

2,542

2,558

(16)

(0.6)

%

Gross openings

15

17

(2)

(11.8)

%

Net closings

(14)

(3)

(11)

n/m

(1) 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. third quarter revenues increased 4.7% from the prior year period to $14.3 million due primarily to increases in royalty income driven by systemwide sales growth, rental income, and sales of ice cream and other products. The increase in rental income resulted from the adoption of the new lease accounting standard in the first quarter of fiscal year 2019. See "Adoption of New Accounting Standard" for further detail.

Segment profit for Baskin-Robbins U.S. decreased to $9.7 million in the third quarter, a decrease of 4.6%, primarily as a result of an increase in general and administrative expenses driven by costs incurred in the current year period to support brand-building activities, offset by the increase in royalty income.

Amounts and percentages may not recalculate due to rounding

Three months ended

Increase (Decrease)

Baskin-Robbins International

September 28,

 2019

September 29,

 2018

$ / #

%

(Unaudited, $ in thousands except as otherwise noted)

Revenues:

Royalty income

$

2,197

2,140

57

2.7

%

Franchise fees

165

203

(38)

(18.7)

%

Rental income

218

137

81

59.1

%

Sales of ice cream and other products

28,459

28,625

(166)

(0.6)

%

Other revenues

(28)

52

(80)

(153.8)

%

Total revenues

$

31,011

31,157

(146)

(0.5)

%

Segment profit

$

13,028

12,009

1,019

8.5

%

Comparable store sales growth (decline)

3.0

%

7.5

%

Systemwide sales (in millions)(1)

$

449.7

425.4

24.3

5.7

%

Points of distribution

5,574

5,466

108

2.0

%

Gross openings

97

82

15

18.3

%

Net openings

58

16

42

262.5

%

(1) 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 5.7% in the third quarter compared to the prior year period driven by sales growth in Japan, the Middle East, Australia, and South Korea. Sales in South Korea were negatively impacted by unfavorable foreign exchange rates, while sales in Japan were positively impacted by favorable foreign exchange rates. On a constant currency basis, systemwide sales increased by approximately 7%.

Baskin-Robbins International third quarter revenues of $31.0 million represented a decrease of 0.5% from the prior year period due primarily to 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.

Third quarter segment profit increased 8.5% from the prior year period to $13.0 million primarily as a result of increases in net income from our South Korea and Japan joint ventures, as well as an increase in net margin on ice cream driven primarily by product mix and pricing, offset by an increase in general and administrative expenses.

Three months ended

Increase (Decrease)

U.S. Advertising Funds

September 28,

 2019

September 29,

 2018

$ / #

%

(Unaudited, $ in thousands)

Revenues:

Advertising fees and related income

$

122,819

118,208

4,611

3.9

%

Total revenues

$

122,819

118,208

4,611

3.9

%

Segment profit

$

%

U.S. Advertising Funds third quarter revenues of $122.8 million represented an increase of 3.9% compared to the prior year period driven primarily by Dunkin' 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

  • During the third quarter, the Company returned $45.7 million to shareholders, including $31.0 million in dividends and $14.7 million through open market repurchases of approximately 180,000 shares. The Company's shares outstanding as of September 28, 2019 were 82,821,829.
  • The Company today announced that the Board of Directors declared a cash dividend of $0.3750 per share, payable on December 11, 2019, to shareholders of record as of the close of business on December 2, 2019.

FISCAL YEAR 2019 TARGETS

As described below, the Company is reiterating and updating certain of its 2019 performance targets.

  • The Company continues to expect low-single digit comparable store sales growth for Dunkin' U.S. and flat to slightly negative comparable store sales growth for Baskin-Robbins U.S.
  • The Company continues to expect to be at the low end of the range of 200 to 250 net new Dunkin' U.S. units. It continues to expect new Dunkin' U.S. restaurants opened in 2019 will contribute at least $130 million in systemwide sales in 2019.
  • The Company continues to expect Baskin-Robbins U.S. franchisees to close approximately ten net units.
  • The Company continues to expect low-to-mid single digit percent revenue growth.
  • The Company continues to expect low-to-mid single digit percent other revenue growth driven by consumer packaged goods.
  • The Company now expects ice cream margin dollars to be approximately $16 million (previously flat compared to 2018 margin of $17.8 million).
  • The Company continues to expect net income of equity method investments (JV net income) to be flat compared to 2018.
  • The Company continues to expect a mid-single digit percent reduction to general and administrative expenses.
  • The Company continues to expect mid-to-high single digit percent operating and adjusted operating income growth.
  • The Company now expects its full-year effective tax rate to be approximately 25% (previously 27%) and continues to expect net interest expense to be approximately $119 million. The tax guidance excludes any potential future impact from material excess tax benefits in the fourth quarter of 2019.
  • The Company continues to expect full-year weighted-average shares outstanding of approximately 84 million.
  • The Company now expects GAAP diluted earnings per share of $2.80 to $2.85 (previously $2.71 to $2.78) and diluted adjusted earnings per share of $3.10 to $3.12 (previously $3.02 to $3.05).
  • The Company continues to expect capital expenditures to be approximately $40 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 February 2016, the Financial Accounting Standards Board issued new guidance for lease accounting, which replaces existing lease accounting guidance. The Company adopted this new guidance in fiscal year 2019 using the modified retrospective transition method, and elected the option to not restate comparative periods in the year of adoption, including amounts as of December 29, 2018 and for the three and nine months ended September 29, 2018. As a result of adopting this new guidance in the first quarter of fiscal year 2019, the Company recognized operating lease assets and liabilities of $388.8 million and $435.1 million, respectively, as of the first day of fiscal year 2019. The adoption of this new guidance also resulted in the recognition of additional rental income and occupancy expenses–franchised restaurants of $4.7 million and $14.1 million for the three and nine months ended September 28, 2019, respectively, related to certain lease costs that the Company passes through to franchisees. Additionally, amortization of certain lease intangible assets, previously recorded within amortization of other intangible assets, is now recorded as part of the amortization of operating lease assets within occupancy expenses–franchised restaurants. Amortization of other intangible assets for the three and nine months ended September 29, 2018 includes $0.6 million and $2.0 million, respectively, of amortization expense related to these lease intangible assets. Additional information regarding the Company's adoption of the new lease accounting guidance is contained in our most recent Form 10-Q, filed with the Securities and Exchange Commission on August 7, 2019.

About Dunkin' Brands Group, Inc.

With more than 21,000 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 third quarter 2019, Dunkin' Brands' 100 percent franchised business model included over 13,000 Dunkin' 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

Nine months ended

September 28,

2019

September 29,

2018

September 28,

2019

September 29,

2018

Revenues:

Franchise fees and royalty income(1)

$

157,224

151,991

454,810

435,740

Advertising fees and related income

128,675

132,471

375,132

375,017

Rental income(2)

31,984

27,547

92,691

79,425

Sales of ice cream and other products(1)

24,409

24,867

72,400

74,784

Other revenues

13,590

13,135

39,277

37,027

Total revenues

355,882

350,011

1,034,310

1,001,993

Operating costs and expenses:

Occupancy expenses—franchised restaurants(2)

19,823

14,765

58,995

43,059

Cost of ice cream and other products

21,066

21,311

59,724

60,956

Advertising expenses

130,846

133,732

379,898

378,283

General and administrative expenses, net

60,333

63,997

176,458

183,122

Depreciation

4,584

4,937

13,916

15,095

Amortization of other intangible assets(2)

4,599

5,230

13,858

15,912

Long-lived asset impairment charges

36

55

361

1,209

Total operating costs and expenses

241,287

244,027

703,210

697,636

Net income of equity method investments

6,667

5,787

13,324

11,665

Other operating income (loss), net

81

(179)

943

(749)

Operating income

121,343

111,592

345,367

315,273

Other income (expense), net:

Interest income

2,996

1,930

7,906

5,088

Interest expense

(31,787)

(31,932)

(96,758)

(96,947)

Loss on debt extinguishment

(13,076)

Other loss, net

(258)

(101)

(308)

(700)

Total other expense, net

(29,049)

(30,103)

(102,236)

(92,559)

Income before income taxes

92,294

81,489

243,131

222,714

Provision for income taxes

19,929

15,422

58,821

45,997

Net income

$

72,365

66,067

184,310

176,717

Earnings per share—basic

$

0.87

0.80

2.23

2.10

Earnings per share—diluted

0.86

0.79

2.20

2.07

(1) For the three months ended September 28, 2019 and September 29, 2018, $5.3 million and $4.8 million, respectively, and for the nine months ended September 28, 2019 and September 29, 2018, $12.5 million and $12.2 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.

(2) The Company adopted new guidance for lease accounting in the first quarter of fiscal year 2019 on a modified retrospective transition method and elected the option to not restate comparative periods. See "Adoption of New Accounting Standard" for further detail.

DUNKIN' BRANDS GROUP, INC. AND SUBSIDIARIES

Consolidated Balance Sheets

(In thousands)

(Unaudited)

September 28,

 2019

December 29,

2018

Assets

Current assets:

Cash and cash equivalents

$

523,374

517,594

Restricted cash

93,868

79,008

Accounts receivable, net

82,427

75,963

Notes and other receivables, net

36,299

64,412

Prepaid income taxes

17,737

27,005

Prepaid expenses and other current assets

45,344

49,491

Total current assets

799,049

813,473

Property, equipment, and software, net

218,530

209,202

Operating lease assets(1)

375,650

Equity method investments

146,072

146,395

Goodwill

888,280

888,265

Other intangible assets, net

1,307,315

1,334,767

Other assets

67,285

64,479

Total assets

$

3,802,181

3,456,581

Liabilities and Stockholders' Deficit

Current liabilities:

Current portion of long-term debt

$

31,150

31,650

Operating lease liabilities(1)

35,822

Accounts payable

69,741

80,037

Deferred revenue

41,229

38,541

Other current liabilities

314,586

389,353

Total current liabilities

492,528

539,581

Long-term debt, net

3,010,785

3,010,626

Operating lease liabilities(1)

384,671

Deferred revenue

321,328

331,980

Deferred income taxes, net

195,532

204,027

Other long-term liabilities

18,196

83,164

Total long-term liabilities

3,930,512

3,629,797

Stockholders' deficit:

Common stock

83

82

Additional paid-in capital

586,613

642,017

Treasury stock, at cost

(3,291)

(1,060)

Accumulated deficit

(1,179,502)

(1,338,709)

Accumulated other comprehensive loss

(24,762)

(15,127)

Total stockholders' deficit

(620,859)

(712,797)

Total liabilities and stockholders' deficit

$

3,802,181

3,456,581

(1) The Company adopted new guidance for lease accounting in the first quarter of fiscal year 2019 on a modified retrospective transition method and elected the option to not restate comparative periods. See "Adoption of New Accounting Standard" for further detail.

DUNKIN' BRANDS GROUP, INC. AND SUBSIDIARIES

Condensed Consolidated Statements of Cash Flows

(In thousands)

(Unaudited)

Nine months ended

September 28,

2019

September 29,

2018

Net cash provided by operating activities

$

157,779

126,529

Cash flows from investing activities:

Additions to property and equipment

(26,515)

(41,450)

Other, net

1,118

20

Net cash used in investing activities

(25,397)

(41,430)

Cash flows from financing activities:

Proceeds from issuance of long-term debt

1,700,000

Repayment of long-term debt

(1,699,237)

(23,688)

Payment of debt issuance and other debt-related costs

(17,937)

Dividends paid on common stock

(93,027)

(86,035)

Repurchases of common stock, including accelerated share repurchases

(24,802)

(650,368)

Exercise of stock options

27,903

71,657

Other, net

(4,779)

(1,101)

Net cash used in financing activities

(111,879)

(689,535)

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

(208)

(350)

Increase (decrease) in cash, cash equivalents, and restricted cash

20,295

(604,786)

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

598,321

1,114,099

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

$

618,616

509,313

DUNKIN' BRANDS GROUP, INC. AND SUBSIDIARIES

Non-GAAP Reconciliations

(In thousands, except share and per share data)

(Unaudited)

Three months ended

Nine months ended

September 28,

2019

September 29,

2018

September 28,

2019

September 29,

2018

Operating income

$

121,343

111,592

345,367

315,273

Operating income margin

34.1

%

31.9

%

33.4

%

31.5

%

Adjustments:

Amortization of other intangible assets

$

4,599

5,230

13,858

15,912

Long-lived asset impairment charges

36

55

361

1,209

Adjusted operating income

$

125,978

116,877

359,586

332,394

Adjusted operating income margin

35.4

%

33.4

%

34.8

%

33.2

%

Net income

$

72,365

66,067

184,310

176,717

Adjustments:

Amortization of other intangible assets

4,599

5,230

13,858

15,912

Long-lived asset impairment charges

36

55

361

1,209

Loss on debt extinguishment

13,076

Tax impact of adjustments(1)

(1,298)

(1,480)

(7,643)

(4,794)

Adjusted net income

$

75,702

69,872

203,962

189,044

Adjusted net income

$

75,702

69,872

203,962

189,044

Weighted-average number of common shares – diluted

83,867,413

84,107,840

83,665,397

85,366,264

Diluted adjusted earnings per share

$

0.90

0.83

2.44

2.21

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

DUNKIN' BRANDS GROUP, INC. AND SUBSIDIARIES

Non-GAAP Reconciliations (continued)

(Unaudited)

Fiscal year ended

December 28, 2019

Low

High

(projected)

(projected)

Diluted earnings per share

$

2.80

2.85

Adjustments:

Amortization of other intangible assets

0.23

0.22

Long-lived asset impairment charges

0.03

Loss on debt extinguishment

0.16

0.16

Tax impact of adjustments(1)

(0.12)

(0.11)

Diluted adjusted earnings per share

$

3.10

3.12

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

SOURCE Dunkin' Brands Group, Inc.



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