Dunkin’ Brands Reports Second Quarter 2016 Results

CANTON, Mass., July 21, 2016 (hospitalitybusinessnews.com) — Dunkin’ Brands Group, Inc., the parent company of Dunkin’ Donuts (DD) and Baskin-Robbins (BR), today reported results for the second quarter ended June 25, 2016.

“We are pleased that we were able to grow both operating income and earnings per share at a significantly faster pace than revenue in the second quarter,” said Dunkin’ Brands Chairman and Chief Executive Officer Nigel Travis. “As for our five-part plan designed to drive Dunkin’ Donuts U.S. comparable store sales growth, while we are still in the early phases of implementation and have not yet seen an acceleration of top-line sales, we are making significant progress with our initiatives. We are especially delighted with our efforts to continue to build our coffee authority, as evidenced by the second quarter growth in our espresso category and the launch of our Cold Brew coffee, and we continue to improve the guest experience through digital technologies like On-The-Go mobile ordering that enables DD Perks members to order in advance and skip to the front of the line.”

“Consistent with our asset light-business model we are selling many of our company-owned stores, the majority of which are in the Dallas market, and as a result, are updating our revenue growth target for 2016 to three to five percent from four to six percent. We’re pleased to have new and existing franchisees taking over this important market and look forward to the next phase of growth in Texas. We anticipate that by the end of the year, we will have fewer than 5 company-owned stores remaining,” said Paul Carbone, Chief Financial Officer, Dunkin’ Brands Group, Inc. “While the sale of these stores impacts our revenue growth, we do not anticipate that there will be a material impact to our profits. Therefore, we are reaffirming all of our other targets for our 2016 performance.”

 

SECOND QUARTER 2016 KEY FINANCIAL HIGHLIGHTS

 

($ in millions, except per share data)

Three months ended

Increase (Decrease)

Amounts and percentages may not recalculate due to rounding

June 25, 2016

June 27, 2015

$ / #

%

Systemwide sales1

$

2,774.9

2,672.4

102.4

3.8

%

Comparable store sales growth (decline):

DD U.S.2

0.5

%

2.8

%

BR U.S.2

0.6

%

4.1

%

DD International

(3.1)

%

(0.1)

%

BR International

(6.6)

%

(2.5)

%

Development data:

Consolidated global net POD development3

198

154

44

28.6

%

DD global PODs at period end

11,941

11,460

481

4.2

%

BR global PODs at period end

7,728

7,635

93

1.2

%

Consolidated global PODs at period end

19,669

19,095

574

3.0

%

Financial data:

Revenues

$

216.3

211.4

4.9

2.3

%

Operating income

106.1

92.6

13.6

14.6

%

Operating income margin

49.1

%

43.8

%

Adjusted operating income4

$

111.3

103.0

8.3

8.1

%

Adjusted operating income margin4

51.5

%

48.7

%

Net income

$

49.6

42.3

7.3

17.2

%

Adjusted net income4

52.7

48.5

4.1

8.5

%

Earnings per share:

Common–basic

0.54

0.44

0.10

22.7

%

Common–diluted

0.54

0.44

0.10

22.7

%

Diluted adjusted earnings per share4

0.57

0.50

0.07

14.0

%

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

92.5

96.9

(4.4)

(4.6)

%

1 Systemwide sales include sales at franchisee- and company-operated restaurants, including joint ventures. While we do not record sales by franchisees or licensees
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. Beginning in the first quarter of fiscal year 2016, we began presenting systemwide sales rather than franchisee-reported sales,
which excludes sales of company-operated restaurants, as we believe the systemwide sales information is a more complete metric in obtaining an understanding of
our financial performance.

2 Comparable store sales growth for DD U.S. and BR U.S. for the three months ended June 27, 2015 have been revised to include only those restaurants that have been open at least 78 weeks (approximately 18 months) to conform to the current period calculation, whereas previously reported figures included only those restaurants that were open at least 54 weeks (approximately 12 months). Please refer to “Non-GAAP Measures and Statistical Data” for further detail.

3 Consolidated global net POD development for the three months ended June 25, 2016 reflects the previously-announced closing of 9 self-serve coffee stations within Speedway locations.

4 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. Please refer to “Non-GAAP Measures and Statistical
Data” and “Dunkin’ Brands Group, Inc. Non-GAAP Reconciliations” for further detail.

 

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

Dunkin’ Donuts U.S. comparable store sales growth in the second quarter was driven by increased average ticket offset by a decline in traffic.  Growth was driven by strong beverage sales, led by iced coffee and hot and iced espresso-based beverages, and breakfast sandwiches, led by the GranDDe Burrito and the Bacon Supreme Omelet breakfast sandwich.

Baskin-Robbins U.S. comparable store sales growth was driven by increased average ticket offset by a decline in traffic. Growth was driven by sales of cups and cones led by the new Warm Cookie Ice Cream Sandwich.

In the second quarter, Dunkin’ Brands franchisees and licensees opened 198 net new restaurants around the globe. This included 78 net new Baskin-Robbins International locations, 73 net new Dunkin’ Donuts U.S. locations (including the closing of 9 Speedway self-serve coffee stations), 35 net new Dunkin’ Donuts International locations, and 12 net new Baskin-Robbins U.S. locations.  Additionally, Dunkin’ Donuts U.S. franchisees remodeled 107 restaurants and Baskin-Robbins U.S. franchisees remodeled 36 restaurants during the quarter.

Revenues for the second quarter increased 2.3% compared to the prior year period due primarily to increased royalty income as a result of systemwide sales growth and an increase in other revenues due primarily to increased license fees recognized in connection with the Dunkin’ K-Cup® pod licensing agreement and an increase in transfer fee income. These increases in revenues were offset by a decrease in sales at company-operated restaurants driven by a net decrease in the number of company-operated restaurants, as well as a decrease in sales of ice cream and other products. As of June 25, 2016, there were 29 points of distribution that were company-operated.

Operating income and adjusted operating income for the second quarter increased $13.6 million, or 14.6%, and $8.3 million, or 8.1%, respectively, from the prior year period primarily as a result of the increases in royalty income and other revenues, offset by a decrease in net margin on ice cream and other products from international markets. Additionally, operating income in the prior year period was unfavorably impacted by costs incurred related to the final settlement of our Canadian pension plan as a result of the closure of our Canadian ice cream manufacturing plant in fiscal year 2012.

Net income and adjusted net income for the second quarter increased by $7.3 million, or 17.2%, and $4.1 million, or 8.5%, respectively, compared to the prior year period primarily as a result of the increases in operating income and adjusted operating income of $13.6 million and $8.3 million, respectively, offset by an increase in income tax expense.

Diluted earnings per share and diluted adjusted earnings per share increased by 22.7% to $0.54 and 14.0% to $0.57, respectively, for the second quarter 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 second quarter of 2015, offset by the exercise of stock options.

SECOND QUARTER 2016 SEGMENT RESULTS

Beginning in the first quarter of fiscal year 2016, certain segment profit amounts in the tables below have been reclassified as a result of the realignment of our organizational structure to better support our segment operations, including the allocation of previously unallocated costs. Additionally, revenues, segment profit, points of distribution information, and systemwide sales related to restaurants located in Puerto Rico were previously included in the Baskin-Robbins International segment, but are now included in the Baskin-Robbins U.S. segment based on functional responsibility. Prior period amounts in the tables below have been revised to reflect these changes for all periods presented.

 

Amounts and percentages may not recalculate due to rounding

Three months ended

Increase (Decrease)

Dunkin’ Donuts U.S.

June 25, 2016

June 27, 2015

$ / #

%

($ in thousands except as otherwise noted)

Comparable store sales growth1

0.5

%

2.8

%

Systemwide sales (in millions)2

$

2,056.9

1,961.6

95.2

4.9

%

Revenues:

Royalty income

$

112,031

106,343

5,688

5.3

%

Franchise fees

9,337

8,661

676

7.8

%

Rental income

24,928

25,613

(685)

(2.7)

%

Sales at company-operated restaurants

4,643

7,727

(3,084)

(39.9)

%

Other revenues

2,721

1,424

1,297

91.1

%

Total revenues

$

153,660

149,768

3,892

2.6

%

Segment profit

$

116,085

108,308

7,777

7.2

%

Points of distribution

8,573

8,240

333

4.0

%

Gross openings

107

115

(8)

(7.0)

%

Net openings3

73

80

(7)

(8.8)

%

1 Comparable store sales growth for the three months ended June 27, 2015 have been revised to include only those restaurants that have been open at least 78 weeks (approximately 18 months) to conform to the current period calculation. Please refer to “Non-GAAP Measures and Statistical Data” for further detail.

2 Systemwide sales include sales at franchisee- and company-operated restaurants, including joint ventures. We do not record sales by franchisees or licensees as
revenue and such sales are not included in our consolidated financial statements. Please refer to “Non-GAAP Measures and Statistical Data” for further detail.
Beginning in the first quarter of fiscal year 2016, we began presenting systemwide sales rather than franchisee-reported sales, which excludes sales of company-
operated restaurants.

3 Net openings reflects the previously-announced closing of 9 self-serve coffee stations within Speedway locations.

 

Dunkin’ Donuts U.S. second quarter revenues of $153.7 million represented an increase of 2.6% over the prior year period. The increase was primarily a result of increased royalty income due to an increase in systemwide sales, as well as an increase in other revenues driven primarily by increases in transfer fee income and refranchising gains, offset by a decrease in sales at company-operated restaurants due to a net decrease in the number of company-operated restaurants.

Dunkin’ Donuts U.S. segment profit in the second quarter increased $7.8 million over the prior year period to $116.1 million, which was driven primarily by the increases in royalty income and other revenues, as well as an increase in other operating income due primarily to a gain recognized in connection with the sale of company-operated restaurants.

 

Amounts and percentages may not recalculate due to rounding

Three months ended

Increase (Decrease)

Dunkin’ Donuts International

June 25, 2016

June 27, 2015

$ / #

%

($ in thousands except as otherwise noted)

Comparable store sales decline

(3.1)%

(0.1)%

Systemwide sales (in millions)1

$

175.0

173.6

1.4

0.8

%

Revenues:

Royalty income

$

4,218

4,087

131

3.2

%

Franchise fees

643

1,334

(691)

(51.8)

%

Rental income

5

(5)

(100.0)

%

Other revenues

357

(5)

362

n/m     

Total revenues

$

5,218

5,421

(203)

(3.7)

%

Segment profit

$

1,975

2,543

(568)

(22.3)

%

Points of distribution

3,368

3,220

148

4.6

%

Gross openings

100

126

(26)

(20.6)

%

Net openings

35

13

22

169.2

%

1 Systemwide sales include sales at franchisee- and company-operated restaurants, including joint ventures. We do not record sales by franchisees or licensees as
revenue and such sales are not included in our consolidated financial statements. Please refer to “Non-GAAP Measures and Statistical Data” for further detail.

 

Dunkin’ Donuts International second quarter systemwide sales increased 0.8% from the prior year period. Sales growth in Asia and Europe was offset by a decline in South Korea. Sales in South Korea, South America, and Asia were negatively impacted by unfavorable foreign exchange rates. On a constant currency basis, systemwide sales increased by approximately 5%.

Dunkin’ Donuts International second quarter revenues of $5.2 million represented a decrease of 3.7% from the prior year period. The decrease in revenues was primarily a result of a decline in franchise fees, offset by an increase in other revenues due to an increase in transfer fee income, as well as an increase in royalty income.

Segment profit for Dunkin’ Donuts International decreased $0.6 million to $2.0 million in the second quarter primarily as a result of a decrease in net income from our South Korea joint venture, as well as the decrease in revenues.

 

Amounts and percentages may not recalculate due to rounding

Three months ended

Increase (Decrease)

Baskin-Robbins U.S.

June 25, 2016

June 27, 2015

$ / #

%

($ in thousands except as otherwise noted)

Comparable store sales growth1

0.6

%

4.1

%

Systemwide sales (in millions)2

$

183.0

181.2

1.8

1.0

%

Revenues:

Royalty income

$

8,824

8,682

142

1.6

%

Franchise fees

171

148

23

15.5

%

Rental income

721

778

(57)

(7.3)

%

Sales of ice cream and other products

661

1,293

(632)

(48.9)

%

Other revenues

3,361

3,251

110

3.4

%

Total revenues

$

13,738

14,152

(414)

(2.9)

%

Segment profit

$

10,738

9,590

1,148

12.0

%

Points of distribution

2,530

2,528

2

0.1

%

Gross openings

31

22

9

40.9

%

Net openings

12

2

10

500.0

%

1 Comparable store sales growth for the three months ended June 27, 2015 have been revised to include only those restaurants that have been open at least 78
weeks (approximately 18 months) to conform to the current period calculation. Please refer to “Non-GAAP Measures and Statistical Data” for further detail.

2 Systemwide sales include sales at franchisee- and company-operated restaurants, including joint ventures. We do not record sales by franchisees or licensees as
revenue and such sales are not included in our consolidated financial statements. Please refer to “Non-GAAP Measures and Statistical Data” for further detail.
Additionally, the prior period has been revised to reflect a reclassification of systemwide sales generated in Puerto Rico from Baskin-Robbins International to Baskin-
Robbins U.S.

 

Baskin-Robbins U.S. second quarter revenue decreased 2.9% from the prior year period to $13.7 million due primarily to a decrease in sales of ice cream and other products, offset by an increase in royalty income and an increase in other revenues driven by an increase in licensing income. A portion of the fluctuations in licensing income and sales of ice cream and other products can be attributed to a shift in certain franchisees that previously purchased ice cream from the Company are now purchasing ice cream directly from our third-party ice cream manufacturer through which we earn a licensing fee.

Segment profit for Baskin-Robbins U.S. increased $1.1 million in the second quarter, or 12.0%, over the prior year period primarily as a result of a reduction in general and administrative expenses, due primarily to expenses incurred in the prior year period related to brand-building activities and incentive compensation, as well as the increases in other revenues and royalty income.

 

Amounts and percentages may not recalculate due to rounding

Three months ended

Increase (Decrease)

Baskin-Robbins International

June 25, 2016

June 27, 2015

$ / #

%

($ in thousands except as otherwise noted)

Comparable store sales decline

(6.6)%

(2.5)%

Systemwide sales (in millions)1

$

360.0

356.1

4.0

1.1

%

Revenues:

Royalty income

$

1,765

1,645

120

7.3

%

Franchise fees

206

243

(37)

(15.2)

%

Rental income

113

119

(6)

(5.0)

%

Sales of ice cream and other products

32,716

33,462

(746)

(2.2)

%

Other revenues

40

103

(63)

(61.2)

%

Total revenues

$

34,840

35,572

(732)

(2.1)

%

Segment profit

$

11,079

11,764

(685)

(5.8)

%

Points of distribution

5,198

5,107

91

1.8

%

Gross openings

139

123

16

13.0

%

Net openings

78

59

19

32.2

%

1 Systemwide sales include sales at franchisee- and company-operated restaurants, including joint ventures. We do not record sales by franchisees or licensees as
revenue and such sales are not included in our consolidated financial statements. Please refer to “Non-GAAP Measures and Statistical Data” for further detail. The
prior period has been revised to reflect a reclassification of systemwide sales generated in Puerto Rico from Baskin-Robbins International to Baskin-Robbins U.S.

 

Baskin-Robbins International systemwide sales increased 1.1% in the second quarter compared to the prior year period driven by sales growth in Japan and the Middle East, offset by sales declines in South Korea and Europe. Sales in Japan were positively impacted by favorable foreign exchange rates while sales in South Korea, Europe, and Asia were negatively impacted by unfavorable foreign exchange rates. On a constant currency basis, systemwide sales increased by approximately 1%.

Baskin-Robbins International second quarter revenues decreased 2.1% from the prior year period to $34.8 million due primarily to a decrease in sales of ice cream products. Systemwide sales and sales of ice cream products are not directly correlated within a given period due to the lag between shipment of products to licensees and retail sales at franchised restaurants, as well as the overall timing of deliveries between fiscal quarters.

Second quarter segment profit decreased 5.8% from the prior year period to $11.1 million as a result of a decrease in net income from our South Korea joint venture and a decrease in net margin on ice cream driven primarily by a decline in sales volume and an increase in commodity costs, offset by a reduction in bad debt expense and other general and administrative expenses.

COMPANY UPDATES

  • The Company today announced that the Board of Directors declared a third quarter cash dividend of $0.30 per share, payable on August 31, 2016 to shareholders of record as of the close of business on August 22, 2016.
  • Earlier this week the Company announced that in the first year since Dunkin’ K-Cup® pods were made available at retail outlets nationwide through partners The J.M. Smucker Company (NYSE: SJM) and Keurig Green Mountain, Inc. (NASDAQ: GMCR), more than 300 million of Dunkin’ K-Cup Pods were sold with retail sales totaling nearly $220 million. IRI Market Advantage, a market research company focused on the consumer packaged goods industry, reported the results and included Dunkin’ K-Cup pods on its list of Rising Stars in Food & Beverage.

FISCAL YEAR 2016 TARGETS

As described below, the Company is reiterating and updating certain targets regarding its 2016 expectations. The Company is now also including GAAP targets for operating income and diluted earnings per share.

  • The Company continues to expect Dunkin’ Donuts U.S. comparable store sales growth of 0 to 2 percent and Baskin-Robbins U.S. comparable store sales growth of 1 to 3 percent.
  • The Company continues to expect that Dunkin’ Donuts U.S. will add between 430 and 460 net new restaurants, excluding the closure of approximately 30 Speedway self-serve coffee stations. The Company continues to expect Baskin-Robbins U.S. will add between 5 and 10 net new restaurants.
  • Internationally, the Company continues to target opening approximately 200 net new restaurants across the two brands. It continues to expect net income of equity method investments to be slightly less than 2015 full-year results.
  • The Company now expects revenue growth of between 3 and 5 percent as a result of the sale of company-owned stores in the second quarter as well as anticipated future sales of company-owned stores in 2016.
  • The Company expects GAAP operating income growth of between 27 and 30 percent and GAAP diluted earnings per share of $2.02 to $2.08 on a 53-week basis.
  • The Company continues to expect adjusted operating income growth of between 8 and 10 percent and diluted adjusted earnings per share of $2.20 to $2.22 on a 53-week basis.
  • The Company is updating its full-year share count guidance to 93,000,0000 (previously it was 94,000,000). It continues to expect a 38.5 percent tax rate.
  • Fiscal year 2016 is a 53-week year for the Company. The target ranges for revenue, GAAP operating income growth, and adjusted operating income growth are applicable on both a 52- and 53-week basis. The impact of the 53rd week on GAAP diluted earnings per share and diluted adjusted earnings per share is approximately $0.03.

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. Non-GAAP Reconciliations.”

 

DUNKIN’ BRANDS GROUP, INC. AND SUBSIDIARIES

Consolidated Statements of Operations

(In thousands, except per share data)

(Unaudited)

Three months ended

Six months ended

June 25,
2016

June 27,
2015

June 25,
2016

June 27,
2015

Revenues:

Franchise fees and royalty income

$

137,195

131,143

260,978

246,468

Rental income

25,769

26,535

48,994

50,162

Sales of ice cream and other products

33,966

35,410

59,857

58,478

Sales at company-operated restaurants

4,643

7,727

10,313

14,285

Other revenues

14,736

10,609

25,943

27,936

Total revenues

216,309

211,424

406,085

397,329

Operating costs and expenses:

Occupancy expenses—franchised restaurants

13,614

13,717

26,810

27,235

Cost of ice cream and other products

22,827

22,876

40,061

38,222

Company-operated restaurant expenses

5,297

7,757

11,790

14,615

General and administrative expenses, net

63,459

68,349

124,654

126,189

Depreciation

5,178

4,991

10,311

10,101

Amortization of other intangible assets

5,568

6,181

11,329

12,381

Long-lived asset impairment charges

4

97

264

Total operating costs and expenses

115,947

123,871

225,052

229,007

Net income of equity method investments

3,717

3,951

6,681

6,898

Other operating income, net

2,062

1,084

3,760

1,108

Operating income

106,141

92,588

191,474

176,328

Other income (expense), net:

Interest income

124

116

273

238

Interest expense

(24,972)

(25,095)

(49,853)

(47,259)

Loss on debt extinguishment and refinancing transactions

(20,554)

Other losses, net

(102)

(12)

(472)

(557)

Total other expense, net

(24,950)

(24,991)

(50,052)

(68,132)

Income before income taxes

81,191

67,597

141,422

108,196

Provision for income taxes

31,601

25,148

54,678

40,322

Net income including noncontrolling interests

49,590

42,449

86,744

67,874

Net income (loss) attributable to noncontrolling interests

131

(75)

Net income attributable to Dunkin’ Brands

$

49,590

42,318

86,744

67,949

Earnings per share—basic

$

0.54

0.44

0.95

0.69

Earnings per share—diluted

0.54

0.44

0.94

0.69

 

 

DUNKIN’ BRANDS GROUP, INC. AND SUBSIDIARIES

Condensed Consolidated Balance Sheets

(In thousands)

(Unaudited)

June 25,
2016

December 26,
2015

Assets

Current assets:

Cash and cash equivalents

$

248,206

260,430

Restricted cash

72,150

71,917

Accounts, notes, and other receivables, net

88,023

128,360

Other current assets

92,285

97,117

Total current assets

500,664

557,824

Property and equipment, net

179,349

182,614

Equity method investments

112,274

106,878

Goodwill and other intangible assets, net

2,278,963

2,290,796

Other assets

59,145

59,007

Total assets

$

3,130,395

3,197,119

Liabilities and Stockholders’ Deficit

Current liabilities:

Current portion of long-term debt

$

25,000

25,000

Accounts payable

18,061

18,663

Other current liabilities

310,482

375,129

Total current liabilities

353,543

418,792

Long-term debt, net

2,411,234

2,420,600

Deferred income taxes, net

468,139

476,510

Other long-term liabilities

101,173

101,960

Total long-term liabilities

2,980,546

2,999,070

Total stockholders’ deficit

(203,694)

(220,743)

Total liabilities and stockholders’ deficit

$

3,130,395

3,197,119

 

 

DUNKIN’ BRANDS GROUP, INC. AND SUBSIDIARIES

Condensed Consolidated Statements of Cash Flows

(In thousands)

(Unaudited)

Six months ended

June 25, 2016

June 27, 2015

Net cash provided by operating activities

$

80,043

47,677

Cash flows from investing activities:

Additions to property and equipment

(6,775)

(14,362)

Proceeds from sale of real estate and company-operated restaurants

7,427

1,586

Other, net

(872)

(2,887)

Net cash used in investing activities

(220)

(15,663)

Cash flows from financing activities:

Proceeds from issuance of long-term debt

2,500,000

Repayment of long-term debt

(12,500)

(1,825,273)

Payment of debt issuance and other debt-related costs

(41,301)

Dividends paid on common stock

(54,851)

(50,815)

Repurchases of common stock, including accelerated share repurchases

(30,000)

(493,869)

Exercise of stock options

3,933

6,364

Change in restricted cash

50

(6,866)

Other, net

1,245

613

Net cash provided by (used in) financing activities

(92,123)

88,853

Effect of exchange rates on cash and cash equivalents

76

(351)

Increase (decrease) in cash and cash equivalents

(12,224)

120,516

Cash and cash equivalents, beginning of period

260,430

208,080

Cash and cash equivalents, end of period

$

248,206

328,596

 

 

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 25,
2016

June 27,
2015

June 25,
2016

June 27,
2015

Operating income

$

106,141

92,588

191,474

176,328

Operating income margin

49.1

%

43.8

%

47.2

%

44.4

%

Adjustments:

Amortization of other intangible assets

$

5,568

6,181

11,329

12,381

Long-lived asset impairment charges

4

97

264

Transaction-related costs(a)

9

127

64

281

Bertico and related litigation(b)

(428)

(428)

(2,753)

Settlement of Canadian pension plan(c)

4,075

4,075

Adjusted operating income

$

111,294

102,971

202,536

190,576

Adjusted operating income margin

51.5

%

48.7

%

49.9

%

48.0

%

Net income attributable to Dunkin’ Brands

$

49,590

42,318

86,744

67,949

Adjustments:

Amortization of other intangible assets

5,568

6,181

11,329

12,381

Long-lived asset impairment charges

4

97

264

Transaction-related costs(a)

9

127

64

281

Bertico and related litigation(b)

(428)

(428)

(2,753)

Settlement of Canadian pension plan(c)

4,075

4,075

Loss on debt extinguishment and refinancing transactions

20,554

Tax impact of adjustments(d)

(2,061)

(4,153)

(4,425)

(13,921)

Adjusted net income

$

52,682

48,548

93,381

88,830

Adjusted net income

$

52,682

48,548

93,381

88,830

Weighted average number of common shares – diluted

92,451,913

96,876,510

92,535,091

99,189,474

Diluted adjusted earnings per share

$

0.57

0.50

1.01

0.90

(a) Represents non-capitalizable costs incurred as a result of the securitized financing facility, which was completed in January 2015.

(b) Adjustment for the three and six months ended June 25, 2016 represents a net reduction to legal reserves for the Bertico litigation based upon final agreement of
interest and related costs associated with the judgment. Adjustment for the six months ended June 27, 2015 represents a net reduction to legal reserves for
the Bertico litigation and related matters, as a result of the Quebec Court of Appeals (Montreal) ruling to reduce the damages assessed against the Company in the
Bertico litigation from approximately C$16.4 million to approximately C$10.9 million, plus costs and interest.

(c) Represents costs incurred related to the final settlement of our Canadian pension plan as a result of the closure of our Canadian ice cream manufacturing plant in
fiscal year 2012.

(d) Tax impact of adjustments calculated at a 40% effective tax rate.

 

 

DUNKIN’ BRANDS GROUP, INC. AND SUBSIDIARIES

Non-GAAP Reconciliations (continued)

(In millions, except per share data)

(Unaudited)

Fiscal year ended

% Increase

December 31, 2016

December 26,

2015

Low

High

Actual

Low

High

(projected,
53 weeks)

(projected,
53 weeks)

(as reported,
52 weeks)

Operating income

$

406.7

416.4

319.6

27

%

30

%

Adjustments:

Amortization of other intangible assets

22.7

22.2

24.7

Long-lived asset impairment charges

3.5

0.3

0.6

Transaction-related costs(a)

0.6

0.1

0.4

Bertico and related litigation(b)

(0.4)

(0.4)

(2.8)

Settlement of Canadian pension plan(c)

4.1

Japan joint venture impairment, net(d)

53.9

Adjusted operating income

$

433.1

438.6

400.5

8

%

10

%

(a) Represents non-capitalizable costs incurred as a result of the securitized financing facility, which was completed in January 2015.

(b) Adjustment for the fiscal year ended December 31, 2016 represents a net reduction to legal reserves for the Bertico litigation based upon final agreement of
interest and related costs associated with the judgment. Adjustment for the fiscal year ended December 26, 2015 represents a net reduction to legal reserves for the
Bertico litigation and related matters, as a result of the Quebec Court of Appeals (Montreal) ruling to reduce the damages assessed against the Company in the
Bertico litigation from approximately C$16.4 million to approximately C$10.9 million, plus costs and interest.

(c) Represents costs incurred related to the final settlement of our Canadian pension plan as a result of the closure of our Canadian ice cream manufacturing plant in fiscal year 2012.

(d) Amount consists of an other-than-temporary impairment of the investment in the Japan joint venture of $54.3 million, less a reduction in depreciation and amortization of $0.4 million resulting from the allocation of the impairment charge to the underlying long-lived assets of the joint venture.

 

Fiscal year ended

December 31, 2016

Low

High

(projected,
53 weeks)

(projected,
53 weeks)

Diluted earnings per share

$

2.02

2.08

Adjustments:

Amortization of other intangible assets

0.24

0.24

Long-lived asset impairment charges

0.04

Transaction-related costs(e)

0.01

Tax impact of adjustments(f)

(0.11)

(0.10)

Diluted adjusted earnings per share

$

2.20

2.22

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