Dunkin´ Brands: Reports First Quarter 2013 Results

Canton / MA. (db) Dunkin´ Brands Group Inc., the parent company of Dunkin´ Donuts and Baskin-Robbins, announced its results for the first quarter ended March 30, 2013. First quarter highlights include: Dunkin´ Donuts U.S. comparable store sales growth of 1,7 percent; Added 108 net new restaurants worldwide including 78 net new Dunkin´ Donuts in the U.S.; Adjusted operating income increased 12,2 percent; Adjusted operating income margin expanded 240 basis points to 43,7 percent; Adjusted EPS increased 16,0 percent to 0,29 USD.

«Our business is strong and we remain confident with our full-year financial targets for 2013, despite the significant impact weather had on both Dunkin´ Donuts and Baskin-Robbins in the U.S. during the first quarter», said Nigel Travis, Chief Executive Officer, Dunkin´ Brands Group Inc. «Our U.S. restaurant operations have never been better and our guest satisfaction survey results are the highest in recent brand history. We´re encouraged by our momentum as we enter the second quarter and look forward to the start of key warmer weather selling seasons for both of our brands».

«As a result of our focus on franchisee profitability, demand for the Dunkin´ Donuts brand remains extremely high, as evidenced by the 78 net new Dunkin´ Donuts restaurants added in the U.S. since the beginning of January, the highest number of openings during this period for the past five years», says Paul Carbone, Dunkin´ Brands Chief Financial Officer. «Expanding the Dunkin´ Donuts brand across the U.S. is the engine for Dunkin´ Brands growth in both the near- and long-term and we look forward to sharing details on the highly attractive franchisee returns of the restaurants opened in 2012 at our upcoming Investor + Analyst Day».

First Quarter 2013 Key Financial Highlights

Global systemwide sales growth in the first quarter was primarily attributable to global store development and Dunkin´ Donuts U.S. comparable store sales growth (which includes stores open 54 weeks or more), as well as growth in Baskin-Robbins International sales.

Dunkin´ Donuts U.S. comparable store sales growth in the first quarter was driven by increased average ticket resulting from guests purchasing more units per transaction, including add-on items such as hash browns and Turbo Shots and positive mix as guests purchased more premium-priced limited time offer breakfast sandwiches and beverages, such as the Türkiye Sausage Breakfast Sandwich, the Angus Steak Breakfast Sandwich, Dark Hot Chocolate and Irish Creme flavours. Donut and K-Cup® sales were strong in the quarter driven by the Brownie Batter Heart Shaped Donuts, the Irish Creme Donut and the launch of Dunkin´ Donuts Caramel K-Cups®. Traffic growth in the quarter was significantly impacted by weather in Dunkin´ Donuts U.S. core markets. Overall, transactions ended the quarter nearly flat. Weather is estimated to have negatively impacted comparable store sales by approximately 120 basis points versus the prior year.

Baskin-Robbins U.S. comparable store sales were negative during the first quarter primarily as a result of weather, which is estimated to have been negatively impacted by 600 basis points versus the prior year when it was unseasonably warm. Western markets, which were not impacted by weather, did experience comparable store sales growth during the quarter driven by sales of sundaes, take-home quarts and a Valentine´s Day custom Conversation Heart Cake promotion.

In the first quarter, Dunkin´ Brands franchisees and licensees opened 108 net new restaurants around the globe. This includes 78 net new Dunkin´ Donuts U.S. locations, 34 net new Baskin-Robbins International locations, two net new Baskin-Robbins U.S. locations and six net closures for Dunkin´ Donuts International. Additionally, Dunkin´ Donuts U.S. franchisees remodelled 113 restaurants during the quarter.

Revenues for the first quarter increased 6,2 percent compared to the prior year primarily from increased royalty income from the increase in systemwide sales, as well as increased franchise fees driven by additional gross development and franchise renewals.

Operating income for the first quarter increased 8,3 million USD or 15,0 percent, from the prior year primarily as a result of the increase in total revenues and continued general and administrative expense leverage, as well as costs incurred in the prior year related to a secondary offering. Adjusted operating income increased 7,7 million USD or 12,2 percent, from the first quarter of 2012 also as a result of the increase in total revenues and continued general and administrative expense leverage.

Net income for the first quarter decreased by 2,2 million USD or 8,3 percent, compared to the prior year as a result of 5,0 million USD of charges incurred in connection with the February 2013 debt repricing, a 4,1 million USD increase in interest expense and a 0,9 million USD increase in income tax expense, offset by the 8,3 million USD increase in operating income. Adjusted net income increased by 0,5 million USD or 1,7 percent, compared to the first quarter of 2012 as a result of the increase in adjusted operating income, offset by increases in interest expense and income tax expense.

Adjusted earnings per share increased by 16,0 percent on a diluted basis to 0,29 USD for the first quarter of 2013, as a result of the increase in adjusted net income as well as a decline in shares outstanding due to the repurchase of 15 million shares in August 2012.

First Quarter 2013 Segment Results

Dunkin´ Donuts U.S. revenues of 119,6 million USD represented an increase of 7,7 percent year-over-year. The increase in revenue was primarily a result of increased royalty income, increased franchise fees driven by additional gross development and franchise renewals and additional sales at company-owned restaurants.

Dunkin´ Donuts U.S. segment profit increased to 86,9 million USD, an increase of 8,6 percent over the prior year. The increase was driven by revenue growth, partially offset by costs related to the incremental sales at company-owned restaurants.

Dunkin´ Donuts International systemwide sales increased 4,7 percent from the prior year, driven by sales growth in South Korea and South-east Asia. On a constant currency basis, systemwide sales increased by approximately two percent.

Dunkin´ Donuts International revenues increased 17,1 percent from the prior year to 4,6 million USD, primarily resulting from an increase in franchise fees driven by franchise renewals, as well as an increase in other revenues driven by incremental transfer fee income.

Segment profit for Dunkin´ Donuts International declined 19,1 percent to 2,6 million USD, primarily from a decline in income from our South Korea joint venture as a result of non-cash charges, losses realized from our new joint venture in Spain and continued investments in personnel for the Dunkin´ Donuts International business.

Baskin-Robbins U.S. revenue declined 2,4 percent from the prior year to 9,6 million USD primarily from a decline in royalty income driven by a 5,7 percent decrease in systemwide sales as a result of a comparable store sales decline of 4,4 percent and fewer restaurants, offset by an increase in other revenues.

Segment profit for the Baskin-Robbins U.S. segment increased 0,3 million USD or 5,7 percent, year-over-year primarily as a result of prior year investments in brand-building advertising, offset by the decline in revenues.

Baskin-Robbins International systemwide sales increased 8,3 percent from the prior year driven by sales growth in South Korea and the Middle East, partially offset by sales declines in Japan. On a constant currency basis, systemwide sales increased by approximately 13 percent.

Baskin-Robbins International revenues increased 4,9 percent year-over-year to 25,4 million USD primarily from an increase in sales of ice cream to the Middle East, as well as an increase in royalty income driven by the increase in systemwide sales.

Segment profit increased 28,0 percent year-over-year to 9,3 million USD, resulting from an increase in net margin on ice cream driven by the increase in sales to the Middle East and reduced cost of ice cream products primarily resulting from the shift in manufacturing to Dean Foods. Also contributing to the increase in segment profit was an increase in income from our South Korea joint venture.

Company Updates

On April 23, 2013, the Company announced that it will host its 2013 Investor + Analyst Day on May 7, 2013, beginning at 8:15 am ET. The event is by invitation only, however a live audio webcast of the conference including slide presentations will be accessible at investor.dunkinbrands.com.

The Company today announced that the Board of Directors declared a second quarter cash dividend of 0,19 USD per share, payable on June 6, 2013 to shareholders of record as of the close of business on May 28, 2013.

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