Dunkin´ Brands: Reports Q4 and FY 2011 Results

Canton / MA. (db) Dunkin´ Brands Group Inc., the parent company of Dunkin´ Donuts (DD) and Baskin-Robbins (BR), reported results for the fourth quarter and fiscal year ended December 31, 2011, periods that included 14 weeks and 53 weeks, respectively.

«We had a strong finish to the year. Our operational execution, innovative product introductions and break-through marketing are differentiating us competitively and delivering results», said Nigel Travis, Chief Executive Officer, Dunkin´ Brands Group Inc. and President, Dunkin´ Donuts U.S. «We continue to grow our brands globally, adding more than six 00 net new Dunkin´ Donuts and Baskin-Robbins locations last year. The long-term agreement we signed with our Dunkin´ Donuts franchisee-owned procurement and distribution cooperative was a significant step forward in support of our goal to accelerate the growth of the brand across the U.S. In 2011, we executed our strategy, remained laser-focused on our priorities and we believe we have positioned the Company to deliver sustainable long-term growth».

Fourth quarter highlights include:

  • Worldwide system-wide sales grew 15,0 percent over the fourth quarter of 2010 (system-wide sales grew 8,1 percent on a 13-week basis)
  • Dunkin´ Donuts U.S. comparable store sales were up 7,4 percent and Baskin-Robbins U.S. comparable store sales were up 5,8 percent
  • 269 net new Dunkin´ Donuts and Baskin-Robbins locations globally
  • Revenues increased 12,5 percent over the fourth quarter of 2010 to 168,5 million USD; on a 13-week basis, revenues increased 7,2 percent to 160,5 million USD
  • Operating income increased 0,4 percent over the fourth quarter of 2010 to 44,6 million USD; adjusted operating income* increased 31,2 percent to 73,0 million USD with adjusted operating income margin* expanding six 20 basis points to 43,3 percent
  • Net income increased 26,8 million USD over the fourth quarter of 2010 to 11,6 million USD; adjusted net income increased 36,6 percent to 36,2 million USD
  • Diluted earnings per pro forma common share* was 0,10 USD; diluted adjusted earnings per pro forma common share* was 0,30 USD; on a 13-week basis, diluted adjusted earnings per pro forma common share was 0,28 USD

Fiscal year 2011 highlights include:

  • Worldwide system-wide sales grew 9,1 percent over fiscal year 2010 (system-wide sales grew 7,4 percent on a 52-week basis)
  • Dunkin´ Donuts U.S. comparable store sales were up 5,1 percent and Baskin-Robbins U.S. comparable store sales were up 0,5 percent
  • 601 net new Dunkin´ Donuts and Baskin-Robbins locations globally bringing Dunkin´ Brands total points of distribution to 16’794 as of year end
  • Revenues increased 8,8 percent to six 28,2 million USD from 577,1 million USD in fiscal year 2010 (revenues increased 7,5 percent on a 52-week basis)
  • Operating income increased six ,1 percent to 205,3 million USD; adjusted operating income increased 16,2 percent to 270,7 million USD with adjusted operating income margin expanding 270 basis points to 43,1 percent
  • Net income increased 28,2 percent to 34,4 million USD; adjusted net income increased 15,9 percent to 101,7 million USD
  • Diluted earnings per pro forma common share was 0,32 USD; diluted adjusted earnings per pro forma common share was 0,94 USD; on a 52-week basis, diluted adjusted earnings per pro forma common share was 0,93 USD

Worldwide system-wide sales growth in the fourth quarter was primarily attributable to Dunkin´ Donuts U.S. comparable store sales growth (which includes stores open 54 weeks or more), global store development, growth in Baskin-Robbins international sales and the impact of the extra week in 2011.

Dunkin´ Donuts U.S. comparable store sales gains in the fourth quarter were driven by increased average ticket and higher traffic resulting from strong beverage sales growth; differentiated breakfast sandwich limited time offers, including the Smoked Sausage Breakfast Sandwich; sales of Dunkin´ Donuts K-Cup portion packs; and the «What Are You Drinkin´» marketing campaign. Baskin-Robbins U.S. comparable store sales growth was driven by new product news around holiday cakes and cake bites as well as improvements in operational execution.

In the fourth quarter, Dunkin´ Brands franchisees and licensees opened 120 net new Dunkin´ Donuts locations in the U.S. — with more than 80 percent of net openings located outside of the brand´s core markets – and 184 net Dunkin´ Donuts and Baskin-Robbins locations outside the U.S. Additionally, Dunkin´ Donuts U.S. franchisees remodelled 248 restaurants during the quarter and six 36 during fiscal year 2011.

Revenues grew by 12,5 percent or 7,2 percent on a 13-week basis, in the fourth quarter compared to the fourth quarter of 2010, primarily from increased royalty income driven by the increase in system-wide sales, as well as sales of ice cream products.

Operating income was modestly favourable over the fourth quarter of 2010 as a result of the increase in revenues offset by an 18,8 million USD net non-cash impairment charge related to the Company´s investment in the South Korean joint venture, driven by the performance of the Dunkin´ Donuts business in that country. Adjusted operating income grew 31,2 percent as a result of the leverage enabled by 12,5 percent revenue growth and minimal expense growth.

Net income increased by 26,8 million USD compared to the fourth quarter of 2010 as a result of a decrease in loss on debt extinguishment and costs associated with the Company´s refinancing in November 2010, offset by an increase in tax expense. Adjusted net income increased 9,7 million USD or 36,6 percent, resulting primarily from increased adjusted operating income and a decrease in interest expense, partially offset by an increase in tax expense.

«We had an outstanding 2011, delivering full-year results which exceeded our long-term targets for both revenue and adjusted operating income», said Neil Moses, Dunkin´ Brands Chief Financial Officer. «Our asset-light franchised business model produced significant revenue growth, high margins and strong free cash flow – as evidenced by the more than 100 million USD in cash we generated in 2011. We are excited about our prospects and remain focused on executing our growth strategies and delivering shareholder value».