Tags: Dunkin | Brands | profit | earnings

Dunkin' Brands' Net Income Falls on Charges

Tuesday, 01 Nov 2011 12:43 PM

Dunkin' Brands Group Inc. said Tuesday its net income plummeted 61 percent in its first quarter as a public company as its efforts to pay down debt and big fees to the private-equity firms that used to own it offset revenue gains.

Dunkin' Brands' net income fell to $7.4 million from $18.8 million in the same period a year ago. But excluding these special items, net income climbed to $31.3 million, or 28 cents per share, beating Wall Street estimates of 25 cents.

Revenue grew 9 percent to $163.5 million, which also beat a forecast of $159.3 million by analysts polled by FactSet as customers visited Dunkin' Donuts' U.S. locations more often and bought more when they did.

The results at Dunkin' Brand, which owns Dunkin' Donuts and Baskin-Robbins ice cream chain, highlight an underlying trend in the restaurant industry. Even though the weak economy is forcing people to cut back on eating out, experts expect that breakfast and snacks -- the domain of Dunkin' Brands -- will be among the few categories to grow over the next decade.

Dunkin's revenue growth was driven by a 13.4 percent rise in revenue at Dunkin' Donuts' U.S., which makes up about three-fourths of the company's total revenue. New items like chicken salad sandwiches and frozen lemonade helped drive afternoon sales. New Keurig cups, the coffee pods made for using in at-home brewers, helped boost the average amount that each customer spent.

Dunkin', which like most companies have been raising prices to deal with higher costs for ingredients like coffee beans and dairy products, also has benefited from the price spikes. Across the company, franchisees raised prices an average of about 2 percent, the company said. Even though some of the costs for raw materials have come down in recent months, many are also still above where they were a year ago.

Results weren't as good at the Baskin-Robbins U.S. division, which fell to $12 million from $12.3 million. But executives noted that revenue at stores open at least a year rose 1.7 percent in the unit after falling 5.8 percent a year ago. That measure excludes the impact from closing struggling stores.

CEO Nigel Travis said the Baskin-Robbins U.S. franchisees are engaged with the headquarters and embracing new technology that will make it easier to track sales. Menu changes, like new flavors and single-serve ice cream cakes, will also help reinvigorate the unit, Travis said.

"We are really on the right path and a long way from where we were 18 months ago," Travis said.

Dunkin' Brands is finding its bearings as public company. The company went public in July after being owned for several years by three big-name private-equity firms: Bain Capital Partners, Carlyle Group and Thomas H. Lee Partners. In the quarter, the company paid a fee of nearly $15 million to the private-equity firms as part of going public.

The company announced Tuesday that the three firms, which still own the majority of Dunkin' Brands' shares and hold seats on the board, plan to sell 22 million shares. That represents about 18 percent of Dunkin' Brands' total shares.

Dunkin' Brands wanted to go public to raise money to pay down debt, which would free it to focus on expanding Dunkin' Donuts internationally and in the U.S., outside its home base in the Northeast. It also wants to expand Baskin-Robbins internationally. During the quarter, it paid about $18 million in fees for paying down and refinancing debt, though that will save money in the long-term by lowering interest expenses, the company said.

In a call with analysts, the Canton, Mass., company sketched out more details of its expansion plans. Executives noted that they had started recruiting Dunkin' Donuts franchisees for markets in Texas, Colorado, New Mexico, Oklahoma and Nebraska. The company also has designs on growing in China, Germany and Spain, adding to its existing stores in the Middle East, South Korea and Japan.

The expansion plans haven't been seamless. In September, Dunkin' Brands announced that its newly hired president of international operations, the first person to hold the title, would leave after four months on the job. The company didn't say why he was leaving and hasn't yet hired a replacement.

Dunkin' shares popped on their first day of trading, closing at $28.93 after an initial pricing of $19. They were down about 5.5 percent in Tuesday trading to $27.49.

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Dunkin' Brands Group Inc. said Tuesday its net income plummeted 61 percent in its first quarter as a public company as its efforts to pay down debt and big fees to the private-equity firms that used to own it offset revenue gains. Dunkin' Brands' net income fell to $7.4...
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Tuesday, 01 Nov 2011 12:43 PM
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