Milling & Baking News - August 9, 2011 - 14

Financial Results 

Dunkin’ earnings ﬂat in quarter; stock up 46% since i.p.o.
CANTON, MASS. — Dunkin’ Brands Group Inc., which went public on July 27, recorded relatively flat earnings in the second quarter of fiscal 2011 as the company focused on U.S. expansion and growing internationally. Net income in the quarter ended June 25 was $17,162,000, down narrowly from $17,337,000 in the same period a year ago. Total revenues in the second quarter rose 4% to $156,972,000 from $150,416,000. “We delivered strong results for the quarter as a result of our continued focus on driving comparable store sales, expanding contiguously in the U.S., and accelerating international growth across our brands,” said Nigel Travis, chief executive officer of Dunkin’ Brands, Inc. and president of Dunkin’ Donuts. “Our emphasis on operational excellence and exciting product innovations, supported by great marketing, produced strong global system-wide sales and comparable store sales growth for Dunkin’ Donuts U.S., while our franchisees and licensees continued to drive new store growth, both domestically and internationally.” Global system-wide sales increased approximately 7% during the second quarter, driven in large part by growth within Dunkin’ Donuts U.S. In the second quarter ended June 25, Dunkin’ Donuts U.S. posted revenues of $107.4 million, up 6% from $101 million in

the same period a year ago. Segment profit for the period was $82.6 million, up 6% from $77.7 million a year ago. By comparison, revenues within Dunkin’ Donuts International increased 17% to $3.8 million from $3.3 million in the second quarter of fiscal 2010. Segment profit during the period, meanwhile, fell 11% to $3.2 million from $3.5 million. “Since the first of the year, we have significantly increased the strength of our balance sheet, and after the completion of our initial public offering, have reduced our

annual interest expense by 50% to approximately $60 million through a combination of debt retirement, restructuring and repricing,” said Neil Moses, chief financial officer. “This financing activity resulted in nonrecurring charges that impacted yearto-date net income. The performance of the business in the second quarter demonstrates the strength of our business model and integrity of our platform for future growth.” For the six months ended June 25, overall company net income was $15,439,000, down 34% from $23,275,000, while revenues were $296,185,000, up 7% from $277,828,000. Since offering its shares at an opening price of $19 on July 27, Dunkin’ has seen its stock price climb as high as $31.94, on Aug. 1. The company’s share price closed at $27.76 on Aug. 2. In a separate announcement, Dunkin’ said it will begin offering Dunkin’ Donuts K-Cup portion packs at its retail locations. The packs will be offered in five flavors — Original Blend, Dunkin’ Decaf, french vanilla, hazelnut and Dunkin’ Dark Roast — at a suggested retail price of $11.99 for a 14-count box. The Dunkin’ Donuts K-Cup portion packs may be used with the Keurig Single-Cup Brewing system. MBN Bakery segment fell 36% to C$1,892,000 ($1,994,000) from C$2,957,000. Sales, meanwhile, rose 4% to C$123,881,000 ($130,546,000) from C$119,532,000. Canada Bread said sales volumes in the Frozen Bakery business improved slightly compared with last year, benefiting from increased bagel sales volumes in the United Kingdom following the re-launch of the New York Bakery brand earlier this year. “The frozen bakery business continues to implement price increases to fully offset the impact of higher raw material and other inflationary costs,” Canada Bread said. “Resulting margin compression was partially offset by lower operating costs. “In the United Kingdom, the company sold a small scale bakery in Cumbria in April 2011 and closed a bakery in London in May 2011, with production consolidated into its bakeries in Maidstone and Walsall.” For the first six months of fiscal 2011 Canada Bread had earnings of C$13,938,000 ($14,692,000), or C$0.55 per share, down sharply from C$33,918,000, or C$1.34 per share, in the same period of fiscal 2010. Net sales also were lower, falling 1% to C$778,005,000 ($820,210,000) from C$783,994,000. MBN
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Canada Bread adjusted earnings rise 14% in second quarter
TORONTO — Canada Bread Co., Ltd. in the second quarter ended June 30 posted earnings of C$14,904,000 ($15,700,000), equal to C$0.59 per share on the common stock, down 29% from C$20,949,000, or C$0.82 per share, in the same period a year ago. The most recent quarterly results included C$12.5 million in pretax restructuring costs related to network optimization initiatives. But earnings from operations before restructuring and other related costs were C$35,103,000 ($36,989,000), up 14% from C$30,711,000. “Our margins strengthened as price increases continue to take hold to offset higher commodity costs,” said Richard Lan, president and chief executive officer. Sales for the first quarter rose 1% to C$406,245,000 ($428,136,000) from C$402,062,000 for the prior year period. Canada Bread attributed the sales gain to higher selling prices as a result of price increases implemented in the first half of 2011. Earnings from operations within the Fresh Bakery segment rose 20%
14 / August 9, 2011 Milling & Baking News

to C$33,211,000 ($35,008,000) from C$27,754,000, while sales were virtually flat at C$282,364,000 ($297,694,000), which compared with C$282,530,000 in the second quarter of fiscal 2010. “Earnings benefited from improved margins, as price increases and improved operating efficiencies offset the impact of higher raw materials and inflationary costs,” Canada Bread said. “Lower advertising and promotional expenses, cost reduction initiatives and the sandwich product line divestiture also contributed to stronger earnings. These benefits were partly offset by lower sales volumes. “The new fresh bakery in Hamilton, Ont., which is a significant element of the company’s value creation plan, began initial production in July 2011 as planned. Construction and commissioning of this bakery, one of the largest fresh bakeries in North America, is on schedule and on budget. The company will gradually transfer production from three bakeries in the Greater Toronto Area.” Operating earnings in the Frozen

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Milling & Baking News - August 9, 2011

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