Dunkin' Brands Group, Inc. (Nasdaq: DNKN), the parent company of Dunkin' Donuts (DD) and Baskin-Robbins (BR), today reported results for the third quarter ended September 24, 2016.

"Our Dunkin' Donuts U.S. business delivered solid comps for the quarter, fueled by record-breaking beverage sales, with double-digit growth in the espresso and iced coffee categories. Other noteworthy achievements in the quarter included: surpassing 5 million members in our DD Perks® rewards program, which remains one of the fastest growing loyalty programs in the quick-service-restaurant industry; the opening of our 12,000th Dunkin' Donuts restaurant worldwide; the hiring of Dave Hoffmann, a leading restaurant executive, as our new Dunkin' Donuts U.S. and Canada president; and the announcement that we will be launching a line of Dunkin' Donuts ready-to-drink iced coffee beverages nationwide in 2017," said Nigel Travis, Dunkin' Brands Chairman and CEO. "We are very pleased with the direction of the Company, and while we have much work to do, we are cautiously optimistic that our new five-part strategy for Dunkin' Donuts U.S., which focuses on coffee leadership, faster innovation, targeted value offers, digital leadership and an improved restaurant experience, will position the Company to see healthy growth in the months and years ahead."

"While the sale of our remaining company-operated restaurants drove a decline in revenues in the quarter, we are pleased to announce that we are now 100 percent franchised," said Paul Carbone, Dunkin' Brands Chief Financial Officer. "In regards to restaurant-level economics, we are particularly encouraged by first-year cash-on-cash returns that franchisees are experiencing in our high-opportunity West and Emerging markets. We will continue to focus on driving franchisee profitability by better serving the customer, building high-margin beverage sales, lowering store construction costs and simplifying store operations. Additionally, sales of Dunkin' Donuts- branded consumer goods through locations outside our restaurants, including our recently announced ready-to-drink iced coffee line, should drive Brand awareness, provide more opportunities for consumers to drink our coffee every day, and deliver profit-sharing income for our franchisees, including in our newest markets."

Global systemwide sales growth in the third 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 third quarter was driven by increased average ticket offset by a decline in traffic. Growth was driven by strong beverage sales, led by iced coffee, including Cold Brew, and hot and iced espresso-based beverages, as well as breakfast sandwiches, led by the Maple Sausage and the Belgian Waffle breakfast sandwiches.

Baskin-Robbins U.S. comparable store sales were negative during the third quarter driven by a decline in traffic offset by increased average ticket. Growth in sales of cups and cones led by Warm Cookie and Donut Ice Cream Sandwiches was more than offset by declines in beverages and sundaes.

In the third quarter, Dunkin' Brands franchisees and licensees opened 115 net new restaurants around the globe. This included 56 net new Dunkin' Donuts U.S. locations (including the closing of 5 Speedway self-serve coffee stations), 45 net new Baskin-Robbins International locations, 11 net new Dunkin' Donuts International locations, and 3 net new Baskin-Robbins U.S. locations. Additionally, Dunkin' Donuts U.S. franchisees remodeled 127 restaurants and Baskin-Robbins U.S. franchisees remodeled 18 restaurants during the quarter.

Revenues for the third quarter decreased $2.7 million, or 1.3%, compared to the prior year period due primarily to a decrease in sales at company-operated restaurants driven by a net decrease in the number of company-operated restaurants, a decrease in franchise fees driven by declines in gross openings and renewal income, as well as a decrease in sales of ice cream and other products primarily to the Middle East. As of September 24, 2016, there were six points of distribution that were company-operated, all of which were sold subsequent to quarter end. These decreases in revenues were offset by increased royalty income as a result of systemwide sales growth. Also offsetting the decrease in total revenues were increased license fees related to the Dunkin' K-Cup® pod licensing agreement.

Operating income and adjusted operating income for the third quarter increased $9.6 million, or 9.6%, and $8.8 million, or 8.3%, respectively, from the prior year period primarily as a result of the increase in royalty income, as well as gains recognized in connection with the sale of company-operated restaurants and a reduction in general and administrative expenses driven primarily by a decrease in bad debt expense, offset by the decrease in franchise fees.

Net income and adjusted net income for the third quarter increased by $6.5 million, or 14.1%, and $5.8 million, or 11.5%, respectively, compared to the prior year period primarily as a result of the increases in operating income and adjusted operating income of $9.6 million and $8.8 million, respectively, offset by an increase in income tax expense.

Diluted earnings per share and diluted adjusted earnings per share increased by 18.8% to $0.57 and 15.4% to$0.60, respectively, for the third 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 third quarter of 2015, offset by the exercise of stock options.

THIRD 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.

COMPANY UPDATES

• The Company today announced that the Board of Directors declared a fourth quarter cash dividend of$0.30 per share, payable on November 30, 2016, to shareholders of record as of the close of business on November 21, 2016.
• The Company announced on September 22, 2016, that David Hoffmann was named president of Dunkin' Donuts U.S. and Canada, effective October 3, 2016. Mr. Hoffmann joins Dunkin' Brands after 22 years with McDonald's Corporation, where he most recently served as President, High Growth Markets, which included China, South Korea, Russia and several additional European markets. Mr. Hoffmann replacesPaul Twohig who, as previously announced, is retiring and will stay with the Company through the end of the first quarter 2017 to ensure a smooth transition. In his new position, Mr. Hoffmann is responsible for Dunkin' Donuts operations and marketing in the U.S. and Canada, as well as global franchising and store development for both Dunkin' Donuts and Baskin-Robbins.
• The Company announced on September 29, 2016, that it will launch a line of Dunkin' Donuts branded ready-to-drink (RTD) coffee beverages in the United States in early 2017. The Coca-Cola Company will manufacture, distribute and sell the product. This marks Dunkin' Donuts' first entry into the RTD coffee category, which has enjoyed very strong growth over the past five years and represents $2.3 billion dollars in annual sales according to Nielsen.

FISCAL YEAR 2016 TARGETS

As described below, the Company is reiterating and updating certain targets regarding its 2016 expectations.

• The Company continues to expect Dunkin' Donuts U.S. comparable store sales growth of 0 to 2 percent. It now expects Baskin-Robbins U.S. comparable store sales growth to be slightly positive, as compared to previous guidance of 1 to 3 percent.
• The Company now expects Dunkin' Donuts U.S. net development to be at the low end of the previously-provided range of 430 to 460 net new restaurants, excluding Speedway self-serve coffee station closures. 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.
• The Company now expects net income of equity method investments to be slightly higher than 2015 full-year results of $12.6 million, as compared to previous guidance of slightly lower than 2015 full-year results. The update is primarily driven by the reduction of depreciation and amortization of its Japan joint venture as a result of the impairment charge recorded in fiscal year 2015.
• The Company now expects revenue growth to be approximately 2 percent on a 53-week basis with the last week being worth approximately 100 basis points. The update is primarily driven by weaker-than-expected sales of ice cream products related to its Baskin-Robbins International segment.
• The Company continues to expect 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 continues to expect full-year weighted-average shares outstanding of approximately 93 million and a 38.5 percent effective tax rate.
• Fiscal year 2016 is a 53-week year for the Company. The target ranges for 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. and Subsidiaries Non-GAAP Reconciliations."

About Dunkin' Brands Group, Inc.

With more than 19,000 points of distribution in more than 60 countries worldwide, Dunkin' Brands Group, Inc. (Nasdaq: DNKN) is one of the world's leading franchisors of quick service restaurants (QSR) serving hot and cold coffee and baked goods, as well as hard-serve ice cream. At the end of the third quarter 2016, Dunkin' Brands' nearly 100 percent franchised business model included more than 12,000 Dunkin' Donuts restaurants and more than 7,700 Baskin-Robbins restaurants. Dunkin' Brands Group, Inc. is headquartered in Canton, Mass.