Domino's Pizza Announces Second Quarter 2013 Financial Results

Continued Strong Global Sales and EPS Growth

ANN ARBOR, Mich., July 23, 2013 // PRNewswire // -- Domino's Pizza, Inc. (NYSE: DPZ), the recognized world leader in pizza delivery, today announced results for the second quarter of 2013, comprised of strong same store sales, EPS growth and positive global store count growth. Domestic same store sales grew 6.7% during the quarter versus the year-ago period, continuing the positive sales momentum in the Company's domestic business. The international division also posted strong results with same store sales growth of 5.8% during the quarter, marking the 78th consecutive quarter of international same store sales growth. The Company had global net store growth of 110 stores in the second quarter of 2013.

Second quarter diluted EPS was 57 cents, up 21.3% over the prior year quarter. During the quarter, the Company also repurchased and retired 655,248 shares of its common stock for $38.0 million. Additionally, on July 17, 2013, the Board of Directors declared a 20 cent per share quarterly dividend for shareholders of record as of September 13, 2013 to be paid on September 30, 2013.

J. Patrick Doyle, Domino's President and Chief Executive Officer, said: "Our team is very proud to be driving the continued transformation of this 53-year-old brand. We've not just endured - we've grown and outperformed, and made Domino's a frequent and favorite choice for our customers. Our franchisees around the world are running great and successful businesses. This quarter's results were more evidence for us that we're on the right track with our strategic plan and execution. Our company's valuation has reflected this positive performance and rewarded our shareholders. This all just makes us more energized to keep pushing forward."

Second Quarter Highlights:

 

(dollars in millions, except per share data)

Second

Quarter of

2013

 

Second

Quarter of

2012

 

Two Fiscal

Quarters of

2013

 

Two Fiscal

Quarters of

2012

Net income

$ 33.3

 

$ 28.1

 

$ 67.7

 

$ 48.8

               

Weighted average diluted shares

57,960,232

 

59,449,449

 

58,091,126

 

59,565,656

               

Diluted earnings per share, as reported

$ 0.57

 

$ 0.47

 

$ 1.17

 

$ 0.82

Items affecting comparability*

$ -

 

$ -

 

$ -

 

$ 0.12

Diluted earnings per share, as adjusted

$ 0.57

 

$ 0.47

 

$ 1.17

 

$ 0.94

  • Revenues were up 10.1% for the second quarter versus the prior year period, due primarily to higher domestic supply chain revenues attributable to volumes from increased order counts combined with higher cheese and other commodity prices, higher domestic franchise and Company-owned store revenues, and higher international revenues attributable to same store sales and store count growth.
  • Net Income was up 18.4% for the second quarter versus the prior year period, driven by domestic and international same store sales growth, international store count growth and higher supply chain margins.
  • Diluted EPS was 57 cents for the second quarter versus 47 cents in the prior year quarter - an increase of ten cents, or 21.3%. This increase was due to higher net income and lower weighted average diluted shares outstanding.

The table below outlines certain statistical measures utilized by the Company to analyze its performance. Refer to the Comments on Regulation G section on page four for additional details.

 

 

Second

Quarter of

2013

 

 

Second

Quarter of

2012

Same store sales growth: (versus prior year period)

     

Domestic Company-owned stores

+ 5.7%

 

+ 0.3%

Domestic franchise stores

+ 6.8%

 

+ 1.9%

Domestic stores

+ 6.7%

 

+ 1.7%

International stores (constant dollar basis)

+ 5.8%

 

+ 5.7%

       
       

Global retail sales growth: (versus prior year period)

     

Domestic stores

+ 7.3%

 

+ 1.9%

International stores

+11.2%

 

+ 6.7%

Total

+ 9.3%

 

+ 4.3%

       

Global retail sales growth: (versus prior year period,

excluding foreign currency impact)

     

Domestic stores

+ 7.3%

 

+ 1.9%

International stores

+13.3%

 

+13.8%

Total

+10.4%

 

+ 7.9%

 

 

Domestic

Company-

owned Stores

 

Domestic

Franchise

Stores

 

Total

Domestic

Stores

 

 

International

Stores

 

 

 

Total

Store counts:

                 

Store count at March 24, 2013

388

 

4,535

 

4,923

 

5,407

 

10,330

Openings

1

 

19

 

20

 

116

 

136

Closings

-

 

(11)

 

(11)

 

(15)

 

(26)

Store count at June 16, 2013

389

 

4,543

 

4,932

 

5,508

 

10,440

Second quarter 2013 net change

1

 

8

 

9

 

101

 

110

Trailing four quarters net change

2

 

29

 

31

 

485

 

516

Conference Call Information

The Company will file its quarterly report on Form 10-Q this morning. Additionally, as previously announced, Domino's Pizza, Inc. will hold a conference call today at 10 a.m. (Eastern) to review its second quarter 2013 financial results. The call can be accessed by dialing (888) 306-6182 (U.S./Canada) or (706) 634-4947 (International). Ask for the Domino's Pizza conference call. The call will also be webcast at www.dominosbiz.com. If you are unable to participate on the call, a replay will be available for thirty days by dialing (855) 859-2056 (U.S./Canada) or (404) 537-3406 (International), Conference ID 86150325. The webcast will also be archived for 30 days on www.dominosbiz.com.

Share Repurchases

During the second quarter of 2013, the Company repurchased and retired 655,248 shares of its common stock under its open market share repurchase program for approximately $38.0 million, or an average price of $58.05 per share. Additionally, subsequent to the second quarter of 2013, the Company repurchased and retired 189,185 shares of its common stock for approximately $10.9 million, or an average of $57.71 per share. The Company has used approximately 57% of the total amount authorized under its $200 million approved open market share repurchase program and currently has approximately $85.4 million remaining under the program.

Dividends

During the two fiscal quarters of 2013, the Company paid approximately $11.5 million of common stock dividends. On July 17, 2013, the Board of Directors declared a 20 cent per share quarterly dividend for shareholders of record as of September 13, 2013, to be paid on September 30, 2013.

Items Affecting Comparability

The Company's reported financial results for the two fiscal quarters of 2013 are not comparable to the reported financial results for the equivalent period in 2012 due to the refinancing that occurred in the first quarter of 2012. The table below presents certain items that affect comparability between 2013 and 2012 financial results. The Company believes that including such information is critical to the understanding of its financial results for the two fiscal quarters of 2013 as compared to the same period in 2012 (See the Comments on Regulation G section on page four for additional details).

In addition to the items noted in the table below, the Company had lower weighted average diluted shares outstanding that resulted in an increase in diluted EPS of nearly one and one half cents in the second quarter of 2013 and approximately three cents in the two fiscal quarters of 2013.

 

Two Fiscal Quarters

 

 

(in thousands, except per share data)

 

 

Pre-tax

 

 

 

After-tax

 

Diluted

EPS

Impact

2012 items affecting comparability:

         

Recapitalization expenses:

         

General and administrative expenses (1)

$ (293)

 

$ (182)

 

$(0.00)

Additional interest expense (2)

(10,222)

 

(6,348)

 

(0.11)

Subtotal

(10,515)

 

(6,530)

 

(0.11)

Deferred tax asset valuation allowance (3)

-

 

(868)

 

(0.01)

Total of 2012 items

$(10,515)

 

$ (7,398)

 

$(0.12)

(1) Primarily includes stock compensation expenses, payroll taxes related to the payments made to certain stock option holders, and legal and professional fees incurred in connection with the Company's 2012 recapitalization.

(2) Primarily includes the write-off of deferred financing fees related to the extinguishment of the 2007 debt in connection with the Company's 2012 recapitalization. Additionally, the Company incurred $2.1 million of interest expense on the 2007 borrowings subsequent to the closing of the 2012 recapitalization but prior to the repayment of the 2007 borrowings, resulting in the payment of interest on both the 2007 and 2012 facilities for a short period of time.

(3) Represents a valuation allowance recorded on a deferred tax asset related to a capital loss that resulted from a write-off of the tax basis goodwill associated with the sale of the six remaining Company-owned stores in a certain market in the first quarter of 2012.

Liquidity

As of June 16, 2013, the Company had approximately:

  • $40.8 million of unrestricted cash and cash equivalents;
  • $1.55 billion in total debt; and
  • $62.3 million of available borrowings under its $100.0 million variable funding notes, net of letters of credit issued of $37.7 million.

The Company's cash borrowing rate averaged 5.4% for both the second quarter of 2013 and the second quarter of 2012. Additionally, the Company invested $11.6 million in capital expenditures during the two fiscal quarters of 2013, versus $8.0 million in the two fiscal quarters of 2012.

Free cash flow, as reconciled below to cash flows from operations as determined under generally accepted accounting principles (GAAP), was approximately $55.3 million in the two fiscal quarters of 2013.

(in thousands)

Two Fiscal

Quarters

of 2013

Net cash provided by operating activities

$66,840

Capital expenditures

(11,587)

   

Free cash flow

$55,253

Comments on Regulation G

In addition to the GAAP financial measures set forth in this press release, the Company has included non-GAAP financial measures within the meaning of Regulation G due to items affecting comparability between fiscal quarters. The Company has also included metrics such as global retail sales growth and same store sales growth, which are commonly used statistical measures in the quick-service restaurant industry that are important to understanding Company performance.

The Company uses "Diluted EPS, as adjusted," which is calculated as reported Diluted EPS adjusted for the items that affect comparability to the prior year period discussed above. The most directly comparable financial measure calculated and presented in accordance with GAAP is Diluted EPS. The Company believes that the Diluted EPS, as adjusted measure is important and useful to investors and other interested persons and that such persons benefit from having a consistent basis for comparison between reporting periods. The Company uses Diluted EPS, as adjusted to internally evaluate operating performance, to evaluate itself against its peers and to determine future performance targets and long-range planning. Additionally, the Company believes that analysts covering the Company's stock performance generally eliminate these items affecting comparability when preparing their financial models, when determining their published EPS estimates and when benchmarking the Company against its competitors.

The Company uses "Global retail sales" to refer to total worldwide retail sales at Company-owned and franchise stores. The Company believes global retail sales information is useful in analyzing revenues because franchisees pay royalties that are based on a percentage of franchise retail sales. The Company reviews comparable industry global retail sales information to assess business trends and to track the growth of the Domino's Pizza® brand. In addition, domestic supply chain revenues are directly impacted by changes in domestic franchise retail sales. Retail sales for franchise stores are reported to the Company by its franchisees and are not included in Company revenues.

The Company uses "Same store sales growth," calculated by including only sales from stores that also had sales in the comparable period of the prior year. International same store sales growth is calculated similarly to domestic same store sales growth. Changes in international same store sales are reported on a constant dollar basis, which reflects changes in international local currency sales.

The Company uses "Free cash flow," calculated as cash flows from operations less capital expenditures, both as reported under GAAP. The Company believes that the free cash flow measure is important to investors and other interested persons, and that such persons benefit from having a measure which communicates how much cash flow is available for working capital needs or to be used for repurchasing debt, making acquisitions, repurchasing common stock, paying dividends or other similar uses of cash.

About Domino's Pizza®

Founded in 1960, Domino's Pizza is the recognized world leader in pizza delivery, with a significant business in carryout pizza. It ranks among the world's top public restaurant brands with its global enterprise of more than 10,400 stores in over 70 international markets. Domino's had global retail sales of over $7.4 billion in 2012, comprised of over $3.5 billion in the U.S. and nearly $3.9 billion internationally. In the second quarter of 2013, Domino's had global retail sales of over $1.8 billion, comprised of $868 million in the U.S. and $961 million internationally. Its system is largely made up of franchise owner-operators who accounted for over 96% of the Domino's Pizza stores as of the second quarter of 2013. The Domino's brand generates over $2 billion in global digital sales per year. Its emphasis on new technology has helped drive the introduction of Domino's ordering apps for Kindle Fire, Android™, iPhone® and Windows Phone 8 - which now cover nearly 95% of the U.S. smartphone market. Continuing its focus on menu enhancement, Domino's established itself as a player in the pan pizza market with the launch of its Handmade Pan Pizza, featuring fresh, never-frozen dough, in October 2012.

Order - www.dominos.com
Mobile - http://mobile.dominos.com
Info - www.dominosbiz.com
Twitter - http://twitter.com/dominos
Facebook - http://www.facebook.com/dominos

For all future earnings releases and other significant webcasts and announcements we plan to continue our practice of publishing press releases. However, for regular investor conferences with no updates from management, we will no longer be sending out a press release to notify the public of the webcast. Instead, please visit our Investor Relations website at www.dominosbiz.com to view a schedule of upcoming conference webcasts.

SAFE HARBOR STATEMENT UNDER THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995:

This press release contains forward-looking statements. You can identify forward-looking statements because they contain words such as "believes," "expects," "may," "will," "should," "seeks," "approximately," "intends," "plans," "estimates," or "anticipates" or similar expressions that concern our strategy, plans or intentions. These forward-looking statements relating to our anticipated profitability, estimates in same store sales growth, the growth of our international business, ability to service our indebtedness, our future cash flows, our operating performance, trends in our business and other descriptions of future events reflect the Company's expectations based upon currently available information and data. However, actual results are subject to future risks and uncertainties that could cause actual results to differ materially from those expressed or implied by such forward-looking statements. The risks and uncertainties that could cause actual results to differ materially include: the level of our long-term and other indebtedness; uncertainties relating to litigation; consumer preferences, spending patterns and demographic trends; the effectiveness of our advertising, operations and promotional initiatives; the strength of our brand in the markets in which we compete; our ability to retain key personnel; new product and concept developments by us, and other food-industry competitors; the ongoing level of profitability of our franchisees; and our ability and that of our franchisees to open new restaurants and keep existing restaurants in operation; changes in food prices, particularly cheese, labor, utilities, insurance, employee benefits and other operating costs; the impact that widespread illness or general health concerns may have on our business and the economy of the countries where we operate; severe weather conditions and natural disasters; changes in our effective tax rate; changes in foreign currency exchange rates; changes in government legislation and regulations; adequacy of our insurance coverage; costs related to future financings; our ability and that of our franchisees to successfully operate in the current credit environment; changes in the level of consumer spending given the general economic conditions including interest rates, energy prices and weak consumer confidence; availability of borrowings under our variable funding notes and our letters of credit; and changes in accounting policies. Important factors that could cause actual results to differ materially from our expectations are more fully described in our other filings with the Securities and Exchange Commission, including under the section headed "Risk Factors" in our annual report on Form 10-K. These forward-looking statements speak only as of the date of this press release, and you should not rely on such statements as representing the views of the Company as of any subsequent date. Except as required by applicable securities laws, we do not undertake to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.

TABLES TO FOLLOW

Domino's Pizza, Inc. and Subsidiaries
Condensed Consolidated Statements of Income
(Unaudited)

 
 

Fiscal Quarter Ended

 

June 16,

2013

% of

Total

Revenues

 

June 17,

2012

% of

Total

Revenues

(In thousands, except per share data)

         

Revenues:

         

Domestic Company-owned stores

$ 78,509

   

$ 73,911

 

Domestic franchise

48,167

   

44,286

 

Domestic supply chain

233,307

   

209,297

 

International

54,026

   

48,630

 

Total revenues

414,009

100.0%

 

376,124

100.0%

           

Cost of sales:

         

Domestic Company-owned stores

59,536

   

55,669

 

Domestic supply chain

207,319

   

186,621

 

International

21,167

   

19,227

 

Total cost of sales

288,022

69.6%

 

261,517

69.5%

Operating margin

125,987

30.4%

 

114,607

30.5%

           

General and administrative

52,146

12.6%

 

48,829

13.0%

Income from operations

73,841

17.8%

 

65,778

17.5%

           

Interest expense, net

(20,396)

(4.9)%

 

(20,665)

(5.5)%

Income before provision for

income taxes

 

53,445

 

12.9%

 

 

45,113

 

12.0%

           

Provision for income taxes

20,175

4.9%

 

17,018

4.5%

Net income

$ 33,270

8.0%

 

$ 28,095

7.5%

           

Earnings per share:

         

Common stock - diluted

$ 0.57

   

$ 0.47

 

Dividends declared per share

$ 0.20

   

$ -

 

 

 

Domino's Pizza, Inc. and Subsidiaries
Condensed Consolidated Statements of Income
(Unaudited)

 
 

Two Fiscal Quarters Ended

 

June 16,

2013

% of

Total

Revenues

 

June 17,

2012

% of

Total

Revenues

(In thousands, except per share data)

         

Revenues:

         

Domestic Company-owned stores

$ 159,603

   

$ 151,526

 

Domestic franchise

99,485

   

89,482

 

Domestic supply chain

464,839

   

423,428

 

International

107,700

   

96,276

 

Total revenues

831,627

100.0%

 

760,712

100.0%

           

Cost of sales:

         

Domestic Company-owned stores

120,804

   

114,947

 

Domestic supply chain

412,732

   

378,150

 

International

42,298

   

38,359

 

Total cost of sales

575,834

69.2%

 

531,456

69.9%

Operating margin

255,793

30.8%

 

229,256

30.1%

           

General and administrative

106,427

12.8%

 

96,583

12.7%

Income from operations

149,366

18.0%

 

132,673

17.4%

           

Interest expense, net

(41,299)

(5.0)%

 

(52,761)

(6.9)%

Income before provision for

income taxes

 

108,067

 

13.0%

 

 

79,912

 

10.5%

           

Provision for income taxes

40,377

4.9%

 

31,075

4.1%

Net income

$ 67,690

8.1%

 

$ 48,837

6.4%

           

Earnings per share:

         

Common stock - diluted

$ 1.17

   

$ 0.82

 

Dividends declared per share

$ 0.40

   

$ 3.00

 

Domino's Pizza, Inc. and Subsidiaries
Condensed Consolidated Balance Sheets
(Unaudited)

         
 

June 16, 2013

 

December 30, 2012

(In thousands)

         

Assets

         

Current assets:

         
 

Cash and cash equivalents

$

40,838

 

$

54,813

 

Restricted cash and cash equivalents

 

59,712

   

60,015

 

Accounts receivable

 

93,987

   

94,103

 

Inventories

 

27,996

   

31,061

 

Advertising fund assets, restricted

 

48,049

   

37,917

 

Other assets

 

31,954

   

28,358

Total current assets

 

302,536

   

306,267

           

Property, plant and equipment, net

 

88,551

   

 

91,445

           

Other assets

 

77,712

   

80,485

           

Total assets

$

468,799

 

$

478,197

           

Liabilities and stockholders' deficit

         

Current liabilities:

         
 

Current portion of long-term debt

$

24,153

 

$

24,349

 

Accounts payable

 

63,875

   

77,414

 

Dividends payable

 

12,214

   

1,502

 

Advertising fund liabilities

 

48,049

   

37,917

 

Other accrued liabilities

 

80,521

   

88,316

Total current liabilities

 

228,812

   

229,498

           

Long-term liabilities:

         
 

Long-term debt, less current portion

 

1,524,420

   

1,536,443

 

Other accrued liabilities

 

44,358

   

47,779

Total long-term liabilities

 

1,568,778

   

1,584,222

           

Total stockholders' deficit

 

(1,328,791)

   

(1,335,523)

           

Total liabilities and stockholders' deficit

$

468,799

 

$

478,197

           

 

Domino's Pizza, Inc. and Subsidiaries
Condensed Consolidated Statements of Cash Flows
(Unaudited)

 
 

Two Fiscal Quarters Ended

 

June 16,

2013

 

June 17,

2012

(In thousands)

     

Cash flows from operating activities:

     

Net income

$ 67,690

 

$ 48,837

Adjustments to reconcile net income to net

cash flows provided by operating activities:

     

Depreciation and amortization

11,407

 

10,441

Gains on sale/disposal of assets

(285)

 

(148)

Amortization of deferred financing costs and other

2,853

 

10,489

Provision for deferred income taxes

2,557

 

4,040

Non-cash compensation expense

10,240

 

8,288

Tax impact from equity-based compensation

(6,043)

 

(7,265)

Other

(1,090)

 

232

Changes in operating assets and liabilities

(20,489)

 

(16,804)

Net cash provided by operating activities

66,840

 

58,110

       

Cash flows from investing activities:

     

Capital expenditures

(11,587)

 

(8,025)

Proceeds from sale of assets

2,077

 

1,172

Changes in restricted cash

303

 

32,981

Other

1,266span>

 

1,157

Net cash provided by (used in) investing activities

(7,941)

 

27,285

       

Cash flows from financing activities:

     

Proceeds from issuance of long-term debt

-

 

1,575,000

Repayments of long-term debt and capital lease obligations

(12,219)

 

(1,453,182)

Proceeds from exercise of stock options

3,738

 

2,088

Tax impact from equity-based compensation

6,043

 

7,265

Purchases of common stock

(56,057)

 

(36,867)

Tax payments for restricted stock upon vesting

(2,845)

 

(1,996)

Payments of common stock dividends and equivalents

(11,454)

 

(184,858)

Cash paid for financing costs

-

 

(31,613)

Net cash used in financing activities

(72,794)

 

(124,163)

       

Effect of exchange rate changes on cash and cash equivalents

(80)

 

(774)

       

Change in cash and cash equivalents

(13,975)

 

(39,542)

       

Cash and cash equivalents, at beginning of period

54,813

 

50,292

       

Cash and cash equivalents, at end of period

$ 40,838

 

$ 10,750

 

SOURCEDomino's Pizza, Inc.

###

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