Domino's Pizza Announces Second Quarter 2014 Financial Results

Delivers Strong Global Sales and Profit Growth

ANN ARBOR, Mich. - July 22, 2014 // PRNewswire // - Domino's Pizza, Inc. (NYSE: DPZ), the recognized world leader in pizza delivery, today announced results for the second quarter of 2014, comprised of strong growth in both same store sales and global store counts, which resulted in 17.5% EPS growth, or 67 cents per share. Domestic same store sales grew 5.4% 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 7.7% during the quarter, marking the 82nd consecutive quarter of international same store sales growth. The Company had global net store growth of 133 stores in the second quarter of 2014.

During the quarter, the Company also repurchased and retired 687,750 shares of its common stock for approximately $49.9 million. Additionally, on July 16, 2014, the Board of Directors declared a 25 cent per share quarterly dividend for shareholders of record as of September 15, 2014 to be paid on September 30, 2014.

J. Patrick Doyle, Domino's President and Chief Executive Officer, said: "The first half of 2014 has proven to be yet another positive story for our global brand and hardworking franchisees. We are performing well in the U.S. and international markets by driving sales and building stores around the world. We also opened our 11,000th store this quarter, an important milestone for a growing brand."

Second Quarter Highlights:

(dollars in millions, except per share data)

Second 
Quarter of 
2014

    

Second 
Quarter of 
2013

    

Two Fiscal 
Quarters of 
2014

    

Two Fiscal 
Quarters of 
2013

Net income

$  38.5

 

$  33.3

 

$  78.9

 

$  67.7

               

Weighted average diluted shares

57,124,457

 

57,960,232

 

57,246,871

 

58,091,126

               

Diluted earnings per share, as reported

$  0.67

 

$  0.57

 

$  1.38

 

$  1.17

Items affecting comparability*

-

 

-

 

(0.02)

 

-

Diluted earnings per share, as adjusted*

$  0.67

 

$  0.57

 

$  1.36

 

$  1.17

               

* Refer to the Items Affecting Comparability section on page three for additional details.

  • Revenues were up 8.8% for the second quarter versus the prior year period, due primarily to higher supply chain revenues from higher cheese and other commodity prices as well as increased volumes, higher international revenues resulting in part from same store sales and store count growth, and increased domestic franchise revenues due primarily to same store sales growth.
  • Net Income was up 15.6% for the second quarter versus the prior year period, driven by domestic and international same store sales growth and global store count growth.
  • Diluted EPS was 67 cents for the second quarter versus 57 cents in the prior year quarter, which represents an increase of 10 cents, or 17.5%. 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 2014

 

 

Second Quarter 
of 2013

   

Same store sales growth: (versus prior year period)

         

  Domestic Company-owned stores

+ 3.5%

 

+ 5.7%

   

  Domestic franchise stores

+ 5.5%

 

+ 6.8%

   

  Domestic stores

+ 5.4%

 

+ 6.7%

   

  International stores (excluding foreign currency impact)

+ 7.7%

 

+ 5.8%

   
           
           

Global retail sales growth: (versus prior year period)

         

  Domestic stores

+  6.9%

 

+  7.3%

   

  International stores

+15.6%

 

+11.2%

   

  Total

+11.5%

 

+  9.3%

   
           

Global retail sales growth: (versus prior year period, 

  excluding foreign currency impact)   

         

  Domestic stores

+  6.9%

 

+  7.3%

   

  International stores

+16.0%

 

+13.3%

   

  Total

+11.7%

 

+10.4%

   

 

 

Domestic 
Company-
owned Stores

 

Domestic 
Franchise 
Stores

 

Total 
Domestic 
Stores

 

 

International 
Stores

 

 

 

Total

Store counts:

                 

  Store count at March 23, 2014

376

 

4,615

 

4,991

 

5,997

 

10,988

  Openings

-

 

18

 

18

 

130

 

148

  Closings

-

 

(7)

 

(7)

 

(8)

 

(15)

  Store count at June 15, 2014

376

 

4,626

 

5,002

 

6,119

 

11,121

  Second quarter 2014 net change

-

 

11

 

11

 

122

 

133

  Trailing four quarters net change

(13)

 

83

 

70

 

611

 

681

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 2014 second quarter financial results.  The call can be accessed by dialing (888) 400-9978 (U.S./Canada) or (706) 634-4947 (International).  Ask for theDomino'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 34199171.  The webcast will also be archived for 30 days on www.dominosbiz.com.

Share Repurchases

During the second quarter of 2014, the Company repurchased and retired 687,750 shares of its common stock under its open market share repurchase program for approximately$49.9 million, or an average price of $72.52 per share. As of July 15, 2014, the Company had authorization for repurchases of approximately $149.8 million remaining under the program.

Dividends

On July 16, 2014, the Board of Directors declared a 25 cent per share quarterly dividend for shareholders of record as of September 15, 2014 to be paid on September 30, 2014.

Items Affecting Comparability

The Company's reported financial results for the two fiscal quarters of 2014 are not comparable to the reported financial results for the equivalent period in 2013. The table below presents certain items that affect comparability between 2014 and 2013 financial results.  The Company believes that including such information is critical to the understanding of its financial results for the two fiscal quarters of 2014 as compared to the same period in 2013 (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 in 2014 that resulted in an increase in diluted EPS of approximately one cent in the second quarter of 2014 and two cents in the two fiscal quarters of 2014.

 

Second Quarter

 

Two Fiscal Quarters

 

 

(in thousands, except per share data)

 

 

Pre-tax

 

 

 

After-tax

 

Diluted 
EPS 
Impact

 

 

 

Pre-tax

 

 

 

After-tax

 

Diluted 
EPS 
Impact

2014 items affecting comparability:

                     

Gain on the sale of Company-owned stores (1)

$         -

 

$          -

 

 $        -

 

$    1,652

 

$ 1,033

 

 $  0.02

Deferred tax asset valuation allowance reversal (2)

-

 

-

 

 -

 

 -

 

329

 

 0.01

Total of 2014 items*

$         -

 

$          -

 

$        -

 

$    1,652

 

$ 1,362

 

$  0.02

                       

* Diluted earnings per share figures may not sum to the total due to the rounding of each individual calculation.

1) Represents the gain recognized on the sale of 14 Company-owned stores to a franchisee. The gain is net of a reduction in goodwill of approximately $0.5 million.

2) As a result of the capital gain recognized in connection with the sale of Company-owned stores, the Company was able to utilize a portion of a previously unrecognized benefit of a capital loss carry forward.

Liquidity

As of June 15, 2014, the Company had approximately:

  • $15.3 million of unrestricted cash and cash equivalents;
  • $1.52 billion in total debt; and
  • $57.9 million of available borrowings under its $100.0 million variable funding notes, net of letters of credit issued of $42.1 million.

The Company's cash borrowing rate averaged 5.3% in the second quarter of 2014 and averaged 5.4% in the second quarter of 2013.  Additionally, the Company invested $18.9 million in capital expenditures during the two fiscal quarters of 2014, compared to $11.6 million in the two fiscal quarters of 2013. 

Free cash flow, as reconciled below to cash flows from operations as determined under generally accepted accounting principles (GAAP), was approximately $41.8 million in the two fiscal quarters of 2014.

(in thousands)

Two Fiscal Quarters

of 2014

Net cash provided by operating activities

$ 60,790

Capital expenditures

(18,948)

   

Free cash flow

$ 41,842

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 excluding foreign currency impacts, which reflect 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 11,000 stores in over 70 international markets. Domino's had global retail sales of over $8.0 billion in 2013, comprised of nearly $3.8 billion in the U.S. and over $4.2 billion internationally. In the second quarter of 2014, Domino's had global retail sales of over $2.0 billion, comprised of $0.9 billion in the U.S. and $1.1 billion internationally. Its system is made up of franchise owners who accounted for nearly 97% of the Domino's Pizza stores as of the second quarter of 2014. The emphasis on technology innovation helped Domino's generate approximately 40% of U.S. sales from its digital channels in 2013, as well as reach an estimated $3 billion annually in global digital sales. Domino's recently launched its ordering app for iPad®, adding to an existing ordering app lineup that covers nearly 95% of the smartphone market. In June 2014, Domino's debuted voice ordering for its iPhone® and Android™ apps, a true technology first within both traditional and e-commerce retail.

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

Please visit our Investor Relations website at www.dominosbiz.com to view a schedule of upcoming earnings releases, significant announcements and 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; our reputation and 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; cyber-attacks or other catastrophic events; 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 15,

2014

% of 
Total 
Revenues

   

June 16,

2013

% of 
Total 
Revenues

(In thousands, except per share data)

         

Revenues:

         

   Domestic Company-owned stores

$ 78,814

   

$  78,509

 

   Domestic franchise

52,038

   

48,167

 

   Domestic supply chain

257,552

   

233,307

 

   International

62,059

   

54,026

 

Total revenues

450,463

100.0%

 

414,009

100.0%

           

Cost of sales:

         

   Domestic Company-owned stores

60,717

   

59,536

 

   Domestic supply chain

230,698

   

207,319

 

   International

24,403

   

21,167

 

Total cost of sales

315,818

70.1%

 

288,022

69.6%

Operating margin

134,645

29.9%

 

125,987

30.4%

           

General and administrative

53,282

11.8%

 

52,146

12.6%

Income from operations

81,363

18.1%

 

73,841

17.8%

           

Interest expense, net

(19,824)

(4.4)%

 

(20,396)

(4.9)%

Income before provision for

   income taxes

 

61,539

 

13.7%

 

 

53,445

 

12.9%

           

Provision for income taxes

23,077

5.2%

 

20,175

4.9%

Net income

$  38,462

8.5%

 

$  33,270

8.0%

           

Earnings per share:

         

   Common stock – diluted

$      0.67

   

$      0.57

 

Dividends declared per share

$      0.25

   

$      0.20

 

 

Domino's Pizza, Inc. and Subsidiaries

Condensed Consolidated Statements of Income

(Unaudited)

   
 

Two Fiscal Quarters Ended

 

June 15,

2014

% of 
Total

Revenues

 

June 16,

2013

% of 
Total

Revenues

(In thousands, except per share data)

            

Revenues:

         

   Domestic Company-owned stores

$ 161,271

   

$  159,603

 

   Domestic franchise

105,459

   

99,485

 

   Domestic supply chain

515,079

   

464,839

 

   International

122,506

   

107,700

 

Total revenues

904,315

100.0%

 

831,627

100.0%

           

Cost of sales:

         

   Domestic Company-owned stores

123,508

   

120,804

 

   Domestic supply chain

461,065

   

412,732

 

   International

48,055

   

42,298

 

Total cost of sales

632,628

70.0%

 

575,834

69.2%

Operating margin

271,687

30.0%

 

255,793

30.8%

           

General and administrative

106,149

11.7%

 

106,427

12.8%

Income from operations

165,538

18.3%

 

149,366

18.0%

           

Interest expense, net

(40,119)

(4.4)%

 

(41,299)

(5.0)%

Income before provision for

   income taxes

 

125,419

 

13.9%

 

 

108,067

 

13.0%

           

Provision for income taxes

46,483

5.2%

 

40,377

4.9%

Net income

$  78,936

8.7%

 

$  67,690

8.1%

           

Earnings per share:

         

   Common stock – diluted

$      1.38

   

$      1.17

 

Dividends declared per share

$      0.50

   

$      0.40

 

 

Domino's Pizza, Inc. and Subsidiaries  

Condensed Consolidated Balance Sheets   

(Unaudited)  

 
     

 

June 15, 2014 

 

 

December 29, 2013 

(In thousands)

           

Assets

              

Current assets: 

           
 

Cash and cash equivalents 

 

$

15,304

 

$

14,383

 

Restricted cash and cash equivalents

   

74,710

   

125,453

 

Accounts receivable

   

105,970

   

105,779

 

Inventories 

   

33,542

   

30,321

 

Advertising fund assets, restricted

   

51,713

   

44,695

 

Other assets

   

39,741

   

30,909

Total current assets

   

320,980

   

351,540

             

Property, plant and equipment, net 

   

98,056

   

97,584

             

Other assets 

   

76,635

   

76,131

               

Total assets 

 

$

495,671

 

$

525,255

               

Liabilities and stockholders' deficit

           

Current liabilities:

           
 

Current portion of long-term debt

 

$

538

 

$

24,144

 

Accounts payable

   

73,184

   

83,408

 

Dividends payable

   

14,437

   

11,849

 

Advertising fund liabilities

   

51,713

   

44,695

 

Other accrued liabilities

   

76,135

   

90,515

Total current liabilities 

   

216,007

   

254,611

             

Long-term liabilities:

           
 

Long-term debt, less current portion 

   

1,523,882

   

1,512,299

 

Other accrued liabilities

   

45,464

   

48,547

Total long-term liabilities

   

1,569,346

   

1,560,846

             

Total stockholders' deficit

   

(1,289,682)

   

(1,290,202)

               

Total liabilities and stockholders' deficit 

 

$

495,671

 

$

525,255

 

Domino's Pizza, Inc. and Subsidiaries

Condensed Consolidated Statements of Cash Flows

(Unaudited)

   
 

Two Fiscal Quarters Ended

 

June 15,

2014

 

 June 16,

2013

(In thousands)

         

Cash flows from operating activities:

     

  Net income

$   78,936

 

$     67,690

  Adjustments to reconcile net income to net

   cash flows provided by operating activities:

     

      Depreciation and amortization

13,077

 

11,407

      Gains on sale/disposal of assets

(1,687)

 

(285)

      Amortization of deferred financing costs

2,771

 

2,853

      Provision (benefit) for deferred income taxes

(2,187)

 

2,557

      Non-cash compensation expense

8,080

 

10,240

      Tax impact from equity-based compensation

(8,319)

 

(6,043)

      Other

(623)

 

(1,090)

      Changes in operating assets and liabilities

(29,258)

 

(20,489)

Net cash provided by operating activities

60,790

 

66,840

       

Cash flows from investing activities:

     

  Capital expenditures

(18,948)

 

(11,587)

  Proceeds from sale of assets

4,967

 

2,077

  Changes in restricted cash

50,743

 

303

  Other

(1,049)

 

1,266

Net cash provided by (used in) investing activities

35,713

 

(7,941)

       

Cash flows from financing activities:

     

  Repayments of long-term debt and capital lease obligations

(12,022)

 

(12,219)

  Proceeds from exercise of stock options

2,648

 

3,738

  Tax impact from equity-based compensation

8,319

 

6,043

  Purchases of common stock

(65,006)

 

(56,057)

  Tax payments for restricted stock upon vesting

(4,363)

 

(2,845)

  Payments of common stock dividends and equivalents

(25,130)

 

(11,454)

Net cash used in financing activities

(95,554)

 

(72,794)

       

Effect of exchange rate changes on cash and cash equivalents

(28)

 

(80)

       

Change in cash and cash equivalents

921

 

(13,975)

       

Cash and cash equivalents, at beginning of period

14,383

 

54,813

       

Cash and cash equivalents, at end of period

$     15,304

 

$     40,838

SOURCE Domino's Pizza, Inc.

Contacts:

Lynn Liddle
Executive Vice President
Communications
Investor Relations
Legislative Affairs
(734) 930-3008

###

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