Domino's Pizza Announces First Quarter 2015 Financial Results

Continued Global Momentum with Strong Sales and EPS Growth

ANN ARBOR, Mich. - April 23, 2015 // PRNewswire // - Domino's Pizza, Inc. (NYSE: DPZ), the recognized world leader in pizza delivery, today announced results for the first quarter of 2015, comprised of strong same store sales results and store count growth, which resulted in robust EPS growth. Domestic same store sales grew 14.5% 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 quarterly same store sales growth of 7.8%, marking the 85th consecutive quarter of international same store sales growth. The Company had global net store growth of 110 stores in the first quarter of 2015.

Diluted EPS was 81 cents for the first quarter, which was up 14.1% over the Company's reported EPS in the prior year quarter, and up 19.1% over the Company's adjusted EPS in the prior year quarter. During the quarter, the Company repurchased 290,877 shares of its common stock for approximately $29.5 million. The Board of Directors also declared a 31-cent per share quarterly dividend for shareholders of record as of June 15, 2015, to be paid on June 30, 2015.

J. Patrick Doyle, Domino's President and Chief Executive Officer, said: "We had an outstanding start to 2015. Strong global sales, store growth and technology advancements all demonstrated the fundamental strength of the Domino's brand."

First Quarter Highlights:

(dollars in millions, except per share data)

 

First

Quarter of

2015

      

First

Quarter of

2014

 

Net income

 

$

46.3

   

$

40.5

 

Weighted average diluted shares

   

57,013,552

     

57,372,471

 

Diluted earnings per share, as reported

 

$

0.81

   

$

0.71

 

Items affecting comparability*

   

     

(0.02)

 

Diluted earnings per share, as adjusted*

 

$

0.81

   

$

0.68

 

 

   

 

Refer to the Items Affecting Comparability section on page three for additional details.  Diluted earnings per share figures may not sum to the total due to the rounding of each individual calculation.

  • Revenues were up 10.6% for the first quarter versus the prior year period, due primarily to higher supply chain revenues from increased volumes and increased sales of equipment to stores in connection with the Company's store reimaging program. Increased domestic franchise and Company-owned store revenues and higher international revenues resulting from both same store sales and store count growth also contributed to this increase.
  • Net Income was up 14.4% for the first quarter versus the prior year period, driven by domestic and international same store sales growth, global store count growth and higher supply chain volumes. This was offset in part by the negative impact of foreign currency exchange rates.
  • Diluted EPS was 81 cents for the first quarter versus 71 cents in the prior year quarter. The diluted EPS of 81 cents for the quarter was 13 cents, or 19.1% higher than the prior year quarter's adjusted EPS of 68 cents. (See the Items Affecting Comparability section on page three and the Comments on Regulation G section on page four.)

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.

   

First

Quarter of

2015

   

First

Quarter of

2014

 

Same store sales growth: (versus prior year period)

               

Domestic Company-owned stores

   

+ 15.9

%

   

+ 1.5

%

Domestic franchise stores

   

+ 14.4

%

   

+ 5.2

%

Domestic stores

   

+ 14.5

%

   

+ 4.9

%

International stores (excluding foreign currency impact)

   

+ 7.8

%

   

+ 7.4

%

                 

Global retail sales growth: (versus prior year period)

               

Domestic stores

   

+ 16.5

%

   

+ 6.3

%

International stores

   

+ 5.0

%

   

+ 11.7

%

Total

   

+ 10.4

%

   

+ 9.1

%

                 

Global retail sales growth: (versus prior year period,

   excluding foreign currency impact)

               

Domestic stores

   

+ 16.5

%

   

+ 6.3

%

International stores

   

+ 16.4

%

   

+ 15.9

%

Total

   

+ 16.4

%

   

+ 11.3

%

 

   

Domestic

Company-

owned Stores

   

Domestic

Franchise

Stores

   

Total

Domestic

Stores

   

International

Stores

   

Total

 

Store counts:

                                       

Store count at December 28, 2014

   

377

     

4,690

     

5,067

     

6,562

     

11,629

 

Openings

   

2

     

20

     

22

     

140

     

162

 

Closings

   

     

(5)

     

(5)

     

(47)

     

(52)

 

Store count at March 22, 2015

   

379

     

4,705

     

5,084

     

6,655

     

11,739

 

First quarter 2015 net change

   

2

     

15

     

17

     

93

     

110

 

Trailing four quarters net change

   

3

     

90

     

93

     

658

     

751

 

Conference Call Information

The Company will file its quarterly report on Form 10-Q this morning. As previously announced, Domino's Pizza, Inc. will hold a conference call today at 10 a.m. (Eastern) to review its first quarter 2015 financial results. The call can be accessed by dialing (888) 400-9978 (U.S./Canada) or (706) 634-4947 (International). Ask for the Domino's Pizza conference call. The call will also be webcast at biz.dominos.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 71614586. The webcast will also be archived for 30 days on biz.dominos.com.

Share Repurchases

During the first quarter of 2015, the Company repurchased and retired 290,877 shares of its common stock under its open market share repurchase program for approximately $29.5 million, or an average price of $101.46 per share. Subsequent to the first quarter of 2015 and through April 16, 2015, the Company repurchased and retired 177,695 shares of its common stock for approximately $18.0 million, or an average of $101.49 per share. As of April 16, 2015, the Company had approximately $85.2 million remaining under the program.

Dividends

On April 21, 2015, the Board of Directors declared a 31 cent per share quarterly dividend for shareholders of record as of June 15, 2015, to be paid on June 30, 2015.

Items Affecting Comparability

The Company's reported financial results for the first quarter of 2015 are not comparable to the reported financial results for the equivalent period in 2014. The table below presents certain items that affect comparability between 2015 and 2014 financial results. The Company believes that including such information is critical to the understanding of its financial results for the first quarter of 2015 as compared to the same period in 2014 (See the Comments on Regulation G section on page four for additional details).



First Quarter of 2014

 

(in thousands, except per share data)

 

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 March 22, 2015, the Company had approximately:

  • $75.0 million of unrestricted cash and cash equivalents;
  • $1.53 billion in total debt; and
  • $55.9 million of available borrowings under its $100.0 million variable funding notes, net of letters of credit issued of $44.1 million. The Company has collateralized these letters of credit with restricted cash, and has the ability to access this cash with minimal notice.

The Company's cash borrowing rate averaged 5.3% in both the first quarter of 2015 and the first quarter of 2014. Additionally, the Company invested $7.6 million in capital expenditures during the first quarter of 2015, versus $6.6 million in the first quarter of 2014.

Free cash flow, as reconciled below to cash flows from operations as determined under generally accepted accounting principles (GAAP), was approximately $77.1 million in the first quarter of 2015.

(in thousands)

 

First Quarter

of 2015

 

Net cash provided by operating activities

 

$

84,745

 

Capital expenditures

   

(7,600)

 

Free cash flow

 

$

77,145

 

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 and digital ordering technology, with a significant business in carryout pizza. It ranks among the world's top public restaurant brands with a global enterprise of more than 11,700 stores in over 75 international markets. Domino's had global retail sales of over $8.9 billion in 2014, comprised of more than $4.1 billion in the U.S. and nearly $4.8 billion internationally. In the first quarter of 2015, Domino's had global retail sales of over $2.2 billion, comprised of $1.1 billion in the U.S. and $1.1 billion internationally. Its system is comprised of franchise owners who accounted for nearly 97% of Domino's Pizza stores as of the first quarter of 2015. Emphasis on technology innovation helped Domino's generate approximately 50% of U.S. sales from digital channels at the end of 2014, and reach an estimated run rate of $4 billion annually in global digital sales. Domino's features an ordering app lineup that covers nearly 95% of the U.S. smartphone market and, in June 2014, debuted voice ordering for its iPhone® and Android™ apps, a true technology first within traditional and e-commerce retail.

Order – www.dominos.com
Mobile – http://mobile.dominos.com
Digital Info – anyware.dominos.com
Company Info – biz.dominos.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 biz.dominos.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; the strength of our brand in the markets in which we compete; our ability to retain key personnel; new product, digital ordering 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

 
   

March 22,

2015

      

% of

Total

Revenues

      

March 23,

2014

      

% of

Total

Revenues

 

(In thousands, except per share data)

                               

Revenues:

                               

Domestic Company-owned stores

 

$

92,375

           

$

82,457

         

Domestic franchise

   

61,774

             

53,421

         

Supply chain

   

311,656

             

284,334

         

International

   

36,222

             

33,640

         

Total revenues

   

502,027

     

100.0

%

   

453,852

     

100.0

%

                                 

Cost of sales:

                               

Domestic Company-owned stores

   

68,152

             

62,791

         

Supply chain

   

276,809

             

254,019

         

Total cost of sales

   

344,961

     

68.7

%

   

316,810

     

69.8

%

Operating margin

   

157,066

     

31.3

%

   

137,042

     

30.2

%

General and administrative

   

62,813

     

12.5

%

   

52,867

     

11.6

%

Income from operations

   

94,253

     

18.8

%

   

84,175

     

18.6

%

                                 

Interest expense, net

   

(20,071)

     

(4.0)%

     

(20,295)

     

(4.5)%

 

Income before provision for income taxes

   

74,182

     

14.8

%

   

63,880

     

14.1

%

                                 

Provision for income taxes

   

27,893

     

5.6

%

   

23,406

     

5.2

%

Net income

 

$

46,289

     

9.2

%

 

$

40,474

     

8.9

%

                                 

Earnings per share:

                               

Common stock – diluted

 

$

0.81

           

$

0.71

         
                                 

Dividends declared per share

 

$

0.31

           

$

0.25

         

 

Domino's Pizza, Inc. and Subsidiaries

Condensed Consolidated Balance Sheets

(Unaudited)

 
   

March 22, 2015

      

December 28, 2014

 

(In thousands)

               

Assets

               

Current assets:

               

Cash and cash equivalents

 

$

74,991

   

$

30,855

 

Restricted cash and cash equivalents

   

121,533

     

120,954

 

Accounts receivable

   

118,085

     

118,395

 

Inventories

   

37,899

     

37,944

 

Advertising fund assets, restricted

   

72,555

     

72,055

 

Other assets

   

20,978

     

48,158

 

Total current assets

   

446,041

     

428,361

 
                 

Property, plant and equipment, net

   

114,744

     

114,046

 
                 

Other assets

   

76,196

     

76,873

 
                 

Total assets

 

$

636,981

   

$

619,280

 
                 

Liabilities and stockholders' deficit

               

Current liabilities:

               

Current portion of long-term debt

 

$

234

   

$

565

 

Accounts payable

   

88,323

     

86,552

 

Dividends payable

   

17,579

     

14,351

 

Advertising fund liabilities

   

72,555

     

72,055

 

Other accrued liabilities

   

96,622

     

92,085

 

Total current liabilities

   

275,313

     

265,608

 
                 

Long-term liabilities:

               

Long-term debt, less current portion

   

1,527,202

     

1,523,546

 

Other accrued liabilities

   

48,044

     

49,591

 

Total long-term liabilities

   

1,575,246

     

1,573,137

 
                 

Total stockholders' deficit

   

(1,213,578)

     

(1,219,465)

 
                 

Total liabilities and stockholders' deficit

 

$

636,981

   

$

619,280

 

 

Domino's Pizza, Inc. and Subsidiaries

Condensed Consolidated Statements of Cash Flows

(Unaudited)

 
   

Fiscal Quarter Ended

 
   

March 22,

2015

       

March 23,

2014

 

(In thousands)

               

Cash flows from operating activities:

               

Net income

 

$

46,289

   

$

40,474

 

Adjustments to reconcile net income to net cash flows provided by 
   
operating activities:

               

Depreciation and amortization

   

7,347

     

6,421

 

(Gain) loss on sale/disposal of assets

   

150

     

(1,556)

 

Amortization of deferred financing costs

   

1,274

     

1,390

 

Provision for deferred income taxes

   

198

     

700

 

Non-cash compensation expense

   

4,466

     

4,455

 

Tax impact from equity-based compensation

   

(4,677)

     

(7,834)

 

Other

   

74

     

45

 

Changes in operating assets and liabilities

   

29,624

     

(7,891)

 

Net cash provided by operating activities

   

84,745

     

36,204

 
                 

Cash flows from investing activities:

               

Capital expenditures

   

(7,600)

     

(6,561)

 

Proceeds from sale of assets

   

6,789

     

3,906

 

Changes in restricted cash

   

(579)

     

16,827

 

Other

   

1,556

     

(279)

 

Net cash provided by investing activities

   

166

     

13,893

 
                 

Cash flows from financing activities:

               

Repayments of long-term debt and capital lease obligations

   

(103)

     

(6,032)

 

Proceeds from exercise of stock options

   

1,196

     

2,458

 

Tax impact from equity-based compensation

   

4,677

     

7,834

 

Purchases of common stock

   

(29,512)

     

(15,131)

 

Tax payments for restricted stock upon vesting

   

(3,632)

     

(4,308)

 

Payments of common stock dividends and equivalents

   

(13,965)

     

(11,053)

 

Net cash used in financing activities

   

(41,339)

     

(26,232)

 
                 

Effect of exchange rate changes on cash and cash equivalents

   

564

     

128

 
                 

Change in cash and cash equivalents

   

44,136

     

23,993

 
                 

Cash and cash equivalents, at beginning of period

   

30,855

     

14,383

 
                 

Cash and cash equivalents, at end of period

 

$

74,991

   

$

38,376

 

"Safe Harbor" Statement under the Private Securities Litigation Reform Act of 1995: Statements in this press release regarding Domino's Pizza, Inc.'s business which are not historical facts are "forward-looking statements" that involve risks and uncertainties. For a discussion of such risks and uncertainties, which could cause actual results to differ from those contained in the forward-looking statements, see "Risk Factors" in the Company's Annual Report or Form 10-K for the most recently ended fiscal year.

SOURCE Domino's Pizza, Inc.

Contact:

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

###

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