Domino's Pizza® Announces Second Quarter 2015 Financial Results

Continued Global Momentum with Strong Sales, Store Count and EPS Growth

ANN ARBOR, Mich. - July 16, 2015 // PRNewswire // - Domino's Pizza, Inc. (NYSE: DPZ), the recognized world leader in pizza delivery, announced results for the second 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 12.8% 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 6.7%, marking the 86th consecutive quarter of international same store sales growth. The Company had global net store growth of 186 stores in the quarter.

Diluted EPS was 81 cents, which was up 20.9% over the Company's diluted EPS in the prior year quarter. During the quarter, the Company repurchased 637,587 shares of its common stock for approximately $68.1 million. The Board of Directors also declared a 31-cent per share quarterly dividend for shareholders of record as of September 15, 2015, to be paid on September 30, 2015.

J. Patrick Doyle, Domino's President and Chief Executive Officer, said: "It was simply another great quarter. Our franchisees and corporate team members are executing at a very high level, and our digital initiatives continue to help attract more customers around the world. We're in a great place as a brand."

Second Quarter Highlights:

 

(dollars in millions, except per share data)

 

Second

Quarter of

2015

   

Second

Quarter of

2014

   

Two Fiscal

Quarters of

2015

   

Two Fiscal

Quarters of

2014

 
 

Net income

 

$

45.9

   

$

38.5

   

$

92.2

   

$

78.9

 
 

Weighted average diluted shares

   

56,628,237

     

57,124,457

     

56,820,743

     

57,246,871

 
 

Diluted earnings per share, as reported

 

$

0.81

   

$

0.67

   

$

1.62

   

$

1.38

 
 

Items affecting comparability*

   

     

     

     

(0.02)

 
 

Diluted earnings per share, as adjusted*

 

$

0.81

   

$

0.67

   

$

1.62

   

$

1.36

 
 

* Refer to the Items Affecting Comparability section below for additional details.

  • Revenues were up 8.5% for the second quarter versus the prior year period, driven by higher domestic same store sales and store count growth, which resulted in increased royalties from our franchised stores and higher revenues at our Company-owned stores. Higher supply chain revenues from increased volumes and incremental sales of equipment to stores in connection with the Company's store reimaging program also contributed to this increase. Although international franchise same store sales and store count grew as compared to the prior year period, the resulting increase in revenues was partially offset by the negative impact of foreign currency exchange rates.
  • Net Income was up 19.4% for the second 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 second quarter versus 67 cents in the prior year quarter, which represents an increase of 14 cents, or 20.9%. 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 below for additional details.

   

Second Quarter

of 2015

   

Second Quarter

of 2014

 

Same store sales growth: (versus prior year period)

               

Domestic Company-owned stores

   

+ 12.5

%

   

+ 3.5

%

Domestic franchise stores

   

+ 12.8

%

   

+ 5.5

%

Domestic stores

   

+ 12.8

%

   

+ 5.4

%

International stores (excluding foreign currency impact)

   

+ 6.7

%

   

+ 7.7

%

                 

Global retail sales growth: (versus prior year period)

               

Domestic stores

   

+ 14.9

%

   

+ 6.9

%

International stores

   

+ 1.3

%

   

+ 15.6

%

Total

   

+ 7.5

%

   

+ 11.5

%

                 

Global retail sales growth: (versus prior year period,

   excluding foreign currency impact)

               

Domestic stores

   

+ 14.9

%

   

+ 6.9

%

International stores

   

+ 15.0

%

   

+ 16.0

%

Total

   

+ 14.9

%

   

+ 11.7

%

 

   

Domestic

Company-

owned Stores

   

Domestic

Franchise

Stores

   

Total

Domestic

Stores

   

International

Stores

   

Total

 

Store counts:

                                       

Store count at March 22, 2015

   

379

     

4,705

     

5,084

     

6,655

     

11,739

 

Openings

   

     

22

     

22

     

178

     

200

 

Closings

   

(1)

     

(7)

     

(8)

     

(6)

     

(14)

 

Transfers

   

(2)

     

2

     

     

     

 

Store count at June 14, 2015

   

376

     

4,722

     

5,098

     

6,827

     

11,925

 

Second quarter 2015 net change

   

(3)

     

17

     

14

     

172

     

186

 

Trailing four quarters net change

   

     

96

     

96

     

708

     

804

 

 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 second 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 71619074. The webcast will also be archived for 30 days on biz.dominos.com.

Share Repurchases

During the second quarter of 2015, the Company repurchased and retired 637,587 shares of its common stock under its open market share repurchase program for approximately $68.1 million, or an average price of $106.84 per share. On July 15, 2015, the Board of Directors approved an increase to the Company's open market share repurchase program, resulting in a total remaining authorized amount for additional share repurchases of $200.0 million.

Dividends

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

Items Affecting Comparability

The Company's reported financial results for the two fiscal quarters 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. Management believes that including such information is critical to the understanding of its financial results for the two fiscal quarters of 2015 as compared to the same period in 2014 (See the Comments on Regulation G section below for additional details).

In addition to the items noted in the table below, the Company had lower weighted average diluted shares outstanding in 2015 that resulted in an increase in diluted EPS of approximately one cent in both the second quarter and the two fiscal quarters of 2015.

 

     

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 14, 2015, the Company had approximately:

  • $25.9 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. This amount is net of letters of credit issued of $44.1 million, of which $13.9 million has been collateralized with restricted cash. The Company has the ability to access this cash with minimal notice.

The Company's cash borrowing rate averaged 5.3% in both the second quarter of 2015 and the second quarter of 2014. Additionally, the Company invested $20.2 million in capital expenditures during the two fiscal quarters of 2015, versus $18.9 million in the two fiscal quarters of 2014.

Free cash flow, as reconciled below to cash flows from operations as determined under generally accepted accounting principles (GAAP), was approximately $83.4 million in the two fiscal quarters of 2015.

(in thousands)

 

Two Fiscal Quarters

of 2015

 

Net cash provided by operating activities

 

$

103,594

 

Capital expenditures

   

(20,238)

 

Free cash flow

 

$

83,356

 

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, supply chain revenues are directly impacted by changes in 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 a global enterprise of more than 11,900 stores in over 80 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 second quarter of 2015, Domino's had global retail sales of nearly $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 stores as of the second 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 $4.0 billion annually in global digital sales. Domino's features an ordering app lineup that covers nearly 95% of the U.S. smartphone market and has recently introduced several innovative ordering platforms, including Ford SYNC®, Samsung Smart TV® and Pebble Watch, as well as Twitter and text message using a pizza emoji. In June 2014, Domino's 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 operating expenses resulting from changes in prices of food (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 14,

2015

     

% of

Total

Revenues

     

June 15,

2014

     

% of

Total

Revenues

 

(In thousands, except per share data)

                               

Revenues:

                               

Domestic Company-owned stores

 

$

88,794

           

$

78,814

         

Domestic franchise

   

60,827

             

52,038

         

Supply chain

   

302,903

             

284,928

         

International franchise

   

36,098

             

34,683

         

Total revenues

   

488,622

     

100.0

%

   

450,463

     

100.0

%

Cost of sales:

                               

Domestic Company-owned stores

   

66,082

             

60,717

         

Supply chain

   

269,868

             

255,101

         

Total cost of sales

   

335,950

     

68.8

%

   

315,818

     

70.1

%

Operating margin

   

152,672

     

31.2

%

   

134,645

     

29.9

%

General and administrative

   

60,441

     

12.3

%

   

53,282

     

11.8

%

Income from operations

   

92,231

     

18.9

%

   

81,363

     

18.1

%

Interest expense, net

   

(18,953)

     

(3.9)

%

   

(19,824)

     

(4.4)

%

Income before provision for income taxes

   

73,278

     

15.0

%

   

61,539

     

13.7

%

Provision for income taxes

   

27,369

     

5.6

%

   

23,077

     

5.2

%

Net income

 

$

45,909

     

9.4

%

 

$

38,462

     

8.5

%

Earnings per share:

                               

Common stock – diluted

 

$

0.81

           

$

0.67

         

Dividends declared per share

 

$

0.31

           

$

0.25

         

 

Domino's Pizza, Inc. and Subsidiaries

Condensed Consolidated Statements of Income

(Unaudited)

 
   

Two Fiscal Quarters Ended

 
   

June 14,

2015

   

% of

Total

Revenues

      

June 15,

2014

   

% of

Total

Revenues

 

(In thousands, except per share data)

                               

Revenues:

                               

Domestic Company-owned stores

 

$

181,169

           

$

161,271

         

Domestic franchise

   

122,601

             

105,459

         

Supply chain

   

614,559

             

569,262

         

International franchise

   

72,320

             

68,323

         

Total revenues

   

990,649

     

100.0

%

   

904,315

     

100.0

%

Cost of sales:

                               

Domestic Company-owned stores

   

134,234

             

123,508

         

Supply chain

   

546,677

             

509,120

         

Total cost of sales

   

680,911

     

68.7

%

   

632,628

     

70.0

%

Operating margin

   

309,738

     

31.3

%

   

271,687

     

30.0

%

General and administrative

   

123,254

     

12.5

%

   

106,149

     

11.7

%

Income from operations

   

186,484

     

18.8

%

   

165,538

     

18.3

%

Interest expense, net

   

(39,024)

     

(3.9)

%

   

(40,119)

     

(4.4)

%

Income before provision for income taxes

   

147,460

     

14.9

%

   

125,419

     

13.9

%

Provision for income taxes

   

55,262

     

5.6

%

   

46,483

     

5.2

%

Net income

 

$

92,198

     

9.3

%

 

$

78,936

     

8.7

%

Earnings per share:

                               

Common stock – diluted

 

$

1.62

           

$

1.38

         

Dividends declared per share

 

$

0.62

           

$

0.50

         

 

Domino's Pizza, Inc. and Subsidiaries

Condensed Consolidated Balance Sheets

(Unaudited)

 
   

June 14, 2015

       

December 28, 2014

 

(In thousands)

               

Assets

               

Current assets:

               

Cash and cash equivalents

 

$

25,891

   

$

30,855

 

Restricted cash and cash equivalents

   

96,817

     

120,954

 

Accounts receivable

   

113,328

     

118,395

 

Inventories

   

36,283

     

37,944

 

Advertising fund assets, restricted

   

90,302

     

72,055

 

Other assets

   

41,880

     

48,158

 

Total current assets

   

404,501

     

428,361

 

Property, plant and equipment, net

   

117,196

     

114,046

 

Other assets

   

76,204

     

76,873

 

Total assets

 

$

597,901

   

$

619,280

 

Liabilities and stockholders' deficit

               

Current liabilities:

               

Current portion of long-term debt

 

$

237

   

$

565

 

Accounts payable

   

76,961

     

86,552

 

Dividends payable

   

17,485

     

14,351

 

Advertising fund liabilities

   

90,302

     

72,055

 

Other accrued liabilities

   

84,228

     

92,085

 

Total current liabilities

   

269,213

     

265,608

 

Long-term liabilities:

               

Long-term debt, less current portion

   

1,527,161

     

1,523,546

 

Other accrued liabilities

   

47,182

     

49,591

 

Total long-term liabilities

   

1,574,343

     

1,573,137

 

Total stockholders' deficit

   

(1,245,655)

     

(1,219,465)

 

Total liabilities and stockholders' deficit

 

$

597,901

   

$

619,280

 

 

Domino's Pizza, Inc. and Subsidiaries

Condensed Consolidated Statements of Cash Flows

(Unaudited)

 
   

Two Fiscal Quarters Ended

 
   

June 14,

2015

      

June 15,

2014

 

(In thousands)

               

Cash flows from operating activities:

               

Net income

 

$

92,198

   

$

78,936

 

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

               

Depreciation and amortization

   

15,028

     

13,077

 

Gains on sale/disposal of assets

   

(272)

     

(1,687)

 

Amortization of deferred financing costs

   

2,550

     

2,771

 

Benefit from deferred income taxes

   

(1,964)

     

(2,187)

 

Non-cash compensation expense

   

7,776

     

8,080

 

Tax impact from equity-based compensation

   

(7,556)

     

(8,319)

 

Other

   

(725)

     

(623)

 

Changes in operating assets and liabilities

   

(3,441)

     

(29,258)

 

Net cash provided by operating activities

   

103,594

     

60,790

 

Cash flows from investing activities:

               

Capital expenditures

   

(20,238)

     

(18,948)

 

Proceeds from sale of assets

   

8,785

     

4,967

 

Changes in restricted cash

   

24,137

     

50,743

 

Other

   

1,449

     

(1,049)

 

Net cash provided by investing activities

   

14,133

     

35,713

 

Cash flows from financing activities:

               

Repayments of long-term debt and capital lease obligations

   

(141)

     

(12,022)

 

Proceeds from exercise of stock options

   

2,067

     

2,648

 

Tax impact from equity-based compensation

   

7,556

     

8,319

 

Purchases of common stock

   

(97,634)

     

(65,006)

 

Tax payments for restricted stock upon vesting

   

(3,737)

     

(4,363)

 

Payments of common stock dividends and equivalents

   

(31,039)

     

(25,130)

 

Net cash used in financing activities

   

(122,928)

     

(95,554)

 

Effect of exchange rate changes on cash and cash equivalents

   

237

     

(28)

 

Change in cash and cash equivalents

   

(4,964)

     

921

 

Cash and cash equivalents, at beginning of period

   

30,855

     

14,383

 

Cash and cash equivalents, at end of period

 

$

25,891

   

$

15,304

 

SOURCE Domino's Pizza, Inc.

Contact:

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

###

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Golden Corral Buffet and Grill
Golden Corral is the nation's leading family style restaurant franchise featuring steaks, buffet and bakery items.
Discovery Point Child Development Centers®
Leading education-based childcare franchise founded in 1988 with corporate headquarters in Atlanta, GA. with a turnkey business model, real estate...
Speaking Roses
Speaking Roses gives you the opportunity to produce, sell, and distribute our patented product in your area using our very own flower printer....

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