Domino's Pizza® Announces Second Quarter 2016 Financial Results

Strong Fundamentals Continue to Drive Strong Sales, Store Count and EPS Growth

ANN ARBOR, Mich. - July 21, 2016 // PRNewswire // - Domino's Pizza, Inc. (NYSE: DPZ), the recognized world leader in pizza delivery, today announced results for the second quarter of 2016, comprised of growth in same store sales, global store counts and diluted earnings per share. Domestic same store sales grew 9.7% during the quarter versus the year-ago period, continuing the 21-quarter positive sales momentum in the U.S. business. The international division also posted strong results with quarterly same store sales growth of 7.1%, marking the 90th consecutive quarter of international same store sales growth. The Company had global net store growth of 244 stores in the quarter, and 1,011 net new stores over the trailing four quarters.

Diluted EPS was 98 cents for the second quarter, which was up 21.0% over the Company's diluted EPS in the prior year quarter. During the quarter, the Company repurchased 1,845,126 shares of its common stock for approximately $224.1 million. The Board of Directors also declared a 38-cent per share quarterly dividend for shareholders of record as of September 15, 2016, to be paid on September 30, 2016.

J. Patrick Doyle, Domino's President and Chief Executive Officer, said: "I am pleased with our impressive top and bottom line results during the second quarter, and the performance of our franchisees in the U.S. and across the globe. The business continued to progress in a very positive direction."

Second Quarter Highlights:

(dollars in millions, except per share data)

 

Second

Quarter of

2016

   

Second

Quarter of

2015

   

Two Fiscal

Quarters of

2016

   

Two Fiscal

Quarters of

2015

 

Net income

 

$

49.3

   

$

45.9

   

$

94.7

   

$

92.2

 

Weighted average diluted shares

   

50,459,754

     

56,628,237

     

50,846,941

     

56,820,743

 

Diluted earnings per share

 

$

0.98

   

$

0.81

   

$

1.86

   

$

1.62

 
  • Revenues were up 12.0% for the second quarter versus the prior year period, due primarily to higher supply chain revenues from increased volumes and store growth. 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 increased 7.3% for the second quarter versus the prior year period, due primarily to higher consolidated operating margins driven by the increase in sales and store growth. Higher general and administrative expenses and higher interest expense as a result of the Company's 2015 recapitalization partially offset this increase.
  • Diluted EPS was 98 cents for the second quarter versus 81 cents in the prior year quarter. This represents a 17-cent or 21.0% increase over the prior year quarter. This increase was driven by the aforementioned operating results as well as lower diluted share counts, primarily as a result of the share repurchases made during the trailing four quarters.

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 three for additional details.

   

Second Quarter of 2016

 

Second Quarter of 2015

Same store sales growth: (versus prior year period)

               

Domestic Company-owned stores

   

+ 9.1

%

   

+ 12.5

%

Domestic franchise stores

   

+ 9.8

%

   

+ 12.8

%

Domestic stores

   

+ 9.7

%

   

+ 12.8

%

International stores (excluding foreign currency impact)

   

+ 7.1

%

   

+ 6.7

%

                 

Global retail sales growth: (versus prior year period)

               

Domestic stores

   

+ 11.8

%

   

+ 14.9

%

International stores

   

+ 11.5

%

   

+ 1.3

%

Total

   

+ 11.7

%

   

+ 7.5

%

                 

Global retail sales growth: (versus prior year period,

   excluding foreign currency impact)

               

Domestic stores

   

+ 11.8

%

   

+ 14.9

%

International stores

   

+ 16.6

%

   

+ 15.0

%

Total

   

+ 14.3

%

   

+ 14.9

%

 

   

Domestic

Company-

owned Stores

   

Domestic

Franchise

Stores

   

Total

Domestic

Stores

   

International

Stores

   

Total

 

Store counts:

                                       

Store count at March 27, 2016

   

385

     

4,831

     

5,216

     

7,476

     

12,692

 

Openings

   

     

36

     

36

     

228

     

264

 

Closings

   

     

(7)

     

(7)

     

(13)

     

(20)

 

Transfers

   

1

     

(1)

     

     

     

 

Store count at June 19, 2016

   

386

     

4,859

     

5,245

     

7,691

     

12,936

 

Second quarter 2016 net change

   

1

     

28

     

29

     

215

     

244

 

Trailing four quarters net change

   

10

     

137

     

147

     

864

     

1,011

 

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 2016 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. The webcast will also be archived for one year on biz.dominos.com.

Share Repurchases

During the second quarter of 2016, the Company repurchased and retired 1,845,126 shares of its common stock under its open market share repurchase program for approximately $224.1 million, or an average price of $121.48 per share. On May 25, 2016, the Board of Directors approved an increase to the Company's open market share repurchase program, so that the Company had an aggregate of $250.0 million available for future share repurchases as of that date. As of June 19, 2016, the end of the second quarter, the Company had a total remaining authorized amount for share repurchases of $225.2 million.

Subsequent to the second quarter, the Company repurchased and retired 85,020 shares for $10.8 million, or an average price of $126.46 per share. As of July 14, 2016, the Company had a total remaining authorized amount for share repurchases of $214.5 million.

Liquidity

As of June 19, 2016, the Company had approximately:

  • $22.3 million of unrestricted cash and cash equivalents;
  • $2.21 billion in total debt; and
  • $68.8 million of available borrowings under its $125.0 million variable funding notes. Letters of credit issued under the Company's variable funding note facility were$46.2 million.

The Company invested $25.0 million in capital expenditures during the two fiscal quarters of 2016. Free cash flow, as reconciled below to cash flows from operations as determined under generally accepted accounting principles (GAAP), was approximately $44.4 million in the two fiscal quarters of 2016.

(in thousands)

 

Two Fiscal
Quarters

of 2016

 

Net cash provided by operating activities

 

$

69,453

 

Capital expenditures

   

(25,045)

 

Free cash flow

 

$

44,408

 

Comments on Regulation G

In addition to the GAAP financial measures set forth in this press release, the Company has included the free cash flow non-GAAP financial measure within the meaning of Regulation G. 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 "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," which is 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," which is 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 12,900 stores in over 80 markets. Domino's had global retail sales of over $9.9 billion in 2015, with more than $4.8 billion in the U.S. and nearly $5.1 billion internationally. In the second quarter of 2016, Domino's had global retail sales of over $2.4 billion, with nearly $1.2 billion in the U.S. and over $1.2 billion internationally. Its system is comprised of independent franchise owners who accounted for over 97% of Domino's stores as of the second quarter of 2016. Emphasis on technology innovation helped Domino's generate over 50% of U.S. sales from digital channels at the end of 2015, and an estimated $4.7 billion annually in global digital sales. Domino's features an ordering app lineup that covers nearly 95% of the U.S. smartphone market and recently introduced several innovative ordering platforms, including Zero-click Ordering, Samsung Smart TV®, Apple Watch and Amazon Echo, as well as Twitter and text message using a pizza emoji. In late 2015, Domino's announced the design and launch of the DXP®, a purpose-built pizza delivery vehicle, as well as its first digital customer loyalty program.

Order – dominos.com 
AnyWare Ordering – anyware.dominos.com 
Company Info – biz.dominos.com   
Twitter – twitter.com/dominos   
Facebook – facebook.com/dominos   
Instagram – instagram.com/dominos 
YouTube – 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; 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 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 19,

2016

   

% of

Total

Revenues

   

June 14,

2015

   

% of

Total

Revenues

 

(In thousands, except per share data)

                               

Revenues:

                               

Domestic Company-owned stores

 

$

97,834

           

$

88,794

         

Domestic franchise

   

69,675

             

60,827

         

Supply chain

   

339,259

             

302,903

         

International franchise

   

40,573

             

36,098

         

Total revenues

   

547,341

     

100.0

%

   

488,622

     

100.0

%

Cost of sales:

                               

Domestic Company-owned stores

   

73,795

             

66,082

         

Supply chain

   

301,708

             

269,868

         

Total cost of sales

   

375,503

     

68.6

%

   

335,950

     

68.8

%

Operating margin

   

171,838

     

31.4

%

   

152,672

     

31.2

%

General and administrative

   

68,137

     

12.4

%

   

60,441

     

12.3

%

Income from operations

   

103,701

     

19.0

%

   

92,231

     

18.9

%

Interest expense, net

   

(25,009)

     

(4.6)%

     

(18,953)

     

(3.9)%

 

Income before provision for income taxes

   

78,692

     

14.4

%

   

73,278

     

15.0

%

Provision for income taxes

   

29,431

     

5.4

%

   

27,369

     

5.6

%

Net income

 

$

49,261

     

9.0

%

 

$

45,909

     

9.4

%

                                 

Earnings per share:

                               

Common stock – diluted

 

$

0.98

           

$

0.81

         
                                 

Dividends declared per share

 

$

0.38

           

$

0.31

         

 

Domino's Pizza, Inc. and Subsidiaries

Condensed Consolidated Statements of Income

(Unaudited)

 
 
   

Two Fiscal Quarters Ended

 
   

June 19,

2016

   

% of

Total

Revenues

   

June 14,

2015

   

% of

Total

Revenues

 

(In thousands, except per share data)

                               

Revenues:

                               

Domestic Company-owned stores

 

$

194,278

           

$

181,169

         

Domestic franchise

   

137,826

             

122,601

         

Supply chain

   

674,954

             

614,559

         

International franchise

   

79,459

             

72,320

         

Total revenues

   

1,086,517

     

100.0

%

   

990,649

     

100.0

%

Cost of sales:

                               

Domestic Company-owned stores

   

146,550

             

134,234

         

Supply chain

   

600,912

             

546,677

         

Total cost of sales

   

747,462

     

68.8

%

   

680,911

     

68.7

%

Operating margin

   

339,055

     

31.2

%

   

309,738

     

31.3

%

General and administrative

   

136,641

     

12.6

%

   

123,254

     

12.5

%

Income from operations

   

202,414

     

18.6

%

   

186,484

     

18.8

%

Interest expense, net

   

(50,880)

     

(4.7)%

     

(39,024)

     

(3.9)%

 

Income before provision for income taxes

   

151,534

     

13.9

%

   

147,460

     

14.9

%

Provision for income taxes

   

56,822

     

5.2

%

   

55,262

     

5.6

%

Net income

 

$

94,712

     

8.7

%

 

$

92,198

     

9.3

%

                                 

Earnings per share:

                               

Common stock – diluted

 

$

1.86

           

$

1.62

         
                                 

Dividends declared per share

 

$

0.76

           

$

0.62

         

 

Domino's Pizza, Inc. and Subsidiaries

Condensed Consolidated Balance Sheets

(Unaudited)

 
 
   

June 19, 2016

   

January 3, 2016

 

(In thousands)

               

Assets

               

Current assets:

               

Cash and cash equivalents

 

$

22,305

   

$

133,449

 

Restricted cash and cash equivalents

   

107,435

     

180,940

 

Accounts receivable

   

132,533

     

131,582

 

Inventories

   

36,473

     

36,861

 

Advertising fund assets, restricted

   

109,025

     

99,159

 

Prepaid expenses and other

   

42,678

     

20,646

 

Total current assets

   

450,449

     

602,637

 

Property, plant and equipment, net

   

131,972

     

131,890

 

Other assets

   

69,857

     

65,318

 

Total assets

 

$

652,278

   

$

799,845

 

Liabilities and stockholders' deficit

               

Current liabilities:

               

Current portion of long-term debt

 

$

48,870

   

$

59,333

 

Accounts payable

   

84,902

     

106,927

 

Dividends payable

   

18,815

     

557

 

Advertising fund liabilities

   

109,025

     

99,159

 

Other accrued liabilities

   

95,115

     

110,007

 

Total current liabilities

   

356,727

     

375,983

 

Long-term liabilities:

               

Long-term debt, less current portion

   

2,165,177

     

2,181,460

 

Other accrued liabilities

   

45,128

     

42,653

 

Total long-term liabilities

   

2,210,305

     

2,224,113

 

Total stockholders' deficit

   

(1,914,754)

     

(1,800,251)

 

Total liabilities and stockholders' deficit

 

$

652,278

   

$

799,845

 

 

 

Domino's Pizza, Inc. and Subsidiaries

Condensed Consolidated Statements of Cash Flows

(Unaudited)

 
   

Two Fiscal Quarters Ended

 
     

June 19,

2016

     

June 14,

2015

 

(In thousands)

               

Cash flows from operating activities:

               

Net income

 

$

94,712

   

$

92,198

 

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

               

Depreciation and amortization

   

16,756

     

15,028

 

Loss (gain) on sale/disposal of assets

   

247

     

(272)

 

Amortization of debt issuance costs

   

3,133

     

2,550

 

Provision (benefit) for deferred income taxes

   

1,775

     

(1,964)

 

Non-cash compensation expense

   

8,617

     

7,776

 

Tax impact from equity-based compensation

   

(34,852)

     

(7,556)

 

Other

   

16

     

(725)

 

Changes in operating assets and liabilities

   

(20,951)

     

(3,441)

 

Net cash provided by operating activities

   

69,453

     

103,594

 

Cash flows from investing activities:

               

Capital expenditures

   

(25,045)

     

(20,238)

 

Proceeds from sale of assets

   

2,765

     

8,785

 

Changes in restricted cash

   

73,505

     

24,137

 

Other

   

(904)

     

1,449

 

Net cash provided by investing activities

   

50,321

     

14,133

 

Cash flows from financing activities:

               

Proceeds from issuance of long-term debt

   

10,000

     

 

Repayments of long-term debt and capital lease obligations

   

(39,878)

     

(141)

 

Proceeds from exercise of stock options

   

10,848

     

2,067

 

Tax impact from equity-based compensation

   

34,852

     

7,556

 

Purchases of common stock

   

(224,139)

     

(97,634)

 

Tax payments for restricted stock upon vesting

   

(3,036)

     

(3,737)

 

Payments of common stock dividends and equivalents

   

(19,099)

     

(31,039)

 

Net cash used in financing activities

   

(230,452)

     

(122,928)

 

Effect of exchange rate changes on cash and cash equivalents

   

(466)

     

237

 

Change in cash and cash equivalents

   

(111,144)

     

(4,964)

 

Cash and cash equivalents, at beginning of period

   

133,449

     

30,855

 

Cash and cash equivalents, at end of period

 

$

22,305

   

$

25,891

 

SOURCE Domino's Pizza, Inc.

Contact:

Tim McIntyre
Executive Vice President
Communications
Investor Relations and Legislative Affairs
(734) 930-3563

###

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