Domino's Pizza® Announces Third Quarter 2016 Financial Results

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

ANN ARBOR, Mich., - Oct. 18, 2016 // PRNewswire // - Domino's Pizza, Inc. (NYSE: DPZ), the recognized world leader in pizza delivery, today announced results for the third quarter of 2016, comprised of strong growth in same store sales, global store counts and diluted earnings per share. Domestic same store sales grew 13.0% during the quarter versus the year-ago period, which represents the 22nd consecutive quarter of positive sales in the U.S. business. The international division also posted strong results with quarterly same store sales growth of 6.6%, marking the 91st consecutive quarter of international same store sales growth. The Company had global net store growth of 316 stores in the quarter, and 1,133 stores over the trailing four quarters.

Diluted EPS was 96 cents for the third quarter, which was up 43.3% over the prior year quarter. During the quarter, the Company repurchased 412,260 shares of its common stock for approximately $59.7 million. The Company's Board of Directors also declared a 38-cent per share quarterly dividend for shareholders of record as of December 15, 2016, to be paid on December 30, 2016.

"We continued to execute at a very high level during the third quarter, as our unprecedented momentum, steady strategy and alignment with our outstanding franchisees is helping to take the business to new heights," said J. Patrick Doyle, Domino's President and Chief Executive Officer. "I couldn't be more pleased with the way our system continues to answer the challenge of sustained success."

Third Quarter Highlights:

(dollars in millions, except per share data)

Third

Quarter of

2016

 

Third

Quarter of

2015

 

Three Fiscal

Quarters of

2016

 

Three Fiscal

Quarters of

2015

Net income

$

47.2

 

$

37.8

 

$

141.9

 

$

130.0

Weighted average diluted shares

 

49,242,182

   

56,115,670

   

50,309,217

   

56,584,913

Diluted earnings per share

$

0.96

 

$

0.67

 

$

2.82

 

$

2.30

  • Revenues were up 16.9% for the third 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 24.8% for the third quarter versus the prior year period, due primarily to higher consolidated operating margins driven in part by the increase in sales and store growth. Higher general and administrative expenses, as well as higher interest expense as a result of the Company's 2015 recapitalization partially offset this increase. Additionally, the Company's consolidated operating margins and net income benefited from lower insurance expense in the quarter, due to a casualty insurance charge recorded in the third quarter of 2015.
  • Diluted EPS was 96 cents for the third quarter versus 67 cents in the prior year quarter. This represents a 29-cent or 43.3% increase over the prior year quarter. This increase was driven by the aforementioned increase in net income 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.

 

Third

Quarter of

2016

   

Third

Quarter of

2015

 

Same store sales growth: (versus prior year period)

             

Domestic Company-owned stores

 

+ 13.8

%

   

+ 11.5

%

Domestic franchise stores

 

+ 12.9

%

   

+ 10.4

%

Domestic stores

 

+ 13.0

%

   

+ 10.5

%

International stores (excluding foreign currency impact)

 

+ 6.6

%

   

+ 7.7

%

               

Global retail sales growth: (versus prior year period)

             

Domestic stores

 

+ 16.2

%

   

+ 12.7

%

International stores

 

+ 13.6

%

   

+ 0.7

%

Total

 

+ 14.9

%

   

+ 6.1

%

               

Global retail sales growth: (versus prior year period,

   excluding foreign currency impact)

             

Domestic stores

 

+ 16.2

%

   

+ 12.7

%

International stores

 

+ 18.1

%

   

+ 17.4

%

Total

 

+ 17.2

%

   

+ 15.2

%

 

 

Domestic

Company-

owned Stores

 

Domestic

Franchise

Stores

 

Total

Domestic

Stores

 

International

Stores

 

Total

Store counts:

                           

Store count at June 19, 2016

 

386

   

4,859

   

5,245

   

7,691

   

12,936

Openings

 

1

   

35

   

36

   

300

   

336

Closings

 

   

(8)

   

(8)

   

(12)

   

(20)

Store count at September 11, 2016

 

387

   

4,886

   

5,273

   

7,979

   

13,252

Third quarter 2016 net change

 

1

   

27

   

28

   

288

   

316

Trailing four quarters net change

 

10

   

151

   

161

   

972

   

1,133

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 third 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 third quarter of 2016, the Company repurchased and retired 412,260 shares of its common stock under its open market share repurchase program for approximately $59.7 million, or an average price of$144.85 per share. As of September 11, 2016, the end of the third quarter, the Company had a total remaining authorized amount for share repurchases of $165.5 million.

Liquidity

As of September 11, 2016, the Company had approximately:

  • $30.0 million of unrestricted cash and cash equivalents;
  • $2.23 billion in total debt; and
  • $46.2 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 $43.8 million.

The Company invested $38.3 million in capital expenditures during the three 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 $124.4 million in the three fiscal quarters of 2016.

(in thousands)

 

Three Fiscal
Quarters

of 2016

 

Net cash provided by operating activities

 

$

162,617

 

Capital expenditures

   

(38,254)

 

Free cash flow

 

$

124,363

 

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 13,200 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 third quarter of 2016, Domino's had global retail sales of nearly $2.5 billion, with over $1.2 billion in the U.S. and nearly $1.3 billion internationally. Its system is comprised of independent franchise owners who accounted for over 97% of Domino's stores as of the third quarter of 2016. Emphasis on technology innovation helped Domino's reach an estimated $4.7 billion annually in global digital sales at the end of 2015, and has produced several innovative ordering platforms including Facebook Messenger, Samsung Smart TV®, Apple Watch, Amazon Echo, 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 Piece of the Pie Rewards™, 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 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

 
 

September 11,

2016

 

% of

Total

Revenues

   

September 6,

2015

 

% of

Total

Revenues

 

(In thousands, except per share data)

                         

Revenues:

                         

Domestic Company-owned stores

$

100,966

         

$

86,456

       

Domestic franchise

 

70,637

           

59,385

       

Supply chain

 

355,036

           

303,591

       

International franchise

 

40,038

           

35,264

       

Total revenues

 

566,677

   

100.0

%

   

484,696

   

100.0

%

Cost of sales:

                         

Domestic Company-owned stores

 

77,221

           

70,032

       

Supply chain

 

315,553

           

272,710

       

Total cost of sales

 

392,774

   

69.3

%

   

342,742

   

70.7

%

Operating margin

 

173,903

   

30.7

%

   

141,954

   

29.3

%

General and administrative

 

72,992

   

12.9

%

   

61,411

   

12.7

%

Income from operations

 

100,911

   

17.8

%

   

80,543

   

16.6

%

Interest expense, net

 

(25,097)

   

(4.4)

%

   

(19,915)

   

(4.1)

%

Income before provision for income taxes

 

75,814

   

13.4

%

   

60,628

   

12.5

%

Provision for income taxes

 

28,582

   

5.1

%

   

22,796

   

4.7

%

Net income

$

47,232

   

8.3

%

 

$

37,832

   

7.8

%

Earnings per share:

                         

Common stock – diluted

$

0.96

         

$

0.67

       

Dividends declared per share

$

0.38

         

$

0.31

       

 

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

 
 

Three Fiscal Quarters Ended

 
 

September 11,

2016

 

% of

Total

Revenues

   

September 6,

2015

 

% of

Total

Revenues

 

(In thousands, except per share data)

                     

Revenues:

                     

Domestic Company-owned stores

$

295,243

       

$

267,625

     

Domestic franchise

 

208,463

         

181,986

     

Supply chain

 

1,029,990

         

918,150

     

International franchise

 

119,497

         

107,584

     

Total revenues

 

1,653,193

 

 100.0

%

   

1,475,345

 

 100.0

%

Cost of sales:

                     

Domestic Company-owned stores

 

223,771

         

204,266

     

Supply chain

 

916,465

         

819,387

     

Total cost of sales

 

1,140,236

 

 69.0

%

   

1,023,653

 

 69.4

%

Operating margin

 

512,957

 

 31.0

%

   

451,692

 

 30.6

%

General and administrative

 

209,632

 

 12.7

%

   

184,665

 

 12.5

%

Income from operations

 

303,325

 

 18.3

%

   

267,027

 

 18.1

%

Interest expense, net

 

(75,977)

 

 (4.5)

%

   

(58,939)

 

 (4.0)

%

Income before provision for income taxes

 

227,348

 

 13.8

%

   

208,088

 

 14.1

%

Provision for income taxes

 

85,403

 

 5.2

%

   

78,058

 

 5.3

%

Net income

$

141,945

 

 8.6

%

 

$

130,030

 

 8.8

%

Earnings per share:

                     

Common stock – diluted

$

2.82

       

$

2.30

     

Dividends declared per share

$

1.14

       

$

0.93

     

 

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

   
   

September 11, 2016

 

January 3, 2016

 

(In thousands)

             

Assets

             

Current assets:

             

Cash and cash equivalents

 

$

29,981

 

$

133,449

 

Restricted cash and cash equivalents

   

123,569

   

180,940

 

Accounts receivable

   

138,107

   

131,582

 

Inventories

   

38,834

   

36,861

 

Advertising fund assets, restricted

   

115,234

   

99,159

 

Prepaid expenses and other

   

26,865

   

20,646

 

Total current assets

   

472,590

   

602,637

 

Property, plant and equipment, net

   

132,601

   

131,890

 

Other assets

   

71,416

   

65,318

 

Total assets

 

$

676,607

 

$

799,845

 

Liabilities and stockholders' deficit

             

Current liabilities:

             

Current portion of long-term debt

 

$

73,877

 

$

59,333

 

Accounts payable

   

103,994

   

106,927

 

Dividends payable

   

18,547

   

557

 

Advertising fund liabilities

   

115,234

   

99,159

 

Other accrued liabilities

   

98,865

   

110,007

 

Total current liabilities

   

410,517

   

375,983

 

Long-term liabilities:

             

Long-term debt, less current portion

   

2,156,884

   

2,181,460

 

Other accrued liabilities

   

45,352

   

42,653

 

Total long-term liabilities

   

2,202,236

   

2,224,113

 

Total stockholders' deficit

   

(1,936,146)

   

(1,800,251)

 

Total liabilities and stockholders' deficit

 

$

676,607

 

$

799,845

 

 

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

 
 

Three Fiscal Quarters Ended

 
 

September 11,

2016

 

September 6,

2015

 

(In thousands)

           

Cash flows from operating activities:

           

Net income

$

141,945

 

$

130,030

 

Adjustments to reconcile net income to net cash provided by

   operating activities:

           

Depreciation and amortization

 

25,460

   

22,695

 

Loss (gain) on sale/disposal of assets

 

473

   

(73)

 

Amortization of debt issuance costs

 

4,562

   

3,825

 

Provision for deferred income taxes

 

2,657

   

959

 

Non-cash compensation expense

 

12,344

   

11,188

 

Tax impact from equity-based compensation

 

(41,479)

   

(15,745)

 

Other

 

(406)

   

(1,216)

 

Changes in operating assets and liabilities

 

17,061

   

15,645

 

Net cash provided by operating activities

 

162,617

   

167,308

 

Cash flows from investing activities:

           

Capital expenditures

 

(38,254)

   

(33,834)

 

Proceeds from sale of assets

 

4,658

   

10,464

 

Changes in restricted cash

 

57,371

   

29,933

 

Other

 

(1,669)

   

1,304

 

Net cash provided by investing activities

 

22,106

   

7,867

 

Cash flows from financing activities:

           

Proceeds from issuance of long-term debt

 

63,000

   

5,000

 

Repayments of long-term debt and capital lease obligations

 

(77,592)

   

(5,198)

 

Proceeds from exercise of stock options

 

12,324

   

4,459

 

Tax impact from equity-based compensation

 

41,479

   

15,745

 

Purchases of common stock

 

(283,858)

   

(138,550)

 

Tax payments for restricted stock upon vesting

 

(5,605)

   

(7,442)

 

Payments of common stock dividends and equivalents

 

(37,548)

   

(48,141)

 

Net cash used in financing activities

 

(287,800)

   

(174,127)

 

Effect of exchange rate changes on cash and cash equivalents

 

(391)

   

603

 

Change in cash and cash equivalents

 

(103,468)

   

1,651

 

Cash and cash equivalents, at beginning of period

 

133,449

   

30,855

 

Cash and cash equivalents, at end of period

$

29,981

 

$

32,506

 

SOURCE Domino's Pizza, Inc.

Contact:

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

###

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