Domino's Pizza® Announces First Quarter 2017 Financial Results

  • Domestic same store sales growth of 10.2%
  • International same store sales growth of 4.3%
  • Global net store growth of 189
  • Global retail sales growth of 13.2%
  • Diluted EPS of $1.26, an increase of 41.6% over the prior year quarter

ANN ARBOR, Mich. - April 27, 2017 // PRNewswire // - Domino's Pizza, Inc. (NYSE: DPZ), the recognized world leader in pizza delivery, today announced results for the first quarter of 2017, comprised of strong growth in same store sales, global store counts and earnings per share. Domestic same store sales grew 10.2% during the quarter versus the year-ago period, which represents the 24th consecutive quarter of positive sales momentum in the Company's domestic business. The international division also posted strong results, with same store sales growth of 4.3% during the quarter, marking the 93rd consecutive quarter of positive international same store sales growth. The Company had global net store growth of 189 stores in the quarter, comprised of 28 net new domestic stores and 161 net new stores internationally. The Company has added 1,308 net new stores over the trailing four quarters.

Diluted EPS was $1.26 for the first quarter, which was up 41.6% over the Company's diluted EPS in the prior year quarter. This increase resulted from outstanding operational results as well as the adoption of a new accounting standard.

During the quarter, the Company repurchased 80,360 shares of its common stock for approximately $12.7 million. The Company's Board of Directors also declared a 46-cent per share quarterly dividend for shareholders of record as of June 15, 2017, to be paid on June 30, 2017.

"It was a great start to 2017, as momentum continued with solid growth in our international business, and our third consecutive quarter of double-digit same store sales growth in the U.S.," said J. Patrick Doyle, Domino's President and Chief Executive Officer. "The ultimate measure of customer satisfaction is more customers choosing to do business with you. The growth we are experiencing – both in store counts and customer visits – is a reflection of great commitment and execution by our franchisees and team members."

First Quarter Highlights:

(dollars in millions, except per share data)

 

First Quarter
of 2017

   

First Quarter
of 2016

 

Net income

 

$

62.5

   

$

45.5

 

Weighted average diluted shares

   

49,706,023

     

51,230,604

 

Diluted earnings per share*

 

$

1.26

   

$

0.89

 
 

*In the first quarter of 2017, the Company adopted Accounting Standards Update No. 2016-09, Compensation-Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting, (ASU 2016-09), which required the Company to record excess tax benefits from equity-based compensation as a reduction of the provision for income taxes in the income statement, whereas they were previously recognized in equity. See the "Adoption of New Accounting Guidance" section below for additional information.

  • Revenues were up 15.8% for the first 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 37.4% for the first quarter versus the prior year period, primarily driven by an increase in same store sales growth and store count as well as higher supply chain volumes and lower food costs. The adoption of the new equity-based compensation accounting standard also positively impacted net income. These increases were partially offset by higher general and administrative expenses from investments in technological initiatives as well as the negative impact of foreign currency exchange rates.
  • Diluted EPS was $1.26 for the first quarter versus 89 cents in the prior year quarter. This represents a 37-cent or 41.6% increase over the prior year quarter. This increase was driven by the increase in net income, as well as lower diluted share count, 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.

 

   

First

Quarter of

2017

   

First

Quarter of

2016

 

Same store sales growth: (versus prior year period)

               

Domestic Company-owned stores

   

+ 14.1

%

   

+ 4.0

%

Domestic franchise stores

   

+   9.8

%

   

+ 6.6

%

Domestic stores

   

+ 10.2

%

   

+ 6.4

%

International stores (excluding foreign currency impact)

   

+   4.3

%

   

+ 7.9

%

                 

Global retail sales growth: (versus prior year period)

               

Domestic stores

   

+ 13.4

%

   

+ 7.9

%

International stores

   

+ 13.0

%

   

+ 6.7

%

Total

   

+ 13.2

%

   

+ 7.3

%

                 

Global retail sales growth: (versus prior year period,

   excluding foreign currency impact)

               

Domestic stores

   

+ 13.4

%

   

+ 7.9

%

International stores

   

+ 17.0

%

   

+ 15.4

%

Total

   

+ 15.2

%

   

+ 11.7

%

 

   

Domestic

Company-

owned Stores

   

Domestic

Franchise

Stores

   

Total

Domestic

Stores

   

International

Stores

   

Total

 

Store counts:

                                       

Store count at January 1, 2017

   

392

     

4,979

     

5,371

     

8,440

     

13,811

 

Openings

   

2

     

27

     

29

     

175

     

204

 

Closings

   

     

(1)

     

(1)

     

(14)

     

(15)

 

Transfers

   

1

     

(1)

     

     

     

 

Store count at March 26, 2017

   

395

     

5,004

     

5,399

     

8,601

     

14,000

 

First quarter 2017 net change

   

3

     

25

     

28

     

161

     

189

 

Trailing four quarters net change

   

10

     

173

     

183

     

1,125

     

1,308

 

Adoption of New Accounting Guidance

The Company adopted ASU 2016-09 in the first quarter of 2017. This standard addresses the accounting for income taxes and forfeitures and the cash flow presentation of share-based compensation. The adoption resulted in a $6.5 million decrease in our first quarter 2017 provision for income taxes, or a 7.2 percentage point decrease in our first quarter 2017 effective tax rate, due to the recognition of excess tax benefits for options exercised and the vesting of equity awards in the first quarter of 2017. This item positively impacted our diluted EPS by approximately 13 cents in the first quarter of 2017. Refer to the Company's Form 10-Q for the quarter ended March 26, 2017 for additional detailed information regarding the impact of the adoption of ASU 2016-09.

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 2017 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 first quarter of 2017, the Company repurchased and retired 80,360 shares of its common stock under its open market share repurchase program for approximately $12.7 million, or an average price of $158.30 per share. As of March 26, 2017, the end of the first quarter, the Company had a total remaining authorized amount for share repurchases of $136.4 million.

Liquidity

As of March 26, 2017, the Company had approximately:

  • $52.1 million of unrestricted cash and cash equivalents;
  • $2.18 billion in total debt; and
  • $80.7 million of available borrowings under its $125.0 million variable funding notes, net of letters of credit issued of
  • $44.3 million. The Company has collateralized $44.0 million of these letters of credit with restricted cash, and has the ability to access this cash with minimal notice.

The Company invested $12.4 million in capital expenditures during the first quarter of 2017, versus $10.5 million in the first quarter of 2016. Free cash flow, as reconciled below to cash flows from operations as determined under generally accepted accounting principles (GAAP), was approximately $73.2 million in the first quarter of 2017.

(in thousands)

 

First Quarter

of 2017

 

Net cash provided by operating activities

 

$

85,693

 

Capital expenditures

   

(12,444)

 

Free cash flow

 

$

73,249

 

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. 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 14,000 stores in over 85 international markets. Domino's had global retail sales of nearly $10.9 billion in 2016, with more than $5.3 billion in the U.S. and more than $5.5 billion internationally. In the first quarter of 2017, Domino's had global retail sales of nearly $2.7 billion, with over $1.3 billion in the U.S. and nearly $1.4 billion internationally. Its system is comprised of independent franchise owners who accounted for over 97% of Domino's stores as of the first quarter of 2017. Emphasis on technology innovation helped Domino's reach an estimated $5.6 billion in global digital sales in 2016, and has produced several innovative ordering platforms, including Google Home, Facebook Messenger, 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 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

 
   

March 26,

2017

   

% of

Total

Revenues

   

March 27,

2016

   

% of

Total

Revenues

 

(In thousands, except per share data)

                               

Revenues:

                               

Domestic Company-owned stores

 

$

113,545

           

$

96,443

         

Domestic franchise

   

79,901

             

68,151

         

Supply chain

   

388,553

             

335,695

         

International franchise

   

42,218

             

38,886

         

Total revenues

   

624,217

     

100.0

%

   

539,175

     

100.0

%

                                 

Cost of sales:

                               

Domestic Company-owned stores

   

87,184

             

72,755

         

Supply chain

   

343,217

             

299,204

         

Total cost of sales

   

430,401

     

69.0

%

   

371,959

     

69.0

%

Operating margin

   

193,816

     

31.0

%

   

167,216

     

31.0

%

General and administrative

   

77,782

     

12.4

%

   

68,504

     

12.7

%

Income from operations

   

116,034

     

18.6

%

   

98,712

     

18.3

%

                                 

Interest expense, net

   

(25,520)

     

(4.1)

%

   

(25,870)

     

(4.8)

%

Income before provision for income taxes

   

90,514

     

14.5

%

   

72,842

     

13.5

%

                                 

Provision for income taxes

   

28,045

     

4.5

%

   

27,391

     

5.1

%

Net income

 

$

62,469

     

10.0

%

 

$

45,451

     

8.4

%

                                 

Earnings per share:

                               

Common stock – diluted

 

$

1.26

           

$

0.89

         
                                 

Dividends declared per share

 

$

0.46

           

$

0.38

         

 

Domino's Pizza, Inc. and Subsidiaries

Condensed Consolidated Balance Sheets

(Unaudited)

 
   

March 26, 2017

   

January 1, 2017

 

(In thousands)

               

Assets

               

Current assets:

               

Cash and cash equivalents

 

$

52,094

   

$

42,815

 

Restricted cash and cash equivalents

   

165,666

     

126,496

 

Accounts receivable

   

150,931

     

150,369

 

Inventories

   

38,326

     

40,181

 

Advertising fund assets, restricted

   

105,078

     

118,377

 

Prepaid expenses and other

   

16,541

     

17,635

 

Total current assets

   

528,636

     

495,873

 

Property, plant and equipment, net

   

137,824

     

138,534

 

Other assets

   

76,002

     

81,888

 

Total assets

 

$

742,462

   

$

716,295

 

Liabilities and stockholders' deficit

               

Current liabilities:

               

Current portion of long-term debt

 

$

300

   

$

38,887

 

Accounts payable

   

110,245

     

111,510

 

Dividends payable

   

22,485

     

619

 

Advertising fund liabilities

   

105,078

     

118,377

 

Other accrued liabilities

   

131,332

     

134,305

 

Total current liabilities

   

369,440

     

403,698

 

Long-term liabilities:

               

Long-term debt, less current portion

   

2,179,258

     

2,148,990

 

Other accrued liabilities

   

47,455

     

46,750

 

Total long-term liabilities

   

2,226,713

     

2,195,740

 

Total stockholders' deficit

   

(1,853,691)

     

(1,883,143)

 

Total liabilities and stockholders' deficit

 

$

742,462

   

$

716,295

 

 

Domino's Pizza, Inc. and Subsidiaries

Condensed Consolidated Statements of Cash Flows

(Unaudited)

 
   

Fiscal Quarter Ended

 
   

March 26,

2017

   

March 27,

2016

 

(In thousands)

               

Cash flows from operating activities:

               

Net income

 

$

62,469

   

$

45,451

 

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

               

Depreciation and amortization

   

9,498

     

8,221

 

Losses on sale/disposal of assets

   

182

     

86

 

Amortization of debt issuance costs

   

1,400

     

1,660

 

Provision for deferred income taxes

   

6,232

     

4,397

 

Non-cash compensation expense

   

5,220

     

4,898

 

Other

   

(52)

     

135

 

Excess tax benefits from equity-based compensation

   

(6,498)

     

(31,896)

 

Changes in operating assets and liabilities

   

7,242

     

(15,804)

 

Net cash provided by operating activities

   

85,693

     

17,148

 

Cash flows from investing activities:

               

Capital expenditures

   

(12,444)

     

(10,486)

 

Proceeds from sale of assets

   

779

     

1,742

 

Changes in restricted cash

   

(39,170)

     

26,817

 

Other

   

544

     

(587)

 

Net cash provided by (used in) investing activities

   

(50,291)

     

17,486

 

Cash flows from financing activities:

               

Repayments of long-term debt and capital lease obligations

   

(9,718)

     

(27,459)

 

Proceeds from exercise of stock options

   

1,433

     

9,182

 

Excess tax benefits from equity-based compensation

   

     

31,896

 

Purchases of common stock

   

(12,721)

     

 

Tax payments for restricted stock upon vesting

   

(4,896)

     

(3,036)

 

Payments of common stock dividends and equivalents

   

(253)

     

(164)

 

Net cash provided by (used in) financing activities

   

(26,155)

     

10,419

 

Effect of exchange rate changes on cash and cash equivalents

   

32

     

(250)

 

Change in cash and cash equivalents

   

9,279

     

44,803

 

Cash and cash equivalents, at beginning of period

   

42,815

     

133,449

 

Cash and cash equivalents, at end of period

 

$

52,094

   

$

178,252

 

Contact:

Tim McIntyre
Executive Vice President
Communication
nvestor Relations and Legislative Affairs
(734) 930-3563

To view the original version on PR Newswire, visit:http://www.prnewswire.com/news-releases/dominos-pizza-announces-first-quarter-2017-financial-results-300446890.html

SOURCE Domino's Pizza, Inc.

###

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