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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, today 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.

Domino's

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  
Facebookhttp://www.facebook.com/dominos  
YouTubehttp://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


 

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SOURCE Domino's Pizza, Inc.

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