Domino's Pizza Announces First Quarter 2014 Financial Results

2014-05-01
  • PDF
  • Print
  • Bookmark
  • Go Back
  • Text Size:
  • Domino's Pizza Revenues were up 8.7% for the first quarter versus the prior year period, due primarily to higher supply chain revenues from higher commodity prices and increased volumes, higher international revenues resulting from both same store sales and store count growth, and increased domestic franchise and Company-owned store revenues.

    Domino's Pizza, Inc. (NYSE: DPZ today announced results for the first quarter of 2014, comprised of strong growth in same store sales and global store counts which resulted in solid EPS growth. Domestic same store sales grew 4.9% 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 7.4% during the quarter, marking the 81st consecutive quarter of international same store sales growth. The Company had global net store growth of 102 stores in the first quarter of 2014.

    Diluted EPS was 71 cents for the quarter. On an as adjusted basis, diluted EPS was 68 cents, a 15.3% increase over the first quarter of 2013. During the quarter, the Company also repurchased and retired 221,481 shares of its common stock for $15.1 million.  Additionally, on April 29, 2014, the Board of Directors declared a 25 cent per share quarterly dividend for shareholders of record as of June 13, 2014 to be paid on June 30, 2014.

    J. Patrick Doyle, Domino's President and Chief Executive Officer, said: "We're off to a great start to the year. Our international division, once again, posted stellar results – reinforcing what a growth engine they are for us. We're thriving in the U.S., too, with sales and store growth, and innovations in both technology and food. Franchisees have reported strong profits.  Our shareholders benefitted from both dividends and share repurchases. We're driving results."

    First Quarter Highlights:

    (dollars in millions, except per share data)

    First

    Quarter of

    2014

    First

    Quarter of

    2013

    Net income

    $  40.5

    $  34.4

    Weighted average diluted shares

    57,372,471

    58,224,408

    Diluted earnings per share, as reported

    $  0.71

    $  0.59

    Items affecting comparability*

    (0.02)

    -

    Diluted earnings per share, as adjusted*

    $  0.68

    $  0.59

    *

    Refer to the Items Affecting Comparability section on page three for additional details. Diluted earnings per share figures may not sum to the total due to the rounding of each individual calculation.

    • Revenues were up 8.7% for the first quarter versus the prior year period, due primarily to higher supply chain revenues from higher commodity prices and increased volumes, higher international revenues resulting from both same store sales and store count growth, and increased domestic franchise and Company-owned store revenues.
    • Net Income was up 17.6% for the first quarter versus the prior year period, driven by domestic and international same store sales growth, global store count growth and a lower effective tax rate, offset in part by the negative impact of foreign currency exchange rates.
    • Diluted EPS was 71 cents for the first quarter versus 59 cents in the prior year quarter. On an as-adjusted basis, diluted EPS was 68 cents for the quarter, which represents an increase of nine cents or 15.3% versus the diluted EPS of 59 cents in the prior year quarter. This increase was due to higher net income and lower weighted average diluted shares outstanding.  (See the Items Affecting Comparability section on page three and the Comments on Regulation G section on page four.)

    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 four for additional details.

     

    First Quarter

    of 2014

    First Quarter

    of 2013

    Same store sales growth: (versus prior year period)

      Domestic Company-owned stores

    + 1.5%

    + 5.0%

      Domestic franchise stores

    + 5.2%

    + 6.3%

      Domestic stores

    + 4.9%

    + 6.2%

      International stores (excluding foreign currency impact)

    + 7.4%

    + 6.5%

    Global retail sales growth: (versus prior year period)

      Domestic stores

    +  6.3%

    +  6.9%

      International stores

    +11.7%

    +11.9%

      Total

    +  9.1%

    +  9.4%

    Global retail sales growth: (versus prior year period, 

      excluding foreign currency impact)   

      Domestic stores

    +  6.3%

    +  6.9%

      International stores

    +15.9%

    +14.1%

      Total

    +11.3%

    +10.5%

     

    Domestic

    Company-

    owned Stores

    Domestic

    Franchise

    Stores

    Total

    Domestic

    Stores

    International

    Stores

    Total

    Store counts:

      Store count at December 29, 2013

    390

    4,596

    4,986

    5,900

    10,886

      Openings

    -

    14

    14

    109

    123

      Closings

    -

    (9)

    (9)

    (12)

    (21)

      Transfers

    (14)

    14

    -

    -

    -

      Store count at March 23, 2014

    376

    4,615

    4,991

    5,997

    10,988

      First quarter 2014 net change

    (14)

    19

    5

    97

    102

      Trailing four quarters net change

    (12)

    80

    68

    590

    658

    Share Repurchases

    During the first quarter of 2014, the Company repurchased and retired 221,481 shares of its common stock under its open market share repurchase program for approximately $15.1 million, or an average price of $68.32 per share. Subsequent to the first quarter of 2014 and through April 24, 2014, the Company repurchased and retired 153,812 shares of its common stock for approximately $11.4 million, or an average of $74.40 per share. As of April 24, 2014, the Company had approximately $188.6 million remaining under the program.

    Dividends

    On April 29, 2014, the Board of Directors declared a 25 cent per share quarterly dividend for shareholders of record as of June 13, 2014, to be paid on June 30, 2014.

    Items Affecting Comparability                                   

    The Company's reported financial results for the first quarter of 2014 are not comparable to the reported financial results for the equivalent period in 2013. The table below presents certain items that affect comparability between 2014 and 2013 financial results.  The Company believes that including such information is critical to the understanding of its financial results for the first quarter of 2014 as compared to the same period in 2013 (See the Comments on Regulation G section on page four for additional details).

    In addition to the items noted in the table below, the Company had lower weighted average diluted shares outstanding that resulted in an increase in diluted EPS of one cent in the first quarter of 2014.

    First Quarter

    (in thousands, except per share data)

    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 March 23, 2014, the Company had approximately:

    • $38.4 million of unrestricted cash and cash equivalents;
    • $1.53 billion in total debt; and
    • $57.7 million of available borrowings under its $100.0 million variable funding notes, net of letters of credit issued of $42.3 million.  The Company has collateralized these letters of credit with restricted cash, and has the ability to access this cash with minimal notice.

    The Company's cash borrowing rate averaged 5.3% in both the first quarter of 2014 and the first quarter of 2013.  Additionally, the Company invested $6.6 million in capital expenditures during the first quarter of 2014, versus $5.1 million in the first quarter of 2013. 

    Free cash flow, as reconciled below to cash flows from operations as determined under generally accepted accounting principles (GAAP), was approximately $29.6 million in the first quarter of 2014.

    (in thousands)

    First Quarter

    of 2014

    Net cash provided by operating activities                     

    $   36,204

    Capital expenditures

    (6,561)

    Free cash flow

    $   29,643

    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, domestic supply chain revenues are directly impacted by changes in domestic 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 reflects 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 its global enterprise of more than 10,900 stores in over 70 international markets. Domino's had global retail sales of over $8.0 billion in 2013, comprised of nearly $3.8 billion in the U.S. and over $4.2 billion internationally. In the first quarter of 2014, Domino's had global retail sales of over $2.0 billion, comprised of $0.9 billion in the U.S. and $1.1 billion internationally. Its system is made up of franchise owner-operators who accounted for over 96% of the Domino's Pizza stores as of the first quarter of 2014. The emphasis on technology innovation helped Domino's generate approximately 40% of sales from its digital channels in 2013, as well as reach an estimated $3 billion annually in global digital sales. Domino's recently launched its ordering app for iPad®, adding to an existing ordering app lineup that covers nearly 95% of the smartphone market. Continuing its focus on menu enhancement, Domino's launched Specialty Chicken in April 2014.

    Domino's Pizza, Inc. and Subsidiaries

    Condensed Consolidated Statements of Income

    (Unaudited)

    Fiscal Quarter Ended

    March 23,

    2014

    % of

    Total

    Revenues

    March 24,

    2013

    % of

    Total

    Revenues

    (In thousands, except per share data)

    Revenues:

       Domestic Company-owned stores

    $   82,457

    $   81,094

       Domestic franchise

    53,421

    51,318

       Domestic supply chain

    257,527

    231,531

       International

    60,447

    53,674

    Total revenues

    453,852

    100.0%

    417,617

    100.0%

    Cost of sales:

       Domestic Company-owned stores

    62,791

    61,269

       Domestic supply chain

    230,367

    205,412

       International

    23,652

    21,130

    Total cost of sales

    316,810

    69.8%

    287,811

    68.9%

    Operating margin

    137,042

    30.2%

    129,806

    31.1%

    General and administrative

    52,867

    11.6%

    54,281

    13.0%

    Income from operations

    84,175

    18.6%

    75,525

    18.1%

    Interest expense, net

    (20,295)

    (4.5)%

    (20,903)

    (5.0)%

    Income before provision for

       income taxes

     

    63,880

     

    14.1%

     

    54,622

     

    13.1%

    Provision for income taxes

    23,406

    5.2%

    20,202

    4.9%

    Net income

    $   40,474

    8.9%

    $   34,420

    8.2%

    Earnings per share:

       Common stock – diluted

    $      0.71

    $      0.59

    Dividends declared per share

    $      0.25

    $      0.20

     

     

    Domino's Pizza, Inc. and Subsidiaries

    Condensed Consolidated Balance Sheets

    (Unaudited)

    March 23, 2014

     

    December 29, 2013

    (In thousands)         

    Assets

    Current assets:

            Cash and cash equivalents                

    $

    38,376

    $

    14,383

            Restricted cash and cash equivalents            

    108,626

    125,453

            Accounts receivable                                     

    103,881

    105,779

            Inventories                                                       

    33,578

    30,321

            Advertising fund assets, restricted                 

    50,185

    44,695

            Other assets                                     

    19,234

    30,909

    Total current assets                                               

    353,880

    351,540

    Property, plant and equipment, net                         

    95,717

    97,584

    Other assets                                             

    74,715

    76,131

    Total assets                                               

    $

    524,312

    $

    525,255

    Liabilities and stockholders' deficit

    Current liabilities:

            Current portion of long-term debt        

    $

    24,155

    $

    24,144

            Accounts payable                                          

    73,183

    83,408

            Dividends payable                                      

    14,490

    11,849

            Advertising fund liabilities                               

    50,185

    44,695

            Other accrued liabilities                      

    78,391

    90,515

    Total current liabilities                                         

    240,404

    254,611

    Long-term liabilities:

            Long-term debt, less current portion       

    1,506,256

    1,512,299

            Other accrued liabilities                    

    46,608

    48,547

    Total long-term liabilities                                    

    1,552,864

    1,560,846

    Total stockholders' deficit                            

    (1,268,956)

    (1,290,202)

    Total liabilities and stockholders' deficit         

    $

    524,312

    $

    525,255

     

     

    Domino's Pizza, Inc. and Subsidiaries

    Condensed Consolidated Statements of Cash Flows

    (Unaudited)

    Fiscal Quarter Ended

    March 23,

    2014

     March 24,

    2013

    (In thousands)

    Cash flows from operating activities:

      Net income

    $     40,474

    $       34,420

      Adjustments to reconcile net income to net

       cash flows provided by operating activities:

          Depreciation and amortization

    6,421

    5,631

          Gains on sale/disposal of assets

    (1,556)

    (88)

          Amortization of deferred financing costs

    1,390

    1,431

          Provision for deferred income taxes

    700

    4,568

          Non-cash compensation expense

    4,455

    5,616

          Tax impact from equity-based compensation

    (7,834)

    (2,574)

          Other

    45

    (959)

          Changes in operating assets and liabilities

    (7,891)

    (396)

    Net cash provided by operating activities

    36,204

    47,649

    Cash flows from investing activities:

      Capital expenditures

    (6,561)

    (5,086)

      Proceeds from sale of assets

    3,906

    1,228

      Changes in restricted cash

    16,827

    (1,360)

      Other

    (279)

    882

    Net cash provided by (used in) investing activities

    13,893

    (4,336)

    Cash flows from financing activities:

      Repayments of long-term debt and capital lease obligations

    (6,032)

    (6,170)

      Proceeds from exercise of stock options

    2,458

    1,528

      Tax impact from equity-based compensation

    7,834

    2,574

      Purchases of common stock

    (15,131)

    (18,019)

      Tax payments for restricted stock upon vesting

    (4,308)

    (2,656)

      Payments of common stock dividends and equivalents

    (11,053)

    (327)

    Net cash used in financing activities

    (26,232)

    (23,070)

    Effect of exchange rate changes on cash and cash equivalents

    128

    25

    Change in cash and cash equivalents

    23,993

    20,268

    Cash and cash equivalents, at beginning of period

    14,383

    54,813

    Cash and cash equivalents, at end of period

    $     38,376

    $       75,081

     



    Logos, product and company names mentioned are the property of their respective owners.

  • PDF
  • Print
  • Bookmark
  • Go Back
  • Text Size:

  • comments powered by Disqus
    Ads by Nevistas

    Newsletters
    Restaurant
    Industry News
     
    Hospitality
    Newsletter
     
    Hospitality
    Trends
     
    Hospitality
    Technology
     
    Your Email Address
     
    Advertise Here