Domino's Pizza Announces First Quarter 2014 Financial Results

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 81^st 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:

• 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.

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.

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.

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.