Domino's Pizza® Announces Third Quarter 2016 Financial Results

Dienstag, 18.10.2016 13:30 von

PR Newswire

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.

Domino's

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.

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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


 

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SOURCE Domino's Pizza, Inc.