Loading ...Momentum Continues with Strong Sales and Profits
ANN ARBOR, Mich., July 27, 2010 /PRNewswire via COMTEX/ —
Domino’s Pizza, Inc. (NYSE: DPZ), the recognized world leader in pizza delivery, today announced strong results for all its operating units for the second quarter ended June 20, 2010. During the quarter, the Company’s domestic same store sales rose 8.8% versus the year ago period on sustained positive consumer response to the Company’s improved pizza and continued focus on operational excellence. Robust sales volume also drove positive results in the Company’s domestic supply chain business. International same store sales grew 6.2% in the second quarter, the 66th consecutive quarter of positive same store sales for the division. The Company repurchased $20.4 million of its debt during the quarter, and an additional $10.0 million subsequent to the quarter, for a total of $279.6 million in repurchases of its fixed rate notes since the beginning of 2009. This healthy second quarter performance resulted in adjusted EPS of 33 cents, up 57% from the adjusted EPS amount in the prior year period.
J. Patrick Doyle, Domino’s President and Chief Executive Officer, said: "Our strong sales momentum in the U.S. is evidence of the success of our improved pizza and focus on operations. The increased sales were not just driven by trial, but by repeat orders from our new larger customer base. I continue to be bullish on the performance of our U.S. business. Meanwhile, despite the tough global economy, our international business continues to thrive – proving the strength of our international franchise business model."
Doyle added, "The positive results we’re driving are also yielding strong free cash flow, enabling us to repurchase debt at a rapid rate and accelerate our earnings per share growth."
Second Quarter Highlights:
(dollars in millions, Second Second First Two First Two
except per share Quarter Quarter Quarters Quarters
data) of 2010 of 2009 of 2010 of 2009
------- ------- --------- ---------
Net income $22.6 $14.5 $47.1 $38.3
Weighted average
diluted shares 60,760,689 57,737,247 60,305,138 57,524,565
Diluted earnings per
share, as reported $0.37 $0.25 $0.78 $0.67
Items affecting
comparability (see
section below) $(0.04) $(0.04) $(0.10) $(0.26)
------ ------ ------ ------
Diluted earnings per
share, as adjusted $0.33 $0.21 $0.68 $0.41
===== ===== ===== =====
- Revenues were up 14.5% for the second quarter versus the prior year period, due primarily to higher volumes and higher commodity prices in supply chain, higher same store sales in both domestic and international stores and store count growth in international markets.
- Net Income in the second quarter was up $8.1 million, or 55.7%, versus the prior year period, driven primarily by improved domestic sales and operating margins, international sales and store growth, lower interest expense and a lower effective tax rate. These improvements were offset by a reduction in pre-tax gains on debt repurchases which were approximately $11.4 million lower in the second quarter versus the prior year period.
- Diluted EPS was 37 cents on an as reported basis for the second quarter. Excluding items affecting comparability, diluted EPS was 33 cents versus 21 cents in the prior year quarter, an increase of 12 cents, or 57%, primarily due to the aforementioned higher net income. (See the Items Affecting Comparability section and the Comments on Regulation G section.)
- Global Retail Sales were up 12.5% in the second quarter, or up 10.3% when excluding foreign currency impact.
Second Second
Quarter Quarter
of 2010 of 2009
------- -------
Same store sales growth: (versus prior
year period)
Domestic Company-owned stores + 8.3% (3.3)%
Domestic franchise stores + 8.8% (0.4)%
------ -----
Domestic stores + 8.8% (0.7)%
====== =====
International stores + 6.2% + 4.1%
====== ======
Global retail sales growth: (versus prior
year period)
Domestic stores + 7.5% (2.0)%
International stores +19.0% (8.0)%
----- -----
Total +12.5% (4.7)%
===== =====
Global retail sales growth: (versus prior
year period,
excluding foreign currency impact)
Domestic stores + 7.5% (2.0)%
International stores +14.1% +11.0 %
----- ------
Total +10.3% + 3.8%
===== =======
Domestic
Franchise
Domestic Stores Total
-------- --------- -----
Company-
owned Domestic International
Stores Stores Stores
--------- --------- --------------
Total
-----
Store
counts:
Store
count at
March 28,
2010 457 4,453 4,910 4,126 9,036
Openings - 21 21 73 94
Closings - (22) (22) (11) (33)
Transfers (2) 2 - - -
Store
count at
June 20,
2010 455 4,454 4,909 4,188 9,097
=== ===== ===== ===== =====
Second
quarter
2010 net
growth (2) 1 (1) 62 61
=== === === === ===
Trailing
four
quarters
net
growth (28) (30) (58) 282 224
=== === === === ===
Conference Call Information
The Company plans to file its quarterly report on Form 10-Q this morning. Additionally, as previously announced, Domino’s Pizza, Inc. will hold a conference call today at 11 a.m. (Eastern) to review its second quarter 2010 financial results. The call can be accessed by dialing (888) 306-6182 (U.S./Canada) or (706) 634-4947 (International). Ask for the Domino’s Pizza conference call. The call will also be webcast at www.dominos.com. If you are unable to participate on the call, a replay will be available for thirty days by dialing (800) 642-1687 (U.S./Canada) or (706) 645-9291 (International), Conference ID 45890713. The webcast will also be archived for 30 days on www.dominosbiz.com.
Debt Repurchases
During the second quarter of 2010, the Company repurchased and retired $20.4 million of principal of its outstanding fixed rate notes, resulting in a pre-tax gain of approximately $1.5 million. This pre-tax gain was recorded in the "Other" line item in the Company’s consolidated income statement.
Subsequent to the second quarter of 2010, the Company repurchased and retired $10.0 million of additional principal of its outstanding fixed rate senior notes, resulting in a pre-tax gain of approximately $0.7 million, which will be recorded in the third quarter of 2010. The Company has classified the $10.0 million of outstanding fixed rate senior notes as a current liability in the consolidated balance sheet as of June 20, 2010. Including this $10.0 million repurchase, the Company has repurchased $279.6 million of its fixed rate notes to date.
Items Affecting Comparability
The Company’s reported financial results for the second quarter and first two quarters of 2010 are not comparable to the reported financial results in the prior year period. The table below presents certain items that affect comparability between 2010 and 2009 financial results. Management believes that including such information is critical to the understanding of its financial results for the second quarter and first two quarters of 2010 as compared to the same periods in 2009 (See the Comments on Regulation G section).
In addition to the items noted in the table below, the Company experienced lower interest expense primarily as a result of lower debt levels, further impacting comparability to periods in the prior year. Lower interest expense resulted in an increase in diluted EPS of approximately three cents in the second quarter of 2010 and six cents in the first two quarters of 2010 versus the comparable periods in 2009.
Second Quarter
--------------
Diluted
EPS
Impact
--------
(in thousands, except per
share data)
Pre- After-
tax tax
----- -------
2010 items affecting
comparability:
--------------------
Gain on debt
extinguishment (1) $1,493 $910 $0.01
Deferred financing fee
write-off and other
(2) (472) (288) (0.00)
Tax reserves (3) 565 2,025 0.03
--- ----- ----
Total of 2010 items $1,586 $2,647 $0.04
====== ====== =====
2009 items affecting
comparability:
--------------------
Gain on debt
extinguishment (4) $12,938 $7,763 $0.13
Deferred financing fee
write-off (2) (323) (194) (0.00)
Stock option plan changes
(5) (4,937) (2,962) (0.05)
Tax reserves (6) (594) (2,223) (0.04)
---- ------ -----
Total of 2009 items $7,084 $2,384 $0.04
====== ====== =====
First Two Quarters
------------------
Diluted
EPS
Impact
--------
(in thousands, except per
share data)
Pre- After-
tax tax
----- -------
2010 items affecting
comparability:
--------------------
Gain on debt
extinguishment (1) $7,636 $4,658 $0.08
Deferred financing fee
write-off and other
(2) (1,109) (677) (0.01)
Tax reserves (3) 565 2,025 0.03
--- ----- ----
Total of 2010 items $7,092 $6,006 $0.10
====== ====== =====
2009 items affecting
comparability:
--------------------
Gain on debt
extinguishment (4) $34,112 $20,467 $0.36
Deferred financing fee
write-off (2) (882) (529) (0.01)
Stock option plan changes
(5) (4,937) (2,962) (0.05)
Tax reserves (6) (594) (2,223) (0.04)
---- ------ -----
Total of 2009 items $27,699 $14,753 $0.26
======= ======= =====
Liquidity
As of June 20, 2010, the Company had:
- $29.0 million of unrestricted cash and cash equivalents,
- $77.7 million of restricted cash and cash equivalents, and
- nearly $1.5 billion in total debt, including $60.0 million of borrowings under its $60.0 million variable funding note facility.
The Company’s cash borrowing rate for the second quarter of 2010 averaged 5.9% versus 6.1% in the prior year period. The Company incurred $11.1 million in capital expenditures during the first two quarters of 2010 versus $9.4 million in the first two quarters of the prior year.
The Company’s free cash flow, as reconciled below to cash flows from operations as determined under generally accepted accounting principles (GAAP), was $38.6 million in the first two quarters of 2010.
First Two
Quarters of
(in thousands) 2010
------------
Net cash provided by operating activities (as
reported) $49,640
Capital expenditures (as reported) (11,058)
-------
Free cash flow $38,582
=======
About Domino’s Pizza(R)
Founded in 1960, Domino’s Pizza is the recognized world leader in pizza delivery. Domino’s is listed on the NYSE under the symbol "DPZ." Through its primarily locally-owned and operated franchised system, Domino’s operates a network of 9,097 franchised and Company-owned stores in the United States and over 60 international markets. The Domino’s Pizza(R) brand, named a Megabrand by Advertising Age magazine, had global retail sales of over $5.6 billion in 2009, comprised of nearly $3.1 billion domestically and over $2.5 billion internationally. During the second quarter of 2010, the Domino’s Pizza(R) brand had global retail sales of nearly $1.4 billion, comprised of approximately $755 million domestically and over $645 million internationally. In June 2010, Pizza Today, the leading publication of the pizza industry, named Domino’s its "Chain of the Year" – making the company a two-time winner of the honor, which they previously received in 2003. Domino’s has expanded its menu significantly since 2008 to include Oven Baked Sandwiches and BreadBowl Pasta(TM), and in 2009 debuted its ‘Inspired New Pizza’ – a permanent change to its core hand-tossed product, reinvented from the crust up with new sauce, cheese and garlic seasoned crust.
TABLES TO FOLLOW
Domino's Pizza, Inc. and Subsidiaries ------------------------------------- Condensed Consolidated Statements of Income ------------------------------------------- (Unaudited) ----------- Fiscal Quarter Ended -------------------- % of % of June 20, Total June 14, Total 2010 Revenues 2009 Revenues ---- -------- ---- -------- (In thousands, except per share data) Revenues: Domestic Company-owned stores $79,076 $76,737 Domestic franchise 38,831 35,686 Domestic supply chain 205,430 172,538 International 39,068 31,671 ------ ------ Total revenues 362,405 100.0% 316,632 100.0% ------- ----- ------- ----- Cost of sales: Domestic Company-owned stores 62,893 62,564 Domestic supply chain 182,208 154,319 International 16,968 13,790 ------ ------ Total cost of sales 262,069 72.3% 230,673 72.9% ------- ---- ------- ---- Operating margin 100,336 27.7% 85,959 27.1% General and administrative 45,787 12.6% 45,655 14.4% ------ ---- ------ ---- Income from operations 54,549 15.1% 40,304 12.7% Interest expense, net (21,722) (6.0)% (25,919) (8.2)% Other 1,493 0.4% 12,938 4.1% ---- ---- Income before provision for income taxes 34,320 9.5% 27,323 8.6% Provision for income taxes 11,695 3.3% 12,796 4.0% ------ --- ------ --- Net income $22,625 6.2% $14,527 4.6% ======= === ======= === Earnings per share: Common stock - diluted $0.37 $0.25
Domino's Pizza, Inc. and Subsidiaries ------------------------------------- Condensed Consolidated Statements of Income ------------------------------------------- (Unaudited) ----------- Two Fiscal Quarters Ended ------------------------- % of % of June 20, Total June 14, Total 2010 Revenues 2009 Revenues ---- -------- ---- -------- (In thousands, except per share data) Revenues: Domestic Company-owned stores $167,282 $157,732 Domestic franchise 80,774 72,569 Domestic supply chain 417,959 346,041 International 77,520 62,118 ------ ------ Total revenues 743,535 100.0% 638,460 100.0% ------- ----- ------- ----- Cost of sales: Domestic Company-owned stores 132,160 127,276 Domestic supply chain 369,555 309,301 International 33,492 27,107 ------ ------ Total cost of sales 535,207 72.0% 463,684 72.6% ------- ---- ------- ---- Operating margin 208,328 28.0% 174,776 27.4% General and administrative 96,238 12.9% 89,554 14.0% ------ ---- ------ ---- Income from operations 112,090 15.1% 85,222 13.3% Interest expense, net (45,845) (6.2)% (52,420) (8.2)% Other 7,636 1.0% 34,112 5.3% ---- ---- Income before provision for income taxes 9.9% 66,914 10.5% 73,881 Provision for income taxes 26,737 3.6% 28,617 4.5% ------ --- ------ --- Net income $47,144 6.3% $38,297 6.0% ======= === ======= === Earnings per share: Common stock - diluted $0.78 $0.67
Domino's Pizza, Inc. and Subsidiaries ------------------------------------- Condensed Consolidated Balance Sheets ------------------------------------- (Unaudited) ----------- June 20, January 3, 2010 2010 --------- ----------- (In thousands) Assets Current assets: Cash and cash equivalents $28,980 $42,392 Restricted cash and cash equivalents 77,663 91,141 Accounts receivable 76,565 76,273 Inventories 27,675 25,890 Advertising fund assets, restricted 21,004 25,116 Other assets 22,564 17,856 ------ ------ Total current assets 254,451 278,668 Property, plant and equipment, net 98,439 102,776 Other assets 65,687 72,317 ------ ------ Total assets $418,577 $453,761 Liabilities and stockholders' deficit Current liabilities: Current portion of long-term debt $10,521 $50,370 Accounts payable 56,025 64,120 Advertising fund liabilities 21,004 25,116 Other accrued liabilities 78,924 79,817 ------ ------ Total current liabilities 166,474 219,423 Long-term liabilities: Long-term debt, less current portion 1,484,574 1,522,463 Other accrued liabilities 30,615 32,869 ------ ------ Total long-term liabilities 1,515,189 1,555,332 Total stockholders' deficit (1,263,086) (1,320,994) ---------- ---------- Total liabilities and stockholders' deficit $418,577 $453,761
Domino's Pizza, Inc. and Subsidiaries ------------------------------------- Condensed Consolidated Statements of Cash Flows ----------------------------------------------- (Unaudited) ----------- Two Fiscal Quarters Ended ------------------------- June 20, June 14, 2010 2009 ---- ---- (In thousands) Cash flows from operating activities: Net income $47,144 $38,297 Adjustments to reconcile net income to net cash flows provided by operating activities: Depreciation and amortization 10,994 11,277 Gains on debt extinguishment (7,636) (34,112) Losses on sale/disposal of assets 123 459 Amortization of deferred financing costs, debt discount and other 2,614 4,242 Provision for deferred income taxes 4,165 10,622 Non-cash compensation expense 5,901 9,838 Other 819 1,584 Changes in operating assets and liabilities (14,484) (13,069) ------- ------- Net cash provided by operating activities 49,640 29,138 Cash flows from investing activities: Capital expenditures (11,058) (9,407) Proceeds from sale of assets 1,779 2,229 Changes in restricted cash 13,478 5,710 Other (1,619) (1,040) ------ ------ Net cash provided by (used in) investing activities 2,580 (2,508) Cash flows from financing activities: Proceeds from issuance of common stock 2,294 2,022 Proceeds from exercise of stock options 2,052 721 Tax benefit from stock options 505 322 Proceeds from issuance of long- term debt 2,861 24,348 Repayments of long-term debt and capital lease obligation (72,968) (37,281) Other (368) (18) ---- --- Net cash used in financing activities (65,624) (9,886) Effect of exchange rate changes on cash and cash equivalents (8) (421) --- ---- Change in cash and cash equivalents (13,412) 16,323 Cash and cash equivalents, at beginning of period 42,392 45,372 ------ ------ Cash and cash equivalents, at end of period $28,980 $61,695 ======= =======
SOURCE Domino’s Pizza, Inc.
