Domino's Pizza Completes its Recapitalization Plan and Declares $13.50 per Share Special Dividend

Apr 17, 2007, 01:00 ET from Domino's Pizza, Inc.

    ANN ARBOR, Mich., April 17 /PRNewswire-FirstCall/ -- Domino's Pizza,
 Inc. (NYSE:   DPZ), the recognized world leader in pizza delivery, announced
 today that it had completed its recapitalization as planned, with a $1.85
 billion securitized debt facility and a declaration by its Board of
 Directors of a $13.50 per share special dividend.
     Domino's Chairman and CEO David A. Brandon said, "We believe this new
 capital structure is the appropriate corporate finance decision for our
 company. Our goal has always been to return capital to our shareholders in
 the most efficient and effective way possible; and this transaction creates
 a unique opportunity to achieve this in a significant way. We expect the
 $13.50 per share dividend will trigger a near-term corresponding decrease
 in our stock price. However, our plan going forward will be to provide a
 strong operating environment for our system of stores, which will deliver
 significant upside growth potential for our franchisees, team members and
     Brandon added, "I am also pleased to announce that our Board of
 Directors has approved an open market share repurchase plan which
 authorizes the company to purchase up to $200 million of DPZ stock. We
 believe this is another appropriate strategy for our shareholders, as we
 intend to deploy a portion of our future free cash flow for this purpose."
     Asset-Backed Securitized Financing:
     Through an asset-backed securitization, Domino's Pizza Master Issuer
 LLC, a wholly-owned subsidiary of the Company, placed $1.85 billion of
 notes in a private transaction consisting of $1.6 billion of fixed rate
 senior notes rated AAA by S&P and Aaa by Moody's; $150 million of variable
 funding senior notes (revolving credit facility) rated AAA by S&P and Aaa
 by Moody's, and $100 million of fixed rate subordinated notes rated BB by
     Uses of these funds will include repayment of the bridge facility that
 was deployed to repurchase approximately $273.6 million of Domino's, Inc.'s
 8 1/4% senior notes due 2011 and repay the Company's previously outstanding
 bank debt; for the payment of a special cash dividend and dividend
 equivalent payments to option holders; for an open market share repurchase
 program; capitalization of certain new ABS entities and to pay
 transaction-related fees and expenses.
     The weighted average contract rate, inclusive of bond insurance, on the
 $1.7 billion of funded securitized debt will be 6.06% and the weighted
 average GAAP rate (after giving effect to hedging transactions) is expected
 to be 6.19%. The securitized notes have been issued by indirect
 subsidiaries of Domino's Pizza that hold substantially all of the Company's
 revenue-generating assets, including royalty income from all domestic
 stores, distribution income, international income and intellectual
 property. The fixed rate notes will have an expected repayment date of five
 years with a legal maturity of 30 years. The notes will not be registered
 under the Securities Act of 1933 and may not be offered or sold in the
 United States absent registration or an applicable exemption from
 registration requirements. This press release is not an offer to sell or a
 solicitation of an offer to buy the notes.
     Domino's Chief Financial Officer, L. David Mounts, commented on the
 securitization: "We are very proud of the work done to execute this
 innovative recapitalization plan, and we appreciate the positive feedback
 we have received from our stakeholders. I'd like to extend my thanks to the
 many team members at Domino's who helped execute this highly successful
 transaction, and our business partners, whose support was invaluable.
 Further, I want to thank both our former lenders and bondholders, and our
 new bondholders and financial guarantors, for their confidence and
     Special Dividend and Dividend Equivalent Rights:
     The Domino's Pizza Board of Directors approved a $13.50 dividend,
 payable on May 4, 2007 to shareholders of record at the close of business
 on April 27, 2007, with an ex-dividend date of May 7, 2007. Shareholders
 who sell their shares prior to the May 7, 2007 ex-dividend date will also
 be selling their right to receive the special dividend. Domino's Pizza
 common stock will start trading on an ex-dividend basis beginning May 7,
 2007, in accordance with NYSE rules.
     Management noted that this dividend allows shareholders to participate
 in a meaningful return-of-capital transaction without surrendering any
 shares of Domino's Pizza. While the tax treatment of the special dividend
 cannot be concluded with certainty until 2008, the Company estimates that,
 for federal income tax purposes, approximately 80-90% of the special cash
 dividend will be treated by shareholders as a return of capital, with the
 remaining 10-20% treated as a dividend. Shareholders are encouraged to
 consult with their financial and tax advisors regarding the circumstances
 of their individual situation.
     The price of Domino's common stock is expected by management to
 decrease in relation to the amount of the special dividend on the
 ex-dividend date May 7, 2007 as is typical when public companies pay
 significant special cash dividends.
     The Board of Directors has adopted a Dividend Equivalent Rights policy,
 allowing holders of Domino's stock options to receive dividend equivalents
 in the form of cash on each share underlying vested options through 2007.
 Additionally, there will be a reduction in exercise price, to the extent
 allowable by law, on unvested options. The Board believes that this policy
 further aligns the interests of management and shareholders, because
 recipients of stock option grants do not receive a benefit from stock
 options unless and until the market price of the Company's common shares
 increases. This policy accomplishes the objective of linking each option
 holder's opportunity for financial gain to increases in shareholder wealth,
 as reflected by the market price of the Company's common stock.
     Management expects transactional and one-time costs associated with the
 recapitalization plan to negatively affect its first half 2007 earnings
     Open Market Share Repurchase:
     The Board of Directors also approved an open market share repurchase
 program for up to $200 million. The Company expects that this will create
 shareholder value through systematic, informed and opportunistic buying of
 DPZ shares.
     Lehman Brothers served as the sole structuring advisor for the
 securitization, and Lehman Brothers, JP Morgan Securities Inc. and Merrill
 Lynch & Co. served as joint bookrunners in connection with the placement of
 the securitized notes. Ropes & Gray served as counsel to Domino's Pizza.
     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 franchised system, Domino's operates a network of 8,366
 franchised and Company-owned stores in the United States and more than 55
 countries. The Domino's Pizza(R) brand, named a Megabrand by Advertising
 Age magazine, had approximately $5.1 billion in global retail sales in
 2006, comprised of $3.2 billion domestically and nearly $1.9 billion
 internationally. During the fourth quarter of 2006, the Domino's Pizza(R)
 brand had global retail sales of nearly $1.6 billion, comprised of nearly
 $1.0 billion domestically and approximately $600 million internationally.
 Domino's Pizza was named "Chain of the Year" by Pizza Today magazine, the
 leading publication of the pizza industry and is the "Official Pizza of
 NASCAR(R)." More information on the Company, in English and Spanish, can be
 found on the web at
 ACT OF 1995:
     This press release contains forward-looking statements. These
 forward-looking statements relating to our anticipated profitability and
 operating performance reflect management'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 can cause
 actual results to differ materially include: our increased leverage as a
 result of the borrowings under our asset-backed securitization facility;
 the uncertainties relating to litigation; consumer preferences, spending
 patterns and demographic trends; the effectiveness of our advertising,
 operations and promotional initiatives; our ability to retain key
 personnel; new product and concept developments by us and other
 food-industry competitors; the ongoing profitability of our franchisees and
 the ability of Domino's Pizza and our franchisees to open new restaurants;
 changes in food prices, 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 in which we operate; severe weather conditions and natural
 disasters; changes in our effective tax rate; changes in government
 legislation and regulations; adequacy of our insurance coverage; costs
 related to future financings and changes in accounting policies. Further
 information about factors that could affect our financial and other results
 is included in our filings with the Securities and Exchange Commission. We
 do not undertake to publicly update or revise any forward-looking
 statements, whether as a result of new information, future events or
 otherwise, except as required to be reported under the rules and
 regulations of the Securities and Exchange Commission.

SOURCE Domino's Pizza, Inc.