Domino's Pizza Announces Second Quarter 2014 Financial Results

ANN ARBOR, Mich., July 22, 2014 /PRNewswire/ -- Domino's Pizza, Inc. (NYSE: DPZ), the recognized world leader in pizza delivery, today announced results for the second quarter of 2014, comprised of strong growth in both same store sales and global store counts, which resulted in 17.5% EPS growth, or 67 cents per share. Domestic same store sales grew 5.4% 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 7.7% during the quarter, marking the 82^nd consecutive quarter of international same store sales growth. The Company had global net store growth of 133 stores in the second quarter of 2014.

During the quarter, the Company also repurchased and retired 687,750 shares of its common stock for approximately $49.9 million.  Additionally, on July 16, 2014, the Board of Directors declared a 25 cent per share quarterly dividend for shareholders of record as of September 15, 2014 to be paid on September 30, 2014.

J. Patrick Doyle, Domino's President and Chief Executive Officer, said: "The first half of 2014 has proven to be yet another positive story for our global brand and hardworking franchisees. We are performing well in the U.S. and international markets by driving sales and building stores around the world.  We also opened our 11,000^th store this quarter, an important milestone for a growing brand."

Second Quarter Highlights:

• Revenues were up 8.8% for the second quarter versus the prior year period, due primarily to higher supply chain revenues from higher cheese and other commodity prices as well as increased volumes, higher international revenues resulting in part from same store sales and store count growth, and increased domestic franchise revenues due primarily to same store sales growth.
• Net Income was up 15.6% for the second quarter versus the prior year period, driven by domestic and international same store sales growth and global store count growth.
• Diluted EPS was 67 cents for the second quarter versus 57 cents in the prior year quarter, which represents an increase of 10 cents, or 17.5%. This increase was due to higher net income and lower weighted average diluted shares outstanding.

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.

Conference Call Information

The Company will 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 10 a.m. (Eastern) to review its 2014 second quarter 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 www.dominosbiz.com.  If you are unable to participate on the call, a replay will be available for thirty days by dialing (855) 859-2056 (U.S./Canada) or (404) 537-3406 (International), Conference ID 34199171.  The webcast will also be archived for 30 days on www.dominosbiz.com.

Share Repurchases

During the second quarter of 2014, the Company repurchased and retired 687,750 shares of its common stock under its open market share repurchase program for approximately $49.9 million, or an average price of $72.52 per share. As of July 15, 2014, the Company had authorization for repurchases of approximately $149.8 million remaining under the program.

Dividends

On July 16, 2014, the Board of Directors declared a 25 cent per share quarterly dividend for shareholders of record as of September 15, 2014 to be paid on September 30, 2014.

Items Affecting Comparability

The Company's reported financial results for the two fiscal quarters 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 two fiscal quarters 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 in 2014 that resulted in an increase in diluted EPS of approximately one cent in the second quarter of 2014 and two cents in the two fiscal quarters of 2014.

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 June 15, 2014, the Company had approximately:

• $15.3 million of unrestricted cash and cash equivalents;
• $1.52 billion in total debt; and
• $57.9 million of available borrowings under its $100.0 million variable funding notes, net of letters of credit issued of $42.1 million.

The Company's cash borrowing rate averaged 5.3% in the second quarter of 2014 and averaged 5.4% in the second quarter of 2013.  Additionally, the Company invested $18.9 million in capital expenditures during the two fiscal quarters of 2014, compared to $11.6 million in the two fiscal quarters of 2013. 

Free cash flow, as reconciled below to cash flows from operations as determined under generally accepted accounting principles (GAAP), was approximately $41.8 million in the two fiscal quarters 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 reflect 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 11,000 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 second 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 owners who accounted for nearly 97% of the Domino's Pizza stores as of the second quarter of 2014. The emphasis on technology innovation helped Domino's generate approximately 40% of U.S. 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. In June 2014, Domino's debuted voice ordering for its iPhone^® and Android^™ apps, a true technology first within both traditional and e-commerce retail.

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Please visit our Investor Relations website at www.dominosbiz.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; our reputation and the strength of our brand in the markets in which we compete; our ability to retain key personnel; new product and concept developments by us, and other food-industry competitors; the ongoing level of profitability of our franchisees; and our ability and that of our franchisees to open new restaurants and keep existing restaurants in operation; 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 where we operate; severe weather conditions and natural disasters; cyber-attacks or other catastrophic events; 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 weak 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

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SOURCE Domino's Pizza, Inc.