Domino's Pizza Announces 2012 Financial Results
Domino's Pizza Announces 2012 Financial Results
Delivers 23% EPS Growth in Fourth Quarter; Initiates Regular Dividend
PR Newswire
ANN ARBOR, Mich., Feb. 28, 2013
ANN ARBOR, Mich., Feb. 28, 2013 /PRNewswire/ -- Domino's Pizza, Inc. (NYSE:
DPZ),the recognized world leader in pizza delivery, today announced results
for the fourth quarter and fiscal 2012, comprised of strong EPS and global
store count growth, and positive same store sales. Historically consistent
cash generation also enabled the Board of Directors to declare a regular
dividend. Domestic same store sales grew 4.7% during the fourth quarter versus
the year-ago period, and 3.1% for the full year, continuing the positive sales
momentum in the Company's domestic business. International also posted strong
results with same store sales growth of 5.2% for both the quarter and full
year periods. The fourth quarter marked the 76^th quarter – or 19^th full year
– of consecutive quarterly international same store sales growth for the
division. The Company also had global net store growth of 513 stores in 2012,
led by a record 492 net new stores internationally, along with 21 net new
domestic stores.
(Logo: http://photos.prnewswire.com/prnh/20120814/DE55948LOGO-b )
Fourth quarter diluted EPS was 64 cents, up 23.1% over the Company's EPS in
the prior year quarter. Diluted EPS, as reported, was $1.91 for fiscal 2012,
up 12% over the as reported EPS in the prior year. Diluted EPS, as adjusted,
was $2.02 for fiscal 2012, up nearly 20% over the as adjusted diluted EPS in
the prior year. The Company also repurchased and retired 1,136,648 shares of
its common stock for $45.5 million during the quarter and repurchased and
retired 2,472,863 shares of its common stock for $88.2 million in fiscal 2012.
On February 27, 2013 the Board of Directors declared a 20-cent quarterly
dividend for shareholders of record as of March 15, 2013 to be paid on March
29, 2013.
J. Patrick Doyle, Domino's President and Chief Executive Officer, said: "Our
performance in 2012 was yet another example of the consistent results we have
delivered to our shareholders. Our strong global brand is driving a robust
record of same store sales growth, new store openings and technological
innovation that is building our business globally."
Doyle continued, "The Board's initiation of a regular quarterly dividend, in
addition to our intention to continue share repurchases, are further evidence
of our commitment to return value to our shareholders."
Fourth Quarter and Fiscal 2012 Highlights:
(dollars in millions, except Fourth Fourth Fiscal Fiscal
per share data) Quarter of Quarter of
2012 2011 2012 2011
Net income $ 37.6 $ 30.9 $ 112.4 $ 105.4
Weighted average diluted shares 58,487,618 59,764,693 58,997,476 61,653,519
Diluted earnings per share, as $ 0.64 $ 0.52 $ 1.91 $ 1.71
reported
Items affecting comparability* - - 0.11 (0.02)
Diluted earnings per share, as $ 0.64 $ 0.52 $ 2.02 $ 1.69
adjusted
*Refer to the items affecting comparability section on Page Four for
additional details.
o Revenues were up 7.5% for the fourth quarter versus the prior-year period,
due primarily to higher volumes in domestic supply chain, higher same
store sales in both domestic and international stores and store count
growth in international markets.
o Net Income was up 21.6% for the fourth quarter versus the prior-year
period, primarily driven by domestic and international same store sales
growth, international store growth and improved operating margins
o Diluted EPS was 64 cents for the fourth quarter versus 52 cents in the
prior-year quarter – an increase of 12 cents, or 23.1%. This increase in
diluted EPS was primarily due to higher net income and lower weighted
average diluted shares outstanding. There were no items that affected
comparability in the fourth quarter of 2012 compared to the fourth quarter
of 2011.
o Global Retail Sales were up 9.7% in the fourth quarter, or up 9.4% when
excluding the impact of foreign currency. For fiscal 2012, global retail
sales were up 6.5%, or up 8.3% when excluding the impact of foreign
currency.
Fourth Fiscal
Quarter of 2012
2012
Same store sales growth: (versus prior year period)
Domestic Company-owned stores + 2.5% + 1.3%
Domestic franchise stores + 4.9% + 3.2%
Domestic stores + 4.7% + 3.1%
International stores (constant dollar basis) + 5.2% + 5.2%
Global retail sales growth: (versus prior year period)
Domestic stores + 5.0% + 3.3%
International stores (constant dollar basis) +14.1% + 9.7%
Total + 9.7% + 6.5%
Global retail sales growth: (versus prior year period,
excluding foreign currency impact)
Domestic stores + 5.0% + 3.3%
International stores +13.6% +13.3%
Total + 9.4% + 8.3%
The table above describes non-GAAP measures. Refer to our comments on
non-GAAP measures on page five for additional details.
Domestic Total
Domestic
Company- Franchise Domestic International
owned Stores Stores Stores Stores
Total
Store counts:
Store count at 387 4,509 4,896 5,144 10,040
September 9, 2012
Openings 2 49 51 223 274
Closings (1) (18) (19) (40) (59)
Transfers - - - - -
Store count at 388 4,540 4,928 5,327 10,255
December 30, 2012
Fourth quarter 2012 1 31 32 183 215
net growth
Fiscal 2012 net (6) 27 21 492 513
growth
Conference Call Information
The Company will file its annual report on Form 10-K this morning.
Additionally, as previously announced, Domino's Pizza, Inc. will hold a
conference call today at 11 a.m. (Eastern) to review its fiscal 2012 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.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
86136427. The webcast will also be archived for 30 days on
www.dominosbiz.com.
Share Repurchases
During the fourth quarter of 2012, the Company repurchased and retired
1,136,648 shares of its common stock under its open market share repurchase
program for approximately $45.5 million, or an average price of $40.05 per
share. For fiscal 2012, the Company repurchased and retired 2,472,863 shares
of its common stock for approximately $88.2 million, or an average price of
$35.68 per share. The Company has used approximately 24% of the total amount
authorized under its open market share repurchase program and has
approximately $152.4 million remaining under the program, which the Company's
Board of Directors reset for a second time at $200.0 million during the third
quarter of 2012.
Dividends
Due to the Company's strong financial performance and consistent free cash
flow generation, the Board of Directors initiated a quarterly dividend of 20
cents per share. This dividend payment will be paid to shareholders of record
as of March 15, 2013 with a payment date of March 29, 2013.
The vast majority of the Company's currently outstanding vested and unvested
stock options are held by the Company's senior management as a key
compensation component and tool for both management retention and aligning the
interests of management with shareholders. However, these stock options are
not eligible to receive ordinary dividends. In recognition of this lost
economic value to management option holders, and due to the Board's desire to
appropriately reward and retain its proven management team for creating value
for the Company's stakeholders, the Compensation Committee approved additional
equity grants for management option holders. As a further retention mechanism,
the Compensation Committee also lengthened the vesting period applicable to
stock options and performance-based restricted shares from three years to four
years beginning with equity awards made in 2013. The Company estimates that it
will incur an additional charge to its general and administrative expense over
four years with the 2013 expense expected to be approximately $5 million as a
result of this special grant.
Long Range Outlook
The Company does not provide quarterly or annual earnings estimates. The
following long range outlook does not constitute specific earnings guidance,
but the Company believes these ranges to be appropriate and achievable over
the long term. The Company has recently adjusted portions of this long range
outlook, as noted below:
Current Prior
Outlook Outlook
Domestic same store sales growth 1% – 3% 1% – 3%
International same store sales growth 3% – 6% 3% – 6%
Net unit growth 4% – 6% 350 – 450 net stores
Global retail sales growth 6% – 10% 5% – 8%
Capital expenditures (in millions) $25 – $35 $25 – $35
Tax rate 37.5% – 38.5% 38% – 39%
Items Affecting Comparability
The Company's reported financial results for fiscal 2012 are not comparable to
the reported financial results for the equivalent prior-year period. The table
below presents certain items that affect comparability between 2012 and 2011
financial results. The Company believes that including such information is
critical to the understanding of its financial results for fiscal 2012 as
compared to the same period in 2011 (See the Comments on Non-GAAP Measures
section).
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 approximately one cent in the fourth quarter of 2012 and nine
cents in fiscal 2012.
Fourth Quarter Full Year
Diluted Diluted
EPS EPS
(in thousands, Impact Impact
except per share Pre-tax After-tax Pre-tax After-tax
data)
2012 items
affecting
comparability:
Recapitalization
expenses:
General and
administrative $
$ - $ - $ - (293) $ (182) $(0.00)
expenses
(1)
Additional
interest expense - - - (10,222) (6,348) (0.11)
(2)
Subtotal - - - (10,515) (6,530) (0.11)
Deferred tax asset
valuation
- - - - (868) (0.01)
allowance
(3)
Tax benefit for
increased tax
basis in - - - - 735 0.01
certain
assets (4)
Total of 2012 $ - $ - $ - $(10,515) $(6,663) $(0.11)
items
2011 items affecting comparability:
Impact related to
the sale of $ -
Company-owned $ - $ - $1,560 $ 962 $0.02
stores (5)
Gain on
Netherlands - - - 678 417 0.01
operations (6)
Total of 2011 $ - $ - $ - $2,238 $1,379 $0.02
items
(1) Primarily includes stock compensation expenses, payroll taxes related
to the payments made to certain stock option holders, and legal and
professional fees incurred in connection with the Company's 2012
recapitalization.
(2) Primarily includes the write-off of deferred financing fees related to
the extinguishment of the 2007 debt in connection with the Company's 2012
recapitalization. Additionally, the Company incurred $2.1 million of interest
expense on the 2007 borrowings subsequent to the closing of the 2012
recapitalization but prior to the repayment of the 2007 borrowings, resulting
in the payment of interest on both the 2007 and 2012 facilities for a short
period of time.
(3) Represents a valuation allowance recorded on a deferred tax asset
related to a capital loss that resulted from a write-off of the tax basis
goodwill associated with the sale of the six remaining Company-owned stores in
a certain market in the first quarter of 2012.
(4) Represents a tax benefit of $0.7 million that was recorded to reflect
an increased tax basis in certain assets due to the issuance of final tax
rules in the third quarter of 2012.
(5) The income recognized primarily relates to the sale of 30
Company-owned stores during the third quarter of 2011 and 56 stores during the
three fiscal quarters of 2011. The income in the third quarter is net of
related expenses of approximately $0.3 million and net of a reduction in
goodwill of approximately $0.3 million. The income during the three fiscal
quarters is net of related expenses of approximately $0.3 million and net of a
reduction in goodwill of approximately $0.7 million.
(6) Relates to the recognition of a contingent gain in connection with the
previous sale of the Netherlands operations to the current master franchisee.
The amount was received by the Company during the first quarter of 2011 as a
portion of the contingency was finalized.
Liquidity
As of December 30, 2012, the Company had approximately:
o $54.8 million of unrestricted cash and cash equivalents,
o $1.56 billion in total debt, and
o $56.5 million of available borrowings under its $100.0 million variable
funding notes, net of letters of credits issued of $43.5 million.
The Company's cash borrowing rate averaged 5.3% for the fourth quarter and
5.5% for fiscal 2012. It invested $29.3 million in capital expenditures
during fiscal 2012 versus $24.3 million in fiscal 2011.
Free cash flow, as reconciled below to cash flows from operations as
determined under generally accepted accounting principles (GAAP), was
approximately $147.1 million in fiscal 2012.
Fiscal
(in thousands)
2011
Net cash provided by operating activities (as reported) $176,320
Capital expenditures (as reported) (29,267)
Free cash flow $147,053
Comments on Non-GAAP Measures
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. Management
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.
Management 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. Management believes global retail
sales information is useful in analyzing revenues because franchisees pay
royalties that are based on a percentage of franchise retail sales. Management
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 on
a constant dollar basis, 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. Management 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
10,200 stores in over 70 international markets. Domino's had global retail
sales of over $7.4 billion in 2012, comprised of over $3.5 billion in the U.S.
and nearly $3.9 billion internationally. In the fourth quarter of 2012,
Domino's had global retail sales of nearly $2.4 billion, comprised of
approximately $1.1 billion in the U.S. and $1.3 billion internationally. Its
system is largely made up of franchise owner-operators who accounted for over
96% of the company's stores as of the fourth quarter 2012. Domino's reached
the unprecedented $1 billion mark in U.S. digital sales during a one-year time
period from April 2011 to April 2012. Its emphasis on new technology has
helped drive the emergence of Domino's ordering apps for Kindle Fire,
Android^™ and iPhone® – which now cover over 80% of the smartphone market.
Continuing its focus on menu enhancement, Domino's established itself as a
player in the Pan Pizza market with the launch of its Handmade Pan Pizza,
featuring fresh, never-frozen dough, in October 2012.
Order - www.dominos.com
Mobile – http://mobile.dominos.com
Info - www.dominosbiz.com
Twitter - http://twitter.com/dominos
Facebook - http://www.facebook.com/Dominos
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
operating performance, trends in our business and other descriptions of future
events 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 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 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; changes in
our effective tax rate; 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. 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
Fiscal Quarter Ended
% of January 1, % of
December 30, Total Total
2012 2012
Revenues Revenues
(In thousands, except per share
data)
Revenues:
Domestic Company-owned stores $ 99,907 $ 98,470
Domestic franchise 61,479 57,965
Domestic supply chain 305,316 282,718
International 72,948 62,595
Total revenues 539,650 100.0% 501,748 100.0%
Cost of sales:
Domestic Company-owned stores 76,066 77,250
Domestic supply chain 273,852 254,402
International 29,056 25,239
Total cost of sales 378,974 70.2% 356,891 71.1%
Operating margin 160,676 29.8% 144,857 28.9%
General and administrative 72,637 13.5% 68,725 13.7%
Income from operations 88,039 16.3% 76,132 15.2%
Interest expense, net (27,734) (5.1)% (28,067) (5.6)%
Income before provision for
income taxes 60,305 11.2% 48,065 9.6%
Provision for income taxes 22,727 4.2% 17,154 3.4%
Net income $ 37,578 7.0% $ 30,911 6.2%
Earnings per share:
Common stock – diluted $ 0.64 $ 0.52
Domino's Pizza, Inc. and Subsidiaries
Condensed Consolidated Statements of Income
Fiscal Year Ended
December 30, % of January 1, % of
Total Total
2012 2012
Revenues Revenues
(In thousands, except per share
data)
Revenues:
Domestic Company-owned $ 323,652 $ 336,349
stores
Domestic franchise 195,000 187,007
Domestic supply chain 942,219 927,904
International 217,568 200,933
Total revenues 1,678,439 100.0% 1,652,193 100.0%
Cost of sales:
Domestic Company-owned 247,391 267,066
stores
Domestic supply chain 843,329 831,665
International 86,381 82,946
Total cost of sales 1,177,101 70.1% 1,181,677 71.5%
Operating margin 501,338 29.9% 470,516 28.5%
General and administrative 219,007 13.1% 211,371 12.8%
Income from operations 282,331 16.8% 259,145 15.7%
Interest expense, net (101,144) (6.0)% (91,339) (5.5)%
Income before provision for
income taxes 181,187 10.8% 167,806 10.2%
Provision for income taxes 68,795 4.1% 62,445 3.8%
Net income $ 112,392 6.7% $ 105,361 6.4%
Earnings per share:
Common stock – diluted $ 1.91 $ 1.71
Domino's Pizza, Inc. and Subsidiaries
Condensed Consolidated Balance Sheets
December 30, January 1,
2012 2012
(In thousands)
Assets
Current assets:
Cash and cash equivalents $ $
54,813 50,292
Restricted cash and cash equivalents 60,015 92,612
Accounts receivable 94,103 87,200
31,061 30,702
Inventories
Advertising fund assets, restricted 37,917 36,281
Other assets 28,358 29,756
Total current 306,267 326,843
assets
Property, plant and equipment, 91,445 92,400
net
Other assets 80,485 61,300
Total assets $ $
478,197 480,543
Liabilities and stockholders' deficit
Current liabilities:
Current portion of long-term debt $ $
24,349 904
Accounts 77,414 69,714
payable
Advertising fund 37,917 36,281
liabilities
Other accrued liabilities 89,818 90,276
Total current liabilities 229,498 197,175
Long-term liabilities:
Long-term debt, less current portion 1,536,443 1,450,369
Other accrued liabilities 47,779 42,738
Total long-term liabilities 1,584,222 1,493,107
Total stockholders' deficit (1,335,523) (1,209,739)
Total liabilities and stockholders' deficit $ $
478,197 480,543
Domino's Pizza, Inc. and Subsidiaries
Condensed Consolidated Statements of Cash Flows
Fiscal Year Ended
December 30, January 1,
2012 2012
(In thousands)
Cash flows from operating activities:
Net income $ 112,392 $ 105,361
Adjustments to reconcile net income to net
cash flows provided by operating activities:
Depreciation and amortization 23,171 24,042
(Gains) losses on sale/disposal of assets 540 (2,436)
Amortization of deferred financing costs, 14,596 6,190
debt discount and other
Provision for deferred income taxes 4,193 8,169
Non-cash compensation expense 17,621 13,954
Tax impact from equity-based compensation (16,220) (15,589)
Other (69) 1,428
Changes in operating assets and 20,096 11,954
liabilities
Net cash provided by operating activities 176,320 153,073
Cash flows from investing activities:
Capital expenditures (29,267) (24,349)
Proceeds from sale of assets 2,988 6,031
Changes in restricted cash 32,597 (7,082)
Other 1,030 (1,541)
Net cash provided by (used in) investing 7,348 (26,941)
activities
Cash flows from financing activities:
Proceeds from issuance of long-term debt 1,575,000 -
Repayments of long-term debt and capital (1,465,509) (890)
lease obligations
Proceeds from issuance of common stock - 563
Proceeds from exercise of stock options 8,945 33,524
Tax impact from equity-based compensation 16,220 15,589
Purchase of common stock (88,238) (165,007)
Common stock dividends and equivalents (185,484) -
Tax payments for restricted stock (5,845) (3,504)
Cash paid for financing costs (32,538) (3,760)
Net cash used in financing activities (177,449) (123,485)
Effect of exchange rate changes on cash and (1,698) (300)
cash equivalents
Change in cash and cash equivalents 4,521 2,347
Cash and cash equivalents, at beginning of 50,292 47,945
period
Cash and cash equivalents, at end of period $ 54,813 $ 50,292
SOURCE Domino's Pizza, Inc.
Website: http://www.dominos.com
Contact: Lynn Liddle, Executive Vice President, Communications, Investor
Relations and Legislative Affairs, +1-734-930-3008
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