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. oRevenues 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. oNet 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 oDiluted 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. oGlobal 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
Domino's Pizza Announces 2012 Financial Results
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