Domino’s Pizza Announces 2016 Financial Results

ANN ARBOR, Mich., Feb. 28, 2017 (hospitalitybusinessnews.com) — Domino’s Pizza, Inc.,  today announced results for the fourth quarter and fiscal 2016, comprised of strong growth in same store sales, global store counts and earnings per share. Domestic same store sales grew 12.2% during the quarter versus the year-ago period, and 10.5% for the full year, continuing the positive sales momentum in the Company’s domestic business. The international division also posted strong results, with same store sales growth of 4.3% during the quarter and 6.3% for the full year. The fourth quarter marked the 92nd consecutive quarter – or 23rd year – of positive international same store sales growth and the 23rd consecutive quarter of positive domestic same store sales growth. The Company also had record global net store growth of 1,281 stores in 2016, comprised of 171 net new domestic stores and 1,110 net new stores internationally.

Fourth quarter diluted EPS was $1.48, up 25.4% over the prior-year quarter; full year diluted EPS was $4.30, up 23.9% over the prior year. Management noted that the as-reported diluted EPS for both the fourth quarter and fiscal 2015 was negatively impacted by expenses related to the Company’s recapitalization, and was positively impacted by the inclusion of an extra, or 53rd, week in the fourth quarter of 2015. Fourth quarter diluted EPS was up 28.7% over the prior-year quarter as-adjusted EPS of $1.15; full year diluted EPS was up 24.6% over the prior year as-adjusted EPS of $3.45.

On February 15, 2017, the Board of Directors declared a 46-cent per share quarterly dividend for shareholders of record as of March 15, 2017 to be paid on March 30, 2017. This represents a 21.1% increase over the previous quarterly dividend amount.

“I’m extremely proud of our franchisees and operators worldwide, including those who contributed toward back-to-back years of double digit sales growth in the U.S.,” said J. Patrick Doyle, Domino’s President and Chief Executive Officer. “While these unprecedented results speak for themselves, I am most pleased with the passion and energy we demonstrated throughout 2016 in meeting the challenge of sustained success. The momentum and alignment within our system has never been stronger.”

Fourth Quarter and Fiscal 2016 Highlights:

 

(dollars in millions, except per share data) Fourth

Quarter of

2016

Fourth

Quarter of

2015

Fiscal

2016

Fiscal

2015

Net income $ 72.7 $ 62.8 $ 214.7 $ 192.8
Weighted average diluted shares 49,090,074 53,351,075 49,923,859 55,532,955
Diluted earnings per share, as reported $ 1.48 $ 1.18 $ 4.30 $ 3.47
Items affecting comparability* (0.02) (0.02)
Diluted earnings per share, as adjusted* $ 1.48 $ 1.15 $ 4.30 $ 3.45
*  Refer to the Items Affecting Comparability section on page three for additional details. Diluted earnings per share, as adjusted figures may not sum to the total due to the rounding of each individual calculation.
  • Revenues were up 10.6% for the fourth quarter versus the prior year period, due primarily to higher supply chain volumes as well as higher Company-owned store, domestic franchise and international franchise revenues resulting from increased same store sales and store count growth. The increase in consolidated revenue was offset in part by the inclusion of the 53rd week in fiscal 2015 and the negative impact of foreign currency exchange rates.
  • Net Income increased 15.9% for the fourth quarter versus the prior year period, primarily driven by an increase in store count and same store sales growth as well as higher supply chain volumes. The increase in consolidated net income was partially offset by higher general and administrative expenses and the negative impact of foreign exchange rates. The inclusion of the 53rd week in 2015 and the Company’s 2015 recapitalization both impact the comparability of the financial results for the fourth quarter. See the Items Affecting Comparability section for additional details.
  • Diluted EPS was $1.48 for the fourth quarter versus $1.18 in the prior year quarter on an as-reported basis. This represents a 30-cent or 25.4% increase over the prior year quarter. Diluted EPS increased 33 cents or 28.7% from $1.15 in the prior year quarter on an as-adjusted basis. This increase was driven by the increase in net income as well as lower diluted share count, primarily as a result of ongoing share repurchases. See the Items Affecting Comparability section and the Comments on Regulation G section for additional details.

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.

 

Fiscal Quarter
of 2016
Fiscal 2016
Same store sales growth: (versus prior year period)
Domestic Company-owned stores + 13.7% + 10.4%
Domestic franchise stores + 12.1% + 10.5%
Domestic stores + 12.2% + 10.5%
International stores (excluding foreign currency impact) + 4.3% + 6.3%
Global retail sales growth: (versus prior year period)
Domestic stores + 8.9% + 10.9%
International stores + 5.3% + 8.8%
Total + 7.0% + 9.8%
Global retail sales growth: (versus prior year period,

excluding foreign currency impact)

Domestic stores + 8.9% + 10.9%
International stores + 10.4% + 14.5%
Total + 9.7% + 12.8%

 

Domestic

Company-

owned Stores

Domestic

Franchise

Stores

Total

Domestic

Stores

International

Stores

Total
Store counts:
Store count at September 11, 2016 387 4,886 5,273 7,979 13,252
Openings 6 98 104 487 591
Closings (1) (5) (6) (26) (32)
Store count at January 1, 2017 392 4,979 5,371 8,440 13,811
Fourth quarter 2016 net change 5 93 98 461 559
Fiscal 2016 net change 8 163 171 1,110 1,281

 

 

Fourth Quarter Full Year
(in thousands, except per share data) Pre-tax After-tax Diluted EPS

Impact

Pre-tax After-tax Diluted EPS

Impact

2015 items affecting comparability:
Recapitalization expenses:
General and administrative expenses (1) $ (860) $ (539) $ (0.01) $ (860) $ (539) $ (0.01)
Interest expense (2) (405) (254) (0.00) (405) (254) (0.00)
Debt issuance cost write-off (3) (6,870) (4,305) (0.08) (6,870) (4,305) (0.08)
Subtotal (8,135) (5,098) (0.10) (8,135) (5,098) (0.09)
Estimated 53rd week impact (4) 10,131 6,348 0.12 10,131 6,348 0.11
Total of 2015 items $ 1,996 $ 1,250 $ 0.02 $ 1,996 $ 1,250 $ 0.02
(1)  Represents legal, professional and administrative fees incurred in connection with the Company’s 2015 recapitalization.
(2)  Represents interest expense the Company incurred on a portion its 2012 borrowings subsequent to the closing of the 2015 recapitalization but prior to the repayment of a portion of the 2012 borrowings, resulting in the payment of interest on both the 2012 and 2015 facilities for a short period of time.
(3)  Represents the write-off of debt issuance costs related to the extinguishment of a portion of the 2012 debt in connection with the Company’s 2015 recapitalization.
(4)  Represents the estimated impact on income of the 53rd week in the fourth quarter and fiscal 2015.

 

Three- to Five-Year Outlook
The Company does not provide quarterly or annual earnings estimates. The following outlook does not constitute specific earnings guidance. In January 2017, the Company provided a three- to five-year outlook as follows:

 

Current

Outlook

Prior

Outlook

Domestic same store sales growth 3% – 6% 2% – 5%
International same store sales growth 3% – 6% 3% – 6%
Net unit growth 6% – 8% 5% – 7%
Global retail sales growth 8% – 12% 7% – 11%

 

Liquidity
As of January 1, 2017, the Company had approximately:

  • $42.8 million of unrestricted cash and cash equivalents;
  • $2.19 billion in total debt; and
  • $80.7 million of available borrowings under its $125.0 million variable funding notes. Letters of credit issued under the Company’s variable funding note facility were $44.3 million.

The Company invested $58.6 million in capital expenditures during fiscal 2016, versus $63.3 million in fiscal 2015. Free cash flow, as reconciled below to cash flows from operations as determined under generally accepted accounting principles (GAAP), was approximately $228.7 million in fiscal 2016.

 

(in thousands) Fiscal 2016
Net cash provided by operating activities $ 287,273
Capital expenditures (58,555)
Free cash flow $ 228,718

 

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, including free cash flow metrics and measures related to items affecting comparability between fiscal quarters and fiscal years. 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 periods 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 in 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, supply chain revenues are directly impacted by changes in 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,” which is 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,” which is 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 a global enterprise of more than 13,800 stores in over 85 markets. Domino’s had global retail sales of nearly $10.9 billion in 2016, with more than $5.3 billion in the U.S. and more than $5.5 billion internationally. In the fourth quarter of 2016, Domino’s had global retail sales of nearly $3.6 billion, with over $1.7 billion in the U.S. and over $1.8 billion internationally. Its system is comprised of independent franchise owners who accounted for over 97% of Domino’s stores as of the fourth quarter of 2016. Emphasis on technology innovation helped Domino’s reach an estimated $5.6 billion in global digital sales in 2016, and has produced several innovative ordering platforms including Google Home, Facebook Messenger, Apple Watch, Amazon Echo, Twitter and text message using a pizza emoji. In late 2015, Domino’s announced the design and launch of the DXP®, a purpose-built pizza delivery vehicle, as well as Piece of the Pie Rewards™, its first digital customer loyalty program.

Order – dominos.com
AnyWare Ordering – anyware.dominos.com
Company Info – biz.dominos.com
Twitter – twitter.com/dominos
Facebook – facebook.com/dominos
Instagram – instagram.com/dominos
YouTube – youtube.com/dominos

Please visit our Investor Relations website at biz.dominos.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; the strength of our brand in the markets in which we compete; our ability to retain key personnel; new product, digital ordering and concept developments by us, and other food-industry competitors; the ongoing level of profitability of our franchisees; our ability and that of our franchisees to open new restaurants and keep existing restaurants in operation; changes in operating expenses resulting from changes in food (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 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 consumer confidence; availability of borrowings under our variable funding notes and our letters of credit; our ability to pay dividends and repurchase shares; 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.

 

Domino’s Pizza, Inc. and Subsidiaries
Condensed Consolidated Statements of Income
(Unaudited)
Fiscal Quarter Ended
January 1,

2017

% of

Total

Revenues

January 3,

2016

% of

Total

Revenues

(In thousands, except per share data)
Revenues:
Domestic Company-owned stores $ 143,781 $ 129,291
Domestic franchise 103,797 90,822
Supply chain 514,355 465,011
International franchise 57,502 56,059
Total revenues 819,435 100.0% 741,183 100.0%
Cost of sales:
Domestic Company-owned stores 108,089 95,028
Supply chain 456,612 414,716
Total cost of sales 564,701 68.9% 509,744 68.8%
Operating margin 254,734 31.1% 231,439 31.2%
General and administrative 104,017 12.7% 93,027 12.6%
Income from operations 150,717 18.4% 138,412 18.6%
Interest expense, net (33,407) (4.1)% (40,285) (5.4)%
Income before provision for income taxes 117,310 14.3% 98,127 13.24%
Provision for income taxes 44,576 5.4% 35,368 4.7%
Net income $ 72,734 8.9% $ 62,759 8.5%
Earnings per share:
Common stock – diluted $ 1.48 $ 1.18
Dividends declared per share $ 0.38 $ 0.31

 

Domino’s Pizza, Inc. and Subsidiaries
Condensed Consolidated Statements of Income
(Unaudited)
Fiscal Year Ended
January 1,

2017

% of

Total

Revenues

January 3,

2016

% of

Total

Revenues

(In thousands, except per share data)
Revenues:
Domestic Company-owned stores $ 439,024 $ 396,916
Domestic franchise 312,260 272,808
Supply chain 1,544,345 1,383,161
International franchise 176,999 163,643
Total revenues 2,472,628 100.0% 2,216,528 100.0%
Cost of sales:
Domestic Company-owned stores 331,860 299,294
Supply chain 1,373,077 1,234,103
Total cost of sales 1,704,937 69.0% 1,533,397 69.2%
Operating margin 767,691 31.0% 683,131 30.8%
General and administrative 313,649 12.7% 277,692 12.5%
Income from operations 454,042 18.3% 405,439 18.3%
Interest expense, net (109,384) (4.4)% (99,224) (4.5)%
Income before provision for income taxes 344,658 13.9% 306,215 13.8%
Provision for income taxes 129,980 5.2% 113,426 5.1%
Net income $ 214,678 8.7% $ 192,789 8.7%
Earnings per share:
Common stock – diluted $ 4.30 $ 3.47
Dividends declared per share $ 1.52 $ 1.24

 

Domino’s Pizza, Inc. and Subsidiaries
Condensed Consolidated Statements of Income
(Unaudited)
January 1, 2017 January 3, 2016
(In thousands)
Assets
Current assets:
Cash and cash equivalents $ 42,815 $ 133,449
Restricted cash and cash equivalents 126,496 180,940
Accounts receivable 150,369 131,582
Inventories 40,181 36,861
Advertising fund assets, restricted 118,377 99,159
Prepaid expenses and other 17,635 20,646
Total current assets 495,873 602,637
Property, plant and equipment, net 138,534 131,890
Other assets 81,888 65,318
Total assets $ 716,295 $ 799,845
Liabilities and stockholders’ deficit
Current liabilities:
Current portion of long-term debt $ 38,887 $ 59,333
Accounts payable 111,510 106,927
Advertising fund liabilities 118,377 99,159
Other accrued liabilities 134,924 110,564
Total current liabilities 403,698 375,983
Long-term liabilities:
Long-term debt, less current portion 2,148,990 2,181,460
Other accrued liabilities 46,750 42,653
Total long-term liabilities 2,195,740 2,224,113
Total stockholders’ deficit (1,883,143) (1,800,251)
Total liabilities and stockholders’ deficit $ 716,295 $ 799,845

 

Domino’s Pizza, Inc. and Subsidiaries
Condensed Consolidated Statements of Cash Flows
(Unaudited)
Fiscal Year Ended
January 1,

2017

January 3,

2016

(In thousands)
Cash flows from operating activities:
Net income $ 214,678 $ 192,789
Adjustments to reconcile net income to net cash flows provided by
operating activities:
Depreciation and amortization 38,140 32,434
Losses on sale/disposal of assets 863 316
Amortization of debt issuance costs 6,418 12,393
Provision (benefit) for deferred income taxes (3,059) 1,713
Non-cash compensation expense 18,564 17,623
Tax impact from equity-based compensation (48,129) (17,775)
Other (224) (1,084)
Changes in operating assets and liabilities 60,022 53,377
Net cash provided by operating activities 287,273 291,786
Cash flows from investing activities:
Capital expenditures (58,555) (63,282)
Proceeds from sale of assets 4,936 12,724
Changes in restricted cash 54,444 (59,986)
Other (1,661) 1,252
Net cash used in investing activities (836) (109,292)
Cash flows from financing activities:
Proceeds from issuance of long-term debt 63,000 1,305,000
Repayments of long-term debt and capital lease obligations (122,334) (564,403)
Proceeds from exercise of stock options 15,234 4,814
Tax impact from equity-based compensation 48,129 17,775
Purchases of common stock (300,250) (738,557)
Tax payments for restricted stock upon vesting (5,646) (7,431)
Payments of common stock dividends and equivalents (73,925) (80,329)
Cash paid for financing costs (17,367)
Other (438)
Net cash used in financing activities (375,792) (80,936)
Effect of exchange rate changes on cash and cash equivalents (1,279) 1,036
Change in cash and cash equivalents (90,634) 102,594
Cash and cash equivalents, at beginning of period 133,449 30,855
Cash and cash equivalents, at end of period $ 42,815 $ 133,449

 

 

 

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