Domino's Pizza, Inc. News
Domino's Pizza Announces First Quarter 2008 Financial Results
First Quarter Highlights: First Quarter First Quarter (dollars in millions, except per share data) of 2008 of 2007 Net income $14.1 $8.4 Weighted average diluted shares 60,085,730 64,076,179 Diluted earnings per share, as reported $0.23 $0.13 Items affecting comparability (see section below) $(0.03) $0.25 Diluted earnings per share, as adjusted $0.21 $0.38 — Diluted EPS was $0.23 on an as-reported basis for the first quarter, up $0.10 from the as-reported prior year period. However, excluding items affecting comparability, diluted EPS declined $0.17, primarily due to increased interest expense as a result of our 2007 recapitalization. (See the Items Affecting Comparability section and the Comments on Regulation G section.) First Quarter First Quarter of 2008 of 2007 Same store sales growth: (versus prior year period) Domestic Company-owned stores (2.4)% +0.6% Domestic franchise stores (5.5)% (3.4)% Domestic stores (5.2)% (2.9)% International stores +8.8% +3.8% Global retail sales growth: (versus prior year period) Domestic stores (4.6)% (1.6)% International stores +22.1% +14.1% Total +5.6% +3.8% Domestic Company- Domestic Total Inter- owned Franchise Domestic national Stores Stores Stores Stores Total Store counts: Store count at December 30, 2007 571 4,584 5,155 3,469 8,624 Openings - 14 14 52 66 Closings - (41) (41) (8) (49) Transfers (29) 29 - - - Store count at March 23, 2008 542 4,586 5,128 3,513 8,641 First quarter 2008 net growth (29) 2 (27) 44 17 Trailing four quarters net growth (28) 27 (1) 248 247
Brandon added, "We continue to be very pleased with the growth and expansion of our international business. And, I am also proud of the work we have done to reduce our G&A spending during this difficult period of cost inflation and soft domestic sales. The bottom line: despite numerous negative influences hitting our business all at once, our ability to produce plentiful free cash flow remains strong —
Conference Call Information
The Company plans to 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
Share Repurchases
During the first quarter of 2008, the Company repurchased and retired approximately 1.4 million shares of its common stock under an open market share repurchase program for
Sale of Certain Company-Owned Stores
During the first quarter of 2008, the Company announced it had agreements in place to sell approximately 60 Company-owned stores in
Restructuring Action
During the first quarter of 2008, the Company announced and executed a plan to eliminate approximately 55 positions that were primarily administrative in nature. In connection with this plan, and other restructuring actions related to the sale of the aforementioned stores, the Company incurred expenses of approximately
Items Affecting Comparability
The Company's reported financial results for the first quarter of 2008 are not comparable to the reported financial results in the prior year period. The table below presents certain items that affect comparability between our 2008 and 2007 financial results. Management believes that including such information is critical to the understanding of our financial results for the first quarter of 2008 as compared to the same period in 2007 (See the Comments on Regulation G section).
In addition to the items noted in the table below, the Company's 2007 recapitalization had a significant impact on ongoing interest expense as a result of higher debt levels. This impacts comparability to periods in the prior year. The increase in ongoing interest expense resulted in a decrease in diluted EPS of approximately
First Quarter Diluted EPS (in thousands, except per share data) Pre-tax After-tax Impact 2008 items affecting comparability: Gain on the sale of Company-owned operations (1) $4,228 $2,537 $0.04 Separation expenses (2) (1,445) (867) (0.01) Total of 2008 items $2,783 $1,670 $0.03 2007 items affecting comparability: General and administrative expenses (3) $(455) $(282) $0.00 Additional interest expense (4) (11,965) (7,418) (0.12) Premium on bond extinguishment (5) (13,294) (8,242) (0.13) Total of 2007 items $(25,714) $(15,942) $(0.25) (1) The gain recognized relates to the sale of 29 Company-owned stores in California and Georgia. (2) Represents separation and related expenses incurred in connection with a previously announced restructuring action and other staffing reduction costs related to the sale of Company-owned operations in California. (3) Primarily includes legal and professional fees incurred in connection with the stock tender and bond tender offers. (4) Primarily includes the write-off of deferred financing fees and bond discount related to extinguished debt and the settlement of interest rate derivatives. (5) Represents the premium paid to tender the Domino's, Inc. senior subordinated notes due 2011. Liquidity As of March 23, 2008, the Company had: — $1.7 billion in total debt, — $3.3 million of unrestricted cash and cash equivalents, — no borrowings under its $150.0 million of variable funding notes, and — letters of credit issued under the variable funding notes of $34.0 million.
The Company's cash borrowing rate for the first quarter of 2008 was 6.1%. The Company incurred
The Company's free cash flow, as reconciled below to cash flows from operations as determined under generally accepted accounting principles, was
First Quarter of (in thousands) 2008 Net cash provided by operating activities (as reported) $20,272 Capital expenditures (as reported) (3,479) Free cash flow $16,793
Comments on Regulation G
In addition to the GAAP financial measures set forth in this press release, the Company has included a non-GAAP financial measure within the meaning of Regulation G due to items affecting comparability between fiscal quarters. Additionally, the Company has included metrics commonly used 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 less 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's 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.
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(R) 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.
Additionally, the Company uses "Free cash flow," calculated as cash flows from operations less capital expenditures, both as reported. The Company's 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 flows are available to be used for de-levering, making acquisitions, repurchasing shares or similar uses of cash.
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 8,641 franchised and Company-owned stores in
SAFE HARBOR STATEMENT UNDER THE PRIVATE SECURITIES LITIGATION REFORM 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 stores and keep existing stores 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 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, including our annual report on Form 10-K for the fiscal year ended
Domino's Pizza, Inc. and Subsidiaries Condensed Consolidated Statements of Income Fiscal Quarter Ended % of % of March 23, Total March 25, Total 2008 Revenues 2007 Revenues (In thousands, except per share data) Revenues: Domestic Company-owned stores $93,047 $95,540 Domestic franchise 36,386 37,517 Domestic supply chain 176,189 179,885 International 33,390 26,379 Total revenues 339,012 100.0% 339,321 100.0% Cost of sales: Domestic Company-owned stores 75,511 75,643 Domestic supply chain 160,626 161,417 International 14,840 11,191 Total cost of sales 250,977 74.0% 248,251 73.2% Operating margin 88,035 26.0% 91,070 26.8% General and administrative 38,685 11.4% 40,338 11.9% Income from operations 49,350 14.6% 50,732 14.9% Interest expense, net (25,818) (7.6)% (23,893) (7.0)% Other - - (13,294) (3.9)% Income before provision for income taxes 23,532 6.9% 13,545 4.0% Provision for income taxes 9,413 2.8% 5,147 1.5% Net income $14,119 4.2% $8,398 2.5% Earnings per share: Common stock - diluted $0.23 $0.13 Domino's Pizza, Inc. and Subsidiaries Condensed Consolidated Balance Sheets March 23, December 30, 2008 2007 (In thousands) Assets Current assets: Cash and cash equivalents $3,325 $11,344 Restricted cash 82,754 80,951 Accounts receivable 69,333 68,446 Inventories 22,128 24,931 Advertising fund assets, restricted 20,574 20,683 Other assets 19,855 20,527 Total current assets 217,969 226,882 Property, plant and equipment, net 118,013 122,890 Other assets 116,890 123,392 Total assets $452,872 $473,164 Liabilities and stockholders' deficit Current liabilities: Current portion of long-term debt $319 $15,312 Accounts payable 57,338 60,411 Advertising fund liabilities 20,574 20,683 Other accrued liabilities 81,730 79,102 Total current liabilities 159,961 175,508 Long-term liabilities: Long-term debt, less current portion 1,704,692 1,704,771 Other accrued liabilities 38,770 43,024 Total long-term liabilities 1,743,462 1,747,795 Total stockholders' deficit (1,450,551) (1,450,139) Total liabilities and stockholders' deficit $452,872 $473,164 Domino's Pizza, Inc. and Subsidiaries Condensed Consolidated Statements of Cash Flows Fiscal Quarter Ended March 23, March 25, 2008 2007 (In thousands) Cash flows from operating activities: Net income $14,119 $8,398 Adjustments to reconcile net income to net cash flows provided by operating activities: Depreciation and amortization 7,071 7,249 (Gains) losses on sale/disposal of assets (4,169) 598 Amortization of deferred financing costs, debt discount and other 2,255 10,215 Provision (benefit) for deferred income taxes 1,777 (198) Non-cash compensation expense 2,065 1,511 Other 199 291 Changes in operating assets and liabilities (3,045) (21,156) Net cash provided by operating activities 20,272 6,908 Cash flows from investing activities: Capital expenditures (3,479) (3,566) Proceeds from sale of assets 8,220 335 Change in restricted cash (1,803) - Other 520 208 Net cash provided by (used in) investing activities 3,458 (3,023) Cash flows from financing activities: Purchase of common stock (18,427) (67) Proceeds from issuance of long-term debt 3,000 780,000 Repayments of long-term debt and capital lease obligation (18,075) (736,656) Cash paid for financing costs - (22,255) Tax benefit from stock options 97 1,167 Other 1,618 2,823 Net cash provided by (used in) financing activities (31,787) 25,012 Effect of exchange rate changes on cash and cash equivalents 38 (13) Change in cash and cash equivalents (8,019) 28,884 Cash and cash equivalents, at beginning of period 11,344 38,222 Cash and cash equivalents, at end of period $3,325 $67,106
SOURCE Domino's Pizza, Inc.
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