Domino's Pizza® Announces 3Q 2016 Results

OREANDA-NEWS. Domino's Pizza, Inc. (NYSE: DPZ), the recognized world leader in pizza delivery, today announced results for the third quarter of 2016, comprised of strong growth in same store sales, global store counts and diluted earnings per share. Domestic same store sales grew 13.0% during the quarter versus the year-ago period, which represents the 22^nd consecutive quarter of positive sales in the U.S. business. The international division also posted strong results with quarterly same store sales growth of 6.6%, marking the 91^st consecutive quarter of international same store sales growth. The Company had global net store growth of 316 stores in the quarter, and 1,133 stores over the trailing four quarters.

Diluted EPS was 96 cents for the third quarter, which was up 43.3% over the prior year quarter. During the quarter, the Company repurchased 412,260 shares of its common stock for approximately $59.7 million. The Company's Board of Directors also declared a 38-cent per share quarterly dividend for shareholders of record as of December 15, 2016, to be paid on December 30, 2016.

"We continued to execute at a very high level during the third quarter, as our unprecedented momentum, steady strategy and alignment with our outstanding franchisees is helping to take the business to new heights," said J. Patrick Doyle, Domino's President and Chief Executive Officer. "I couldn't be more pleased with the way our system continues to answer the challenge of sustained success."

Third Quarter Highlights:

(dollars in millions, except per share data)	Third Quarter of 2016			Third Quarter of 2015			Three Fiscal Quarters of 2016			Three Fiscal Quarters of 2015
Net income	$	47.2		$	37.8		$	141.9		$	130.0
Weighted average diluted shares		49,242,182			56,115,670			50,309,217			56,584,913
Diluted earnings per share	$	0.96		$	0.67		$	2.82		$	2.30

• Revenues were up 16.9% for the third quarter versus the prior year period, due primarily to higher supply chain revenues from increased volumes and store growth. Increased domestic franchise and Company-owned store revenues and higher international revenues resulting from both same store sales and store count growth also contributed to this increase.
• Net Income increased 24.8% for the third quarter versus the prior year period, due primarily to higher consolidated operating margins driven in part by the increase in sales and store growth. Higher general and administrative expenses, as well as higher interest expense as a result of the Company's 2015 recapitalization partially offset this increase. Additionally, the Company's consolidated operating margins and net income benefited from lower insurance expense in the quarter, due to a casualty insurance charge recorded in the third quarter of 2015.
• Diluted EPS was 96 cents for the third quarter versus 67 cents in the prior year quarter. This represents a 29-cent or 43.3% increase over the prior year quarter. This increase was driven by the aforementioned increase in net income as well as lower diluted share counts, primarily as a result of the share repurchases made during the trailing four quarters

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 three for additional details.

 

Share Repurchases

During the third quarter of 2016, the Company repurchased and retired 412,260 shares of its common stock under its open market share repurchase program for approximately $59.7 million, or an average price of $144.85 per share. As of September 11, 2016, the end of the third quarter, the Company had a total remaining authorized amount for share repurchases of $165.5 million.

Liquidity

As of September 11, 2016, the Company had approximately:

• $30.0 million of unrestricted cash and cash equivalents;
• $2.23 billion in total debt; and
• $46.2 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 $43.8 million.

The Company invested $38.3 million in capital expenditures during the three fiscal quarters of 2016. Free cash flow, as reconciled below to cash flows from operations as determined under generally accepted accounting principles (GAAP), was approximately $124.4 million in the three fiscal quarters of 2016.

Comments on Regulation G

In addition to the GAAP financial measures set forth in this press release, the Company has included the free cash flow non-GAAP financial measure within the meaning of Regulation G. 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 "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 13,200 stores in over 80 markets. Domino's had global retail sales of over $9.9 billion in 2015, with more than $4.8 billion in the U.S. and nearly $5.1 billion internationally. In the third quarter of 2016, Domino's had global retail sales of nearly $2.5 billion, with over $1.2 billion in the U.S. and nearly $1.3 billion internationally. Its system is comprised of independent franchise owners who accounted for over 97% of Domino's stores as of the third quarter of 2016. Emphasis on technology innovation helped Domino's reach an estimated $4.7 billion annually in global digital sales at the end of 2015, and has produced several innovative ordering platforms including Facebook Messenger, Samsung Smart TV^®, 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.

 

 

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