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Domino's Pizza Announces Second Quarter 2007 Financial Results

Posts Positive Domestic and International Same Store Sales Gains

ANN ARBOR, Mich., July 24 /PRNewswire-FirstCall/ -- Domino's Pizza, Inc. (NYSE: DPZ), the recognized world leader in pizza delivery, today announced results for the second quarter ended June 17, 2007. Management noted that, although it posted positive same store sales both domestically and internationally, the quarter's earnings were significantly impacted by expenses associated with the Company's recapitalization, which was completed in April 2007.




    Highlights:

    (dollars in millions, except per share data)

                             Second       Second     First Two    First Two
                          Quarter of    Quarter of  Quarters of  Quarters of
                              2007         2006         2007         2006

    Revenues                  $340.3      $327.7       $679.6      $675.4
    Net income                  $2.3       $24.5        $10.7       $50.7

    Weighted average
     diluted shares       64,717,208  63,340,062   64,798,109  65,522,650

    Diluted earnings per
     share, as reported        $0.04       $0.39        $0.17       $0.77
    Items affecting
     comparability
     (see section below)       $0.24    $ (0.05)        $0.49     $ (0.04)
    Diluted earnings per share,
     as adjusted               $0.28       $0.34        $0.65       $0.73



    -- Revenues were up 3.8% for the second quarter, due primarily to an
       increase in domestic distribution revenues, driven by higher food
       prices, primarily cheese, and to a lesser extent, higher domestic
       Company-owned store and domestic franchise revenues, driven by
       increases in same store sales.

-- Net income was down 90.5% for the second quarter, driven primarily by

the impact of the Company's recapitalization, offset in part by

domestic same store sales growth and continued strong performance in

international operations.

-- Diluted EPS was $0.04 on an as-reported basis for the second quarter,

which reflected $0.24 per share of special items that affect comparability to the prior year period. As a result, diluted EPS on an as-reported basis was down $0.35 from the as-reported amount in the prior year period. However, excluding the effect of these special

items, diluted EPS declined by $0.06, driven by higher interest expense

       related to increased debt levels as a result of the Company's
       recapitalization.  (See the Items Affecting Comparability section and
       the Comments on Regulation G section.)



                                                      Second         Second
                                                    Quarter of     Quarter of
                                                        2007           2006

Same store sales growth: (versus the

prior year period)

    Domestic Company-owned stores                      +4.4%          (3.2)%
    Domestic franchise stores                          +1.8%          (5.2)%
    Domestic stores                                    +2.1%          (4.9)%
    International stores                               +3.9%          +5.7%

    Global retail sales growth: (versus
     the prior year period)
    Domestic stores                                    +3.2%          (3.9)%
    International stores                              +15.3%         +11.5%
    Total                                              +7.7%          +1.3%



                       Domestic   Domestic    Total
                   Company-owned  Franchise  Domestic  International
                        Stores     Stores     Stores     Stores      Total
    Store counts:
      Store count at
       March 25, 2007    570       4,559       5,129      3,265      8,394
      Openings             4          12          16         66         82
      Closings            (1)        (16)        (17)       (10)       (27)
      Transfers           (6)          6           -          -          -
      Store count at
       June 17, 2007     567       4,561       5,128      3,321      8,449
      Second quarter 2007
       net growth         (3)          2          (1)        56         55
      Trailing four
       quarters net
       growth            (10)         35          25        234        259

David A. Brandon, Domino's Chairman and Chief Executive Officer, said: "We are pleased to report the sales momentum we created in our domestic system during the first quarter continued into the second quarter. The marketing and operational initiatives we implemented in our Team USA stores have been duplicated by many of our franchised stores over the past few quarters, and have helped drive the sales gains we are reporting today. And, we continue to benefit from the strong store growth and same store sales growth we have come to expect from our International division."

Brandon continued: "Our positive sales momentum is particularly important at this time, as we are currently experiencing a challenging cost environment with labor, commodity and energy prices all rising in unison, putting a short- term strain on store margins. Although we have nearly 47-years of experience successfully managing through commodity pricing cycles and fluctuating cost pressures, the current situation is unique due to the number of significant cost increases we are incurring at one time. We believe these conditions will lead to a material price increase in the pizza category."

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 11a.m. (Eastern) to review its second quarter 2007 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 web cast at www.dominos.com. If you are unable to participate on the call, a replay will be available through midnight August 24, 2007 by dialing (800) 642-1687 (U.S./Canada) or (706) 645- 9291 (International), Conference ID 2473543. The web cast will be archived for 30 days on www.dominos.com.

California Legal Matter

A state of California regulation, which provides that employees are entitled to an unpaid 30-minute, duty-free meal period after working for five hours and a paid 10-minute rest period per four hours of work, has resulted in lawsuits affecting Domino's Pizza and others in the restaurant sector. On June 10, 2003, Vega v. Domino's Pizza LLC was filed, in Orange County Superior Court, alleging that Domino's Pizza failed to provide meal and rest breaks to employees. Employers who fail to provide a meal or rest period "shall pay the employee one additional hour of pay" for each work day that the period is not provided. A central issue in the case has been whether "one additional hour of pay" constitutes a wage subject to a three-year statute of limitations, or a penalty subject to a one-year statute of limitations. On April 16, 2007, the California Supreme Court ruled that the additional hour of pay should be designated as "wages" and therefore subject to the three (3) year statue of limitations. Based on the current status of these matters and based on management's best estimate of future potential loss, the Company reserved $5.0 million for these matters during the second quarter of 2007.

Items Affecting Comparability

The Company's reported financial results for the second quarter and first two quarters of 2007 included several items that affect the comparability to the reported financial results in the comparable periods in the prior year, including:

(i) the impact of the Company's recapitalization, which was completed in

April 2007,

(ii) the 2007 impact of the aforementioned reserve recorded in connection

with legal matters in California, and (iii) the 2006 tax impact of the sale of Company-owned France and Netherlands operations.

The table below presents the items that affect comparability between the 2007 and 2006 financial results. Management believes that disclosing the following information is critical to the understanding of our financial results for the second quarter and first two quarters of 2007 as compared to similar periods in 2006 (See the Comments on Regulation G section). Second Quarter (in thousands) Diluted Pre-tax After-tax EPS Impact

    2007 items affecting comparability:

    Recapitalization expenses:
    General and administrative
     expenses (1)                      $(2,418)        $(1,499)      

$(0.02)

Additional interest income on

     recapitalization funds (2)          2,632           2,632         

0.04

Additional interest expense (3) (21,913) (13,586) (0.21)

    Premium on bond extinguishment (4)     N/A             N/A          
N/A
      Subtotal                         (21,699)        (12,453)        (0.19)

    Legal expenses (5)                  (5,000)         (3,100)        (0.05)
    2007 items affecting
     comparability                    $(26,699)       $(15,553)       $(0.24)

    2006 item affecting comparability:

    Tax benefit related to
     sale of France
     and the Netherlands (6)               N/A          $2,889        $ 0.05



                                                First Two Quarters
                                                                     Diluted
    (in thousands)                     Pre-tax        After-tax     EPS Impact
    2007 items affecting comparability:

    Recapitalization expenses:
    General and administrative
     expenses (1)                     $ (2,873)       $ (1,781)      

$(0.03)

Additional interest income on

     recapitalization funds (2)          2,632           2,632         

0.04

Additional interest expense (3) (33,878) (21,005) (0.32)

    Premium on bond extinguishment (4) (13,294)         (8,242)        (0.13)
      Subtotal                         (47,413)        (28,396)        (0.44)

    Legal expenses (5)                  (5,000)         (3,100)        (0.05)
    2007 items affecting
     comparability                    $(52,413)       $(31,496)       $(0.49)

    2006 item affecting comparability:

    Tax benefit related to
     sale of France
     and the Netherlands (6)               N/A          $2,889        $ 0.04

(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 recapitalization,
        including the tender offers for Domino's Pizza, Inc. common stock and
        Domino's, Inc. senior subordinated notes due 2011.

(2) Includes tax-exempt interest income that was earned on funds received

in connection with the recapitalization prior to disbursement of the

        funds.
    (3) Includes the write-off of deferred financing fees and bond discount
        related to extinguished debt as well as net expense incurred in
        connection with the settlement of interest rate derivatives.
    (4) Represents the premium paid to bond holders in the tender offer for
        the Domino's, Inc. senior subordinated notes due 2011.

(5) Represents expenses incurred in connection with certain legal matters

in California.

(6) Represents the tax benefit recognized in the second quarter of 2006

relating to the third quarter 2006 sale of the France and Netherlands

        operations.

    Liquidity
    As of June 17, 2007, the Company had:
    -- $1.7 billion in total debt,
    -- $93.3 million of cash and cash equivalents,
    -- $5.0 million of borrowings under its $150.0 million revolving credit
       facility and
-- letters of credit issued under its revolving credit facility of $30.7 million.

The Company's cash borrowing rate for the second quarter of 2007 was 6.1%. The Company incurred $8.7 million in capital expenditures during the first two quarters of 2007 versus $9.4 million in the first two quarters of the prior year.

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, distribution 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 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.

About Domino's

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 8,449 franchised and Company-owned stores in the United States and more than 55 countries. The Domino's Pizza(R) brand, named a Megabrand by Advertising Age magazine, had global retail sales of nearly $5.1 billion in 2006, comprised of $3.2 billion domestically and nearly $1.9 billion internationally. During the second quarter of 2007, the Domino's Pizza(R) brand had global retail sales of more than $1.2 billion, comprised of approximately $754.7 million domestically and approximately $492.5 million internationally. Domino's Pizza was named "Chain of the Year" by Pizza Today magazine, the leading publication of the pizza industry and is the "Official Pizza of NASCAR(R)." More information on the Company, in English and Spanish, can be found on the web at www.dominos.com.

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 restaurants; 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 December 31, 2006. We do not undertake to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, except as required to be reported under the rules and regulations of the Securities and Exchange Commission.




                    Domino's Pizza, Inc. and Subsidiaries
                 Condensed Consolidated Statements of Income

                                        Fiscal Quarter Ended

                                           % of                    % of
                              June 17,     Total       June 18,    Total
                                 2007     Revenues       2006     Revenues
    (In thousands, except
     per share data)
    Revenues:
      Domestic Company-
       owned stores            $92,821                 $90,225
      Domestic franchise        37,130                  35,762
      Domestic distribution    182,517                 170,048
      International             27,821                  31,706
    Total revenues             340,289     100.0%      327,741     100.0%

    Cost of sales:
      Domestic Company-
       owned stores             72,304                  71,230
      Domestic distribution    164,170                 151,605
      International             11,948                  16,141
    Total cost of sales        248,422      73.0%      238,976      72.9%
    Operating margin            91,867      27.0%       88,765      27.1%

    General and administrative  48,568      14.3%       42,366      12.9%
    Income from operations      43,299      12.7%       46,399      14.2%

    Interest expense, net       41,056      12.0%       12,776       3.9%
    Income before provision
     (benefit) for income taxes  2,243       0.7%       33,623      10.3%

    Provision (benefit)
     for income taxes              (74)      0.0%        9,117       2.8%
    Net income                  $2,317       0.7%      $24,506       7.5%

    Earnings per share:
      Common stock - diluted    $ 0.04                  $ 0.39



                    Domino's Pizza, Inc. and Subsidiaries
                 Condensed Consolidated Statements of Income

                                Two Fiscal Quarters Ended

                                          % of                      % of
                             June 17,     Total       June 18,      Total
                               2007      Revenues       2006      Revenues
    (In thousands, except
     per share data)
    Revenues:
      Domestic Company-
       owned stores          $188,361                 $186,703
      Domestic franchise       74,647                   73,892
      Domestic distribution   362,402                  352,436
      International            54,200                   62,364
    Total revenues            679,610      100.0%      675,395     100.0%

    Cost of sales:
      Domestic Company-
       owned stores           147,947                  146,436
      Domestic distribution   325,587                  314,248
      International            23,139                   31,652
    Total cost of sales       496,673       73.1%      492,336      72.9%
    Operating margin          182,937       26.9%      183,059      27.1%

    General and administrative 88,906       13.1%       82,769      12.3%
    Income from operations     94,031       13.8%      100,290      14.8%

    Interest expense, net      64,950        9.5%       24,485       3.6%
    Other                      13,294        2.0%            -         -
    Income before provision
     for income taxes          15,787        2.3%       75,805      11.2%

    Provision for
     income taxes               5,073        0.7%       25,147       3.7%
    Net income                $10,714        1.6%      $50,658       7.5%

    Earnings per share:
      Common stock - diluted   $ 0.17                   $ 0.77



                     Domino's Pizza, Inc. and Subsidiaries
                     Condensed Consolidated Balance Sheets

                                              June 17, 2007  December 31, 2006
    (In thousands)
    Assets
    Current assets:
      Cash and cash equivalents                   $93,300        $38,222
      Accounts receivable                          69,329         65,697
      Inventories                                  21,595         22,803
      Advertising fund assets, restricted          17,099         18,880
      Other assets                                 32,297         20,703
    Total current assets                          233,620        166,305

    Property, plant and equipment, net            111,799        117,144

    Other assets                                  128,643         96,754

    Total assets                                 $474,062       $380,203

    Liabilities and stockholders' deficit
    Current liabilities:
      Current portion of long-term debt              $299         $1,477
      Accounts payable                             54,570         55,036
      Advertising fund liabilities                 17,099         18,880
      Other accrued liabilities                    75,135         79,808
    Total current liabilities                     147,103        155,201

    Long-term liabilities:
      Long-term debt, less current portion      1,709,983        740,120
      Other accrued liabilities                    51,050         49,775
    Total long-term liabilities                 1,761,033        789,895

    Total stockholders' deficit                (1,434,074)      (564,893)

    Total liabilities and stockholders' deficit  $474,062       $380,203



                      Domino's Pizza, Inc. and Subsidiaries
                Condensed Consolidated Statements of Cash Flows

                                                   Two Fiscal Quarters Ended
                                                     June 17,      June 18,
                                                       2007          2006
    (In thousands)
    Cash flows from operating activities:
      Net income                                     $10,714        $50,658
      Adjustments to reconcile net income to net
       cash flows provided by operating activities:
        Depreciation and amortization                 14,583         14,974
        Amortization and write-off of deferred
         financing costs and debt discount            33,099          1,580
        Benefit for deferred income taxes             (1,422)       

(2,268)

        Non-cash compensation expense                  4,587          2,090
        Other                                          1,208              6

Changes in operating assets and liabilities (38,550) (13,116)

Net cash provided by operating activities 24,219 53,924

Cash flows from investing activities:

      Capital expenditures                            (8,728)       

(9,447)

      Other                                              773          1,162
    Net cash used in investing activities             (7,955)        

(8,285)

Cash flows from financing activities:

      Repurchase of common stock                         (67)      

(145,000)

Common stock dividends and equivalents (896,971) (7,419)

Proceeds from issuance of long-term debt 2,509,938 100,000

      Cash paid for financing costs                  (57,959)         

(250)

Repayments of long-term debt and capital

       lease obligation                           (1,541,993)      

(45,128)

      Tax benefit from stock options                  20,774          3,666
      Other                                            5,051          5,201

Net cash provided by (used in)

     financing activities                             38,773        

(88,930)

    Effect of exchange rate changes on cash
     and cash equivalents                                 41             84

    Increase (decrease) in cash and
     cash equivalents                                 55,078       

(43,207)

    Cash and cash equivalents, at
     beginning of period                              38,222         66,919

    Cash and cash equivalents, at end of period     $ 93,300        $23,712

SOURCE Domino's Pizza, Inc.

CONTACT: Lynn Liddle, Executive Vice President, Communications and Investor Relations of Domino's Pizza, Inc., +1-734-930-3008