Form 10-Q
Table of Contents

 

SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

 


 

FORM 10-Q

 

(Mark One)

x   QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the quarterly period ended June 15, 2003

 

OR

 

¨   TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the transition period from:                          to                         

 

Commission file number: 333-74797

 


 

Domino’s, Inc.

(Exact name of registrant as specified in its charter)

 

Delaware    38-3025165

(State or other jurisdiction of

incorporation or organization)

  

(I.R.S. Employer

Identification Number)

 

30 Frank Lloyd Wright Drive

Ann Arbor, Michigan 48106

(Address of principal executive offices)

 

(734) 930-3030

(Registrant’s telephone number, including area code)

 


 

Indicate by check mark whether registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.  Yes  x    No  ¨

 

Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Act):  Yes  ¨    No  x

 

The number of shares outstanding of the registrant’s common stock as of July 21, 2003 was 10 shares.

 



Table of Contents

Domino’s, Inc.

 

INDEX

 

         Page No.

PART I.  

FINANCIAL INFORMATION

    
Item 1.  

Financial Statements

    
   

Condensed Consolidated Balance Sheets – June 15, 2003 (Unaudited) and December 29, 2002

   3
   

Condensed Consolidated Statements of Income (Unaudited) – Fiscal quarter and two fiscal quarters ended June 15, 2003 and June 16, 2002

   4
   

Condensed Consolidated Statements of Cash Flows (Unaudited) – Two fiscal quarters ended June 15, 2003 and June 16, 2002

   5
   

Notes to Condensed Consolidated Financial Statements (Unaudited)

   6
Item 2.  

Management’s Discussion and Analysis of Financial Condition and Results of Operations

   12
Item 3.  

Quantitative and Qualitative Disclosures About Market Risk

   17
Item 4.  

Controls and Procedures

   17
PART II.  

OTHER INFORMATION

    
Item 6.  

Exhibits and Reports on Form 8-K

   18

SIGNATURES

   18

 

2


Table of Contents

PART I. FINANCIAL INFORMATION

Item 1.   Financial Statements

 

Domino’s, Inc. and Subsidiaries

Condensed Consolidated Balance Sheets

 

(In thousands)    June 15, 2003

    December 29, 2002

 
     (Unaudited)     (Note)  

Assets

                

Current assets:

                

Cash and cash equivalents

   $ 51,746     $ 22,472  

Accounts receivable

     56,269       57,497  

Inventories

     20,539       21,832  

Notes receivable

     3,179       3,398  

Prepaid expenses and other

     8,917       6,673  

Advertising fund assets, restricted

     31,920       28,231  

Deferred income taxes

     7,141       6,809  
    


 


Total current assets

     179,711       146,912  
    


 


Property, plant and equipment:

                

Land and buildings

     15,865       15,986  

Leasehold and other improvements

     59,108       57,029  

Equipment

     150,675       145,513  

Construction in progress

     5,047       5,727  
    


 


       230,695       224,255  

Accumulated depreciation and amortization

     111,161       103,708  
    


 


Property, plant and equipment, net

     119,534       120,547  
    


 


Other assets:

                

Deferred financing costs

     16,038       18,264  

Goodwill

     27,601       27,232  

Capitalized software

     27,374       28,313  

Other assets

     19,697       20,872  

Deferred income taxes

     56,416       60,287  
    


 


Total other assets

     147,126       154,968  
    


 


Total assets

   $ 446,371     $ 422,427  
    


 


Liabilities and stockholder’s deficit

                

Current liabilities:

                

Current portion of long-term debt

   $ 3,761     $ 2,843  

Accounts payable

     45,123       46,131  

Insurance reserves

     8,677       8,452  

Advertising fund liabilities

     31,920       28,231  

Other accrued liabilities

     73,906       71,571  
    


 


Total current liabilities

     163,387       157,228  
    


 


Long-term liabilities:

                

Long-term debt, less current portion

     576,905       599,180  

Insurance reserves

     15,011       12,510  

Other accrued liabilities

     29,386       29,090  
    


 


Total long-term liabilities

     621,302       640,780  
    


 


Stockholder’s deficit:

                

Common stock

     —         —    

Additional paid-in capital

     120,723       120,723  

Retained deficit

     (456,292 )     (491,793 )

Accumulated other comprehensive loss

     (2,749 )     (4,511 )
    


 


Total stockholder’s deficit

     (338,318 )     (375,581 )
    


 


Total liabilities and stockholder’s deficit

   $ 446,371     $ 422,427  
    


 



Note: The balance sheet at December 29, 2002 has been derived from the audited consolidated financial statements at that date but does not include all of the information and footnotes required by accounting principles generally accepted in the United States for complete financial statements.

 

See accompanying notes.

 

3


Table of Contents

Domino’s, Inc. and Subsidiaries

Condensed Consolidated Statements of Income

(Unaudited)

 

     Fiscal Quarter Ended

   Two Fiscal Quarters Ended

(In thousands)    June 15,
2003


   June 16,
2002


   June 15,
2003


   June 16,
2002


Revenues:

                           

Domestic Company-owned stores

   $ 85,875    $ 88,482    $ 175,817    $ 178,388

Domestic franchise

     32,349      32,037      66,753      66,596

Domestic distribution

     154,632      154,721      322,068      320,466

International

     22,360      18,822      42,830      36,668
    

  

  

  

Total revenues

     295,216      294,062      607,468      602,118
    

  

  

  

Operating expenses:

                           

Cost of sales

     216,583      215,790      446,635      441,128

General and administrative

     39,407      47,473      80,260      91,644
    

  

  

  

Total operating expenses

     255,990      263,263      526,895      532,772
    

  

  

  

Income from operations

     39,226      30,799      80,573      69,346

Interest income

     92      50      195      268

Interest expense

     11,020      13,694      23,353      27,213
    

  

  

  

Income before provision for income taxes

     28,298      17,155      57,415      42,401

Provision for income taxes

     10,757      6,346      21,530      15,687
    

  

  

  

Net income

   $ 17,541    $ 10,809    $ 35,885    $ 26,714
    

  

  

  

 

See accompanying notes.

 

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Table of Contents

Domino’s, Inc. and Subsidiaries

Condensed Consolidated Statements of Cash Flows

(Unaudited)

 

     Two Fiscal Quarters Ended

 
(In thousands)    June 15,
2003


    June 16,
2002


 

Cash flows from operating activities:

                

Net cash provided by operating activities

   $ 60,458     $ 52,356  
    


 


Cash flows from investing activities:

                

Capital expenditures

     (11,556 )     (24,696 )

Acquisitions of franchise operations

     —         (21,850 )

Other

     1,992       (618 )
    


 


Net cash used in investing activities

     (9,564 )     (47,164 )
    


 


Cash flows from financing activities:

                

Capital contribution

     —         521  

Repayments of long-term debt

     (21,413 )     (32,087 )

Distributions to Parent

     (384 )     (10,063 )
    


 


Net cash used in financing activities

     (21,797 )     (41,629 )
    


 


Effect of exchange rate changes on cash and cash equivalents

     177       117  
    


 


Increase (decrease) in cash and cash equivalents

     29,274       (36,320 )

Cash and cash equivalents, at beginning of period

     22,472       55,147  
    


 


Cash and cash equivalents, at end of period

   $ 51,746     $ 18,827  
    


 


 

See accompanying notes.

 

5


Table of Contents

Domino’s, Inc. and Subsidiaries

Notes to Condensed Consolidated Financial Statements

(Unaudited; tabular amounts in thousands)

 

June 15, 2003

 

1. Basis of Presentation

 

The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by accounting principles generally accepted in the United States for complete financial statements. In the opinion of management, all adjustments, consisting of normal recurring items, considered necessary for a fair presentation have been included. Operating results for the fiscal quarter and two fiscal quarters ended June 15, 2003 are not necessarily indicative of the results that may be expected for the fiscal year ending December 28, 2003. For further information, refer to the consolidated financial statements and footnotes thereto for the fiscal year ended December 29, 2002 included in our Form 10-K.

 

2. Comprehensive Income

 

     Fiscal Quarter Ended

   

Two Fiscal

Quarters Ended


 
    

June 15,

2003


    June 16,
2002


   

June 15,

2003


    June 16,
2002


 

Net income

   $ 17,541     $ 10,809     $ 35,885     $ 26,714  

Unrealized loss on derivative instruments, net of tax

     (1,464 )     (2,543 )     (1,565 )     (2,898 )

Reclassification adjustment for losses included in net income, net of tax

     1,044       726       2,092       1,465  

Currency translation adjustment

     1,124       522       1,235       480  
    


 


 


 


Comprehensive income

   $ 18,245     $ 9,514     $ 37,647     $ 25,761  
    


 


 


 


 

3. Segment Information

 

The following table summarizes revenues, income from operations and earnings before interest, taxes, depreciation and amortization, calculated in the manner required by SFAS No. 131 and which we refer to throughout this document as EBITDA, for each of the Company’s reportable segments.

 

     Fiscal Quarter Ended June 15, 2003 and June 16, 2002

     Domestic
Stores


   Domestic
Distribution


   International

   Intersegment
Revenues


    Other

    Total

Revenues –

                                           

2003

   $ 118,224    $ 177,817    $ 22,360    $ (23,185 )   $ —       $ 295,216

2002

     120,519      179,391      18,822      (24,670 )     —         294,062

Income from operations –

                                           

2003

   $ 29,213    $ 10,407    $ 6,337      N/A     $ (6,731 )   $ 39,226

2002

     28,620      9,830      5,042      N/A       (12,693 )     30,799

EBITDA –

                                           

2003

   $ 32,033    $ 12,125    $ 6,565      N/A     $ (5,271 )   $ 45,452

2002

     30,789      11,360      5,207      N/A       (5,709 )     41,647
     Two Fiscal Quarters Ended June 15, 2003 and June 16, 2002

     Domestic
Stores


   Domestic
Distribution


   International

   Intersegment
Revenues


    Other

    Total

Revenues –

                                           

2003

   $ 242,570    $ 370,346    $ 42,830    $ (48,278 )   $ —       $ 607,468

2002

     244,984      369,065      36,668      (48,599 )     —         602,118

Income from operations –

                                           

2003

   $ 60,827    $ 22,331    $ 12,012      N/A     $ (14,597 )   $ 80,573

2002

     62,104      19,937      9,646      N/A       (22,341 )     69,346

EBITDA –

                                           

2003

   $ 66,614    $ 25,720    $ 12,442      N/A     $ (9,493 )   $ 95,283

2002

     66,584      22,971      9,965      N/A       (12,132 )     87,388

 

 

6


Table of Contents

The following table reconciles EBITDA to income before provision for income taxes.

 

     Fiscal Quarter Ended

   

Two Fiscal

Quarters Ended


 
    

June 15,

2003


   

June 16,

2002


   

June 15,

2003


   

June 16,

2002


 

EBITDA

   $ 45,452     $ 41,647     $ 95,283     $ 87,388  

Depreciation and amortization

     (6,587 )     (6,671 )     (13,325 )     (13,823 )

Interest expense

     (11,020 )     (13,694 )     (23,353 )     (27,213 )

Interest income

     92       50       195       268  

Gains (losses) on sale/disposal of assets and other

     361       (3,473 )     358       (3,303 )

Loss on debt extinguishments

     —         (704 )     (1,743 )     (916 )
    


 


 


 


Income before provision for income taxes

   $ 28,298     $ 17,155     $ 57,415     $ 42,401  
    


 


 


 


 

4. Recapitalization

 

On June 25, 2003, the Company, together with its parent and subsidiaries, consummated a recapitalization transaction (the “2003 Recapitalization”) whereby the Company:

 

  (1)   issued and sold $403.0 million aggregate principal amount at maturity of 8¼% Senior Subordinated Notes due 2011 (the “2011 Notes”) at a discount resulting in gross proceeds of $400.1 million;
  (2)   borrowed $610.0 million in term loans and secured a $125.0 million revolving credit facility (collectively the “2003 Senior Credit Facility”); and
  (3)   used the proceeds from the 2011 Notes, borrowings under the 2003 Senior Credit Facility and cash from operations to:

 

    purchase an aggregate of $206.7 million principal amount of its 10 3/8% Senior Subordinated Notes due 2009 (the “2009 Notes”) for an aggregate purchase price of approximately $236.7 million;

 

    repay all amounts outstanding under the previous senior credit facility;

 

    distribute amounts to its parent to redeem all of its outstanding 11.5% Cumulative Preferred Stock for an aggregate redemption price of approximately $200.5 million;

 

    distribute amounts to its parent to pay a dividend on its outstanding common stock in the aggregate amount of approximately $188.3 million;

 

    make compensatory make-whole payments to specified parent shareholders and Company officers, directors and employees who hold parent stock options in the aggregate amount of approximately $12.4 million; and

 

    pay related transaction fees and expenses.

 

The 2003 Recapitalization, including the transactions described above, will be recorded in the third fiscal quarter of 2003.

 

The tables below present condensed consolidating financial information for the applicable periods for: (1) Domino’s, Inc.; (2) on a combined basis, the guarantor subsidiaries of the 2011 Notes, which includes most of the domestic subsidiaries of the Company and one foreign subsidiary of the Company; and (3) on a combined basis, the non-guarantor subsidiaries of the 2011 Notes. Each of the guarantor subsidiaries is jointly, severally, fully and unconditionally liable under the related guarantee.

 

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Table of Contents

Domino’s, Inc.

Supplemental Condensed Consolidating Statements of Income

 

     Fiscal Quarter Ended June 15, 2003

 
     Domino’s, Inc.

    Guarantor
Subsidiaries


    Non-Guarantor
Subsidiaries


    Eliminations

    Consolidated

 

Revenues

   $ —       $ 289,882     $ 5,334     $ —       $ 295,216  

Cost of sales

     —         212,626       3,957       —         216,583  

General and administrative

     —         38,018       1,389       —         39,407  
    


 


 


 


 


Total operating expenses

     —         250,644       5,346       —         255,990  
    


 


 


 


 


Income (loss) from operations

     —         39,238       (12 )     —         39,226  

Equity earnings in subsidiaries

     24,455       —         —         (24,455 )     —    

Interest income (expense), net

     (10,961 )     109       (76 )     —         (10,928 )
    


 


 


 


 


Income (loss) before (provision) benefit for income taxes

     13,494       39,347       (88 )     (24,455 )     28,298  

(Provision) benefit for income taxes

     4,047       (14,804 )     —         —         (10,757 )
    


 


 


 


 


Net income (loss)

   $ 17,541     $ 24,543     $ (88 )   $ (24,455 )   $ 17,541  
    


 


 


 


 


     Two Fiscal Quarters Ended June 15, 2003

 
     Domino’s, Inc.

    Guarantor
Subsidiaries


    Non-Guarantor
Subsidiaries


    Eliminations

    Consolidated

 

Revenues

   $ —       $ 597,496     $ 9,972     $ —       $ 607,468  

Cost of sales

     —         439,039       7,596       —         446,635  

General and administrative

     1,743       75,979       2,538       —         80,260  
    


 


 


 


 


Total operating expenses

     1,743       515,018       10,134       —         526,895  
    


 


 


 


 


Income (loss) from operations

     (1,743 )     82,478       (162 )     —         80,573  

Equity earnings in subsidiaries

     52,597       —         —         (52,597 )     —    

Interest income (expense), net

     (23,253 )     228       (133 )     —         (23,158 )
    


 


 


 


 


Income (loss) before (provision) benefit for income taxes

     27,601       82,706       (295 )     (52,597 )     57,415  

(Provision) benefit for income taxes

     8,284       (29,814 )     —         —         (21,530 )
    


 


 


 


 


Net income (loss)

   $ 35,885     $ 52,892     $ (295 )   $ (52,597 )   $ 35,885  
    


 


 


 


 


     Fiscal Quarter Ended June 16, 2002

 
     Domino’s, Inc.

    Guarantor
Subsidiaries


    Non-Guarantor
Subsidiaries


    Eliminations

    Consolidated

 

Revenues

   $ —       $ 290,329     $ 3,733     $ —       $ 294,062  

Cost of sales

     —         213,074       2,716       —         215,790  

General and administrative

     704       45,825       944       —         47,473  
    


 


 


 


 


Total operating expenses

     704       258,899       3,660       —         263,263  
    


 


 


 


 


Income (loss) from operations

     (704 )     31,430       73       —         30,799  

Equity earnings in subsidiaries

     20,227       —         —         (20,227 )     —    

Interest income (expense), net

     (13,614 )     23       (53 )     —         (13,644 )
    


 


 


 


 


Income (loss) before (provision) benefit for income taxes

     5,909       31,453       20       (20,227 )     17,155  

(Provision) benefit for income taxes

     4,900       (11,246 )     —         —         (6,346 )
    


 


 


 


 


Net income (loss)

   $ 10,809     $ 20,207     $ 20     $ (20,227 )   $ 10,809  
    


 


 


 


 


 

8


Table of Contents
     Two Fiscal Quarters Ended June 16, 2002

 
     Domino’s, Inc.

    Guarantor
Subsidiaries


    Non-Guarantor
Subsidiaries


    Eliminations

    Consolidated

 

Revenues

   $ —       $ 594,907     $ 7,211     $ —       $ 602,118  

Cost of sales

     —         435,774       5,354       —         441,128  

General and administrative

     916       88,780       1,948       —         91,644  
    


 


 


 


 


Total operating expenses

     916       524,554       7,302       —         532,772  
    


 


 


 


 


Income (loss) from operations

     (916 )     70,353       (91 )     —         69,346  

Equity earnings in subsidiaries

     44,733       —         —         (44,733 )     —    

Interest income (expense), net

     (27,054 )     212       (103 )     —         (26,945 )
    


 


 


 


 


Income (loss) before (provision) benefit for income taxes

     16,763       70,565       (194 )     (44,733 )     42,401  

(Provision) benefit for income taxes

     9,951       (25,638 )     —         —         (15,687 )
    


 


 


 


 


Net income (loss)

   $ 26,714     $ 44,927     $ (194 )   $ (44,733 )   $ 26,714  
    


 


 


 


 


 

Domino’s, Inc.

Supplemental Condensed Consolidating Balance Sheets

 

     As of June 15, 2003

 
     Domino’s, Inc.

    Guarantor
Subsidiaries


   Non-Guarantor
Subsidiaries


   Eliminations

    Consolidated

 

Cash

   $ —       $ 50,736    $ 1,010    $ —       $ 51,746  

Accounts receivable

     —         50,952      5,317      —         56,269  

Advertising fund assets, restricted

     —         —        31,920      —         31,920  

Other current assets

     —         37,923      1,853      —         39,776  
    


 

  

  


 


Current assets

     —         139,611      40,100      —         179,711  

Property, plant and equipment, net

     —         115,292      4,242      —         119,534  

Other assets

     262,163       75,363      6,498      (196,898 )     147,126  
    


 

  

  


 


Total assets

   $ 262,163     $ 330,266    $ 50,840    $ (196,898 )   $ 446,371  
    


 

  

  


 


Current portion of long-term debt

   $ 3,650     $ —      $ 111    $ —       $ 3,761  

Accounts payable

     —         35,290      9,833      —         45,123  

Advertising fund liabilities

     —         —        31,920      —         31,920  

Other current liabilities

     19,504       61,850      1,229      —         82,583  
    


 

  

  


 


Current liabilities

     23,154       97,140      43,093      —         163,387  

Long-term debt

     576,553       —        352      —         576,905  

Other long-term liabilities

     774       43,372      251      —         44,397  
    


 

  

  


 


Long-term liabilities

     577,327       43,372      603      —         621,302  

Stockholder’s equity (deficit)

     (338,318 )     189,754      7,144      (196,898 )     (338,318 )
    


 

  

  


 


Total liabilities and stockholder’s equity (deficit)

   $ 262,163     $ 330,266    $ 50,840    $ (196,898 )   $ 446,371  
    


 

  

  


 


 

9


Table of Contents
     As of December 29, 2002

 
     Domino’s, Inc.

    Guarantor
Subsidiaries


   Non-Guarantor
Subsidiaries


   Eliminations

    Consolidated

 

Cash

   $ —       $ 21,522    $ 950    $ —       $ 22,472  

Accounts receivable

     —         53,523      3,974      —         57,497  

Advertising fund assets, restricted

     —         —        28,231      —         28,231  

Other current assets

     —         37,075      1,637      —         38,712  
    


 

  

  


 


Current assets

     —         112,120      34,792      —         146,912  

Property, plant and equipment, net

     —         116,916      3,631      —         120,547  

Other assets

     246,053       81,404      6,435      (178,924 )     154,968  
    


 

  

  


 


Total assets

   $ 246,053     $ 310,440    $ 44,858    $ (178,924 )   $ 422,427  
    


 

  

  


 


Current portion of long-term debt

   $ 2,738     $ —      $ 105    $ —       $ 2,843  

Accounts payable

     —         38,010      8,121      —         46,131  

Advertising fund liabilities

     —         —        28,231      —         28,231  

Other current liabilities

     18,858       59,746      1,419      —         80,023  
    


 

  

  


 


Current liabilities

     21,596       97,756      37,876      —         157,228  

Long-term debt

     598,877       —        303      —         599,180  

Other long-term liabilities

     1,161       40,165      274      —         41,600  
    


 

  

  


 


Long-term liabilities

     600,038       40,165      577      —         640,780  

Stockholder’s equity (deficit)

     (375,581 )     172,519      6,405      (178,924 )     (375,581 )
    


 

  

  


 


Total liabilities and stockholder’s equity (deficit)

   $ 246,053     $ 310,440    $ 44,858    $ (178,924 )   $ 422,427  
    


 

  

  


 


 

Domino’s, Inc.

Supplemental Condensed Consolidating Statements of Cash Flows

 

     Two Fiscal Quarters Ended June 15, 2003

 
     Domino’s, Inc.

    Guarantor
Subsidiaries


    Non-Guarantor
Subsidiaries


    Eliminations

   Consolidated

 

Net cash flows provided by (used in) operating activities

   $ (21,673 )   $ 81,712     $ 419     $ —      $ 60,458  
    


 


 


 

  


Capital expenditures

     —         (11,141 )     (415 )     —        (11,556 )

Other

     —         1,992       —         —        1,992  
    


 


 


 

  


Net cash flows used in investing activities

     —         (9,149 )     (415 )     —        (9,564 )
    


 


 


 

  


Repayments of long-term debt

     (21,413 )     —         —         —        (21,413 )

Other

     43,086       (43,470 )     —         —        (384 )
    


 


 


 

  


Net cash flows provided by (used in) financing activities

     21,673       (43,470 )     —         —        (21,797 )
    


 


 


 

  


Effect of exchange rate differences on cash and cash equivalents

     —         121       56       —        177  
    


 


 


 

  


Increase in cash and cash equivalents

     —         29,214       60       —        29,274  
    


 


 


 

  


Cash and cash equivalents, at the beginning of the period

     —         21,522       950       —        22,472  
    


 


 


 

  


Cash and cash equivalents, at the end of the period

   $ —       $ 50,736     $ 1,010     $ —      $ 51,746  
    


 


 


 

  


 

10


Table of Contents
     Two Fiscal Quarters Ended June 16, 2002

 
     Domino’s, Inc.

    Guarantor
Subsidiaries


    Non-Guarantor
Subsidiaries


    Eliminations

   Consolidated

 

Net cash flows provided by (used in) operating activities

   $ (14,195 )   $ 66,060     $ 491     $ —      $ 52,356  
    


 


 


 

  


Capital expenditures

     —         (24,260 )     (436 )     —        (24,696 )

Other

     —         (22,468 )     —         —        (22,468 )
    


 


 


 

  


Net cash flows used in investing activities

     —         (46,728 )     (436 )     —        (47,164 )
    


 


 


 

  


Repayments of long-term debt

     (31,378 )     —         (709 )     —        (32,087 )

Other

     45,573       (55,115 )     —         —        (9,542 )
    


 


 


 

  


Net cash flows provided by (used in) financing activities

     14,195       (55,115 )     (709 )     —        (41,629 )
    


 


 


 

  


Effect of exchange rate differences on cash and cash equivalents

     —         86       31       —        117  
    


 


 


 

  


Decrease in cash and cash equivalents

     —         (35,697 )     (623 )     —        (36,320 )
    


 


 


 

  


Cash and cash equivalents, at the beginning of the period

     —         53,966       1,181       —        55,147  
    


 


 


 

  


Cash and cash equivalents, at the end of the period

   $ —       $ 18,269     $ 558     $ —      $ 18,827  
    


 


 


 

  


 

11


Table of Contents
Item 2.   Management’s Discussion and Analysis of Financial Condition and Results of Operations

(Unaudited; tabular amounts in millions, except percentages and store data)

 

The 2003 and 2002 second quarters referenced herein represent the twelve-week periods ended June 15, 2003 and June 16, 2002, respectively. The 2003 and 2002 first two quarters referenced herein represent the twenty-four week periods ended June 15, 2003 and June 16, 2002, respectively.

 

Store Growth Activity

 

The following is a summary of the Company’s store growth activity for the second quarter and first two quarters of 2003.

 

     Second Quarter of 2003

    

Beginning

of Period


   Opened

   Closed

    Transfers

  

End of

Period


Domestic Company-owned stores

   578    3    (2 )   —      579

Domestic franchise

   4,274    21    (12 )   —      4,283
    
  
  

 
  

Domestic stores

   4,852    24    (14 )   —      4,862

International

   2,401    44    (16 )   —      2,429
    
  
  

 
  

Total

   7,253    68    (30 )   —      7,291
    
  
  

 
  
     First Two Quarters of 2003

    

Beginning

of Period


   Opened

   Closed

    Transfers

  

End of

Period


Domestic Company-owned stores

   577    4    (2 )   —      579

Domestic franchise

   4,271    43    (31 )   —      4,283
    
  
  

 
  

Domestic stores

   4,848    47    (33 )   —      4,862

International

   2,382    91    (44 )   —      2,429
    
  
  

 
  

Total

   7,230    138    (77 )   —      7,291
    
  
  

 
  

 

Revenues

 

Revenues include retail sales by Company-owned stores, royalties and fees from domestic and international franchise stores, and sales of food, equipment and supplies by our distribution centers to certain domestic and international franchise stores.

 

Consolidated revenues increased $1.1 million or 0.4% to $295.2 million in the second quarter of 2003, from $294.1 million in the comparable period in 2002, and increased $5.4 million or 0.9% to $607.5 million in the first two quarters of 2003, from $602.1 million in the comparable period in 2002. These increases in revenues were due primarily to increases in international revenues, offset in part by decreases in domestic stores revenues. Additionally, revenues for the first two quarters of 2003 were positively impacted by an increase in domestic distribution revenues. These results are more fully described below.

 

Domestic Stores

 

Domestic stores are comprised of domestic Company-owned store operations and domestic franchise operations, as summarized in the following table.

 

Domestic Stores


  

Second Quarter

of 2003


   

Second Quarter

of 2002


    First Two
Quarters of 2003


   

First Two

Quarters of 2002


 

Domestic Company-owned stores

   $ 85.9    72.6 %   $ 88.5    73.4 %   $ 175.8    72.5 %   $ 178.4    72.8 %

Domestic franchise

     32.3    27.4 %     32.0    26.6 %     66.8    27.5 %     66.6    27.2 %
    

  

 

  

 

  

 

  

Total domestic stores revenues

   $ 118.2    100.0 %   $ 120.5    100.0 %   $ 242.6    100.0 %   $ 245.0    100.0 %
    

  

 

  

 

  

 

  

 

Domestic stores revenues decreased $2.3 million or 1.9% to $118.2 million in the second quarter of 2003, from $120.5 million in the comparable period in 2002, and decreased $2.4 million or 1.0% to $242.6 million in the first two quarters of 2003, from $245.0 million in the comparable period in 2002. These decreases in revenues were due primarily to decreases in same store sales at our domestic stores during 2003. Same store sales for domestic stores decreased 0.3% and 0.8% in the second quarter and first two quarters of 2003, respectively, compared to the same period in 2002.

 

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Table of Contents

Domestic Company-Owned Stores

 

Revenues from domestic Company-owned store operations decreased $2.6 million or 2.9% to $85.9 million in the second quarter of 2003, from $88.5 million in the comparable period in 2002, and decreased $2.6 million or 1.4% to $175.8 million in the first two quarters of 2003, from $178.4 million in the comparable period in 2002. These decreases in revenues were due primarily to decreases in same store sales. Same store sales for domestic Company-owned stores decreased 2.9% and 4.3% in the second quarter and first two quarters of 2003, respectively, compared to the same period in 2002. There were 579 and 583 domestic Company-owned stores in operation as of June 15, 2003 and June 16, 2002, respectively.

 

Domestic Franchise

 

Revenues from domestic franchise operations increased slightly in the second quarter and first two quarters of 2003 from the comparable period in 2002. These increases in revenues were due primarily to increases in the average number of domestic franchise stores open during 2003. There were 4,283 and 4,223 domestic franchise stores in operation as of June 15, 2003 and June 16, 2002, respectively. Same store sales for domestic franchise stores remained relatively flat, increasing 0.1% in the second quarter of 2003 and decreasing 0.2% in the first two quarters of 2003, compared to the same period in 2002.

 

Domestic Distribution

 

Revenues from domestic distribution operations decreased slightly in the second quarter of 2003 from the comparable period in 2002 and increased $1.6 million or 0.5% to $322.1 million in the first two quarters of 2003, from $320.5 million in the comparable period in 2002. This increase in revenues in the first two quarters of 2003 was due primarily to increases in volumes, offset by a market decrease in overall food basket prices, including lower cheese prices. The cheese block price per pound averaged $1.11 and $1.12 in the second quarter and first two quarters of 2003, respectively, compared to $1.22 and $1.24 in the comparable period in 2002.

 

International

 

Revenues from international operations increased $3.6 million or 18.8% to $22.4 million in the second quarter of 2003, from $18.8 million in the comparable period in 2002, and increased $6.1 million or 16.8% to $42.8 million in the first two quarters of 2003, from $36.7 million in the comparable period in 2002. These increases in revenues were due in part to increases in same store sales and in the average number of international stores open during 2003. On a constant dollar basis, same store sales increased 2.6% and 3.5% in the second quarter and first two quarters of 2003, respectively, compared to the same period in 2002. On a historical dollar basis, same store sales increased 6.0% and 6.3% in the second quarter and first two quarters of 2003, respectively, compared to the same period in 2002. The 2003 same store sales results indicate that the U.S. Dollar was generally weaker against the currencies of those countries in which we compete, as compared to the same period in 2002. There were 2,429 and 2,290 international stores in operation as of June 15, 2003 and June 16, 2002, respectively.

 

Cost of Sales / Operating Margin

 

The consolidated operating margin, which we define as revenues less cost of sales, increased slightly in the second quarter of 2003 and decreased slightly in the first two quarters of 2003 from the comparable period in 2002, as summarized in the following table.

 

    

Second Quarter

of 2003


   

Second Quarter

of 2002


   

First Two

Quarters of 2003


   

First Two

Quarters of 2002


 

Revenues

   $ 295.2    100.0 %   $ 294.1    100.0 %   $ 607.5    100.0 %   $ 602.1    100.0 %

Cost of sales

     216.6    73.4 %     215.8    73.4 %     446.6    73.5 %     441.1    73.3 %
    

  

 

  

 

  

 

  

Consolidated operating margin

   $ 78.6    26.6 %   $ 78.3    26.6 %   $ 160.9    26.5 %   $ 161.0    26.7 %
    

  

 

  

 

  

 

  

 

Consolidated cost of sales is comprised primarily of domestic Company-owned store and domestic distribution costs incurred to generate related revenues. Components of consolidated cost of sales primarily include food, labor and occupancy costs.

 

13


Table of Contents

Consolidated cost of sales increased $0.8 million or 0.4% to $216.6 million in the second quarter of 2003, from $215.8 million in the comparable period in 2002, and increased $5.5 million or 1.2% to $446.6 million in the first two quarters of 2003, from $441.1 million in the comparable period in 2002. These net increases in consolidated cost of sales were driven in part by cost of sales changes at domestic Company-owned stores and domestic distribution, as more fully described below.

 

Domestic Company-Owned Stores

 

The domestic Company-owned store operating margin decreased $2.7 million or 13.1% to $18.3 million in the second quarter of 2003, from $21.0 million in the comparable period in 2002, and decreased $6.3 million or 14.5% to $37.2 million in the first two quarters of 2003, from $43.5 million in the comparable period in 2002, as summarized in the following table.

 

Domestic Company-Owned Stores


  

Second Quarter

of 2003


   

Second Quarter

of 2002


   

First Two

Quarters of 2003


   

First Two

Quarters of 2002


 

Revenues

   $ 85.9    100.0 %   $ 88.5    100.0 %   $ 175.8    100.0 %   $ 178.4    100.0 %

Cost of sales

     67.6    78.8 %     67.5    76.2 %     138.6    78.9 %     134.9    75.6 %
    

  

 

  

 

  

 

  

Store operating margin

   $ 18.3    21.2 %   $ 21.0    23.8 %   $ 37.2    21.1 %   $ 43.5    24.4 %
    

  

 

  

 

  

 

  

 

Cost of sales increased as a percentage of store revenues in the second quarter and first two quarters of 2003, compared to the comparable period in 2002, due primarily to increases in food, labor and occupancy costs.

 

As a percentage of store revenues, food costs increased 0.4% to 26.4% in the second quarter of 2003, from 26.0% in the comparable period in 2002, and increased 0.9% to 26.7% in the first two quarters of 2003, from 25.8% in the comparable period in 2002. These increases in food costs as a percentage of store revenues were due primarily to a change in product mix per order as a result of certain promotions and new product introductions, offset in part by a market decrease in overall food prices, including cheese. As a percentage of store revenues, labor costs remained flat at 30.1% in the second quarter of 2003, compared to the same period in 2002, and increased 0.5% to 30.3% in the first two quarters of 2003, from 29.8% in the comparable period in 2002. This increase primarily reflects the impact of decreased same store sales and the resulting effects on the fixed portion of store labor and, to a lesser extent, increased average wage rates at our stores. As a percentage of store revenues, occupancy costs, which include rent, telephone, utilities and depreciation, increased 1.5% to 10.6% in the second quarter of 2003, from 9.1% in the comparable period in 2002, and increased 1.4% to 10.2% in the first two quarters of 2003, from 8.8% in the comparable period in 2002. These increases in occupancy costs were due primarily to increases in store operating costs including, telephone, utilities and depreciation. This increase in depreciation is primarily a result of recent investments in our stores including the implementation of a new point of sale system as well as significant investments in the re-imaging of substantially all of our stores.

 

Domestic Distribution

 

The domestic distribution operating margin increased $0.6 million or 3.5% to $17.9 million in the second quarter of 2003, from $17.3 million in the comparable period in 2002, and increased $2.7 million or 7.8% to $37.7 million in the first two quarters of 2003, from $35.0 million in the comparable period in 2002. These results are summarized in the following tables.

 

Domestic Distribution


  

Second Quarter

of 2003


   

Second Quarter

of 2002


   

First Two

Quarters of 2003


   

First Two

Quarters of 2002


 

Revenues

   $ 154.6    100.0 %   $ 154.7    100.0 %   $ 322.1    100.0 %   $ 320.5    100.0 %

Cost of sales

     136.7    88.4 %     137.4    88.8 %     284.4    88.3 %     285.5    89.1 %
    

  

 

  

 

  

 

  

Distribution operating margin

   $ 17.9    11.6 %   $ 17.3    11.2 %   $ 37.7    11.7 %   $ 35.0    10.9 %
    

  

 

  

 

  

 

  

 

Cost of sales as a percentage of distribution revenues was positively impacted by increases in volumes, efficiencies in the areas of operations and purchasing as well as reductions in certain commodity prices, including cheese. Reductions in certain food prices have a positive effect on the distribution operating margin as a percentage of distribution revenues due to the fixed dollar margin earned by domestic distribution on sales of certain food items, including cheese. Had cheese prices remained constant with 2002 levels, the domestic distribution operating margin for the second quarter and first two quarters of 2003 would have been approximately 11.3% and 11.4% of distribution revenues, respectively, or 0.3% less than the reported amounts for each of the second quarter and first two quarters of 2003.

 

14


Table of Contents

General and Administrative Expenses

 

General and administrative expenses decreased $8.1 million or 17.0% to $39.4 million in the second quarter of 2003, from $47.5 million in the comparable period in 2002, and decreased $11.3 million or 12.4% to $80.3 million in the first two quarters of 2003, from $91.6 million in the comparables period in 2002. As a percentage of total revenues, general and administrative expenses decreased 2.8% to 13.3% in the second quarter of 2003, from 16.1% in the comparable period in 2002, and decreased 2.0% to 13.2% in the first two quarters of 2003, from 15.2% in the comparable period in 2002. These improvements in general and administrative expenses as a percentage of revenues were due in part to management’s continued focus on controlling overhead costs, including decreases in administrative labor, and decreases in depreciation and amortization. Additionally, during the second quarter of 2002, the Company expensed approximately $5.3 million of certain capitalized software costs.

 

Interest Expense

 

Interest expense decreased $2.7 million or 19.5% to $11.0 million in the second quarter of 2003, from $13.7 million in the comparable period in 2002, and decreased $3.8 million or 14.2% to $23.4 million in the first two quarters of 2003, from $27.2 million in the comparable period in 2002. These decreases in interest expense were due primarily to decreases in related variable interest rates on our senior credit facility borrowings and reduced debt levels. The Company repaid $21.4 million of debt in the first two quarters of 2003.

 

Provision for Income Taxes

 

Provision for income taxes increased $4.5 million to $10.8 million in the second quarter of 2003, from $6.3 million in the comparable period in 2002, and increased $5.8 million to $21.5 million in the first two quarters of 2003, from $15.7 million in the comparable period in 2002.

 

Liquidity and Capital Resources

 

We had working capital of $16.3 million and cash and cash equivalents of $51.7 million at June 15, 2003. Historically, we have operated with minimal or negative working capital primarily because our receivable collection periods and inventory turn rates are faster than the normal payment terms on our current liabilities. In addition, our sales are not typically seasonal, which further limits our working capital requirements. Our primary sources of liquidity are cash flows from operations and availability of borrowings under our revolving credit facility. We expect to fund planned capital expenditures and debt repayments from these sources.

 

As of June 15, 2003, we had $580.7 million of long-term debt, of which $3.8 million was classified as a current liability. There were no borrowings under our $100 million revolving credit facility. Letters of credit issued under the revolving credit facility were $21.8 million. These letters of credit are primarily related to our casualty insurance programs and distribution center leases. Borrowings under the revolving credit facility are available to fund our working capital requirements, capital expenditures and other general corporate purposes.

 

Cash provided by operating activities was $60.5 million and $52.4 million in the first two quarters of 2003 and 2002, respectively. The $8.1 million increase was due primarily to a $9.2 million increase in net income.

 

Cash used in investing activities was $9.6 million and $47.2 million in the first two quarters of 2003 and 2002, respectively. The $37.6 million decrease was due primarily to a $21.9 million decrease in acquisitions of franchise operations and a $13.1 million decrease in capital expenditures. The decrease in acquisitions of franchise operations is due primarily to the Company’s purchase of our franchise operations in Arizona in the first quarter of 2002 (the “Arizona Acquisition”).

 

Cash used in financing activities was $21.8 million and $41.6 million in the first two quarters of 2003 and 2002, respectively. The $19.8 million decrease was due primarily to a $9.7 million decrease in distributions to parent primarily relating to the Arizona Acquisition and a $10.7 million decrease in repayments of long-term debt.

 

15


Table of Contents

On June 25, 2003, the Company, together with its parent and subsidiaries, consummated a recapitalization transaction which included, among other things, the issuance and sale by Domino’s, Inc. of $403.0 million aggregate principal amount at maturity of 8¼% Senior Subordinated Notes due 2011 (the “2011 Notes”) and borrowings by Domino’s, Inc. of $610.0 million in term loans. The Company also secured a $125.0 million revolving credit facility (together with the term loans, the “2003 Senior Credit Facility”). The Company used the proceeds from these borrowings and cash from operations to:

 

    purchase an aggregate of $206.7 million principal amount of its 10 3/8% Senior Subordinated Notes due 2009 (the “2009 Notes”) for an aggregate purchase price of approximately $236.7 million;

 

    repay all amounts outstanding under the previous senior credit facility;

 

    distribute amounts to its parent to redeem all of its outstanding 11.5% Cumulative Preferred Stock for an aggregate redemption price of approximately $200.5 million;

 

    distribute amounts to its parent to pay a dividend on its outstanding common stock in the aggregate amount of approximately $188.3 million;

 

    make compensatory make-whole payments to specified parent shareholders and Company officers, directors and employees who hold parent stock options in the aggregate amount of approximately $12.4 million; and

 

    pay related transaction fees and expenses.

 

The 2011 Notes accrue interest at a rate of 8¼% per annum and will be payable semi-annually in arrears on January 1 and July 1, commencing on January 1, 2004. Prior to July 1, 2006, the Company may redeem, at a fixed price, up to 40% of the aggregate principal amount of the 2011 Notes with the proceeds of equity offerings, if any, by the Company or its parent. Prior to July 1, 2007, the Company may also redeem the 2011 Notes, as a whole, but not in part, upon the occurrence of a change in control, as defined in the 2011 Notes. Beginning July 1, 2007, the Company may redeem all or a part of the 2011 Notes at fixed redemption prices, ranging from 104.125% of par in 2007 to 100% of par in 2009 and thereafter. In the event of a change in control, as defined in the 2011 Notes, the Company will be obligated to repurchase the 2011 Notes tendered by the holders at a fixed price. The 2011 Notes are guaranteed by most of the Company’s domestic subsidiaries as well as one foreign subsidiary.

 

The 2003 Senior Credit Facility consists of $610.0 million in term loans expiring in June 2010 and a $125.0 million revolving credit facility expiring in June 2009. The agreement requires annual amortization of the term loans, made in equal quarterly payments, of $10.0 million in 2003, $30.0 million in 2004, $45.0 million in 2005, $60.0 million in 2006, $75.0 million in 2007, $85.0 million in 2008, $95.0 million in 2009 and $210.0 million in 2010. The 2003 Senior Credit Facility contains certain financial and non-financial covenants and is guaranteed by the Company’s parent and most of the Company’s domestic subsidiaries and one foreign subsidiary. The 2003 Senior Credit Facility is secured by a first priority lien on substantially all of the assets of the Company. Borrowings under the 2003 Senior Credit Facility bear interest at LIBOR plus an applicable margin not to exceed 300 basis points.

 

Based upon the current level of operations and anticipated growth, we believe that the cash generated from operations and amounts available under the revolving credit facility will be adequate to meet our anticipated debt service requirements, capital expenditures and working capital needs for the next several years. There can be no assurance, however, that our business will generate sufficient cash flows from operations or that future borrowings will be available under the senior credit facility or through other sources to enable us to service our indebtedness, including the senior credit facility and the senior subordinated notes, or to make anticipated capital expenditures. Our future operating performance and our ability to service or refinance the senior subordinated notes and to service, extend or refinance the senior credit facility will be subject to future economic conditions and subject to financial, business and other factors, many of which are beyond our control. Additionally, the Company may be requested to provide funds to TISM, Inc., our parent company (“TISM”), for stock dividends, stock repurchases, distributions and/or other cash needs of TISM.

 

16


Table of Contents

Forward-Looking Statements

 

Certain statements contained in this filing relating to capital spending levels and the adequacy of our capital resources are forward-looking. Also, statements that contain words such as “believes,” “expects,” “anticipates,” “intends,” “estimates” or similar expressions are forward-looking statements. Forward-looking statements involve risks and uncertainties that could cause actual results to differ materially from those expressed or implied by such forward-looking statements. Among these risks and uncertainties are competitive factors, increases in our operating costs, ability to retain our key personnel, our substantial leverage, ability to implement our growth and cost-saving strategies, industry trends and general economic conditions, adequacy of insurance coverage and other factors, all of which are described in the Form 10-K for the year ended December 29, 2002 and our other filings with the Securities and Exchange Commission. We do not undertake to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.

 

Item  3.   Quantitative and Qualitative Disclosures About Market Risk

 

Market Risk

 

The Company is exposed to market risks from interest rate changes on our variable rate debt. Management actively monitors this exposure. The Company does not engage in speculative transactions nor does it hold or issue financial instruments for trading purposes.

 

Interest Rate Derivatives

 

The Company may enter into interest rate swaps, collars or similar instruments with the objective of reducing volatility relating to our borrowing costs.

 

The Company is party to an interest rate collar and four interest rate swap agreements which effectively convert the variable Eurodollar component of the effective interest rate on a portion of the Company’s debt under its senior credit facility to various fixed rates over various terms. These agreements are summarized as follows:

 

Derivative


 

Total

Notional Amount


  

Term


 

Rate


Interest Rate Collar

  $70.0 million    June 2001—June 2003  

3.86%—Floor

6.00%—Ceiling

Interest Rate Swap

  $70.0 million    June 2001—June 2004   4.90%

Interest Rate Swap

  $35.0 million    September 2001—September 2003   3.645%

Interest Rate Swap

  $35.0 million    September 2001—September 2004   3.69%

Interest Rate Swap

  $75.0 million    August 2002—June 2005   3.25%

 

Interest Rate Risk

 

The Company’s variable interest expense is sensitive to changes in the general level of interest rates. As of June 15, 2003, a portion of the Company’s debt is borrowed at Eurodollar rates plus a blended margin rate of 2.25%. As of June 15, 2003, the weighted average interest rate on our $77.3 million of variable interest debt was 3.54%.

 

The Company had total interest expense of approximately $23.4 million in the first two quarters of 2003. The estimated increase in interest expense for this period from a hypothetical 200 basis point adverse change in applicable variable interest rates would be approximately $0.7 million.

 

Item  4.   Controls and Procedures

 

a.   Within 90 days prior to the date of the filing of this report, the Company’s Chief Executive Officer and Chief Financial Officer conducted an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures pursuant to Exchange Act Rules 13a-14 and 15d-14. Based upon that evaluation such officers concluded that our disclosure controls and procedures are effective to ensure that information is gathered, analyzed and disclosed on a timely basis.

 

b.   There have been no significant changes in the Company’s internal controls or in other factors that could significantly affect these controls subsequent to the date of the evaluation referred to above.

 

17


Table of Contents

PART II. OTHER INFORMATION

 

Item  6.   Exhibits and Reports on Form 8-K

 

a.   Exhibits

 

Exhibit

Number


  

Description


31.1

   Certification by David A. Brandon pursuant to Rule 13a-14(a) and 15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

31.2

   Certification by Harry J. Silverman pursuant to Rule 13a-14(a) and 15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

32.1

   Certification by David A. Brandon pursuant to Section 1350, Chapter 63 of Title 18, United States Code, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

32.2

   Certification by Harry J. Silverman pursuant to Section 1350, Chapter 63 of Title 18, United States Code, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

 

b.   The following Current Reports on Form 8-K were filed or furnished with the SEC:

 

Current Report on Form 8-K dated May 28, 2003 which included a press release to announce the commencement of a tender offer for all outstanding 10 3/8% Senior Subordinated Notes due January 15, 2009 (the “Notes”) issued by the Company and to solicit the consent of holders of the Notes to amend certain provisions of the Indenture governing the Notes.

 

Current Report on Form 8-K dated June 10, 2003 which included a press release to announce that it had fixed the tender offer consideration and the total purchase price to be paid for the Notes validly tendered and accepted for purchase. The Company also announced in a separate press release that it had received consents from holders of the Notes representing in excess of a majority in principal amount of its outstanding Notes and the consent condition relating to the pending tender offer for all of the outstanding Notes had been satisfied.

 

Current Report on Form 8-K dated June 25, 2003 which included a press release stating that the Company accepted for purchase $206.7 million in principal amount of the outstanding Notes issued by the Company.

 

Current Report on Form 8-K dated June 25, 2003 stating that the Company, together with its parent and subsidiaries, consummated a recapitalization transaction. Accompanying exhibits included the related indenture and credit agreement, as well as stock option plan amendment documentation and the employment agreement with the Company’s Chief Executive Officer.

 

Current Report on Form 8-K dated July 29, 2003 which included a press release announcing the Company’s second quarter 2003 financial results.

 

SIGNATURES

 

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned duly authorized officer.

 

       

DOMINOS, INC.

(Registrant)

Date: July 29, 2003              

/s/    HARRY J. SILVERMAN         


        Chief Financial Officer

 

 

18

Certification by David A. Brandon

EXHIBIT 31.1

 

Section 302—CERTIFICATION OF CHIEF EXECUTIVE OFFICER

 

I, David A. Brandon, certify that:

 

1.   I have reviewed this quarterly report on Form 10-Q of Domino’s, Inc.
2.   Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3.   Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4.   The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have:

 

  (a)   Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

 

  (b)   Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

 

  (c)   Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

 

5.   The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent function):

 

  (a)   All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

 

  (b)   Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

 

Date: July 29, 2003

 

 
/s/    DAVID A. BRANDON

David A. Brandon

Chief Executive Officer

 

Certification by Harry J. Silverman

EXHIBIT 31.2

 

Section 302—CERTIFICATION OF CHIEF FINANCIAL OFFICER

 

I, Harry J. Silverman, certify that:

 

1.   I have reviewed this quarterly report on Form 10-Q of Domino’s, Inc.
2.   Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3.   Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4.   The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have:

 

  (a)   Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

 

  (b)   Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

 

  (c)   Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

 

5.   The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent function):

 

  (a)   All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

 

  (b)   Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

 

Date: July 29, 2003

 

/s/    HARRY J. SILVERMAN        

Harry J. Silverman

Chief Financial Officer

Certification by David A. Brandon

EXHIBIT 32.1

 

CERTIFICATION PURSUANT TO

SECTION 1350, CHAPTER 63 OF TITLE 18, UNITED STATES CODE,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

 

Pursuant to Section 1350, Chapter 63 of Title 18, United States Code, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, the undersigned, as Chief Executive Officer of Domino’s, Inc. (the “Company”), does hereby certify that to the undersigned’s knowledge:

 

  1)   the Company’s Quarterly Report on Form 10-Q for the quarter ending March 23, 2003 (the “Report”), fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

 

  2)   the information contained in the Company’s Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

 

/s/    DAVID A. BRANDON

David A. Brandon

Chief Executive Officer

 

Dated: July 29, 2003

Certification by Harry J. Silverman

EXHIBIT 32.2

 

CERTIFICATION PURSUANT TO

SECTION 1350, CHAPTER 63 OF TITLE 18, UNITED STATES CODE,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

 

Pursuant to Section 1350, Chapter 63 of Title 18, United States Code, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, the undersigned, as Chief Financial Officer of Domino’s, Inc. (the “Company”), does hereby certify that to the undersigned’s knowledge:

 

  1)   the Company’s Quarterly Report on Form 10-Q for the quarter ending March 23, 2003 (the “Report”), fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

 

  2)   the information contained in the Company’s Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

 

 
/s/    HARRY J. SILVERMAN

Harry J. Silverman

Chief Financial Officer

 

Dated: July 29, 2003