Domino’s Pizza: Announces 2015 Financial Results

Ann Arbor / MG. (dp) Domino’s Pizza Inc., the recognized world leader in pizza delivery, today announced results for the fourth quarter and fiscal 2015, comprised of strong growth in same store sales, global store counts and earnings. Domestic same store sales grew 10.7 percent during the quarter versus the year-ago period, and 12.0 percent for the full year, continuing the positive sales momentum in the Company’s domestic business. The international division also posted strong results, with same store sales growth of 8.6 percent during the quarter and 7.8 percent for the full year. The fourth quarter marked the 88th consecutive quarter – or 22nd full year – of positive international same store sales growth. The Company also had global net store growth of 901 stores in 2015, comprised of 133 net new domestic stores and a record 768 net new stores internationally.

On an as-reported basis, fourth quarter diluted EPS was 1.18 USD, up 38.8 percent over the prior-year quarter; full year diluted EPS was 3.47 USD, up 21.3 percent over the prior year. Management noted that the as-reported diluted EPS for both the fourth quarter and fiscal year was negatively impacted by expenses related to the Company’s recapitalization, which was completed during the fourth quarter, and was positively impacted by the inclusion of an extra, or 53rd, week in the fourth quarter of 2015. On an as-adjusted basis, fourth quarter diluted EPS was 1.15 USD, up 26.4 percent over the prior-year quarter; full year as-adjusted diluted EPS was 3.45 USD, up 19.0 percent over the prior year.

In connection with the Company’s recapitalization, as further discussed below, the Company borrowed 1.3 billion USD, and used a portion of the proceeds to retire a portion of its existing debt and enter into a 600 million USD accelerated share repurchase (ASR) program. As part of the ASR, the Company received and retired 4’858’994 shares of its common stock during the quarter. Additionally, on February 24, 2016, the Board of Directors declared a 38-cent per share quarterly dividend for shareholders of record as of March 15, 2016 to be paid on March 30, 2016. This represents a 22.6 percent increase over the previous quarterly dividend amount.

«Our network of strong franchisees has become even more profitable during these years of continued positive same store sales growth», said J. Patrick Doyle, Domino’s President and Chief Executive Officer. «Great store economics around the world have led to accelerated unit growth. It’s a positive cycle and the momentum continued through 2015».

Fourth Quarter and Fiscal 2015 Highlights:

(Dollars in millions, except per share data)	Q4/2015		Q4/2014		Fiscal 2015		Fiscal 2014
Net income	USD	62.8	USD	48.0	USD	192.8	USD	162.6
Weighted average diluted shares		53’351’075		56’777’007		55’532’955		56’931’226
Diluted earnings per share, as reported	USD	1.18	USD	0.85	USD	3.47	USD	2.86
Items affecting comparability*		(0.02)		0.06		(0.02)		0.04
Diluted earnings per share, as adjusted*	USD	1.15	USD	0.91	USD	3.45	USD	2.90

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• Revenues were up 15.3 percent for the fourth quarter versus the prior year period largely due to the estimated 49.7 million USD positive impact of the 53rd week in 2015. Revenue growth was also driven by higher supply chain volumes and sales of equipment to stores in connection with the Company’s global store reimaging program. Higher domestic same store sales and store count growth, which resulted in increased royalties from franchised stores and higher revenues at Company-owned stores, also contributed to this increase. International revenues also benefited from increased same store sales and store count growth, and were offset in part by the negative impact of foreign currency.
• Net Income was up 30.7 percent for the fourth quarter versus the prior year period, driven by domestic and international same store sales growth, global store count growth and higher supply chain volumes. The estimated 6.3 million USD positive impact of the 53rdweek, and the non-recurrence of an asset impairment charge in the fourth quarter of 2014 also contributed to the increase. These increases were offset in part by the negative impact of foreign currency exchange rates and, to a lesser extent, expenses related to the Company’s recapitalization.
• Diluted EPS increases, as noted earlier, were due to higher net income and lower weighted average diluted shares outstanding. (See the Items Affecting Comparability section and the Comments on Regulation G section.)

The table below outlines certain statistical measures utilized by the Company to analyze its performance.

	Q4/2015			Fiscal 2015
Same store sales growth: (versus prior year period)
Domestic Company-owned stores		+10.0	%		+ 12.2	%
Domestic franchise stores		+ 10.7	%		+ 11.9	%
Domestic stores		+ 10.7	%		+ 12.0	%
International stores (excluding foreign currency impact)		+ 8.6	%		+ 7.8	%
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Global retail sales growth*: (versus prior year period)
Domestic stores		+ 21.5	%		+ 16.9	%
International stores		+ 14.2	%		+ 6.1	%
Total		+ 17.6	%		+ 11.1	%
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Global retail sales growth*: (versus prior year period, excluding foreign currency impact)
Domestic stores		+ 21.5	%		+ 16.9	%
International stores		+ 28.3	%		+ 20.1	%
Total		+ 25.2	%		+ 18.6	%

^{*Global retail sales include the favorable impact of the extra week in the fourth quarter.}
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	Domestic Company-owned Stores		Domestic Franchise Stores		Total Domestic Stores		International Stores		Total
Store counts:
Store count at September 06, 2015		377		4’735		5’112		7’007		12’119
Openings		9		83		92		348		440
Closings		—		(4)		(4)		(25)		(29)
Transfers		(2)		2		—		—		—
Store count at January 03, 2016		384		4’816		5’200		7’330		12’530
Fourth quarter 2015 net change		7		81		88		323		411
Trailing four quarters net change		7		126		133		768		901

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2015 Recapitalization

On October 27, 2015, the Company announced it had completed its recapitalization. The Company borrowed 1.3 billion USD of fixed rate senior secured notes and entered into a new 125.0 million USD of variable funding note facility, which replaced its previous 100.0 million USD variable funding note facility. The Company used a portion of the proceeds from the recapitalization to repurchase and retire approximately 551.3 million USD of its outstanding 2012 fixed rate notes, at par. Additionally, in connection with the recapitalization, the Board of Directors authorized a new share repurchase program that allows the Company to repurchase up to 800.0 million USD of its common stock. This 800.0 million USD share repurchase program replaced the then existing 200.0 million USD share repurchase program. As part of this 800.0 million USD share repurchase program, the Company entered into a 600.0 million USD ASR agreement with a counterparty. On October 30, 2015 and as part of the ASR, the Company received and retired 4’858’994 shares of its common stock. At final settlement of the ASR, which is expected to be completed by the end of the first quarter of fiscal 2016, the Company may receive additional shares of common stock, or, under certain circumstances, the Company may be required to deliver shares of its common stock or may elect to make a cash payment to the counterparty, based on the terms of the related ASR agreement. As of February 18, 2016, the Company had authorization for repurchases of 200.0 million USD remaining under its open market share repurchase program.

The Company incurred certain expenses in connection with the recapitalization that are outlined in the items affecting comparability table below. Separately, the Company also recorded 17.4 million USD of debt issuance costs, which are included as a reduction of long-term debt on the consolidated balance sheet at January 3, 2016 and are expected be amortized into interest expense over the terms of its fixed rate notes.

Dividends

On February 24, 2016, the Board of Directors declared a 38-cent per share quarterly dividend for shareholders of record as of March 15, 2016, to be paid on March 30, 2016. This represents a 22.6 percent increase over the previous quarterly dividend amount.