Item 1. Financial Statements.
Dominos Pizza, Inc. and Subsidiaries
Condensed Consolidated Balance Sheets
(Unaudited)
|
|
|
|
|
|
|
|
|
(In thousands)
|
|
March 23, 2014
|
|
|
December 29, 2013
(Note)
|
|
Assets
|
|
|
|
|
|
|
|
|
Current assets:
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
$
|
38,376
|
|
|
$
|
14,383
|
|
Restricted cash and cash equivalents
|
|
|
108,626
|
|
|
|
125,453
|
|
Accounts receivable
|
|
|
103,881
|
|
|
|
105,779
|
|
Inventories
|
|
|
33,578
|
|
|
|
30,321
|
|
Prepaid expenses and other
|
|
|
11,991
|
|
|
|
20,199
|
|
Advertising fund assets, restricted
|
|
|
50,185
|
|
|
|
44,695
|
|
Deferred income taxes
|
|
|
7,243
|
|
|
|
10,710
|
|
|
|
|
|
|
|
|
|
|
Total current assets
|
|
|
353,880
|
|
|
|
351,540
|
|
|
|
|
|
|
|
|
|
|
Property, plant and equipment:
|
|
|
|
|
|
|
|
|
Land and buildings
|
|
|
23,646
|
|
|
|
23,423
|
|
Leasehold and other improvements
|
|
|
91,035
|
|
|
|
90,508
|
|
Equipment
|
|
|
175,275
|
|
|
|
174,667
|
|
Construction in progress
|
|
|
6,609
|
|
|
|
8,900
|
|
|
|
|
|
|
|
|
|
|
|
|
|
296,565
|
|
|
|
297,498
|
|
Accumulated depreciation and amortization
|
|
|
(200,848
|
)
|
|
|
(199,914
|
)
|
|
|
|
|
|
|
|
|
|
Property, plant and equipment, net
|
|
|
95,717
|
|
|
|
97,584
|
|
|
|
|
|
|
|
|
|
|
Other assets:
|
|
|
|
|
|
|
|
|
Deferred financing costs
|
|
|
27,303
|
|
|
|
28,693
|
|
Goodwill
|
|
|
16,109
|
|
|
|
16,598
|
|
Capitalized software
|
|
|
14,743
|
|
|
|
14,464
|
|
Other assets
|
|
|
13,491
|
|
|
|
13,209
|
|
Deferred income taxes
|
|
|
3,069
|
|
|
|
3,167
|
|
|
|
|
|
|
|
|
|
|
Total other assets
|
|
|
74,715
|
|
|
|
76,131
|
|
|
|
|
|
|
|
|
|
|
Total assets
|
|
$
|
524,312
|
|
|
$
|
525,255
|
|
|
|
|
|
|
|
|
|
|
Liabilities and stockholders deficit
|
|
|
|
|
|
|
|
|
Current liabilities:
|
|
|
|
|
|
|
|
|
Current portion of long-term debt
|
|
$
|
24,155
|
|
|
$
|
24,144
|
|
Accounts payable
|
|
|
73,183
|
|
|
|
83,408
|
|
Dividends payable
|
|
|
14,490
|
|
|
|
11,849
|
|
Insurance reserves
|
|
|
13,845
|
|
|
|
13,297
|
|
Advertising fund liabilities
|
|
|
50,185
|
|
|
|
44,695
|
|
Other accrued liabilities
|
|
|
64,546
|
|
|
|
77,218
|
|
|
|
|
|
|
|
|
|
|
Total current liabilities
|
|
|
240,404
|
|
|
|
254,611
|
|
|
|
|
|
|
|
|
|
|
Long-term liabilities:
|
|
|
|
|
|
|
|
|
Long-term debt, less current portion
|
|
|
1,506,256
|
|
|
|
1,512,299
|
|
Insurance reserves
|
|
|
25,597
|
|
|
|
25,528
|
|
Deferred income taxes
|
|
|
4,572
|
|
|
|
7,827
|
|
Other accrued liabilities
|
|
|
16,439
|
|
|
|
15,192
|
|
|
|
|
|
|
|
|
|
|
Total long-term liabilities
|
|
|
1,552,864
|
|
|
|
1,560,846
|
|
|
|
|
|
|
|
|
|
|
Stockholders deficit:
|
|
|
|
|
|
|
|
|
Common stock
|
|
|
558
|
|
|
|
558
|
|
Additional paid-in capital
|
|
|
3,171
|
|
|
|
669
|
|
Retained deficit
|
|
|
(1,270,117
|
)
|
|
|
(1,289,445
|
)
|
Accumulated other comprehensive loss
|
|
|
(2,568
|
)
|
|
|
(1,984
|
)
|
|
|
|
|
|
|
|
|
|
Total stockholders deficit
|
|
|
(1,268,956
|
)
|
|
|
(1,290,202
|
)
|
|
|
|
|
|
|
|
|
|
Total liabilities and stockholders deficit
|
|
$
|
524,312
|
|
|
$
|
525,255
|
|
|
|
|
|
|
|
|
|
|
Note: The balance sheet at
December 29, 2013 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
Dominos Pizza, Inc. and Subsidiaries
Condensed Consolidated Statements of Income
(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
Fiscal Quarter Ended
|
|
|
|
March 23,
|
|
|
March 24,
|
|
(In thousands, except per share data)
|
|
2014
|
|
|
2013
|
|
Revenues:
|
|
|
|
|
|
|
|
|
Domestic Company-owned stores
|
|
$
|
82,457
|
|
|
$
|
81,094
|
|
Domestic franchise
|
|
|
53,421
|
|
|
|
51,318
|
|
Domestic supply chain
|
|
|
257,527
|
|
|
|
231,531
|
|
International
|
|
|
60,447
|
|
|
|
53,674
|
|
|
|
|
|
|
|
|
|
|
Total revenues
|
|
|
453,852
|
|
|
|
417,617
|
|
|
|
|
|
|
|
|
|
|
Cost of sales:
|
|
|
|
|
|
|
|
|
Domestic Company-owned stores
|
|
|
62,791
|
|
|
|
61,269
|
|
Domestic supply chain
|
|
|
230,367
|
|
|
|
205,412
|
|
International
|
|
|
23,652
|
|
|
|
21,130
|
|
|
|
|
|
|
|
|
|
|
Total cost of sales
|
|
|
316,810
|
|
|
|
287,811
|
|
|
|
|
|
|
|
|
|
|
Operating margin
|
|
|
137,042
|
|
|
|
129,806
|
|
General and administrative
|
|
|
52,867
|
|
|
|
54,281
|
|
|
|
|
|
|
|
|
|
|
Income from operations
|
|
|
84,175
|
|
|
|
75,525
|
|
Interest income
|
|
|
31
|
|
|
|
42
|
|
Interest expense
|
|
|
(20,326
|
)
|
|
|
(20,945
|
)
|
|
|
|
|
|
|
|
|
|
Income before provision for income taxes
|
|
|
63,880
|
|
|
|
54,622
|
|
Provision for income taxes
|
|
|
23,406
|
|
|
|
20,202
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
$
|
40,474
|
|
|
$
|
34,420
|
|
|
|
|
|
|
|
|
|
|
Earnings per share:
|
|
|
|
|
|
|
|
|
Common stock basic
|
|
$
|
0.73
|
|
|
$
|
0.62
|
|
Common stock diluted
|
|
|
0.71
|
|
|
|
0.59
|
|
Dividends declared per share
|
|
$
|
0.25
|
|
|
$
|
0.20
|
|
See accompanying notes.
4
Dominos Pizza, Inc. and Subsidiaries
Consolidated Statements of Comprehensive Income
(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
Fiscal Quarter Ended
|
|
|
|
March 23,
|
|
|
March 24,
|
|
(In thousands)
|
|
2014
|
|
|
2013
|
|
Net income
|
|
$
|
40,474
|
|
|
$
|
34,420
|
|
Other comprehensive income (loss), before tax:
|
|
|
|
|
|
|
|
|
Currency translation adjustment
|
|
|
(1,026
|
)
|
|
|
22
|
|
Tax attributes of items in other comprehensive income (loss):
|
|
|
|
|
|
|
|
|
Currency translation adjustment
|
|
|
442
|
|
|
|
(73
|
)
|
|
|
|
|
|
|
|
|
|
Other comprehensive loss, net of tax
|
|
|
(584
|
)
|
|
|
(51
|
)
|
|
|
|
|
|
|
|
|
|
Comprehensive income
|
|
$
|
39,890
|
|
|
$
|
34,369
|
|
|
|
|
|
|
|
|
|
|
See
accompanying notes.
5
Dominos Pizza, Inc. and Subsidiaries
Condensed Consolidated Statements of Cash Flows
(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
Fiscal Quarter Ended
|
|
|
|
March 23,
|
|
|
March 24,
|
|
(In thousands)
|
|
2014
|
|
|
2013
|
|
Cash flows from operating activities:
|
|
|
|
|
|
|
|
|
Net income
|
|
$
|
40,474
|
|
|
$
|
34,420
|
|
Adjustments to reconcile net income to net cash provided by operating activities:
|
|
|
|
|
|
|
|
|
Depreciation and amortization
|
|
|
6,421
|
|
|
|
5,631
|
|
Gains on sale/disposal of assets
|
|
|
(1,556
|
)
|
|
|
(88
|
)
|
Amortization of deferred financing costs
|
|
|
1,390
|
|
|
|
1,431
|
|
Provision for deferred income taxes
|
|
|
700
|
|
|
|
4,568
|
|
Non-cash compensation expense
|
|
|
4,455
|
|
|
|
5,616
|
|
Tax impact from equity-based compensation
|
|
|
(7,834
|
)
|
|
|
(2,574
|
)
|
Other
|
|
|
45
|
|
|
|
(959
|
)
|
Changes in operating assets and liabilities
|
|
|
(7,891
|
)
|
|
|
(396
|
)
|
|
|
|
|
|
|
|
|
|
Net cash provided by operating activities
|
|
|
36,204
|
|
|
|
47,649
|
|
|
|
|
|
|
|
|
|
|
Cash flows from investing activities:
|
|
|
|
|
|
|
|
|
Capital expenditures
|
|
|
(6,561
|
)
|
|
|
(5,086
|
)
|
Proceeds from sale of assets
|
|
|
3,906
|
|
|
|
1,228
|
|
Changes in restricted cash
|
|
|
16,827
|
|
|
|
(1,360
|
)
|
Other
|
|
|
(279
|
)
|
|
|
882
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by (used in) investing activities
|
|
|
13,893
|
|
|
|
(4,336
|
)
|
|
|
|
|
|
|
|
|
|
Cash flows from financing activities:
|
|
|
|
|
|
|
|
|
Repayments of long-term debt and capital lease obligations
|
|
|
(6,032
|
)
|
|
|
(6,170
|
)
|
Proceeds from exercise of stock options
|
|
|
2,458
|
|
|
|
1,528
|
|
Tax impact from equity-based compensation
|
|
|
7,834
|
|
|
|
2,574
|
|
Purchases of common stock
|
|
|
(15,131
|
)
|
|
|
(18,019
|
)
|
Tax payments for restricted stock upon vesting
|
|
|
(4,308
|
)
|
|
|
(2,656
|
)
|
Payments of common stock dividends and equivalents
|
|
|
(11,053
|
)
|
|
|
(327
|
)
|
|
|
|
|
|
|
|
|
|
Net cash used in financing activities
|
|
|
(26,232
|
)
|
|
|
(23,070
|
)
|
|
|
|
|
|
|
|
|
|
Effect of exchange rate changes on cash and cash equivalents
|
|
|
128
|
|
|
|
25
|
|
|
|
|
|
|
|
|
|
|
Change in cash and cash equivalents
|
|
|
23,993
|
|
|
|
20,268
|
|
Cash and cash equivalents, at beginning of period
|
|
|
14,383
|
|
|
|
54,813
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents, at end of period
|
|
$
|
38,376
|
|
|
$
|
75,081
|
|
|
|
|
|
|
|
|
|
|
See
accompanying notes.
6
Dominos Pizza, Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements
(Unaudited; tabular amounts in thousands, except percentages, share and per share amounts)
March 23, 2014
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 Rule 10-01 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. For further information, refer to the consolidated financial statements and footnotes for the fiscal year ended December 29, 2013 included in our
annual report on Form 10-K.
In the opinion of the Company, all adjustments, consisting of normal recurring items, considered necessary
for a fair statement have been included. Operating results for the fiscal quarter ended March 23, 2014 are not necessarily indicative of the results that may be expected for the fiscal year ending December 28, 2014.
2. Segment Information
The following table summarizes revenues, income from operations and earnings before interest, taxes, depreciation,
amortization and other, which is the measure by which the Company allocates resources to its segments and which we refer to as Segment Income, for each of our reportable segments.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fiscal Quarters Ended March 23, 2014 and March 24, 2013
|
|
|
|
Domestic
Stores
|
|
|
Domestic
Supply
Chain
|
|
|
International
|
|
|
Intersegment
Revenues
|
|
|
Other
|
|
|
Total
|
|
Revenues
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2014
|
|
$
|
135,878
|
|
|
$
|
282,245
|
|
|
$
|
60,447
|
|
|
$
|
(24,718
|
)
|
|
$
|
|
|
|
$
|
453,852
|
|
2013
|
|
|
132,412
|
|
|
|
254,745
|
|
|
|
53,674
|
|
|
|
(23,214
|
)
|
|
|
|
|
|
|
417,617
|
|
Income from operations
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2014
|
|
$
|
48,091
|
|
|
$
|
21,229
|
|
|
$
|
30,161
|
|
|
|
N/A
|
|
|
$
|
(15,306
|
)
|
|
$
|
84,175
|
|
2013
|
|
|
43,835
|
|
|
|
20,537
|
|
|
|
27,052
|
|
|
|
N/A
|
|
|
|
(15,899
|
)
|
|
|
75,525
|
|
Segment Income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2014
|
|
$
|
47,979
|
|
|
$
|
23,215
|
|
|
$
|
30,273
|
|
|
|
N/A
|
|
|
$
|
(7,972
|
)
|
|
$
|
93,495
|
|
2013
|
|
|
45,302
|
|
|
|
22,367
|
|
|
|
27,124
|
|
|
|
N/A
|
|
|
|
(8,109
|
)
|
|
|
86,684
|
|
The following table reconciles Total Segment Income to consolidated income before provision for income taxes.
|
|
|
|
|
|
|
|
|
|
|
Fiscal Quarter Ended
|
|
|
|
March 23,
2014
|
|
|
March 24,
2013
|
|
Total Segment Income
|
|
$
|
93,495
|
|
|
$
|
86,684
|
|
Depreciation and amortization
|
|
|
(6,421
|
)
|
|
|
(5,631
|
)
|
Gains on sale/disposal of assets
|
|
|
1,556
|
|
|
|
88
|
|
Non-cash compensation expense
|
|
|
(4,455
|
)
|
|
|
(5,616
|
)
|
|
|
|
|
|
|
|
|
|
Income from operations
|
|
|
84,175
|
|
|
|
75,525
|
|
Interest income
|
|
|
31
|
|
|
|
42
|
|
Interest expense
|
|
|
(20,326
|
)
|
|
|
(20,945
|
)
|
|
|
|
|
|
|
|
|
|
Income before provision for income taxes
|
|
$
|
63,880
|
|
|
$
|
54,622
|
|
|
|
|
|
|
|
|
|
|
7
3. Earnings Per Share
|
|
|
|
|
|
|
|
|
|
|
Fiscal Quarter Ended
|
|
|
|
March 23,
2014
|
|
|
March 24,
2013
|
|
Net income available to common
stockholders basic and diluted
|
|
$
|
40,474
|
|
|
$
|
34,420
|
|
|
|
|
|
|
|
|
|
|
Basic weighted average number of shares
|
|
|
55,211,837
|
|
|
|
55,746,790
|
|
Earnings per share basic
|
|
$
|
0.73
|
|
|
$
|
0.62
|
|
Diluted weighted average number of shares
|
|
|
57,372,471
|
|
|
|
58,224,408
|
|
Earnings per share diluted
|
|
$
|
0.71
|
|
|
$
|
0.59
|
|
The denominator used in calculating diluted earnings per share for common stock for the first quarter of 2014
does not include 199,040 options to purchase common stock as the effect of including these options would have been anti-dilutive. The denominator used in calculating diluted earnings per share for common stock for the first quarter of 2013 does not
include 466,920 options to purchase common stock as the effect of including these options would have been anti-dilutive.
4. Stockholders Deficit
The following table summarizes changes in Stockholders Deficit for the first quarter of 2014.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accumulated
|
|
|
|
|
|
|
Additional
|
|
|
|
|
|
Other
|
|
|
|
Common Stock
|
|
|
Paid-in
|
|
|
Retained
|
|
|
Comprehensive
|
|
|
|
Shares
|
|
|
Amount
|
|
|
Capital
|
|
|
Deficit
|
|
|
Loss
|
|
Balance at December 29, 2013
|
|
|
55,768,672
|
|
|
$
|
558
|
|
|
$
|
669
|
|
|
$
|
(1,289,445
|
)
|
|
$
|
(1,984
|
)
|
Net income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
40,474
|
|
|
|
|
|
Common stock dividends
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(13,952
|
)
|
|
|
|
|
Issuance of common stock, net
|
|
|
25,418
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common stock effectively repurchased for required employee tax withholdings
|
|
|
(58,671
|
)
|
|
|
(1
|
)
|
|
|
(4,307
|
)
|
|
|
|
|
|
|
|
|
Purchases of common stock
|
|
|
(221,481
|
)
|
|
|
(2
|
)
|
|
|
(7,935
|
)
|
|
|
(7,194
|
)
|
|
|
|
|
Exercise of stock options
|
|
|
260,537
|
|
|
|
3
|
|
|
|
2,455
|
|
|
|
|
|
|
|
|
|
Tax impact from equity-based compensation
|
|
|
|
|
|
|
|
|
|
|
7,834
|
|
|
|
|
|
|
|
|
|
Non-cash compensation expense
|
|
|
|
|
|
|
|
|
|
|
4,455
|
|
|
|
|
|
|
|
|
|
Currency translation adjustment, net of tax
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(584
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at March 23, 2014
|
|
|
55,774,475
|
|
|
$
|
558
|
|
|
$
|
3,171
|
|
|
$
|
(1,270,117
|
)
|
|
$
|
(2,568
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
5. Dividends
During the first quarter of 2014, the Company paid approximately $11.1 million of common stock dividends. Additionally,
during the first quarter of 2014, the Companys Board of Directors declared a $0.25 per share quarterly dividend on its outstanding common stock. The Company had approximately $14.5 million accrued for common stock dividends at March 23,
2014.
Subsequent to the first quarter, on April 29, 2014, the Companys Board of Directors declared a $0.25 per share quarterly
dividend on its outstanding common stock for shareholders of record as of June 13, 2014 to be paid on June 30, 2014.
8
6. Accumulated Other Comprehensive Loss
In 2013, the Company adopted Accounting Standards Update 2013-02,
Reporting of Amounts Reclassified Out of Accumulated
Other Comprehensive Income
, which requires an entity to present either on the face of the statement where net income is presented or in the notes to the financial statements, significant amounts reclassified out of accumulated other
comprehensive income (loss) by the respective line items of net income.
The approximately $2.6 million of accumulated other comprehensive
loss at March 23, 2014 and the approximately $2.0 million of accumulated other comprehensive loss at December 29, 2013 represent currency translation adjustments, net of tax. There were no reclassifications out of accumulated other
comprehensive loss to net income in the first quarter of 2014 or the first quarter of 2013.
7. Open Market Share Repurchase Program
During the first quarter of 2014, the Company repurchased and retired 221,481 shares of common stock for a total of
approximately $15.1 million. As of March 23, 2014, the Company had $200.0 million remaining for future share repurchases under its Board of Directors approved $200.0 million open market share repurchase program, as the Board of Directors reset
the open market share repurchase program at their February 12, 2014 meeting. Subsequent to the first quarter of 2014 and through April 24, 2014, the Company repurchased and retired an additional 153,812 shares of common stock for a total
of approximately $11.4 million.
During the first quarter of 2013, the Company repurchased and retired 362,899 shares of common stock for
a total of approximately $18.0 million under the Companys open market share repurchase program.
8. Fair Value Measurements
Fair value measurements enable the reader of the financial statements to assess the inputs used to develop those
measurements by establishing a hierarchy for ranking the quality and reliability of the information used to determine fair values. The Company classifies and discloses assets and liabilities carried at fair value in one of the following three
categories:
Level 1: Quoted market prices in active markets for identical assets or liabilities.
Level 2: Observable market based inputs or unobservable inputs that are corroborated by market data.
Level 3: Unobservable inputs that are not corroborated by market data.
The fair values of the Companys cash equivalents and investments in marketable securities are based on quoted prices in active markets
for identical assets. The following tables summarize the carrying amounts and fair values of certain assets at March 23, 2014 and December 29, 2013:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
At March 23, 2014
|
|
|
|
|
|
|
Fair Value Estimated Using
|
|
|
|
Carrying
Amount
|
|
|
Level 1
Inputs
|
|
|
Level 2
Inputs
|
|
|
Level 3
Inputs
|
|
Cash equivalents
|
|
$
|
27,437
|
|
|
$
|
27,437
|
|
|
$
|
|
|
|
$
|
|
|
Restricted cash equivalents
|
|
|
93,739
|
|
|
|
93,739
|
|
|
|
|
|
|
|
|
|
Investments in marketable securities
|
|
|
3,739
|
|
|
|
3,739
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
At December 29, 2013
|
|
|
|
|
|
|
Fair Value Estimated Using
|
|
|
|
Carrying
Amount
|
|
|
Level 1
Inputs
|
|
|
Level 2
Inputs
|
|
|
Level 3
Inputs
|
|
Cash equivalents
|
|
$
|
5,303
|
|
|
$
|
5,303
|
|
|
$
|
|
|
|
$
|
|
|
Restricted cash equivalents
|
|
|
93,608
|
|
|
|
93,608
|
|
|
|
|
|
|
|
|
|
Investments in marketable securities
|
|
|
3,269
|
|
|
|
3,269
|
|
|
|
|
|
|
|
|
|
9
At March 23, 2014, the Company estimates that the $1.528 billion in principal amount of
outstanding fixed rate notes had a fair value of approximately $1.630 billion, and at December 29, 2013 the $1.534 billion in principal amount of outstanding fixed rate notes had a fair value of approximately $1.643 billion. The fixed rate
notes are classified as a Level 2 measurement, as the Company estimated the fair value amount by using available market information. The Company obtained broker quotes from two separate brokerage firms that are knowledgeable about the Companys
fixed rate notes and, at times, trade these notes. Further, the Company performs its own internal analysis based on the information it gathers from public markets, including information on notes that are similar to that of the Company. However,
considerable judgment is required in interpreting market data to develop estimates of fair value. Accordingly, the fair value estimates presented here are not necessarily indicative of the amount that the Company or the debtholders could realize in
a current market exchange. The use of different assumptions and/or estimation methodologies may have a material effect on the estimated fair value.
9. Sale of Company-Owned Stores
During the first quarter of 2014, the Company sold 14 Company-owned stores to a franchisee. In connection with the sale of
these 14 stores, the Company recorded a $1.7 million pre-tax gain on the sale of the related assets, which was net of a $0.5 million reduction in goodwill. The gain was recorded in general and administrative expense in the Companys condensed
consolidated statements of income. This transaction will not have a material ongoing impact on the Companys consolidated financial results.
As a result of the capital gain recognized in connection with the sale of the 14 Company-owned stores, the Company also released $0.3 million
of a deferred tax valuation allowance.
10
Item 2. Managements Discussion and Analysis of Financial Condition and
Results of Operations.
(Unaudited; tabular amounts in millions, except percentages and store data)
The 2014 and 2013 first quarters referenced herein represent the twelve-week periods ended March 23, 2014 and March 24, 2013,
respectively.
Overview
We
are the number one pizza delivery company in the United States based on reported consumer spending, and the second largest pizza company in the world based on number of units. We operate through a substantially franchised network of stores, located
in all 50 states and in more than 70 international markets, as well as Company-owned stores, all of which are in the United States. In addition, we operate regional dough manufacturing and supply chain centers in the United States and Canada.
Our financial results are driven largely by retail sales at our franchise and Company-owned stores. Changes in retail sales are driven by
changes in same store sales and store counts. We monitor both of these metrics very closely, as they directly impact our revenues and profits, and strive to consistently increase both metrics. Retail sales drive royalty payments from franchisees as
well as Company-owned store and supply chain revenues. Retail sales are primarily impacted by the strength of the Dominos Pizza
®
brand, the results of our marketing, the effectiveness of
our digital and technology platforms, our ability to execute our store operating model, the overall global economic environment and the success of our business strategies.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
First Quarter
of 2014
|
|
|
First Quarter
of 2013
|
|
Global retail sales growth
|
|
|
+9.1
|
%
|
|
|
|
|
|
|
+9.4
|
%
|
|
|
|
|
Same store sales growth:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Domestic Company-owned stores
|
|
|
+1.5
|
%
|
|
|
|
|
|
|
+5.0
|
%
|
|
|
|
|
Domestic franchise stores
|
|
|
+5.2
|
%
|
|
|
|
|
|
|
+6.3
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Domestic stores
|
|
|
+4.9
|
%
|
|
|
|
|
|
|
+6.2
|
%
|
|
|
|
|
International stores (excluding foreign currency impact)
|
|
|
+7.4
|
%
|
|
|
|
|
|
|
+6.5
|
%
|
|
|
|
|
Store counts (at end of period):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Domestic Company-owned stores
|
|
|
376
|
|
|
|
|
|
|
|
388
|
|
|
|
|
|
Domestic franchise stores
|
|
|
4,615
|
|
|
|
|
|
|
|
4,535
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Domestic stores
|
|
|
4,991
|
|
|
|
|
|
|
|
4,923
|
|
|
|
|
|
International stores
|
|
|
5,997
|
|
|
|
|
|
|
|
5,407
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total stores
|
|
|
10,988
|
|
|
|
|
|
|
|
10,330
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income statement data:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total revenues
|
|
$
|
453.9
|
|
|
|
100.0
|
%
|
|
$
|
417.6
|
|
|
|
100.0
|
%
|
Cost of sales
|
|
|
316.8
|
|
|
|
69.8
|
%
|
|
|
287.8
|
|
|
|
68.9
|
%
|
General and administrative
|
|
|
52.9
|
|
|
|
11.6
|
%
|
|
|
54.3
|
|
|
|
13.0
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from operations
|
|
|
84.2
|
|
|
|
18.5
|
%
|
|
|
75.5
|
|
|
|
18.1
|
%
|
Interest expense, net
|
|
|
(20.3
|
)
|
|
|
(4.5
|
)%
|
|
|
(20.9
|
)
|
|
|
(5.0
|
)%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income before provision for income taxes
|
|
|
63.9
|
|
|
|
14.1
|
%
|
|
|
54.6
|
|
|
|
13.1
|
%
|
Provision for income taxes
|
|
|
23.4
|
|
|
|
5.2
|
%
|
|
|
20.2
|
|
|
|
4.9
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
$
|
40.5
|
|
|
|
8.9
|
%
|
|
$
|
34.4
|
|
|
|
8.2
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
During the first quarter, we experienced strong domestic same store sales increases driven by our continued
consumer offerings of higher quality food at value pricing and effective marketing to support our promotions. While weather typically does not have a meaningful impact on our domestic same store sales, we estimate that the unusually severe winter
weather during the quarter also positively impacted our domestic results. Additionally, we produced earnings growth despite commodity and foreign currency exchange rate pressures. We believe that our innovative digital platforms and technology
continue to drive orders and sales and provide us with a competitive advantage versus regional chains and individual establishments. Internationally, we continued to have strong same store sales and store growth in the first quarter, as we opened a
net 97 stores. We believe that our strong global brand, quality and affordable food offerings, combined with our operations and innovative technology all contributed to our results during the first quarter of 2014. We intend to further grow our
business by continuing to focus on operational excellence, effective marketing, industry-leading technology platforms and delivering high quality food and service to our customers.
11
Global retail sales, which are total retail sales at franchise and Company-owned stores
worldwide, increased 9.1% in the first quarter of 2014. This increase was driven primarily by domestic and international same store sales growth, as well as an increase in our worldwide store counts during the trailing four quarters. This was
offset, in part, by the negative impact of foreign currency exchange rates. Domestic same store sales growth reflected the sustained positive sales trends and the continued success of our products and marketing. International same store sales growth
also reflected continued strong performance.
Revenues increased $36.2 million, up 8.7% in the first quarter of 2014. This increase was
due primarily to higher domestic supply chain revenues attributable to higher commodity prices and volume growth, higher international revenues, and higher domestic franchise and Company-owned store revenues, as a result of same store sales and
store count growth. These increases were offset in part by the negative impact on international revenues of changes in foreign currency exchange rates. These changes in revenues are described in more detail below.
Income from operations increased $8.7 million, up 11.5% in the first quarter of 2014. This increase was driven primarily by higher royalty
revenues from both domestic and international franchise stores, lower general and administrative expenses due primarily to a $1.7 million pre-tax gain on the sale of 14 Company-owned stores, and higher domestic supply chain profits driven primarily
by higher volumes. These increases were offset in part by the negative impact of the changes in foreign currency exchange rates.
Net
income increased $6.1 million, up 17.6% in the first quarter of 2014. This increase was driven in part by domestic and international same store sales growth, international store count growth, and a $1.4 million positive impact from the sale of 14
Company-owned stores and the associated reversal of a deferred tax asset valuation allowance. Higher domestic supply chain profits and a lower effective tax rate also drove the increase in net income, and all of the increases described were offset
in part by changes in foreign currency exchange rates.
Revenues
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
First Quarter
of 2014
|
|
|
First Quarter
of 2013
|
|
Domestic Company-owned stores
|
|
$
|
82.5
|
|
|
|
18.2
|
%
|
|
$
|
81.1
|
|
|
|
19.4
|
%
|
Domestic franchise
|
|
|
53.4
|
|
|
|
11.8
|
%
|
|
|
51.3
|
|
|
|
12.3
|
%
|
Domestic supply chain
|
|
|
257.5
|
|
|
|
56.7
|
%
|
|
|
231.5
|
|
|
|
55.4
|
%
|
International
|
|
|
60.4
|
|
|
|
13.3
|
%
|
|
|
53.7
|
|
|
|
12.9
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total revenues
|
|
$
|
453.9
|
|
|
|
100.0
|
%
|
|
$
|
417.6
|
|
|
|
100.0
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenues primarily consist of retail sales from our Company-owned stores, royalties from our domestic and
international franchise stores and sales of food, equipment and supplies from our supply chain centers to substantially all of our domestic franchise stores and certain international franchise stores. Company-owned store and franchise store revenues
may vary significantly from period to period due to changes in store count mix, while supply chain revenues may vary significantly as a result of fluctuations in commodity prices, primarily cheese and meats.
Domestic Stores Revenues
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
First Quarter
of 2014
|
|
|
First Quarter
of 2013
|
|
Domestic Company-owned stores
|
|
$
|
82.5
|
|
|
|
60.7
|
%
|
|
$
|
81.1
|
|
|
|
61.2
|
%
|
Domestic franchise
|
|
|
53.4
|
|
|
|
39.3
|
%
|
|
|
51.3
|
|
|
|
38.8
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Domestic stores
|
|
$
|
135.9
|
|
|
|
100.0
|
%
|
|
$
|
132.4
|
|
|
|
100.0
|
%
|
|
|
|
|
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Domestic stores revenues increased $3.5 million, up 2.6% in the first quarter of 2014. This increase was due
primarily to royalty revenues earned on higher franchise same store sales and higher domestic Company-owned same store sales. These changes in domestic stores revenues are more fully described below.
12
Domestic Company-Owned Stores Revenues
Revenues from domestic Company-owned store operations increased $1.4 million, up 1.7% in the first quarter of 2014. This increase was due
primarily to higher same store sales. Domestic Company-owned same store sales increased 1.5% in the first quarter of 2014, compared to an increase of 5.0% in the first quarter of 2013.
Domestic Franchise Revenues
Revenues from domestic franchise operations increased $2.1 million, up 4.1% in the first quarter of 2014. This increase was due primarily to
higher domestic franchise same store sales, and to a lesser extent, an increase in the average number of domestic franchise stores open during 2014. Domestic franchise same store sales increased 5.2% in the first quarter of 2014, compared to an
increase of 6.3% in the first quarter of 2013. These increases were partially offset by a reduction in revenues from a change to the Companys gift card program that occurred in the first quarter of 2013.
Domestic Supply Chain Revenues
Revenues from domestic supply chain operations increased $26.0 million, up 11.2% in the first quarter of 2014. This increase was due primarily
to higher overall commodity prices, including cheese, and higher volumes as a result of increased order counts at the store level. The published cheese block price-per-pound averaged $2.16 in the first quarter of 2014, up from $1.67 in the
comparable period in 2013. We estimate that the higher cheese block price (passed through directly in domestic supply chain pricing to franchisees) resulted in an approximate $9.7 million increase in domestic supply chain revenues during the first
quarter of 2014.
International Revenues
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|
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|
First Quarter
of 2014
|
|
|
First Quarter
of 2013
|
|
International royalty and other
|
|
$
|
33.6
|
|
|
|
55.6
|
%
|
|
$
|
29.9
|
|
|
|
55.7
|
%
|
International supply chain
|
|
|
26.8
|
|
|
|
44.4
|
%
|
|
|
23.8
|
|
|
|
44.3
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
International
|
|
$
|
60.4
|
|
|
|
100.0
|
%
|
|
$
|
53.7
|
|
|
|
100.0
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
International revenues primarily consist of royalties from our international franchise stores and
international supply chain sales. Revenues from international operations increased $6.7 million, up 12.6% in the first quarter of 2014. This increase was due primarily to higher international royalty and other revenues as well as higher
international supply chain revenues as discussed below.
Revenues from international royalties and other increased $3.7 million, up 12.6%
in the first quarter of 2014. This increase was due primarily to higher same store sales and more international stores being open during 2014, offset in part by the negative impact of changes in foreign currency exchange rates of approximately $1.3
million in the first quarter of 2014 caused by the stronger dollar when compared to the currencies in the international markets in which we compete. When excluding the impact of foreign currency exchange rates, same store sales increased 7.4% in the
first quarter of 2014, compared to an increase of 6.5% in the first quarter of 2013. When including the impact of foreign currency exchange rates, same store sales increased 3.7% in the first quarter of 2014, compared to an increase of 4.5% in the
first quarter of 2013.
Revenues from international supply chain operations increased $3.0 million, up 12.6% in the first quarter of 2014
due primarily to higher volumes.
13
Cost of Sales / Operating Margin
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First Quarter
of 2014
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|
|
First Quarter
of 2013
|
|
Consolidated revenues
|
|
$
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453.9
|
|
|
|
100.0
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%
|
|
$
|
417.6
|
|
|
|
100.0
|
%
|
Consolidated cost of sales
|
|
|
316.8
|
|
|
|
69.8
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%
|
|
|
287.8
|
|
|
|
68.9
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%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consolidated operating margin
|
|
$
|
137.0
|
|
|
|
30.2
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%
|
|
$
|
129.8
|
|
|
|
31.1
|
%
|
|
|
|
|
|
|
|
|
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|
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|
Cost of sales consists primarily of domestic Company-owned store and domestic supply chain costs incurred to
generate related revenues. Components of cost of sales primarily include food, labor and occupancy costs.
The operating margin, which we
define as revenues less cost of sales, increased $7.2 million, up 5.6% in the first quarter of 2014. This increase in the operating margin was due primarily to higher domestic and international franchise revenues and higher supply chain volumes.
Franchise revenues do not have a cost of sales component and, as such, changes in franchise revenues have a disproportionate effect on the operating margin.
As a percentage of revenues, the operating margin decreased 0.9 percentage points in the first quarter of 2014. This decrease was due
primarily to higher overall commodity prices, including cheese and meats.
As indicated above, the operating margin as a percentage of
revenues was negatively impacted by higher cheese costs. Cheese price changes are a pass-through in domestic supply chain revenues and cost of sales and, as such, have no impact on the related operating margin as measured in dollars.
However, cheese price changes do impact operating margin when measured as a percentage of revenues. For example, if the 2014 average cheese prices had been in effect during 2013, the impact on supply chain margins would have caused the
Companys operating margin for the first quarter of 2013 to be approximately 30.4% of revenues versus the reported 31.1%. However, the dollar margins for those same periods would have been unaffected.
Domestic Company-Owned Stores Operating Margin
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|
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|
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|
|
|
|
|
Domestic Company-Owned Stores
|
|
First Quarter
of 2014
|
|
|
First Quarter
of 2013
|
|
Revenues
|
|
$
|
82.5
|
|
|
|
100.0
|
%
|
|
$
|
81.1
|
|
|
|
100.0
|
%
|
Cost of sales
|
|
|
62.8
|
|
|
|
76.1
|
%
|
|
|
61.3
|
|
|
|
75.6
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Store operating margin
|
|
$
|
19.7
|
|
|
|
23.9
|
%
|
|
$
|
19.8
|
|
|
|
24.4
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The domestic Company-owned store operating margin, which does not include certain store-level costs such as
royalties and advertising, decreased $0.1 million, down 0.8% in the first quarter of 2014. This decrease was due primarily to higher food costs, offset in part by higher same store sales.
As a percentage of store revenues, the store operating margin decreased 0.5 percentage points in the first quarter of 2014. Food costs
increased 0.6 percentage points to 28.3% in the first quarter of 2014 due primarily to higher cheese, meat and other commodity prices. The cheese block price per pound averaged $2.16 in the first quarter of 2014 compared to $1.67 in the first
quarter of 2013. Occupancy costs (which include rent, telephone, utilities and depreciation) increased 0.2 percentage points to 8.9% in the first quarter of 2014, due primarily to slightly higher telephone, rent and utility costs per store.
Insurance costs decreased 0.2 percentage points to 2.7% in the first quarter of 2014. Labor and related costs decreased 0.2 percentage points to 27.9% in the first quarter of 2014 due primarily to leveraging higher sales per store.
Domestic Supply Chain Operating Margin
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Domestic Supply Chain
|
|
First Quarter
of 2014
|
|
|
First Quarter
of 2013
|
|
Revenues
|
|
$
|
257.5
|
|
|
|
100.0
|
%
|
|
$
|
231.5
|
|
|
|
100.0
|
%
|
Cost of sales
|
|
|
230.4
|
|
|
|
89.5
|
%
|
|
|
205.4
|
|
|
|
88.7
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Supply Chain operating margin
|
|
$
|
27.2
|
|
|
|
10.5
|
%
|
|
$
|
26.1
|
|
|
|
11.3
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The domestic supply chain operating margin increased $1.1 million, up 4.0% in the first quarter of 2014. This
increase was due primarily to higher volumes resulting from higher order counts at the store level.
14
As a percentage of supply chain revenues, the supply chain operating margin decreased 0.8
percentage points in the first quarter of 2014, due primarily to higher cheese, meat and other commodity costs, offset in part by the positive impact of higher volumes. Increases in certain food prices have a negative effect on the domestic supply
chain operating margin percent due to the fixed dollar margin earned by domestic supply chain on certain food items. Had the 2014 cheese prices been in effect during 2013, the domestic supply chain operating margin as a percentage of domestic supply
chain revenues would have been approximately 10.8% for the first quarter of 2013 versus the reported 11.3%. However, the dollar margins for those same periods would have been unaffected.
General and Administrative Expenses
General and administrative expenses decreased $1.4 million, down 2.6% in the first quarter of 2014. This decrease was due primarily to a $1.7
million pre-tax gain on the sale of 14 Company-owned stores, the non-recurrence of the 2013 $1.8 million reimbursement to our national advertising fund related to their historical costs to support the Companys gift card program, and a decrease
in non-cash compensation expense of $1.2 million. Offsetting these decreases were our ongoing expenditures on technology and international initiatives, which also increased general and administrative expenses during the quarter compared to the prior
year quarter.
Interest Expense
Interest expense decreased $0.6 million to $20.3 million in the first quarter of 2014. This decrease was due primarily to an average lower debt
balance during the first quarter of 2014 compared to the same period in 2013.
The Companys cash borrowing rate was flat at 5.3% for
both the first quarter of 2014 and the first quarter of 2013.
Provision for Income Taxes
Provision for income taxes increased $3.2 million to $23.4 million in the first quarter of 2014, due primarily to higher pre-tax income, offset
in part by a reversal of a deferred tax valuation allowance of approximately $0.3 million recognized in connection with the sale of 14 Company-owned stores during the quarter. The effective tax rate decreased 0.4 percentage points to 36.6% during
the first quarter of 2014, from 37.0% in the comparable period in 2013.
Liquidity and Capital Resources
As of March 23, 2014, we had working capital of $4.9 million, excluding restricted cash and cash equivalents of $108.6 million, and
including unrestricted cash and cash equivalents of $38.4 million. Historically, we have operated with minimal positive working capital, 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. We generally collect our receivables within three weeks from the date of the related sale, and we generally experience 30 to 40 inventory turns per year. In addition, our sales are not
typically seasonal, which further limits our working capital requirements. These factors, coupled with servicing our debt obligations, paying our quarterly dividend, investing in our business and repurchasing our common stock, all of which are
generally funded by cash flows from operations, also reduce our working capital amounts. As of March 23, 2014, we had approximately $45.6 million of restricted cash held for future principal and interest payments, $42.0 million of cash held as
collateral for outstanding letters of credit, $20.9 million of restricted cash held in a three month interest reserve as required by the related debt agreements and $0.1 million of other restricted cash, for a total of $108.6 million of restricted
cash and cash equivalents.
As of March 23, 2014, we had approximately $1.53 billion of long-term debt, of which $24.2 million was
classified as a current liability. As of March 23, 2014, we had $42.3 million of outstanding letters of credit and $57.7 million of available capacity under our $100.0 million variable funding notes. The letters of credit are primarily related
to our casualty insurance programs and supply chain center leases. Borrowings under the variable funding notes are available to fund our working capital requirements, capital expenditures and other general corporate purposes. However, our primary
source of liquidity is cash flows from operations and availability of borrowings under our variable funding notes.
15
During the first quarter of 2014, the Company repurchased and retired 221,481 shares of common
stock for a total of approximately $15.1 million. As of March 23, 2014, we had approximately $200.0 million remaining for future share repurchases under the current Board of Directors approved $200.0 million open market share repurchase
program. Subsequent to the first quarter of 2014 and through April 24, 2014, the Company repurchased and retired an additional 153,812 shares of common stock for a total of approximately $11.4 million. We continue to maintain our flexibility to
use ongoing excess cash flow generation and (subject to certain restrictions in the documents governing the variable funding notes) availability under the variable funding notes for, among other things, the repurchase of shares under the current
authorized program, the payment of dividends and other corporate uses.
During the first quarter of 2014, the Company paid approximately
$11.1 million of common stock dividends. Additionally, during the first quarter of 2014, the Companys Board of Directors declared a $0.25 per share quarterly dividend on its outstanding common stock. The Company had approximately $14.5 million
accrued for common stock dividends at March 23, 2014. Subsequent to the first quarter, on April 29, 2014, the Companys Board of Directors declared a $0.25 per share quarterly dividend for shareholders of record as of June 13,
2014 to be paid on June 30, 2014.
During the first quarter of 2014, we experienced strong increases in both domestic and
international same store sales versus the comparable period in the prior year. Additionally, our international business continued to grow store counts in the first quarter of 2014. These factors have contributed to our continued ability to generate
positive operating cash flows. We expect to use our unrestricted cash and cash equivalents, cash flows from operations and available borrowings under the variable funding notes to, among other things, fund working capital requirements, invest in our
core business, service our indebtedness, pay dividends and repurchase our common stock. We have historically funded our working capital requirements, capital expenditures, debt repayments and repurchases of common stock primarily from our cash flows
from operations and, when necessary, our available borrowings under variable funding note facilities. The Company believes its current unrestricted cash and cash equivalents balance and its expected cash flows from operations will be sufficient to
fund operations for at least the next twelve months. We did not have any material commitments for capital expenditures as of March 23, 2014.
Cash provided by operating activities was $36.2 million in the first quarter of 2014 and $47.6 million in the first quarter of 2013. The $11.4
million decrease was due primarily to a $3.9 million decrease in net income, excluding non-cash adjustments versus the prior year period, as non-cash adjustments related to deferred tax assets and the tax benefit of equity instruments more than
offset our improved operating performance. Cash provided by operating activities was also negatively impacted by a $7.5 million net change in operating assets and liabilities, due primarily to the timing of payments of current operating liabilities.
Cash provided by investing activities was $13.9 million in the first quarter of 2014 and cash used in investing activities was $4.3
million in the first quarter of 2013. The $18.2 million change was due primarily to an $18.2 million change in restricted cash and cash equivalents mainly as a result of the payment of the third quarter 2013 dividend that was included as restricted
cash at the end of fiscal 2013.
Cash used in financing activities was $26.2 million in the first quarter of 2014 and $23.1 million in the
first quarter of 2013. The $3.1 million increase was due primarily to a $10.7 million increase in common stock dividends and equivalent payments, offset by a $2.9 million decrease in cash used to repurchase shares of the Companys common stock
versus the first quarter of 2013.
16
Based upon the current level of operations and anticipated growth, we believe that the cash
generated from operations, our current unrestricted cash and cash equivalents and amounts available under our variable funding notes will be adequate to meet our anticipated debt service requirements, capital expenditures and working capital needs
for at least the next twelve months. Our ability to continue to fund these items and continue to reduce debt could be adversely affected by the occurrence of any of the events described under Risk Factors in our filings with the
Securities and Exchange Commission. 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 variable funding notes or otherwise to enable us to
service our indebtedness, or to make anticipated capital expenditures. Our future operating performance and our ability to service, extend or refinance the fixed rate notes and to service, extend or refinance the variable funding notes will be
subject to future economic conditions and to financial, business and other factors, many of which are beyond our control.
Forward-Looking Statements
This filing contains forward-looking statements. You can identify forward-looking statements because they contain words such as
believes, expects, may, will, should, seeks, approximately, intends, plans, estimates, or anticipates or similar
expressions that concern our strategy, plans or intentions. Forward-looking statements relating to our anticipated profitability, estimates in same store sales growth, the growth of our international business, ability to service our indebtedness,
our future cash flows, our operating performance, trends in our business and other descriptions of future events reflect the Companys 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 could cause actual results to differ materially include: the
level of and our ability to refinance our long-term and other indebtedness; the uncertainties relating to litigation; consumer preferences, spending patterns and demographic trends; the effectiveness of our advertising, operations and promotional
initiatives; the strength of our brand in the markets in which we compete; our ability to retain key personnel; new product and concept developments by us, and other food-industry competitors; the ongoing level of profitability of our franchisees;
our ability and that of our franchisees to open new restaurants and keep existing restaurants in operation; changes in food prices, particularly cheese, labor, utilities, insurance, employee benefits and other operating costs; the impact that
widespread illness or general health concerns may have on our business and the economy of the countries where we operate; severe weather conditions and natural disasters; changes in our effective tax rate; changes in foreign currency exchange rates;
changes in government legislation and regulations; adequacy of our insurance coverage; costs related to future financings; our ability and that of our franchisees to successfully operate in the current credit environment; changes in the level of
consumer spending given the general economic conditions including interest rates, energy prices and weak consumer confidence; availability of borrowings under our variable funding notes and our letters of credit; and changes in accounting policies.
Important factors that could cause actual results to differ materially from our expectations are more fully described in our other filings with the Securities and Exchange Commission, including under the section headed Risk Factors in
our annual report on Form 10-K. These forward-looking statements speak only as of the date of this filing, and you should not rely on such statements as representing the views of the Company as of any subsequent date. Except as required by
applicable securities law, we do not undertake to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.
17