Item 1. Financial Statements.
Dominos Pizza, Inc. and Subsidiaries
Condensed Consolidated Balance Sheets
(Unaudited)
|
|
|
|
|
|
|
|
|
(In thousands)
|
|
June 19, 2016
|
|
|
January 3, 2016
(Note)
|
|
Assets
|
|
|
|
|
|
|
|
|
Current assets:
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
$
|
22,305
|
|
|
$
|
133,449
|
|
Restricted cash and cash equivalents
|
|
|
107,435
|
|
|
|
180,940
|
|
Accounts receivable
|
|
|
132,533
|
|
|
|
131,582
|
|
Inventories
|
|
|
36,473
|
|
|
|
36,861
|
|
Prepaid expenses and other
|
|
|
42,678
|
|
|
|
20,646
|
|
Advertising fund assets, restricted
|
|
|
109,025
|
|
|
|
99,159
|
|
|
|
|
|
|
|
|
|
|
Total current assets
|
|
|
450,449
|
|
|
|
602,637
|
|
|
|
|
|
|
|
|
|
|
Property, plant and equipment:
|
|
|
|
|
|
|
|
|
Land and buildings
|
|
|
29,063
|
|
|
|
29,064
|
|
Leasehold and other improvements
|
|
|
115,172
|
|
|
|
111,071
|
|
Equipment
|
|
|
195,359
|
|
|
|
186,405
|
|
Construction in progress
|
|
|
6,141
|
|
|
|
9,633
|
|
|
|
|
|
|
|
|
|
|
|
|
|
345,735
|
|
|
|
336,173
|
|
Accumulated depreciation and amortization
|
|
|
(213,763
|
)
|
|
|
(204,283
|
)
|
|
|
|
|
|
|
|
|
|
Property, plant and equipment, net
|
|
|
131,972
|
|
|
|
131,890
|
|
|
|
|
|
|
|
|
|
|
Other assets:
|
|
|
|
|
|
|
|
|
Goodwill
|
|
|
16,097
|
|
|
|
16,097
|
|
Capitalized software
|
|
|
34,426
|
|
|
|
28,505
|
|
Other assets
|
|
|
15,697
|
|
|
|
14,851
|
|
Deferred income taxes
|
|
|
3,637
|
|
|
|
5,865
|
|
|
|
|
|
|
|
|
|
|
Total other assets
|
|
|
69,857
|
|
|
|
65,318
|
|
|
|
|
|
|
|
|
|
|
Total assets
|
|
$
|
652,278
|
|
|
$
|
799,845
|
|
|
|
|
|
|
|
|
|
|
Liabilities and stockholders deficit
|
|
|
|
|
|
|
|
|
Current liabilities:
|
|
|
|
|
|
|
|
|
Current portion of long-term debt
|
|
$
|
48,870
|
|
|
$
|
59,333
|
|
Accounts payable
|
|
|
84,902
|
|
|
|
106,927
|
|
Dividends payable
|
|
|
18,815
|
|
|
|
557
|
|
Insurance reserves
|
|
|
18,495
|
|
|
|
17,597
|
|
Advertising fund liabilities
|
|
|
109,025
|
|
|
|
99,159
|
|
Other accrued liabilities
|
|
|
76,620
|
|
|
|
92,410
|
|
|
|
|
|
|
|
|
|
|
Total current liabilities
|
|
|
356,727
|
|
|
|
375,983
|
|
|
|
|
|
|
|
|
|
|
Long-term liabilities:
|
|
|
|
|
|
|
|
|
Long-term debt, less current portion
|
|
|
2,165,177
|
|
|
|
2,181,460
|
|
Insurance reserves
|
|
|
24,642
|
|
|
|
23,314
|
|
Other accrued liabilities
|
|
|
20,486
|
|
|
|
19,339
|
|
|
|
|
|
|
|
|
|
|
Total long-term liabilities
|
|
|
2,210,305
|
|
|
|
2,224,113
|
|
|
|
|
|
|
|
|
|
|
Stockholders deficit:
|
|
|
|
|
|
|
|
|
Common stock
|
|
|
483
|
|
|
|
498
|
|
Additional paid-in capital
|
|
|
93
|
|
|
|
6,942
|
|
Retained deficit
|
|
|
(1,912,755
|
)
|
|
|
(1,804,143
|
)
|
Accumulated other comprehensive loss
|
|
|
(2,575
|
)
|
|
|
(3,548
|
)
|
|
|
|
|
|
|
|
|
|
Total stockholders deficit
|
|
|
(1,914,754
|
)
|
|
|
(1,800,251
|
)
|
|
|
|
|
|
|
|
|
|
Total liabilities and stockholders deficit
|
|
$
|
652,278
|
|
|
$
|
799,845
|
|
|
|
|
|
|
|
|
|
|
Note: The balance sheet at January 3, 2016 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
|
|
|
Two Fiscal Quarters Ended
|
|
(In thousands, except per share data)
|
|
June 19,
2016
|
|
|
June 14,
2015
|
|
|
June 19,
2016
|
|
|
June 14,
2015
|
|
Revenues:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Domestic Company-owned stores
|
|
$
|
97,834
|
|
|
$
|
88,794
|
|
|
$
|
194,278
|
|
|
$
|
181,169
|
|
Domestic franchise
|
|
|
69,675
|
|
|
|
60,827
|
|
|
|
137,826
|
|
|
|
122,601
|
|
Supply chain
|
|
|
339,259
|
|
|
|
302,903
|
|
|
|
674,954
|
|
|
|
614,559
|
|
International franchise
|
|
|
40,573
|
|
|
|
36,098
|
|
|
|
79,459
|
|
|
|
72,320
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total revenues
|
|
|
547,341
|
|
|
|
488,622
|
|
|
|
1,086,517
|
|
|
|
990,649
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of sales:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Domestic Company-owned stores
|
|
|
73,795
|
|
|
|
66,082
|
|
|
|
146,550
|
|
|
|
134,234
|
|
Supply chain
|
|
|
301,708
|
|
|
|
269,868
|
|
|
|
600,912
|
|
|
|
546,677
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total cost of sales
|
|
|
375,503
|
|
|
|
335,950
|
|
|
|
747,462
|
|
|
|
680,911
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating margin
|
|
|
171,838
|
|
|
|
152,672
|
|
|
|
339,055
|
|
|
|
309,738
|
|
General and administrative
|
|
|
68,137
|
|
|
|
60,441
|
|
|
|
136,641
|
|
|
|
123,254
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from operations
|
|
|
103,701
|
|
|
|
92,231
|
|
|
|
202,414
|
|
|
|
186,484
|
|
Interest income
|
|
|
197
|
|
|
|
57
|
|
|
|
473
|
|
|
|
139
|
|
Interest expense
|
|
|
(25,206
|
)
|
|
|
(19,010
|
)
|
|
|
(51,353
|
)
|
|
|
(39,163
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income before provision for income taxes
|
|
|
78,692
|
|
|
|
73,278
|
|
|
|
151,534
|
|
|
|
147,460
|
|
Provision for income taxes
|
|
|
29,431
|
|
|
|
27,369
|
|
|
|
56,822
|
|
|
|
55,262
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
$
|
49,261
|
|
|
$
|
45,909
|
|
|
$
|
94,712
|
|
|
$
|
92,198
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings per share:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common stock - basic
|
|
$
|
1.00
|
|
|
$
|
0.84
|
|
|
$
|
1.92
|
|
|
$
|
1.68
|
|
Common stock - diluted
|
|
|
0.98
|
|
|
|
0.81
|
|
|
|
1.86
|
|
|
|
1.62
|
|
Dividends declared per share
|
|
$
|
0.38
|
|
|
$
|
0.31
|
|
|
$
|
0.76
|
|
|
$
|
0.62
|
|
See accompanying notes.
4
Dominos Pizza, Inc. and Subsidiaries
Consolidated Statements of Comprehensive Income
(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fiscal Quarter Ended
|
|
|
Two Fiscal Quarters Ended
|
|
(In thousands)
|
|
June 19,
2016
|
|
|
June 14,
2015
|
|
|
June 19,
2016
|
|
|
June 14,
2015
|
|
Net income
|
|
$
|
49,261
|
|
|
$
|
45,909
|
|
|
$
|
94,712
|
|
|
$
|
92,198
|
|
Other comprehensive income (loss), before tax:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Currency translation adjustment
|
|
|
456
|
|
|
|
77
|
|
|
|
1,113
|
|
|
|
(733
|
)
|
Tax attributes of items in other comprehensive income (loss):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Currency translation adjustment
|
|
|
(68
|
)
|
|
|
84
|
|
|
|
(140
|
)
|
|
|
465
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other comprehensive income (loss), net of tax
|
|
|
388
|
|
|
|
161
|
|
|
|
973
|
|
|
|
(268
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Comprehensive income
|
|
$
|
49,649
|
|
|
$
|
46,070
|
|
|
$
|
95,685
|
|
|
$
|
91,930
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
See accompanying notes.
5
Dominos Pizza, Inc. and Subsidiaries
Condensed Consolidated Statements of Cash Flows
(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
Two Fiscal Quarters Ended
|
|
(In thousands)
|
|
June 19,
2016
|
|
|
June 14,
2015
|
|
Cash flows from operating activities:
|
|
|
|
|
|
|
|
|
Net income
|
|
$
|
94,712
|
|
|
$
|
92,198
|
|
Adjustments to reconcile net income to net cash provided by operating activities:
|
|
|
|
|
|
|
|
|
Depreciation and amortization
|
|
|
16,756
|
|
|
|
15,028
|
|
Loss (gain) on sale/disposal of assets
|
|
|
247
|
|
|
|
(272
|
)
|
Amortization of debt issuance costs
|
|
|
3,133
|
|
|
|
2,550
|
|
Provision (benefit) for deferred income taxes
|
|
|
1,775
|
|
|
|
(1,964
|
)
|
Non-cash compensation expense
|
|
|
8,617
|
|
|
|
7,776
|
|
Tax impact from equity-based compensation
|
|
|
(34,852
|
)
|
|
|
(7,556
|
)
|
Other
|
|
|
16
|
|
|
|
(725
|
)
|
Changes in operating assets and liabilities
|
|
|
(20,951
|
)
|
|
|
(3,441
|
)
|
|
|
|
|
|
|
|
|
|
Net cash provided by operating activities
|
|
|
69,453
|
|
|
|
103,594
|
|
|
|
|
|
|
|
|
|
|
Cash flows from investing activities:
|
|
|
|
|
|
|
|
|
Capital expenditures
|
|
|
(25,045
|
)
|
|
|
(20,238
|
)
|
Proceeds from sale of assets
|
|
|
2,765
|
|
|
|
8,785
|
|
Changes in restricted cash
|
|
|
73,505
|
|
|
|
24,137
|
|
Other
|
|
|
(904
|
)
|
|
|
1,449
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by investing activities
|
|
|
50,321
|
|
|
|
14,133
|
|
|
|
|
|
|
|
|
|
|
Cash flows from financing activities:
|
|
|
|
|
|
|
|
|
Proceeds from issuance of long-term debt
|
|
|
10,000
|
|
|
|
|
|
Repayments of long-term debt and capital lease obligations
|
|
|
(39,878
|
)
|
|
|
(141
|
)
|
Proceeds from exercise of stock options
|
|
|
10,848
|
|
|
|
2,067
|
|
Tax impact from equity-based compensation
|
|
|
34,852
|
|
|
|
7,556
|
|
Purchases of common stock
|
|
|
(224,139
|
)
|
|
|
(97,634
|
)
|
Tax payments for restricted stock upon vesting
|
|
|
(3,036
|
)
|
|
|
(3,737
|
)
|
Payments of common stock dividends and equivalents
|
|
|
(19,099
|
)
|
|
|
(31,039
|
)
|
|
|
|
|
|
|
|
|
|
Net cash used in financing activities
|
|
|
(230,452
|
)
|
|
|
(122,928
|
)
|
|
|
|
|
|
|
|
|
|
Effect of exchange rate changes on cash and cash equivalents
|
|
|
(466
|
)
|
|
|
237
|
|
|
|
|
|
|
|
|
|
|
Change in cash and cash equivalents
|
|
|
(111,144
|
)
|
|
|
(4,964
|
)
|
Cash and cash equivalents, at beginning of period
|
|
|
133,449
|
|
|
|
30,855
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents, at end of period
|
|
$
|
22,305
|
|
|
$
|
25,891
|
|
|
|
|
|
|
|
|
|
|
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)
June 19, 2016
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 January 3, 2016 included in our annual
report on Form 10-K.
In the opinion of management, all adjustments, consisting of normal recurring items, considered necessary for a fair
statement have been included. Operating results for the fiscal quarter ended June 19, 2016 are not necessarily indicative of the results that may be expected for the fiscal year ending January 1, 2017.
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 June 19, 2016 and June 14, 2015
|
|
|
|
Domestic
Stores
|
|
|
Supply
Chain
|
|
|
International
Franchise
|
|
|
Intersegment
Revenues
|
|
|
Other
|
|
|
Total
|
|
Revenues
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2016
|
|
$
|
167,509
|
|
|
$
|
367,858
|
|
|
$
|
40,573
|
|
|
$
|
(28,599
|
)
|
|
$
|
|
|
|
$
|
547,341
|
|
2015
|
|
|
149,621
|
|
|
|
327,374
|
|
|
|
36,098
|
|
|
|
(24,471
|
)
|
|
|
|
|
|
|
488,622
|
|
Income from operations
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2016
|
|
$
|
58,731
|
|
|
$
|
29,299
|
|
|
$
|
32,204
|
|
|
|
N/A
|
|
|
$
|
(16,533
|
)
|
|
$
|
103,701
|
|
2015
|
|
|
52,723
|
|
|
|
26,012
|
|
|
|
29,569
|
|
|
|
N/A
|
|
|
|
(16,073
|
)
|
|
|
92,231
|
|
Segment Income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2016
|
|
$
|
60,936
|
|
|
$
|
31,682
|
|
|
$
|
32,238
|
|
|
|
N/A
|
|
|
$
|
(8,739
|
)
|
|
$
|
116,117
|
|
2015
|
|
|
54,279
|
|
|
|
28,315
|
|
|
|
29,509
|
|
|
|
N/A
|
|
|
|
(9,303
|
)
|
|
|
102,800
|
|
|
|
|
|
Two Fiscal Quarters Ended June 19, 2016 and June 14, 2015
|
|
|
|
Domestic
Stores
|
|
|
Supply
Chain
|
|
|
International
Franchise
|
|
|
Intersegment
Revenues
|
|
|
Other
|
|
|
Total
|
|
Revenues
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2016
|
|
$
|
332,104
|
|
|
$
|
730,377
|
|
|
$
|
79,459
|
|
|
$
|
(55,423
|
)
|
|
$
|
|
|
|
$
|
1,086,517
|
|
2015
|
|
|
303,770
|
|
|
|
665,130
|
|
|
|
72,320
|
|
|
|
(50,571
|
)
|
|
|
|
|
|
|
990,649
|
|
Income from operations
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2016
|
|
$
|
117,150
|
|
|
$
|
57,644
|
|
|
$
|
61,945
|
|
|
|
N/A
|
|
|
$
|
(34,325
|
)
|
|
$
|
202,414
|
|
2015
|
|
|
108,250
|
|
|
|
53,207
|
|
|
|
58,284
|
|
|
|
N/A
|
|
|
|
(33,257
|
)
|
|
|
186,484
|
|
Segment Income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2016
|
|
$
|
121,405
|
|
|
$
|
62,354
|
|
|
$
|
62,010
|
|
|
|
N/A
|
|
|
$
|
(17,735
|
)
|
|
$
|
228,034
|
|
2015
|
|
|
111,552
|
|
|
|
57,771
|
|
|
|
58,258
|
|
|
|
N/A
|
|
|
|
(18,565
|
)
|
|
|
209,016
|
|
7
The following table reconciles Total Segment Income to consolidated income before provision for income taxes.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fiscal Quarter Ended
|
|
|
Two Fiscal Quarters Ended
|
|
|
|
June 19,
2016
|
|
|
June 14,
2015
|
|
|
June 19,
2016
|
|
|
June 14,
2015
|
|
Total Segment Income
|
|
$
|
116,117
|
|
|
$
|
102,800
|
|
|
$
|
228,034
|
|
|
$
|
209,016
|
|
Depreciation and amortization
|
|
|
(8,535
|
)
|
|
|
(7,681
|
)
|
|
|
(16,756
|
)
|
|
|
(15,028
|
)
|
(Loss) gain on sale/disposal of assets
|
|
|
(161
|
)
|
|
|
422
|
|
|
|
(247
|
)
|
|
|
272
|
|
Non-cash compensation expense
|
|
|
(3,720
|
)
|
|
|
(3,310
|
)
|
|
|
(8,617
|
)
|
|
|
(7,776
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from operations
|
|
|
103,701
|
|
|
|
92,231
|
|
|
|
202,414
|
|
|
|
186,484
|
|
Interest income
|
|
|
197
|
|
|
|
57
|
|
|
|
473
|
|
|
|
139
|
|
Interest expense
|
|
|
(25,206
|
)
|
|
|
(19,010
|
)
|
|
|
(51,353
|
)
|
|
|
(39,163
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income before provision for income taxes
|
|
$
|
78,692
|
|
|
$
|
73,278
|
|
|
$
|
151,534
|
|
|
$
|
147,460
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3. Earnings Per Share
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fiscal Quarter Ended
|
|
|
Two Fiscal Quarters Ended
|
|
|
|
June 19,
2016
|
|
|
June 14,
2015
|
|
|
June 19,
2016
|
|
|
June 14,
2015
|
|
Net income available to common stockholders - basic and diluted
|
|
$
|
49,261
|
|
|
$
|
45,909
|
|
|
$
|
94,712
|
|
|
$
|
92,198
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic weighted average number of shares
|
|
|
49,213,330
|
|
|
|
54,833,094
|
|
|
|
49,455,412
|
|
|
|
55,020,404
|
|
Earnings per share - basic
|
|
$
|
1.00
|
|
|
$
|
0.84
|
|
|
$
|
1.92
|
|
|
$
|
1.68
|
|
Diluted weighted average number of shares
|
|
|
50,459,754
|
|
|
|
56,628,237
|
|
|
|
50,846,941
|
|
|
|
56,820,743
|
|
Earnings per share - diluted
|
|
$
|
0.98
|
|
|
$
|
0.81
|
|
|
$
|
1.86
|
|
|
$
|
1.62
|
|
The denominators used in calculating diluted earnings per share for common stock for the second quarter of
2016 and two fiscal quarters of 2016 do not include 216,690 options to purchase common stock, as the effect of including these options would have been anti-dilutive. The denominators used in calculating diluted earnings per share for the second
quarter of 2016 and two fiscal quarters of 2016 do not include 17,870 and 23,560 restricted performance shares, respectively, as the effect of including these shares would have been anti-dilutive. The denominators used in calculating diluted
earnings per share for common stock for the second quarter and two fiscal quarters of 2015 do not include 70,910 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 two fiscal quarters of 2016.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common Stock
|
|
|
Additional
Paid-in
Capital
|
|
|
Retained
Deficit
|
|
|
Accumulated
Other
Comprehensive
Loss
|
|
|
|
Shares
|
|
|
Amount
|
|
|
|
|
Balance at January 3, 2016
|
|
|
49,838,221
|
|
|
$
|
498
|
|
|
$
|
6,942
|
|
|
$
|
(1,804,143
|
)
|
|
$
|
(3,548
|
)
|
Net income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
94,712
|
|
|
|
|
|
Common stock dividends
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(37,330
|
)
|
|
|
|
|
Issuance of common stock, net
|
|
|
20,200
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Tax payments for restricted stock upon vesting
|
|
|
(24,947
|
)
|
|
|
|
|
|
|
(3,036
|
)
|
|
|
|
|
|
|
|
|
Purchases of common stock
|
|
|
(2,302,062
|
)
|
|
|
(23
|
)
|
|
|
(58,122
|
)
|
|
|
(165,994
|
)
|
|
|
|
|
Exercise of stock options
|
|
|
805,100
|
|
|
|
8
|
|
|
|
10,840
|
|
|
|
|
|
|
|
|
|
Tax impact from equity-based compensation
|
|
|
|
|
|
|
|
|
|
|
34,852
|
|
|
|
|
|
|
|
|
|
Non-cash compensation expense
|
|
|
|
|
|
|
|
|
|
|
8,617
|
|
|
|
|
|
|
|
|
|
Currency translation adjustment, net of tax
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
973
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at June 19, 2016
|
|
|
48,336,512
|
|
|
$
|
483
|
|
|
$
|
93
|
|
|
$
|
(1,912,755
|
)
|
|
$
|
(2,575
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
On March 14, 2016, the Company received and retired 456,936 shares of its common stock in connection with
the final settlement of its previously announced $600.0 million accelerated share repurchase (ASR) program. At the commencement of the program, in the fourth quarter of 2015, the Company paid $600.0 million to a counterparty and received
and retired a portion of the shares from the ASR program, based on the terms of the related ASR agreement.
8
5. Dividends
During the second quarter of 2016, on April 26, 2016, the Companys Board of Directors declared a $0.38 per share
quarterly dividend on its outstanding common stock for shareholders of record as of June 15, 2016 which was paid on June 30, 2016. The Company had approximately $18.8 million accrued for common stock dividends at June 19, 2016.
Subsequent to the second quarter, on July 20, 2016, the Companys Board of Directors declared a $0.38 per share quarterly dividend
on its outstanding common stock for shareholders of record as of September 15, 2016 to be paid on September 30, 2016.
6. Accumulated Other Comprehensive Loss
The approximately $2.6 million of accumulated other comprehensive loss at June 19, 2016 and the approximately $3.5
million of accumulated other comprehensive loss at January 3, 2016 represent currency translation adjustments, net of tax. There were no reclassifications out of accumulated other comprehensive loss to net income in the two fiscal quarters of
2016 or the two fiscal quarters of 2015.
7. Open Market Share Repurchase Program
During the first quarter of 2016, the Company received and retired 456,936 shares of its common stock in connection with the
final settlement of its previously announced $600.0 million accelerated share repurchase program. The Company did not repurchase any shares of its common stock under its Board of Directors approved open market share repurchase program in the first
quarter of 2016.
During the second quarter of 2016, the Company repurchased and retired 1,845,126 shares of its common stock under its
Board of Directors approved open market share repurchase program for a total of approximately $224.1 million. On May 25, 2016, the Board of Directors approved an increase to the Companys open market share repurchase program, so that the
Company had an aggregate of $250.0 million available for future share repurchases as of May 25, 2016. As of June 19, 2016, the end of the second quarter, the Company had a total remaining authorized amount for share repurchases of
approximately $225.2 million.
Subsequent to the second quarter of 2016, the Company repurchased and retired 85,020 shares for
approximately $10.8 million. As of July 14, 2016, the Company had $214.5 million remaining for future share repurchases under its Board of Directors approved open market share repurchase program.
During the second quarter of 2015, the Company repurchased and retired 637,587 shares of common stock for a total of approximately $68.1
million; during the two fiscal quarters of 2015, the Company repurchased and retired 928,464 shares of common stock for approximately $97.6 million.
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 June 19, 2016 and January 3, 2016:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
At June 19, 2016
|
|
|
|
|
|
|
Fair Value Estimated Using
|
|
|
|
Carrying
Amount
|
|
|
Level 1
Inputs
|
|
|
Level 2
Inputs
|
|
|
Level 3
Inputs
|
|
Cash equivalents
|
|
$
|
9,678
|
|
|
$
|
9,678
|
|
|
$
|
|
|
|
$
|
|
|
Restricted cash equivalents
|
|
|
70,263
|
|
|
|
70,263
|
|
|
|
|
|
|
|
|
|
Investments in marketable securities
|
|
|
7,110
|
|
|
|
7,110
|
|
|
|
|
|
|
|
|
|
9
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
At January 3, 2016
|
|
|
|
|
|
|
Fair Value Estimated Using
|
|
|
|
Carrying
Amount
|
|
|
Level 1
Inputs
|
|
|
Level 2
Inputs
|
|
|
Level 3
Inputs
|
|
Cash equivalents
|
|
$
|
108,766
|
|
|
$
|
108,766
|
|
|
$
|
|
|
|
$
|
|
|
Restricted cash equivalents
|
|
|
128,554
|
|
|
|
128,554
|
|
|
|
|
|
|
|
|
|
Investments in marketable securities
|
|
|
6,054
|
|
|
|
6,054
|
|
|
|
|
|
|
|
|
|
At June 19, 2016, management estimates that the approximately $929.4 million in principal amount of
outstanding fixed rate notes from its 2012 recapitalization had a fair value of approximately $964.8 million; and at January 3, 2016, management estimates that the approximately $962.7 million in principal amount of outstanding fixed rate notes
from its 2012 recapitalization had a fair value of approximately $991.6 million.
At June 19, 2016, management estimates that the
$497.5 million in principal amount of outstanding five-year fixed rate notes from its 2015 recapitalization had a fair value of approximately $504.5 million; and at January 3, 2016, management estimates that the $500.0 million in principal
amount of outstanding five-year fixed rate notes from its 2015 recapitalization had a fair value of approximately $489.5 million. At June 19, 2016, management estimates that the $796.0 million in principal amount of outstanding ten-year fixed
rate notes from its 2015 recapitalization had a fair value of approximately $812.7 million; and at January 3, 2016, management estimates that the $800.0 million in principal amount of outstanding ten-year fixed rate notes from its 2015
recapitalization had a fair value of approximately $781.6 million.
The fixed rate notes are classified as a Level 2 measurement, as the
Company estimates the fair value amount by using available market information. The Company obtained quotes from two separate brokerage firms that are knowledgeable about the Companys fixed rate notes and, at times, trade these notes. The
Company also performed its own internal analysis based on the information gathered from public markets, including information on notes that are similar to those of the Company. However, considerable judgment is required to interpret market data to
estimate fair value. Accordingly, the fair value estimates presented 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 values stated above.
9. Legal Matters
On February 14, 2011, Dominos Pizza LLC was named as a defendant in a lawsuit along with Fischler Enterprises of
C.F., Inc., a franchisee, and Jeffrey S. Kidd, the franchisees delivery driver, filed by Yvonne Wiederhold, the plaintiff, as Personal Representative of the Estate of Richard E. Wiederhold, deceased. The case involved a traffic accident in
which the franchisees delivery driver is alleged to have caused an accident involving a vehicle driven by Richard Wiederhold. Mr. Wiederhold sustained spinal injuries resulting in quadriplegia and passed away several months after the
accident. The jury returned a $10.1 million judgment for the plaintiff where the Company and Mr. Kidd were found to be 90% liable (after certain offsets and other deductions the final verdict was $8.9 million). In the second quarter of 2016,
the trial court ruled on all post-judgment motions and entered the judgment. The Company denies liability and is in the process of filing an appeal of the verdict on a variety of grounds.
On September 11, 2012, Dominos Pizza LLC was named as a defendant in a lawsuit along with MAC Pizza Management, Inc., a large
franchisee, and Joshua Balka, the franchisees delivery driver, filed by Raghurami Reddy, the plaintiff. The case involved a traffic accident in which the franchisees delivery driver collided with another vehicle, where the driver of the
other vehicle sustained head injuries and the passenger of the other vehicle sustained fatal injuries. The jury delivered a $32.0 million judgment for the plaintiff where the Company was found to be 60% liable. The Company denied liability and filed
an appeal of the verdict on a variety of grounds. In the first quarter of 2015, the appellate court reversed the trial courts decision and dismissed the claims against the Company. The plaintiff filed a Petition for Review with the
Supreme Court of the State of Texas. The Company filed opposition to the writ of review and asserted that the claims were appropriately dismissed by the Court of Appeals of the State of Texas. In the second quarter of 2016, the Texas Supreme
Court rejected the plaintiffs writ of certiorari, leaving the appellate courts favorable decision to stand.
10. Supplemental Disclosures of Cash Flow Information
The Company had non-cash investing activities related to accruals for capital expenditures of $0.7 million at June 19,
2016 and $1.1 million at June 14, 2015.
During the two fiscal quarters of 2015, the Company renewed the capital lease of a supply
chain center building and extended the term of the lease through August 2028. As a result of the new lease, the Company recorded non-cash financing activities of $3.4 million for the increase in capital lease assets and liabilities during the first
quarter of 2015.
10
11. New Accounting Pronouncements
In February 2016, the Financial Accounting Standards Board (FASB) issued Accounting Standard Update (ASU) 2016-02,
Leases
(Topic 842)
. ASU 2016-02 requires a lessee to recognize assets and liabilities on the balance sheet for leases with lease terms greater than 12 months. ASU 2016-02 is effective for fiscal years, and interim periods within those years, beginning
after December 15, 2018, and early adoption is permitted. The Company is currently assessing the impact of this ASU on its consolidated financial statements.
In March 2016, the FASB issued ASU 2016-04,
Liabilities Extinguishment of Liabilities (Subtopic 405-20): Recognition of Breakage for
Certain Prepaid Stored-Value Products
. ASU 2016-04 aligns recognition of the financial liabilities related to prepaid stored-value products (for example, gift cards) with Topic 606,
Revenues from Contracts with Customers
, for
non-financial liabilities. In general, these liabilities may be extinguished proportionately in earnings as redemptions occur, or when redemption is remote if issuers are not entitled to the unredeemed stored value. ASU 2016-04 is effective for
fiscal years, and interim periods within those years, beginning after December 15, 2017, and early adoption is permitted. The Company is currently assessing the impact of this ASU on its consolidated financial statements.
In March 2016, the FASB issued ASU 2016-09,
Compensation Stock Compensation (Topic 718): Improvements to Employee Share-Based
Payment Accounting
. ASU 2016-09 is intended to simplify several areas of accounting for share-based compensation arrangements, including the income tax impact, classification on the statement of cash flows and forfeitures. The update is
effective for fiscal years, and interim periods within those years, beginning after December 15, 2016, and early adoption is permitted. The Company is currently assessing the impact of this ASU on its consolidated financial statements.
In March 2016, the Financial Accounting Standards Board (FASB) issued Accounting Standard Update (ASU) 2016-08,
Revenue from Contracts with
Customers (Topic 606): Principal versus Agent Considerations (Reporting Revenue Gross versus Net)
. In April 2016, the FASB issued ASU 2016-10,
Revenue from Contracts with Customers (Topic 606): Identifying Performance Obligations and
Licensing
. In May 2016, the FASB issued ASU 2016-12,
Revenue from Contracts with Customers (Topic 606): Narrow-Scope Improvements and Practical Expedients
and ASU 2016-11,
Revenue Recognition (Topic 605) and Derivatives and Hedging
(Topic 815): Rescission of SEC Guidance Because of Accounting Standards Updates 2014-09 and 2014-16 Pursuant to Staff Announcements at the March 3, 2016 EITF Meeting
. These amendments provide additional clarification and implementation
guidance on the previously issued ASU 2014-09,
Revenue from Contracts with Customers (Topic 606)
.
The amendments in ASU 2016-08
clarify how an entity should identify the specified good or service for the principal versus agent evaluation and how it should apply the control principle to certain types of arrangements. ASU 2016-10 clarifies the following two aspects of ASU
2014-09: identifying performance obligations and licensing implementation guidance. ASU 2016-11 rescinds several SEC Staff Announcements that are codified in Topic 605, including, among other items, guidance relating to accounting for consideration
given by a vendor to a customer, as well as accounting for shipping and handling fees and freight services.
ASU 2016-12
provides clarification to Topic 606 on how to assess collectability, present sales
tax, treat noncash consideration, and account for completed and modified contracts at the time of transition. In addition, ASU 2016-12 clarifies that an entity retrospectively applying the guidance in Topic 606 is not required to disclose the effect
of the accounting change in the period of adoption. The effective date and transition requirements for these amendments are the same as the effective date and transition requirements of ASU 2014-09, which is effective for fiscal years, and for
interim periods within those years, beginning after December 15, 2017. The Company is currently assessing the impact of these ASUs on its consolidated financial statements.
11
Ite
m 2. Managements Discussion and Analysis of Financial Condition
and Results of Operations.
(Unaudited; tabular amounts in millions, except percentages and store data)
The 2016 and 2015 second quarters referenced herein represent the twelve-week periods ended June 19, 2016 and June 14, 2015. The 2016
and 2015 two fiscal quarters referenced herein represent the twenty-four-week periods ended June 19, 2016 and June 14, 2015.
Overview
Dominos is the second largest pizza restaurant chain in the world, with more than 12,900 locations in over 80 markets.
Founded in 1960, our roots are in convenient pizza delivery, while a significant amount of our sales also come from carryout customers. Dominos generates revenues and earnings by charging royalties to our independent franchisees. The Company
also generates revenues and earnings by selling food, equipment and supplies to franchisees primarily in the U.S. and Canada, and by operating a number of our own stores. Franchisees profit by selling pizza and other complementary items to their
local customers. In our international markets, we generally grant geographical rights to the Dominos Pizza
®
brand to master franchisees. These master franchisees are charged with
developing their geographical area, and they profit by sub-franchising and selling ingredients and equipment to those sub-franchisees, as well as by running pizza stores. Everyone in the system can benefit, including the end consumer, who can feed
their family Dominos menu items conveniently and economically.
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 extensive advertising through various media channels, the impact of technological innovation and digital ordering, our ability to execute our strong and proven business
model and the overall global economic environment.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Second Quarter
of 2016
|
|
|
Second Quarter
of 2015
|
|
|
Two Fiscal
Quarters
of 2016
|
|
|
Two Fiscal
Quarters
of 2015
|
|
Global retail sales growth
|
|
|
+11.7
|
%
|
|
|
|
|
|
|
+7.5
|
%
|
|
|
|
|
|
|
+9.5
|
%
|
|
|
|
|
|
|
+8.9
|
%
|
|
|
|
|
Same store sales growth:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Domestic Company-owned stores
|
|
|
+9.1
|
%
|
|
|
|
|
|
|
+12.5
|
%
|
|
|
|
|
|
|
+6.5
|
%
|
|
|
|
|
|
|
+14.2
|
%
|
|
|
|
|
Domestic franchise stores
|
|
|
+9.8
|
%
|
|
|
|
|
|
|
+12.8
|
%
|
|
|
|
|
|
|
+8.2
|
%
|
|
|
|
|
|
|
+13.6
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Domestic stores
|
|
|
+9.7
|
%
|
|
|
|
|
|
|
+12.8
|
%
|
|
|
|
|
|
|
+8.0
|
%
|
|
|
|
|
|
|
+13.7
|
%
|
|
|
|
|
International stores (excluding foreign currency impact)
|
|
|
+7.1
|
%
|
|
|
|
|
|
|
+6.7
|
%
|
|
|
|
|
|
|
+7.5
|
%
|
|
|
|
|
|
|
+7.2
|
%
|
|
|
|
|
Store counts (at end of period):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Domestic Company-owned stores
|
|
|
386
|
|
|
|
|
|
|
|
376
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Domestic franchise stores
|
|
|
4,859
|
|
|
|
|
|
|
|
4,722
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Domestic stores
|
|
|
5,245
|
|
|
|
|
|
|
|
5,098
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
International stores
|
|
|
7,691
|
|
|
|
|
|
|
|
6,827
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total stores
|
|
|
12,936
|
|
|
|
|
|
|
|
11,925
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income statement data:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total revenues
|
|
$
|
547.3
|
|
|
|
100.0
|
%
|
|
$
|
488.6
|
|
|
|
100.0
|
%
|
|
$
|
1,086.5
|
|
|
|
100.0
|
%
|
|
$
|
990.6
|
|
|
|
100.0
|
%
|
Cost of sales
|
|
|
375.5
|
|
|
|
68.6
|
%
|
|
|
336.0
|
|
|
|
68.8
|
%
|
|
|
747.5
|
|
|
|
68.8
|
%
|
|
|
680.9
|
|
|
|
68.7
|
%
|
General and administrative
|
|
|
68.1
|
|
|
|
12.4
|
%
|
|
|
60.4
|
|
|
|
12.3
|
%
|
|
|
136.6
|
|
|
|
12.6
|
%
|
|
|
123.3
|
|
|
|
12.5
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from operations
|
|
|
103.7
|
|
|
|
19.0
|
%
|
|
|
92.2
|
|
|
|
18.9
|
%
|
|
|
202.4
|
|
|
|
18.6
|
%
|
|
|
186.5
|
|
|
|
18.8
|
%
|
Interest expense, net
|
|
|
(25.0
|
)
|
|
|
(4.6
|
)%
|
|
|
(19.0
|
)
|
|
|
(3.9
|
)%
|
|
|
(50.9
|
)
|
|
|
(4.7
|
)%
|
|
|
(39.0
|
)
|
|
|
(3.9
|
)%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income before provision for income taxes
|
|
|
78.7
|
|
|
|
14.4
|
%
|
|
|
73.3
|
|
|
|
15.0
|
%
|
|
|
151.5
|
|
|
|
13.9
|
%
|
|
|
147.5
|
|
|
|
14.9
|
%
|
Provision for income taxes
|
|
|
29.4
|
|
|
|
5.4
|
%
|
|
|
27.4
|
|
|
|
5.6
|
%
|
|
|
56.8
|
|
|
|
5.2
|
%
|
|
|
55.3
|
|
|
|
5.6
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
$
|
49.3
|
|
|
|
9.0
|
%
|
|
$
|
45.9
|
|
|
|
9.4
|
%
|
|
$
|
94.7
|
|
|
|
8.7
|
%
|
|
$
|
92.2
|
|
|
|
9.3
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
During the second quarter and two fiscal quarters of 2016, we sustained our strong domestic same store sales
performance and also continued our solid growth in international same store sales. Our Dominos Piece of the Pie Rewards
TM
loyalty program contributed significantly to our domestic same store
sales performance. Additionally, we remained focused on growing online ordering and improving the digital customer experience through our technology platforms.
12
We also continued our global expansion with the opening of 244 net new stores in the second
quarter of 2016, bringing our year-to date total to 406 stores. We opened 215 net new stores internationally and 29 net new stores domestically during the second quarter of 2016. Overall, we believe this global store growth, along with our strong
sales, emphasis on technology, operations, and marketing initiatives have combined to strengthen our brand.
Global retail sales, which
are total retail sales at franchise and Company-owned stores worldwide, increased 11.7% in the second quarter of 2016 and 9.5% in the two fiscal quarters of 2016. These increases were 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. The impact of foreign currency exchange rates partially offset these increases, resulting from a generally stronger U.S. dollar when compared to the
currencies in the international markets in which we compete. Domestic same store sales growth reflected the sustained positive sales trends and the continued success of our products, marketing and technology platforms. International same store sales
growth also reflected continued strong performance.
Total revenues increased $58.7 million, or 12.0%, in the second quarter of 2016, and
$95.9 million, or 9.7% in the two fiscal quarters of 2016. These increases were due primarily to higher supply chain volumes resulting from order and store count growth, as well as higher Company-owned store, domestic franchise and international
franchise revenues resulting from same store sales and store count growth. These increases were offset in part by the negative impact of changes in foreign currency exchange rates on international franchise royalties and international supply chain
revenues. These changes in revenues are described in more detail below.
Income from operations increased $11.5 million, or 12.4%, in the
second quarter of 2016, and $15.9 million, or 8.5%, in the two fiscal quarters of 2016. These increases were driven by higher royalty revenues from domestic and international franchise stores, as well as increased supply chain volumes. Higher
general and administrative expenses partially offset these increases.
Net income increased $3.4 million, or 7.3%, in the second quarter
of 2016, and $2.5 million, or 2.7%, in the two fiscal quarters of 2016. These increases were driven by higher income from operations, as noted above. Higher interest expense as a result of our recapitalization in 2015 partially offset these
increases.
Revenues
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Second Quarter
of 2016
|
|
|
Second Quarter
of 2015
|
|
|
Two Fiscal
Quarters
of 2016
|
|
|
Two Fiscal
Quarters
of 2015
|
|
Domestic Company-owned stores
|
|
$
|
97.8
|
|
|
|
17.9
|
%
|
|
$
|
88.8
|
|
|
|
18.2
|
%
|
|
$
|
194.3
|
|
|
|
17.9
|
%
|
|
$
|
181.2
|
|
|
|
18.3
|
%
|
Domestic franchise
|
|
|
69.7
|
|
|
|
12.7
|
%
|
|
|
60.8
|
|
|
|
12.4
|
%
|
|
|
137.8
|
|
|
|
12.7
|
%
|
|
|
122.6
|
|
|
|
12.4
|
%
|
Supply chain
|
|
|
339.3
|
|
|
|
62.0
|
%
|
|
|
302.9
|
|
|
|
62.0
|
%
|
|
|
675.0
|
|
|
|
62.1
|
%
|
|
|
614.6
|
|
|
|
62.0
|
%
|
International franchise
|
|
|
40.6
|
|
|
|
7.4
|
%
|
|
|
36.1
|
|
|
|
7.4
|
%
|
|
|
79.5
|
|
|
|
7.3
|
%
|
|
|
72.3
|
|
|
|
7.3
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total revenues
|
|
$
|
547.3
|
|
|
|
100.0
|
%
|
|
$
|
488.6
|
|
|
|
100.0
|
%
|
|
$
|
1,086.5
|
|
|
|
100.0
|
%
|
|
$
|
990.6
|
|
|
|
100.0
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenues primarily consist of retail sales from our Company-owned stores, royalties and fees from our domestic
and international franchised stores and sales of food, equipment and supplies from our supply chain centers to substantially all of our domestic franchised stores and certain international franchised stores. Company-owned store and franchised store
revenues may vary from period to period due to changes in store count mix. Supply chain revenues may vary significantly from period to period as a result of fluctuations in commodity prices as well as the mix of products we sell.
Domestic Stores Revenues
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Second Quarter
of 2016
|
|
|
Second Quarter
of 2015
|
|
|
Two Fiscal
Quarters of 2016
|
|
|
Two Fiscal
Quarters
of 2015
|
|
Domestic Company-owned stores
|
|
$
|
97.8
|
|
|
|
58.4
|
%
|
|
$
|
88.8
|
|
|
|
59.3
|
%
|
|
$
|
194.3
|
|
|
|
58.5
|
%
|
|
$
|
181.2
|
|
|
|
59.6
|
%
|
Domestic franchise
|
|
|
69.7
|
|
|
|
41.6
|
%
|
|
|
60.8
|
|
|
|
40.7
|
%
|
|
|
137.8
|
|
|
|
41.5
|
%
|
|
|
122.6
|
|
|
|
40.4
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Domestic stores
|
|
$
|
167.5
|
|
|
|
100.0
|
%
|
|
$
|
149.6
|
|
|
|
100.0
|
%
|
|
$
|
332.1
|
|
|
|
100.0
|
%
|
|
$
|
303.8
|
|
|
|
100.0
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Domestic stores revenues increased $17.9 million, or 12.0%, in the second quarter of 2016, and $28.3 million,
or 9.3%, in the two fiscal quarters of 2016. These increases were driven by 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.
13
Domestic Company-Owned Stores
Revenues from domestic Company-owned store operations increased $9.0 million, or 10.2%, in the second quarter of 2016, and $13.1 million, or
7.2%, in the two fiscal quarters of 2016. Domestic Company-owned same store sales increased 9.1% in the second quarter of 2016, and 6.5% in the two fiscal quarters of 2016. This compared to an increase of 12.5% in the second quarter of 2015 and
14.2% in the two fiscal quarters of 2015. An increase in the average number of Company-owned stores open during the second quarter and two fiscal quarters of 2016 also contributed, to a lesser extent.
Domestic Franchise
Revenues from
domestic franchise operations increased $8.9 million, or 14.5%, in the second quarter of 2016, and $15.2 million, or 12.4%, in the two fiscal quarters of 2016. These increases were driven by growth of 9.8% in same store sales in the second quarter
of 2016 and an 8.2% increase in the two fiscal quarters of 2016. This compared to an increase of 12.8% in the second quarter of 2015, and 13.6% in the two fiscal quarters of 2015. An increase in the average number of domestic franchised stores open
during the second quarter and two fiscal quarters of 2016 also contributed, to a lesser extent. Revenues further benefited from fees paid by franchisees for technology initiatives.
Supply Chain Revenues
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Second Quarter
of 2016
|
|
|
Second Quarter
of 2015
|
|
|
Two Fiscal
Quarters
of 2016
|
|
|
Two Fiscal
Quarters
of 2015
|
|
Domestic supply chain
|
|
$
|
309.4
|
|
|
|
91.2
|
%
|
|
$
|
276.9
|
|
|
|
91.4
|
%
|
|
$
|
617.0
|
|
|
|
91.4
|
%
|
|
$
|
563.0
|
|
|
|
91.6
|
%
|
International supply chain
|
|
|
29.9
|
|
|
|
8.8
|
%
|
|
|
26.0
|
|
|
|
8.6
|
%
|
|
|
58.0
|
|
|
|
8.6
|
%
|
|
|
51.6
|
|
|
|
8.4
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total supply chain
|
|
$
|
339.3
|
|
|
|
100.0
|
%
|
|
$
|
302.9
|
|
|
|
100.0
|
%
|
|
$
|
675.0
|
|
|
|
100.0
|
%
|
|
$
|
614.6
|
|
|
|
100.0
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
In fiscal 2016, the Company began managing the Alaska and Hawaii supply chain centers as part of its domestic
supply chain business. Prior to fiscal 2016, these centers were managed as part of the Companys international supply chain business. Revenues from these supply chain centers are included in the second quarter of 2016 and the second quarter of
2015 domestic supply chain revenues, as well as the two fiscal quarters of 2016 and the two fiscal quarters of 2015 in the table above.
Domestic
Supply Chain
Domestic supply chain revenues increased $32.5 million, or 11.7%, in the second quarter of 2016, and $54.0 million,
or 9.6%, in the two fiscal quarters of 2016. These increases were primarily attributable to higher volumes from increased order counts at the store level as well as store count growth. Our commodity market basket remained relatively flat during the
second quarter of 2016 and two fiscal quarters of 2016, as decreases in cheese costs were offset by higher meat prices. We estimate that the lower cheese block price resulted in an approximate $0.7 million decrease in domestic supply chain revenues
during the second quarter of 2016, and an approximate $1.1 million decrease in the two fiscal quarters of 2016.
International Supply Chain
Revenues from international supply chain operations increased $3.9 million, or 14.9%, in the second quarter of 2016, and $6.4
million, or 12.5%, in the two fiscal quarters of 2016. The increases resulted primarily from higher volumes, but were partially offset by an approximate $1.3 million negative impact of foreign currency exchange rates in the second quarter of 2016
and an approximate $4.1 million negative impact of foreign currency exchange rates in the two fiscal quarters of 2016.
International Franchise
Revenues
Revenues from international franchise operations increased $4.5 million, or 12.4%, in the second quarter of 2016, and
$7.2 million, or 9.9%, in the two fiscal quarters of 2016. These increases were due to higher same store sales and an increase in the average number of international stores open during each period. These increases were offset in part by the negative
impact of changes in foreign currency exchange rates of approximately $1.8 million in the second quarter of 2016, and $4.7 million in the two fiscal quarters of 2016. Excluding the impact of foreign currency exchange rates, same store sales
increased 7.1% in the second quarter of 2016, and 7.5% in the two fiscal quarters of 2016. This compared to an increase of 6.7% in the second quarter of 2015, and 7.2% in the two fiscal quarters of 2015. Including the impact of foreign currency in
the second quarter and two fiscal quarters of 2016, same store sales increased 2.8% from the second quarter of 2015, and 1.8% from the two fiscal quarters of 2015.
14
Cost of Sales / Operating Margin
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Second Quarter
of 2016
|
|
|
Second Quarter
of 2015
|
|
|
Two Fiscal
Quarters
of 2016
|
|
|
Two Fiscal
Quarters
of 2015
|
|
Consolidated revenues
|
|
$
|
547.3
|
|
|
|
100.0
|
%
|
|
$
|
488.6
|
|
|
|
100.0
|
%
|
|
$
|
1,086.5
|
|
|
|
100.0
|
%
|
|
$
|
990.6
|
|
|
|
100.0
|
%
|
Consolidated cost of sales
|
|
|
375.5
|
|
|
|
68.6
|
%
|
|
|
336.0
|
|
|
|
68.8
|
%
|
|
|
747.5
|
|
|
|
68.8
|
%
|
|
|
680.9
|
|
|
|
68.7
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consolidated operating margin
|
|
$
|
171.8
|
|
|
|
31.4
|
%
|
|
$
|
152.7
|
|
|
|
31.2
|
%
|
|
$
|
339.1
|
|
|
|
31.2
|
%
|
|
$
|
309.7
|
|
|
|
31.3
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of sales consists primarily of Company-owned store and supply chain costs incurred to generate related
revenues. Components of consolidated cost of sales primarily include food, labor, occupancy, and delivery costs.
Consolidated operating
margin (which we define as revenues less cost of sales) increased $19.1 million, or 12.6%, in the second quarter of 2016, and $29.4 million, or 9.5%, in the two fiscal quarters of 2016. Higher domestic and international franchise revenues as well as
higher supply chain volumes contributed to the increased operating margin in the second quarter of 2016 and the two fiscal quarters of 2016. Franchise revenues do not have a cost of sales component, so changes in franchise revenues have a
disproportionate effect on the operating margin.
As a percentage of revenues, the operating margin increased 0.2 percentage points in the
second quarter of 2016, and decreased 0.1 percentage points in the two fiscal quarters of 2016. In the second quarter of 2016, a higher percentage of international and domestic royalty revenue positively impacted the margin. This increase was offset
in part by lower Company-owned store operating margins.
In the two fiscal quarters of 2016, lower Company-owned store operating margins
negatively impacted the margin. This decrease was partially offset by a higher percentage of international and domestic royalty revenue.
Domestic Company-Owned Stores Operating Margin
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Second Quarter
of 2016
|
|
|
Second Quarter
of 2015
|
|
|
Two Fiscal
Quarters
of 2016
|
|
|
Two Fiscal
Quarters
of 2015
|
|
Revenues
|
|
$
|
97.8
|
|
|
|
100.0
|
%
|
|
$
|
88.8
|
|
|
|
100.0
|
%
|
|
$
|
194.3
|
|
|
|
100.0
|
%
|
|
$
|
181.2
|
|
|
|
100.0
|
%
|
Cost of sales
|
|
|
73.8
|
|
|
|
75.4
|
%
|
|
|
66.1
|
|
|
|
74.4
|
%
|
|
|
146.6
|
|
|
|
75.4
|
%
|
|
|
134.2
|
|
|
|
74.1
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Store operating margin
|
|
$
|
24.0
|
|
|
|
24.6
|
%
|
|
$
|
22.7
|
|
|
|
25.6
|
%
|
|
$
|
47.7
|
|
|
|
24.6
|
%
|
|
$
|
46.9
|
|
|
|
25.9
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The domestic Company-owned store operating margin (which does not include certain store-level costs such as
royalties and advertising) increased $1.3 million, or 5.8%, in the second quarter of 2016. The operating margin also increased $0.8 million, or 1.7%, in the two fiscal quarters of 2016. These increases were due primarily to higher same store sales
and lower delivery expenses. Higher food costs, labor rates, transaction-related expenses, and insurance expenses partially offset these positive factors.
As a percentage of store revenues, the store operating margin decreased 1.0 percentage points in the second quarter of 2016, and 1.3
percentage points in the two fiscal quarters, as discussed in more detail below.
|
|
|
Food costs increased 0.6 percentage points to 26.6% in second quarter of 2016, and 0.1 percentage points to 26.4% in the two fiscal quarters of 2016. The increase in the second quarter of 2016 was due primarily to
promotional activities.
|
|
|
|
Labor and related costs increased 0.1 percentage points in the second quarter of 2016 to 29.4%, and 0.7 percentage points in the two fiscal quarters of 2016 to 29.8%. These increases were due to higher wages resulting
primarily from an increase in labor rates in certain markets.
|
|
|
|
Insurance costs increased 0.5 percentage points to 3.4% in the second quarter of 2016, and 0.4 percentage points to 3.2% in the two fiscal quarters of 2016. These increases were driven by increased frequency and
severity of casualty insurance claims.
|
|
|
|
Transaction-related expenses increased 0.4 percentage points to 2.1% in the second quarter of 2016, and 0.4 percentage points to 2.1% in the two fiscal quarters of 2016.
|
|
|
|
Delivery expenses decreased 0.3 percentage points to 3.4% in the second quarter of 2016, and 0.4 percentage points to 3.4% in the two fiscal quarters of 2016, due primarily to lower fuel prices.
|
15
Supply Chain Operating Margin
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Second Quarter
of 2016
|
|
|
Second Quarter
of 2015
|
|
|
Two Fiscal
Quarters
of 2016
|
|
|
Two Fiscal
Quarters
of 2015
|
|
Revenues
|
|
$
|
339.3
|
|
|
|
100.0
|
%
|
|
$
|
302.9
|
|
|
|
100.0
|
%
|
|
$
|
675.0
|
|
|
|
100.0
|
%
|
|
$
|
614.6
|
|
|
|
100.0
|
%
|
Cost of sales
|
|
|
301.7
|
|
|
|
88.9
|
%
|
|
|
269.9
|
|
|
|
89.1
|
%
|
|
|
600.9
|
|
|
|
89.0
|
%
|
|
|
546.7
|
|
|
|
89.0
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Supply chain operating margin
|
|
$
|
37.6
|
|
|
|
11.1
|
%
|
|
$
|
33.0
|
|
|
|
10.9
|
%
|
|
$
|
74.0
|
|
|
|
11.0
|
%
|
|
$
|
67.9
|
|
|
|
11.0
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The supply chain operating margin increased $4.6 million, or 13.7%, in the second quarter of 2016, and $6.1
million, or 9.1%, in the two fiscal quarters of 2016. These increases were driven by higher volumes from store count growth and increased store order counts.
As a percentage of supply chain revenues, the supply chain operating margin increased 0.2 percentage points in the second quarter of 2016, and
remained flat in the two fiscal quarters of 2016. In both the second quarter of 2016 and the two fiscal quarters of 2016, higher volumes and lower fuel costs benefited the operating margin while higher labor and casualty insurance claims negatively
impacted the operating margin. Food costs as a percentage of supply chain revenues decreased in the second quarter of 2016. Our commodity market basket remained relatively flat during the second quarter of 2016 and two fiscal quarters of 2016, as
decreases in cheese costs were offset by higher meat prices. Decreases in certain commodity prices have a positive effect on the supply chain operating margin percentage due to the fixed dollar margin earned by supply chain on certain food items.
The cheese block price per pound averaged $1.40 in the second quarter of 2016 as compared to $1.59 in the second quarter of 2015. The cheese block price per pound averaged $1.43 in the two fiscal quarters of 2016 as compared to $1.57 in the two
fiscal quarters of 2015. Changes in our U.S. cheese prices decreased both revenues and costs by $0.7 million in the second quarter of 2016 and by $1.1 million in the two fiscal quarters of 2016. If our U.S. cheese prices for 2016 had been in effect
during 2015, the supply chain operating margin as a percentage of supply chain revenues would have remained the same in the second quarter of 2015 and two fiscal quarters of 2015. The dollar margin would also have been unaffected.
General and Administrative Expenses
General and administrative expenses increased $7.7 million, or 12.7%, in the second quarter of 2016, and $13.4 million, or 10.9%, in the two
fiscal quarters of 2016. These increases were primarily driven by continued investments in technology, specifically in e-commerce and other technological initiatives, as well as other labor and related expenses. Investments in labor and other
expenses to support the growth of our international markets and performance-based compensation expenses also contributed to these increases.
Interest Expense
Interest expense
increased $6.2 million to $25.2 million in the second quarter of 2016, and $12.2 million to $51.4 million in the two fiscal quarters of 2016. The increases were driven by a higher average debt balance as a result of the 2015 recapitalization and
were offset in part by a lower weighted average borrowing rate.
The Companys weighted average borrowing rate decreased to 4.6% in
the second quarter of 2016 and the two fiscal quarters of 2016, from 5.3% in the second quarter and the two fiscal quarters of 2015. The decreases in the Companys weighted average borrowing rate resulted from the lower interest rates on the
new debt issued as part of the 2015 recapitalization.
Provision for Income Taxes
Provision for income taxes increased $2.1 million to $29.4 million in the second quarter of 2016, and $1.6 million to $56.8 million in the two
fiscal quarters of 2016 due primarily to higher pre-tax income. The effective tax rate increased slightly to 37.4% during the second quarter of 2016 as compared to the second quarter of 2015, and remained flat at 37.5% during the two fiscal quarters
of 2016 as compared to the two fiscal quarters of 2015.
Liquidity and Capital Resources
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 the use of our ongoing cash flows from operations to service our debt obligations, invest in our business,
pay dividends and repurchase our common stock, reduce our working capital amounts. As of June 19, 2016, we had negative working capital of $13.7 million, excluding restricted cash and cash equivalents of $107.4 million and including total
unrestricted cash and cash equivalents of $22.3 million.
16
As of June 19, 2016, we had approximately $80.7 million of restricted cash held for future
principal and interest payments, $26.6 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 $107.4 million of restricted cash and
cash equivalents.
As of June 19, 2016, we had approximately $2.21 billion of long-term debt, of which $48.9 million was classified
as a current liability. Our fixed rate notes from the recapitalizations we completed in 2015 and 2012 have original scheduled principal payments of $59.0 million in 2016, $38.6 million in each of 2017 and 2018, $878.5 million in 2019, $488.0 million
in 2020, $8.0 million in each of 2021 through 2024 and $728.0 million in 2025. As of June 19, 2016, we had $46.2 million of outstanding letters of credit, $10.0 million of borrowings, and $68.8 million of available capacity under our
$125.0 million variable funding note facility. 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.
During the first quarter of 2016, the Companys previously announced $600.0 million accelerated share repurchase (ASR) program was
completed. On March 14, 2016, at final settlement, the Company received and retired 456,936 shares of its common stock based on the terms of the related ASR agreement. The Company received and retired a total of 5,315,930 shares over the
entirety of the $600.0 million ASR program at an average purchase price per share of $112.87.
In the second quarter of 2016, the Company
repurchased and retired 1,845,126 shares of common stock for a total of approximately $224.1 million. On May 25, 2016, the Board of Directors approved an increase to the Companys open market share repurchase program, so that the Company
had an aggregate of $250.0 million available for future share repurchases as of that date. As of June 19, 2016, the end of the second quarter, the Company had a total remaining authorized amount for share repurchases of approximately $225.2
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
second quarter of 2016, the Companys Board of Directors declared a $0.38 per share quarterly dividend on its outstanding common stock for shareholders of record as of June 15, 2016 which was paid on June 30, 2016. The Company had
approximately $18.8 million accrued for common stock dividends at June 19, 2016. Subsequent to the second quarter, the Companys Board of Directors declared a $0.38 per share quarterly dividend for shareholders of record as of
September 15, 2016 to be paid on September 30, 2016.
During the second quarter and two fiscal quarters of 2016, we experienced
increases in both domestic and international same store sales versus the comparable periods in the prior year. Additionally, our international and domestic businesses continued to grow store counts in the second quarter of 2016. These factors
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. We did not have any material commitments for capital expenditures as of June 19,
2016.
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 note facility 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.
The following table illustrates the main components of
our cash flows:
|
|
|
|
|
|
|
|
|
(In millions)
|
|
Two Fiscal
Quarters of 2016
|
|
|
Two Fiscal
Quarters of 2015
|
|
Cash Flows Provided By (Used In)
|
|
|
|
|
|
|
|
|
Net cash provided by operating activities
|
|
$
|
69.5
|
|
|
$
|
103.6
|
|
Net cash provided by investing activities
|
|
|
50.3
|
|
|
|
14.1
|
|
Net cash used in financing activities
|
|
|
(230.5
|
)
|
|
|
(122.9
|
)
|
Exchange rate changes
|
|
|
(0.5
|
)
|
|
|
0.2
|
|
|
|
|
|
|
|
|
|
|
Change in cash and cash equivalents
|
|
$
|
(111.1
|
)
|
|
$
|
(5.0
|
)
|
|
|
|
|
|
|
|
|
|
17
Operating Activities
Cash provided by operating activities was $69.5 million in the two fiscal quarters of 2016. This resulted from net income of $94.7 million
generated during the period, which included net non-cash expenses of $4.3 million, and a $21.0 million decrease in cash from changes in operating assets and liabilities, primarily related to the timing of payments of accounts payable balances.
Cash provided by operating activities was $103.6 million in the two fiscal quarters of 2015. This was mainly the result of net income of $92.2
million that was generated during the quarter, which included net non-cash expenses of $14.8 million. Also, a $3.4 million decrease in cash from changes in operating assets and liabilities reduced the cash generated from operating activities,
primarily related to the timing of tax payments.
Investing Activities
Cash provided by investing activities was $50.3 million in the two fiscal quarters of 2016, which consisted primarily of a decrease in
restricted cash of $73.5 million due to scheduled payments on our long-term debt and proceeds from the sale of assets of $2.8 million. Capital expenditures totaling $25.0 million (driven by increased investments in our technological initiatives,
Company-owned
stores and supply chain centers) partially offset the cash provided by investing activities.
Cash provided by investing activities was $14.1 million in the two fiscal quarters of 2015, which consisted primarily of a decrease in
restricted cash of $24.1 million due to scheduled payments on our long-term debt and proceeds from the sale of assets of $8.8 million. Capital expenditures of $20.2 million partially offset the cash provided by investing activities.
Financing Activities
We
used $230.5 million of cash in financing activities in the two fiscal quarters of 2016. We used $224.1 million to repurchase and retire shares of common stock, and we made $39.9 million in payments on our long-term debt obligations, which included a
required catch-up amortization payment on the fixed rate notes from the recapitalization we completed in 2012 upon exceeding the 4.5x leverage covenant as defined in the related agreements. We also paid $19.1 million in dividends to our
shareholders, and made $3.0 million in tax payments for restricted stock upon vesting. The tax impact of equity-based compensation, proceeds from the exercise of stock options, and $10.0 million draw on our variable funding note facility partially
offset these uses of cash in financing activities in the two fiscal quarters of 2016.
We used $122.9 million of cash in financing
activities in the two fiscal quarters of 2015, primarily related to purchases of common stock and funding dividend payments to our shareholders. The tax impact of equity-based compensation and proceeds from exercise of stock options offset the use
of cash in financing activities in the two fiscal quarters of 2015.
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. These 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 our long-term and other indebtedness; 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, digital ordering 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 operating expenses resulting from changes in prices of food (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 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 laws, we do not undertake to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.
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