SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-Q
(Mark One)
| x | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended June 15, 2003
OR
| ¨ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the transition period from: to
Commission file number: 333-74797
Domino’s, Inc.
(Exact name of registrant as specified in its charter)
| Delaware | 38-3025165 | |
| (State or other jurisdiction of incorporation or organization) |
(I.R.S. Employer Identification Number) |
30 Frank Lloyd Wright Drive
Ann Arbor, Michigan 48106
(Address of principal executive offices)
(734) 930-3030
(Registrant’s telephone number, including area code)
Indicate by check mark whether registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No ¨
Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Act): Yes ¨ No x
The number of shares outstanding of the registrant’s common stock as of July 21, 2003 was 10 shares.
Domino’s, Inc.
| Page No. | ||||
| PART I. | FINANCIAL INFORMATION |
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| Item 1. | Financial Statements |
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| Condensed Consolidated Balance Sheets – June 15, 2003 (Unaudited) and December 29, 2002 |
3 | |||
| 4 | ||||
| 5 | ||||
| Notes to Condensed Consolidated Financial Statements (Unaudited) |
6 | |||
| Item 2. | Management’s Discussion and Analysis of Financial Condition and Results of Operations |
12 | ||
| Item 3. | 17 | |||
| Item 4. | 17 | |||
| PART II. | OTHER INFORMATION |
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| Item 6. | 18 | |||
| 18 | ||||
2
PART I. FINANCIAL INFORMATION
| Item 1. | Financial Statements |
Domino’s, Inc. and Subsidiaries
Condensed Consolidated Balance Sheets
| (In thousands) | June 15, 2003 |
December 29, 2002 |
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| (Unaudited) | (Note) | |||||||
| Assets |
||||||||
| Current assets: |
||||||||
| Cash and cash equivalents |
$ | 51,746 | $ | 22,472 | ||||
| Accounts receivable |
56,269 | 57,497 | ||||||
| Inventories |
20,539 | 21,832 | ||||||
| Notes receivable |
3,179 | 3,398 | ||||||
| Prepaid expenses and other |
8,917 | 6,673 | ||||||
| Advertising fund assets, restricted |
31,920 | 28,231 | ||||||
| Deferred income taxes |
7,141 | 6,809 | ||||||
| Total current assets |
179,711 | 146,912 | ||||||
| Property, plant and equipment: |
||||||||
| Land and buildings |
15,865 | 15,986 | ||||||
| Leasehold and other improvements |
59,108 | 57,029 | ||||||
| Equipment |
150,675 | 145,513 | ||||||
| Construction in progress |
5,047 | 5,727 | ||||||
| 230,695 | 224,255 | |||||||
| Accumulated depreciation and amortization |
111,161 | 103,708 | ||||||
| Property, plant and equipment, net |
119,534 | 120,547 | ||||||
| Other assets: |
||||||||
| Deferred financing costs |
16,038 | 18,264 | ||||||
| Goodwill |
27,601 | 27,232 | ||||||
| Capitalized software |
27,374 | 28,313 | ||||||
| Other assets |
19,697 | 20,872 | ||||||
| Deferred income taxes |
56,416 | 60,287 | ||||||
| Total other assets |
147,126 | 154,968 | ||||||
| Total assets |
$ | 446,371 | $ | 422,427 | ||||
| Liabilities and stockholder’s deficit |
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| Current liabilities: |
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| Current portion of long-term debt |
$ | 3,761 | $ | 2,843 | ||||
| Accounts payable |
45,123 | 46,131 | ||||||
| Insurance reserves |
8,677 | 8,452 | ||||||
| Advertising fund liabilities |
31,920 | 28,231 | ||||||
| Other accrued liabilities |
73,906 | 71,571 | ||||||
| Total current liabilities |
163,387 | 157,228 | ||||||
| Long-term liabilities: |
||||||||
| Long-term debt, less current portion |
576,905 | 599,180 | ||||||
| Insurance reserves |
15,011 | 12,510 | ||||||
| Other accrued liabilities |
29,386 | 29,090 | ||||||
| Total long-term liabilities |
621,302 | 640,780 | ||||||
| Stockholder’s deficit: |
||||||||
| Common stock |
— | — | ||||||
| Additional paid-in capital |
120,723 | 120,723 | ||||||
| Retained deficit |
(456,292 | ) | (491,793 | ) | ||||
| Accumulated other comprehensive loss |
(2,749 | ) | (4,511 | ) | ||||
| Total stockholder’s deficit |
(338,318 | ) | (375,581 | ) | ||||
| Total liabilities and stockholder’s deficit |
$ | 446,371 | $ | 422,427 | ||||
Note: The balance sheet at December 29, 2002 has been derived from the audited consolidated financial statements at that date but does not include all of the information and footnotes required by accounting principles generally accepted in the United States for complete financial statements.
See accompanying notes.
3
Domino’s, Inc. and Subsidiaries
Condensed Consolidated Statements of Income
(Unaudited)
| Fiscal Quarter Ended |
Two Fiscal Quarters Ended | |||||||||||
| (In thousands) | June 15, 2003 |
June 16, 2002 |
June 15, 2003 |
June 16, 2002 | ||||||||
| Revenues: |
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| Domestic Company-owned stores |
$ | 85,875 | $ | 88,482 | $ | 175,817 | $ | 178,388 | ||||
| Domestic franchise |
32,349 | 32,037 | 66,753 | 66,596 | ||||||||
| Domestic distribution |
154,632 | 154,721 | 322,068 | 320,466 | ||||||||
| International |
22,360 | 18,822 | 42,830 | 36,668 | ||||||||
| Total revenues |
295,216 | 294,062 | 607,468 | 602,118 | ||||||||
| Operating expenses: |
||||||||||||
| Cost of sales |
216,583 | 215,790 | 446,635 | 441,128 | ||||||||
| General and administrative |
39,407 | 47,473 | 80,260 | 91,644 | ||||||||
| Total operating expenses |
255,990 | 263,263 | 526,895 | 532,772 | ||||||||
| Income from operations |
39,226 | 30,799 | 80,573 | 69,346 | ||||||||
| Interest income |
92 | 50 | 195 | 268 | ||||||||
| Interest expense |
11,020 | 13,694 | 23,353 | 27,213 | ||||||||
| Income before provision for income taxes |
28,298 | 17,155 | 57,415 | 42,401 | ||||||||
| Provision for income taxes |
10,757 | 6,346 | 21,530 | 15,687 | ||||||||
| Net income |
$ | 17,541 | $ | 10,809 | $ | 35,885 | $ | 26,714 | ||||
See accompanying notes.
4
Domino’s, Inc. and Subsidiaries
Condensed Consolidated Statements of Cash Flows
(Unaudited)
| Two Fiscal Quarters Ended |
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| (In thousands) | June 15, 2003 |
June 16, 2002 |
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| Cash flows from operating activities: |
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| Net cash provided by operating activities |
$ | 60,458 | $ | 52,356 | ||||
| Cash flows from investing activities: |
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| Capital expenditures |
(11,556 | ) | (24,696 | ) | ||||
| Acquisitions of franchise operations |
— | (21,850 | ) | |||||
| Other |
1,992 | (618 | ) | |||||
| Net cash used in investing activities |
(9,564 | ) | (47,164 | ) | ||||
| Cash flows from financing activities: |
||||||||
| Capital contribution |
— | 521 | ||||||
| Repayments of long-term debt |
(21,413 | ) | (32,087 | ) | ||||
| Distributions to Parent |
(384 | ) | (10,063 | ) | ||||
| Net cash used in financing activities |
(21,797 | ) | (41,629 | ) | ||||
| Effect of exchange rate changes on cash and cash equivalents |
177 | 117 | ||||||
| Increase (decrease) in cash and cash equivalents |
29,274 | (36,320 | ) | |||||
| Cash and cash equivalents, at beginning of period |
22,472 | 55,147 | ||||||
| Cash and cash equivalents, at end of period |
$ | 51,746 | $ | 18,827 | ||||
See accompanying notes.
5
Domino’s, Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements
(Unaudited; tabular amounts in thousands)
June 15, 2003
1. Basis of Presentation
The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by accounting principles generally accepted in the United States for complete financial statements. In the opinion of management, all adjustments, consisting of normal recurring items, considered necessary for a fair presentation have been included. Operating results for the fiscal quarter and two fiscal quarters ended June 15, 2003 are not necessarily indicative of the results that may be expected for the fiscal year ending December 28, 2003. For further information, refer to the consolidated financial statements and footnotes thereto for the fiscal year ended December 29, 2002 included in our Form 10-K.
2. Comprehensive Income
| Fiscal Quarter Ended |
Two Fiscal Quarters Ended |
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| June 15, 2003 |
June 16, 2002 |
June 15, 2003 |
June 16, 2002 |
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| Net income |
$ | 17,541 | $ | 10,809 | $ | 35,885 | $ | 26,714 | ||||||||
| Unrealized loss on derivative instruments, net of tax |
(1,464 | ) | (2,543 | ) | (1,565 | ) | (2,898 | ) | ||||||||
| Reclassification adjustment for losses included in net income, net of tax |
1,044 | 726 | 2,092 | 1,465 | ||||||||||||
| Currency translation adjustment |
1,124 | 522 | 1,235 | |||||||||||||