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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 March 21, 2004

 

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: 333-107774

 


 

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 April 26, 2004 was 10 shares.

 



Table of Contents

Domino’s, Inc.

 

INDEX

 

          Page No.

PART I.

   FINANCIAL INFORMATION     
Item 1.    Financial Statements     
     Condensed Consolidated Balance Sheets – March 21, 2004 (Unaudited) and December 28, 2003    3
     Condensed Consolidated Statements of Income (Unaudited) – Fiscal quarter ended March 21, 2004 and March 23, 2003    4
     Condensed Consolidated Statements of Cash Flows (Unaudited) – Fiscal quarter ended March 21, 2004 and March 23, 2003    5
     Notes to Condensed Consolidated Financial Statements (Unaudited)    6

Item 2.

   Management’s Discussion and Analysis of Financial Condition and Results of Operations    12

Item 3.

   Quantitative and Qualitative Disclosures About Market Risk    19

Item 4.

   Controls and Procedures    19
PART II.    OTHER INFORMATION     

Item 5.

   Other Information    20

Item 6.

   Exhibits and Reports on Form 8-K    20

SIGNATURES

   20

 

2


Table of Contents

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

 

Domino’s, Inc. and Subsidiaries

Condensed Consolidated Balance Sheets

 

(In thousands)

 

   March 21, 2004

    December 28, 2003

 
     (Unaudited)     (Note)  

Assets

                
Current assets:                 

Cash and cash equivalents

   $ 36,611     $ 42,726  

Accounts receivable

     60,297       64,571  

Inventories

     23,045       19,480  

Notes receivable

     3,402       3,785  

Prepaid expenses and other

     12,519       16,040  

Advertising fund assets, restricted

     21,345       30,544  

Deferred income taxes

     5,732       5,730  
    


 


Total current assets

     162,951       182,876  
    


 


Property, plant and equipment:

                

Land and buildings

     21,809       21,849  

Leasehold and other improvements

     64,803       61,433  

Equipment

     162,308       158,286  

Construction in progress

     3,503       6,133  
    


 


       252,423       247,701  

Accumulated depreciation and amortization

     124,676       120,634  
    


 


Property, plant and equipment, net

     127,747       127,067  
    


 


Other assets:

                

Deferred financing costs

     18,149       18,847  

Goodwill

     23,305       23,432  

Capitalized software

     26,282       27,197  

Other assets

     17,340       16,988  

Deferred income taxes

     49,205       52,042  
    


 


Total other assets

     134,281       138,506  
    


 


Total assets

   $ 424,979     $ 448,449  
    


 


Liabilities and stockholder’s deficit

                

Current liabilities:

                

Current portion of long-term debt

   $ 286     $ 18,572  

Accounts payable

     49,098       53,388  

Insurance reserves

     9,893       9,432  

Advertising fund liabilities

     21,345       30,544  

Other accrued liabilities

     59,057       72,327  
    


 


Total current liabilities

     139,679       184,263  
    


 


Long-term liabilities:

                

Long-term debt, less current portion

     942,035       941,165  

Insurance reserves

     16,045       15,941  

Other accrued liabilities

     26,748       25,169  
    


 


Total long-term liabilities

     984,828       982,275  
    


 


Stockholder’s deficit:

                

Common stock

     —         —    

Additional paid-in capital

     124,494       124,210  

Retained deficit

     (824,125 )     (842,308 )

Deferred stock compensation

     (218 )     —    

Accumulated other comprehensive income

     321       9  
    


 


Total stockholder’s deficit

     (699,528 )     (718,089 )
    


 


Total liabilities and stockholder’s deficit

   $ 424,979     $ 448,449  
    


 



Note: The balance sheet at December 28, 2003 has been derived from the audited consolidated financial statements at that date but does not include all of the information and footnotes required by accounting principles generally accepted in the United States for complete financial statements.

 

See accompanying notes.

 

3


Table of Contents

Domino’s, Inc. and Subsidiaries

Condensed Consolidated Statements of Income

(Unaudited)

 

     Fiscal Quarter Ended

 

(In thousands)

 

  

March 21,

2004


   

March 23,

2003


 

Revenues:

                

Domestic Company-owned stores

   $ 87,964     $ 89,942  

Domestic franchise

     34,637       34,404  

Domestic distribution

     170,850       167,436  

International

     25,303       20,470  
    


 


Total revenues

     318,754       312,252  
    


 


Operating expenses:

                

Cost of sales

     237,643       231,804  

General and administrative

     37,640       37,358  
    


 


Total operating expenses

     275,283       269,162  
    


 


Income from operations

     43,471       43,090  

Interest income

     86       103  

Interest expense

     (13,985 )     (12,333 )

Other

     —         (1,743 )
    


 


Income before provision for income taxes

     29,572       29,117  

Provision for income taxes

     11,164       10,773  
    


 


Net income

   $ 18,408     $ 18,344  
    


 


 

See accompanying notes.

 

4


Table of Contents

Domino’s, Inc. and Subsidiaries

Condensed Consolidated Statements of Cash Flows

(Unaudited)

 

     Fiscal Quarter Ended

 

(In thousands)

 

  

March 21,

2004


   

March 23,

2003


 

Cash flows from operating activities:

                

Net cash provided by operating activities

   $ 18,729     $ 32,599  
    


 


Cash flows from investing activities:

                

Capital expenditures

     (6,795 )     (5,219 )

Other

     553       1,002  
    


 


Net cash used in investing activities

     (6,242 )     (4,217 )
    


 


Cash flows from financing activities:

                

Repayments of debt

     (18,371 )     (20,500 )

Distributions to Parent

     (225 )     (114 )
    


 


Net cash used in financing activities

     (18,596 )     (20,614 )
    


 


Effect of exchange rate changes on cash and cash equivalents

     (6 )     (2 )
    


 


Increase (decrease) in cash and cash equivalents

     (6,115 )     7,766  

Cash and cash equivalents, at beginning of period

     42,726       22,472  
    


 


Cash and cash equivalents, at end of period

   $ 36,611     $ 30,238  
    


 


 

See accompanying notes.

 

5


Table of Contents

Domino’s, Inc. and Subsidiaries

Notes to Condensed Consolidated Financial Statements

(Unaudited; tabular amounts in thousands)

 

March 21, 2004

 

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 ended March 21, 2004 are not necessarily indicative of the results that may be expected for the fiscal year ending January 2, 2005. For further information, refer to the consolidated financial statements and footnotes thereto for the fiscal year ended December 28, 2003 included in our Form 10-K.

 

2. Comprehensive Income

 

     Fiscal Quarter Ended

 
    

March 21,

2004


   

March 23,

2003


 

Net income

   $ 18,408     $ 18,344  

Unrealized losses on derivative instruments, net of tax

     (193 )     (101 )

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

     649       1,048  

Currency translation adjustment

     (144 )     111  
    


 


Comprehensive income

   $ 18,720     $ 19,402  
    


 


 

3. Segment Information

 

The following table summarizes revenues, income from operations and earnings before interest, taxes, depreciation, amortization, gains (losses) on sale/disposal of assets and other, which is the measure in which management allocates resources to its segments and which we refer to throughout this document as Segment Income, for each of the Company’s reportable segments.

 

     Fiscal Quarter Ended March 21, 2004 and March 23, 2003

     Domestic
Stores


   Domestic
Distribution


   International

   Intersegment
Revenues


    Other

    Total

Revenues –

                                           

2004

   $ 122,601    $ 193,940    $ 25,303    $ (23,090 )   $ —       $ 318,754

2003

     124,346      192,528      20,470      (25,092 )     —         312,252

Income from operations –

                                           

2004

   $ 31,774    $ 10,932    $ 7,510      N/A     $ (6,745 )   $ 43,471

2003

     31,614      11,924      5,675      N/A       (6,123 )     43,090

Segment Income –

                                           

2004

   $ 34,827    $ 13,137    $ 7,746      N/A     $ (5,265 )   $ 50,445

2003

     34,581      13,595   </