Well, at least Domino's Pizza
But thank you for taking this point head-on.
Domino's quarterly report makes it clear just how much impact the recapitalization has on ongoing operations. Its interest expense payments of $13 million are nearly as high as its net income of $15.9 million. Yes, $900 million-plus in debt is an awfully large burden for a company with a revenue run rate of $1.3 billion per year and razor-thin earnings before tax (EBT).
But you know what? It doesn't make much sense to grouse about Domino's debt, nor about the fact that most of the proceeds from the IPO didn't go to company coffers. Both of these issues were well-known to shareholders prior to their decisions to purchase the stock, or at least they should have been.
Domino's earnings this quarter were deeply impacted by rising raw material costs, most notably cheese, which rose in price an average of $0.90 per pound, or 81%. On a nearly 10% increase in top-line sales, Domino's operating income increased 0.5%. After the interest costs were subtracted, the company's earnings level declined 9.2%. The top-line growth is certainly promising, and reflecting the analysis we posted a few weeks ago, Domino's international outlets showed dramatically better results on a constant currency and on a nominal basis than its domestic results.
Really, though, I just have to continue to regard Domino's as a company that went public for all the wrong reasons -- a slow-growth company that has saturated all of its easy markets and has been larded with debt and beset by sharp competition from Papa John's