What is Common-size Financial Statement ?
A common size financial statement shows all items as percentages of a common
base number. It make easier to analysis between companies or between time
periods of a company. Using common-size financial statements helps
investors spot trends that a raw financial statement may not uncover. The
values on the common size statement are expressed as percentages of a statement
component, such as revenue.
The concept has two uses, which are:
- Time series analysis. The percentages for each line item are compared over a period of time, to discern trends that management can act upon. For example, an increase in the cost of goods sold percentage might call for changes in price points or more attention to supplier costs.
- Industry comparison. The financial statements of competitors can be converted into the common size format, which makes them comparable to a company's own financial statements. One can then determine how the cost structure or asset base of a competitor varies from the company's.
This is the example of Common-Size Financial Statement of Domino's Pizza:
Common-Size Financial Statement on 2015
compared to 2014
Revenues
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 as a result of fluctuations
in commodity prices as well as the mix of products we sell.
Consolidated revenues increased $222.7 million or 11.2% in
2015. The increase was due primarily to higher
supply chain food volumes as well as increased sales of equipment to stores in
connection with our store reimaging program. Higher Company-owned store,
domestic franchise and international franchise revenues resulting from same
store sales and store count growth also contributed to the rise in revenue. The
inclusion of the 53rd week in 2015 also positively impacted revenues by an
estimated $49.7 million. 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, as well as lower cheese and
other commodity prices. These changes in revenues are more fully described
below.
Revenues from domestic stores are primarily comprised
of retail sales from domestic Company owned store operations as well as
royalties from retail sales and other fees from domestic franchised stores, as summarized
in the following table.
Higher franchise same store sales, store count growth and
higher domestic Company-owned same store sales drove an increase in overall
domestic store revenues of $91.0 million or 15.7%. These results are more fully
described below.
Domestic Company-owned stores
Revenues from domestic
Company-owned store operations increased $48.4 million or 13.9% in 2015. This
increase was due to a 12.2% increase in same store sales as compared to 2014,
as well as an estimated $9.1 million impact of the 53rd week, offset in part by
the sale of 14 Company-owned stores to a franchisee that occurred in the first
quarter of 2014.
Domestic franchise
Revenues from domestic franchise
operations increased $42.6 million or 18.5% in 2015. The increase was driven by
an 11.9% increase in same store sales as compared to 2014, as well as an
estimated $6.1 million impact of the 53rd week, and an increase in the average
number of domestic franchised stores open during 2015. Revenues further
benefited from fees paid by franchisees to reimburse us for expenses we
incurred for our internally developed online ordering platform.
Supply chain
Revenues from supply chain operations are
primarily comprised of sales of food, equipment
and supplies from our supply chain centers to substantially all of our domestic
franchised stores and certain international franchised stores, as summarized in
the following table.
Domestic supply chain
Domestic supply chain revenues
increased $115.4 million or 10.1% in 2015. These increases were primarily
attributable to higher volumes from increased order counts at the store level
and increases in sales of equipment in connection with our store reimaging
program, as well as an estimated $27.8 million impact of the 53rd week. They
were partially offset by lower cheese and other commodity prices. We estimate
that the lower cheese block price (passed through directly in domestic supply
chain pricing to franchisees) resulted in an approximate $45.3 million decrease
in domestic supply chain revenues during 2015.
International supply chain
Revenues from international
supply chain operations increased $5.2 million or 4.3% in 2015. This increase
resulted primarily from higher volumes in 2015 and an estimated $2.6 million
impact of the 53rd week, and were offset in part by the negative impact of foreign
currency exchange rates of approximately $16.4 million in 2015.
International franchise
International franchise revenues
primarily consist of royalties from retail sales and other fees from our
international franchise stores. Revenues from international franchise operations
increased $11.0 million or 7.2% in 2015. This increase was due to an increase
in the average number of international stores open during 2015, higher same
store sales and an estimated $4.1 million impact of the 53rd week, and was
offset in part by the negative impact of changes in foreign currency exchange
rates of approximately $19.9 million in 2015. Excluding the impact of foreign
currency exchange rates, same store sales increased 7.8% in 2015 compared to 2014.
When the impact of foreign currency exchange rates is included, same store
sales decreased 4.4% in 2015 compared to 2014. This variance was caused by a
generally stronger U.S. dollar when compared to the currencies in the
international markets in which we compete.
Cost of sales / Operating margin
Consolidated cost of sales
consists primarily of domestic Company-owned store and supply chain costs
incurred to generate related revenues. Components of consolidated cost of sales
primarily include food, labor and occupancy costs. The changes to the consolidated
operating margin, which we define as revenues less cost of sales are summarized
in the following table.
The $88.3 million or 14.9% increase in consolidated
operating margin was due primarily to higher domestic and international
franchise revenues and higher supply chain margins, as well as an estimated
$16.6 million impact of the 53rd week. Franchise revenues do not have a cost of
sales component, so changes in franchise revenues have a disproportionate
effect on the consolidated operating margin.
As a percentage of total revenues, our consolidated
operating margin increased 1.0 percentage points in 2015, due to higher supply
chain and Company-owned stores operating margins as a percentage of their
revenues, as well as a higher mix of franchise revenues. These changes are more
fully described below.
Domestic Company-owned stores
The changes to domestic
Company-owned store operating margin, which do not include other store-level costs such as royalties and
advertising, are summarized in the following table.
The $16.5 million or 20.4% increase in the domestic
Company-owned store operating margin was due primarily to higher same store
sales, a decrease in overall commodity prices, and an estimated $3.1 million
impact of the 53rd week.
As a percentage of store revenues, the store operating
margin increased 1.3 percentage points in 2015, as discussed in more detail
below.
- Food costs decreased 2.2 percentage points to 26.1% in 2015, due primarily to lower overall commodity prices. The cheese block price per pound averaged $1.62 in 2015 compared to $2.13 in 2014.
- Occupancy costs, which include rent, telephone, utilities and depreciation, decreased 1.1 percentage points to 8.1% in 2015 due primarily to the positive impact of higher sales per store.
- Labor and related costs increased 1.1 percentage points to 29.1% in 2015, due primarily to higher performance based compensation and overtime as a result of increased same store sales.
- Insurance costs increased 1.3 percentage points to 4.0% in 2015, due primarily to a $4.3 million incremental insurance expense in the third quarter of 2015 related to updated actuarial estimates for our casualty insurance program.
The $18.3 million increase in the supply chain operating
margin was due primarily to higher volumes from increased store order counts
and an estimated $3.3 million impact of the 53rd week.
As a percentage of supply chain revenues, the supply chain
operating margin increased 0.4 percentage points in 2015 due to lower commodity
prices and lower fuel costs. However, the operating margin was negatively
impacted by incremental casualty and health insurance expense, including $1.4
million recorded in the third quarter of 2015 related to updated actuarial
estimates for our casualty insurance program, as well as increased labor and
delivery costs. Decreases in certain food 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. Changes in our U.S. cheese prices decreased
both revenues and costs by $45.3 million in fiscal 2015. If our U.S. cheese
prices for 2015 had been in effect during 2014, the supply chain operating
margin as a percentage of supply chain revenues would have increased by 0.4 percentage
points. However, the dollar margin would have been unaffected.
General and administrative expenses
General and
administrative expenses increased $28.3 million or 11.3% in 2015. These increases
were driven by continued investments in technological initiatives and labor
(primarily in ecommerce, information technology and international operations)
as well as higher volume-driven expenses resulting from improved operating
performance and higher same store sales, including variable performance-based compensation,
Company-owned store national advertising contributions and franchisee
incentives. The nonrecurring $1.7 million pre-tax gain recognized from the sale
of 14 Company-owned stores during the first quarter of 2014 and an estimated
$4.7 million impact of the inclusion of the 53rd week in 2015 also contributed
to the increase for fiscal 2015. These increases were offset in part by the
non-recurring $5.8 million impairment charge in 2014.
Interest income
Interest income increased slightly to $0.3
million in 2015.
Interest expense
Interest expense increased $12.6 million
to $99.5 million in 2015. The increase was due primarily to approximately $7.3
million of expenses incurred in the fourth quarter of 2015 related to the 2015
Recapitalization, including a $6.9 million write-off of debt issuance costs and
$0.4 million of interest expense that was incurred on the 2012 debt subsequent
to the closing of the 2015 Recapitalization but prior to the repayment of the
2012 debt. Interest expense also increased due to a higher average debt
balance, offset in part by a lower average interest rate.
Our cash borrowing rate decreased to 5.1% in fiscal 2015,
from 5.3% in fiscal 2014. The decrease in the Company’s cash borrowing rate
resulted from the lower interest rate on the new debt issued as part of the
2015 Recapitalization. Our average outstanding debt balance, excluding capital
lease obligations, was approximately $1.68 billion in 2015 and approximately
$1.52 billion in 2014. The increase in the average outstanding debt balance was
due to the issuance of debt in connection with the 2015 Recapitalization.
Provision for income taxes. Provision for income taxes
increased $17.4 million to $113.4 million in 2015, due primarily to higher
pre-tax income. The Company’s effective income tax rate decreased slightly by
0.1 percentage points to 37.0% of pre-tax income in 2015.
Reference:
Ilham Anugraha Pramuditya
C1L014033
International Accounting
Jenderal Soedirman University
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