The FINANCIAL -- Domino's Pizza, Inc. announced results for the first quarter of fiscal 2018, comprised of strong growth in same store sales, global store counts and earnings per share.
Domestic same store sales grew 8.3% during the quarter versus the year-ago period, continuing the positive sales momentum in the Company's domestic business. The international division also posted positive results, with same store sales growth of 5.0% during the quarter. The first quarter marked the 97th consecutive quarter of positive international same store sales growth and the 28th consecutive quarter of positive domestic same store sales growth. The Company also had first quarter global net store growth of 110 stores, comprised of 79 net new international stores and 31 net new domestic stores. First quarter diluted EPS was $2.00, up 58.7% over the prior year quarter, according to Domino's Pizza.
During the first quarter of 2018, the Company repurchased 448,008 shares of its common stock for approximately $101.1 million. Additionally, on April 24, 2018, the Board of Directors declared a 55-cent per share quarterly dividend for shareholders of record as of June 15, 2018, to be paid on June 29, 2018.
"The first quarter of 2018 was another outstanding performance by our franchisees and managers across the globe," said J. Patrick Doyle, Domino's President and Chief Executive Officer. "We delivered in every way: from global retail sales growth through strong domestic and international same store sales comps, to new stores, and through both delivery and carryout.
"As my tenure as CEO comes to a close, I am extremely proud of what we have accomplished as a global system over the past several years, and I am confident the future of Domino's is in good hands. Our business model works, thanks to our committed and hard-working franchisees, our dedicated store managers and the visionary leaders who are among the best in the restaurant industry."
Revenues increased $161.2 million, or 25.8%, in the first quarter of 2018. The Company adopted Accounting Standards Codification 606, Revenue from Contracts with Customers ("ASC 606") in the first quarter of 2018. This resulted in the recognition of $82.2 million in domestic franchise advertising revenues related to contributions from domestic franchisees to Domino's National Advertising Fund Inc. ("DNAF"), the Company's consolidated not-for-profit advertising fund. In the first quarter of 2017 under accounting standards in effect at that time, the Company had presented these contributions net with the related disbursements in its consolidated statement of income. Refer to the "Adoption of New Accounting Guidance" section on page three for additional information related to the adoption of this accounting standard. The remaining increase in revenues was due primarily to higher supply chain volumes resulting from order and store count growth. Higher domestic Company-owned store, domestic franchise and international franchise revenues resulting from higher same store sales and store count growth also contributed to the increase. Consolidated revenues also benefited from the positive impact of changes in foreign currency exchange rates.
Net Income increased $26.4 million, or 42.2%, in the first quarter of 2018. This increase was driven by an increase in global royalty revenues and higher supply chain volumes, partially offset by higher general and administrative expenses. A lower statutory tax rate resulting from the enactment of the Tax Cuts and Jobs Act of 2017 and a higher deduction related to excess tax benefits from equity-based compensation also positively impacted net income in the first quarter of 2018 through a reduction in the provision for income taxes. This increase in net income was partially offset by higher interest expense resulting from a higher average debt balance due to our recapitalization in 2017.
Diluted EPS was $2.00 for the first quarter versus $1.26 in the prior year quarter. This represents a 74-cent or 58.7% increase over the prior year quarter. This was driven by higher net income, as well as lower diluted share count, primarily resulting from share repurchases.
Adoption of New Accounting Guidance
The Company adopted ASC 606 during the first quarter of 2018. ASC 606 requires a gross presentation on the consolidated statement of income for franchisee contributions received by and related expenses of DNAF, the Company's consolidated not-for-profit advertising fund. Under prior accounting guidance, the Company had presented the restricted assets and liabilities of DNAF in its consolidated balance sheets and had determined that it acted as an agent for accounting purposes with regard to franchise store contributions and disbursements. As a result, the Company historically presented the activities of DNAF net in its consolidated statement of income and consolidated statement of cash flows. Upon the adoption of ASC 606, the Company determined that there are not performance obligations associated with the franchise advertising contributions received by DNAF that are separate from our domestic royalty payment stream, and as a result, these franchise contributions and the related expenses are presented gross in the Company's consolidated statement of income and consolidated statement of cash flows. While this change will materially impact the gross amount of reported franchise revenues and expenses, the impact is generally expected to be an offsetting increase to both revenues and expenses such that the impact on income from operations and net income is not expected to be material. Refer to the Company's Form 10-Q for the fiscal quarter ended March 25, 2018 for additional information regarding the adoption of ASC 606.
The Company also adopted ASU 2016-18, Statement of Cash Flows (Topic 230): Restricted Cash ("ASU 2016-18"), which requires that restricted cash and cash equivalents be included as components of total cash and cash equivalents as presented on the statement of cash flows. The Company historically presented changes in restricted cash and cash equivalents in the investing section of its consolidated statement of cash flows. This new guidance did not impact the Company's financial results, but did result in a change in the presentation of restricted cash and restricted cash equivalents within the statement of cash flows. Refer to the Company's Form 10-Q for the fiscal quarter ended March 25, 2018 for additional information regarding the adoption of ASU 2016-18.
On April 24, 2018, the Company completed a recapitalization with the receipt of $825.0 million of gross proceeds from its issuance of fixed rate senior secured notes.
The Company will use a portion of the proceeds from the recapitalization to repay the remaining $490.1 million in outstanding principal and interest under its 2015 five-year fixed rate notes on April 27, 2018. The proceeds will also be used to pay transaction-related fees and expenses and to pre-fund a portion of the principal and interest payable on the 2018 Notes. The Company will use the remaining proceeds for general corporate purposes. For further details, refer to the Company's separate refinancing press release and the Company's Form 10-Q for the quarter ended March 25, 2018.
During the first quarter of 2018, the Company repurchased and retired 448,008 shares of its common stock under its Board of Directors-approved open market share repurchase program for a total of approximately $101.1 million. As of March 25, 2018, the end of the first quarter, the Company's total remaining authorized amount for share repurchases was approximately $648.9 million.
Subsequent to the first quarter of 2018, the Company repurchased and retired an additional 351,699 shares of common stock for a total of approximately $81.3 million, which was funded through borrowings of $80.0 million on its 2017 variable funding notes.
As of March 25, 2018, the Company had approximately:
$44.6 million of unrestricted cash and cash equivalents;
$3.15 billion in total debt; and
$128.3 million of available borrowings under its $175.0 million variable funding notes, net of letters of credit issued of $46.7 million. Subsequent to the first quarter of 2018, the Company borrowed $80.0 million under its variable funding notes to fund share repurchases.
The Company invested $13.6 million in capital expenditures in the first quarter of 2018, versus $12.4 million in the first quarter of 2017. Free cash flow to net cash provided by operating activities, as determined under accounting principles generally accepted in the United States of America ("GAAP"), was approximately $70.0 million in the first quarter of 2018.