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DOMINOS PIZZA INC - Quarter Report: 2022 September (Form 10-Q)

 

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

 

FORM 10-Q

 

(Mark One)

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 11, 2022

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: 001-32242

 

Domino’s Pizza, Inc.

(Exact Name of Registrant as Specified in Its Charter)

 

Delaware

 

38-2511577

(State or Other Jurisdiction of

Incorporation or Organization)

 

(I.R.S. Employer

Identification No.)

30 Frank Lloyd Wright Drive

Ann Arbor, Michigan

 

48105

(Address of Principal Executive Offices)

 

(Zip Code)

(734) 930-3030

(Registrant’s Telephone Number, Including Area Code)

 

Securities registered pursuant to Section 12(b) of the Exchange Act:

Title of Each Class

Trading Symbol

Name of Each Exchange on Which Registered

Domino’s Pizza, Inc. Common Stock, $0.01 par value

DPZ

New York Stock Exchange

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 ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

 

Large accelerated filer

 

 

Accelerated filer

 

Non-accelerated filer

 

 

Smaller reporting company

 

Emerging growth company

 

 

 

 

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes No ☒

As of October 6, 2022, Domino’s Pizza, Inc. had 35,399,379 shares of common stock, par value $0.01 per share, outstanding.

 

 


 

Domino’s Pizza, Inc.

TABLE OF CONTENTS

 

 

 

 

 

Page No.

PART I.

 

FINANCIAL INFORMATION

 

 

 

 

 

Item 1.

 

Financial Statements

 

3

 

 

 

 

 

Condensed Consolidated Balance Sheets (Unaudited) – As of September 11, 2022 and January 2, 2022

 

3

 

 

 

 

 

Condensed Consolidated Statements of Income (Unaudited) – Fiscal quarters and three fiscal quarters ended September 11, 2022 and September 12, 2021

 

4

 

 

 

 

 

Condensed Consolidated Statements of Comprehensive Income (Unaudited) – Fiscal quarters and three fiscal quarters ended September 11, 2022 and September 12, 2021

 

5

 

 

 

 

 

Condensed Consolidated Statements of Cash Flows (Unaudited) – Three fiscal quarters ended September 11, 2022 and September 12, 2021

 

6

 

 

 

 

 

Notes to Condensed Consolidated Financial Statements (Unaudited)

 

7

 

 

 

Item 2.

 

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

 

15

 

 

 

Item 3.

 

Quantitative and Qualitative Disclosures About Market Risk

 

26

 

 

 

Item 4.

 

Controls and Procedures

 

26

 

 

 

PART II.

 

OTHER INFORMATION

 

 

 

 

 

Item 1.

 

Legal Proceedings

 

27

 

 

 

Item 1A.

 

Risk Factors

 

27

 

 

 

Item 2.

 

Unregistered Sales of Equity Securities and Use of Proceeds

 

27

 

 

 

Item 3.

 

Defaults Upon Senior Securities

 

27

 

 

 

Item 4.

 

Mine Safety Disclosures

 

27

 

 

 

Item 5.

 

Other Information

 

27

 

 

 

Item 6.

 

Exhibits

 

28

 

 

SIGNATURES

 

29

 

2


 

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements.

Domino’s Pizza, Inc. and Subsidiaries

Condensed Consolidated Balance Sheets

(Unaudited)

(In thousands)

 

September 11, 2022

 

 

January 2, 2022 (1)

 

Assets

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

Cash and cash equivalents

 

$

114,776

 

 

$

148,160

 

Restricted cash and cash equivalents

 

 

184,564

 

 

 

180,579

 

Accounts receivable, net

 

 

242,775

 

 

 

255,327

 

Inventories

 

 

72,586

 

 

 

68,328

 

Prepaid expenses and other

 

 

30,497

 

 

 

27,242

 

Advertising fund assets, restricted

 

 

181,200

 

 

 

180,904

 

Total current assets

 

 

826,398

 

 

 

860,540

 

Property, plant and equipment:

 

 

 

 

 

 

Land and buildings

 

 

106,907

 

 

 

108,372

 

Leasehold and other improvements

 

 

197,462

 

 

 

193,572

 

Equipment

 

 

329,687

 

 

 

312,772

 

Construction in progress

 

 

26,874

 

 

 

27,815

 

 

 

 

660,930

 

 

 

642,531

 

Accumulated depreciation and amortization

 

 

(349,643

)

 

 

(318,466

)

Property, plant and equipment, net

 

 

311,287

 

 

 

324,065

 

Other assets:

 

 

 

 

 

 

Operating lease right-of-use assets

 

 

217,739

 

 

 

210,702

 

Goodwill

 

 

16,153

 

 

 

15,034

 

Capitalized software, net

 

 

105,541

 

 

 

95,558

 

Investments

 

 

125,840

 

 

 

125,840

 

Other assets

 

 

41,260

 

 

 

37,968

 

Deferred income taxes

 

 

2,191

 

 

 

2,109

 

Total other assets

 

 

508,724

 

 

 

487,211

 

Total assets

 

$

1,646,409

 

 

$

1,671,816

 

Liabilities and stockholders' deficit

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

Current portion of long-term debt

 

$

55,787

 

 

$

55,588

 

Accounts payable

 

 

91,299

 

 

 

91,547

 

Operating lease liabilities

 

 

40,823

 

 

 

37,155

 

Insurance reserves

 

 

32,971

 

 

 

32,588

 

Dividends payable

 

 

39,632

 

 

 

918

 

Advertising fund liabilities

 

 

173,345

 

 

 

173,737

 

Other accrued liabilities

 

 

144,880

 

 

 

199,208

 

Total current liabilities

 

 

578,737

 

 

 

590,741

 

Long-term liabilities:

 

 

 

 

 

 

Long-term debt, less current portion

 

 

5,097,292

 

 

 

5,014,638

 

Operating lease liabilities

 

 

190,248

 

 

 

184,471

 

Insurance reserves

 

 

38,145

 

 

 

36,913

 

Other accrued liabilities

 

 

49,455

 

 

 

50,667

 

Deferred income taxes

 

 

9,077

 

 

 

3,922

 

Total long-term liabilities

 

 

5,384,217

 

 

 

5,290,611

 

Stockholders' deficit:

 

 

 

 

 

 

Common stock

 

 

354

 

 

 

361

 

Additional paid-in capital

 

 

587

 

 

 

840

 

Retained deficit

 

 

(4,313,643

)

 

 

(4,207,917

)

Accumulated other comprehensive loss

 

 

(3,843

)

 

 

(2,820

)

Total stockholders' deficit

 

 

(4,316,545

)

 

 

(4,209,536

)

Total liabilities and stockholders' deficit

 

$

1,646,409

 

 

$

1,671,816

 

 

(1) The condensed consolidated balance sheet at January 2, 2022 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.

The accompanying notes are an integral part of these condensed consolidated financial statements.

3


 

Domino’s Pizza, Inc. and Subsidiaries

Condensed Consolidated Statements of Income

(Unaudited)

 

 

Fiscal Quarter Ended

 

 

Three Fiscal Quarters Ended

 

 

 

September 11,

 

 

September 12,

 

 

September 11,

 

 

September 12,

 

(In thousands, except per share data)

 

2022

 

 

2021

 

 

2022

 

 

2021

 

Revenues:

 

 

 

 

 

 

 

 

 

 

 

 

U.S. Company-owned stores

 

$

112,388

 

 

$

108,416

 

 

$

328,785

 

 

$

337,749

 

U.S. franchise royalties and fees

 

 

128,878

 

 

 

121,624

 

 

 

379,261

 

 

 

372,946

 

Supply chain

 

 

646,082

 

 

 

588,819

 

 

 

1,902,215

 

 

 

1,760,119

 

International franchise royalties and fees

 

 

67,055

 

 

 

70,553

 

 

 

202,803

 

 

 

207,068

 

U.S. franchise advertising

 

 

114,193

 

 

 

108,578

 

 

 

331,863

 

 

 

336,278

 

Total revenues

 

 

1,068,596

 

 

 

997,990

 

 

 

3,144,927

 

 

 

3,014,160

 

Cost of sales:

 

 

 

 

 

 

 

 

 

 

 

 

U.S. Company-owned stores

 

 

98,589

 

 

 

86,932

 

 

 

280,029

 

 

 

260,693

 

Supply chain

 

 

588,157

 

 

 

525,858

 

 

 

1,728,159

 

 

 

1,571,426

 

Total cost of sales

 

 

686,746

 

 

 

612,790

 

 

 

2,008,188

 

 

 

1,832,119

 

Gross margin

 

 

381,850

 

 

 

385,200

 

 

 

1,136,739

 

 

 

1,182,041

 

General and administrative

 

 

91,205

 

 

 

96,342

 

 

 

285,769

 

 

 

288,043

 

U.S. franchise advertising

 

 

114,193

 

 

 

108,578

 

 

 

331,863

 

 

 

336,278

 

Income from operations

 

 

176,452

 

 

 

180,280

 

 

 

519,107

 

 

 

557,720

 

Other income

 

 

 

 

 

 

 

 

 

 

 

2,500

 

Interest income

 

 

833

 

 

 

48

 

 

 

1,101

 

 

 

138

 

Interest expense

 

 

(45,437

)

 

 

(45,523

)

 

 

(137,160

)

 

 

(130,822

)

Income before provision for income taxes

 

 

131,848

 

 

 

134,805

 

 

 

383,048

 

 

 

429,536

 

Provision for income taxes

 

 

31,344

 

 

 

14,403

 

 

 

89,087

 

 

 

74,754

 

Net income

 

$

100,504

 

 

$

120,402

 

 

$

293,961

 

 

$

354,782

 

Earnings per share:

 

 

 

 

 

 

 

 

 

 

 

 

Common stock - basic

 

$

2.82

 

 

$

3.29

 

 

$

8.20

 

 

$

9.43

 

Common stock - diluted

 

 

2.79

 

 

 

3.24

 

 

 

8.11

 

 

 

9.30

 

 

The accompanying notes are an integral part of these condensed consolidated financial statements.

 

 

 

4


 

Domino’s Pizza, Inc. and Subsidiaries

Condensed Consolidated Statements of Comprehensive Income

(Unaudited)

 

 

 

Fiscal Quarter Ended

 

 

Three Fiscal Quarters Ended

 

 

 

September 11,

 

 

September 12,

 

 

September 11,

 

 

September 12,

 

(In thousands)

 

2022

 

 

2021

 

 

2022

 

 

2021

 

Net income

 

$

100,504

 

 

$

120,402

 

 

$

293,961

 

 

$

354,782

 

Currency translation adjustment

 

 

47

 

 

 

(404

)

 

 

(1,023

)

 

 

12

 

Comprehensive income

 

$

100,551

 

 

$

119,998

 

 

$

292,938

 

 

$

354,794

 

 

The accompanying notes are an integral part of these condensed consolidated financial statements.

5


 

Domino’s Pizza, Inc. and Subsidiaries

Condensed Consolidated Statements of Cash Flows

(Unaudited)

 

 

 

Three Fiscal Quarters Ended

 

 

 

September 11,

 

 

September 12,

 

(In thousands)

 

2022

 

 

2021

 

Cash flows from operating activities:

 

 

 

 

 

 

Net income

 

$

293,961

 

 

$

354,782

 

Adjustments to reconcile net income to net cash provided by operating activities:

 

 

 

 

 

 

Depreciation and amortization

 

 

56,026

 

 

 

50,219

 

Loss on sale/disposal of assets

 

 

475

 

 

 

493

 

Amortization of debt issuance costs

 

 

3,937

 

 

 

5,770

 

Provision for deferred income taxes

 

 

5,912

 

 

 

4,831

 

Non-cash equity-based compensation expense

 

 

21,590

 

 

 

19,453

 

Excess tax benefits from equity-based compensation

 

 

(907

)

 

 

(18,258

)

Provision for losses on accounts and notes receivable

 

 

2,870

 

 

 

532

 

Unrealized gain on investments

 

 

 

 

 

(2,500

)

Changes in operating assets and liabilities

 

 

(49,288

)

 

 

20,212

 

Changes in advertising fund assets and liabilities, restricted

 

 

(4,422

)

 

 

49,067

 

Net cash provided by operating activities

 

 

330,154

 

 

 

484,601

 

Cash flows from investing activities:

 

 

 

 

 

 

Capital expenditures

 

 

(50,508

)

 

 

(50,652

)

Purchase of investments

 

 

 

 

 

(40,000

)

Purchase of franchise operations and other assets

 

 

(6,814

)

 

 

 

Other

 

 

(1,375

)

 

 

306

 

Net cash used in investing activities

 

 

(58,697

)

 

 

(90,346

)

Cash flows from financing activities:

 

 

 

 

 

 

Proceeds from issuance of long-term debt

 

 

120,000

 

 

 

1,850,000

 

Repayments of long-term debt and finance lease obligations

 

 

(41,441

)

 

 

(896,193

)

Proceeds from exercise of stock options

 

 

1,296

 

 

 

15,948

 

Purchases of common stock

 

 

(293,739

)

 

 

(1,104,687

)

Tax payments for restricted stock upon vesting

 

 

(10,691

)

 

 

(6,817

)

Payments of common stock dividends and equivalents

 

 

(79,689

)

 

 

(71,218

)

Cash paid for financing costs

 

 

 

 

 

(14,938

)

Other

 

 

 

 

 

(244

)

Net cash used in financing activities

 

 

(304,264

)

 

 

(228,149

)

Effect of exchange rate changes on cash

 

 

(611

)

 

 

58

 

Change in cash and cash equivalents, restricted cash and cash equivalents

 

 

(33,418

)

 

 

166,164

 

 

 

 

 

 

 

 

Cash and cash equivalents, beginning of period

 

 

148,160

 

 

 

168,821

 

Restricted cash and cash equivalents, beginning of period

 

 

180,579

 

 

 

217,453

 

Cash and cash equivalents included in advertising fund assets, restricted,
   beginning of period

 

 

161,741

 

 

 

115,872

 

Cash and cash equivalents, restricted cash and cash equivalents and cash and
   cash equivalents included in advertising fund assets, restricted, beginning of period

 

 

490,480

 

 

 

502,146

 

 

 

 

 

 

 

 

Cash and cash equivalents, end of period

 

 

114,776

 

 

 

295,352

 

Restricted cash and cash equivalents, end of period

 

 

184,564

 

 

 

206,274

 

Cash and cash equivalents included in advertising fund assets, restricted,
   end of period

 

 

157,722

 

 

 

166,684

 

Cash and cash equivalents, restricted cash and cash equivalents and cash and
   cash equivalents included in advertising fund assets, restricted, end of period

 

$

457,062

 

 

$

668,310

 

 

The accompanying notes are an integral part of these condensed consolidated financial statements.

6


 

Domino’s Pizza, Inc. and Subsidiaries

Notes to Condensed Consolidated Financial Statements

(Unaudited; tabular amounts in thousands, except percentages, share and per share amounts)

September 11, 2022

 

 

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 Rule 10-01 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. For further information, refer to the consolidated financial statements and footnotes for the fiscal year ended January 2, 2022 included in the Company’s 2021 Annual Report on Form 10-K, filed with the Securities and Exchange Commission on March 1, 2022 (the “2021 Form 10-K”).

In the opinion of management, all adjustments, consisting of normal recurring items, considered necessary for a fair statement have been included. Operating results for the fiscal quarter and three fiscal quarters ended September 11, 2022 are not necessarily indicative of the results that may be expected for the fiscal year ending January 1, 2023.

 

2. Segment Information

 

The following tables summarize revenues and earnings before interest, taxes, depreciation, amortization and other, which is the measure by which the Company allocates resources to its segments and which the Company refers to as Segment Income, for each of its reportable segments. Intersegment revenues are comprised of sales of food, equipment and supplies from the supply chain segment to the Company-owned stores in the U.S. stores segment. Intersegment sales prices are market based. The “Other” column as it relates to Segment Income below primarily includes corporate administrative costs that are not allocable to a reportable segment, including labor, computer expenses, professional fees, travel and entertainment, rent, insurance and other corporate administrative costs.

 

 

Fiscal Quarters Ended September 11, 2022 and September 12, 2021

 

 

 

U.S.

 

 

Supply

 

 

International

 

 

Intersegment

 

 

 

 

 

 

 

 

 

Stores

 

 

Chain

 

 

Franchise

 

 

Revenues

 

 

Other

 

 

Total

 

Revenues

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

2022

 

$

355,459

 

 

$

683,267

 

 

$

67,055

 

 

$

(37,185

)

 

$

 

 

$

1,068,596

 

2021

 

 

338,618

 

 

 

619,840

 

 

 

70,553

 

 

 

(31,021

)

 

 

 

 

 

997,990

 

Segment Income

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

2022

 

$

100,529

 

 

$

49,892

 

 

$

53,762

 

 

N/A

 

 

$

(2,919

)

 

$

201,264

 

2021

 

 

101,968

 

 

 

53,579

 

 

 

57,311

 

 

N/A

 

 

 

(10,010

)

 

 

202,848

 

 

 

 

Three Fiscal Quarters Ended September 11, 2022 and September 12, 2021

 

 

 

U.S.

 

 

Supply

 

 

International

 

 

Intersegment

 

 

 

 

 

 

 

 

 

Stores

 

 

Chain

 

 

Franchise

 

 

Revenues

 

 

Other

 

 

Total

 

Revenues

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

2022

 

$

1,039,909

 

 

$

2,008,526

 

 

$

202,803

 

 

$

(106,311

)

 

$

 

 

$

3,144,927

 

2021

 

 

1,046,973

 

 

 

1,854,609

 

 

 

207,068

 

 

 

(94,490

)

 

 

 

 

 

3,014,160

 

Segment Income

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

2022

 

$

301,876

 

 

$

149,874

 

 

$

161,698

 

 

N/A

 

 

$

(16,250

)

 

$

597,198

 

2021

 

 

321,252

 

 

 

164,723

 

 

 

168,145

 

 

N/A

 

 

 

(25,726

)

 

 

628,394

 

 

The following table reconciles total Segment Income to consolidated income before provision for income taxes.

 

 

 

Fiscal Quarter Ended

 

 

Three Fiscal Quarters Ended

 

 

 

September 11,

 

 

September 12,

 

 

September 11,

 

 

September 12,

 

 

 

2022

 

 

2021

 

 

2022

 

 

2021

 

Total Segment Income

 

$

201,264

 

 

$

202,848

 

 

$

597,198

 

 

$

628,394

 

Depreciation and amortization

 

 

(18,933

)

 

 

(16,578

)

 

 

(56,026

)

 

 

(50,219

)

Loss on sale/disposal of assets

 

 

(27

)

 

 

(37

)

 

 

(475

)

 

 

(493

)

Non-cash equity-based compensation expense

 

 

(5,852

)

 

 

(5,953

)

 

 

(21,590

)

 

 

(19,453

)

Recapitalization-related expenses

 

 

 

 

 

 

 

 

 

 

 

(509

)

Income from operations

 

 

176,452

 

 

 

180,280

 

 

 

519,107

 

 

 

557,720

 

Other income

 

 

 

 

 

 

 

 

 

 

 

2,500

 

Interest income

 

 

833

 

 

 

48

 

 

 

1,101

 

 

 

138

 

Interest expense

 

 

(45,437

)

 

 

(45,523

)

 

 

(137,160

)

 

 

(130,822

)

Income before provision for income taxes

 

$

131,848

 

 

$

134,805

 

 

$

383,048

 

 

$

429,536

 

 

7


 

 

3. Earnings Per Share

 

 

 

Fiscal Quarter Ended

 

 

Three Fiscal Quarters Ended

 

 

 

September 11,

 

 

September 12,

 

 

September 11,

 

 

September 12,

 

 

 

2022

 

 

2021

 

 

2022

 

 

2021

 

Net income available to common stockholders - basic and diluted

 

$

100,504

 

 

$

120,402

 

 

$

293,961

 

 

$

354,782

 

Basic weighted average number of shares

 

 

35,692,744

 

 

 

36,627,660

 

 

 

35,869,581

 

 

 

37,639,418

 

Earnings per share – basic

 

$

2.82

 

 

$

3.29

 

 

$

8.20

 

 

$

9.43

 

Diluted weighted average number of shares

 

 

36,062,316

 

 

 

37,130,209

 

 

 

36,265,918

 

 

 

38,144,509

 

Earnings per share – diluted

 

$

2.79

 

 

$

3.24

 

 

$

8.11

 

 

$

9.30

 

 

The denominators used in calculating diluted earnings per share for common stock for the fiscal quarters and three fiscal quarters each ended September 11, 2022 and September 12, 2021 do not include the following because the effect of including these shares would be anti-dilutive or because the performance condition for these awards had not yet been met:

 

 

 

Fiscal Quarter Ended

 

 

Three Fiscal Quarters Ended

 

 

 

September 11,

 

 

September 12,

 

 

September 11,

 

 

September 12,

 

 

 

2022

 

 

2021

 

 

2022

 

 

2021

 

Anti-dilutive shares underlying stock-based awards

 

 

 

 

 

 

 

 

 

 

 

 

   Stock options

 

 

116,641

 

 

 

625

 

 

 

117,328

 

 

 

80,103

 

   Restricted stock awards and units

 

 

1,561

 

 

 

 

 

 

1,285

 

 

 

5,641

 

Performance condition not met

 

 

 

 

 

 

 

 

 

 

 

 

   Restricted stock awards and units

 

 

41,800

 

 

 

62,131

 

 

 

41,800

 

 

 

62,131

 

 

4. Stockholders’ Deficit

The following table summarizes the changes in stockholders’ deficit for the third quarter of 2022:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Accumulated

 

 

 

 

 

 

 

 

 

Additional

 

 

 

 

 

Other

 

 

 

Common Stock

 

 

Paid-in

 

 

Retained

 

 

Comprehensive

 

 

 

Shares

 

 

Amount

 

 

Capital

 

 

Deficit

 

 

Loss

 

Balance at June 19, 2022

 

 

35,899,646

 

 

$

359

 

 

$

3,589

 

 

$

(4,180,367

)

 

$

(3,890

)

Net income

 

 

 

 

 

 

 

 

 

 

 

100,504

 

 

 

 

Dividends declared on common stock and equivalents
($
1.10 per share)

 

 

 

 

 

 

 

 

 

 

 

(39,035

)

 

 

 

Issuance and cancellation of stock awards, net

 

 

1,569

 

 

 

 

 

 

 

 

 

 

 

 

 

Tax payments for restricted stock upon vesting

 

 

(20,787

)

 

 

 

 

 

(7,925

)

 

 

(371

)

 

 

 

Purchases of common stock

 

 

(490,789

)

 

 

(5

)

 

 

(1,699

)

 

 

(194,374

)

 

 

 

Exercise of stock options

 

 

8,573

 

 

 

 

 

 

770

 

 

 

 

 

 

 

Non-cash equity-based compensation expense

 

 

 

 

 

 

 

 

5,852

 

 

 

 

 

 

 

Currency translation adjustment

 

 

 

 

 

 

 

 

 

 

 

 

 

 

47

 

Balance at September 11, 2022

 

 

35,398,212

 

 

$

354

 

 

$

587

 

 

$

(4,313,643

)

 

$

(3,843

)

 

8


 

The following table summarizes the changes in stockholders’ deficit for the three fiscal quarters of 2022:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Accumulated

 

 

 

 

 

 

 

 

 

Additional

 

 

 

 

 

Other

 

 

 

Common Stock

 

 

Paid-in

 

 

Retained

 

 

Comprehensive

 

 

 

Shares

 

 

Amount

 

 

Capital

 

 

Deficit

 

 

Loss

 

Balance at January 2, 2022

 

 

36,138,273

 

 

$

361

 

 

$

840

 

 

$

(4,207,917

)

 

$

(2,820

)

Net income

 

 

 

 

 

 

 

 

 

 

 

293,961

 

 

 

 

Dividends declared on common stock and equivalents
($
3.30 per share)

 

 

 

 

 

 

 

 

 

 

 

(118,403

)

 

 

 

Issuance and cancellation of stock awards, net

 

 

15,775

 

 

 

 

 

 

 

 

 

 

 

 

 

Tax payments for restricted stock upon vesting

 

 

(26,612

)

 

 

 

 

 

(10,320

)

 

 

(371

)

 

 

 

Purchases of common stock

 

 

(739,847

)

 

 

(7

)

 

 

(12,819

)

 

 

(280,913

)

 

 

 

Exercise of stock options

 

 

10,623

 

 

 

 

 

 

1,296

 

 

 

 

 

 

 

Non-cash equity-based compensation expense

 

 

 

 

 

 

 

 

21,590

 

 

 

 

 

 

 

Currency translation adjustment

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(1,023

)

Balance at September 11, 2022

 

 

35,398,212

 

 

$

354

 

 

$

587

 

 

$

(4,313,643

)

 

$

(3,843

)

 

Subsequent to the end of the third quarter of 2022, on October 11, 2022, the Company’s Board of Directors declared a $1.10 per share quarterly dividend on its outstanding common stock for shareholders of record as of December 15, 2022 to be paid on December 30, 2022.

 

The following table summarizes the changes in stockholders’ deficit for the third quarter of 2021:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Accumulated

 

 

 

 

 

 

 

 

 

Additional

 

 

 

 

 

Other

 

 

 

Common Stock

 

 

Paid-in

 

 

Retained

 

 

Comprehensive

 

 

 

Shares

 

 

Amount

 

 

Capital

 

 

Deficit

 

 

Loss

 

Balance at June 20, 2021

 

 

36,853,571

 

 

$

369

 

 

$

7,771

 

 

$

(4,146,702

)

 

$

(2,008

)

Net income

 

 

 

 

 

 

 

 

 

 

 

120,402

 

 

 

 

Dividends declared on common stock and equivalents
($
0.94 per share)

 

 

 

 

 

 

 

 

 

 

 

(34,400

)

 

 

 

Issuance and cancellation of stock awards, net

 

 

938

 

 

 

 

 

 

 

 

 

 

 

 

 

Tax payments for restricted stock upon vesting

 

 

(11,918

)

 

 

 

 

 

(5,730

)

 

 

 

 

 

 

Purchases of common stock

 

 

(391,007

)

 

 

(4

)

 

 

(14,801

)

 

 

(64,882

)

 

 

 

Exercise of stock options

 

 

113,903

 

 

 

1

 

 

 

6,922

 

 

 

 

 

 

 

Non-cash equity-based compensation expense

 

 

 

 

 

 

 

 

5,953

 

 

 

 

 

 

 

Currency translation adjustment

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(404

)

Balance at September 12, 2021

 

 

36,565,487

 

 

$

366

 

 

$

115

 

 

$

(4,125,582

)

 

$

(2,412

)

 

The following table summarizes the changes in stockholders’ deficit for the three fiscal quarters of 2021:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Accumulated

 

 

 

 

 

 

 

 

 

Additional

 

 

 

 

 

Other

 

 

 

Common Stock

 

 

Paid-in

 

 

Retained

 

 

Comprehensive

 

 

 

Shares

 

 

Amount

 

 

Capital

 

 

Deficit

 

 

Loss

 

Balance at January 3, 2021

 

 

38,868,350

 

 

$

389

 

 

$

5,122

 

 

$

(3,303,492

)

 

$

(2,424

)

Net income

 

 

 

 

 

 

 

 

 

 

 

354,782

 

 

 

 

Dividends declared on common stock and equivalents
($
2.82 per share)

 

 

 

 

 

 

 

 

 

 

 

(105,555

)

 

 

 

Issuance and cancellation of stock awards, net

 

 

(980

)

 

 

 

 

 

 

 

 

 

 

 

 

Tax payments for restricted stock upon vesting

 

 

(14,819

)

 

 

 

 

 

(6,817

)

 

 

 

 

 

 

Purchases of common stock

 

 

(2,469,473

)

 

 

(25

)

 

 

(33,345

)

 

 

(1,071,317

)

 

 

 

Exercise of stock options

 

 

182,409

 

 

 

2

 

 

 

15,946

 

 

 

 

 

 

 

Non-cash equity-based compensation expense

 

 

 

 

 

 

 

 

19,453

 

 

 

 

 

 

 

Other

 

 

 

 

 

 

 

 

(244

)

 

 

 

 

 

 

Currency translation adjustment

 

 

 

 

 

 

 

 

 

 

 

 

 

 

12

 

Balance at September 12, 2021

 

 

36,565,487

 

 

$

366

 

 

$

115

 

 

$

(4,125,582

)

 

$

(2,412

)

 

9


 

5. 2022 Variable Funding Notes

Subsequent to the end of the third quarter of 2022, on September 16, 2022 (the “Closing Date”), certain of the Company’s subsidiaries issued a new variable funding note facility which allows for advances of up to $120.0 million of Series 2022-1 Variable Funding Senior Secured Notes, Class A-1 Notes (the “2022 Variable Funding Notes”). The 2022 Variable Funding Notes were undrawn on the Closing Date. The Company's existing $200.0 million Series 2021-1 Variable Funding Senior Secured Notes, Class A-1 Notes (the “2021 Variable Funding Notes”) also remain in place.

6. Fair Value Measurements

Fair value measurements enable the reader of the financial statements to assess the inputs used to develop those measurements by establishing a hierarchy for ranking the quality and reliability of the information used to determine fair values. The Company classifies and discloses assets and liabilities carried at fair value in one of the following three categories:

Level 1: Quoted market prices in active markets for identical assets or liabilities.

Level 2: Observable market-based inputs or unobservable inputs that are corroborated by market data.

Level 3: Unobservable inputs that are not corroborated by market data.

 

Fair Value of Cash Equivalents and Investments

The fair values of the Company’s cash equivalents and investments in marketable securities are based on quoted prices in active markets for identical assets. The fair value of the Company’s Level 3 investment is not readily determinable. The fair value represents its cost with adjustments for observable changes in prices resulting from orderly transactions for the identical or a similar investment of the same issuer or impairments.

The following tables summarize the carrying amounts and fair values of certain assets at September 11, 2022 and January 2, 2022:

 

 

 

At September 11, 2022

 

 

 

 

 

 

Fair Value Estimated Using

 

 

 

Carrying

 

 

Level 1

 

 

Level 2

 

 

Level 3

 

 

 

Amount

 

 

Inputs

 

 

Inputs

 

 

Inputs

 

Cash equivalents

 

$

73,258

 

 

$

73,258

 

 

$

 

 

$

 

Restricted cash equivalents

 

 

117,195

 

 

 

117,195

 

 

 

 

 

 

 

Investments in marketable securities

 

 

13,498

 

 

 

13,498

 

 

 

 

 

 

 

Advertising fund cash equivalents, restricted

 

 

146,235

 

 

 

146,235

 

 

 

 

 

 

 

Investments

 

 

125,840

 

 

 

 

 

 

 

 

 

125,840

 

 

 

 

At January 2, 2022

 

 

 

 

 

 

Fair Value Estimated Using

 

 

 

Carrying

 

 

Level 1

 

 

Level 2

 

 

Level 3

 

 

 

Amount

 

 

Inputs

 

 

Inputs

 

 

Inputs

 

Cash equivalents

 

$

87,384

 

 

$

87,384

 

 

$

 

 

$

 

Restricted cash equivalents

 

 

115,185

 

 

 

115,185

 

 

 

 

 

 

 

Investments in marketable securities

 

 

15,433

 

 

 

15,433

 

 

 

 

 

 

 

Advertising fund cash equivalents, restricted

 

 

140,115

 

 

 

140,115

 

 

 

 

 

 

 

Investments

 

 

125,840

 

 

 

 

 

 

 

 

 

125,840

 

 

The Company holds a non-controlling interest in DPC Dash Ltd, a privately-held business company limited by shares incorporated with limited liability under the laws of the British Virgin Islands (“DPC Dash”). Through its subsidiaries, DPC Dash serves as the Company’s master franchisee in China that owns and operates Domino’s Pizza stores in that market. The Company’s investment in DPC Dash’s senior ordinary shares, which are not in-substance common stock, represents an equity investment without a readily determinable fair value and is recorded at cost with adjustments for observable changes in prices resulting from orderly transactions for the identical or a similar investment of the same issuer or impairments.

 

10


 

The Company did not record any adjustments to the carrying amount of $125.8 million in the third quarter or three fiscal quarters of 2022. The following table summarizes the reconciliation of the carrying amount of the Company’s investment in DPC Dash from the opening balance at January 3, 2021 to the closing balance at September 12, 2021 as a result of the additional investment made in the first quarter of 2021:

 

 

 

Three Fiscal Quarters Ended September 12, 2021

 

 

 

Carrying Amount

 

 

 

 

 

 

 

 

Carrying Amount

 

 

 

January 3,

 

 

 

 

 

Unrealized

 

 

September 12,

 

 

 

2021

 

 

Purchases

 

 

Gain

 

 

2021

 

Investments

 

$

40,000

 

 

$

40,000

 

 

$

2,500

 

 

$

82,500

 

 

Fair Value of Debt

 

The estimated fair values of the Company’s fixed rate notes are classified as Level 2 measurements, as the Company estimates the fair value amount by using available market information. The Company obtained quotes from two separate brokerage firms that are knowledgeable about the Company’s fixed rate notes and, at times, trade these notes. The Company also performed its own internal analysis based on the information gathered from public markets, including information on notes that are similar to those of the Company. However, considerable judgment is required to interpret market data to estimate fair value. Accordingly, the fair value estimates presented are not necessarily indicative of the amount that the Company or the debtholders could realize in a current market exchange. The use of different assumptions and/or estimation methodologies may have a material effect on the estimated fair values stated below.

 

Management estimated the approximate fair values of the Company's 2015, 2017, 2018, 2019 and 2021 fixed rate notes as follows:

 

 

 

September 11, 2022

 

 

January 2, 2022

 

 

 

Principal Amount

 

 

Fair Value

 

 

Principal Amount

 

 

Fair Value

 

2015 Ten-Year Notes

 

$

754,000

 

 

$

734,396

 

 

$

760,000

 

 

$

777,480

 

2017 Ten-Year Notes

 

 

955,000

 

 

 

899,610

 

 

 

962,500

 

 

 

1,000,038

 

2018 7.5-Year Notes

 

 

409,063

 

 

 

394,336

 

 

 

412,250

 

 

 

420,907

 

2018 9.25-Year Notes

 

 

385,000

 

 

 

365,750

 

 

 

388,000

 

 

 

407,788

 

2019 Ten-Year Notes

 

 

658,125

 

 

 

590,996

 

 

 

663,188

 

 

 

693,031

 

2021 7.5-Year Notes

 

 

839,375

 

 

 

722,702

 

 

 

845,750

 

 

 

849,133

 

2021 Ten-Year Notes

 

 

987,500

 

 

 

834,438

 

 

 

995,000

 

 

 

1,017,885

 

 

The Company’s 2021 Variable Funding Notes are a variable rate loan and the fair value of this loan approximates book value based on the borrowing rates currently available for variable rate loans obtained from third party lending institutions. This fair value represents a Level 2 measurement. The Company had $120.0 million of outstanding borrowings under its 2021 Variable Funding Notes at September 11, 2022 and, subsequent to the end of the third quarter of 2022, repaid $60.0 million of these outstanding borrowings. The Company did not have any outstanding borrowings under its 2021 Variable Funding Notes as of January 2, 2022.

 

7. Revenue Disclosures

 

Contract Liabilities

 

Contract liabilities primarily consist of deferred franchise fees and deferred development fees. Deferred franchise fees and deferred development fees of $5.5 million and $5.4 million were included in current other accrued liabilities as of September 11, 2022 and January 2, 2022, respectively. Deferred franchise fees and deferred development fees of $23.3 million and $24.3 million were included in long-term other accrued liabilities as of September 11, 2022 and January 2, 2022, respectively.

 

Changes in deferred franchise fees and deferred development fees for the three fiscal quarters of 2022 and the three fiscal quarters of 2021 were as follows:

 

 

 

Three Fiscal Quarters Ended

 

 

 

September 11,

 

 

September 12,

 

 

 

2022

 

 

2021

 

Deferred franchise fees and deferred development fees at beginning of period

 

$

29,694

 

 

$

19,090

 

Revenue recognized during the period

 

 

(4,688

)

 

 

(3,944

)

New deferrals due to cash received and other

 

 

3,774

 

 

 

4,784

 

Deferred franchise fees and deferred development fees at end of period

 

$

28,780

 

 

$

19,930

 

 

11


 

Advertising Fund Assets

 

As of September 11, 2022, advertising fund assets, restricted of $181.2 million consisted of $157.7 million of cash and cash equivalents, $16.4 million of accounts receivable and $7.1 million of prepaid expenses. As of September 11, 2022, advertising fund cash and cash equivalents included $7.9 million of cash contributed from U.S. Company-owned stores that had not yet been expended.

 

As of January 2, 2022, advertising fund assets, restricted of $180.9 million consisted of $161.7 million of cash and cash equivalents, $14.5 million of accounts receivable and $4.7 million of prepaid expenses. As of January 2, 2022, advertising fund cash and cash equivalents included $7.2 million of cash contributed from U.S. Company-owned stores that had not yet been expended.

8. Leases

The Company leases certain retail store and supply chain center locations, supply chain vehicles, equipment and its corporate headquarters with expiration dates through 2041.

The components of operating and finance lease cost for the third quarter and three fiscal quarters of 2022 and the third quarter and three fiscal quarters of 2021 were as follows:

 

 

Fiscal Quarter Ended

 

 

Three Fiscal Quarters Ended

 

 

 

September 11,

 

 

September 12,

 

 

September 11,

 

 

September 12,

 

 

 

2022

 

 

2021

 

 

2022

 

 

2021

 

Operating lease cost

 

$

11,302

 

 

$

10,451

 

 

$

32,366

 

 

$

31,201

 

Finance lease cost:

 

 

 

 

 

 

 

 

 

 

 

 

Amortization of right-of-use assets

 

 

1,228

 

 

 

1,022

 

 

 

3,631

 

 

 

2,944

 

Interest on lease liabilities

 

 

1,086

 

 

 

1,050

 

 

 

2,922

 

 

 

2,798

 

Total finance lease cost

 

$

2,314

 

 

$

2,072

 

 

$

6,553

 

 

$

5,742

 

 

Rent expense totaled $17.5 million and $55.4 million in the third quarter and three fiscal quarters of 2022, respectively. Rent expense totaled $18.3 million and $54.4 million in the third quarter and three fiscal quarters of 2021, respectively. Rent expense includes operating lease cost, as well as expense for non-lease components including common area maintenance, real estate taxes and other costs for the Company’s real estate leases. Rent expense also includes the variable rate per mile driven and fixed maintenance charges for the Company’s supply chain center tractors and trailers and expense for short-term rentals. Rent expense for certain short-term supply chain center tractor and trailer rentals was $1.3 million and $5.1 million in the third quarter and three fiscal quarters of 2022, respectively. Rent expense for short-term supply chain center tractor and trailer rentals was $1.8 million and $5.6 million in the third quarter and three fiscal quarters of 2021, respectively. Variable rent expense and rent expense for other short-term leases were immaterial in both the third quarter and three fiscal quarters of 2022 and 2021.

Supplemental balance sheet information related to the Company’s finance leases as of September 11, 2022 and January 2, 2022 was as follows:

 

 

September 11,

 

 

January 2,

 

 

 

2022

 

 

2022

 

Land and buildings

 

$

85,489

 

 

$

86,965

 

Equipment

 

 

1,802

 

 

 

 

Finance lease assets

 

 

87,291

 

 

 

86,965

 

Accumulated depreciation and amortization

 

 

(18,031

)

 

 

(14,423

)

Finance lease assets, net

 

$

69,260

 

 

$

72,542

 

 

 

 

 

 

 

 

Current portion of long-term debt

 

$

4,287

 

 

$

4,088

 

Long-term debt, less current portion

 

 

69,591

 

 

 

72,250

 

Total principal payable on finance leases

 

$

73,878

 

 

$

76,338

 

 

As of September 11, 2022 and January 2, 2022, the weighted average remaining lease term and weighted average discount rate for the Company’s operating and finance leases were as follows:

 

 

September 11, 2022

 

January 2, 2022

 

 

Operating

 

Finance

 

Operating

 

Finance

 

 

Leases

 

Leases

 

Leases

 

Leases

Weighted average remaining lease term

 

6 years

 

14 years

 

7 years

 

15 years

Weighted average discount rate

 

3.6%

 

5.8%

 

3.5%

 

5.8%

 

12


 

Supplemental cash flow information related to leases for the third quarter and three fiscal quarters of 2022 and the third quarter and three fiscal quarters of 2021 were as follows:

 

 

Fiscal Quarter Ended

 

 

Three Fiscal Quarters Ended

 

 

 

September 11,

 

 

September 12,

 

 

September 11,

 

 

September 12,

 

 

 

2022

 

 

2021

 

 

2022

 

 

2021

 

Cash paid for amounts included in the measurement of lease liabilities:

 

 

 

 

 

 

 

 

 

 

 

 

Operating cash flows from operating leases

 

$

11,581

 

 

$

10,236

 

 

$

30,076

 

 

$

29,528

 

Operating cash flows from finance leases

 

 

1,086

 

 

 

1,050

 

 

 

2,922

 

 

 

2,798

 

Financing cash flows from finance leases

 

 

1,038

 

 

 

771

 

 

 

2,816

 

 

 

2,068

 

Right-of-use assets obtained in exchange for lease obligations:

 

 

 

 

 

 

 

 

 

 

 

 

Operating leases

 

 

4,241

 

 

 

7,785

 

 

 

35,405

 

 

 

19,138

 

Finance leases

 

 

453

 

 

 

390

 

 

 

453

 

 

 

6,050

 

 

Maturities of lease liabilities as of September 11, 2022 were as follows:

 

 

 

Operating

 

 

Finance

 

 

 

Leases

 

 

Leases

 

2022

 

$

18,493

 

 

$

2,745

 

2023

 

 

43,705

 

 

 

7,623

 

2024

 

 

43,399

 

 

 

8,209

 

2025

 

 

37,856

 

 

 

8,028

 

2026

 

 

35,257

 

 

 

8,724

 

Thereafter

 

 

81,564

 

 

 

77,868

 

Total future minimum rental commitments

 

 

260,274

 

 

 

113,197

 

Less – amounts representing interest

 

 

(29,203

)

 

 

(39,319

)

Total lease liabilities

 

$

231,071

 

 

$

73,878

 

 

As of September 11, 2022, the Company had additional leases for one supply chain center, one storage warehouse facility and certain supply chain and U.S. Company-owned store vehicles that had not yet commenced with estimated future minimum rental commitments of approximately $72.3 million. These leases are expected to commence in 2022 and 2023 with lease terms of up to 16 years. These undiscounted amounts are not included in the table above.

The Company has guaranteed lease payments related to certain franchisees’ and others’ lease arrangements. The maximum amount of potential future payments under these guarantees was $7.1 million and $9.1 million as of September 11, 2022 and January 2, 2022, respectively. The Company does not believe these arrangements have had or are likely to have a material effect on its results of operations, financial condition, revenues, expenses or liquidity.

9. Supplemental Disclosures of Cash Flow Information

 

The Company had non-cash investing activities related to accruals for capital expenditures of $6.0 million at September 11, 2022 and $5.4 million at January 2, 2022. The Company also had $0.1 million of non-cash investing activities related to lease incentives in the three fiscal quarters of both 2022 and 2021.

10. Company-owned Store Transactions

 

During the first quarter of 2022, the Company purchased 23 U.S. franchised stores from certain of the Companys existing U.S. franchisees for $6.8 million, which included $4.0 million of intangibles, $1.7 million of equipment and leasehold improvements and $1.1 million of goodwill.

 

Subsequent to the end of the third quarter of 2022, the Company sold 114 U.S. Company-owned stores in Arizona and Utah to certain of its franchisees for $41.1 million, and the Company expects to record a gain on this transaction in the fourth quarter of 2022. The accounting for this transaction is still in process as of the date these condensed consolidated financial statements were issued and therefore the Company is unable to make any additional disclosures.
 

 

13


 

11. New Accounting Pronouncements

Accounting Standards Not Yet Adopted

 

The Company has considered all new accounting standards issued by the Financial Accounting Standards Board (“FASB”). The Company has not yet adopted the following standard.

 

Accounting Standards Update (“ASU”) 2020-04, Facilitation of the Effects of Reference Rate Reform on Financial Reporting

 

In March 2020, the FASB issued ASU 2020-04, Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting (“ASU 2020-04”), which provides temporary optional expedients and exceptions for applying generally accepted accounting principles to contracts, hedging relationships and other transactions affected by reference rate reform. The Company’s 2021 Variable Funding Notes bear interest at fluctuating interest rates based on LIBOR. However, the associated loan documents contemplate a transition from LIBOR to secured overnight financing rate (“SOFR”) in the event that LIBOR ceases to exist. The Company’s 2022 Variable Funding Notes bear interest at fluctuating interest rates based on SOFR. ASU 2020-04 may currently be adopted and may be applied prospectively to contract modifications made on or before December 31, 2022. The Company does not expect the adoption of this guidance to have a material impact on its condensed consolidated financial statements.

14


 

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

(Unaudited; tabular amounts in millions, except percentages and store data)

The 2022 and 2021 third quarters referenced herein represent the twelve-week periods ended September 11, 2022 and September 12, 2021, respectively. The 2022 and 2021 three fiscal quarters referenced herein represent the thirty-six-week periods ended September 11, 2022 and September 12, 2021, respectively. In this section, we discuss the results of our operations for the third quarter and three fiscal quarters of 2022 as compared to the third quarter and three fiscal quarters of 2021.

 

Overview

 

Domino’s is the largest pizza company in the world with more than 19,500 locations in over 90 markets around the world as of September 11, 2022, and operates two distinct service models within its stores with a significant business in both delivery and carryout. Founded in 1960, our roots are in convenient pizza delivery, while a significant amount of our sales also come from carryout customers. We are a highly recognized global brand, and we focus on serving neighborhoods locally through our large worldwide network of franchise owners and U.S. Company-owned stores. We are primarily a franchisor, with approximately 98% of Domino’s global stores currently owned and operated by our independent franchisees. Franchising enables an individual to be his or her own employer and maintain control over all employment-related matters and pricing decisions, while also benefiting from the strength of the Domino’s global brand and operating system with limited capital investment by us.

 

The Domino’s business model is straightforward: Domino’s stores handcraft and serve quality food at a competitive price, with easy ordering access and efficient service, enhanced by our technological innovations. Our hand-tossed dough is made fresh and distributed to stores around the world by us and our franchisees.

 

Domino’s generates revenues and earnings by charging royalties and fees to our franchisees. Royalties are ongoing percent-of-sales fees for use of the Domino’s® brand marks. We also generate revenues and earnings by selling food, equipment and supplies to franchisees through our supply chain operations, primarily in the U.S. and Canada, and by operating a number of Company-owned stores in the United States. Franchisees profit by selling pizza and other complementary items to their local customers. In our international markets, we generally grant geographical rights to the Domino’s Pizza® brand to master franchisees. These master franchisees are charged with developing their geographical area, and they may profit by sub-franchising and selling food and equipment to those sub-franchisees, as well as by running pizza stores. We believe that everyone in the system can benefit, including the end consumer, who can purchase Domino’s menu items for themselves and their family conveniently and economically.

 

The Domino’s business model can yield strong returns for our franchise owners and our Company-owned stores. It can also yield significant cash flows to us, through a consistent franchise royalty payment and supply chain revenue stream, with moderate capital expenditures. We have historically returned cash to shareholders through dividend payments and share repurchases. We believe we have a proven business model for success, which includes leading with technology, service and product innovation and leveraging our global scale, which has historically driven strong returns for our shareholders.

 

Third Quarter of 2022 Highlights

 

Global retail sales, excluding foreign currency impact (which includes total retail sales at Company-owned and franchised stores worldwide) increased 4.7% as compared to the third quarter of 2021. U.S. retail sales increased 4.1% and international retail sales, excluding foreign currency impact, increased 5.2% as compared to the third quarter of 2021.
Same store sales increased 2.0% in our U.S. stores and declined 1.8% in our international stores (excluding foreign currency impact).
Revenues increased 7.1%.
Income from operations decreased 2.1%.
Net income decreased 16.5%.
Diluted earnings per share decreased 13.9%.

 

Three Fiscal Quarters of 2022 Highlights

 

Global retail sales, excluding foreign currency impact (which includes total retail sales at Company-owned and franchised stores worldwide) increased 3.2% as compared to the three fiscal quarters of 2021. U.S. retail sales increased 0.7% and international retail sales, excluding foreign currency impact, increased 5.7% as compared to the three fiscal quarters of 2021.
Same store sales declined 1.6% in our U.S. stores and declined 0.8% in our international stores (excluding foreign currency impact).
Revenues increased 4.3%.
Income from operations decreased 6.9%.
Net income decreased 17.1%.
Diluted earnings per share decreased 12.8%.

 

15


 

Excluding the negative impact of foreign currency, Dominos experienced global retail sales growth during the third quarter and three fiscal quarters of 2022. We believe our commitment to value, convenience, quality and new products continues to keep consumers engaged with the brand. U.S. same store sales increased 2.0% in the third quarter of 2022 and declined 1.6% in the three fiscal quarters of 2022, rolling over a decrease in U.S. same store sales of 1.9% in the third quarter of 2021 and an increase in U.S. same store sales of 4.6% in the three fiscal quarters of 2021. The decline in U.S. same store sales in the three fiscal quarters of 2022 was attributable to lower order counts due in part to labor shortages affecting store hours and staffing levels in many of our markets and economic stimulus activity in the U.S in the three fiscal quarters of 2021 in response to the COVID-19 pandemic which did not recur in the respective periods of 2022. A higher average ticket per transaction resulting from higher menu and national offer pricing, as well as increases to our average delivery fee contributed to the increase in U.S. same store sales in the third quarter of 2022 and partially offset the decline in U.S. same store sales in the three fiscal quarters of 2022.

International same store sales (excluding foreign currency impact) declined 1.8% and 0.8% in the third quarter and three fiscal quarters of 2022, respectively, rolling over increases in international same store sales (excluding foreign currency impact) of 8.8% and 11.4% in the third quarter and three fiscal quarters of 2021, respectively. The decline in same store sales (excluding foreign currency impact) in the third quarter and three fiscal quarters of 2022 in our international business was driven in part by a value added tax holiday in the United Kingdom in the three fiscal quarters of 2021 that did not recur in the second and third quarter of 2022. Our U.S. and international same store sales (excluding foreign currency impact) continue to be pressured by our fortressing strategy, which includes increasing store concentration in certain markets where we compete, as well as from aggressive competitive activity.

During the third quarter and three fiscal quarters of 2022, we experienced significant inflationary pressures in our commodity, labor and fuel costs resulting from the macroeconomic environment in the U.S., which had a significant impact on our overall operating results as compared to the respective periods of 2021.

We continued our global expansion with the opening of 225 net stores in the third quarter of 2022, bringing our year-to-date total to 671. We had 24 net stores open in the U.S. and 201 net stores open internationally during the third quarter of 2022.

Overall, we believe our continued global store growth, along with our global retail sales growth (excluding foreign currency impact), emphasis on technology, operations, and marketing initiatives, have combined to strengthen our brand.

16


 

Statistical Measures

 

The tables below outline certain statistical measures we utilize to analyze our performance. This historical data is not necessarily indicative of results to be expected for any future period.

 

Global Retail Sales Growth (excluding foreign currency impact)

 

Global retail sales growth (excluding foreign currency impact) is a commonly used statistical measure in the quick-service restaurant industry that is important to understanding performance. Global retail sales refers to total worldwide retail sales at Company-owned and franchise stores. We believe global retail sales information is useful in analyzing revenues because franchisees pay royalties and, in the U.S., advertising fees that are based on a percentage of franchise retail sales. We review comparable industry global retail sales information to assess business trends and to track the growth of the Domino’s Pizza brand. In addition, supply chain revenues are directly impacted by changes in franchise retail sales in the U.S. and Canada. Retail sales for franchise stores are reported to us by our franchisees and are not included in our revenues. Global retail sales growth, excluding foreign currency impact, is calculated as the change of international local currency global retail sales against the comparable period of the prior year.

 

 

 

Third Quarter
of 2022

 

Third Quarter
of 2021

 

Three Fiscal Quarters
of 2022

 

Three Fiscal Quarters
of 2021

U.S. stores

 

+4.1%

 

+1.1%

 

+0.7%

 

+7.6%

International stores (excluding foreign currency impact)

 

+5.2%

 

+16.5%

 

+5.7%

 

+19.2%

Total (excluding foreign currency impact)

 

+4.7%

 

+8.5%

 

+3.2%

 

+13.1%

 

Same Store Sales Growth

 

Same store sales growth is a commonly used statistical measure in the quick-service restaurant industry that is important to understanding performance. Same store sales growth is calculated by including only sales from stores that also had sales in the comparable weeks of both years. International same store sales growth is calculated similarly to U.S. same store sales growth. Changes in international same store sales are reported excluding foreign currency impacts, which reflect changes in international local currency sales.

 

 

 

Third Quarter
of 2022

 

Third Quarter
of 2021

 

Three Fiscal Quarters
of 2022

 

Three Fiscal Quarters
of 2021

U.S. Company-owned stores (1)

 

(1.9)%

 

(8.9)%

 

(7.3)%

 

(2.0)%

U.S. franchise stores (1)

 

+2.2%

 

(1.5)%

 

(1.2)%

 

+5.1%

U.S. stores

 

+2.0%

 

(1.9)%

 

(1.6)%

 

+4.6%

International stores (excluding foreign currency impact)

 

(1.8)%

 

+8.8%

 

(0.8)%

 

+11.4%

 

(1) During the first quarter of 2022, we purchased 23 U.S. franchised stores from certain of our existing U.S. franchisees (the “2022 Store Purchase”). The same store sales growth for these stores is reflected in U.S. Company-owned stores in the third quarter and three fiscal quarters of 2022.

 

Store Growth Activity

 

Store counts and net store growth are commonly used statistical measures in the quick-service restaurant industry that are important to understanding performance.

 

 

 

U.S.
Company-
owned
 Stores

 

 

U.S.
Franchise
Stores

 

 

Total
U.S.
Stores

 

 

International Stores

 

 

Total

 

Store count at June 19, 2022

 

 

401

 

 

 

6,218

 

 

 

6,619

 

 

 

12,675

 

 

 

19,294

 

Openings

 

 

1

 

 

 

26

 

 

 

27

 

 

 

263

 

 

 

290

 

Closings (1)

 

 

 

 

 

(3

)

 

 

(3

)

 

 

(62

)

 

 

(65

)

Store count at September 11, 2022

 

 

402

 

 

 

6,241

 

 

 

6,643

 

 

 

12,876

 

 

 

19,519

 

Third quarter 2022 net store growth

 

 

1

 

 

 

23

 

 

 

24

 

 

 

201

 

 

 

225

 

Trailing four quarters net store growth (2)

 

 

12

 

 

 

160

 

 

 

172

 

 

 

967

 

 

 

1,139

 

 

(1) Temporary store closures are not treated as store closures and affected stores are included in the ending store count. Based on information reported to us by our master franchisees, we estimate that as of September 11, 2022, there were fewer than 125 international stores temporarily closed.

(2) Trailing four quarters net store growth does not include the effect of transfers associated with the 2022 Store Purchase.

17


 

Income Statement Data

 

 

 

Third Quarter
of 2022

 

Third Quarter
of 2021

 

Three Fiscal Quarters
of 2022

 

Three Fiscal Quarters
of 2021

U.S. Company-owned stores

 

$112.4

 

 

 

$108.4

 

 

 

$328.8

 

 

 

$337.7

 

 

U.S. franchise royalties and fees

 

  128.9

 

 

 

  121.6

 

 

 

  379.3

 

 

 

  372.9

 

 

Supply chain

 

  646.1

 

 

 

  588.8

 

 

 

  1,902.2

 

 

 

  1,760.1

 

 

International franchise royalties and fees

 

  67.1

 

 

 

  70.6

 

 

 

  202.8

 

 

 

  207.1

 

 

U.S. franchise advertising

 

  114.2

 

 

 

  108.6

 

 

 

  331.9

 

 

 

  336.3

 

 

Total revenues

 

  1,068.6

 

100.0%

 

  998.0

 

100.0%

 

  3,144.9

 

100.0%

 

  3,014.2

 

100.0%

U.S. Company-owned stores

 

  98.6

 

 

 

  86.9

 

 

 

  280.0

 

 

 

  260.7

 

 

Supply chain

 

  588.2

 

 

 

  525.9

 

 

 

  1,728.2

 

 

 

  1,571.4

 

 

Total cost of sales

 

  686.7

 

64.3%

 

  612.8

 

61.4%

 

  2,008.2

 

63.9%

 

  1,832.1

 

60.8%

Gross margin

 

  381.9

 

35.7%

 

  385.2

 

38.6%

 

  1,136.7

 

36.1%

 

  1,182.0

 

39.2%

General and administrative

 

  91.2

 

8.5%

 

  96.3

 

9.6%

 

  285.8

 

9.1%

 

  288.0

 

9.6%

U.S. franchise advertising

 

  114.2

 

10.7%

 

  108.6

 

10.9%

 

  331.9

 

10.5%

 

  336.3

 

11.1%

Income from operations

 

  176.5

 

16.5%

 

  180.3

 

18.1%

 

  519.1

 

16.5%

 

  557.7

 

18.5%

Other income

 

  —

 

0.0%

 

  —

 

0.0%

 

  —

 

0.0%

 

  2.5

 

0.1%

Interest expense, net

 

  (44.6)

 

(4.2)%

 

  (45.5)

 

(4.6)%

 

  (136.1)

 

(4.3)%

 

  (130.7)

 

(4.3)%

Income before provision for income taxes

 

  131.8

 

12.3%

 

  134.8

 

13.5%

 

  383.0

 

12.2%

 

  429.5

 

14.3%

Provision for income taxes

 

  31.3

 

2.9%

 

  14.4

 

1.4%

 

  89.1

 

2.9%

 

  74.8

 

2.5%

Net income

 

$100.5

 

9.4%

 

$120.4

 

12.1%

 

$294.0

 

9.3%

 

$354.8

 

11.8%

Revenues

 

 

 

Third Quarter
of 2022

 

 

Third Quarter
of 2021

 

 

Three Fiscal Quarters
of 2022

 

 

Three Fiscal Quarters
of 2021

 

U.S. Company-owned stores

 

$

112.4

 

 

 

10.5

%

 

$

108.4

 

 

 

10.8

%

 

$

328.8

 

 

 

10.4

%

 

$

337.7

 

 

 

11.2

%

U.S. franchise royalties and fees

 

 

128.9

 

 

 

12.1

%

 

 

121.6

 

 

 

12.2

%

 

 

379.3

 

 

 

12.1

%

 

 

372.9

 

 

 

12.4

%

Supply chain

 

 

646.1

 

 

 

60.4

%

 

 

588.8

 

 

 

59.0

%

 

 

1,902.2

 

 

 

60.5

%

 

 

1,760.1

 

 

 

58.4

%

International franchise royalties and fees

 

 

67.1

 

 

 

6.3

%

 

 

70.6

 

 

 

7.1

%

 

 

202.8

 

 

 

6.4

%

 

 

207.1

 

 

 

6.9

%

U.S. franchise advertising

 

 

114.2

 

 

 

10.7

%

 

 

108.6

 

 

 

10.9

%

 

 

331.9

 

 

 

10.6

%

 

 

336.3

 

 

 

11.1

%

Total revenues

 

$

1,068.6

 

 

 

100.0

%

 

$

998.0

 

 

 

100.0

%

 

$

3,144.9

 

 

 

100.0

%

 

$

3,014.2

 

 

 

100.0

%

 

Revenues primarily consist of retail sales from our Company-owned stores, royalties, advertising contributions and fees from our U.S. franchised stores, royalties and fees from our international franchised stores and sales of food, equipment and supplies from our supply chain centers to substantially all of our U.S. 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 from period to period as a result of fluctuations in commodity prices as well as the mix of products we sell.

U.S. Stores Revenues

 

 

Third Quarter
of 2022

 

 

Third Quarter
of 2021

 

 

Three Fiscal Quarters
of 2022

 

 

Three Fiscal Quarters
of 2021

 

U.S. Company-owned stores

 

$

112.4

 

 

 

31.6

%

 

$

108.4

 

 

 

32.0

%

 

$

328.8

 

 

 

31.6

%

 

$

337.7

 

 

 

32.3

%

U.S. franchise royalties and fees

 

 

128.9

 

 

 

36.3

%

 

 

121.6

 

 

 

35.9

%

 

 

379.3

 

 

 

36.5

%

 

 

372.9

 

 

 

35.6

%

U.S. franchise advertising

 

 

114.2

 

 

 

32.1

%

 

 

108.6

 

 

 

32.1

%

 

 

331.9

 

 

 

31.9

%

 

 

336.3

 

 

 

32.1

%

U.S. stores

 

$

355.5

 

 

 

100.0

%

 

$

338.6

 

 

 

100.0

%

 

$

1,039.9

 

 

 

100.0

%

 

$

1,047.0

 

 

 

100.0

%

 

18


 

U.S. Company-owned Stores

 

Revenues from U.S. Company-owned store operations increased $4.0 million, or 3.7%, in the third quarter of 2022 due to an increase in the average number of U.S. Company-owned stores open during the period resulting from net store growth and the 2022 Store Purchase, and was partially offset by a decline in U.S. Company-owned same store sales. Revenues from U.S. Company-owned store operations decreased $9.0 million, or 2.7%, in the three fiscal quarters of 2022 due to a decline in U.S. Company-owned same store sales. This decrease was partially offset by an increase in the average number of U.S. Company-owned stores open during the period resulting from net store growth and the 2022 Store Purchase.

 

U.S. Company-owned same store sales declined 1.9% and 7.3% in the third quarter and three fiscal quarters of 2022, respectively. U.S. Company-owned same store sales declined 8.9% and 2.0% in the third quarter and three fiscal quarters of 2021, respectively.

 

U.S. Franchise Royalties and Fees

 

Revenues from U.S. franchise royalties and fees increased $7.3 million, or 6.0%, in the third quarter of 2022 due to an increase in U.S. franchise same store sales, as well as an increase in the average number of U.S. franchised stores open during the period resulting from net store growth and higher revenues from fees paid by our franchisees for the use of our technology platforms. Revenues from U.S. franchise royalties and fees increased $6.3 million, or 1.7%, in the three fiscal quarters of 2022 due primarily to an increase in revenues from fees paid by our franchisees for the use of our technology platforms as well as an increase in the average number of U.S. franchised stores open during the period resulting from net store growth. These increases were partially offset by a decline in U.S. franchise same store sales in the three fiscal quarters of 2022. Revenues from U.S. franchise royalties and fees were negatively impacted by the 2022 Store Purchase in both the third quarter and three fiscal quarters of 2022.

 

U.S. franchise same store sales increased 2.2% in the third quarter of 2022 and declined 1.2% in the three fiscal quarters of 2022. U.S. franchise same store sales declined 1.5% in the third quarter of 2021 and increased 5.1% in the three fiscal quarters of 2021.

 

U.S. Franchise Advertising

 

Revenues from U.S. franchise advertising increased $5.6 million, or 5.2%, in the third quarter of 2022 due primarily to an increase in U.S. franchise same store sales and an increase in the average number of U.S. franchised stores open during the period resulting from net store growth, partially offset by the 2022 Store Purchase. Approximately $2.8 million in advertising incentives related to certain brand promotions in the third quarter of 2021, which did not recur in the third quarter of 2022, also contributed to the increase in U.S. franchise advertising revenue in the third quarter of 2022.

 

Revenues from U.S. franchise advertising decreased $4.4 million, or 1.3%, in the three fiscal quarters of 2022 due primarily to a decline in U.S. franchise same store sales. Additionally, the Company recorded approximately $2.3 million more in advertising incentives related to certain brand promotions in the three fiscal quarters of 2022 as compared to the three fiscal quarters of 2021, which also contributed to the decrease in U.S. franchise advertising revenues. The decrease in U.S. franchise advertising revenues in the three fiscal quarters of 2022 was partially offset by an increase in the average number of U.S. franchised stores open during the period resulting from net store growth, but was partially offset by the 2022 Store Purchase.

 

Supply Chain

 

Supply chain revenues increased $57.3 million, or 9.7%, in the third quarter of 2022, and increased $142.1 million, or 8.1%, in the three fiscal quarters of 2022 due to higher market basket pricing to stores, partially offset by lower order volumes at our U.S. franchise stores during the respective periods. Our market basket pricing to stores increased 13.4% during the third quarter of 2022, which resulted in an estimated $69.0 million increase in supply chain revenues. Our market basket pricing to stores increased 13.5% during the three fiscal quarters of 2022, which resulted in an estimated $202.2 million increase in supply chain revenues.

 

International Franchise Royalties and Fee Revenues

 

Revenues from international franchise royalties and fees decreased $3.5 million, or 5.0%, in the third quarter of 2022, and decreased $4.3 million, or 2.1%, in the three fiscal quarters of 2022 due primarily to the negative impact of changes in foreign currency exchange rates of $7.9 million and $18.0 million in the third quarter and three fiscal quarters of 2022, respectively. A decline in international same store sales (excluding foreign currency impact) in the third quarter and three fiscal quarters of 2022 also contributed to the decreases in international franchise revenues in the respective periods. An increase in the average number of international franchise stores open during the respective periods, resulting from net store growth, partially offset the declines in revenues.

 

Excluding the impact of foreign currency exchange rates, international franchise same store sales declined 1.8% and 0.8% in the third quarter and three fiscal quarters of 2022, respectively. Excluding the impact of foreign currency exchange rates, international franchise same store sales increased 8.8% and 11.4% in the third quarter and three fiscal quarters of 2021, respectively.

19


 

Cost of Sales / Gross Margin

 

 

 

 

Third Quarter
of 2022

 

 

Third Quarter
of 2021

 

 

Three Fiscal Quarters
of 2022

 

 

Three Fiscal Quarters
of 2021

 

Total revenues

 

$

1,068.6

 

 

 

100.0

%

 

$

998.0

 

 

 

100.0

%

 

$

3,144.9

 

 

 

100.0

%

 

$

3,014.2

 

 

 

100.0

%

Total cost of sales

 

 

686.7

 

 

 

64.3

%

 

 

612.8

 

 

 

61.4

%

 

 

2,008.2

 

 

 

63.9

%

 

 

1,832.1

 

 

 

60.8

%

Gross margin

 

$

381.9

 

 

 

35.7

%

 

$

385.2

 

 

 

38.6

%

 

$

1,136.7

 

 

 

36.1

%

 

$

1,182.0

 

 

 

39.2

%

 

Consolidated cost of sales consists of U.S. Company-owned store and supply chain costs incurred to generate the related revenues. Components of consolidated cost of sales primarily include food, labor, delivery and occupancy costs. Consolidated gross margin (which we define as revenues less cost of sales) decreased $3.3 million, or 0.9%, in the third quarter of 2022, and decreased $45.3 million, or 3.8%, in the three fiscal quarters of 2022, due primarily to lower U.S. Company-owned store revenues, as well as higher food, labor and delivery costs. Franchise revenues do not have a cost of sales component, so changes in these revenues have a disproportionate effect on gross margin. Additionally, as our market basket prices fluctuate, our revenues and gross margin percentages in our supply chain segment also fluctuate; however, actual product-level dollar gross margins remain unchanged.

 

As a percentage of revenues, the consolidated gross margin decreased 2.9 percentage points in the third quarter of 2022, and decreased 3.1 percentage points in the three fiscal quarters of 2022. U.S. Company-owned store gross margin decreased 7.5 percentage points in the third quarter of 2022, and decreased 8.0 percentage points in the three fiscal quarters of 2022. Supply chain gross margin decreased 1.7 percentage points in the third quarter of 2022, and decreased 1.5 percentage points in the three fiscal quarters of 2022. These changes in gross margin are described below.

 

U.S. Company-Owned Store Gross Margin

 

 

Third Quarter
of 2022

 

 

Third Quarter
of 2021

 

 

Three Fiscal Quarters
of 2022

 

 

Three Fiscal Quarters
of 2021

 

Revenues

 

$

112.4

 

 

 

100.0

%

 

$

108.4

 

 

 

100.0

%

 

$

328.8

 

 

 

100.0

%

 

$

337.7

 

 

 

100.0

%

Cost of sales

 

 

98.6

 

 

 

87.7

%

 

 

86.9

 

 

 

80.2

%

 

 

280.0

 

 

 

85.2

%

 

 

260.7

 

 

 

77.2

%

Store gross margin

 

$

13.8

 

 

 

12.3

%

 

$

21.5

 

 

 

19.8

%

 

$

48.8

 

 

 

14.8

%

 

$

77.0

 

 

 

22.8

%

 

U.S. Company-owned store gross margin (which does not include certain store-level costs such as royalties and advertising) decreased $7.7 million, or 35.8%, in the third quarter of 2022 due primarily to higher food and labor costs. U.S. Company-owned store gross margin decreased $28.2 million, or 36.7%, in the three fiscal quarters of 2022 due primarily to lower same store sales, as well as higher food and labor costs. As a percentage of store revenues, the U.S. Company-owned store gross margin decreased 7.5 percentage points in the third quarter of 2022, and decreased 8.0 percentage points in the three fiscal quarters of 2022. These changes in gross margin as a percentage of revenues are discussed in additional detail below.

Food costs increased 4.1 percentage points to 32.5% in the third quarter of 2022, and increased 4.1 percentage points to 31.7% in the three fiscal quarters of 2022 as a result of higher food basket prices.
Labor costs increased 1.7 percentage points to 31.6% in the third quarter of 2022, and increased 1.9 percentage points to 30.5% in the three fiscal quarters of 2022 due primarily to continued investments in frontline team member wage rates in our U.S. Company-owned stores, as well as lower sales leverage.
Occupancy costs, including rent, telephone, utilities and depreciation, increased 0.9 percentage points to 9.6% in the third quarter of 2022, and increased 1.4 percentage points to 9.3% in the three fiscal quarters of 2022 due primarily to lower sales leverage, as well as higher utility rates in our U.S. Company-owned stores.
Insurance costs increased 0.2 percentage points to 3.9% in the third quarter of 2022, and increased 0.7 percentage points to 4.3% in the three fiscal quarters of 2022 due primarily to unfavorable claims experience as well as lower sales leverage.

 

Supply Chain Gross Margin

 

 

Third Quarter
of 2022

 

 

Third Quarter
of 2021

 

 

Three Fiscal Quarters
of 2022

 

 

Three Fiscal Quarters
of 2021

 

Revenues

 

$

646.1

 

 

 

100.0

%

 

$

588.8

 

 

 

100.0

%

 

$

1,902.2

 

 

 

100.0

%

 

$

1,760.1

 

 

 

100.0

%

Cost of sales

 

 

588.2

 

 

 

91.0

%

 

 

525.9

 

 

 

89.3

%

 

 

1,728.2

 

 

 

90.8

%

 

 

1,571.4

 

 

 

89.3

%

Supply chain gross margin

 

$

57.9

 

 

 

9.0

%

 

$

62.9

 

 

 

10.7

%

 

$

174.0

 

 

 

9.2

%

 

$

188.7

 

 

 

10.7

%

 

Supply chain gross margin decreased $5.0 million, or 8.0%, in the third quarter of 2022, and decreased $14.7 million, or 7.8%, in the three fiscal quarters of 2022 due primarily to higher delivery and labor costs. As a percentage of supply chain revenues, supply chain gross margin decreased 1.7 percentage points in the third quarter of 2022 and decreased 1.5 percentage points in the three fiscal quarters of 2022 due to higher food and delivery costs. The increases in food and delivery costs as a percentage of supply chain revenues resulted from macroeconomic inflationary pressures in the U.S., as well as lower sales leverage.

20


 

General and Administrative Expenses

General and administrative expenses decreased $5.1 million, or 5.3%, in the third quarter of 2022 driven primarily by lower labor costs. General and administrative expenses decreased $2.3 million, or 0.8%, in the three fiscal quarters of 2022 driven primarily by lower labor costs, partially offset by higher travel expenses, amortization expense for capitalized software and non-cash equity-based compensation expense.

 

U.S. Franchise Advertising Expenses

 

U.S. franchise advertising expenses increased $5.6 million, or 5.2%, in the third quarter of 2022, and decreased $4.4 million, or 1.3%, in the three fiscal quarters of 2022 consistent with the changes in U.S. franchise advertising revenues. U.S. franchise advertising costs are accrued and expensed when the related U.S. franchise advertising revenues are recognized, as our consolidated not-for-profit advertising fund is obligated to expend such revenues on advertising and other activities that promote the Domino’s brand and these revenues cannot be used for general corporate purposes.

 

Other Income

 

During the first quarter of 2021, we recorded a $2.5 million unrealized gain on our investment in DPC Dash (Note 6) resulting from the observable change in price from the valuation of our additional $40.0 million investment. We did not record any adjustments to the carrying amount in the third quarter or three fiscal quarters of 2022, or the third quarter of 2021.

 

Interest Expense, Net

Interest expense, net decreased $0.9 million, or 1.9%, in the third quarter of 2022 driven primarily by higher interest income. Interest expense, net increased $5.4 million, or 4.1%, in the three fiscal quarters of 2022 driven by higher average borrowings resulting from our recapitalization transaction completed on April 16, 2021 (the “2021 Recapitalization”), partially offset by higher interest income.

Our weighted average borrowing rate decreased to 3.7% in both the third quarter and three fiscal quarters of 2022 from 3.8% in the third quarter of 2021 and from 3.9% in the three fiscal quarters of 2021, due to lower interest rates on the debt outstanding as a result of the 2021 Recapitalization.

Provision for Income Taxes

Income tax expense increased $16.9 million, or 117.6%, in the third quarter of 2022 due to a higher effective tax rate, and was partially offset by a decrease in income before provision for income taxes. The effective tax rate increased to 23.8% during the third quarter of 2022 as compared to 10.7% in the third quarter of 2021. Income tax expense increased $14.3 million, or 19.2%, in the three fiscal quarters of 2022 due to a higher effective tax rate, and was partially offset by a decrease in income before provision for income taxes. The effective tax rate increased to 23.3% during the three fiscal quarters of 2022 as compared to 17.4% in the three fiscal quarters of 2021. The higher effective tax rate in the third quarter and three fiscal quarters of 2022 was driven in part by a 9.8 and 4.0 percentage point change in excess tax benefits from equity-based compensation, which are recorded as a reduction to the income tax provision, in the third quarter and three fiscal quarters of 2022 as compared to the respective periods in 2021. The decreases in excess tax benefits from equity-based compensation were a result of fewer stock option exercises in the third quarter and three fiscal quarters of 2022 as compared to the respective periods in 2021. The increase in the effective tax rate was also a result of lower foreign tax credits in the respective periods of 2022.

 

21


 

Segment Income

We evaluate the performance of our reportable segments and allocate resources to them based on earnings before interest, taxes, depreciation, amortization and other, referred to as Segment Income. Segment Income for each of our reportable segments is summarized in the table below. Other Segment Income primarily includes corporate administrative costs that are not allocable to a reportable segment, including labor, computer expenses, professional fees, travel and entertainment, rent, insurance and other corporate administrative costs.

 

 

 

Third Quarter
of 2022

 

 

Third Quarter
of 2021

 

 

Three Fiscal Quarters
of 2022

 

 

Three Fiscal Quarters
of 2021

 

U.S. stores

 

$

100.5

 

 

$

102.0

 

 

$

301.9

 

 

$

321.3

 

Supply chain

 

 

49.9

 

 

 

53.6

 

 

 

149.9

 

 

 

164.7

 

International franchise

 

 

53.8

 

 

 

57.3

 

 

 

161.7

 

 

 

168.1

 

Other

 

 

(2.9

)

 

 

(10.0

)

 

 

(16.3

)

 

 

(25.7

)

 

U.S. Stores

U.S. stores Segment Income decreased $1.4 million, or 1.4%, in the third quarter of 2022, primarily due to the $7.7 million decrease in U.S. Company-owned store gross margin, and was partially offset by the $7.3 million increase in U.S. franchise royalties and fees revenues, each as discussed above. U.S. stores Segment Income decreased $19.4 million, or 6.0%, in the three fiscal quarters of 2022, primarily due to the $28.2 million decrease in U.S. Company-owned store gross margin, and was partially offset by the $6.3 million increase in U.S. franchise royalties and fees revenues, each as discussed above. U.S. franchise revenues do not have a cost of sales component, therefore changes in these revenues have a disproportionate effect on U.S. stores Segment Income. U.S. franchise advertising costs are accrued and expensed when the related U.S. franchise advertising revenues are recognized and had no impact on U.S. stores Segment Income.

 

Supply Chain

Supply chain Segment Income decreased $3.7 million, or 6.9%, in the third quarter of 2022, primarily due to the $5.0 million decrease in supply chain gross margin discussed above. Supply chain Segment Income decreased $14.8 million, or 9.0%, in the three fiscal quarters of 2022, primarily due to the $14.7 million decrease in supply chain gross margin discussed above.

 

International Franchise

International franchise Segment Income decreased $3.5 million, or 6.2%, in the third quarter of 2022, primarily due to the $3.5 million decrease in international franchise royalties and fees revenues discussed above. International franchise Segment Income decreased $6.4 million, or 3.8%, in the three fiscal quarters of 2022, primarily due to the $4.3 million decrease in international franchise royalties and fees revenues discussed above. International franchise revenues do not have a cost of sales component, therefore changes in these revenues have a disproportionate effect on international franchise Segment Income.

 

Other

Other Segment Income increased $7.1 million, or 70.8%, in the third quarter of 2022, and increased $9.5 million, or 36.8%, in the three fiscal quarters of 2022, primarily due to lower labor costs.

 

Liquidity and Capital Resources

 

Historically, our receivable collection periods and inventory turn rates are faster than the normal payment terms on our current liabilities, resulting in efficient deployment of working capital. We generally collect our receivables within three weeks from the date of the related sale and we generally experience multiple inventory turns per month. In addition, our sales are not typically seasonal, which further limits variations in our working capital requirements. These factors allow us to manage our working capital and our ongoing cash flows from operations to invest in our business and other strategic opportunities, pay dividends and repurchase and retire shares of our common stock. As of September 11, 2022, we had working capital of $55.2 million, excluding restricted cash and cash equivalents of $184.6 million, advertising fund assets, restricted, of $181.2 million and advertising fund liabilities of $173.3 million. Working capital as of September 11, 2022 included unrestricted cash and cash equivalents of $114.8 million.

 

22


 

Our primary source of liquidity is cash flows from operations and availability of borrowings under our variable funding notes. During the third quarter and three fiscal quarters of 2022, we continued to increase global retail sales (excluding foreign currency impact), which continued our ability to generate positive cash provided by operating activities. As of September 11, 2022, we had a variable funding note facility which allowed for advances of up to $200.0 million of Series 2021-1 Variable Funding Senior Secured Notes, Class A-1 Notes and certain other credit instruments, including letters of credit (the “2021 Variable Funding Notes”). The letters of credit are primarily related to our casualty insurance programs and certain supply chain center leases. As of September 11, 2022, we had $120.0 million of outstanding borrowings and $35.8 million of available borrowing capacity under our 2021 Variable Funding Notes, net of letters of credit issued of $44.2 million. Subsequent to the end of the third quarter of 2022, we repaid $60.0 million of the outstanding borrowings under our 2021 Variable Funding Notes. Additionally, subsequent to the end of the third quarter of 2022, on September 16, 2022 (the “Closing Date”), certain of our subsidiaries issued a new variable funding note facility which allows for advances of up to $120.0 million of Series 2022-1 Variable Funding Senior Secured Notes, Class A-1 Notes (the “2022 Variable Funding Notes”). The 2022 Variable Funding Notes were undrawn on the Closing Date. Our existing 2021 Variable Funding Notes also remain in place.

 

We expect to continue to use our unrestricted cash and cash equivalents, cash flows from operations, excess cash from our recapitalization transactions and available borrowings under our variable funding notes to, among other things, fund working capital requirements, invest in our core business, service our indebtedness, pay dividends and repurchase shares of our common stock.

 

Our ability to continue to fund these items and continue to service our debt could be adversely affected by the occurrence of any of the events described under “Risk Factors” in our 2021 Form 10-K. There can be no assurance that our business will generate sufficient cash flows from operations or that future borrowings will be available under our variable funding notes or otherwise to enable us to service our indebtedness, or to make anticipated capital expenditures. Our future operating performance and our ability to service, extend or refinance our outstanding senior notes and to service, extend or refinance our variable funding notes will be subject to future economic conditions and to financial, business and other factors, many of which are beyond our control.

 

Restricted Cash

As of September 11, 2022, we had $136.6 million of restricted cash held for future principal and interest payments and other working capital requirements of our asset-backed securitization structure, $47.8 million of restricted cash held in a three-month interest reserve as required by the related debt agreements and $0.2 million of other restricted cash for a total of $184.6 million of restricted cash and cash equivalents. As of September 11, 2022, we also held $157.7 million of advertising fund restricted cash and cash equivalents, which can only be used for activities that promote the Domino’s brand.

 

Long-Term Debt

As of September 11, 2022, we had approximately $5.15 billion of long-term debt, of which $55.8 million was classified as a current liability. As of September 11, 2022, our fixed rate notes from the recapitalizations we completed in 2021, 2019, 2018, 2017 and 2015 had original scheduled principal payments of $12.9 million in the remainder of 2022, $51.5 million in each of 2023 and 2024, $1.17 billion in 2025, $39.3 million in 2026, $1.31 billion in 2027, $811.5 million in 2028, $625.9 million in 2029, $10.0 million in 2030 and $905.0 million in 2031. Additionally, as of September 11, 2022, we had $120.0 million of outstanding borrowings under our 2021 Variable Funding Notes.

 

In accordance with our debt agreements, the payment of principal on the outstanding senior notes may be suspended if our leverage ratio is less than or equal to 5.0x total debt to adjusted EBITDA, as defined in the related agreements, and no catch-up provisions are applicable. As of the fourth quarter of 2020, we had a leverage ratio of less than 5.0x, and accordingly, did not make the previously scheduled debt amortization payment on our then-outstanding notes in the first quarter of 2021. Subsequent to the closing of the 2021 Recapitalization, we had a leverage ratio of greater than 5.0x, and accordingly, resumed making the previously scheduled debt amortization payment on our notes beginning in the second quarter of 2021.

 

The notes are subject to certain financial and non-financial covenants, including a debt service coverage ratio calculation. The covenant requires a minimum coverage ratio of 1.75x total debt service to securitized net cash flow, as defined in the related agreements. In the event that certain covenants are not met, the notes may become due and payable on an accelerated schedule.

 

Share Repurchase Programs

 

Our share repurchase programs have historically been funded by excess operating cash flows, excess proceeds from our recapitalization transactions and borrowings under our variable funding notes. On July 20, 2021, our Board of Directors authorized a share repurchase program to repurchase up to $1.0 billion of our common stock.

23


 

During the third quarter of 2022, we repurchased and retired 490,789 shares of our common stock under our Board of Directors-approved share repurchase program for a total of approximately $196.1 million. During the three fiscal quarters of 2022, we repurchased and retired 739,847 shares of our common stock under our Board of Directors-approved share repurchase program for a total of approximately $293.7 million. As of September 11, 2022, we had a total remaining authorized amount for share repurchases of approximately $410.4 million.

 

Dividends

 

On July 19, 2022, our Board of Directors declared a $1.10 per share quarterly dividend on our outstanding common stock for shareholders of record as of September 15, 2022, which was paid on September 30, 2022. We had approximately $39.6 million accrued for common stock dividends at September 11, 2022. Subsequent to the end of the third quarter, on October 11, 2022, our Board of Directors declared a $1.10 per share quarterly dividend on our outstanding common stock for shareholders of record as of December 15, 2022 to be paid on December 30, 2022.

 

Sources and Uses of Cash

The following table illustrates the main components of our cash flows:

(In millions)

 

Three Fiscal Quarters
of 2022

 

 

Three Fiscal Quarters
of 2021

 

Cash flows provided by (used in)

 

 

 

 

 

 

Net cash provided by operating activities

 

$

330.2

 

 

$

484.6

 

Net cash used in investing activities

 

 

(58.7

)

 

 

(90.3

)

Net cash used in financing activities

 

 

(304.3

)

 

 

(228.1

)

Effect of exchange rate changes on cash

 

 

(0.6

)

 

 

0.1

 

Change in cash and cash equivalents, restricted cash and cash equivalents

 

$

(33.4

)

 

$

166.2

 

 

Operating Activities

 

Cash provided by operating activities decreased $154.4 million in the three fiscal quarters of 2022. This decrease was primarily due to a $53.5 million negative impact of changes in advertising fund assets and liabilities, restricted, in the three fiscal quarters of 2022 as compared to the three fiscal quarters of 2021 due to receipts for advertising contributions outpacing payments for advertising activities in the three fiscal quarters of 2021 as well as the negative impact of changes in operating assets and liabilities of $52.1 million. The negative impact of changes in operating assets and liabilities primarily related to the timing of payments on accrued liabilities, accounts payable, income taxes and prepaid expenses in the three fiscal quarters of 2022 as compared to the three fiscal quarters of 2021. Additionally, net income decreased $60.8 million. However, this decrease in net income included a $12.0 million increase in non-cash adjustments, resulting in an overall decrease to cash provided by operating activities in the three fiscal quarters of 2022 as compared to the three fiscal quarters of 2021 of $48.8 million.

 

Investing Activities

Cash used in investing activities was $58.7 million in the three fiscal quarters of 2022, which primarily consisted of $50.5 million of capital expenditures (driven primarily by investments in technological initiatives, supply chain centers and corporate store operations). As a result of the 2022 Store Purchase, we also acquired 23 U.S. franchise stores from certain of our existing U.S. franchisees in the first quarter of 2022 for $6.8 million.

 

Financing Activities

Cash used in financing activities was $304.3 million in the three fiscal quarters of 2022, which primarily consisted of the repurchase of approximately $293.7 million in common stock under our Board of Directors-approved share repurchase program, dividend payments of $79.7 million, repayments of long-term debt and finance lease obligations of $41.1 million and tax payments for the vesting of restricted stock of $10.7 million. These uses of cash were partially offset by borrowings under our 2021 Variable Funding Notes of $120.0 million and proceeds from the exercise of stock options of $1.3 million.

 

Critical Accounting Estimates

 

For a description of the Company’s critical accounting estimates, refer to “Part II—Item 7—Management’s Discussion and Analysis of Financial Condition and Results of Operations” in the 2021 Form 10-K. The Company considers its most significant accounting policies and estimates to be long-lived assets, casualty insurance reserves and income taxes. There have been no material changes to the Company’s critical accounting estimates since January 2, 2022.

24


 

Forward-Looking Statements

 

This filing contains various forward-looking statements about the Company within the meaning of the Private Securities Litigation Reform Act of 1995 (the “Act”) that are based on current management expectations that involve substantial risks and uncertainties which could cause actual results to differ materially from the results expressed in, or implied by, these forward-looking statements. The following cautionary statements are being made pursuant to the provisions of the Act and with the intention of obtaining the benefits of the “safe harbor” provisions of the Act. You can identify forward-looking statements by the use of words such as “anticipates,” “believes,” “could,” “should,” “estimates,” “expects,” “intends,” “may,” “will,” “plans,” “predicts,” “projects,” “seeks,” “approximately,” “potential,” “outlook” and similar terms and phrases that concern our strategy, plans or intentions, including references to assumptions. These forward-looking statements address various matters including information concerning future results of operations and business strategy, our anticipated profitability, estimates in same store sales growth, the growth of our U.S. and international business, our ability to service our indebtedness, our future cash flows, our operating performance, trends in our business and other descriptions of future events reflect the Company’s expectations based upon currently available information and data. While we believe these expectations and projections are based on reasonable assumptions, such forward-looking statements are inherently subject to risks, uncertainties and assumptions. Important factors that could cause actual results to differ materially from our expectations are more fully described under the section headed “Risk Factors” in this filing and in our other filings with the Securities and Exchange Commission, including under the section headed “Risk Factors” in our 2021 Form 10-K. Actual results may differ materially from those expressed or implied in the forward-looking statements as a result of various factors, including but not limited to: our substantial increased indebtedness as a result of our recapitalization transactions and our ability to incur additional indebtedness or refinance or renegotiate key terms of that indebtedness in the future; the impact a downgrade in our credit rating may have on our business, financial condition and results of operations; our future financial performance and our ability to pay principal and interest on our indebtedness; our ability to manage difficulties associated with or related to the ongoing COVID-19 pandemic and the effects of COVID-19 and related regulations and policies on our business and supply chain, including impacts on the availability of labor; labor shortages or changes in operating expenses resulting from changes in prices of food (particularly cheese), fuel and other commodity costs, labor, utilities, insurance, employee benefits and other operating costs; the effectiveness of our advertising, operations and promotional initiatives; shortages, interruptions or disruptions in the supply or delivery of fresh food products and store equipment; the strength of our brand, including our ability to compete in the U.S. and internationally in our intensely competitive industry, including the food service and food delivery markets; the impact of social media and other consumer-oriented technologies on our business, brand and reputation; the impact of new or improved technologies and alternative methods of delivery on consumer behavior; new product, digital ordering and concept developments by us, and other food-industry competitors; our ability to maintain good relationships with and attract new franchisees, and franchisees’ ability to successfully manage their operations without negatively impacting our royalty payments and fees or our brand’s reputation; our ability to successfully implement cost-saving strategies; our ability and that of our franchisees to successfully operate in the current and future credit environment; changes in the level of consumer spending given general economic conditions, including interest rates, energy prices and consumer confidence; our ability and that of our franchisees to open new restaurants and keep existing restaurants in operation; the impact that widespread illness, health epidemics or general health concerns, severe weather conditions and natural disasters may have on our business and the economies of the countries where we operate; changes in foreign currency exchange rates; changes in income tax rates; our ability to retain or replace our executive officers and other key members of management and our ability to adequately staff our stores and supply chain centers with qualified personnel; our ability to find and/or retain suitable real estate for our stores and supply chain centers; changes in government legislation and regulations, including changes in laws and regulations regarding information privacy, payment methods and consumer protection and social media; adverse legal judgments or settlements; food-borne illness or contamination of products or food tampering; data breaches, power loss, technological failures, user error or other cyber risks threatening us or our franchisees; the impact that environmental, social and governance matters may have on our business and reputation; the effect of war, terrorism, catastrophic events or climate change; our ability to pay dividends and repurchase shares; changes in consumer tastes, spending and traffic patterns and demographic trends; actions by activist investors; changes in accounting policies; and adequacy of our insurance coverage. In light of these risks, uncertainties and assumptions, the forward-looking events discussed in this filing might not occur. All forward-looking statements speak only as of the date of this filing and should be evaluated with an understanding of their inherent uncertainty. Except as required under federal securities laws and the rules and regulations of the Securities and Exchange Commission, or other applicable law, we will not undertake, and specifically disclaim, any obligation to publicly update or revise any forward-looking statements to reflect events or circumstances arising after the date of this filing, whether as a result of new information, future events or otherwise. You are cautioned not to place undue reliance on the forward-looking statements included in this filing or that may be made elsewhere from time to time by, or on behalf of, us. All forward-looking statements attributable to us are expressly qualified by these cautionary statements.

25


 

Item 3. Quantitative and Qualitative Disclosures About Market Risk.

Market Risk

 

We do not engage in speculative transactions nor do we hold or issue financial instruments for trading purposes. In connection with the recapitalizations of our business, we have issued fixed rate notes and entered into variable funding notes and, at September 11, 2022, we are exposed to interest rate risk on borrowings under our 2021 Variable Funding Notes. As of September 11, 2022, we had $120.0 million of outstanding borrowings under our 2021 Variable Funding Notes.

 

Our 2021 Variable Funding Notes bear interest at fluctuating interest rates based on LIBOR. There is currently uncertainty around whether LIBOR will continue to exist after 2023. Our 2021 Variable Funding Notes loan documents contemplate a transition from LIBOR to secured overnight financing rate (“SOFR”) in the event that LIBOR ceases to exist. Because the composition and characteristics of SOFR are not the same as those of LIBOR, in such event, there can be no assurance that SOFR will perform the same way LIBOR would have at any given time or for any applicable period. As a result, our interest expense could increase, in which event we may have difficulties making interest payments and funding our other fixed costs, and our available cash flow for general corporate requirements may be adversely affected. Subsequent to the end of the third quarter of 2022, we entered into a facility for our 2022 Variable Funding Notes which bear interest at fluctuating interest rates based on SOFR. Our existing 2021 Variable Funding Notes also remain in place.

 

Our fixed rate debt exposes the Company to changes in market interest rates reflected in the fair value of the debt and to the risk that the Company may need to refinance maturing debt with new debt at a higher rate. Our existing fixed rate notes have various maturities such that we would not be required to refinance all of our debt at one time. Refer to the original scheduled principal payments disclosed within the Liquidity and Capital Resources section.

 

We are exposed to market risks from changes in commodity prices. During the normal course of business, we purchase cheese and certain other food products that are affected by changes in commodity prices and, as a result, we are subject to volatility in our food costs. Severe increases in commodity prices or food costs, including as a result of inflation, could affect the global and U.S. economies and could also adversely impact our business, financial condition or results of operations. We may periodically enter into financial instruments to manage this risk, although we have not done so historically. We do not engage in speculative transactions or hold or issue financial instruments for trading purposes. In instances when we use fixed pricing agreements with our suppliers, these agreements cover our physical commodity needs, are not net-settled and are accounted for as normal purchases.

 

We have exposure to various foreign currency exchange rate fluctuations for revenues generated by our operations outside the U.S., which can adversely impact our net income and cash flows. Approximately 6.3% of our total revenues in the third quarter of 2022, approximately 6.4% of our total revenues in the three fiscal quarters of 2022, approximately 7.1% of our total revenues in the third quarter of 2021 and approximately 6.9% of our total revenues in the three fiscal quarters of 2021 were derived from our international franchise segment, a majority of which were denominated in foreign currencies. We also operate dough manufacturing and distribution facilities in Canada, which generate revenues denominated in Canadian dollars. We do not enter into financial instruments to manage this foreign currency exchange risk. A hypothetical 10% adverse change in the foreign currency rates for our international markets would have resulted in a negative impact on royalty revenues of approximately $18.0 million in the three fiscal quarters of 2022.

Item 4. Controls and Procedures.

 

Management, with the participation of the Company’s Chief Executive Officer, Russell J. Weiner, and Executive Vice President and Chief Financial Officer, Sandeep Reddy, performed an evaluation of the effectiveness of the Company’s disclosure controls and procedures (as that term is defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended) as of the end of the period covered by this report. Based on that evaluation, Mr. Weiner and Mr. Reddy concluded that the Company’s disclosure controls and procedures were effective.

 

During the quarterly period ended September 11, 2022, there were no changes in the Company’s internal control over financial reporting as defined in Rules 13a-15(f) and 15d-15(f) that have materially affected or are reasonably likely to materially affect the Company’s internal control over financial reporting.

26


 

PART II. OTHER INFORMATION

 

We are a party to lawsuits, revenue agent reviews by taxing authorities and administrative proceedings in the ordinary course of business which include, without limitation, workers’ compensation, general liability, automobile and franchisee claims. We are also subject to suits related to employment practices.

 

While we may occasionally be party to large claims, including class action suits, we do not believe that any existing matters, individually or in the aggregate, will materially affect our financial position, results of operations or cash flows.

 

Item 1A. Risk Factors.

 

There have been no material changes with respect to those risk factors previously disclosed in Item 1A “Risk Factors” in Part I of our 2021 Form 10-K.

 

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.

c. Purchases of Equity Securities by the Issuer and Affiliated Purchasers.

 

 

 

 

 

 

 

 

 

 

 

 

 

Maximum
Approximate Dollar

 

 

 

 

 

 

 

 

 

Total Number of Shares

 

 

Value of Shares that

 

 

 

Total Number

 

 

 

 

 

Purchased as Part of

 

 

May Yet Be Purchased

 

 

 

of Shares

 

 

Average Price Paid

 

 

Publicly Announced

 

 

Under the Program (2)

 

Period

 

Purchased (1)

 

 

Per Share

 

 

Program (2)

 

 

(in thousands)

 

Period #7 (June 20, 2022
   to July 17, 2022)

 

 

1,179

 

 

$

395.84

 

 

 

 

 

$

606,437

 

Period #8 (July 18, 2022
   to August 14, 2022)

 

 

225,466

 

 

 

390.83

 

 

 

223,822

 

 

 

518,966

 

Period #9 (August 15, 2022
   to September 11, 2022)

 

 

268,114

 

 

 

406.66

 

 

 

266,967

 

 

 

410,358

 

Total

 

 

494,759

 

 

$

399.42

 

 

 

490,789

 

 

$

410,358

 

 

(1)

3,970 shares in the third quarter of 2022 were purchased as part of the Company’s employee stock payroll deduction plan. During the third quarter, the shares were purchased at an average price of $387.29.

 

(2)

On July 20, 2021, the Company’s Board of Directors authorized a share repurchase program to repurchase up to $1.0 billion of the Company’s common stock. As of September 11, 2022, $410.4 million remained available for future purchases of the Company’s common stock under this share repurchase program.

 

 

Authorization for the repurchase program may be modified, suspended, or discontinued at any time. The repurchase of shares in any particular period and the actual amount of such purchases remain at the discretion of the Board of Directors, and no assurance can be given that shares will be repurchased in the future.

 

Item 3. Defaults Upon Senior Securities.

None.

 

Item 4. Mine Safety Disclosures.

Not applicable.

 

Item 5. Other Information.

None.

27


 

Item 6. Exhibits.

 

Exhibit

Number

 

Description

31.1

 

Certification by Russell J. Weiner pursuant to Rule 13a-14(a) and 15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002, relating to Domino’s Pizza, Inc.

31.2

 

Certification by Sandeep Reddy pursuant to Rule 13a-14(a) and 15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002, relating to Domino’s Pizza, Inc.

32.1

 

Certification by Russell J. Weiner pursuant to Section 1350, Chapter 63 of Title 18, United States Code, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, relating to Domino’s Pizza, Inc.

32.2

 

Certification by Sandeep Reddy pursuant to Section 1350, Chapter 63 of Title 18, United States Code, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, relating to Domino’s Pizza, Inc.

101.INS

 

XBRL Instance Document – The instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document.

101.SCH

 

Inline XBRL Taxonomy Extension Schema Document.

101.CAL

 

Inline XBRL Taxonomy Extension Calculation Linkbase Document.

101.LAB

 

Inline XBRL Taxonomy Extension Label Linkbase Document.

101.PRE

 

Inline XBRL Taxonomy Extension Presentation Linkbase Document.

101.DEF

 

Inline XBRL Taxonomy Extension Definition Linkbase Document.

104

 

Cover page Interactive Data File (formatted as Inline XBRL and contained in exhibit 101).

 

28


 

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

 

 

 

 

 

 

 

DOMINO’S PIZZA, INC.

(Registrant)

 

Date: October 13, 2022

 

 

 

 

 

/s/ Sandeep Reddy

 

 

 

 

 

 

 Sandeep Reddy

 

 

 

 

 

 

Executive Vice President, Chief Financial Officer

(Principal Financial Officer)

 

29