10-Q

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

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

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.

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.

(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.

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

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


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)


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


		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


(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


	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


Large accelerated filer	☒	Accelerated filer	☐
Non-accelerated filer	☐	Smaller reporting company	☐
Emerging growth company	☐