Fair Value Measurements

6 Months Ended

Jun. 16, 2024

Fair Value Disclosures [Abstract]

Fair Value Measurements

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 Marketable Securities

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.

Fair Value of Investments

The Company holds a non-controlling interest in DPC Dash Ltd (“DPC Dash”), the Company’s master franchisee in China that owns and operates Domino’s Pizza stores in that market. The Company accounts for its investment in DPC Dash as a trading security and records it at fair value at the end of each reporting period, with gains and losses recorded in other income or expense in its condensed consolidated statements of income. As of June 16, 2024, the fair value of the Company’s investment in 18,101,019 DPC Dash ordinary shares is based on the active exchange quoted price for the equity security of HK$58.80 per share (HK: 1405).

The Company recorded a positive adjustment of $11.4 million in the second quarter of 2024 and a negative adjustment of $7.3 million in the two fiscal quarters of 2024 to the carrying amount of its investment in DPC Dash. These amounts were recorded in other income (expense) in the Company’s condensed consolidated statements of income. The Company recorded a negative adjustment to the carrying amount of its investment in DPC Dash of $15.0 million in the second quarter of 2023 and did not record any adjustments to the carrying amount of its investment in the first quarter of 2023.

The following tables summarize the carrying amounts and fair values of certain assets at June 16, 2024 and December 31, 2023:

	At June 16, 2024
			Fair Value Estimated Using
	Carrying		Level 1		Level 2		Level 3
	Amount		Inputs		Inputs		Inputs
Cash equivalents	$	231,511	$	231,511	$	—	$	—
Restricted cash equivalents		132,579		132,579		—		—
Investments in marketable securities		19,063		19,063		—		—
Advertising fund cash equivalents, restricted		56,881		56,881		—		—
Investment in DPC Dash		136,252		136,252		—		—

	At December 31, 2023
			Fair Value Estimated Using
	Carrying		Level 1		Level 2		Level 3
	Amount		Inputs		Inputs		Inputs
Cash equivalents	$	50,732	$	50,732	$	—	$	—
Restricted cash equivalents		133,063		133,063		—		—
Investments in marketable securities		16,720		16,720		—		—
Advertising fund cash equivalents, restricted		69,199		69,199		—		—
Investment in DPC Dash		143,553		143,553		—		—

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 noteholders 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 notes as follows:

	June 16, 2024				December 31, 2023
	Principal Amount		Fair Value		Principal Amount		Fair Value
2015 Ten-Year Notes	$	742,000	$	727,902	$	744,000	$	727,632
2017 Ten-Year Notes		940,000		899,580		942,500		895,375
2018 7.5-Year Notes		402,688		393,023		403,750		392,041
2018 9.25-Year Notes		379,000		365,735		380,000		365,180
2019 Ten-Year Notes		648,000		592,920		649,688		591,865
2021 7.5-Year Notes		826,625		735,696		828,750		730,958
2021 Ten-Year Notes		972,500		840,240		975,000		830,700

The Company did not have any outstanding borrowings under its variable funding notes at June 16, 2024 or December 31, 2023.