☒ 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 ~~7, 2021,~~6, 2022, Domino’s Pizza, Inc. had ~~36,386,777~~35,399,379 shares of common stock, par value $0.01 per share, outstanding.


(In thousands)	September 12, 2021			January 3, 2021 (1)			September 11, 2022			January 2, 2022 (1)
Assets
Current assets:
Cash and cash equivalents	$	295,352		$	168,821		$	114,776		$	148,160
Restricted cash and cash equivalents		206,274			217,453			184,564			180,579
Accounts receivable, net		238,906			244,560			242,775			255,327
Inventories		64,563			66,683			72,586			68,328
Prepaid expenses and other		34,094			24,169			30,497			27,242
Advertising fund assets, restricted		186,807			147,698			181,200			180,904
Total current assets		1,025,996			869,384			826,398			860,540
Property, plant and equipment:
Land and buildings		95,111			88,063			106,907			108,372
Leasehold and other improvements		189,499			186,456			197,462			193,572
Equipment		309,811			292,456			329,687			312,772
Construction in progress		10,289			13,014			26,874			27,815
		604,710			579,989			660,930			642,531
Accumulated depreciation and amortization		(311,335	)		(282,625	)		(349,643	)		(318,466	)
Property, plant and equipment, net		293,375			297,364			311,287			324,065
Other assets:
Operating lease right-of-use assets		218,172			228,268			217,739			210,702
Goodwill		15,034			15,061			16,153			15,034
Capitalized software, net		91,371			81,306			105,541			95,558
Investments		82,500			40,000			125,840			125,840
Other assets		36,324			33,881			41,260			37,968
Deferred income taxes		1,584			1,904			2,191			2,109
Total other assets		444,985			400,420			508,724			487,211
Total assets	$	1,764,356		$	1,567,168		$	1,646,409		$	1,671,816
Liabilities and stockholders' deficit
Current liabilities:
Current portion of long-term debt	$	54,846		$	2,855		$	55,787		$	55,588
Accounts payable		111,780			94,499			91,299			91,547
Operating lease liabilities		37,093			35,861			40,823			37,155
Insurance reserves		27,900			26,377			32,971			32,588
Dividends payable		35,066			729			39,632			918
Advertising fund liabilities		178,539			141,175			173,345			173,737
Other accrued liabilities		151,130			169,323			144,880			199,208
Total current liabilities		596,354			470,819			578,737			590,741
Long-term liabilities:
Long-term debt, less current portion		5,014,705			4,116,018			5,097,292			5,014,638
Operating lease liabilities		193,024			202,268			190,248			184,471
Insurance reserves		40,218			37,125			38,145			36,913
Other accrued liabilities		36,958			35,244			49,455			50,667
Deferred income taxes		10,610			6,099			9,077			3,922
Total long-term liabilities		5,295,515			4,396,754			5,384,217			5,290,611
Stockholders' deficit:
Common stock		366			389			354			361
Additional paid-in capital		115			5,122			587			840
Retained deficit		(4,125,582	)		(3,303,492	)		(4,313,643	)		(4,207,917	)
Accumulated other comprehensive loss		(2,412	)		(2,424	)		(3,843	)		(2,820	)
Total stockholders' deficit		(4,127,513	)		(3,300,405	)		(4,316,545	)		(4,209,536	)
Total liabilities and stockholders' deficit	$	1,764,356		$	1,567,168		$	1,646,409		$	1,671,816

(1) The condensed consolidated balance sheet at January ~~3, 2021~~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.


	Fiscal Quarter Ended						Three Fiscal Quarters Ended						Fiscal Quarter Ended						Three Fiscal Quarters Ended
	September 12,			September 6,			September 12,			September 6,			September 11,			September 12,			September 11,			September 12,
(In thousands, except per share data)	2021			2020			2021			2020			2022			2021			2022			2021
Revenues:
U.S. Company-owned stores	$	108,416		$	113,254		$	337,749		$	329,820		$	112,388		$	108,416		$	328,785		$	337,749
U.S. franchise royalties and fees		121,624			118,054			372,946			335,898			128,878			121,624			379,261			372,946
Supply chain		588,819			573,661			1,760,119			1,625,502			646,082			588,819			1,902,215			1,760,119
International franchise royalties and fees		70,553			54,602			207,068			160,202			67,055			70,553			202,803			207,068
U.S. franchise advertising		108,578			108,148			336,278			309,422			114,193			108,578			331,863			336,278
Total revenues		997,990			967,719			3,014,160			2,760,844			1,068,596			997,990			3,144,927			3,014,160
Cost of sales:
U.S. Company-owned stores		86,932			90,788			260,693			258,007			98,589			86,932			280,029			260,693
Supply chain		525,858			514,950			1,571,426			1,443,608			588,157			525,858			1,728,159			1,571,426
Total cost of sales		612,790			605,738			1,832,119			1,701,615			686,746			612,790			2,008,188			1,832,119
Operating margin		385,200			361,981			1,182,041			1,059,229
Gross margin														381,850			385,200			1,136,739			1,182,041
General and administrative		96,342			91,652			288,043			268,209			91,205			96,342			285,769			288,043
U.S. franchise advertising		108,578			108,148			336,278			309,422			114,193			108,578			331,863			336,278
Income from operations		180,280			162,181			557,720			481,598			176,452			180,280			519,107			557,720
Other income		0			0			2,500			0			—			—			—			2,500
Interest income		48			197			138			1,769			833			48			1,101			138
Interest expense		(45,523	)		(38,605	)		(130,822	)		(117,802	)		(45,437	)		(45,523	)		(137,160	)		(130,822	)
Income before provision for income taxes		134,805			123,773			429,536			365,565			131,848			134,805			383,048			429,536
Provision for income taxes		14,403			24,644			74,754			26,166			31,344			14,403			89,087			74,754
Net income	$	120,402		$	99,129		$	354,782		$	339,399		$	100,504		$	120,402		$	293,961		$	354,782
Earnings per share:
Common stock - basic	$	3.29		$	2.53		$	9.43		$	8.70		$	2.82		$	3.29		$	8.20		$	9.43
Common stock - diluted		3.24			2.49			9.30			8.54			2.79			3.24			8.11			9.30

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


	Three Fiscal Quarters Ended						Three Fiscal Quarters Ended
	September 12,			September 6,			September 11,			September 12,
(In thousands)	2021			2020			2022			2021
Cash flows from operating activities:
Net income	$	354,782		$	339,399		$	293,961		$	354,782
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization		50,219			44,116			56,026			50,219
Loss on sale/disposal of assets		493			1,530			475			493
Amortization of debt issuance costs		5,770			3,853			3,937			5,770
Provision for deferred income taxes		4,831			3,681			5,912			4,831
Non-cash equity-based compensation expense		19,453			14,934			21,590			19,453
Excess tax benefits from equity-based compensation		(18,258	)		(56,862	)		(907	)		(18,258	)
Provision for losses on accounts and notes receivable		532			1,536			2,870			532
Unrealized gain on investments		(2,500	)		—			—			(2,500	)
Changes in operating assets and liabilities		20,212			(14,146	)		(49,288	)		20,212
Changes in advertising fund assets and liabilities, restricted		49,067			32,358			(4,422	)		49,067
Net cash provided by operating activities		484,601			370,399			330,154			484,601
Cash flows from investing activities:
Capital expenditures		(50,652	)		(51,163	)		(50,508	)		(50,652	)
Purchase of investments		(40,000	)		(40,000	)		—			(40,000	)
Purchase of franchise operations and other assets								(6,814	)		—
Other		306			94			(1,375	)		306
Net cash used in investing activities		(90,346	)		(91,069	)		(58,697	)		(90,346	)
Cash flows from financing activities:
Proceeds from issuance of long-term debt		1,850,000			158,000			120,000			1,850,000
Repayments of long-term debt and finance lease obligations		(896,193	)		(190,843	)		(41,441	)		(896,193	)
Proceeds from exercise of stock options		15,948			26,526			1,296			15,948
Purchases of common stock		(1,104,687	)		(79,590	)		(293,739	)		(1,104,687	)
Tax payments for restricted stock upon vesting		(6,817	)		(6,584	)		(10,691	)		(6,817	)
Payments of common stock dividends and equivalents		(71,218	)		(61,093	)		(79,689	)		(71,218	)
Cash paid for financing costs		(14,938	)		—			—			(14,938	)
Other		(244	)		—			—			(244	)
Net cash used in financing activities		(228,149	)		(153,584	)		(304,264	)		(228,149	)
Effect of exchange rate changes on cash		58			243			(611	)		58
Change in cash and cash equivalents, restricted cash and cash equivalents		166,164			125,989			(33,418	)		166,164

Cash and cash equivalents, beginning of period		168,821			190,615			148,160			168,821
Restricted cash and cash equivalents, beginning of period		217,453			209,269			180,579			217,453
Cash and cash equivalents included in advertising fund assets, restricted, beginning of period		115,872			84,040			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		502,146			483,924			490,480			502,146

Cash and cash equivalents, end of period		295,352			330,719			114,776			295,352
Restricted cash and cash equivalents, end of period		206,274			160,330			184,564			206,274
Cash and cash equivalents included in advertising fund assets, restricted, end of period		166,684			118,864			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	$	668,310		$	609,913		$	457,062		$	668,310

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)

1. Basis of Presentation ~~and Updates to Significant Accounting Policies~~

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 ~~3, 2021~~2, 2022 included in the Company’s ~~2020~~2021 Annual Report on Form 10-K, filed with the Securities and Exchange Commission on ~~February 25, 2021~~March 1, 2022 (the ~~“2020~~“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 ~~12, 2021~~11, 2022 are not necessarily indicative of the results that may be expected for the fiscal year ending January ~~2, 2022.~~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 12, 2021 and September 6, 2020														Fiscal Quarters Ended September 11, 2022 and September 12, 2021
	U.S.		Supply		International		Intersegment								U.S.		Supply		International		Intersegment
	Stores		Chain		Franchise		Revenues			Other			Total		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		338,618		619,840		70,553		(31,021	)		—			997,990
2020		339,456		605,481		54,602		(31,820	)		—			967,719
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		101,968		53,579		57,311	N/A				(10,010	)		202,848
2020		101,513		51,114		44,461	N/A				(13,689	)		183,399


	Three Fiscal Quarters Ended September 12, 2021 and September 6, 2020														Three Fiscal Quarters Ended September 11, 2022 and September 12, 2021
	U.S.		Supply		International		Intersegment								U.S.		Supply		International		Intersegment
	Stores		Chain		Franchise		Revenues			Other			Total		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		1,046,973		1,854,609		207,068		(94,490	)		—			3,014,160
2020		975,140		1,717,225		160,202		(91,723	)		—			2,760,844
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		321,252		164,723		168,145	N/A				(25,726	)		628,394
2020		292,724		159,455		124,375	N/A				(34,376	)		542,178

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

Fiscal Quarter Ended

Three Fiscal Quarters Ended

September 12,

September 6,

September 12,

September 6,

2021

2020

2021

2020

Total Segment Income

$
202,848

$
183,399

$
628,394

$
542,178

Depreciation and amortization

(16,578
)

(15,327
)

(50,219
)

(44,116
)
Loss on sale/disposal of assets

(37
)

(986
)

(493
)

(1,530
)
Non-cash equity-based compensation expense

(5,953
)

(4,905
)

(19,453
)

(14,934
)
Recapitalization-related expenses

—

—

(509
)

—

Income from operations

180,280

162,181

557,720

481,598

Other income

—

—

2,500

—

Interest income

48

197

138

1,769

Interest expense

(45,523
)

(38,605
)

(130,822
)

(117,802
)
Income before provision for income taxes

$
134,805

$
123,773

$
429,536

$
365,565

3. Earnings Per Share


	Fiscal Quarter Ended				Three Fiscal Quarters Ended				Fiscal Quarter Ended				Three Fiscal Quarters Ended
	September 12,		September 6,		September 12,		September 6,		September 11,		September 12,		September 11,		September 12,
	2021		2020		2021		2020		2022		2021		2022		2021
Net income available to common stockholders - basic and diluted	$	120,402	$	99,129	$	354,782	$	339,399	$	100,504	$	120,402	$	293,961	$	354,782
Basic weighted average number of shares		36,627,660		39,246,231		37,639,418		38,990,149		35,692,744		36,627,660		35,869,581		37,639,418
Earnings per share – basic	$	3.29	$	2.53	$	9.43	$	8.70	$	2.82	$	3.29	$	8.20	$	9.43
Diluted weighted average number of shares		37,130,209		39,791,805		38,144,509		39,724,289		36,062,316		37,130,209		36,265,918		38,144,509
Earnings per share – diluted	$	3.24	$	2.49	$	9.30	$	8.54	$	2.79	$	3.24	$	8.11	$	9.30

The denominators used in calculating diluted earnings per share for common stock for the ~~third quarter~~fiscal quarters and three fiscal quarters ofeach ended September 11, 2022 and September 12, 2021 ~~did~~do not include ~~625~~ ~~and~~ ~~80,103~~ ~~options to purchase common stock, respectively, as~~the following because the effect of including these ~~options~~shares would ~~have been anti-dilutive. The denominator used in calculating diluted earnings per share for the three fiscal quarters of 2021 did not include~~ ~~5,641~~ restricted stock units, as the effect of including these units would have been anti-dilutive. The denominators used in calculating diluted earnings per share for the third quarter and three fiscal quarters of 2021 each did not include ~~62,131~~ ~~restricted performance shares, as~~be anti-dilutive or because the performance ~~targets~~condition for these awards had not yet been ~~met.~~met:

~~The denominators used in calculating diluted earnings per share for the third quarter and three fiscal quarters of 2020 did not include~~ ~~52,390~~ ~~and~~ ~~53,130~~ options to purchase common stock, respectively, as the effect of including these options would have been anti-dilutive. The denominators used in calculating diluted earnings per share for the third quarter and three fiscal quarters of 2020 each did not include ~~118,518~~ ~~restricted performance shares, as the performance targets 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 ~~2021.~~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	)

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.~~2022:

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
)


													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	)

~~On April 30, 2021, the Company entered into a $1.0~~ ~~billion accelerated share repurchase agreement (the “ASR Agreement”) with a counterparty. Refer to Note 5 for additional information related to this transaction.~~

~~On July 20, 2021, the Company’s Board of Directors authorized a new share repurchase program to repurchase up to $1.0~~ ~~billion of the Company’s common stock. This repurchase program replaced the Company’s previously approved $1.0~~ ~~billion share repurchase program, which was fully utilized in connection with the ASR Agreement. During the third quarter of 2021, the Company repurchased and retired~~ ~~391,007~~ ~~shares of its common stock, including~~ ~~238,190~~ ~~shares received at settlement of the ASR Agreement and~~ ~~152,817~~ ~~shares of its common stock under this Board of Directors-approved share repurchase program for a total of approximately $79.7~~ ~~million. During the three fiscal quarters of 2021, the Company repurchased and retired~~ ~~2,469,473~~ ~~shares of its common stock, including the~~ ~~2,250,786~~ ~~shares of common stock repurchased under the ASR Agreement and~~ ~~218,687~~ ~~shares of common stock repurchased under the Company's Board of Directors-approved share repurchase program for a total of approximately $1.1~~ ~~billion. As of September 12, 2021, the end of the third quarter, the Company had a total remaining authorized amount for share repurchases of approximately $920.3~~ ~~million. Subsequent to the end of the third quarter and through October 12, 2021, the Company repurchased and retired an additional~~ ~~205,145~~ ~~shares of common stock for a total of approximately $100.1~~ ~~million.~~

Subsequent to the end of the third quarter of 2022, on October ~~12, 2021~~11, 2022, the Company’s Board of Directors declared a $~~0.94~~1.10 per share quarterly dividend on its outstanding common stock for shareholders of record as of December 15, ~~2021~~2022, to be paid on December 30, ~~2021~~2022.

The following table summarizes the changes in stockholders’ deficit for the third quarter of ~~2020.~~2021:


												Accumulated															Accumulated
						Additional						Other									Additional						Other
	Common Stock					Paid-in			Retained			Comprehensive			Common Stock						Paid-in			Retained			Comprehensive
	Shares			Amount		Capital			Deficit			Loss			Shares			Amount			Capital			Deficit			Loss
Balance at June 14, 2020		39,347,213		$	393	$	32,251		$	(3,311,015	)	$	(4,535	)
Balance at June 20, 2021																36,853,571		$	369		$	7,771		$	(4,146,702	)	$	(2,008	)
Net income		—			—		—			99,129			—			—			—			—			120,402			—
Dividends declared on common stock and equivalents ($0.78 per share)		—			—		—			(30,741	)		—
Dividends declared on common stock and equivalents ($0.94 per share)																—			—			—			(34,400	)		—
Issuance and cancellation of stock awards, net		32,676			1		—			—			—			938			—			—			—			—
Tax payments for restricted stock upon vesting		(12,195	)		—		(4,757	)		—			—			(11,918	)		—			(5,730	)		—			—
Purchases of common stock																(391,007	)		(4	)		(14,801	)		(64,882	)		—
Exercise of stock options		24,781			—		1,725			—			—			113,903			1			6,922			—			—
Non-cash equity-based compensation expense		—			—		4,905			—			—			—			—			5,953			—			—
Currency translation adjustment		—			—		—			—			1,113			—			—			—			—			(404	)
Balance at September 6, 2020		39,392,475		$	394	$	34,124		$	(3,242,627	)	$	(3,422	)
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 ~~2020.~~2021:


													Accumulated															Accumulated
							Additional						Other									Additional						Other
	Common Stock						Paid-in			Retained			Comprehensive			Common Stock						Paid-in			Retained			Comprehensive
	Shares			Amount			Capital			Deficit			Loss			Shares			Amount			Capital			Deficit			Loss
Balance at December 29, 2019		38,934,009		$	389		$	243		$	(3,412,649	)	$	(3,742	)
Balance at January 3, 2021																	38,868,350		$	389		$	5,122		$	(3,303,492	)	$	(2,424	)
Net income		—			—			—			339,399			—			—			—			—			354,782			—
Dividends declared on common stock and equivalents ($2.34 per share)		—			—			—			(91,880	)		—
Dividends declared on common stock and equivalents ($2.82 per share)																	—			—			—			(105,555	)		—
Issuance and cancellation of stock awards, net		38,389			1			—			—			—			(980	)		—			—			—			—
Tax payments for restricted stock upon vesting		(18,215	)		—			(6,584	)		—			—			(14,819	)		—			(6,817	)		—			—
Purchases of common stock		(271,064	)		(3	)		(988	)		(78,599	)		—			(2,469,473	)		(25	)		(33,345	)		(1,071,317	)		—
Exercise of stock options		709,356			7			26,519			—			—			182,409			2			15,946			—			—
Non-cash equity-based compensation expense		—			—			14,934			—			—			—			—			19,453			—			—
Adoption of credit losses standard		—			—			—			1,102			—
Other																	—			—			(244	)		—			—
Currency translation adjustment		—			—			—			—			320			—			—			—			—			12
Balance at September 6, 2020		39,392,475		$	394		$	34,124		$	(3,242,627	)	$	(3,422	)
Balance at September 12, 2021																	36,565,487		$	366		$	115		$	(4,125,582	)	$	(2,412	)

5. ~~Recapitalization~~2022 Variable Funding Notes

~~On April~~Subsequent to the end of the third quarter of 2022, on September 16, ~~2021~~2022 (the ~~“closing date”~~“Closing Date”), ~~the Company completed a recapitalization transaction (the “2021 Recapitalization”) in which~~ certain of the Company’s subsidiaries ~~issued new notes pursuant to an asset-backed securitization. The new notes consist of $850.0~~ ~~million Series 2021-1~~ ~~2.662% Fixed Rate Senior Secured Notes, Class A-2-I with an anticipated term of~~ ~~7.5~~ ~~years (the “2021 A-2-I Fixed Rate Notes”) and $1.0~~ ~~billion Series 2021-1~~ ~~3.151% Fixed Rate Senior Secured Notes, Class A-2-II with an anticipated term of~~ 10 years (collectively with the 2021 A-2-I Fixed Rate Notes, the “2021 Notes”) in an offering exempt from registration under the Securities Act of 1933, as amended. As of September 12, 2021, the 2021 Notes had scheduled principal payments of $~~4.6~~ ~~million in 2021, $18.5~~ ~~million in each of 2022 through 2027, $804.8~~ ~~million in 2028, $10.0~~ ~~million in each of 2029 and 2030 and $905.0~~ ~~million in 2031. Gross proceeds from the issuance of the 2021 Notes were $1.85~~ ~~billion.~~

~~Concurrently, certain of the Company’s subsidiaries also~~ issued a new variable funding note facility which allows for advances of up to $~~200.0~~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 ~~and certain other credit instruments, including letters of credit~~ (the “2021 Variable Funding Notes”)~~. The 2021 Variable Funding Notes were undrawn on the closing date. In connection with the issuance of the 2021 Variable Funding Notes, the Company’s previous $200.0~~ ~~million variable funding note facility was canceled.~~

~~A portion of proceeds from the 2021 Recapitalization was used to repay the remaining $291.0~~ ~~million~~ also remain in ~~outstanding principal under the Company’s 2017 five-year floating rate notes and $582.0~~ million in outstanding principal under the Company’s 2017 five-year fixed rate notes, prefund a portion of the interest payable on the 2021 Notes and pay transaction fees and expenses. In connection with the repayment of the 2017 five-year floating rate notes and 2017 five-year fixed rate notes, the Company expensed approximately $~~2.0~~ ~~million for the remaining unamortized debt issuance costs associated with these notes. Additionally, in connection with the 2021 Recapitalization, the Company capitalized $14.9~~ ~~million of debt issuance costs, which are being amortized into interest expense over the~~ ~~7.5~~ ~~and 10-year expected terms of the 2021 Notes.~~

~~As of the fourth quarter of 2020, the Company had a leverage ratio of less than~~ ~~5.0~~x, and accordingly, did not make the previously scheduled debt amortization payment for its then-outstanding notes beginning in the first quarter of 2021. Accordingly, all principal amounts of the Company’s outstanding notes were classified as long-term debt in the condensed consolidated balance sheet as of January 3, 2021. Subsequent to the closing of the 2021 Recapitalization, the Company had a leverage ratio of greater than ~~5.0x and, accordingly, the Company resumed making the scheduled amortization payments on its notes in the second quarter of 2021.~~

~~On April 30, 2021, the Company entered into the $1.0~~ ~~billion ASR Agreement. Pursuant to the terms of the ASR Agreement, on May 3, 2021, the Company used a portion of the proceeds from the 2021 Recapitalization to pay the counterparty $1.0~~ ~~billion in cash and received and retired~~ ~~2,012,596~~ ~~shares of its common stock. Final settlement of the ASR Agreement occurred on July 21, 2021. In connection with the ASR Agreement, the Company received and retired a total of~~ ~~2,250,786~~ ~~shares of its common stock at an average price of $444.29~~.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 ~~12, 2021~~11, 2022 and January ~~3, 2021:~~2, 2022:


	At September 12, 2021								At September 11, 2022
			Fair Value Estimated Using								Fair Value Estimated Using
	Carrying		Level 1		Level 2		Level 3		Carrying		Level 1		Level 2		Level 3
	Amount		Inputs		Inputs		Inputs		Amount		Inputs		Inputs		Inputs
Cash equivalents	$	247,009	$	247,009	$	—	$	—	$	73,258	$	73,258	$	—	$	—
Restricted cash equivalents		131,725		131,725		—		—		117,195		117,195		—		—
Investments in marketable securities		15,103		15,103		—		—		13,498		13,498		—		—
Advertising fund cash equivalents, restricted		151,763		151,763		—		—		146,235		146,235		—		—
Investments		82,500		—		—		82,500		125,840		—		—		125,840


	At January 3, 2021								At January 2, 2022
			Fair Value Estimated Using								Fair Value Estimated Using
	Carrying		Level 1		Level 2		Level 3		Carrying		Level 1		Level 2		Level 3
	Amount		Inputs		Inputs		Inputs		Amount		Inputs		Inputs		Inputs
Cash equivalents	$	151,502	$	151,502	$	—	$	—	$	87,384	$	87,384	$	—	$	—
Restricted cash equivalents		126,595		126,595		—		—		115,185		115,185		—		—
Investments in marketable securities		13,251		13,251		—		—		15,433		15,433		—		—
Advertising fund cash equivalents, restricted		104,197		104,197		—		—		140,115		140,115		—		—
Investments		40,000		—		—		40,000		125,840		—		—		125,840

~~During the second quarter of 2020, a subsidiary of the~~The Company ~~acquired~~holds a non-controlling interest in DPC Dash ~~Brands Ltd.,~~Ltd, a privately-held business company limited by shares incorporated with limited liability under the laws of the British Virgin Islands (“~~Dash Brands”~~DPC Dash”)~~, for $40.0~~ ~~million.~~. Through its subsidiaries, DPC Dash ~~Brands~~ 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 ~~Dash Brands’~~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.

~~In the first quarter of 2021, the Company invested an additional $~~10

~~40.0~~

~~million in Dash Brands based on Dash Brands’ achievement of certain pre-established performance conditions. In the first quarter of 2021, the Company recorded a positive adjustment of $2.5~~ ~~million to the original carrying amount of $40.0~~ million resulting from the observable change in price from the valuation of the additional investment. This amount was recorded in other income in the Company’s condensed consolidated statements of income. The Company did not record any adjustments to the carrying amount of $~~82.5~~125.8 million in the ~~second or~~ third quarter or three fiscal quarters of ~~2021.~~2022.

The following table summarizes the reconciliation of the carrying amount of the Company’s investment in DPC Dash ~~Brands~~ from the opening balance at January 3, 2021 to the closing balance at September 12, ~~2021.~~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

Three Fiscal Quarters of 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 ~~and floating~~ 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 ~~and floating~~ 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~~Management estimated the approximate fair values of the Company's 2015, ~~fixed rate notes, the~~ 2017, ~~fixed~~2018, 2019 and ~~floating rate notes, the 2018 fixed rate notes, the 2019 fixed rate notes and the~~ 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 $

September 12, 2021

January 3, 2021

Principal Amount

Fair Value

Principal Amount

Fair Value

2015 Ten-Year Fixed Rate Notes

$
762,000

$
794,766

$
766,000

$
809,662

2017 Five-Year Fixed Rate Notes

—

—

582,000

582,582

2017 Ten-Year Fixed Rate Notes

965,000

1,028,690

970,000

1,035,960

2017 Five-Year Floating Rate Notes

—

—

291,000

291,000

2018 7.5-Year Fixed Rate Notes

413,313

429,018

415,438

437,456

2018 9.25-Year Fixed Rate Notes

389,000

420,898

391,000

422,280

2019 Ten-Year Fixed Rate Notes

664,875

715,406

668,250

712,355

2021 7.5-Year Fixed Rate Notes

847,875

880,094

—

—

2021 Ten-Year Fixed Rate Notes

997,500

1,053,360

—

—

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 ~~variable funding notes at September 12,~~ 2021 orVariable Funding Notes as of January ~~3, 2021.~~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 $~~4.8~~5.5 million and $~~4.1~~5.4 million were included in current other accrued liabilities as of September ~~12, 2021~~11, 2022 and January ~~3, 2021,~~2, 2022, respectively. Deferred franchise fees and deferred development fees of $~~15.1~~23.3 million and $~~15.0~~24.3 million were included in long-term other accrued liabilities as of September ~~12, 2021~~11, 2022 and January ~~3, 2021,~~2, 2022, respectively.

Changes in deferred franchise fees and deferred development fees for the three fiscal quarters of ~~2021~~2022 and the three fiscal quarters of ~~2020~~2021 were as follows:


	Three Fiscal Quarters Ended						Three Fiscal Quarters Ended
	September 12,			September 6,			September 11,			September 12,
	2021			2020			2022			2021
Deferred franchise fees and deferred development fees at beginning of period	$	19,090		$	20,463		$	29,694		$	19,090
Revenue recognized during the period		(3,944	)		(4,302	)		(4,688	)		(3,944	)
New deferrals due to cash received and other		4,784			3,937			3,774			4,784
Deferred franchise fees and deferred development fees at end of period	$	19,930		$	20,098		$	28,780		$	19,930

Advertising Fund Assets

As of September ~~12, 2021,~~11, 2022, advertising fund assets, restricted of $~~186.8~~181.2 million consisted of $~~166.7~~157.7 million of cash and cash equivalents, $~~18.7~~16.4 million of accounts receivable and $~~1.4~~7.1 million of prepaid expenses. As of September ~~12, 2021,~~11, 2022, advertising fund cash and cash equivalents included $~~8.3~~7.9 million of cash contributed from U.S. Company-owned stores that had not yet been expended.

As of January ~~3, 2021,~~2, 2022, advertising fund assets, restricted of $~~147.7~~180.9 million consisted of $~~115.9~~161.7 million of cash and cash equivalents, $~~27.0~~14.5 million of accounts receivable and $~~4.8~~4.7 million of prepaid expenses. As of January ~~3, 2021,~~2, 2022, advertising fund cash and cash equivalents included $~~6.5~~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 ~~2021~~2022 and the third quarter and three fiscal quarters of ~~2020~~2021 were as follows:


	Fiscal Quarter Ended				Three Fiscal Quarters Ended				Fiscal Quarter Ended				Three Fiscal Quarters Ended
	September 12,		September 6,		September 12,		September 6,		September 11,		September 12,		September 11,		September 12,
	2021		2020		2021		2020		2022		2021		2022		2021
Operating lease cost	$	10,451	$	10,267	$	31,201	$	30,099	$	11,302	$	10,451	$	32,366	$	31,201
Finance lease cost:
Amortization of right-of-use assets		1,022		548		2,944		1,248		1,228		1,022		3,631		2,944
Interest on lease liabilities		1,050		794		2,798		2,066		1,086		1,050		2,922		2,798
Total finance lease cost	$	2,072	$	1,342	$	5,742	$	3,314	$	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 ~~totaled $17.4~~ ~~million and $50.0~~ ~~million in the third quarter and three fiscal quarters of 2020, respectively. Rent expense~~ includes operating lease cost, as well as expense for non-lease components including common area maintenance, real estate taxes and ~~insurance~~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. ~~Variable rent~~Rent expense for certain short-term supply chain center tractor and ~~rent~~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 ~~leases were immaterial for~~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 ~~2020, respectively.~~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 ~~12, 2021~~11, 2022 and January ~~3, 2021~~2, 2022 was as follows:


	September 12,			January 3,			September 11,			January 2,
	2021			2021			2022			2022
Land and buildings	$	74,085		$	68,084		$	85,489		$	86,965
Equipment								1,802			—
Finance lease assets								87,291			86,965
Accumulated depreciation and amortization		(12,991	)		(10,049	)		(18,031	)		(14,423	)
Finance lease assets, net	$	61,094		$	58,035		$	69,260		$	72,542

Current portion of long-term debt	$	3,346		$	2,855		$	4,287		$	4,088
Long-term debt, less current portion		61,180			57,700
Long-term debt, less current portion								69,591			72,250
Total principal payable on finance leases	$	64,526		$	60,555		$	73,878		$	76,338

As of September ~~12, 2021~~11, 2022 and January ~~3, 2021,~~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 12, 2021

January 3, 2021

September 11, 2022

January 2, 2022

Operating

Finance

Operating

Finance

Operating

Finance

Operating

Finance

Leases

Weighted average remaining lease term

7 years

15 years

7 years

16 years

6 years

14 years

7 years

15 years

Weighted average discount rate

3.7%

6.5%

3.7%

6.8%

3.6%

5.8%

3.5%

5.8%

Supplemental cash flow information related to leases for the third quarter and three fiscal quarters of ~~2021~~2022 and the third quarter and three fiscal quarters of ~~2020~~2021 were as follows:


	Fiscal Quarter Ended				Three Fiscal Quarters Ended				Fiscal Quarter Ended				Three Fiscal Quarters Ended
	September 12,		September 6,		September 12,		September 6,		September 11,		September 12,		September 11,		September 12,
	2021		2020		2021		2020		2022		2021		2022		2021
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases	$	10,236	$	9,288	$	29,528	$	29,455	$	11,581	$	10,236	$	30,076	$	29,528
Operating cash flows from finance leases		1,050		794		2,798		2,066		1,086		1,050		2,922		2,798
Financing cash flows from finance leases		771		348		2,068		1,388		1,038		771		2,816		2,068
Right-of-use assets obtained in exchange for lease obligations:
Operating leases		7,785		10,719		19,138		26,297		4,241		7,785		35,405		19,138
Finance leases		390		1,717		6,050		20,463		453		390		453		6,050

Maturities of lease liabilities as of September ~~12, 2021~~11, 2022 were as follows:


	Operating			Finance			Operating			Finance
	Leases			Leases			Leases			Leases
2021	$	16,203		$	2,394
2022		44,458			7,197		$	18,493		$	2,745
2023		39,019			6,759			43,705			7,623
2024		37,769			7,216			43,399			8,209
2025		31,375			7,018			37,856			8,028
2026								35,257			8,724
Thereafter		92,261			74,509			81,564			77,868
Total future minimum rental commitments		261,085			105,093			260,274			113,197
Less – amounts representing interest		(30,968	)		(40,567	)		(29,203	)		(39,319	)
Total lease liabilities	$	230,117		$	64,526		$	231,071		$	73,878

As of September ~~12, 2021,~~11, 2022, the Company ~~has~~had additional leases for one supply chain center, one storage warehouse facility and certain supply chain ~~tractors~~ and ~~trailers~~U.S. Company-owned store vehicles that had not yet commenced with estimated future minimum rental commitments of approximately $~~66.6~~72.3 million. These leases are expected to commence in ~~2021~~2022 and ~~2022~~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 $~~10.3~~7.1 million and $~~12.6~~9.1 million as of September ~~12, 2021~~11, 2022 and January ~~3, 2021,~~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 $~~4.0~~6.0 million at September ~~12, 2021~~11, 2022 and $~~4.3~~5.4 million at January ~~3, 2021.~~2, 2022. The Company also had ~~less than~~ $0.1 million of non-cash investing activities related to lease incentives in the three fiscal quarters of both 2022 and 2021.

Restricted stock awards granted to members of the Company’s Board of Directors in fiscal 2021 were granted with a fair value equal to the market price of the Company’s common stock on the grant date and vest ~~one year~~ from the date of grant, generally subject to the director’s continued service. These awards also contain provisions for accelerated vesting upon the retirement eligibility of holders that have achieved specified service and age requirements.

Restricted stock units granted in fiscal 2021 were granted with a fair value equal to the market price of the Company’s common stock on the grant date. These restricted stock units are separated into 2 or 3 ~~tranches and have time-based ratable vesting conditions with the last tranche of the award vesting~~ ~~three years~~ from the grant date, generally subject to the holder’s continued employment. These awards generally also contain provisions for accelerated vesting upon the retirement eligibility of holders that have achieved specified service and age requirements.

Performance-based restricted stock units granted in fiscal 2021 were granted with a fair value equal to the market price of the Company’s common stock on the grant date, adjusted for the estimated fair value of the market condition included in the award. These performance-based restricted stock units may vest ~~three years~~ from the date of grant, generally subject to the holder’s continued employment, and have time and performance-based vesting conditions which provide for potential payouts of the target award amount between 0 ~~percent and~~ ~~200~~ percent, based on the Company’s three-year cumulative achievement as compared to the specified target performance conditions. The performance-based restricted stock units also include provisions for a potential modifier (upward or downward) based on the Company’s cumulative ~~three-year~~ common stock performance relative to that of a pre-established peer group. These awards also contain provisions for accelerated vesting of the time-based vesting condition upon the retirement eligibility of holders that have achieved specified service and age requirements. Management estimated the fair value of each performance-based restricted stock unit using a Monte-Carlo simulation pricing method. The risk-free interest rate is based on the estimated expected life and is estimated based on U.S. Treasury Bond rates as of the grant date. The Monte-Carlo simulation also includes assumptions for expected volatility based principally on the historical volatility of the Company’s share price, as well as the correlation of the Company’s share price as compared to that of the pre-established peer group.

11. New Accounting Pronouncements

~~Recently Adopted Accounting Standard~~

~~Accounting Standards Update (“ASU”) 2019-12, Income Taxes – Simplifying the Accounting for Income Taxes (Topic 740)~~

~~In December 2019, the Financial Accounting Standards Board (“FASB”) issued ASU 2019-12,~~ ~~Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes (“ASU 2019-12”)~~, which simplifies the accounting for income taxes. ASU 2019-12 was effective for fiscal years beginning after December 15, 2020, including applicable interim periods. The Company adopted this accounting standard in the first quarter of 2021, and it did not have a material impact on its condensed consolidated financial statements.

Accounting Standards Not Yet Adopted

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

~~ASU~~Accounting Standards Update (“ASU”) 2020-04, Facilitation of the Effects of Reference Rate Reform on Financial Reporting ~~(Topic 848)~~

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. ~~Subsequent to the closing of the 2021 Recapitalization, the~~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. ~~If the Company further needs to renegotiate its loan documents, the Company cannot predict what alternative index would be negotiated with its lenders.~~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 ~~is currently assessing the impact of adopting this standard but~~ does not expect the adoption of this guidance to have a material impact on its condensed consolidated financial statements.

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

The ~~2021~~2022 and ~~2020~~2021 third quarters referenced herein represent the twelve-week periods ended September 11, 2022 and September 12, 2021, ~~and September 6, 2020,~~ respectively. The ~~2021~~2022 and ~~2020~~2021 three fiscal quarters referenced herein represent the thirty-six-week periods ended September ~~12, 2021~~11, 2022 and September ~~6, 2020,~~12, 2021, respectively. In this section, we discuss the results of our operations for the third quarter and three fiscal quarters of ~~2021~~2022 as compared to the ~~respective periods~~third quarter and three fiscal quarters of ~~2020.~~2021.

Domino’s is the largest pizza company in the world with ~~a significant business in both delivery and carryout, and~~ more than ~~18,300~~19,500 locations in over 90 markets around the world as of September ~~12, 2021.~~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 ~~U.S.~~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. ~~These factors emphasize~~We believe we have a proven business model for success, which includes leading with technology, service and product innovation and leveraging our ~~focus on~~global scale, which has historically driven strong returns for our ~~stakeholders, including our customers, team members, franchisees, communities and~~ shareholders.

~~Domino's~~s experienced global retail sales growth during ~~both~~ the third quarter and three fiscal quarters of ~~2021.~~2022. We believe our commitment to value, convenience, quality and new products continues to keep consumers engaged with the brand. ~~We continued our strong international same store sales performance with 111 straight quarters of positive international same store sales. Although~~ U.S. same store sales ~~were positive for~~increased 2.0% in the third quarter of 2022 and declined 1.6% in the three fiscal quarters of ~~2021,~~2022, rolling over a decrease in U.S. same store sales ~~declined~~of 1.9% in the third quarter of 2021 ~~rolling over~~and an increase in U.S. same store sales of ~~17.5%~~4.6% in the ~~third quarter~~three fiscal quarters of ~~2020. This decrease~~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 ~~as well as a waning in the level of~~and economic stimulus activity in the U.S in the ~~third quarter~~three fiscal quarters of ~~2021. Same~~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. ~~continue to be positively affected by changes~~same store sales in ~~consumer ordering behavior observed since~~ the ~~onset~~three fiscal quarters of 2022.

International same store sales (excluding foreign currency impact) declined 1.8% and 0.8% in the ~~COVID-19 pandemic. Internationally, we continued to experience sustained~~third quarter and three fiscal quarters of 2022, respectively, rolling over increases in ~~retail~~international same store sales ~~during~~(excluding foreign currency impact) of 8.8% and 11.4% in the third quarter and three fiscal quarters of 2021, ~~resulting from evolving consumer trends, as well as~~respectively. The decline in same store sales (excluding foreign currency impact) in the ~~reopening~~third quarter and ~~resumption~~three fiscal quarters of ~~normal store hours and operating procedures at certain of~~2022 in our international ~~franchised stores~~business was driven in part by a value added tax holiday in the United Kingdom in the three fiscal quarters of 2021 that ~~had been temporarily closed or affected by changes~~did not recur in ~~operating procedures and store hours for portions of~~ the second and third ~~quarters~~quarter of ~~2020 as a result of the COVID-19 pandemic.~~2022. Our U.S. and international same store sales ~~results~~(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 ~~323~~225 net stores in the third quarter of ~~2021,~~2022, bringing our year-to-date total to ~~736 net store openings.~~671. We had 4524 net stores open in the U.S. and ~~278~~201 net stores open internationally during the third quarter of ~~2021.~~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.

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) 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.

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 ~~on a constant dollar basis~~excluding foreign currency impacts, which ~~reflects~~reflect changes in international local currency sales.

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

(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 ~~12, 2021,~~11, 2022, there were fewer than ~~175~~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.


	Third Quarter of 2021		Third Quarter of 2020			Three Fiscal Quarters of 2021			Three Fiscal Quarters of 2020		Third Quarter of 2022		Third Quarter of 2021		Three Fiscal Quarters of 2022		Three Fiscal Quarters of 2021
U.S. Company-owned stores	$108.4		$113.3		$337.7			$329.8			$112.4		$108.4		$328.8		$337.7
U.S. franchise royalties and fees	121.6		118.1		372.9			335.9			128.9		121.6		379.3		372.9
Supply chain	588.8		573.7		1,760.1			1,625.5			646.1		588.8		1,902.2		1,760.1
International franchise royalties and fees	70.6		54.6		207.1			160.2			67.1		70.6		202.8		207.1
U.S. franchise advertising	108.6		108.1		336.3			309.4			114.2		108.6		331.9		336.3
Total revenues	998.0	100.0%	967.7	100.0%	3,014.2		100.0%	2,760.8		100.0%	1,068.6	100.0%	998.0	100.0%	3,144.9	100.0%	3,014.2	100.0%
U.S. Company-owned stores	86.9		90.8		260.7			258.0			98.6		86.9		280.0		260.7
Supply chain	525.9		515.0		1,571.4			1,443.6			588.2		525.9		1,728.2		1,571.4
Total cost of sales	612.8	61.4%	605.7	62.6%	1,832.1		60.8%	1,701.6		61.7%	686.7	64.3%	612.8	61.4%	2,008.2	63.9%	1,832.1	60.8%
Operating margin	385.2	38.6%	362.0	37.4%	1,182.0		39.2%	1,059.2		38.4%
Gross margin											381.9	35.7%	385.2	38.6%	1,136.7	36.1%	1,182.0	39.2%
General and administrative	96.3	9.6%	91.7	9.4%	288.0		9.6%	268.2		9.7%	91.2	8.5%	96.3	9.6%	285.8	9.1%	288.0	9.6%
U.S. franchise advertising	108.6	10.9%	108.1	11.2%	336.3		11.1%	309.4		11.2%	114.2	10.7%	108.6	10.9%	331.9	10.5%	336.3	11.1%
Income from operations	180.3	18.1%	162.2	16.8%	557.7		18.5%	481.6		17.4%	176.5	16.5%	180.3	18.1%	519.1	16.5%	557.7	18.5%
Other income	—	0.0%	—	0.0%	2.5		0.1%	—		0.0%	—	0.0%	—	0.0%	—	0.0%	2.5	0.1%
Interest expense, net	(45.5)	(4.6)%	(38.4)	(4.0)%	(130.7)		(4.3)%	(116.0)		(4.2)%	(44.6)	(4.2)%	(45.5)	(4.6)%	(136.1)	(4.3)%	(130.7)	(4.3)%
Income before provision for income taxes	134.8	13.5%	123.8	12.8%	429.5		14.3%	365.6		13.2%	131.8	12.3%	134.8	13.5%	383.0	12.2%	429.5	14.3%
Provision for income taxes	14.4	1.4%	24.6	2.6%	74.8		2.5%	26.2		0.9%	31.3	2.9%	14.4	1.4%	89.1	2.9%	74.8	2.5%
Net income	$120.4	12.1%	$99.1	10.2%	$354.80		11.8%	$339.4		12.3%	$100.5	9.4%	$120.4	12.1%	$294.0	9.3%	$354.8	11.8%

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.

Revenues from U.S. Company-owned store operations ~~decreased $4.8~~increased $4.0 million, or ~~4.3%~~3.7%, in the third quarter of ~~2021~~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 ~~decrease~~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. Revenues from U.S. Company-owned store operations increased $7.9 million, or 2.4%, in~~growth and the three fiscal quarters of 2021 due to an increase in the average number of U.S. Company-owned stores open during the period resulting from net store growth, partially offset by a decrease in U.S. Company-owned same store sales.2022 Store Purchase.

U.S. Company-owned same store sales ~~decreased 8.9%~~declined 1.9% and 7.3% in the third quarter ~~of 2021~~ and ~~decreased 2.0% in the~~ three fiscal quarters of ~~2021.~~2022, respectively. U.S. Company-owned same store sales ~~increased 16.6%~~declined 8.9% and 2.0% in the third quarter ~~of 2020~~ and ~~increased 12.4% in the~~ three fiscal quarters of ~~2020.~~2021, respectively.

Revenues from U.S. franchise royalties and fees increased ~~$3.6~~$7.3 million, or ~~3.0%~~6.0%, in the third quarter of ~~2021~~2022 due ~~primarily~~ 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. The decrease in U.S. franchise same store sales partially offset~~growth and higher revenues from fees paid by our franchisees for the ~~increase in U.S. franchise royalties and fee revenues.~~use of our technology platforms. Revenues from U.S. franchise royalties and fees increased ~~$37.0~~$6.3 million, or ~~11.0%~~1.7%, in the three fiscal quarters of ~~2021~~2022 due primarily to higher same store sales and an increase in the average number of U.S. franchised stores open during the period resulting from net store growth. U.S. franchise royalties were also negatively impacted by $3.0 million in the three fiscal quarters of 2020 as a result of funding we provided to our franchisees as part of an effort to donate 10 million slices of pizza to people and organizations at the frontlines of the COVID-19 pandemic in the franchisees’ local communities. U.S. franchise royalties and fees further benefited in both the third quarter and three fiscal quarters of 2021 from an increase in revenues from fees paid by our franchisees for the use of our technology ~~platforms.~~

U.S. franchise same store sales decreased 1.5% in the third quarter of 2021 and increased 5.1% in the three fiscal quarters of 2021. U.S. franchise same store sales increased 17.5% in the third quarter of 2020 and increased 11.6% in the three fiscal quarters of 2020.

Revenues from U.S. franchise advertising increased $0.4 million, or 0.4%, in the third quarter of 2021 due primarily to an increase in the average number of U.S. franchised stores open during the period, resulting from net store growth. This increase was partially offset by a decrease in U.S. franchise same store salesplatforms as well as ~~approximately $2.8 million in advertising incentives related to the Domino’s Surprise Frees~~TM ~~promotion. Revenues from U.S. franchise advertising increased $26.9 million, or 8.7%, in the three fiscal quarters of 2021, due primarily to same store sales growth and~~ 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.

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 ~~referenced above.~~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 revenues increased ~~$15.2~~$57.3 million, or ~~2.6%~~9.7%, in the third quarter of ~~2021,~~2022, and increased $142.1 million, or 8.1%, in the three fiscal quarters of 2022 due ~~primarily~~ to higher market basket pricing to stores, ~~and higher revenues from sales of equipment to~~partially offset by lower order volumes at our U.S. ~~franchised stores. Supply chain revenues increased $134.6 million, or 8.3%, in~~franchise stores during the ~~three fiscal quarters of 2021, due primarily to higher volumes from increased orders and higher market basket pricing to stores.~~respective periods. Our market basket pricing to stores increased ~~2.1%~~13.4% during the third quarter of ~~2021,~~2022, which resulted in an estimated ~~$6.3~~$69.0 million increase in supply chain revenues. Our market basket pricing to stores increased ~~2.6%~~13.5% during the three fiscal quarters of ~~2021,~~2022, which resulted in an estimated ~~$38.0~~$202.2 million increase in supply chain revenues.

Revenues from international franchise royalties and fees ~~increased $16.0~~decreased $3.5 million, or ~~29.2%~~5.0%, in the third quarter of ~~2021,~~2022, and ~~increased $46.9~~decreased $4.3 million, or ~~29.3%~~2.1%, in the three fiscal quarters of ~~2021~~2022 due primarily to ~~higher retail sales resulting from same store sales growth and an increase in~~ the average number of international franchised stores open during the period, resulting from net store growth. These increases in retail sales were benefited by the reopening and resumption of normal store hours and operating procedures at certain of the Company’s international franchised stores that had been temporarily closed or affected by changes in operating procedures and store hours for portions of the second and third quarters of 2020 as a result of the COVID-19 pandemic. The positivenegative impact of changes in foreign currency exchange rates of ~~$1.3~~$7.9 million and ~~$7.4~~$18.0 million in the third quarter ~~of 2021~~ and three fiscal quarters of ~~2021, respectively,~~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 ~~increases~~decreases in international franchise ~~royalties and fees~~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 ~~of 2021,~~ and ~~increased 11.4% in the~~ three fiscal quarters of 2021. Excluding the impact of foreign currency exchange rates, international franchise same store sales increased 6.2% in the third quarter of 2020, and increased 3.0% in the three fiscal quarters of 2020.2021, respectively.

Consolidated cost of sales consists ~~primarily~~ 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 ~~operating~~gross margin (which we define as revenues less cost of sales) ~~increased $23.2~~decreased $3.3 million, or ~~6.4%~~0.9%, in the third quarter of ~~2021,~~2022, and ~~increased $122.8~~decreased $45.3 million, or ~~11.6%~~3.8%, in the three fiscal quarters of ~~2021,~~2022, due primarily to lower U.S. Company-owned store revenues, as well as higher ~~global franchise revenues.~~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 ~~the operating~~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 ~~operating~~gross margin ~~increased 1.2~~decreased 2.9 percentage points in the third quarter of ~~2021~~2022, and ~~increased 0.8~~decreased 3.1 percentage points in the three fiscal quarters of ~~2021.~~2022. U.S. Company-owned store ~~operating~~gross margin ~~remained consistent in the third quarter of 2021 and increased 1.0 percentage point in the three fiscal quarters of 2021. Supply chain operating margin increased 0.5~~decreased 7.5 percentage points in the third quarter of ~~2021~~2022, and decreased ~~0.5~~8.0 percentage points in the three fiscal quarters of ~~2021.~~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 ~~operating~~gross margin are described below.

U.S. Company-owned store ~~operating~~gross margin (which does not include certain store-level costs such as royalties and advertising) decreased ~~$1.0~~$7.7 million, or ~~4.4%~~35.8%, in the third quarter of ~~2021,~~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, ~~partially offset by lower~~as well as higher food and labor costs. U.S. Company-owned store operating margin increased $5.2 million, or 7.3%, in the three fiscal quarters of 2021, due primarily to lower labor costs and higher retail sales due to net store growth, but these increases were partially offset by lower same store sales. As a percentage of store revenues, the U.S. Company-owned store ~~operating~~gross margin ~~remained consistent~~decreased 7.5 percentage points in the third quarter of ~~2021~~2022, and ~~increased 1.0~~decreased 8.0 percentage ~~point~~points in the three fiscal quarters of ~~2021.~~2022. These changes in ~~operating~~gross margin as a percentage of revenues are discussed in additional detail below.

Supply chain ~~operating~~gross margin ~~increased $4.2~~decreased $5.0 million, or ~~7.2%~~8.0%, in the third quarter of ~~2021,~~2022, and decreased $14.7 million, or 7.8%, in the three fiscal quarters of 2022 due primarily ~~due~~ to higher ~~equipment revenues as well as lower supply cost.~~delivery and labor costs. As a percentage of supply chain revenues, ~~the~~ supply chain ~~operating~~gross margin ~~increased 0.5~~decreased 1.7 percentage points in the third quarter of 2021. While the market basket pricing to stores increased 2.1% during the third quarter of 2021, we incurred additional supply costs during the third quarter of 2020 as a result of certain expenses related to the provision of safety2022 and cleaning equipment in connection with the COVID-19 pandemic. Higher labor cost as a percentage of revenues in the third quarter of 2021 partially offset the effect of the lower supply costs. Supply chain operating margin increased $6.8 million, or 3.6%, in the three fiscal quarters of 2021, primarily due to higher equipment revenues as well as lower supply cost and higher volumes from increased store orders. As a percentage of supply chain revenues, the supply chain operating margin decreased ~~0.5~~1.5 percentage points in the three fiscal quarters of ~~2021 primarily~~2022 due to higher food and ~~labor cost.~~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.

General and administrative expenses ~~increased $4.7~~decreased $5.1 million, or ~~5.1%~~5.3%, in the third quarter of ~~2021,~~2022 driven primarily by lower labor costs. General and ~~increased $19.8~~administrative expenses decreased $2.3 million, or ~~7.4%~~0.8%, in the three fiscal quarters of ~~2021,~~2022 driven primarily by ~~higher~~lower labor costs, ~~including~~partially offset by higher travel expenses, amortization expense for capitalized software and non-cash equity-based compensation ~~expense as well as higher travel~~ expense. ~~The increases in general and administrative expenses were partially offset by lower professional fees in both the third quarter and three fiscal quarters of 2021.~~

U.S. franchise advertising expenses increased ~~$0.4~~$5.6 million, or ~~0.4%~~5.2%, in the third quarter of ~~2021,~~2022, and ~~increased $26.9~~decreased $4.4 million, or ~~8.7%~~1.3%, in the three fiscal quarters of ~~2021,~~2022 consistent with the ~~increase~~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 was~~During the first quarter of 2021, we recorded a $2.5 million ~~in the three fiscal quarters of 2021, representing the~~ unrealized gain ~~recorded~~ on ~~the Company’s~~our investment in DPC Dash ~~Brands~~ (Note 6) resulting from the observable change in price from the valuation of ~~the~~our additional $40.0 million ~~investment made~~investment. We did not record any adjustments to the carrying amount in the ~~first~~third quarter or three fiscal quarters of 2022, or the third quarter of 2021.

Interest expense, net ~~increased $7.1~~decreased $0.9 million, or ~~18.4%~~1.9%, in the third quarter of ~~2021, and~~2022 driven primarily by higher interest income. Interest expense, net increased ~~$14.7~~$5.4 million, or ~~12.6%~~4.1%, in the three fiscal quarters of ~~2021. These increases were~~2022 driven by higher average borrowings resulting from our recapitalization transaction completed on April 16, 2021 (the “2021 Recapitalization”)~~. In connection with the 2021 Recapitalization, we recorded $2.3 million of incremental~~, partially offset by higher interest expense in the second quarter of 2021, primarily representing the expense for $2.0 million of the remaining unamortized debt issuance costs associated with the 2017 five-year fixed rate notes and 2017 five-year floating rate notes, and $0.3 million of additional interest expense incurred on the 2017 five-year fixed rate notes and 2017 five-year floating rate notes subsequent to the closing of the 2021 Recapitalization but prior to the repayment of the 2017 five-year fixed rate notes and 2017 five-year floating rate notes, resulting in the payment of interest on both the 2017 five-year fixed rate notes and 2017 five-year floating rate notes and the 2021 Notes (as defined in the "2021 Recapitalization" section below) for a short period of time.income.

~~The Company’s~~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 ~~third quarter~~three fiscal quarters of ~~2020, resulting from the~~2021, due to lower interest rates on the debt outstanding ~~due to~~as a result of the 2021 Recapitalization. ~~The Company's weighted average borrowing rate was 3.9% in the three fiscal quarters of both 2021 and 2020.~~

Income tax expense ~~decreased $10.2~~increased $16.9 million, or ~~41.6%~~117.6%, in the third quarter of ~~2021,~~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 ~~$48.6~~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 ~~185.7%~~19.2%, in the three fiscal quarters of ~~2021,~~2022 due to ~~changes~~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 ~~on non-cash~~from equity-based compensation, which are recorded as a reduction to the income tax provision, as well as higher pre-tax income in the respective periods of 2021. The Company recognized $14.0 million in excess tax benefits in the third quarter of 2021 as compared to $3.4 million in the third quarter of 2020, and $18.3 million in excess tax benefits in the three fiscal quarters of 2021 as compared to $56.9 million in the three fiscal quarters of 2020. These changes in excess tax benefits from non-cash equity-based compensation resulted primarily from the timing of stock options exercised in the third quarter and three fiscal quarters of ~~2021~~2022 as compared to the ~~same~~respective periods in ~~2020.~~2021. The ~~effective~~decreases in excess tax ~~rate decreased to 10.7% during the third quarter~~benefits from equity-based compensation were a result of ~~2021 as compared to 19.9%~~fewer stock option exercises in the third quarter ~~of 2020. The effective tax rate increased to 17.4% during the~~and three fiscal quarters of ~~2021~~2022 as compared to ~~7.2%~~the respective periods in 2021. The increase in the ~~three fiscal quarters~~effective tax rate was also a result of ~~2020.~~lower foreign tax credits in the respective periods of 2022.

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.

U.S. stores Segment Income ~~increased $0.5~~decreased $1.4 million, or ~~0.4%~~1.4%, in the third quarter of ~~2021,~~2022, primarily due to the ~~$3.6~~$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, ~~partially offset by the $1.0 million decrease in U.S. Company-owned store operating margin,~~each as discussed above. U.S. stores Segment Income ~~increased $28.5~~decreased $19.4 million, or ~~9.7%~~6.0%, in the three fiscal quarters of ~~2021,~~2022, primarily due to the ~~$37.0~~$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, ~~and the $5.2 million increase in U.S. Company-owned store operating margin,~~each as discussed above. U.S. franchise revenues do not have a cost of sales component, sotherefore 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. ~~These increases in U.S. stores Segment Income were partially offset by increased investments in technological initiatives for the respective periods.~~

Supply chain Segment Income ~~increased $2.5~~decreased $3.7 million, or ~~4.8%~~6.9%, in the third quarter of ~~2021,~~2022, primarily due to the ~~$4.2~~$5.0 million ~~increase~~decrease in ~~operating~~supply chain gross margin ~~described~~discussed above. Supply chain Segment Income ~~increased $5.3~~decreased $14.8 million, or ~~3.3%~~9.0%, in the three fiscal quarters of ~~2021,~~2022, primarily due to the ~~$6.8~~$14.7 million ~~increase~~decrease in ~~operating~~supply chain gross margin ~~described~~discussed above.

International franchise Segment Income ~~increased $12.9~~decreased $3.5 million, or ~~28.9%~~6.2%, in the third quarter of ~~2021,~~2022, primarily due ~~primarily~~ to the ~~$16.0~~$3.5 million ~~increase~~decrease in international franchise royalties and fees revenues discussed above. International franchise Segment Income ~~increased $43.8~~decreased $6.4 million, or ~~35.2%~~3.8%, in the three fiscal quarters of ~~2021,~~2022, primarily due ~~primarily~~ to the ~~$46.9~~$4.3 million ~~increase~~decrease in international franchise royalties and fees revenues discussed above. International franchise revenues do not have a cost of sales component, sotherefore changes in these revenues have a disproportionate effect on international franchise Segment Income. ~~The increases in international franchise Segment Income were partially offset by increased investments in technological initiatives in the third quarter and three fiscal quarters of 2021.~~

Other Segment Income increased ~~$3.7~~$7.1 million, or ~~26.9%~~70.8%, in the third quarter of ~~2021,~~2022, and increased ~~$8.7~~$9.5 million, or ~~25.2%~~36.8%, in the three fiscal quarters of ~~2021,~~2022, primarily due ~~primarily~~ to ~~higher corporate administrative costs allocated to our segments as compared to 2020, as well as~~ lower professional fees. The increase in allocated costs in the third quarter and three fiscal quarters of 2021 was due primarily to higher investments in technological initiatives to support technology for our U.S. and international franchise stores. Higher labor ~~and travel costs partially offset the increases in other Segment Income.~~costs.

Historically, ~~we have operated with minimal positive working capital or negative working capital, primarily because~~ our receivable collection periods and inventory turn rates are faster than the normal payment terms on our current ~~liabilities.~~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 ~~coupled with the use of~~allow us to manage our working capital and our ongoing cash flows from operations to ~~service our debt obligations,~~ invest in our business and other strategic opportunities, pay dividends and repurchase and retire shares of our common ~~stock, reduce our working capital amounts.~~stock. As of September ~~12, 2021,~~11, 2022, we had working capital of ~~$215.1~~$55.2 million, excluding restricted cash and cash equivalents of ~~$206.3~~$184.6 million, advertising fund assets, restricted, of ~~$186.8~~$181.2 million and advertising fund liabilities of ~~$178.5~~$173.3 million. Working capital ~~includes total~~as of September 11, 2022 included unrestricted cash and cash equivalents of ~~$295.4~~$114.8 million.

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 ~~2021,~~2022, we experienced increases in international same store sales versus the comparable periods in the prior year. While our U.S. same store sales declined in the third quarter of 2021, same store sales increased during the three fiscal quarters of 2021. Additionally, both our U.S. and international businesses grew store counts in the third quarter and three fiscal quarters of 2021. These factors contributedcontinued to ~~our~~increase global retail sales ~~growth realized in both the third quarter and three fiscal quarters of 2021~~(excluding foreign currency impact), which ~~resulted in~~continued our ~~continued~~ ability to generate positive cash provided by operating ~~cash flows.~~activities. As of September ~~12, 2021,~~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 ~~12, 2021,~~11, 2022, we had no$120.0 million of outstanding borrowings and ~~$157.5~~$35.8 million of available borrowing capacity under our 2021 Variable Funding Notes, net of letters of credit issued of ~~$42.5~~$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 ~~filings with the Securities and Exchange Commission.~~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 ~~the~~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.

As of September ~~12, 2021,~~11, 2022, we had ~~$158.6~~$136.6 million of restricted cash held for future principal and interest payments and other working capital requirements of our asset-backed securitization structure, ~~$47.5~~$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 ~~$206.3~~$184.6 million of restricted cash and cash equivalents. As of September ~~12, 2021,~~11, 2022, we also held ~~$166.7~~$157.7 million of advertising fund restricted cash and cash equivalents, which can only be used for activities that promote the Domino’s brand.

As of September ~~12, 2021,~~11, 2022, we had approximately ~~$5.07~~$5.15 billion of long-term debt, of which ~~$54.8~~$55.8 million was classified as a current liability. As of September ~~12, 2021,~~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 ~~2021,~~2022, $51.5 million in each of ~~2022,~~ 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 ~~beginning~~ in the first quarter of ~~2021. Accordingly, all principal amounts of our outstanding notes were classified as long-term debt in the condensed consolidated balance sheet as of January 3,~~ 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 ~~outstanding~~ notes beginning in the second quarter of 2021.

~~During~~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 ~~second quarter of 2021, on April 16, 2021 (the “closing date”), we completed~~related agreements. In the ~~2021 Recapitalization in which~~event that certain ~~of our subsidiaries issued new~~covenants are not met, the notes pursuant to our asset-backed securitization structure. The new notes consist of $850.0 million Series 2021-1 2.662% Fixed Rate Senior Secured Notes, Class A-2-I with an anticipated term of 7.5 years (the “2021 A-2-I Fixed Rate Notes”),may become due and $1.0 billion Series 2021-1 3.151% Fixed Rate Senior Secured Notes, Class A-2-II with an anticipated term of 10 years (collectively with the 2021 A-2-I Fixed Rate Notes, the “2021 Notes”) in an offering exempt from registration under the Securities Act of 1933, as amended. As of September 12, 2021, the 2021 Notes had scheduled principal payments of $4.6 million in 2021, $18.5 million in each of 2022 through 2027, $804.8 million in 2028, $10.0 million in each of 2029 and 2030 and $905.0 million in 2031. Gross proceeds from the issuance of the 2021 Notes were $1.85 billion.

Concurrently, certain of our subsidiaries also issued the 2021 Variable Funding Notes, which allow 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 were undrawn on the closing date. In connection with the issuance of our 2021 Variable Funding Notes, our previous variable funding note facility was canceled.

A portion of proceeds from the 2021 Recapitalization was used to repay the remaining $291.0 million in outstanding principal under our 2017 five-year floating rate notes and $582.0 million in outstanding principal under our 2017 five-year fixed rate notes. The proceeds were also used to pre-fund a portion of the interest payable on the 2021 Notes and pay transaction fees and expenses. In connection with the repayment of the 2017 five-year floating rate notes and 2017 five-year fixed rate notes, we expensed approximately $2.0 million for the remaining unamortized debt issuance costs associated with these notes. Additionally, in connection with the 2021 Recapitalization, we capitalized $14.9 million of debt issuance costs, which are being amortized into interest expense over the 7.5 and 10-year expected terms of the 2021 Notes. We used the remaining proceeds for general corporate purposes, which primarily included a $1.0 billionan accelerated ~~share repurchase agreement (the “ASR Agreement”) with a counterparty. The ASR Agreement is described in additional detail below.~~schedule.

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.

During the ~~first~~third quarter of ~~2021,~~2022, we repurchased and retired ~~65,870~~490,789 shares of our common stock under our Board of Directors-approved share repurchase program for a total of approximately ~~$25.0~~$196.1 million. ~~Our Board of Directors authorized a new share repurchase program to repurchase up to $1.0 billion of our common stock on February 24, 2021.~~

On April 30, 2021, we entered into the ASR Agreement. Pursuant to the terms of the ASR Agreement, on May 3, 2021, we used a portion of the proceeds from the 2021 Recapitalization to pay the counterparty $1.0 billion in cash and received and retired 2,012,596 shares of our common stock. Final settlement of the ASR Agreement occurred on July 21, 2021. In connection with the ASR Agreement, we received and retired a total of 2,250,786 shares of our common stock at an average price of $444.29, including the 2,012,596 shares of our common stock received and retired during the second quarter of 2021.

On July 20, 2021, our Board of Directors authorized a new share repurchase program to repurchase up to $1.0 billion of our common stock. This repurchase program replaced our previously approved $1.0 billion share repurchase program, which was fully utilized in connection with the ASR Agreement.

During the ~~third quarter~~three fiscal quarters of ~~2021,~~2022, we repurchased and retired ~~152,817~~739,847 shares of our common stock under our Board of Directors-approved share repurchase program for a total of approximately ~~$79.7~~$293.7 million. During the three fiscal quarters of 2021, we repurchased and retired 2,469,473 shares of our common stock (including 2,250,786 shares of common stock repurchased under the ASR Agreement and 218,687 shares of common stock repurchased under our Board of Directors-approved share repurchase program) for a total of approximately $1.1 billion. As of September ~~12, 2021,~~11, 2022, we had a total remaining authorized amount for share repurchases of approximately ~~$920.3~~$410.4 million. ~~Subsequent to the end of the third quarter and through October 12, 2021, we repurchased and retired an additional 205,145 shares of common stock for a total of approximately $100.1 million.~~

On July ~~20, 2021,~~19, 2022, our Board of Directors declared a ~~$0.94~~$1.10 per share quarterly dividend on our outstanding common stock for shareholders of record as of September 15, ~~2021,~~2022, which was paid on September 30, ~~2021.~~2022. We had approximately ~~$35.1~~$39.6 million accrued for common stock dividends at September ~~12, 2021.~~11, 2022. Subsequent to the end of the third quarter, on October ~~12, 2021,~~11, 2022, our Board of Directors declared a ~~$0.94~~$1.10 per share quarterly dividend on our outstanding common stock for shareholders of record as of December 15, ~~2021,~~2022 to be paid on December 30, ~~2021.~~2022.

Cash provided by operating activities ~~increased $114.2~~decreased $154.4 million in the three fiscal quarters of ~~2021~~2022. This decrease was primarily due to the positive impact of changes in operating assets and liabilities of $73.0 million. The positive impact of changes in operating assets and liabilities related to the timing of payments on accounts payable and accrued liabilities, income tax payments as well as the timing of collections on accounts receivable in 2021 as compared to 2020. The increase in net income, adjusted for the impact of non-cash transactions, of $24.5a $53.5 million in the three fiscal quarters of 2021 also contributed to the increase in cash provided by operating activities. The increase in cash provided by operating activities was also due to a $16.7 million positivenegative impact of changes in advertising fund assets and liabilities, restricted, in ~~2021~~the three fiscal quarters of 2022 as compared to ~~2020~~the three fiscal quarters of 2021 due to ~~the receipt of~~receipts for advertising contributions outpacing payments for advertising ~~activities.~~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.

Cash used in investing activities was ~~$90.3~~$58.7 million in the three fiscal quarters of ~~2021,~~2022, which primarily consisted of ~~$50.7~~$50.5 million of capital expenditures (driven primarily by investments in technological initiatives, supply chain centers and corporate store operations) ~~and an additional investment~~. 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 ~~Dash Brands (Note 6)~~the first quarter of ~~$40.0~~2022 for $6.8 million.

Cash used in financing activities was ~~$228.1~~$304.3 million in the three fiscal quarters of ~~2021,~~2022, which primarily ~~related to~~consisted of the repurchase of approximately ~~$1.1 billion~~$293.7 million in common stock under our Board of Directors-approved share repurchase program, ~~(including $1.0 billion under the ASR Agreement),~~dividend payments of $79.7 million, repayments of long-term debt and finance lease obligations of ~~$896.2 million, dividend payments of $71.2 million, cash paid for financing costs as part of the 2021 Recapitalization of $14.9~~$41.1 million and tax payments for the vesting of restricted stock of ~~$6.8~~$10.7 million. Of the total amount of repayments of long-term debt and finance lease obligations, $873.0 million represents the repayment of the remaining principal under our then-outstanding 2017 five-year floating rate notes and 2017 five-year fixed rate notes as part of the 2021 Recapitalization. These uses of cash were partially offset by ~~proceeds from~~borrowings under our 2021 ~~Recapitalization~~Variable Funding Notes of ~~$1.85 billion~~$120.0 million and proceeds from the exercise of stock options of ~~$15.9~~$1.3 million.

For a description of the Company’s critical accounting ~~policies and~~ estimates, refer to “Part II—Item 7—Management’s Discussion and Analysis of Financial Condition and Results of Operations” in the ~~2020~~2021 Form 10-K. The Company considers its most significant accounting policies and estimates to be ~~revenue recognition,~~ long-lived assets, casualty insurance ~~and legal matters, share-based payments~~reserves and income taxes. There have been no material changes to the Company’s critical accounting ~~policies and~~ estimates since January ~~3, 2021.~~2, 2022.

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 ~~2020~~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;~~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; ~~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 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;~~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.

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 ~~12, 2021,~~11, 2022, we are exposed to interest rate risk on borrowings under our ~~variable funding notes.~~2021 Variable Funding Notes. As of September ~~12, 2021,~~11, 2022, we had no$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 ~~approximately 5.6% of our total revenues in the third quarter of 2020 and approximately 5.8% of our total revenues in the three fiscal quarters of 2020~~ 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 ~~$18.4~~$18.0 million in the three fiscal quarters of ~~2021.~~2022.

Management, with the participation of the Company’s Chief Executive Officer, ~~(who is also serving as the Company’s interim principal financial officer), Richard E. Allison, Jr.,~~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. ~~Allison~~Weiner and Mr. Reddy concluded that the Company’s disclosure controls and procedures were effective.

During the quarterly period ended September ~~12, 2021,~~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.

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.

There have been no material changes with respect to those risk factors previously disclosed in Item 1A “Risk Factors” in Part I of our ~~2020~~2021 Form 10-K.

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.


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 ~~12, 2021~~11, 2022 and January ~~3, 2021~~2, 2022	3

	Condensed Consolidated Statements of Income (Unaudited) – Fiscal quarters and three fiscal quarters ended September ~~12, 2021~~11, 2022 and September ~~6, 2020~~12, 2021	4

	Condensed Consolidated Statements of Comprehensive Income (Unaudited) – Fiscal quarters and three fiscal quarters ended September ~~12, 2021~~11, 2022 and September ~~6, 2020~~12, 2021	5

	Condensed Consolidated Statements of Cash Flows (Unaudited) ~~–Three~~– Three fiscal quarters ended September ~~12, 2021~~11, 2022 and September ~~6, 2020~~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	1615

Item 3.	Quantitative and Qualitative Disclosures About Market Risk	2726

Item 4.	Controls and Procedures	2726

PART II.	OTHER INFORMATION

Item 1.	Legal Proceedings	2827

Item 1A.	Risk Factors	2827

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	2827

Item 3.	Defaults Upon Senior Securities	2827

Item 4.	Mine Safety Disclosures	2827

Item 5.	Other Information	2827

Item 6.	Exhibits	2928

SIGNATURES		3029


	Third Quarter of 2022	Third Quarter of 2021	Three Fiscal Quarters of 2022	Third Quarter of 2020	Three Fiscal Quarters of 2021	Three Fiscal Quarters of 2020
U.S. stores	+4.1%	+1.1%	+0.7%	~~+21.3%~~	+7.6%	~~+15.3%~~
International stores (excluding foreign currency impact)	+5.2%	+16.5%	+5.7%	~~+8.5%~~	+19.2%	~~+4.0%~~
Total (excluding foreign currency impact)	+4.7%	+8.5%	+3.2%	~~+14.8%~~	+13.1%	~~+9.6%~~


	U.S. Company- owned Stores		U.S. Franchise Stores			Total U.S. Stores			International Stores			Total			U.S. Company- owned Stores		U.S. Franchise Stores			Total U.S. Stores			International Stores			Total
Store count at June 20, 2021		366		6,060			6,426			11,631			18,057
Store count at June 19, 2022																401		6,218			6,619			12,675			19,294
Openings		1		45			46			287			333			1		26			27			263			290
Closings (1)		—		(1	)		(1	)		(9	)		(10	)		—		(3	)		(3	)		(62	)		(65	)
Store count at September 12, 2021		367		6,104			6,471			11,909			18,380
Third quarter 2021 net store growth		1		44			45			278			323
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)		19		213			232			892			1,124			12		160			172			967			1,139


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


	Three Fiscal Quarters of 2021
	Carrying Amount						Carrying Amount
	January 3,				Unrealized		September 12,
	2021		Purchases		Gain		2021
Investments	$	40,000	$	40,000	$	2,500	$	82,500


(In millions)	Three Fiscal Quarters of 2021			Three Fiscal Quarters of 2020			Three Fiscal Quarters of 2022			Three Fiscal Quarters of 2021
Cash flows provided by (used in)
Net cash provided by operating activities	$	484.6		$	370.4		$	330.2		$	484.6
Net cash used in investing activities		(90.3	)		(91.1	)		(58.7	)		(90.3	)
Net cash used in financing activities		(228.1	)		(153.6	)		(304.3	)		(228.1	)
Effect of exchange rate changes on cash		0.1			0.2			(0.6	)		0.1
Change in cash and cash equivalents, restricted cash and cash equivalents	$	166.2		$	126.0		$	(33.4	)	$	166.2


							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
Period	Purchased (1)		Per Share		Program (2)		(in thousands)
Period #7 (June 21, 2021 to July 18, 2021)		913	$	475.82		—	$	—
Period #8 (July 19, 2021 to August 15, 2021)		300,483		530.80		299,265		967,586
Period #9 (August 16, 2021 to September 12, 2021)		93,194		515.30		91,742		920,312
Total		394,590	$	521.24		391,007	$	920,312


(1)	~~3,583~~3,970 shares in the third quarter of ~~2021~~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 ~~$511.95.~~$387.29.
(2)	On April 30, 2021, the Company entered into the ASR Agreement. Pursuant to the terms of the ASR Agreement, on May 3, 2021, the Company received and retired 2,012,596 shares of its common stock. Final settlement of the ASR Agreement occurred on July 21, 2021. The total number of shares purchased in Period 8, 2021 (July 19, 2021 to August 15, 2021) includes 238,190 shares received at final settlement of the ASR Agreement. In connection with the ASR Agreement, the Company received and retired a total of 2,250,786 shares of its common stock at an average price of $444.29. On July 20, 2021, the Company’s Board of Directors authorized a ~~new~~ share repurchase program to repurchase up to $1.0 billion of the Company’s common stock. As of September ~~12, 2021, $920.3~~11, 2022, $410.4 million remained available for future purchases of the Company’s common stock under this share repurchase program.
	Subsequent to the end of the third quarter and through October 12, 2021, the Company repurchased and retired an additional 205,145 shares of common stock for a total of approximately $100.1 million, or an average price of $487.90 per share.
	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.


Exhibit Number		Description
~~10.1~~		~~Form of Restricted Stock Unit Award Agreement under the Amended Domino’s Pizza, Inc. 2004 Equity Incentive Plan.~~
31.1		Certification by ~~Richard E. Allison, Jr.~~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 ~~Richard E. Allison, Jr.~~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).


	DOMINO’S PIZZA, INC. (Registrant)
Date: October ~~14, 2021~~13, 2022	/s/ ~~Richard E. Allison, Jr.~~Sandeep Reddy
	~~Richard E. Allison, Jr.~~Sandeep Reddy
		Executive Vice President, Chief ~~Executive~~Financial Officer (~~Principal Executive Officer and~~ Principal Financial Officer)