PART I. FINANCIAL INFORMATION

Item 1. Financial Statements.

Domino’s Pizza, Inc. and Subsidiaries

Condensed Consolidated Balance Sheets

(Unaudited)

(In thousands)

June 16, 2019

December 30, 2018 (1)

Assets

Current assets:

Cash and cash equivalents
$
108,259
$
25,438

Restricted cash and cash equivalents

152,713

166,993

Accounts receivable, net

182,904

190,091

Inventories

44,281

45,975

Prepaid expenses and other

37,578

25,710

Advertising fund assets, restricted

117,712

112,744

Total current assets

643,447

566,951

Property, plant and equipment:

Land and buildings

41,385

41,147

Leasehold and other improvements

155,532

170,498

Equipment

237,088

243,654

Construction in progress

29,314

31,822

463,319

487,121

Accumulated depreciation and amortization

(249,184
)
(252,182
)

Property, plant and equipment, net

214,135

234,939

Other assets:

Operating lease
right-of-use
assets

211,204

—

Goodwill

13,542

14,919

Capitalized software, net

69,629

63,809

Other assets

21,965

21,241

Deferred income taxes

3,245

5,526

Total other assets

319,585

105,495

Total assets
$
1,177,167
$
907,385

Liabilities and stockholders’ deficit

Current liabilities:

Current portion of long-term debt
$
35,919
$
35,893

Accounts payable

82,456

92,546

Operating lease liabilities

30,156

—

Insurance reserves

22,078

22,210

Dividends payable

27,355

581

Advertising fund liabilities

113,416

107,150

Other accrued liabilities

101,526

121,363

Total current liabilities

412,906

379,743

Long-term liabilities:

Long-term debt, less current portion

3,414,988

3,495,691

Operating lease liabilities

188,305

—

Insurance reserves

33,507

31,065

Other accrued liabilities

31,747

40,807

Total long-term liabilities

3,668,547

3,567,563

Stockholders’ deficit:

Common stock

412

410

Additional
paid-in
capital

10,788

569

Retained deficit

(2,911,278
)
(3,036,471
)
Accumulated other comprehensive loss

(4,208
)
(4,429
)

Total stockholders’ deficit

(2,904,286
)
(3,039,921
)

Total liabilities and stockholders’ deficit
$
1,177,167
$
907,385


(In thousands)	September 8, 2019			December 30, 2018 (1)
Assets
Current assets:
Cash and cash equivalents	$	66,706		$	25,438
Restricted cash and cash equivalents		177,292			166,993
Accounts receivable, net		185,403			190,091
Inventories		51,010			45,975
Prepaid expenses and other		15,438			25,710
Advertising fund assets, restricted		109,490			112,744

Total current assets		605,339			566,951

Property, plant and equipment:
Land and buildings		41,408			41,147
Leasehold and other improvements		160,850			170,498
Equipment		241,972			243,654
Construction in progress		26,649			31,822

		470,879			487,121
Accumulated depreciation and amortization		(254,669	)		(252,182	)

Property, plant and equipment, net		216,210			234,939

Other assets:
Operating lease right-of-use assets		227,495			—
Goodwill		13,542			14,919
Capitalized software, net		71,055			63,809
Other assets		22,743			21,241
Deferred income taxes		3,888			5,526

Total other assets		338,723			105,495

Total assets	$	1,160,272		$	907,385

Liabilities and stockholders’ deficit
Current liabilities:
Current portion of long-term debt	$	35,935		$	35,893
Accounts payable		95,657			92,546
Operating lease liabilities		32,203			—
Insurance reserves		22,337			22,210
Dividends payable		27,006			581
Advertising fund liabilities		104,945			107,150
Other accrued liabilities		103,162			121,363

Total current liabilities		421,245			379,743

Long-term liabilities:
Long-term debt, less current portion		3,407,101			3,495,691
Operating lease liabilities		202,128			—
Insurance reserves		32,858			31,065
Other accrued liabilities		32,589			40,807

Total long-term liabilities		3,674,676			3,567,563

Stockholders’ deficit:
Common stock		409			410
Additional paid-in capital		75			569
Retained deficit		(2,932,195	)		(3,036,471	)
Accumulated other comprehensive loss		(3,938	)		(4,429	)

Total stockholders’ deficit		(2,935,649	)		(3,039,921	)

Total liabilities and stockholders’ deficit	$	1,160,272		$	907,385

(1)	The balance sheet at December 30, 2018 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.

See accompanying notes.

Table of Contents

Domino’s Pizza, Inc. and Subsidiaries

Condensed Consolidated Statements of Income

(Unaudited)

Fiscal Quarter Ended

Two Fiscal Quarters Ended

June 16,

June 17,

June 16,

June 17,

(In thousands, except per share data)

2019

2018

2019

2018

Revenues:

U.S. Company-owned stores
$
105,001
$
118,795
$
228,451
$
239,981

U.S. franchise royalties and fees

95,594

87,418

192,302

176,908

Supply chain

467,577

440,917

939,677

880,980

International franchise royalties and fees

54,975

51,337

109,559

103,758

U.S. franchise advertising

88,500

80,929

177,621

163,140

Total revenues

811,647

779,396

1,647,610

1,564,767

Cost of sales:

U.S. Company-owned stores

80,366

91,976

175,906

185,014

Supply chain

414,610

393,840

832,744

786,308

Total cost of sales

494,976

485,816

1,008,650

971,322

Operating margin

316,671

293,580

638,960

593,445

General and administrative

89,248

86,506

178,912

170,684

U.S. franchise advertising

88,500

80,929

177,621

163,140

Income from operations

138,923

126,145

282,427

259,621

Interest income

922

1,179

1,615

1,659

Interest expense

(33,866
)
(36,127
)
(68,920
)
(66,413
)

Income before provision for income taxes

105,979

91,197

215,122

194,867

Provision for income taxes

13,620

13,789

30,113

28,632

Net income
$
92,359
$
77,408
$
185,009
$
166,235

Earnings per share:

Common stock - basic
$
2.25
$
1.84
$
4.52
$
3.92

Common stock - diluted

2.19

1.78

4.38

3.78


	Fiscal Quarter Ended						Three Fiscal Quarters Ended
	September 8,			September 9,			September 8,			September 9,
(In thousands, except per share data)	2019			2018			2019			2018
Revenues:
U.S. Company-owned stores	$	94,575		$	118,540		$	323,026		$	358,521
U.S. franchise royalties and fees		97,047			89,427			289,349			266,335
Supply chain		485,110			445,096			1,424,787			1,326,076
International franchise royalties and fees		54,586			50,424			164,145			154,182
U.S. franchise advertising		89,494			82,478			267,115			245,618

Total revenues		820,812			785,965			2,468,422			2,350,732

Cost of sales:
U.S. Company-owned stores		71,610			92,998			247,516			278,012
Supply chain		432,951			397,688			1,265,695			1,183,996

Total cost of sales		504,561			490,686			1,513,211			1,462,008

Operating margin		316,251			295,279			955,211			888,724

General and administrative		83,728			80,369			262,640			251,053
U.S. franchise advertising		89,494			82,478			267,115			245,618

Income from operations		143,029			132,432			425,456			392,053
Interest income		968			792			2,583			2,451
Interest expense		(33,752	)		(33,976	)		(102,672	)		(100,389	)

Income before provision for income taxes		110,245			99,248			325,367			294,115
Provision for income taxes		23,872			15,153			53,985			43,785

Net income	$	86,373		$	84,095		$	271,382		$	250,330

Earnings per share:
Common stock - basic	$	2.11		$	2.02		$	6.63		$	5.94
Common stock - diluted		2.05			1.95			6.44			5.73

See accompanying notes.

Table of Contents

Domino’s Pizza, Inc. and Subsidiaries

Condensed Consolidated Statements of Comprehensive Income

(Unaudited)

Fiscal Quarter Ended

Two Fiscal Quarters Ended

June 16,

June 17,

June 16,

June 17,

(In thousands)

2019

2018

2019

2018

Net income
$
92,359
$
77,408
$
185,009
$
166,235

Currency translation adjustment

(16
)
(603
)
221

(1,058
)

Comprehensive income
$
92,343
$
76,805
$
185,230
$
165,177


	Fiscal Quarter Ended					Three Fiscal Quarters Ended
	September 8,		September 9,			September 8,		September 9,
(In thousands)	2019		2018			2019		2018
Net income	$	86,373	$	84,095		$	271,382	$	250,330
Currency translation adjustment		270		(84	)		491		(1,142	)

Comprehensive income	$	86,643	$	84,011		$	271,873	$	249,188

See accompanying notes.

Table of Contents

Domino’s Pizza, Inc. and Subsidiaries

Condensed Consolidated Statements of Cash Flows

(Unaudited)

Two Fiscal Quarters Ended

June 16,

June 17,

(In thousands)

2019

2018

Cash flows from operating activities:

Net income
$
185,009
$
166,235

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

Depreciation and amortization

27,850

23,310

Loss on sale/disposal of assets

2,829

519

Amortization of debt issuance costs

2,198

5,469

Provision for deferred income taxes

2,276

1,484

Non-cash
compensation expense

8,589

11,443

Excess tax benefits from equity-based compensation

(18,446
)
(15,318
)
Other

550

111

Changes in operating assets and liabilities

(10,713
)
(50,165
)
Changes in advertising fund assets and liabilities, restricted

1,411

11,624

Net cash provided by operating activities

201,553

154,712

Cash flows from investing activities:

Capital expenditures

(25,708
)
(37,290
)
Proceeds from sale of assets

8,161

323

Maturities of advertising fund investments, restricted

15,152

29,007

Purchases of advertising fund investments, restricted

—

(35,152
)
Other

(132
)
(672
)

Net cash used in investing activities

(2,527
)
(43,784
)

Cash flows from financing activities:

Proceeds from issuance of long-term debt

—

905,000

Repayments of long-term debt and finance lease obligations

(82,886
)
(586,133
)
Proceeds from exercise of stock options

9,290

5,206

Purchases of common stock

(11,453
)
(320,067
)
Tax payments for restricted stock upon vesting

(2,567
)
(2,318
)
Payments of common stock dividends and equivalents

(26,680
)
(23,538
)
Cash paid for financing costs

—

(8,207
)

Net cash used in financing activities

(114,296
)
(30,057
)

Effect of exchange rate changes on cash

111

(132
)

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

84,841

80,739

Cash and cash equivalents, beginning of period

25,438

35,768

Restricted cash and cash equivalents, beginning of period

166,993

191,762

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

44,988

27,316

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

237,419

254,846

Cash and cash equivalents, end of period

108,259

157,788

Restricted cash and cash equivalents, end of period

152,713

144,970

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

61,288

32,827

Cash and cash equivalents, restricted cash and cash equivalents and cash and cash equivalents included in advertising fund assets, restricted, end of period
$
322,260
$
335,585


	Three Fiscal Quarters Ended
	September 8,			September 9,
(In thousands)	2019			2018
Cash flows from operating activities:
Net income	$	271,382		$	250,330
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization		40,982			35,770
Loss (gain) on sale/disposal of assets		3,141			(5,187	)
Amortization of debt issuance costs		3,288			6,581
Provision for deferred income taxes		1,627			1,737
Non-cash compensation expense		13,269			15,660
Excess tax benefits from equity-based compensation		(19,670	)		(22,722	)
Other		774			356
Changes in operating assets and liabilities		16,214			(25,580	)
Changes in advertising fund assets and liabilities, restricted		(6,411	)		5,574

Net cash provided by operating activities		324,596			262,519

Cash flows from investing activities:
Capital expenditures		(42,676	)		(65,074	)
Proceeds from sale of assets		9,738			8,213
Maturities of advertising fund investments, restricted		30,152			44,007
Purchases of advertising fund investments, restricted		—			(50,152	)
Other		(351	)		(2,357	)

Net cash used in investing activities		(3,137	)		(65,363	)

Cash flows from financing activities:
Proceeds from issuance of long-term debt		—			905,000
Repayments of long-term debt and finance lease obligations		(91,860	)		(595,067	)
Proceeds from exercise of stock options		10,122			8,967
Purchases of common stock		(105,149	)		(429,190	)
Tax payments for restricted stock upon vesting		(5,820	)		(6,849	)
Payments of common stock dividends and equivalents		(53,598	)		(46,720	)
Cash paid for financing costs		—			(8,207	)

Net cash used in financing activities		(246,305	)		(172,066	)

Effect of exchange rate changes on cash		139			(235	)

Change in cash and cash equivalents, restricted cash and cash equivalents		75,293			24,855

Cash and cash equivalents, beginning of period		25,438			35,768
Restricted cash and cash equivalents, beginning of period		166,993			191,762
Cash and cash equivalents included in advertising fund assets, restricted, beginning of period		44,988			27,316

Cash and cash equivalents, restricted cash and cash equivalents and cash and cash equivalents included in advertising fund assets, restricted, beginning of period		237,419			254,846

Cash and cash equivalents, end of period		66,706			84,600
Restricted cash and cash equivalents, end of period		177,292			168,170
Cash and cash equivalents included in advertising fund assets, restricted, end of period		68,714			26,931

Cash and cash equivalents, restricted cash and cash equivalents and cash and cash equivalents included in advertising fund assets, restricted, end of period	$	312,712		$	279,701

See accompanying notes.

Table of Contents

Domino’s Pizza, Inc. and Subsidiaries

Notes to Condensed Consolidated Financial Statements

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

~~June 16,~~September 8, 2019

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 December 30, 2018 included in the Company’s 2018 Annual Report on Form

10-K,

filed with the Securities and Exchange Commission on February 21, 2019 (the “2018 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 ended ~~June 16,~~September 8, 2019 are not necessarily indicative of the results that may be expected for the fiscal year ending December 29, 2019.

Updates to Significant Accounting Policies

The Company adopted Accounting Standards Codification 842,

Leases

(“ASC 842”) in the first quarter of 2019. As a result, the Company updated its significant accounting policies for leases below. Refer to Note 7 for additional information related to the Company’s lease arrangements and Note 11 for the impact of the adoption of ASC 842 on the Company’s condensed consolidated financial statements.

Leases

The Company leases certain retail store and supply chain center locations, supply chain vehicles and its corporate headquarters. The Company determines whether an arrangement is or contains a lease at contract inception. The majority of the Company’s leases are classified as operating leases, which are included in operating lease

right-of-use

assets and operating lease liabilities in the Company’s condensed consolidated balance sheet. Finance leases are included in property, plant and equipment, current portion of long-term debt and long-term debt on the Company’s condensed consolidated balance sheet.

Right-of-use

assets and lease liabilities are recognized based on the present value of the future minimum lease payments over the lease term at the commencement date for leases exceeding 12 months. Minimum lease payments include only the fixed lease component of the agreement, as well as any variable rate payments that depend on an index, initially measured using the index at the lease commencement date. Lease terms may include options to renew when it is reasonably certain that the Company will exercise that option.

The Company estimates its incremental borrowing rate for each lease using a portfolio approach based on the respective weighted average term of the agreements. This estimation considers the market rates of the Company’s outstanding collateralized borrowings and interpolations of rates outside of the terms of the outstanding borrowings, including comparisons to comparable borrowings of similarly-rated companies with longer term borrowings.

Operating lease expense is recognized on a straight-line basis over the lease term and is included in cost of sales or general and administrative expense. Amortization expense for finance leases is recognized on a straight-line basis over the lease term and is included in cost of sales, ~~or general and administrative expense,~~ while interest expense for finance leases is recognized using the effective interest method. Variable lease payments that do not depend on a rate or index, payments associated with

non-lease

components and short-term rentals (leases with terms less than

months) are expensed as incurred.

Table of Contents

2. Segment Information

The following table summarizes revenues, income from operations 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.

Fiscal Quarters Ended June 16, 2019 and June 17, 2018

U.S.

Supply

International

Intersegment

Stores

Chain

Franchise

Revenues

Other

Total

Revenues

2019
$
289,095
$
495,989
$
54,975
$
(28,412
) $
—
$
  811,647

2018

287,142

474,471

51,337

(33,554
)
—

779,396

Income from operations

2019
$
77,050
$
41,305
$
41,432

N/A
$
(20,864
) $
138,923

2018

73,193

36,494

39,104

N/A

(22,646
)
126,145

Segment Income

2019
$
82,006
$
45,382
$
41,491

N/A
$
(9,235
) $
159,644

2018

76,087

39,454

39,150

N/A

(10,241
)
144,450

Two Fiscal Quarters Ended June 16, 2019 and June 17, 2018

U.S.

Supply

International

Intersegment

Stores

Chain

Franchise

Revenues

Other

Total

Revenues

2019
$
598,374
$
1,001,670
$
109,559
$
(61,993
) $
—
$
1,647,610

2018

580,029

948,426

103,758

(67,446
)
—

1,564,767

Income from operations

2019
$
157,664
$
83,327
$
84,186

N/A
$
  (42,750
) $
282,427

2018

148,481

73,866

80,628

N/A

(43,354
)
259,621

Segment Income

2019
$
165,604
$
91,429
$
84,290

N/A
$
(19,628
) $
321,695

2018

154,431

79,610

80,721

N/A

(19,337
)
295,425


	Fiscal Quarters Ended September 8, 2019 and September 9, 2018
	U.S.		Supply		International		Intersegment
	Stores		Chain		Franchise		Revenues			Other			Total
Revenues
2019	$	281,116	$	511,709	$	54,586	$	(26,599	)	$	—		$	820,812
2018		290,445		478,517		50,424		(33,421	)		—			785,965
Income from operations
2019	$	80,188	$	40,513	$	42,281		N/A		$	(19,953	)	$	143,029
2018		78,636		35,452		39,374		N/A			(21,030	)		132,432
Segment Income
2019	$	82,556	$	44,432	$	42,337		N/A		$	(8,172	)	$	161,153
2018		75,721		38,561		39,416		N/A			(10,295	)		143,403

	Three Fiscal Quarters Ended September 8, 2019 and September 9, 2018
	U.S.		Supply		International		Intersegment
	Stores		Chain		Franchise		Revenues			Other			Total
Revenues
2019	$	879,490	$	1,513,380	$	164,145	$	(88,593	)	$	—		$	2,468,422
2018		870,474		1,426,943		154,182		(100,867	)		—			2,350,732
Income from operations
2019	$	237,852	$	123,840	$	126,467		N/A		$	(62,703	)	$	425,456
2018		227,117		109,319		120,002		N/A			(64,385	)		392,053
Segment Income
2019	$	248,160	$	135,861	$	126,628		N/A		$	(27,801	)	$	482,848
2018		230,152		118,171		120,138		N/A			(29,633	)		438,828

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

Fiscal Quarter Ended

Two Fiscal Quarters Ended

June 16,

June 17,

June 16,

June 17,

2019

2018

2019

2018

Total Segment Income
$
159,644
$
144,450
$
321,695
$
295,425

Depreciation and amortization

(14,060
)
(12,240
)
(27,850
)
(23,310
)
Loss on sale/disposal of assets

(2,680
)
(154
)
(2,829
)
(519
)
Non-cash
compensation expense

(3,981
)
(5,379
)
(8,589
)
(11,443
)
Recapitalization-related expenses

—

(532
)
—

(532
)

Income from operations

138,923

126,145

282,427

259,621

Interest income

922

1,179

1,615

1,659

Interest expense

(33,866
)
(36,127
)
(68,920
)
(66,413
)

Income before provision for income taxes
$
105,979
$
91,197
$
215,122
$
194,867


	Fiscal Quarter Ended						Three Fiscal Quarters Ended
	September 8,			September 9,			September 8,			September 9,
	2019			2018			2019			2018
Total Segment Income	$	161,153		$	143,403		$	482,848		$	438,828
Depreciation and amortization		(13,132	)		(12,460	)		(40,982	)		(35,770	)
(Loss) gain on sale/disposal of assets		(312	)		5,706			(3,141	)		5,187
Non-cash compensation expense		(4,680	)		(4,217	)		(13,269	)		(15,660	)
Recapitalization-related expenses		—			—			—			(532	)

Income from operations		143,029			132,432			425,456			392,053
Interest income		968			792			2,583			2,451
Interest expense		(33,752	)		(33,976	)		(102,672	)		(100,389	)

Income before provision for income taxes	$	110,245		$	99,248		$	325,367		$	294,115

3. Earnings Per Share

Fiscal Quarter Ended

Two Fiscal Quarters Ended

June 16,

June 17,

June 16,

June 17,

2019

2018

2019

2018

Net income available to common stockholders - basic and diluted
$
92,359
$
77,408
$
185,009
$
166,235

Basic weighted average number of shares

41,023,269

42,044,035

40,944,400

42,433,073

Earnings per share – basic
$
2.25
$
1.84
$
4.52
$
3.92

Diluted weighted average number of shares

42,236,507

43,582,996

42,219,649

43,981,253

Earnings per share – diluted
$
2.19
$
1.78
$
4.38
$
3.78


	Fiscal Quarter Ended				Three Fiscal Quarters Ended
	September 8,		September 9,		September 8,		September 9,
	2019		2018		2019		2018
Net income available to common stockholders - basic and diluted	$	86,373	$	84,095	$	271,382	$	250,330

Basic weighted average number of shares		40,954,279		41,585,933		40,947,693		42,150,693
Earnings per share – basic	$	2.11	$	2.02	$	6.63	$	5.94
Diluted weighted average number of shares		42,040,291		43,067,191		42,158,447		43,675,627
Earnings per share – diluted	$	2.05	$	1.95	$	6.44	$	5.73

Table of Contents

The denominators used in calculating diluted earnings per share for the ~~second~~third quarter and ~~two~~three fiscal quarters of 2019 ~~each~~ do not include ~~71,180~~161,670 options to purchase common stock, as the effect of including these options would have been anti-dilutive. The denominators used in calculating diluted earnings per share for the ~~second~~third quarter and ~~two~~three fiscal quarters of 2019

each do not include

~~93,412~~

142,477 restricted performance shares, as the performance targets for these awards had not yet been met.

The denominators used in calculating diluted earnings per share for ~~common stock for~~ the ~~second~~third quarter and ~~two~~three fiscal quarters of 2018 do not include

~~68,760~~

76,130 and

~~90,670~~

137,156 options ~~respectively,~~ to purchase common stock, respectively, as the effect of including these options would have been anti-dilutive. The denominator used in calculating diluted earnings per share for the three fiscal quarters of 2018 does not include 28,570 shares subject to restricted stock awards, as the effect of including these shares would have been anti-dilutive. The denominators used in calculating diluted earnings per share for the ~~second~~third quarter and ~~two~~three fiscal quarters of 2018

each do not include ~~116,624~~

160,998 restricted performance shares, as the performance targets for these awards had not yet been met.

4. Changes in Stockholders’ Deficit

The following table summarizes changes in stockholders’ deficit for the ~~second~~third quarter of 2019.


													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 March 24, 2019		41,083,890		$	411		$	5,464		$	(2,976,848	)	$	(4,192	)
Balance at June 16, 2019																	41,232,358		$	412		$	10,788		$	(2,911,278	)	$	(4,208	)
Net income		—			—			—			92,359			—			—			—			—			86,373			—
Dividends declared on common stock and equivalents ($ 0.65 per share)		—			—			—			(26,789	)		—
Dividends declared on common stock and equivalents ($0.65 per share)																	—			—			—			(26,569	)		—
Issuance and cancellation of stock awards, net		(3,079	)		—			—			—			—			45,479			—			—			—			—
Tax payments for restricted stock upon vesting		(377	)		—			(100	)		—			—			(12,603	)		—			(3,253	)		—			—
Purchases of common stock		(12,295	)		(1	)		(3,308	)		—			—			(384,338	)		(3	)		(12,972	)		(80,721	)		—
Exercise of stock options		164,219			2			4,751			—			—			18,100			—			832			—			—
Non-cash compensation expense		—			—			3,981			—			—			—			—			4,680			—			—
Currency translation adjustment		—			—			—			—			(16	)		—			—			—			—			270

Balance at June 16, 2019		41,232,358		$	412		$	10,788		$	(2,911,278	)	$	(4,208	)
Balance at September 8, 2019																	40,898,996		$	409		$	75		$	(2,932,195	)	$	(3,938	)

The following table summarizes changes in ~~stockholders~~

’

stockholders’ deficit for the ~~two~~three fiscal quarters of 2019.


													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 30, 2018		40,977,561		$	410		$	569		$	(3,036,471	)	$	(4,429	)		40,977,561		$	410		$	569		$	(3,036,471	)	$	(4,429	)
Net income		—			—			—			185,009			—			—			—			—			271,382			—
Dividends declared on common stock and equivalents ($ 1.30 per share)		—			—			—			(53,454	)		—
Dividends declared on common stock and equivalents ($1.95 per share)																	—			—			—			(80,023	)		—
Issuance and cancellation of stock awards, net		5,161						—			—			—			50,640			—			—			—			—
Tax payments for restricted stock upon vesting		(9,441	)		—			(2,567	)		—			—			(22,044	)		—			(5,820	)		—			—
Purchases of common stock		(45,844	)		(1	)		(5,090	)		(6,362	)		—			(430,182	)		(4	)		(18,062	)		(87,083	)		—
Exercise of stock options		304,921			3			9,287			—			—			323,021			3			10,119			—			—
Non-cash compensation expense		—			—			8,589			—			—			—			—			13,269			—			—
Currency translation adjustment		—			—			—			—			221			—			—			—			—			491

Balance at June 16, 2019		41,232,358		$	412		$	10,788		$	(2,911,278	)	$	(4,208	)
Balance at September 8, 2019																	40,898,996		$	409		$	75		$	(2,932,195	)	$	(3,938	)

Subsequent to the ~~second~~third quarter, on

~~July 10,~~October 4, 2019

, the Company’s Board of Directors declared a $0.65 per share quarterly dividend on its outstanding common stock for shareholders of record as of

~~September~~December 13, 2019

to be paid on

~~September 30,~~December 27, 2019

. On October 4, 2019, 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

with no expiration date

. This repurchase program replaces the remaining availability of approximately $53.6 million under the Company’s

existing

$750.0 million share repurchase program

. Authorization for the repurchase program may be modified, suspended, or discontinued at any time.

Table of Contents

The following table summarizes changes in stockholders’ deficit for the ~~second~~third quarter of 2018.


													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 March 25, 2018		42,625,881		$	426		$	137		$	(2,768,591	)	$	(2,836	)
Balance at June 17, 2018																	41,837,693		$	418		$	737		$	(2,926,921	)	$	(3,439	)
Net income		—			—			—			77,408			—			—			—			—			84,095			—
Dividends declared on common stock and equivalents ($ 0.55 per share)		—			—			—			(23,012	)		—
Dividends declared on common stock and equivalents ($0.55 per share)																	—			—			—			(22,889	)		—
Issuance and cancellation of stock awards, net		(1,340	)		—			—			—			—			72,990			1			—			—			—
Tax payments for restricted stock upon vesting		(76	)		—			(19	)		—			—			(16,580	)		—			(4,531	)		—			—
Purchases of common stock		(905,556	)		(9	)		(6,248	)		(212,726	)		—			(397,490	)		(4	)		(2,269	)		(106,850	)		—
Exercise of stock options		118,784			1			1,487			—			—			99,549			1			3,760			—			—
Non-cash compensation expense		—			—			5,380			—			—			—			—			4,217			—			—
Currency translation adjustment		—			—			—			—			(603	)		—			—			—			—			(84	)

Balance at June 17, 2018		41,837,693		$	418		$	737		$	(2,926,921	)	$	(3,439	)
Balance at September 9, 2018																	41,596,162		$	416		$	1,914		$	(2,972,565	)	$	(3,523	)

The following table summarizes changes in stockholders’ deficit for the ~~two~~three fiscal quarters of 2018.


													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 31, 2017		42,898,329		$	429		$	5,654		$	(2,739,437	)	$	(2,030	)		42,898,329		$	429		$	5,654		$	(2,739,437	)	$	(2,030	)
Net income		—			—			—			166,235			—			—			—			—			250,330			—
Dividends declared on common stock and equivalents ($ 1.10 per share)		—			—			—			(46,561	)		—
Dividends declared on common stock and equivalents ($1.65 per share)																	—			—			—			(69,450	)		—
Issuance and cancellation of stock awards, net		7,866			—			—			—			—			80,932			1			—			—			—
Tax payments for restricted stock upon vesting		(10,237	)		—			(2,318	)		—			—			(26,893	)		—			(6,849	)		—			—
Purchases of common stock		(1,353,564	)		(14	)		(19,245	)		(300,808	)		—			(1,751,054	)		(18	)		(21,514	)		(407,658	)		—
Exercise of stock options		295,299			3			5,203			—			—			394,848			4			8,963			—			—
Non-cash compensation expense		—			—			11,443			—			—			—			—			15,660			—			—
Adoption of revenue recognition accounting standard		—			—			—			(6,701	)		—			—			—			—			(6,701	)		—
Currency translation adjustment		—			— ��			—			—			(1,058	)		—			—			—			—			(1,142	)
Reclassification adjustment for stranded taxes		—			—			—			351			(351	)		—			—			—			351			(351	)

Balance at June 17, 2018		41,837,693		$	418		$	737		$	(2,926,921	)	$	(3,439	)
Balance at September 9, 2018																	41,596,162		$	416		$	1,914		$	(2,972,565	)	$	(3,523	)

5. 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.

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 following tables summarize the carrying amounts and fair values of certain assets at ~~June 16,~~September 8, 2019 and December 30, 2018:

At June 16, 2019

Fair Value Estimated Using

Carrying

Level 1

Level 2

Level 3

Amount

Inputs

Inputs

Inputs

Cash equivalents $ 93,178 $ 93,178 $ —   $ —
Restricted cash equivalents 91,476 91,476 —   —
Investments in marketable securities 10,068 10,068 —   —
Advertising fund cash equivalents, restricted 52,055 52,055 —   —
Advertising fund investments, restricted 35,000 35,000 —   —


	At September 8, 2019
			Fair Value Estimated Using
	Carrying		Level 1		Level 2		Level 3
	Amount		Inputs		Inputs		Inputs
Cash equivalents	$	58,993	$	58,993	$	—	$	—
Restricted cash equivalents		104,424		104,424		—		—
Investments in marketable securities		10,851		10,851		—		—
Advertising fund cash equivalents, restricted		57,682		57,682		—		—
Advertising fund investments, restricted		20,000		20,000		—		—

Table of Contents


	At December 30, 2018
			Fair Value Estimated Using
	Carrying		Level 1		Level 2		Level 3
	Amount		Inputs		Inputs		Inputs
Cash equivalents	$	11,877	$	11,877	$	—	$	—
Restricted cash equivalents		112,272		112,272		—		—
Investments in marketable securities		8,718		8,718		—		—
Advertising fund cash equivalents, restricted		31,547		31,547		—		—
Advertising fund investments, restricted		50,152		50,152		—		—

Management estimated the approximate fair values of the 2015 fixed rate notes, the 2017 fixed and floating rate notes and the 2018 fixed rate notes as follows:

June 16, 2019

December 30, 2018

Principal Amount

Fair Value

Principal Amount

Fair Value

2015
Ten-Year
Fixed Rate Notes
$
776,000
$
810,920
$
780,000
$
783,120

2017 Five-Year Fixed Rate Notes

589,500

589,500

592,500

575,910

2017
Ten-Year
Fixed Rate Notes

982,500

1,014,923

987,500

956,888

2017 Five-Year Floating Rate Notes

294,750

294,455

296,250

295,065

2018
7.5-Year
Fixed Rate Notes

420,750

432,952

422,875

416,955

2018
9.25-Year
Fixed Rate Notes

396,000

413,820

398,000

396,010


	September 8, 2019				December 30, 2018
	Principal Amount		Fair Value		Principal Amount		Fair Value
2015 Ten-Year Fixed Rate Notes	$	774,000	$	817,344	$	780,000	$	783,120
2017 Five-Year Fixed Rate Notes		588,000		590,352		592,500		575,910
2017 Ten-Year Fixed Rate Notes		980,000		1,038,800		987,500		956,888
2017 Five-Year Floating Rate Notes		294,000		293,706		296,250		295,065
2018 7.5-Year Fixed Rate Notes		419,688		438,573		422,875		416,955
2018 9.25-Year Fixed Rate Notes		395,000		421,465		398,000		396,010

At ~~June 16,~~September 8, 2019, the Company did ~~not~~0t have any outstanding borrowings under its variable funding notes. The Company had $65.0 million outstanding under its variable funding notes at December 30, 2018. Borrowings under the variable funding notes are a variable rate loan. The fair value of this loan approximated 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 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 above.

6. Revenue Disclosures

Contract Liabilities

Contract liabilities consist of deferred franchise fees and deferred development fees. Changes in contract liabilities were as follows:


	Two Fiscal Quarters Ended						Three Fiscal Quarters Ended
	June 16,			June 17,			September 8,			September 9,
	2019			2018			2019			2018
Contract liabilities at beginning of period	$	19,900		$	19,404		$	19,900		$	19,404
Revenue recognized during the period		(2,630	)		(2,325	)		(3,923	)		(3,540	)
New deferrals due to cash received and other		1,807			3,239			4,613			3,917

Contract liabilities at end of period	$	19,077		$	20,318		$	20,590		$	19,781

Advertising Fund Assets

As of ~~June 16,~~September 8, 2019, advertising fund assets, restricted of ~~$117.7~~$109.5 million consisted of ~~$96.3~~$88.7 million of cash, cash equivalents and investments, ~~$18.6~~$18.3 million of accounts receivable and ~~$2.8~~$2.5 million of prepaid expenses. As of ~~June 16,~~September 8, 2019, advertising fund cash, cash equivalents and investments included ~~$4.3~~$4.6 million of cash contributed from Company-owned stores that had not yet been expended.

As of December 30, 2018, advertising fund assets, restricted of $112.7 million consisted of $95.1 million of cash, cash equivalents and investments, $15.3 million of accounts receivable and $2.3 million of prepaid expenses. As of December 30, 2018, advertising fund cash, cash equivalents and investments included $5.5 million of cash contributed from Company-owned stores that had not yet been expended.

Table of Contents

Lease Disclosures

The Company leases certain retail store and supply chain center locations, supply chain vehicles and its corporate headquarters with expiration dates through ~~2034.~~2037.

The components of operating and finance lease cost for the ~~second~~third quarter and ~~two~~three fiscal quarters of 2019 were as follows:

Fiscal Quarter Ended

Two Fiscal Quarters Ended

June 16,

June 16,

2019

2019

Operating lease cost

$
9,518
$
20,314

Finance lease cost:

Amortization of
right-of-use
assets
255 509
Interest on lease liabilities
317 796

Total finance lease cost

$
572
$
1,305


	Fiscal Quarter Ended		Three Fiscal Quarters Ended
	September 8,		September 8,
	2019		2019
Operating lease cost	$	9,150	$	29,464
Finance lease cost:
Amortization of right-of-use assets		254		763
Interest on lease liabilities		473		1,269

Total finance lease cost	$	727	$	2,032

Rent expense totaled $

~~15.9~~

$16.1 million and $

~~32.3~~

$48.4 million in the ~~second~~third quarter and ~~two~~three fiscal quarters of 2019, respectively, and totaled $

~~15.2~~

$15.7 million and $

~~30.6~~

$46.3 million in the ~~second~~third quarter and ~~two~~three fiscal quarters of 2018, respectively. Rent expense includes operating lease cost, as well as expense for

non-lease

components including common area maintenance, real estate taxes and insurance 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 expense and rental expense for short-term leases was immaterial for both the third quarter and three fiscal quarters of 2019.

Supplemental balance sheet information related to the Company’s leases as of ~~June 16,~~September 8, 2019 and December 30, 2018 was as follows:

June 16,

December 30,

2019

2018

Land and buildings
$ 22,183 $
22,171

Accumulated depreciation and amortization
(7,187 )
(6,678
)

Finance lease assets, net
$ 14,996 $
15,493

Current portion of long-term debt
$ 669 $
643

Long-term debt, less current portion
16,087 ��
16,363

Total principal payable on finance leases
$ 16,756 $
17,006


	September 8,			December 30,
	2019			2018
Land and buildings	$	22,195		$	22,171
Accumulated depreciation and amortization		(7,441	)		(6,678	)

Finance lease assets, net	$	14,754		$	15,493

Current portion of long-term debt	$	685		$	643
Long-term debt, less current portion		15,922			16,363

Total principal payable on finance leases	$	16,607		$	17,006

As of ~~June 16,~~September 8, 2019, the weighted average remaining lease term and weighted average discount rate for the Company’s operating and finance leases were as follows:

Operating

Finance

Operating

Finance

Leases

Weighted average remaining lease term

years

8 years

14 years

Weighted average discount rate

3.9

11.3

3.8

11.4

Supplemental cash flow information related to leases for the ~~second~~third quarter and ~~two~~three fiscal quarters of 2019 was as follows:


					Fiscal Quarter Ended		Three Fiscal Quarters Ended
	Fiscal Quarter Ended		Two Fiscal Quarters Ended		September 8,		September 8,
	June 16, 2019		June 16, 2019		2019		2019
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases	$	9,398	$	20,088	$	9,968	$	30,056
Operating cash flows from finance leases		317		796		473		1,269
Financing cash flows from finance leases		106		261		161		422
Right-of-use assets obtained in exchange for new lease obligations:
Operating leases		13,391		26,368		23,434		49,802
Finance leases		—		—		—		—

During the first quarter of 2018, the Company renewed the lease of a supply chain center building and extended the term of the lease through 2033. During the third quarter of 2018, the Company renewed the leases of two supply chain center buildings and extended the terms of the leases through

2036

and

2037

, respectively. As a result of ~~the lease renewal,~~these extended leases, the Company recorded

non-cash

financing activities of ~~$2.6~~$11.4 million for the increase in ~~capital~~finance lease assets and liabilities during the ~~two~~three fiscal quarters of 2018.

Table of Contents

Maturities of lease liabilities as of ~~June 16,~~September 8, 2019 were as follows:

Operating

Finance

Leases

Leases

2019

$
19,825
$
1,389
2020
36,827 2,416
2021
34,323 2,434
2022
31,191 2,452
2023
28,591 2,475
Thereafter
105,474 23,796

Total future minimum rental commitments
256,231 34,962
Less – amounts representing interest
(37,770
)
(18,206 )

Total lease liabilities

$
218,461
$
16,756


	Operating			Finance
	Leases			Leases
2019	$	12,212		$	791
2020		40,157			2,417
2021		37,979			2,435
2022		34,819			2,453
2023		32,245			2,477
Thereafter		116,664			23,810

Total future minimum rental commitments		274,076			34,383
Less – amounts representing interest		(39,745	)		(17,776	)

Total lease liabilities	$	234,331		$	16,607

Maturities of lease liabilities as of December 30, 2018 were as follows:


	Operating		Finance
	Leases		Leases
2019	$	40,752	$	2,396
2020		37,519		2,415
2021		34,538		2,433
2022		30,763		2,451
2023		27,388		2,474
Thereafter		100,310		23,781

Total future minimum rental commitments	$	271,270		35,950

Less – amounts representing interest				(18,944	)

Total principal payable on finance leases			$	17,006

As of ~~June 16,~~September 8, 2019, the Company has additional ~~operating~~ leases for two supply chain ~~center~~centers and certain supply chain tractors and trailers ~~and a new office building being constructed by the Company’s landlord~~ that had not yet commenced with estimated future minimum rental commitments of approximately $36.4 million. The Company has also entered into an additional finance lease for a supply chain center that had not yet commenced with estimated future minimum rental commitments of approximately $28.7$50.6 million. These leases are expected to commence in 2019 with lease terms of up to 15 years. These undiscounted amounts are not included in the tables above.

The Company has guaranteed lease payments related to certain franchisees’ lease arrangements. The maximum amount of potential future payments under these guarantees is ~~$18.2~~$17.9 million and $2.4 million as of ~~June 16,~~September 8, 2019 and December 30, 2018, respectively. The Company does not believe these arrangements have or are likely to have a material effect on its results of operations, financial condition, revenues or expenses, capital expenditures or liquidity.

.8. Legal Matters

On February 14, 2011, Domino’s Pizza LLC was named as a defendant in a lawsuit along with Fischler Enterprises of C.F., Inc., a franchisee, and Jeffrey S. Kidd, the franchisee’s delivery driver, filed by Yvonne Wiederhold, the plaintiff, as Personal Representative of the Estate of Richard E. Wiederhold, deceased. The case involved a traffic accident in which the franchisee’s delivery driver is alleged to have caused an accident involving a vehicle driven by Richard Wiederhold. Mr. Wiederhold sustained spinal injuries resulting in quadriplegia and passed away several months after the accident. The case went to trial in 2016 and the Company was found liable, but the verdict was reversed by the Florida Fifth District Court of Appeals in May 2018 and was remanded to the Ninth Judicial Circuit Court of Florida for a new trial. The case was tried again in June 2019 and the jury returned ana $9.0 million judgment for the plaintiff where the Company and Mr. Kidd were found to be 100% liable (after certain offsets and other deductions the final verdict was $8.0 million). The Company continues to deny liability and has filed ~~post-judgment motions with the ultimate intention of filing another~~

an appeal ~~of the verdict, if necessary.~~

9. Supplemental Disclosures of Cash Flow Information

The Company had

non-cash

investing activities related to accruals for capital expenditures of ~~$4.8~~$4.7 million at ~~June 16,~~September 8, 2019 and $3.8 million at December 30, 2018.

Table of Contents

10. Sale of Company-owned Stores

During the second quarter of 2019, the Company sold 59 U.S. Company-owned stores to certain of its existing U.S. franchisees for proceeds of $9.7 million, of which $8.1 million was received in cash during the second quarter. The remaining $1.6 million was ~~included in short-term notes receivable as of June 16, 2019.~~collected during the third quarter. In connection with the sale of the stores, the Company recorded a $2.4 million

pre-tax

loss on the sale of the related assets and liabilities, which included a $1.4 million reduction in goodwill. The loss was recorded in general and administrative expense in the Company’s condensed consolidated statements of income.

11. New Accounting Pronouncements

Recently Adopted Accounting Standard

Accounting Standards Update

2016-02,

Leases (Topic 842)

In February 2016, the Financial Accounting Standards Board (“FASB”) issued ASU

2016-02,

Leases (Topic 842)

which requires a lessee to recognize assets and liabilities on the balance sheet for leases with lease terms greater than 12 months. On December 31, 2018, the Company adopted ASC 842 using the modified retrospective method. The comparative information has not been restated and continues to be reported under the accounting standards in effect for those periods.

The adoption of ASC 842 had a material impact on the Company’s assets and liabilities due to the recognition of operating lease

right-of-use

assets and lease liabilities on its condensed consolidated balance sheet. The Company elected the optional practical expedient to retain its current classification of leases, and accordingly, the adoption of ASC 842 did not have a material effect on the Company’s condensed consolidated statement of income and condensed consolidated statement of cash flows. Refer to Note 7 for additional disclosure related to the Company’s lease arrangements.

The effects of the changes made to the Company’s condensed consolidated balance sheet as of December 31, 2018 for the adoption of ASC 842 were as follows:

Balance at
December 30,
2018

Adjustments
Due to ASC
842

Balance at
December 31,
2018

Assets
Current assets:
Prepaid expenses and other $ 25,710 $ (35 ) $ 25,675
Property, plant and equipment:
Construction in progress 31,822 (1,904 ) 29,918
Other assets:
Operating lease right-of-use assets —   218,860 218,860

Liabilities and stockholders’ deficit
Current liabilities:
Operating lease liabilities —   32,033 32,033
Other accrued liabilities 55,001 (136 ) 54,865
Long-term liabilities:
Operating lease liabilities —   194,736 194,736
Other accrued liabilities 40,807 (9,712 ) 31,095


	Balance at December 30, 2018		Adjustments Due to ASC 842			Balance at December 31, 2018
Assets
Current assets:
Prepaid expenses and other	$	25,710	$	(35	)	$	25,675
Property, plant and equipment:
Construction in progress		31,822		(1,904	)		29,918
Other assets:
Operating lease right-of-use assets		—		218,860			218,860
Liabilities and stockholders’ deficit
Current liabilities:
Operating lease liabilities		—		32,033			32,033
Other accrued liabilities		55,001		(136	)		54,865
Long-term liabilities:
Operating lease liabilities		—		194,736			194,736
Other accrued liabilities		40,807		(9,712	)		31,095

On December 31, 2018, the Company recorded an adjustment of $226.8 million for operating lease

right-of-use

assets and liabilities. The operating lease

right-of-use

assets recorded on the date of adoption were also net of a $7.9 million reclassification of other accrued liabilities and prepaid expenses representing previously deferred (prepaid) rent and lease incentives. The Company also derecognized $1.9 million of construction in progress and other long-term accrued liabilities associated with a new building that ~~will be~~was leased to the Company ~~upon completion~~ in the third quarter of 2019. This lease was previously accounted for as a

build-to-suit

arrangement under prior lease accounting guidance.

Table of Contents

During the ~~second~~third quarter and ~~two~~three fiscal quarters of 2019, we experienced global retail sales ~~growth. Our~~growth and positive U.S. and international same store sales growth. Our U.S. carryout business experienced continued strong growth. While our overall U.S. delivery business continues to grow, our U.S. delivery same store sales growth ~~remained positive but was~~has been pressured by our current strategy to increase store concentration in certain markets where we ~~compete.~~

16compete as well as from aggressive competitive activity.

~~Table of Contents~~

We also continued our global expansion with the opening of ~~200~~214 net new stores in the ~~second~~third quarter of 2019, bringing our

year-to-date

total to ~~400.~~614. We opened ~~158~~174 net new stores internationally and 4240 net new stores in the U.S. during the ~~second~~third quarter of 2019. Overall, we believe this global store growth, along with our strong sales, emphasis on technology, operations, and marketing initiatives, have combined to strengthen our brand.

Global retail sales, which are total worldwide retail sales at franchise and Company-owned stores, increased ~~5.1%~~5.8% in the ~~second~~third quarter of 2019 and increased ~~4.8%~~5.2% in the ~~two~~three fiscal quarters of 2019. These increases were driven by an increase in worldwide store counts during the trailing four quarters as well as U.S. and international same store sales growth. The negative impact of changes in foreign currency exchange rates partially offset this increase, resulting from a generally stronger U.S. dollar when compared to the currencies in the international markets in which we compete. U.S. same store sales growth reflected the sustained positive sales trends and the continued success of our products, marketing and technology platforms. International same store sales growth also reflected continued positive performance.

Total revenues increased ~~$32.2~~$34.8 million, or ~~4.1%~~4.4%, in the ~~second~~third quarter of 2019 and increased ~~$82.8~~$117.7 million, or ~~5.3%~~5.0%, in the ~~two~~three fiscal quarters of 2019. These increases were due primarily to higher global retail sales, which resulted in higher supply chain and global franchise revenues. The increases in international franchise revenues were partially offset by the negative impact of changes in foreign currency exchange rates. These increases in revenues were also partially offset by lower U.S. Company-owned store revenues resulting from the sale of 59 Company-owned stores to certain of our existing U.S. franchisees during the second quarter of 2019 (the “Second Quarter Store Sale”). These changes in revenues are described in more detail below.

Income from operations increased ~~$12.8~~$10.6 million, or ~~10.1%~~8.0%, in the ~~second~~third quarter of 2019 and increased ~~$22.8~~$33.4 million, or ~~8.8%~~8.5%, in the ~~two~~three fiscal quarters of 2019. These increases were primarily driven by higher royalty revenues from U.S. and international franchised stores, as well as higher supply chain margins. ~~Higher investments~~A

pre-tax

gain of $5.9 million recognized from the sale of 12 Company-owned stores in ~~technological initiatives and other areas and a~~the third quarter of 2018 partially offset these increases. A $2.4 million

pre-tax

loss related to the Second Quarter Store Sale and continued investments in technological initiatives and other areas also partially offset these ~~increases. Income from operations was also negatively impacted by changes in foreign currency exchange rates~~increases in the ~~second quarter and the two~~three fiscal quarters of 2019.

Net income increased ~~$15.0~~$2.3 million, or ~~19.3%~~2.7%, in the ~~second~~third quarter of 2019 and increased ~~$18.8~~$21.1 million, or ~~11.3%~~8.4%, in the ~~two~~three fiscal quarters of 2019, driven by higher income from ~~operations and lower~~operations. These increases in net income were partially offset by a higher effective tax ~~expense~~rate in 2019 resulting primarily from ~~higher~~lower excess tax benefits from equity-based compensation. ~~Net~~The increase in net income ~~further benefited from lower~~in the three fiscal quarters of 2019 was also partially offset by higher interest expense ~~in the second quarter of 2019~~ resulting from ~~$3.3 million of incremental interest expense recorded in the second quarter of 2018 in connection with~~a higher average debt balance and a slightly higher weighted average borrowing rate following our debt recapitalization transaction completed on April 24, 2018 (the “2018 Recapitalization”). The increase in net income in the two fiscal quarters of 2019 was partially offset by higher interest expense resulting primarily from a higher average debt balance and a higher weighted average borrowing rate following the 2018 Recapitalization.

Revenues


	Second Quarter				Second Quarter				Two Fiscal				Two Fiscal				Third Quarter				Third Quarter				Three Fiscal				Three Fiscal
	of 2019				of 2018				Quarters of 2019				Quarters of 2018				of 2019				of 2018				Quarters of 2019				Quarters of 2018
U.S. Company-owned stores	$	105.0	12.9	%	$	118.8	15.2	%	$	228.5	13.9	%	$	240.0	15.3	%	$	94.6	11.5	%	$	118.5	15.1	%	$	323.0	13.1	%	$	358.5	15.3	%
U.S. franchise royalties and fees		95.6	11.8	%		87.4	11.2	%		192.3	11.7	%		176.9	11.3	%		97.0	11.8	%		89.4	11.4	%		289.3	11.7	%		266.3	11.3	%
Supply chain		467.6	57.6	%		440.9	56.6	%		939.7	57.0	%		881.0	56.4	%		485.1	59.1	%		445.1	56.6	%		1,424.8	57.8	%		1,326.1	56.4	%
International franchise royalties and fees		55.0	6.8	%		51.3	6.6	%		109.6	6.6	%		103.8	6.6	%		54.6	6.7	%		50.4	6.4	%		164.1	6.6	%		154.2	6.6	%
U.S. franchise advertising		88.5	10.9	%		80.9	10.4	%		177.6	10.8	%		163.1	10.4	%		89.5	10.9	%		82.5	10.5	%		267.1	10.8	%		245.6	10.4	%

Total revenues	$	811.6	100.0	%	$	779.4	100.0	%	$	1,647.6	100.0	%	$	1,564.8	100.0	%	$	820.8	100.0	%	$	786.0	100.0	%	$	2,468.4	100.0	%	$	2,350.7	100.0	%

Revenues primarily consist of retail sales from our Company-owned stores, royalties, advertising contributions and fees from our U.S. franchised stores, royalties and fees from our international franchised stores and sales of food, equipment and supplies from our supply chain centers to all of our U.S. franchised stores and certain international franchised stores. Company-owned store, franchised store and supply chain revenues may vary from period to period due to changes in store count mix. Supply chain revenues may also vary significantly from period to period as a result of fluctuations in commodity prices as well as the mix of products we sell.

U.S. Stores Revenues

Second Quarter

Second Quarter

Two Fiscal

Two Fiscal

of 2019

of 2018

Quarters of 2019

Quarters of 2018

U.S. Company-owned stores
$
105.0

36.3
% $
118.8

41.4
% $
228.5

38.2
% $
240.0

41.4
%
U.S. franchise royalties and fees

95.6

33.1
%
87.4

30.4
%
192.3

32.1
%
176.9

30.5
%
U.S. franchise advertising

88.5

30.6
%
80.9

28.2
%
177.6

29.7
%
163.1

28.1
%

U.S. stores
$
289.1

100.0
% $
287.1

100.0
% $
598.4

100.0
% $
580.0

100.0
%


	Third Quarter				Third Quarter				Three Fiscal				Three Fiscal
	of 2019				of 2018				Quarters of 2019				Quarters of 2018
U.S. Company-owned stores	$	94.6	33.6	%	$	118.5	40.8	%	$	323.0	36.7	%	$	358.5	41.2	%
U.S. franchise royalties and fees		97.0	34.5	%		89.4	30.8	%		289.3	32.9	%		266.3	30.6	%
U.S. franchise advertising		89.5	31.9	%		82.5	28.4	%		267.1	30.4	%		245.6	28.2	%

U.S. stores	$	281.1	100.0	%	$	290.4	100.0	%	$	879.5	100.0	%	$	870.5	100.0	%

Table of Contents

U.S. Company-Owned Stores

Revenues from U.S. Company-owned store operations decreased ~~$13.8~~$23.9 million, or ~~11.6%~~20.2%, in the ~~second~~third quarter of 2019 and decreased ~~$11.5~~$35.5 million, or ~~4.8%~~9.9%, in the ~~two~~three fiscal quarters of 2019 due primarily to the Second Quarter Store Sale. These decreases in revenues were partially offset by higher same store sales. Company-owned same store sales increased ~~2.1%~~1.7% in the ~~second~~third quarter of 2019 and increased ~~2.6%~~2.3% in the ~~two~~three fiscal quarters of 2019. Company-owned same store sales increased ~~5.1%~~4.9% in the ~~second~~third quarter of 2018 and increased ~~5.8%~~5.4% in the ~~two~~three fiscal quarters of 2018.

U.S. Franchise Royalties and Fees

Revenues from U.S. franchise royalties and fees increased ~~$8.2~~$7.6 million, or ~~9.4%~~8.5%, in the ~~second~~third quarter of 2019 and increased ~~$15.4~~$23.0 million, or ~~8.7%~~8.6%, in the ~~two~~three fiscal quarters of 2019 due primarily to higher same store sales and an increase in the average number of U.S. franchised stores open during the period due to net store growth and, to a lesser extent, the Second Quarter Store Sale. U.S. franchise same store sales increased ~~3.1%~~2.5% in the ~~second~~third quarter of 2019 and increased ~~3.5%~~3.2% in the ~~two~~three fiscal quarters of 2019. U.S. franchise same store sales increased ~~7.0%~~6.4% in the ~~second~~third quarter of 2018 and increased ~~7.7%~~7.3% in the ~~two~~three fiscal quarters of 2018.

U.S. Franchise Advertising

Revenues from U.S. franchise advertising increased ~~$7.6~~$7.0 million, or ~~9.4%~~8.5%, in the ~~second~~third quarter of 2019 and increased ~~$14.5~~$21.5 million, or ~~8.9%~~8.8%, in the ~~two~~three fiscal quarters of 2019 due primarily to higher same store sales and an increase in the average number of U.S. franchised stores open during the period due to net store growth and, to a lesser extent, the Second Quarter Store Sale. U.S. franchise same store sales increased 3.1% in the second quarter of 2019 and increased 3.5% in the two fiscal quarters of 2019. U.S. franchise same store sales increased 7.0% in the second quarter of 2018 and increased 7.7% in the two fiscal quarters of 2018.

Supply Chain Revenues

Second Quarter

Second Quarter

Two Fiscal

Two Fiscal

of 2019

of 2018

Quarters of 2019

Quarters of 2018

U.S. supply chain
$
424.6

90.8
% $
399.7

90.7
% $
853.3

90.8
% $
798.6

90.6
%
International supply chain

43.0

9.2
%
41.2

9.3
%
86.4

9.2
%
82.4

9.4
%

Total supply chain
$
467.6

100.0
% $
440.9

100.0
% $
939.7

100.0
% $
881.0

100.0
%


	Third Quarter				Third Quarter				Three Fiscal				Three Fiscal
	of 2019				of 2018				Quarters of 2019				Quarters of 2018
U.S. supply chain	$	440.1	90.7	%	$	403.8	90.7	%	$	1,293.3	90.8	%	$	1,202.3	90.7	%
International supply chain		45.0	9.3	%		41.3	9.3	%		131.5	9.2	%		123.8	9.3	%

Total supply chain	$	485.1	100.0	%	$	445.1	100.0	%	$	1,424.8	100.0	%	$	1,326.1	100.0	%

U.S. Supply Chain

U.S. supply chain revenues increased ~~$24.9~~$36.3 million, or ~~6.2%~~9.0%, in the ~~second~~third quarter of 2019 and increased ~~$54.7~~$91.0 million, or ~~6.8%~~7.6%, in the ~~two~~three fiscal quarters of 2019. These increases were due primarily to higher volumes from increased orders resulting from an increase in the average number of U.S. franchise stores open during the period, as a result of the factors described above, and an increase in market basket pricing. Our market basket pricing to stores increased ~~2.3%~~2.8% in the ~~second~~third quarter of 2019 and increased ~~2.0%~~2.3% in the ~~two~~three fiscal quarters of 2019, which resulted in an estimated increase in U.S. supply chain revenues of ~~$5.6~~$9.8 million in the ~~second~~third quarter of 2019 and ~~$11.8~~$21.6 million in the ~~two~~three fiscal quarters of 2019.

International Supply Chain

Revenues from international supply chain operations increased ~~$1.8~~$3.7 million, or ~~4.4%~~9.0%, in the ~~second~~third quarter of 2019 and increased ~~$4.0~~$7.7 million, or ~~4.9%~~6.2%, in the ~~two~~three fiscal quarters of 2019 due primarily to higher volumes from increased orders and an increase in market basket pricing. These increases in revenues were partially offset by the negative impact of changes in foreign currency exchange rates of ~~$1.7~~$0.2 million in the ~~second~~third quarter of 2019 and ~~$3.8~~$4.1 million in the ~~two~~three fiscal quarters of 2019.

International Franchise Royalties and Fee Revenues

Revenues from international franchise royalties and fees increased ~~$3.7~~$4.2 million, or ~~7.1%~~8.3%, in the ~~second~~third quarter of 2019 and increased ~~$5.8~~$9.9 million, or ~~5.6%~~6.5%, in the ~~two~~three fiscal quarters of 2019. These increases were due primarily to an increase in the average number of international stores open during the period and higher same store sales. These increases in revenues were partially offset by the negative impact of changes in foreign currency exchange rates of ~~$3.0~~$1.5 million in the ~~second~~third quarter of 2019 and ~~$6.6~~$8.1 million in the ~~two~~three fiscal quarters of 2019. Excluding the impact of changes in foreign currency exchange rates, international franchise same store sales increased ~~2.4%~~1.7% in the ~~second~~third quarter of 2019 and increased ~~2.1%~~2.0% in the ~~two~~three fiscal quarters of 2019. Excluding the impact of changes in foreign currency exchange rates, international franchise same store sales increased ~~4.0%~~3.3% in the ~~second~~third quarter of 2018 and ~~increased 4.4%~~4.0% in the ~~two~~three fiscal quarters of 2018.

Table of Contents

Cost of Sales / Operating Margin


	Second Quarter				Second Quarter				Two Fiscal				Two Fiscal				Third Quarter				Third Quarter				Three Fiscal				Three Fiscal
	of 2019				of 2018				Quarters of 2019				Quarters of 2018				of 2019				of 2018				Quarters of 2019				Quarters of 2018
Consolidated revenues	$	811.6	100.0	%	$	779.4	100.0	%	$	1,647.6	100.0	%	$	1,564.8	100.0	%	$	820.8	100.0	%	$	786.0	100.0	%	$	2,468.4	100.0	%	$	2,350.7	100.0	%
Consolidated cost of sales		495.0	61.0	%		485.8	62.3	%		1,008.7	61.2	%		971.3	62.1	%		504.6	61.5	%		490.7	62.4	%		1,513.2	61.3	%		1,462.0	62.2	%

Consolidated operating margin	$	316.7	39.0	%	$	293.6	37.7	%	$	639.0	38.8	%	$	593.4	37.9	%	$	316.3	38.5	%	$	295.3	37.6	%	$	955.2	38.7	%	$	888.7	37.8	%

Cost of sales consists primarily of Company-owned store and supply chain costs incurred to generate related revenues. Components of consolidated cost of sales primarily include food, labor, delivery and occupancy costs.

Consolidated operating margin (which we define as revenues less cost of sales) increased ~~$23.1~~$21.0 million, or ~~7.9%~~7.1%, in the ~~second~~third quarter of 2019 and increased ~~$45.6~~$66.5 million, or ~~7.7%~~7.5%, in the ~~two~~three fiscal quarters of 2019 due primarily to higher global franchise revenues and higher supply chain volumes. Franchise revenues do not have a cost of sales component, so changes in these revenues have a disproportionate effect on the operating margin.

As a percentage of revenues, the consolidated operating margin increased ~~1.3~~0.9 percentage points in the ~~second~~third quarter of 2019 and increased 0.9 percentage points in the ~~two~~three fiscal quarters of 2019. Company-owned store operating margin increased 2.8 percentage points in the third quarter of 2019 and increased 0.9 percentage points in the ~~second quarter of 2019 and increased 0.1 percentage points in the two~~three fiscal quarters of 2019. Supply chain operating margin increased ~~0.6~~0.1 percentage points in the ~~second~~third quarter of 2019 and increased ~~0.7~~0.5 percentage points in the ~~two~~three fiscal quarters of 2019. These changes in operating margin are more fully discussed below.

U.S. Company-Owned Stores Operating Margin

Second Quarter

Second Quarter

Two Fiscal

Two Fiscal

of 2019

of 2018

Quarters of 2019

Quarters of 2018

Revenues
$
105.0

100.0
% $
118.8

100.0
% $
228.5

100.0
% $
240.0

100.0
%
Cost of sales

80.4

76.5
%
92.0

77.4
%
175.9

77.0
%
185.0

77.1
%

Store operating margin
$
24.6

23.5
% $
26.8

22.6
% $
52.5

23.0
% $
55.0

22.9
%


	Third Quarter				Third Quarter				Three Fiscal				Three Fiscal
	of 2019				of 2018				Quarters of 2019				Quarters of 2018
Revenues	$	94.6	100.0	%	$	118.5	100.0	%	$	323.0	100.0	%	$	358.5	100.0	%
Cost of sales		71.6	75.7	%		93.0	78.5	%		247.5	76.6	%		278.0	77.5	%

Store operating margin	$	23.0	24.3	%	$	25.5	21.5	%	$	75.5	23.4	%	$	80.5	22.5	%

The U.S. Company-owned store operating margin (which does not include certain store-level costs such as royalties and advertising) decreased ~~$2.2~~$2.5 million, or ~~8.1%~~10.1%, in the ~~second~~third quarter of 2019 and decreased ~~$2.5~~$5.0 million, or ~~4.4%~~6.2%, in the ~~two~~three fiscal quarters of 2019 due primarily to the Second Quarter Store Sale. Operating margin in both the ~~second~~third quarter and the ~~two~~three fiscal quarters of 2019 was also negatively impacted by higher labor costs, partially offset by higher same store sales. As a percentage of store revenues, the U.S. Company-owned store operating margin increased 2.8 percentage points in the third quarter of 2019 and increased 0.9 percentage points in the ~~second quarter of 2019 and increased 0.1 percentage points in the two~~three fiscal quarters of 2019. These changes in operating margin as a percentage of revenues are discussed in more detail below.

Food costs decreased ~~0.6~~0.3 percentage points to ~~26.9%~~27.4% in the ~~second~~third quarter of 2019 and decreased 0.4 percentage points to ~~27.0%~~27.1% in the ~~two~~three fiscal quarters of 2019 due primarily to the leveraging of higher same store ~~sales and improvements in efficiency.~~sales. These decreases were partially offset by higher food prices.

Labor costs decreased ~~0.6~~2.2 percentage points to ~~29.4%~~28.1% in the ~~second~~third quarter of 2019 and ~~increased~~decreased 0.4 percentage points to ~~30.2%~~29.6% in the ~~two~~three fiscal quarters of 2019. The Second Quarter Store Sale contributed to the reduction in labor costs as a percentage of store revenues in both the ~~second~~third quarter and ~~two~~three fiscal quarters of 2019 due to the high labor rates in the market in which the sold stores operated. ~~These decreases were partially offset~~The reduction in labor costs as a percentage of store revenues in the ~~second quarter of 2019 and fully offset in the two~~three fiscal quarters of 2019 was partially offset by an increase in average labor rates in our remaining Company-owned store markets.

Supply Chain Operating Margin

Second Quarter

Second Quarter

Two Fiscal

Two Fiscal

of 2019

of 2018

Quarters of 2019

Quarters of 2018

Revenues
$
467.6

100.0
% $
440.9

100.0
% $
939.7

100.0
% $
881.0

100.0
%
Cost of sales

414.6

88.7
%
393.8

89.3
%
832.7

88.6
%
786.3

89.3
%

Supply chain operating margin
$
53.0

11.3
% $
47.1

10.7
% $
106.9

11.4
% $
94.7

10.7
%


	Third Quarter				Third Quarter				Three Fiscal				Three Fiscal
	of 2019				of 2018				Quarters of 2019				Quarters of 2018
Revenues	$	485.1	100.0	%	$	445.1	100.0	%	$	1,424.8	100.0	%	$	1,326.1	100.0	%
Cost of sales		433.0	89.2	%		397.7	89.3	%		1,265.7	88.8	%		1,184.0	89.3	%

Supply chain operating margin	$	52.2	10.8	%	$	47.4	10.7	%	$	159.1	11.2	%	$	142.1	10.7	%

The supply chain operating margin increased ~~$5.9~~$4.8 million, or ~~12.5%~~10.0%, in the ~~second~~third quarter of 2019 and increased ~~$12.2~~$17.0 million, or ~~13.0%~~12.0%, in the ~~two~~three fiscal quarters of 2019, primarily driven by higher volumes from increased orders. As a percentage of supply chain revenues, the supply chain operating margin increased ~~0.6~~0.1 percentage points in the ~~second~~third quarter of ~~2019 and~~2019. As a percentage of supply chain revenues, the supply chain operating margin increased ~~0.7~~0.5 percentage points in the ~~two~~three fiscal quarters of 2019 due primarily to procurement savings, ~~and lower insurance expense,~~ offset in part by higher labor costs.

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General and Administrative Expenses

General and administrative expenses increased ~~$2.7~~$3.3 million, or ~~3.2%~~4.2%, in the ~~second~~third quarter of 2019 and increased ~~$8.2~~$11.5 million, or ~~4.8%~~4.6%, in the ~~two~~three fiscal quarters of ~~2019, driven by continued investments~~2019. A

pre-tax

gain of $5.9 million recognized from the sale of 12 Company-owned stores in ~~technological initiatives~~the third quarter of 2018 resulted in an increase in general and ~~other areas.~~administrative expenses as compared to the prior year. Lower advertising expenses, resulting primarily from the Second Quarter Store Sale, partially offset these increases. A $2.4 million

pre-tax

loss related to the Second Quarter Store Sale and continued investments in technological initiatives and other areas also contributed to the ~~increases.~~increase in the three fiscal quarters of 2019.

U.S. Franchise Advertising Expenses

U.S. franchise advertising expenses increased ~~$7.6~~$7.0 million, or ~~9.4%~~8.5%, in the ~~second~~third quarter of 2019 and increased ~~$14.5~~$21.5 million, or ~~8.9%~~8.8%, in the ~~two~~three fiscal quarters of 2019 due to higher 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 these revenues cannot be used for general corporate purposes.

Interest Expense, Net

Interest expense, net decreased ~~$2.0~~$0.4 million, or ~~5.7%~~1.2%, in the ~~second~~third quarter of 2019 and increased ~~$2.5~~$2.2 million, or ~~3.9%~~2.2%, in the ~~two~~three fiscal quarters of 2019. The ~~decrease in interest expense, net~~increase in the second quarter of 2019 resulted from $3.3 million of incremental interest expense recorded in the second quarter of 2018 in connection with the 2018 Recapitalization. This decrease was partially offset in the second quarter of 2019 and more than offset in the twothree fiscal quarters of 2019 was driven by a higher weighted average debt balance, ~~driven~~ primarily bydue to higher average borrowings resulting from the 2018 Recapitalization and outstanding borrowings under our variable funding notes. A higher weighted average borrowing rate also contributed to higher interest expense during the ~~second quarter and two~~three fiscal quarters of 2019. The increase in the three fiscal quarters of 2019 was partially offset by $3.3 million of incremental interest expense recorded in the second quarter of 2018 in connection with the 2018 Recapitalization.

The Company’s weighted average borrowing rate ~~increased to~~was 4.1% in both the ~~second~~third quarter and the ~~two~~three fiscal quarters of 2019 ~~from 4.0%~~and was 4.1% in the ~~second~~third quarter of 2018 and ~~3.9%~~4.0% in the ~~two~~three fiscal quarters of ~~2018, resulting from the higher interest rates on the debt outstanding in 2019 as compared to the same periods in~~ 2018.

Provision for Income Taxes

Provision for income taxes ~~decreased $0.2~~increased $8.7 million, or ~~1.2%~~57.5%, in the ~~second~~third quarter of 2019 and increased ~~$1.5~~$10.2 million, or ~~5.2%~~23.3%, in the ~~two~~three fiscal quarters of 2019. The effective tax rate increased to 21.7% in the third quarter of 2019 and increased to 16.6% in the three fiscal quarters of 2019 as compared to 15.3% in the third quarter of 2018 and 14.9% in the three fiscal quarters of 2018. Higher

pre-tax

income and lower excess tax benefits from equity-based compensation contributed to higher tax expense in both the ~~second~~third quarter and the ~~two~~three fiscal quarters of 2019, but these increases were fully offset in the second quarter of 2019 and partially offset in the two fiscal quarters of 2019 by higher excess tax benefits from equity-based compensation. The effective tax rate decreased to 12.9% in the second quarter of 2019 and decreased to 14.0% in the two fiscal quarters of 2019 as compared to 15.1% in the second quarter of 2018 and 14.7% in the two fiscal quarters of 2018.2019.

Liquidity and Capital Resources

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. We generally collect our receivables within three weeks from the date of the related sale, and we generally experience 35 to 45 inventory turns per year. In addition, our sales are not typically seasonal, which further limits our working capital requirements. The use of our ongoing cash flows from operations to service our debt obligations, invest in our business, pay dividends and repurchase our common stock reduces our working capital amounts. As of ~~June 16,~~September 8, 2019, we had working capital of ~~$73.5~~$2.3 million, excluding restricted cash and cash equivalents of ~~$152.7~~$177.3 million, advertising fund assets, restricted, of ~~$117.7~~$109.5 million and advertising fund liabilities of ~~$113.4~~$104.9 million. Working capital includes total unrestricted cash and cash equivalents of ~~$108.3~~$66.7 million.

During the ~~second~~third quarter and ~~two~~three fiscal quarters of 2019, we experienced increases in both U.S. and international same store sales versus the comparable periods in the prior year. Additionally, our international and U.S. businesses grew store counts in the ~~second~~third quarter and the ~~two~~three fiscal quarters of 2019. These factors contributed to our continued ability to generate positive operating cash flows. 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 our common stock. We did not have any material commitments for capital expenditures as of ~~June 16,~~September 8, 2019.

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Based upon our current level of operations and anticipated growth, we believe that the cash generated from operations, our current unrestricted cash and cash equivalents and amounts available under our variable funding note facility will be adequate to meet our anticipated debt service requirements, capital expenditures and working capital needs for at least the next twelve months. Our ability to continue to fund these items and continue to reduce 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. There can be no assurance that our business will generate sufficient cash flows from operations or that future borrowings will be available under the 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 fixed and floating rate 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.

~~Table of Contents~~

Restricted Cash

As of ~~June 16,~~September 8, 2019, we had approximately ~~$115.9~~$140.9 million of restricted cash held for future principal and interest payments and other working capital requirements of our asset-backed securitization structure, ~~$36.6~~$36.2 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 ~~$152.7~~$177.3 million of restricted cash and cash equivalents. As of ~~June 16,~~September 8, 2019, we also held ~~$61.3~~$68.7 million of advertising fund restricted cash and cash equivalents, which can only be used for activities that promote the Domino’s Pizza brand.

Long-Term Debt

As of ~~June 16,~~September 8, 2019, we had approximately ~~$3.45~~$3.44 billion of long-term debt, of which $35.9 million was classified as a current liability. Our fixed and floating rate notes from the recapitalizations we completed in 2018, 2017 and 2015 have original scheduled principal payments of ~~$17.6~~$8.8 million in the remainder of 2019, $35.3 million in each of 2020 and 2021, $888.0 million in 2022, $26.3 million in each of 2023 and 2024, $1.14 billion in 2025, $14.0 million in 2026 and $1.27 billion in 2027. As of ~~June 16,~~September 8, 2019, we had no outstanding borrowings under our variable funding notes and $126.9 million available for borrowing, net of letters of credit issued of $48.1 million. The letters of credit are primarily related to our casualty insurance programs and supply chain center leases. Borrowings under the variable funding notes are available to fund our working capital requirements, capital expenditures and, subject to other limitations, other general corporate purposes including dividend payments and repurchases of our common stock.

Share Repurchase Programs

Our ~~open market~~ share repurchase programs have historically been funded by excess cash flows. On February 14, 2018, our Board of Directors authorized a share repurchase program to repurchase up to $750.0 million of the Company’s common stock. During the ~~second~~third quarter of 2019, we repurchased and retired ~~12,295~~384,338 shares of our common stock under our Board of Directors-approved ~~open market~~ share repurchase program for a total of approximately ~~$3.3~~$93.7 million, or an average price of ~~$269.14~~$243.79 per share. During the ~~two~~three fiscal quarters of 2019, we repurchased and retired ~~45,844~~430,182 shares of our common stock under our Board of Directors-approved ~~open market~~ share repurchase program for a total of approximately ~~$11.5~~$105.1 million, or an average price of ~~$249.82~~$244.43 per share. As of ~~June 16,~~September 8, 2019, we had a total remaining authorized amount for share repurchases of approximately ~~$147.3~~$53.6 million.

During the ~~second~~third quarter of 2018, we repurchased and retired ~~905,556~~397,490 shares of our common stock under our Board of Directors-approved ~~open market~~ share repurchase program for a total of approximately ~~$219.0~~$109.1 million, or an average price of ~~$241.82~~$274.53 per share. During the ~~two~~three fiscal quarters of 2018, we repurchased and retired ~~1,353,564~~1,751,054 shares of our common stock under our Board of Directors-approved ~~open market~~ share repurchase program for a total of approximately ~~$320.1~~$429.2 million, or an average price of ~~$236.46~~$245.10 per share.

Subsequent to the third quarter, on October 4, 2019, 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, which has no expiration date. This repurchase program replaces the remaining availability of approximately $53.6 million under the Company’s existing $750.0 million share repurchase program. Authorization for the repurchase program may be modified, suspended, or discontinued at any time.

Dividends

On ~~March 29,~~June 28, 2019, the Company paid a $0.65 dividend to its shareholders of record as of ~~March 15,~~June 14, 2019. During the ~~second~~third quarter of 2019, on April 23, 2019, the Company’s Board of Directors declared a $0.65 per share quarterly dividend on its outstanding common stock for shareholders of record as of June 14, 2019, which was paid on June 28, 2019.

~~Subsequent to the second quarter,~~ on July 10, 2019, the Company’s Board of Directors declared a $0.65 per share quarterly dividend on its outstanding common stock for shareholders of record as of September 13, 2019, which was paid subsequent to ~~be paid~~the third quarter on September 30, 2019.

Subsequent to the third quarter, on October 4, 2019, the Company’s Board of Directors declared a $0.65 per share quarterly dividend on its outstanding common stock for shareholders of record as of December 13, 2019 to be paid on December 27, 2019.

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

(In millions)

Two Fiscal Quarters
of 2019

Two Fiscal Quarters
of 2018

Cash Flows Provided By (Used In)

Net cash provided by operating activities
$
201.6
$
154.7

Net cash used in investing activities

(2.5
)
(43.8
)
Net cash used in financing activities

(114.3
)
(30.1
)
Exchange rate changes

0.1

(0.1
)

Change in cash and cash equivalents, restricted cash and cash equivalents
$
84.8
$
80.7


(In millions)	Three Fiscal Quarters of 2019			Three Fiscal Quarters of 2018
Cash Flows Provided By (Used In)
Net cash provided by operating activities	$	324.6		$	262.5
Net cash used in investing activities		(3.1	)		(65.4	)
Net cash used in financing activities		(246.3	)		(172.1	)
Exchange rate changes		0.1			(0.2	)

Change in cash and cash equivalents, restricted cash and cash equivalents	$	75.3		$	24.9

Operating Activities

Cash provided by operating activities increased ~~$46.9~~$62.1 million in the ~~two~~three fiscal quarters of 2019 due to the positive impact of changes in operating assets and liabilities of ~~$26.1~~$32.9 million, an increase in net income of ~~$18.8~~$21.1 million and higher

non-cash

amounts of ~~$2.0~~$8.2 million. The positive impact of changes in operating assets and liabilities was primarily related to the timing of receipts on accounts receivable and timing of payments on accounts payable and accrued liabilities during 2019 as compared to 2018 and was partially offset by the negative impact of changes in advertising fund assets and liabilities, restricted in 2019 as compared to ~~2018.~~

~~Table~~2018 due to higher spending of ~~Contents~~

fund assets.

Investing Activities

Cash used in investing activities was ~~$2.5~~$3.1 million in the ~~two~~three fiscal quarters of ~~2019, which consisted primarily~~2019. We used $42.7 million of ~~$25.7 million of~~cash for capital expenditures (driven primarily by investments in technological initiatives and supply chain centers). This use of cash was partially offset by maturities of advertising fund investments, restricted of ~~$15.2~~$30.2 million and proceeds from the sale of assets of ~~$8.2~~$9.7 million, which primarily related to the Second Quarter Store Sale.

Cash used in investing activities was ~~$43.8~~$65.4 million in the ~~two~~three fiscal quarters of 2018, which consisted primarily of ~~$37.3~~$65.1 million of capital expenditures (driven primarily by investments in ~~technological initiatives,~~ supply chain centers, technological initiatives and U.S. Company-owned stores) and purchases of restricted advertising fund investments of ~~$35.2~~$50.2 million. These uses of cash were partially offset by maturities of restricted advertising fund investments of ~~$29.0~~$44.0 million.

Financing Activities

Cash used in financing activities was ~~$114.3~~$246.3 million in the ~~two~~three fiscal quarters of 2019, primarily related to purchases of common stock of $105.1 million under our Board of Directors-approved share repurchase program, repayments of long-term debt of ~~$82.9~~$91.9 million (of which $65.0 million related to the repayment of borrowings under our variable funding notes), dividend payments to our shareholders of ~~$26.7~~$53.6 million ~~purchases of common stock of $11.5 million under our Board of Directors-approved open market share repurchase program~~ and tax payments for restricted stock upon vesting of ~~$2.6~~$5.8 million. These uses of cash were partially offset by proceeds from the exercise of stock options of ~~$9.3~~$10.1 million.

Cash used in financing activities was ~~$30.1~~$172.1 million in the ~~two~~three fiscal quarters of 2018. We issued $825.0 million of debt in connection with our 2018 Recapitalization and borrowed $80.0 million under our variable funding notes. However, these increases in cash were offset by repayments of long-term debt of ~~$586.1~~$595.1 million (of which $490.0 million was an optional prepayment on our 2015 five-year fixed rate notes using a portion of the proceeds received from the 2018 Recapitalization and $80.0 million related to the repayment of the borrowings under our variable funding notes), purchases of common stock of ~~$320.1~~$429.2 million, dividend payments to our shareholders of ~~$23.5~~$46.7 million, and cash paid for financing costs related to our 2018 Recapitalization of $8.2 million. We also received proceeds of $9.0 million from the exercise of stock options and made ~~$2.3~~$6.8 million in tax payments for restricted stock upon ~~vesting and received proceeds of $5.2 million from the exercise of stock options.~~

vesting.

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Forward-Looking Statements

This filing contains various forward-looking statements about the Company within the meaning of the Private Securities Litigation Reform Act of 1995 (the “Act”) that are based on current management expectations that involve substantial risks and uncertainties which could cause actual results to differ materially from the results expressed in, or implied by, these forward-looking statements. The following cautionary statements are being made pursuant to the provisions of the Act and with the intention of obtaining the benefits of the “safe harbor” provisions of the Act. You can identify forward-looking statements by the use of words such as “anticipates,” “believes,” “could,” “should,” “estimates,” “expects,” “intends,” “may,” “will,” “plans,” “predicts,” “projects,” “seeks,” “approximately,” “potential,” “outlook” and similar terms and phrases that concern our strategy, plans or intentions, including references to assumptions. These forward-looking statements address various matters including information concerning future results of operations and business strategy, our anticipated profitability, estimates in same store sales growth, the growth of our U.S. and international business, 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 in our other filings with the Securities and Exchange Commission, including under the section headed “Risk Factors” in our Annual Report on 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; the effectiveness of our advertising, operations and promotional initiatives; the strength of our brand, including our ability to compete in the U.S. and internationally in our intensely competitive industry; the impact of social media and other consumer-oriented technologies on our business, brand and reputation; new product, digital ordering and concept developments by us, and other food-industry competitors; our ability to maintain good relationships with our franchisees and their ongoing level of profitability; 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 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; 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 and consumer protection; adverse legal judgments or settlements; food-borne illness or contamination of products; data breaches, power loss, technological failures, user error or other cyber risks; the effect of war, terrorism or catastrophic events; our ability to pay dividends and repurchase shares; changes in consumer preferences, spending and traffic patterns and demographic trends; 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.

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~~Item 3.~~

~~Quantitative and Qualitative Disclosures About Market Risk.~~

Item 3. Quantitative and Qualitative Disclosures About Market Risk.

Market Risk

We do not engage in speculative transactions nor do we hold or issue financial instruments for trading purposes. In connection with the recapitalizations of our business, we issued fixed and floating rate notes and entered into variable funding notes and, at ~~June 16,~~September 8, 2019, we are exposed to interest rate risk on borrowings under our floating rate notes and variable funding notes. As of ~~June 16,~~September 8, 2019, we had no outstanding borrowings under our variable funding notes. Our floating rate notes and our variable funding notes bear interest at fluctuating interest rates based on LIBOR.

There is currently uncertainty around whether LIBOR will continue to exist after 2021. If LIBOR ceases to exist, we may need to renegotiate our loan documents and we cannot predict what alternative index would be negotiated with our lenders. 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.

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.

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. We may periodically enter into financial instruments to manage this risk. 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 ~~6.8%~~6.7% of our total revenues in the ~~second~~third quarter of 2019, ~~approximately~~6.4% of our total revenues in the third quarter of 2018 and 6.6% of our total revenues in the ~~two~~three fiscal quarters of 2019 and ~~approximately 6.6% of our total revenues in both the second quarter and two fiscal quarters of~~ 2018 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 rate risk. A hypothetical 10% adverse change in the foreign currency exchange rates for our international markets would have resulted in a negative impact on royalty revenues of approximately ~~$9.6~~$14.4 million in the ~~two~~three fiscal quarters of 2019.

~~Item 4.~~

~~Controls and Procedures.~~

Item 4. Controls and Procedures.

Management, with the participation of the Company’s Chief Executive Officer, Richard E. Allison, Jr., and Executive Vice President and Chief Financial Officer, Jeffrey D. Lawrence, 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 and Mr. Lawrence concluded that the Company’s disclosure controls and procedures were effective.

During the quarterly period ended ~~June 16,~~September 8, 2019, there were no changes in the Company’s internal ~~controls~~control over financial reporting, as defined in Rules

13a-15(f)

and

15d-15(f)

under the Securities and Exchange Act of 1934, as amended, that have materially affected or are reasonably likely to materially affect the Company’s internal control over financial reporting.

Table of Contents

PART II. OTHER INFORMATION

~~Item 1.~~

~~Legal Proceedings.~~

Item 1. Legal Proceedings.

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 as well as intellectual property, including patents.

As previously disclosed in our 2018 Form

10-K,

on February 14, 2011, Domino’s Pizza LLC was named as a defendant in a lawsuit along with Fischler Enterprises of C.F., Inc., a franchisee, and Jeffrey S. Kidd, the franchisee’s delivery driver, filed by Yvonne Wiederhold, the plaintiff, as Personal Representative of the Estate of Richard E. Wiederhold, deceased. The case involved a traffic accident in which the franchisee’s delivery driver is alleged to have caused an accident involving a vehicle driven by Richard Wiederhold. Mr. Wiederhold sustained spinal injuries resulting in quadriplegia and passed away several months after the accident. The case went to trial in 2016 and the Company was found liable, but the verdict was reversed by the Florida Fifth District Court of Appeals in May 2018 and was remanded to the Ninth Judicial Circuit Court of Florida for a new trial. The case was tried again in June 2019 and the jury returned ana $9.0 million judgment for the plaintiff where the Company and Mr. Kidd were found to be 100% liable (after certain offsets and other deductions the final verdict was $8.0 million). The Company continues to deny liability and has filed ~~post-judgment motions with the ultimate intention of filing another appeal of the verdict, if necessary.~~an appeal.

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

~~Item 1A.~~

~~Risk Factors.~~

Item 1A. Risk Factors.

There have been no material changes in the risk factors previously disclosed in our 2018 Form

10-K.

~~Item 2.~~

~~Unregistered Sales of Equity Securities and Use of Proceeds.~~

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

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

Maximum
Approximate Dollar

Total Number of Shares

Value of Shares that

Total Number

Purchased as Part of

May Yet Be Purchased

of Shares

Average Price Paid

Publicly Announced

Under the Program

Period

Purchased (1)

Per Share

Program (2)

(in thousands)

Period #4 (March 25, 2019 to April 21, 2019)

1,909
$
247.89

—
$
150,645

Period #5 (April 22, 2019 to May 19, 2019)

13,577

269.56

12,295

147,336

Period #6 (May 20, 2019 to June 16, 2019)

1,348

283.44

—

147,336

Total

16,834
$
268.22

12,295
$
147,336


							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 17, 2019 to July 14, 2019)		1,194	$	275.16		—	$	147,336
Period #8 (July 15, 2019 to August 11, 2019)		231,739		252.72		230,097		89,166
Period #9 (August 12, 2019 to September 8, 2019)		157,402		230.44		154,241		53,640

Total		390,335	$	243.81		384,338	$	53,640

(1)	~~4,539~~5,997 shares in the ~~second~~third quarter of 2019 were purchased as part of the Company’s employee stock payroll deduction plan at an average price of ~~$265.71.~~$245.21.

(2)

As previously disclosed, on February 14, 2018, the Company’s Board of Directors authorized a $750.0 million share repurchase program, which has no expiration date. As of ~~June 16,~~September 8, 2019, the Company had approximately ~~$147.3~~$53.6 million remaining for future share repurchases under this program. On October 4, 2019, 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, which has no expiration date. This repurchase program replaces the remaining availability of approximately $53.6 million under the Company’s existing $750.0 million share repurchase program. Authorization for the repurchase program may be modified, suspended, or discontinued at any time. The repurchase of shares in any particular period and the actual amount of such purchases remain at the discretion of the Board of Directors, and no assurance can be given that shares will be repurchased in the future.

~~Item 3.~~

~~Defaults Upon Senior Securities.~~

Item 3. Defaults Upon Senior Securities.

None.

~~Item 4.~~

~~Mine Safety Disclosures.~~

Item 4. Mine Safety Disclosures.

Not applicable.

~~Item 5.~~

~~Other Information.~~

Item 5. Other Information.

None.

~~None.~~

Table of Contents

~~Item 6.~~

~~Exhibits.~~

Item 6. Exhibits.


Exhibit Number		Description

	~~10.1~~	~~Thirteenth Amendment to a Lease Agreement between Domino’s Farms Office Park, L.L.C. and Domino’s Pizza LLC, dated as of May 14, 2019.~~

	~~10.2~~	~~Fourteenth Amendment to a Lease Agreement between Domino’s Farms Office Park, L.L.C. and Domino’s Pizza LLC, dated as of May 31, 2019.~~

	31.1	Certification by Richard E. Allison, Jr. 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 Jeffrey D. Lawrence 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. 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 Jeffrey D. Lawrence 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.~~Document – the instance document does not appear in the Interactive Data file because its XBLR 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).

Table of Contents

SIGNATURES

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


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

Large accelerated filer	☒	Accelerated filer	☐

Non-accelerated filer ~~filer~~	☐	Smaller reporting company	☐

		Emerging growth company	☐


	Second Quarter of 2019					Second Quarter of 2018					Two Fiscal Quarters of 2019					Two Fiscal Quarters of 2018
Global retail sales growth		+5.1	%				+12.6	%				+4.8	%				+14.7	%
Same store sales growth:
U.S. Company-owned stores (1)		+2.1	%				+5.1	%				+2.6	%				+5.8	%
U.S. franchise stores (1)		+3.1	%				+7.0	%				+3.5	%				+7.7	%

U.S. stores		+3.0	%				+6.9	%				+3.5	%				+7.6	%
International stores (excluding foreign currency impact)		+2.4	%				+4.0	%				+2.1	%				+4.4	%
Store counts (at end of period):
U.S. Company-owned stores		333					396
U.S. franchise stores		5,612					5,296

U.S. stores		5,945					5,692
International stores		10,369					9,430

Total stores		16,314					15,122
Income statement data:
Total revenues	$	811.6		100.0	%	$	779.4		100.0	%	$	1,647.6		100.0	%	$	1,564.8		100.0	%
Cost of sales		495.0		61.0	%		485.8		62.3	%		1,008.7		61.2	%		971.3		62.1	%
General and administrative		89.2		11.0	%		86.5		11.1	%		178.9		10.9	%		170.7		10.9	%
U.S. franchise advertising		88.5		10.9	%		80.9		10.4	%		177.6		10.8	%		163.1		10.4	%

Income from operations		138.9		17.1	%		126.1		16.2	%		282.4		17.1	%		259.6		16.6	%
Interest expense, net		(32.9	)	(4.0	)%		(34.9	)	(4.5	)%		(67.3	)	(4.0	)%		(64.8	)	(4.1	)%

Income before provision for income taxes		106.0		13.1	%		91.2		11.7	%		215.1		13.1	%		194.9		12.5	%
Provision for income taxes		13.6		1.7	%		13.8		1.8	%		30.1		1.9	%		28.6		1.9	%

Net income	$	92.4		11.4	%	$	77.4		9.9	%	$	185.0		11.2	%	$	166.2		10.6	%


	Third Quarter					Third Quarter					Three Fiscal					Three Fiscal
	of 2019					of 2018					Quarters of 2019					Quarters of 2018
Global retail sales growth		+5.8	%				+8.3	%				+5.2	%				+12.5	%
Same store sales growth:
U.S. Company-owned stores (1)		+1.7	%				+4.9	%				+2.3	%				+5.4	%
U.S. franchise stores (1)		+2.5	%				+6.4	%				+3.2	%				+7.3	%

U.S. stores		+2.4	%				+6.3	%				+3.1	%				+7.1	%
International stores (excluding foreign currency impact)		+1.7	%				+3.3	%				+2.0	%				+4.0	%
Store counts (at end of period):
U.S. Company-owned stores (1)		333					386
U.S. franchise stores (1)		5,652					5,365

U.S. stores		5,985					5,751
International stores		10,543					9,603

Total stores		16,528					15,354

Income statement data:
Total revenues	$	820.8		100.0	%	$	786.0		100.0	%	$	2,468.4		100.0	%	$	2,350.7		100.0	%
Cost of sales		504.6		61.5	%		490.7		62.4	%		1,513.2		61.3	%		1,462.0		62.2	%
General and administrative		83.7		10.2	%		80.4		10.2	%		262.6		10.7	%		251.1		10.7	%
U.S. franchise advertising		89.5		10.9	%		82.5		10.6	%		267.1		10.8	%		245.6		10.4	%

Income from operations		143.0		17.4	%		132.4		16.8	%		425.5		17.2	%		392.1		16.7	%
Interest expense, net		(32.8	)	(4.0	)%		(33.2	)	(4.2	)%		(100.1	)	(4.0	)%		(97.9	)	(4.2	)%

Income before provision for income taxes		110.2		13.4	%		99.2		12.6	%		325.4		13.2	%		294.1		12.5	%
Provision for income taxes		23.9		2.9	%		15.2		1.9	%		54.0		2.2	%		43.8		1.9	%

Net income	$	86.4		10.5	%	$	84.1		10.7	%	$	271.4		11.0	%	$	250.3		10.6	%


		Page No.

PART I.	FINANCIAL INFORMATION

Item 1.	Financial Statements		3

	Condensed Consolidated Balance Sheets (Unaudited) – As of ~~June 16,~~September 8, 2019 and December 30, 2018		3

	Condensed Consolidated Statements of Income (Unaudited) – Fiscal quarters and ~~two~~three fiscal quarters ended ~~June 16,~~September 8, 2019 and ~~June 17,~~September 9, 2018		4

	Condensed Consolidated Statements of Comprehensive Income (Unaudited) – Fiscal quarters and ~~two~~three fiscal quarters ended ~~June 16,~~September 8, 2019 and ~~June 17,~~September 9, 2018		5

	Condensed Consolidated Statements of Cash Flows (Unaudited) – ~~Two~~Three fiscal quarters ended ~~June 16,~~September 8, 2019 and ~~June 17,~~September 9, 2018		6

	Notes to Condensed Consolidated Financial Statements (Unaudited)		7

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations		16

Item 3.	Quantitative and Qualitative Disclosures About Market Risk		24

Item 4.	Controls and Procedures		24

PART II.	OTHER INFORMATION

Item 1.	Legal Proceedings		25

Item 1A.	Risk Factors		25

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds		25

Item 3.	Defaults Upon Senior Securities		25

Item 4.	Mine Safety Disclosures		25

Item 5.	Other Information		25

Item 6.	Exhibits		26

SIGNATURES			27


(In thousands)	June 16, 2019			December 30, 2018 (1)
Assets
Current assets:
Cash and cash equivalents	$	108,259		$	25,438
Restricted cash and cash equivalents		152,713			166,993
Accounts receivable, net		182,904			190,091
Inventories		44,281			45,975
Prepaid expenses and other		37,578			25,710
Advertising fund assets, restricted		117,712			112,744

Total current assets		643,447			566,951

Property, plant and equipment:
Land and buildings		41,385			41,147
Leasehold and other improvements		155,532			170,498
Equipment		237,088			243,654
Construction in progress		29,314			31,822

		463,319			487,121
Accumulated depreciation and amortization		(249,184	)		(252,182	)

Property, plant and equipment, net		214,135			234,939

Other assets:
Operating lease right-of-use assets		211,204			—
Goodwill		13,542			14,919
Capitalized software, net		69,629			63,809
Other assets		21,965			21,241
Deferred income taxes		3,245			5,526

Total other assets		319,585			105,495

Total assets	$	1,177,167		$	907,385

Liabilities and stockholders’ deficit
Current liabilities:
Current portion of long-term debt	$	35,919		$	35,893
Accounts payable		82,456			92,546
Operating lease liabilities		30,156			—
Insurance reserves		22,078			22,210
Dividends payable		27,355			581
Advertising fund liabilities		113,416			107,150
Other accrued liabilities		101,526			121,363

Total current liabilities		412,906			379,743

Long-term liabilities:
Long-term debt, less current portion		3,414,988			3,495,691
Operating lease liabilities		188,305			—
Insurance reserves		33,507			31,065
Other accrued liabilities		31,747			40,807

Total long-term liabilities		3,668,547			3,567,563

Stockholders’ deficit:
Common stock		412			410
Additional paid-in capital		10,788			569
Retained deficit		(2,911,278	)		(3,036,471	)
Accumulated other comprehensive loss		(4,208	)		(4,429	)

Total stockholders’ deficit		(2,904,286	)		(3,039,921	)

Total liabilities and stockholders’ deficit	$	1,177,167		$	907,385


	At June 16, 2019
			Fair Value Estimated Using
	Carrying		Level 1		Level 2		Level 3
	Amount		Inputs		Inputs		Inputs
Cash equivalents	$	93,178	$	93,178	$	—	$	—
Restricted cash equivalents		91,476		91,476		—		—
Investments in marketable securities		10,068		10,068		—		—
Advertising fund cash equivalents, restricted		52,055		52,055		—		—
Advertising fund investments, restricted		35,000		35,000		—		—


(In millions)	Two Fiscal Quarters of 2019			Two Fiscal Quarters of 2018
Cash Flows Provided By (Used In)
Net cash provided by operating activities	$	201.6		$	154.7
Net cash used in investing activities		(2.5	)		(43.8	)
Net cash used in financing activities		(114.3	)		(30.1	)
Exchange rate changes		0.1			(0.1	)

Change in cash and cash equivalents, restricted cash and cash equivalents	$	84.8		$	80.7

DOMINO’S PIZZA, INC.
(Registrant)

Date: ~~July 16,~~October 8, 2019

/s/ Jeffrey D. Lawrence

Jeffrey D. Lawrence

Executive Vice President, Chief Financial Officer
(Principal Financial and Accounting Officer)