UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

FORM

10-Q

(Mark One)

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

For the quarterly period ended

~~September 8, 2019~~

March 22, 2020

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

For the transition period from

Commission file number:

001-32242

Domino’s Pizza, ~~Inc.~~Inc.

(Exact Name of Registrant as Specified in Its Charter)


Delaware		38-2511577
(State or Other Jurisdiction of Incorporation or Organization)		(I.R.S. Employer Identification No.)

30 Frank Lloyd Wright Drive Ann Arbor, Michigan		48105
(Address of Principal Executive Offices)		(Zip Code)

(734)

930-3030

(Registrant’s Telephone Number, Including Area Code)

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


Title of Each Class	Trading Symbol	Name of Each Exchange on Which Registered
Domino’s Pizza, Inc. Common Stock, $0.01 par value	DPZ	New York Stock Exchange

Indicate by check mark whether registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes

☒

☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation

S-T

(§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes

☒

☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a

non-accelerated

filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule

12b-2

of the Exchange Act.

Large accelerated filer	☒	Accelerated filer	☐

Non-accelerated filer	☐	Smaller reporting company	☐

Emerging growth company	☐	~~Emerging growth company~~	~~☐~~

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

☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule

12b-2

of the Exchange Act). Yes

☐

☒

As of ~~October 1, 2019,~~April 16, 2020, Domino’s Pizza, Inc. had ~~40,900,458~~39,117,878 shares of common stock, par value $0.01 per share, outstanding.

Table of Contents

Domino’s Pizza, Inc.

TABLE OF CONTENTS


		Page No.
PART I.	FINANCIAL INFORMATION

Item 1.	Financial Statements		3

	Condensed Consolidated Balance Sheets (Unaudited) – As of ~~September 8, 2019~~March 22, 2020 and December ~~30, 2018~~29, 2019		3

	Condensed Consolidated Statements of Income (Unaudited) – Fiscal quarters ended March 22, 2020 and ~~three fiscal quarters ended September 8,~~March 24, 2019 ~~and September 9, 2018~~		4

	Condensed Consolidated Statements of Comprehensive Income (Unaudited) – Fiscal quarters ended March 22, 2020 and ~~three fiscal quarters ended September 8,~~March 24, 2019 ~~and September 9, 2018~~		5

	Condensed Consolidated Statements of Cash Flows (Unaudited) – ~~Three fiscal~~Fiscal quarters ended ~~September 8,~~March 22, 2020 and March 24, 2019 ~~and 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 14

Item 3.	Quantitative and Qualitative Disclosures About Market Risk		24 21

Item 4.	Controls and Procedures		24 21

PART II.	OTHER INFORMATION

Item 1.	Legal Proceedings		25 22

Item 1A.	Risk Factors		25 22

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds		25 23

Item 3.	Defaults Upon Senior Securities		25 23

Item 4.	Mine Safety Disclosures		25 23

Item 5.	Other Information		25 23

Item 6.	Exhibits		26 23

SIGNATURES			27 24

Table of Contents

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements.

Domino’s Pizza, Inc. and Subsidiaries

Condensed Consolidated Balance Sheets

(Unaudited)

(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


(In thousands)	March 22, 2020			December 29, 2019 (1)
Assets
Current assets:
Cash and cash equivalents	$	200,801		$	190,615
Restricted cash and cash equivalents		189,370			209,269
Accounts receivable, net		219,199			210,260
Inventories		49,010			52,955
Prepaid expenses and other		26,025			19,129
Advertising fund assets, restricted		109,969			105,389

Total current assets		794,374			787,617

Property, plant and equipment:
Land and buildings		44,732			44,845
Leasehold and other improvements		165,843			164,071
Equipment		249,467			243,708
Construction in progress		39,806			42,705

		499,848			495,329
Accumulated depreciation and amortization		(259,131	)		(252,448	)

Property, plant and equipment, net		240,717			242,881

Other assets:
Operating lease right-of-use assets		228,940			228,785
Goodwill		15,061			15,093
Capitalized software, net		74,203			73,140
Other assets		27,539			24,503
Deferred income taxes		9,042			10,073

Total other assets		354,785			351,594

Total assets	$	1,389,876		$	1,382,092

Liabilities and stockholders’ deficit
Current liabilities:
Current portion of long-term debt	$	43,390		$	43,394
Accounts payable		94,502			111,101
Operating lease liabilities		36,914			33,318
Insurance reserves		23,453			23,735
Dividends payable		30,985			471
Advertising fund liabilities		106,832			101,921
Other accrued liabilities		116,093			139,891

Total current liabilities		452,169			453,831

Long-term liabilities:
Long-term debt, less current portion		4,061,198			4,071,055
Operating lease liabilities		199,304			202,731
Insurance reserves		35,362			34,675
Other accrued liabilities		34,033			35,559

Total long-term liabilities		4,329,897			4,344,020

Stockholders’ deficit:
Common stock		390			389
Additional paid-in capital		12,474			243
Retained deficit		(3,398,986	)		(3,412,649	)
Accumulated other comprehensive loss		(6,068	)		(3,742	)

Total stockholders’ deficit		(3,392,190	)		(3,415,759	)

Total liabilities and stockholders’ deficit	$	1,389,876		$	1,382,092

(1)	The balance sheet at December ~~30, 2018~~29, 2019 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~~The accompanying ~~notes.~~notes are an integral part of these condensed consolidated statements.

Table of Contents

Domino’s Pizza, Inc. and Subsidiaries

Condensed Consolidated Statements of Income

(Unaudited)


	Fiscal Quarter Ended						Three Fiscal Quarters Ended						Fiscal Quarter Ended
	September 8,			September 9,			September 8,			September 9,			March 22,			March 24,
(In thousands, except per share data)	2019			2018			2019			2018			2020			2019
Revenues:
U.S. Company-owned stores	$	94,575		$	118,540		$	323,026		$	358,521		$	102,326		$	123,450
U.S. franchise royalties and fees		97,047			89,427			289,349			266,335			104,746			96,708
Supply chain		485,110			445,096			1,424,787			1,326,076			512,700			472,100
International franchise royalties and fees		54,586			50,424			164,145			154,182			57,496			54,584
U.S. franchise advertising		89,494			82,478			267,115			245,618			95,834			89,121

Total revenues		820,812			785,965			2,468,422			2,350,732			873,102			835,963

Cost of sales:
U.S. Company-owned stores		71,610			92,998			247,516			278,012			79,388			95,540
Supply chain		432,951			397,688			1,265,695			1,183,996			453,557			418,134

Total cost of sales		504,561			490,686			1,513,211			1,462,008			532,945			513,674

Operating margin		316,251			295,279			955,211			888,724			340,157			322,289

General and administrative		83,728			80,369			262,640			251,053			88,489			89,664
U.S. franchise advertising		89,494			82,478			267,115			245,618			95,834			89,121

Income from operations		143,029			132,432			425,456			392,053			155,834			143,504
Interest income		968			792			2,583			2,451			932			693
Interest expense		(33,752	)		(33,976	)		(102,672	)		(100,389	)		(39,470	)		(35,054	)

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
Income before (benefit) provision for income taxes														117,296			109,143
(Benefit) provision for income taxes														(4,306	)		16,493

Net income	$	86,373		$	84,095		$	271,382		$	250,330		$	121,602		$	92,650

Earnings per share:
Common stock - basic	$	2.11		$	2.02		$	6.63		$	5.94		$	3.14		$	2.27
Common stock - diluted		2.05			1.95			6.44			5.73			3.07			2.20

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

Table of Contents

Domino’s Pizza, Inc. and Subsidiaries

Condensed Consolidated Statements of Comprehensive Income

(Unaudited)


	Fiscal Quarter Ended					Three Fiscal Quarters Ended					Fiscal Quarter Ended
	September 8,		September 9,			September 8,		September 9,			March 22,			March 24,
(In thousands)	2019		2018			2019		2018			2020			2019
Net income	$	86,373	$	84,095		$	271,382	$	250,330		$	121,602		$	92,650
Currency translation adjustment		270		(84	)		491		(1,142	)		(2,326	)		237

Comprehensive income	$	86,643	$	84,011		$	271,873	$	249,188		$	119,276		$	92,887

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

Table of Contents

Domino’s Pizza, Inc. and Subsidiaries

Condensed Consolidated Statements of Cash Flows

(Unaudited)


	Fiscal Quarter Ended
	March 22,			March 24,
(In thousands)	2020			2019
Cash flows from operating activities:
Net income	$	121,602		$	92,650
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization		14,032			13,790
Loss on sale/disposal of assets		306			149
Amortization of debt issuance costs		1,291			1,101
Provision for deferred income taxes		702			1,467
Non-cash compensation expense		4,914			4,608
Excess tax benefits from equity-based compensation		(30,449	)		(8,663	)
Provision for losses on accounts and notes receivable		1,589			94
Changes in operating assets and liabilities		(23,119	)		1,974
Changes in advertising fund assets and liabilities, restricted		4,490			(10,172	)

Net cash provided by operating activities		95,358			96,998

Cash flows from investing activities:
Capital expenditures		(17,467	)		(12,222	)
Other		(426	)		262

Net cash used in investing activities		(17,893	)		(11,960	)

Cash flows from financing activities:
Repayments of long-term debt and finance lease obligations		(10,849	)		(48,968	)
Proceeds from exercise of stock options		10,105			4,537
Purchases of common stock		(79,590	)		(8,144	)
Tax payments for restricted stock upon vesting		(1,796	)		(2,467	)
Payments of common stock dividends and equivalents		(80	)		(90	)
Other		152			—

Net cash used in financing activities		(82,058	)		(55,132	)

Effect of exchange rate changes on cash		(961	)		124

Change in cash and cash equivalents, restricted cash and cash equivalents		(5,554	)		30,030

Cash and cash equivalents, beginning of period		190,615			25,438
Restricted cash and cash equivalents, beginning of period		209,269			166,993
Cash and cash equivalents included in advertising fund assets, restricted, beginning of period		84,040			44,988

Cash and cash equivalents, restricted cash and cash equivalents and cash and cash equivalents included in advertising fund assets, restricted, beginning of period		483,924			237,419

Cash and cash equivalents, end of period		200,801			83,114
Restricted cash and cash equivalents, end of period		189,370			150,055
Cash and cash equivalents included in advertising fund assets, restricted, end of period		88,199			34,280

Cash and cash equivalents, restricted cash and cash equivalents and cash and cash equivalents included in advertising fund assets, restricted, end of period	$	478,370		$	267,449

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

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)

~~September 8, 2019~~March 22, 2020

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~~29, 2019 included in the Company’s ~~2018~~2019 Annual Report on Form

10-K,

filed with the Securities and Exchange Commission on February ~~21, 2019~~20, 2020 (the ~~“2018~~“2019 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 ~~September 8, 2019~~March 22, 2020 are not necessarily indicative of the results that may be expected for the fiscal year ending ~~December 29, 2019.~~January 3, 202

Updates to Significant Accounting Policies

The Company adopted Accounting Standards Codification ~~842,~~326,

~~Leases~~Financial Instruments – Credit Losses

(“ASC ~~842”~~326”) in the first quarter of ~~2019.~~2020. As a result, the Company updated its significant accounting policies for ~~leases~~the measurement of credit losses 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~~326 on the Company’s condensed consolidated financial statements.

~~Leases~~

Allowances for Credit Losses

The Company ~~leases certain retail store~~closely monitors accounts and ~~supply chain center locations, supply chain vehicles~~notes receivable balances and ~~its corporate headquarters.~~ estimates the allowance for credit losses. These estimates are based on historical collection experience and other factors, including those related to current market conditions and events. The Company’s allowance

for accounts and notes receivable have not historically been material.

The Company ~~determines whether an arrangement~~also monitors its

off-balance

sheet exposures under its letters of credit, surety bonds and lease guarantees. None of these arrangements has or is ~~or contains~~likely to have 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 debtmaterial effect on the Company’s ~~condensed consolidated balance sheet.~~

~~Right-of-use~~

~~assets and lease liabilities are recognized based on the present value~~results 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.operations, financial condition, revenues, expenses or liquidity.

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, 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 12 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 September 8, 2019 and September 9, 2018														Fiscal Quarters Ended March 22, 2020 and March 24, 2019
	U.S.		Supply		International		Intersegment								U.S.		Supply		International		Intersegment
	Stores		Chain		Franchise		Revenues			Other			Total		Stores		Chain		Franchise		Revenues			Other			Total
Revenues
2020															$	302,906	$	541,639	$	57,496	$	(28,939	)	$	—		$	873,102
2019	$	281,116	$	511,709	$	54,586	$	(26,599	)	$	—		$	820,812		309,279		505,681		54,584		(33,581	)		—			835,963
2018		290,445		478,517		50,424		(33,421	)		—			785,965
Income from operations
2020															$	85,410	$	47,375	$	43,460		N/A		$	(20,411	)	$	155,834
2019	$	80,188	$	40,513	$	42,281		N/A		$	(19,953	)	$	143,029		80,615		42,021		42,754		N/A			(21,886	)		143,504
2018		78,636		35,452		39,374		N/A			(21,030	)		132,432
Segment Income
2020															$	88,277	$	51,437	$	43,504		N/A		$	(8,132	)	$	175,086
2019	$	82,556	$	44,432	$	42,337		N/A		$	(8,172	)	$	161,153		83,598		46,047		42,800		N/A			(10,394	)		162,051
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

Table of Contents

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


	Fiscal Quarter Ended						Three Fiscal Quarters Ended						Fiscal Quarter Ended
	September 8,			September 9,			September 8,			September 9,			March 22,			March 24,
	2019			2018			2019			2018			2020			2019
Total Segment Income	$	161,153		$	143,403		$	482,848		$	438,828		$	175,086		$	162,051
Depreciation and amortization		(13,132	)		(12,460	)		(40,982	)		(35,770	)		(14,032	)		(13,790	)
(Loss) gain on sale/disposal of assets		(312	)		5,706			(3,141	)		5,187
Loss on sale/disposal of assets														(306	)		(149	)
Non-cash compensation expense		(4,680	)		(4,217	)		(13,269	)		(15,660	)		(4,914	)		(4,608	)
Recapitalization-related expenses		—			—			—			(532	)

Income from operations		143,029			132,432			425,456			392,053			155,834			143,504
Interest income		968			792			2,583			2,451			932			693
Interest expense		(33,752	)		(33,976	)		(102,672	)		(100,389	)		(39,470	)		(35,054	)

Income before provision for income taxes	$	110,245		$	99,248		$	325,367		$	294,115
Income before (benefit) provision for income taxes													$	117,296		$	109,143

3. Earnings Per Share


	Fiscal Quarter Ended				Three Fiscal Quarters Ended				Fiscal Quarter Ended
	September 8,		September 9,		September 8,		September 9,		March 22,		March 24,
	2019		2018		2019		2018		2020		2019
Net income available to common stockholders - basic and diluted	$	86,373	$	84,095	$	271,382	$	250,330	$	121,602	$	92,650

Basic weighted average number of shares		40,954,279		41,585,933		40,947,693		42,150,693		38,665,924		40,865,532
Earnings per share – basic	$	2.11	$	2.02	$	6.63	$	5.94	$	3.14	$	2.27
Diluted weighted average number of shares		42,040,291		43,067,191		42,158,447		43,675,627		39,633,404		42,202,429
Earnings per share – diluted	$	2.05	$	1.95	$	6.44	$	5.73	$	3.07	$	2.20

~~Table of Contents~~

The ~~denominators~~denominator used in calculating diluted earnings per share for the ~~third~~first quarter ~~and three fiscal quarters~~ of ~~2019 do~~2020 does not include ~~161,670~~128,280 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 third quarter and three fiscal quarters of 2019 each do not include 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 the third quarter and three fiscal quarters of 2018 do not include 76,130 and 137,156 options 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~~first quarter of ~~2018~~2020 does not include ~~28,570~~84,765 restricted performance shares, as the performance targets for these awards had not yet been met.

The denominator used in calculating diluted earnings per share for the first quarter of 2019 does not include 71,880 options to purchase common stock as the effect of including these options would have been anti-dilutive. The denominator used in calculating diluted earnings per share for the first quarter of 2019 does not include 1,800 shares subject to restricted stock awards, as the effect of including these shares would have been anti-dilutive. The ~~denominators~~denominator used in calculating diluted earnings per share for the ~~third~~first quarter ~~and three fiscal quarters~~ of ~~2018 each do~~2019 does not include ~~160,998~~96,712 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 ~~third~~first quarter of ~~2019.~~2020.

Accumulated

Additional

Other

Common Stock

Paid-in

Retained

Comprehensive

Shares

Amount

Capital

Deficit

Loss

Balance at June 16, 2019

41,232,358
$
412
$
10,788
$
(2,911,278
) $
(4,208
)
Net income

—

—

—

86,373

—

Dividends declared on common stock and equivalents ($0.65 per share)

—

—

—

(26,569
)
—

Issuance and cancellation of stock awards, net

45,479

—

—

—

—

Tax payments for restricted stock upon vesting

(12,603
)
—

(3,253
)
—

—

Purchases of common stock

(384,338
)
(3
)
(12,972
)
(80,721
)
—

Exercise of stock options

18,100

—

832

—

—

Non-cash
compensation expense

—

—

4,680

—

—

Currency translation adjustment

—

—

—

—

270

Balance at September 8, 2019

40,898,996
$
409
$
75
$
(2,932,195
) $
(3,938
)

~~The following table summarizes changes in stockholders’ deficit for the three fiscal quarters of 2019.~~

Accumulated

Additional

Other

Common Stock

Paid-in

Retained

Comprehensive

Shares

Amount

Capital

Deficit

Loss

Balance at December 30, 2018

40,977,561
$
410
$
569
$
(3,036,471
) $
(4,429
)
Net income

—

—

—

271,382

—

Dividends declared on common stock and equivalents ($1.95 per share)

—

—

—

(80,023
)
—

Issuance and cancellation of stock awards, net

50,640
—

—

—

—

Tax payments for restricted stock upon vesting

(22,044
)
—

(5,820
)
—

—

Purchases of common stock

(430,182
)
(4
)
(18,062
)
(87,083
)
—

Exercise of stock options

323,021

3

10,119

—

—

Non-cash
compensation expense

—

—

13,269

—

—

Currency translation adjustment

—

—

—

—

491

Balance at September 8, 2019

40,898,996
$
409
$
75
$
(2,932,195
) $
(3,938
)


													Accumulated
							Additional						Other
	Common Stock						Paid-in			Retained			Comprehensive
	Shares			Amount			Capital			Deficit			Loss
Balance at December 29, 2019		38,934,009		$	389		$	243		$	(3,412,649	)	$	(3,742	)
Net income		—			—			—			121,602			—
Dividends declared on common stock and equivalents ($0.78 per share)		—			—			—			(30,442	)		—
Issuance and cancellation of stock awards, net		1,645			—			—			—			—
Tax payments for restricted stock upon vesting		(5,929	)		—			(1,796	)		—			—
Purchases of common stock		(271,064	)		(3	)		(988	)		(78,599	)		—
Exercise of stock options		380,938			4			10,101			—			—
Non-cash compensation expense		—			—			4,914			—			—
Adoption of ASC 326 (Note 9 )		—			—			—			1,102			—
Currency translation adjustment		—			—			—			—			(2,326	)

Balance at March 22, 2020		39,039,599		$	390		$	12,474		$	(3,398,986	)	$	(6,068	)

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

~~October 4, 2019~~

, April 21, 2020, the Company’s Board of Directors declared a ~~$0.65~~$0.78 per share quarterly dividend on its outstanding common stock for shareholders of record as of

~~December 13, 2019~~

June 15, 2020 to be paid on June 30, 2020.

~~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

Maturities of lease liabilities as of ~~September 8, 2019~~March 22, 2020 were as follows:


	Operating			Finance			Operating			Finance
	Leases			Leases			Leases			Leases
2019	$	12,212		$	791
2020		40,157			2,417		$	33,683		$	2,467
2021		37,979			2,435			40,956			2,775
2022		34,819			2,453			38,068			2,792
2023		32,245			2,477			32,776			2,815
2024								31,228			2,839
Thereafter		116,664			23,810			96,570			25,493

Total future minimum rental commitments		274,076			34,383			273,281			39,181
Less – amounts representing interest		(39,745	)		(17,776	)		(37,063	)		(20,175	)

Total lease liabilities	$	234,331		$	16,607		$	236,218		$	19,006

~~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 ~~September 8, 2019,~~March 22, 2020, the Company has additional leases for two supply chain centers and certain supply chain tractors and trailers that had not yet commenced with estimated future minimum rental commitments of approximately ~~$50.6~~$68.6 million. These leases are expected to commence in ~~2019~~2020 with lease terms of up to 1521 years.

One of the supply chain center leases commenced in the second quarter of 2020. These undiscounted amounts are not included in the ~~tables~~table above.

The Company has guaranteed lease payments related to certain franchisees’ lease arrangements. The maximum amount of potential future payments under these guarantees ~~is $17.9 million and $2.4~~was $15.8 million as of ~~September 8, 2019 and December 30, 2018, respectively.~~March 22, 2020. 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 a $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~~

~~an appeal~~

9. Supplemental Disclosures of Cash Flow Information

The Company had

non-cash

investing activities related to accruals for capital expenditures of ~~$4.7~~$3.4 million at ~~September 8, 2019~~March 22, 2020 and ~~$3.8~~$6.9 million at December ~~30, 2018.~~

~~Table of Contents~~

29, 2019.

~~10. Sale of Company-owned Stores~~9

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 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~~ASU

~~2016-02,~~2016-13,

~~Leases~~Financial Instruments – Credit Losses (Topic ~~842)~~326)

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

~~2016-02,~~2016-13,

~~Leases~~Financial Instruments – Credit Losses (Topic ~~842)~~326): Measurement of Credit Losses on Financial Instruments

~~which~~. ASC 326 requires companies to measure credit losses utilizing a methodology that reflects expected credit losses and requires a ~~lessee~~consideration of a broader range of reasonable and supportable information to ~~recognize assets and liabilities on the balance sheet for leases with lease terms greater than 12 months. On December 31, 2018, the~~inform credit loss estimates. The Company adopted ~~ASC 842~~this standard as of December 30, 2019, the first day of its 2020 fiscal year, using the modified retrospective ~~method.~~approach and it did not have a material impact on its condensed consolidated financial statements.

The effects of the changes made to the Company’s condensed consolidated balance sheet as of December 30, 2019 for the adoption of ASC 326 were as follows:


	Balance at December 29, 2019			Adjustments Due to ASC 326			Balance at December 30, 2019
Assets
Current assets:
Accounts receivable, net	$	210,260		$	1,435		$	211,695
Prepaid expenses and other		19,129			4			19,133
Other assets:
Other assets		12,521			27			12,548
Deferred income taxes		10,073			(364	)		9,709
Liabilities and stockholders’ deficit
Stockholders’ deficit:
Retained deficit		(3,412,649	)		1,102			(3,411,547	)

Table of Contents

The Company recognized the cumulative effect of initially applying ASC 326 as an adjustment to the opening balance of retained deficit. 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~~that period. An adjustment to beginning retained deficit and a ~~material impact on the Company’s assets and liabilities due~~corresponding adjustment to the ~~recognition~~allowance for doubtful accounts and notes receivable 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

~~On December 31, 2018, the Company recorded an adjustment of $226.8~~approximately $1.5 million ~~for operating lease~~

~~right-of-use~~

~~assets and liabilities. The operating lease~~

~~right-of-use~~

~~assets~~was recorded on the date of adoption, ~~were~~representing the remeasurement of these accounts to Company’s estimate for current expected credit losses. The adjustment to beginning retained deficit was also net of a ~~$7.9~~$0.4 million ~~reclassification of other accrued liabilities and prepaid expenses representing previously~~adjustment to 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 was leased to the Company 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~~

~~ASU 2018-15, Intangibles – Goodwill and Other – Internal-Use Software (Subtopic 350-40)~~

~~In August 2018, the FASB issued ASU 2018-15,~~

~~Intangibles – Goodwill and Other – Internal-Use Software (Subtopic 350-40): Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That Is a Service Contract~~

(“ASU 2018-15”), which aligns the accounting for implementation costs of a cloud computing arrangement that is a service contract with the guidance on capitalizing costs associated with developing or obtaining internal-use software. ASU 2018-15 also requires companies to amortize these implementation costs over the life of the service contract in the same line in the statement of income as the fees associated with the hosting service. ASU 2018-15 is effective for fiscal years beginning after December 15, 2019, including interim periods within those fiscal years. The Company adopted this accounting standard prospectively in the third quarter of 2019, and the adoption of this guidance did not have a material impact on the Company’s condensed consolidated financial statements.taxes.

Accounting Standards Not Yet Adopted

The Company has considered all new accounting standards issued by the FASB. The Company has not yet completed its assessment of the following ~~standards.~~standard.

ASU

~~2016-13,~~

~~Financial Instruments~~ 2019-12, Income Taxes – ~~Credit Losses~~Simplifying the Accounting for Income Taxes (Topic ~~326)~~740)

In ~~June 2016,~~December 2019, the FASB issued

Accounting Standard Update No. 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes (ASU 2019-12)

, which simplifies the accounting for income taxes. ASU

~~2016-13,~~2019-12

~~Financial Instruments – Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments~~

~~(“ASU~~

~~2016-13”).~~

~~ASU~~

~~2016-13~~

requires companies to measure credit losses utilizing a methodology that reflects expected credit losses and requires a consideration of a broader range of reasonable and supportable information to inform credit loss estimates. ASU

~~2016-13~~

is effective for fiscal years beginning after December 15, ~~2019,~~2020, including applicable interim ~~periods within those fiscal years.~~periods. The Company is currently assessing the impact of adopting this standard but does not expect the adoption of this guidance to have a material impact on its consolidated financial statements.

10.

COVID-19

Pandemic

In December 2019, a novel coronavirus disease

(“COVID-19”)

was reported and in January 2020, the World Health Organization (“WHO”) declared it a Public Health Emergency of International Concern. On February 28, 2020, the WHO raised its assessment of the

COVID-19

threat from high to very high at a global level due to the continued increase in the number of cases and affected countries, and on March 11, 2020, the WHO characterized

COVID-19

as a pandemic. While the Company did not incur significant disruptions to its operations during the first quarter of 2020 from COVID-19, it is unable at this time to predict the impact that COVID-19 will have on its business, financial position and operating results in future periods due to numerous uncertainties and is closely monitoring the impact of the pandemic on all aspects of its business.

Table of Contents

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

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

The 2020 and 2019 ~~and 2018 third~~first quarters referenced herein represent the twelve-week periods ended ~~September 8, 2019~~March 22, 2020 and ~~September 9, 2018, respectively. The 2019 and 2018 three fiscal quarters referenced herein represent the~~

~~thirty-six-week~~March 24, 2019.

~~periods ended September 8, 2019 and September 9, 2018, respectively.~~

Overview

Domino’s is the largest pizza company in the world based on global retail sales, with more than ~~16,500~~17,000 locations in over ~~85 markets.~~90 markets around the world. Founded in 1960, our roots are in convenient pizza delivery, while a significant amount of our sales also come from carryout customers. Domino’s generates revenues and earnings by charging royalties and fees to our independent franchisees. The Company also generates revenues and earnings by selling food, equipment and supplies to franchisees primarily in the U.S. and Canada, and by operating a number of our own stores in the U.S. Franchisees profit by selling pizza and other complementary items to their local customers. In our international markets, we generally grant geographical rights to the Domino’s Pizza

brand to master franchisees. These master franchisees are charged with developing their geographical area, and they can profit by

sub-franchising

and selling ingredients and equipment to those

sub-franchisees,

as well as by running pizza stores directly. ~~Everyone~~We believe that everyone in the system can benefit, including the end consumer, who can feed their family Domino’s menu items conveniently and economically.

Our financial results are driven largely by retail sales at our franchise and Company-owned stores. Changes in retail sales are driven by changes in same store sales and store counts. We monitor both of these metrics very closely, as they directly impact our revenues and profits, and we strive to consistently increase both metrics. Retail sales drive royalty payments from franchisees, as well as Company-owned store and supply chain revenues. Retail sales are primarily impacted by the strength of the Domino’s Pizza

brand, the results of our extensive advertising through various media channels, the impact of technological innovation and digital ordering, our ability to execute our strong and proven business model and the overall global economic environment.

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
%


	First Quarter					First Quarter
	of 2020					of 2019
Global retail sales growth (versus prior year period, excluding foreign currency impact)		+5.9	%				+8.5	%
Same store sales growth (1):
U.S. Company-owned stores		+3.9	%				+2.1	%
U.S. franchise stores		+1.5	%				+4.1	%

U.S. stores		+1.6	%				+3.9	%
International stores (excluding foreign currency impact)		+1.5	%				+1.8	%
Store counts (at end of period):
U.S. Company-owned stores		345					392
U.S. franchise stores		5,811					5,511

U.S. stores		6,156					5,903
International stores		10,933					10,211

Total stores (2)		17,089					16,114

Income statement data:
Total revenues	$	873.1		100.0	%	$	836.0		100.0	%
Cost of sales		532.9		61.0	%		513.7		61.4	%
General and administrative		88.5		10.2	%		89.7		10.7	%
U.S. franchise advertising		95.8		11.0	%		89.1		10.7	%

Income from operations		155.8		17.8	%		143.5		17.2	%
Interest expense, net		(38.5	)	(4.4	)%		(34.4	)	(4.1	)%

Income before provision for income taxes		117.3		13.4	%		109.1		13.1	%
(Benefit) provision for income taxes		(4.3	)	(0.5	)%		16.5		2.0	%

Net income	$	121.6		13.9	%	$	92.7		11.1	%

(1)

~~During~~Same store sales growth is calculated by including only sales for a given period from stores that had sales in the ~~second quarter~~comparable weeks of ~~2019, the Company sold 59 U.S. Company-owned stores to certain of its existing U.S. franchisees. The~~both years. International same store sales growth ~~for these stores~~ is ~~reflected~~calculated similarly to U.S. same store sales growth. Changes in ~~U.S. franchise stores~~ international same store sales are reported excluding foreign currency impacts, which reflect changes in international local currency sales.

(2)

Temporary store closures due to

COVID-19

in the ~~third~~first quarter of 2020 are not treated as store closures and ~~three fiscal quarters of 2019.~~affected stores are included in the ending store count.

1614

Table of Contents

During the ~~third~~first quarter ~~and three fiscal quarters~~ of ~~2019,~~2020, we experienced global retail sales ~~growth and positive~~growth. Our 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 ~~has been~~remained positive but was pressured by our current strategy to increase store concentration in certain markets where we ~~compete as well as~~compete. Beginning at the end of the first quarter of 2020 through the date of this filing, while we have seen an increase in U.S. same store sales, the

COVID-19

pandemic has negatively impacted our global retail sales growth and, in our international business, same store sales growth due to temporary store closures and changes in operating procedures and store hours resulting from ~~aggressive competitive activity.~~

actions taken to increase social distancing across the markets in which we operate.

We ~~also~~ continued our global expansion with the opening of ~~214~~69 net new stores in the ~~third~~first quarter of ~~2019, bringing our~~

~~year-to-date~~

~~total to 614. We~~2020. Although we opened ~~174 net~~143 gross new stores internationally, ~~and 40~~we also closed 104 stores, primarily resulting from the closure of our South Africa market, unrelated to

COVID-19,

comprising 71 stores in total. We also opened 30 net new stores in the U.S. during the ~~third~~first quarter of ~~2019.~~2020. Overall, we believe ~~this~~our continued global store growth, along with our ~~strong~~ sales growth, emphasis on technology, operations, and marketing initiatives have combined to strengthen our brand.

Global retail sales, excluding foreign currency impact, which ~~are~~includes total ~~worldwide~~ retail sales at franchise and Company-owned stores worldwide, increased ~~5.8%~~5.9% in the ~~third~~first quarter of ~~2019 and increased 5.2% in the three fiscal quarters of 2019. These increases were~~2020. This increase was 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 ~~$34.8~~$37.1 million, or 4.4%, in the ~~third~~first quarter of ~~2019 and increased $117.7 million, or 5.0%, in the three fiscal quarters of 2019. These increases were~~2020 due primarily to higher supply chain food volumes as well as higher global franchise revenues resulting from 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.growth. 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~~“2019 Store Sale”). These changes in revenues are described in more detail below.

Income from operations increased ~~$10.6~~$12.3 million, or ~~8.0%~~8.6%, in the ~~third~~first quarter of ~~2019 and increased $33.4 million, or 8.5%, in the three fiscal quarters of 2019. These increases were~~2020, primarily driven by higher royalty revenues from U.S. and international franchised stores, as well as higher supply chain margins. A

~~pre-tax~~

~~gain of $5.9 million recognized~~Income from ~~the sale of 12~~operations was negatively impacted by lower Company-owned ~~stores~~store margins and changes in foreign currency exchange rates in the ~~third~~first quarter of ~~2018 partially offset these increases. A $2.4 million~~

~~pre-tax~~2020.

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

Net income increased ~~$2.3~~$29.0 million, or ~~2.7%~~31.2%, in the ~~third~~first quarter of ~~2019 and increased $21.1 million, or 8.4%, in the three fiscal quarters of 2019,~~2020, driven by ~~higher income from operations. These increases in net income were partially offset by a higher effective~~lower tax ~~rate in 2019~~expense resulting primarily from ~~lower~~higher excess tax benefits from equity-based ~~compensation. The~~compensation and higher income from operations, as noted above. This increase in net income ~~in the three fiscal quarters of 2019~~ was ~~also~~ partially offset by higher interest expense resulting from a higher average debt balance ~~and a slightly higher weighted average borrowing rate~~ following our ~~debt~~ recapitalization transaction completed on ~~April 24, 2018~~November 19, 2019 (the ~~“2018~~“2019 Recapitalization”).

Revenues

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

11.5
% $
118.5

15.1
% $
323.0

13.1
% $
358.5

15.3
%
U.S. franchise royalties and fees

97.0

11.8
%
89.4

11.4
%
289.3

11.7
%
266.3

11.3
%
Supply chain

485.1

59.1
%
445.1

56.6
%
1,424.8

57.8
%
1,326.1

56.4
%
International franchise royalties and fees

54.6

6.7
%
50.4

6.4
%
164.1

6.6
%
154.2

6.6
%
U.S. franchise advertising

89.5

10.9
%
82.5

10.5
%
267.1

10.8
%
245.6

10.4
%

Total revenues
$
820.8

100.0
% $
786.0

100.0
% $
2,468.4

100.0
% $
2,350.7

100.0
%


	First Quarter				First Quarter
	of 2020				of 2019
U.S. Company-owned stores	$	102.3	11.7	%	$	123.5	14.8	%
U.S. franchise royalties and fees		104.7	12.0	%		96.7	11.6	%
Supply chain		512.7	58.7	%		472.1	56.4	%
International franchise royalties and fees		57.5	6.6	%		54.6	6.5	%
U.S. franchise advertising		95.8	11.0	%		89.1	10.7	%

Total revenues	$	873.1	100.0	%	$	836.0	100.0	%

Revenues primarily consist of retail sales from our Company-owned stores, royalties, advertising contributions and fees from our U.S. franchised stores, royalties and fees from our international franchised stores and sales of food, equipment and supplies from our supply chain centers to substantially all of our U.S. franchised stores and certain international franchised stores. Company-owned store and franchised store ~~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

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
%


	First Quarter				First Quarter
	of 2020				of 2019
U.S. Company-owned stores	$	102.3	33.8	%	$	123.5	39.9	%
U.S. franchise royalties and fees		104.7	34.6	%		96.7	31.3	%
U.S. franchise advertising		95.8	31.6	%		89.1	28.8	%

U.S. stores	$	302.9	100.0	%	$	309.3	100.0	%

~~Table of Contents~~

U.S. Company-Owned Stores

Revenues from U.S. Company-owned store operations decreased ~~$23.9~~$21.2 million, or ~~20.2%~~17.1%, in the ~~third~~first quarter of ~~2019 and decreased $35.5 million, or 9.9%, in the three fiscal quarters of 2019~~2020 due primarily to the ~~Second Quarter~~2019 Store Sale. ~~These decreases~~This decrease in revenues ~~were~~was partially offset by higher same store sales. Company-owned same store sales increased ~~1.7%~~3.9% in the ~~third~~first quarter of ~~2019~~2020 and ~~increased 2.3%~~2.1% in the ~~three fiscal quarters~~first quarter of 2019. ~~Company-owned same store sales increased 4.9% in the third quarter~~

Table of ~~2018 and increased 5.4% in the three fiscal quarters of 2018.~~Contents

U.S. Franchise Royalties and Fees

Revenues from U.S. franchise royalties and fees increased ~~$7.6~~$8.0 million, or ~~8.5%~~8.3%, in the ~~third~~first quarter of ~~2019 and increased $23.0 million, or 8.6%, in the three fiscal quarters of 2019~~2020 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~~2019 Store Sale. U.S. franchise same store sales increased ~~2.5%~~1.5% in the ~~third~~first quarter of ~~2019~~2020 and ~~increased 3.2%~~4.1% in the ~~three fiscal quarters~~first quarter of 2019. U.S. franchise ~~same store sales increased 6.4%~~royalties and fees further benefited from an increase in revenues from fees paid by franchisees for the ~~third quarter~~use of ~~2018 and increased 7.3% in the three fiscal quarters of 2018.~~our technology platforms.

U.S. Franchise Advertising

Revenues from U.S. franchise advertising increased ~~$7.0~~$6.7 million, or ~~8.5%~~7.5%, in the ~~third~~first quarter of ~~2019 and increased $21.5 million, or 8.8%, in the three fiscal quarters of 2019~~2020 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~~2019 Store Sale.

~~Supply Chain Revenues~~

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

Revenues from supply chain operations are primarily comprised of sales of food, equipment and supplies from our supply chain centers to substantially all of our U.S. ~~supply~~franchised stores and certain international franchised stores. Supply chain revenues increased ~~$36.3~~$40.6 million, or ~~9.0%~~8.6%, in the ~~third~~first quarter of ~~2019 and increased $91.0 million, or 7.6%, in the three fiscal quarters of 2019. These increases were~~2020. This increase was 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,~~year and an increase in market basket ~~pricing.~~pricing to stores. Our market basket pricing to stores increased ~~2.8% in~~2.9% during the ~~third~~first quarter of ~~2019 and increased 2.3% in the three fiscal quarters of 2019,~~2020, which resulted in an estimated $15.9 million increase in ~~U.S.~~ supply chain ~~revenues of $9.8 million in the third quarter of 2019 and $21.6 million in the three fiscal quarters of 2019.~~

~~International Supply Chain~~

Revenues from international supply chain operations increased $3.7 million, or 9.0%, in the third quarter of 2019 and increased $7.7 million, or 6.2%, in the 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 $0.2 million in the third quarter of 2019 and $4.1 million in the three fiscal quarters of 2019.

revenue.

International Franchise Royalties and Fee Revenues

Revenues from international franchise royalties and fees increased ~~$4.2~~$2.9 million, or ~~8.3%~~5.3%, in the ~~third~~first quarter of ~~2019 and increased $9.9 million, or 6.5%, in the three fiscal quarters of 2019. These increases were~~2020. This increase was 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~~The negative impact of changes in foreign currency exchange rates of ~~$1.5~~$1.4 million partially offset the increase in revenues in the ~~third~~first quarter of ~~2019 and $8.1 million in the three fiscal quarters of 2019. Excluding the impact of changes in foreign currency exchange rates, international~~2020. International franchise same store sales increased ~~1.7%~~1.5% in the ~~third~~first quarter of ~~2019~~2020 and increased ~~2.0%~~1.8% in the ~~three fiscal quarters~~first quarter of 2019. ~~Excluding the impact of changes in foreign currency exchange rates, international franchise same store sales increased 3.3% in the third quarter of 2018 and 4.0% in the three fiscal quarters of 2018.~~

~~Table of Contents~~

Cost of Sales / Operating Margin

Third Quarter

Third Quarter

Three Fiscal

Three Fiscal

of 2019

of 2018

Quarters of 2019

Quarters of 2018

Consolidated revenues
$
820.8

100.0
% $
786.0

100.0
% $
2,468.4

100.0
% $
2,350.7

100.0
%
Consolidated cost of sales

504.6

61.5
%
490.7

62.4
%
1,513.2

61.3
%
1,462.0

62.2
%

Consolidated operating margin
$
316.3

38.5
% $
295.3

37.6
% $
955.2

38.7
% $
888.7

37.8
%


	First Quarter				First Quarter
	of 2020				of 2019
Consolidated revenues	$	873.1	100.0	%	$	836.0	100.0	%
Consolidated cost of sales		532.9	61.0	%		513.7	61.4	%

Consolidated operating margin	$	340.2	39.0	%	$	322.3	38.6	%

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 ~~$21.0~~$17.9 million, or ~~7.1%~~5.5%, in the ~~third~~first quarter of ~~2019 and increased $66.5 million, or 7.5%, in the three fiscal quarters of 2019~~2020 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 ~~0.9~~0.4 percentage points in the ~~third~~first quarter of ~~2019 and increased 0.9~~2020. Company-owned store operating margin decreased 0.2 percentage points in the ~~three fiscal quarters of 2019. Company-owned store operating margin increased 2.8 percentage points in the third~~first quarter of ~~2019~~2020 and ~~increased 0.9 percentage points in the three fiscal quarters of 2019. Supply~~supply chain operating margin increased 0.1 percentage points in the ~~third~~first quarter of ~~2019 and increased 0.5 percentage points in the three fiscal quarters of 2019.~~2020. These changes in ~~operating~~ margin are more fully discussed below.

U.S. Company-Owned Stores Operating Margin

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
%


	First Quarter				First Quarter
	of 2020				of 2019
Revenues	$	102.3	100.0	%	$	123.5	100.0	%
Cost of sales		79.4	77.6	%		95.5	77.4	%

Store operating margin	$	22.9	22.4	%	$	27.9	22.6	%

The U.S. Company-owned store operating margin (which does not include certain store-level costs such as royalties and advertising) decreased ~~$2.5~~$5.0 million, or ~~10.1%~~17.8%, in the ~~third~~first quarter of ~~2019 and decreased $5.0 million, or 6.2%, in the three fiscal quarters of 2019~~2020 due primarily to the ~~Second Quarter~~2019 Store Sale. ~~Operating margin in both the third quarter and the three fiscal quarters~~

Table of ~~2019 was also negatively impacted by higher labor costs, partially offset by higher same store sales.~~ Contents

As a percentage of store revenues, the ~~U.S. Company-owned~~ store operating margin ~~increased 2.8~~decreased 0.2 percentage points in the ~~third~~first quarter of ~~2019 and increased 0.9 percentage points in the three fiscal quarters of 2019. These changes in operating margin~~2020, as ~~a percentage of revenues are~~ discussed in more detail below.

Food costs ~~decreased 0.3~~increased 0.7 percentage points to ~~27.4%~~27.8% in the ~~third~~first quarter of ~~2019 and decreased 0.4 percentage points to 27.1% in the three fiscal quarters of 2019~~2020 due primarily to ~~the leveraging of higher same store sales. These decreases were partially offset by~~ higher food prices.

Labor costs decreased ~~2.2~~1.8 percentage points to ~~28.1%~~29.0% in the ~~third~~first quarter of ~~2019 and decreased 0.4 percentage points to 29.6% in the three fiscal quarters of 2019.~~2020. The ~~Second Quarter~~2019 Store Sale contributed to the reduction in labor costs as a percentage of store revenues ~~in both the third quarter and three fiscal quarters of 2019~~ due to the high labor rates in the market in which the sold stores operated. The reduction in labor costs as a percentage of store revenues ~~in the three fiscal quarters of 2019~~ was partially offset by an increase in average labor rates in our remaining Company-owned store ~~markets.~~markets, including additional bonus pay resulting from the

COVID-19

pandemic.

Insurance costs increased 0.5 percentage points to 3.4% in the first quarter of 2020 due primarily to unfavorable claims experience.

Delivery costs increased 0.4 percentage points to 3.6% in the first quarter of 2020 due primarily to a higher average

per-mile

reimbursement rate for our delivery drivers.

Occupancy costs increased 0.4 percentage points to 8.0% in the first quarter of 2020 due primarily to higher depreciation costs.

Supply Chain Operating Margin

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
%


	First Quarter				First Quarter
	of 2020				of 2019
Revenues	$	512.7	100.0	%	$	472.1	100.0	%
Cost of sales		453.6	88.5	%		418.1	88.6	%

Supply chain operating margin	$	59.1	11.5	%	$	54.0	11.4	%

The supply chain operating margin increased ~~$4.8~~$5.1 million, or ~~10.0%~~9.6%, in the ~~third~~first quarter of ~~2019 and increased $17.0 million, or 12.0%, in the three fiscal quarters of 2019,~~2020, primarily driven by higher volumes from increased store orders. As a percentage of supply chain revenues, the supply chain operating margin increased 0.1 percentage points in the ~~third~~first quarter of ~~2019. As a percentage of supply chain revenues, the supply chain operating margin increased 0.5 percentage points in the three fiscal quarters of 2019~~2020 due primarily to ~~procurement savings,~~lower labor, delivery and insurance costs, offset in part by higher ~~labor~~food costs.

~~Table of Contents~~

General and Administrative Expenses

General and administrative expenses ~~increased $3.3~~decreased $1.2 million, or ~~4.2%~~1.3%, in the ~~third~~first quarter of ~~2019~~2020, driven by lower performance-based compensation expense and ~~increased $11.5 million, or 4.6%, in the three fiscal quarters of 2019. A~~

~~pre-tax~~

gain of $5.9 million recognized from the sale of 12 Company-owned stores in the third quarter of 2018 resulted in an increase in general and administrative expenses as compared to the prior year. Lowerlower advertising expenses, ~~resulting~~partially offset by higher health insurance costs. The decrease in advertising expenses resulted primarily from the ~~Second Quarter~~2019 Store ~~Sale, partially offset these increases. A $2.4 million~~

~~pre-tax~~Sale.

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

U.S. Franchise Advertising Expenses

U.S. franchise advertising expenses increased ~~$7.0~~$6.7 million, or ~~8.5%~~7.5%, in the ~~third~~first quarter of ~~2019 and increased $21.5 million, or 8.8%,~~2020, consistent with the increase in ~~the three fiscal quarters of 2019 due to higher~~ U.S. franchise advertising ~~revenues.~~revenue. 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 $0.4~~increased $4.1 million, or ~~1.2%~~12.2%, in the ~~third~~first quarter of ~~2019 and increased $2.2 million, or 2.2%, in the three fiscal quarters of 2019. The increase in the three fiscal quarters of 2019 was~~2020 driven primarily by a higher ~~weighted~~ average debt ~~balance, primarily due to higher average borrowings~~balances 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 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 ~~was 4.1%~~decreased to 4.0% in ~~both~~ the ~~third~~first quarter ~~and the three fiscal quarters~~ of ~~2019 and was~~2020, from 4.1% in the ~~third~~first quarter of ~~2018 and 4.0%~~2019, resulting from the lower interest rates on the debt outstanding in 2020 following the ~~three fiscal quarters of 2018.~~2019 Recapitalization as compared to the same period in 2019.

(Benefit) Provision for Income Taxes

~~Provision for income taxes increased $8.7~~Income tax expense decreased $20.8 million, or ~~57.5%~~126.1%, in the ~~third~~first quarter of 2020 due primarily to higher excess tax benefits on equity-based compensation, which are recorded as a reduction to the income tax provision, partially offset by higher

pre-tax

income. The Company recognized $30.4 million in excess tax benefits in the first quarter of 2020 as compared to $8.7 million in the first quarter of 2019, ~~and increased $10.2 million, or 23.3%,~~resulting from a significant increase in stock options exercised in the ~~three fiscal quarters~~first quarter of 2020 as compared to the first quarter of 2019. The effective tax rate ~~increased~~decreased to ~~21.7% in~~negative 3.7% during the ~~third~~first quarter of ~~2019 and increased to 16.6% in the three fiscal quarters of 2019~~2020 as compared to ~~15.3%~~15.1% in the ~~third~~first quarter of ~~2018~~2019.

Table of Contents

COVID-19

Impact

As of April 21, 2020, nearly all of our U.S. stores remain open, with dining rooms closed and ~~14.9%~~stores deploying contactless delivery and carryout solutions. Based on information reported to us by our master franchisees, we estimate that as of April 21, 2020, there are approximately 1,750 international stores that are temporarily closed.

Subsequent to the end of the first quarter, we borrowed $158.0 million under our outstanding variable funding notes as a precautionary measure due to the market uncertainty arising from

COVID-19.

These borrowings, along with our current unrestricted cash as of the end of the first quarter, provided us with approximately $358.8 million in cash on hand to provide enhanced financial flexibility.

Beginning at the ~~three fiscal quarters~~end of ~~2018. Higher~~

~~pre-tax~~

~~income~~the first quarter of 2020, we have begun making significant investments in our team members as a result of this pandemic, including through enhanced sick pay policies and ~~lower excess tax benefits from equity-based compensation contributed~~bonuses for our hourly corporate store and supply chain team members. While it is not possible at this time to ~~higher tax expense in both~~estimate the ~~third quarter~~ full impact that

COVID-19

could have on our business, the continued spread of

COVID-19

and the ~~three fiscal quarters~~measures taken by the governments of ~~2019.~~

countries affected could disrupt our continuing operations and supply chain and, as a result, could adversely impact our business, financial condition or results of operations.

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 ~~September 8, 2019,~~March 22, 2020, we had working capital of ~~$2.3~~$149.7 million, excluding restricted cash and cash equivalents of ~~$177.3~~$189.4 million, advertising fund assets, restricted, of ~~$109.5~~$110.0 million and advertising fund liabilities of ~~$104.9~~$106.8 million. Working capital includes total unrestricted cash and cash equivalents of ~~$66.7~~$200.8 million. Subsequent to the end of the first quarter, we borrowed $158.0 million under our outstanding variable funding notes as a precautionary measure due to the market uncertainty arising from

COVID-19.

During the ~~third~~first quarter ~~and three fiscal quarters~~ of ~~2019,~~2020, we experienced increases in both U.S. and international same store sales versus the comparable ~~periods~~period in the prior year. Additionally, our international and U.S. businesses grew store counts in the ~~third~~first quarter ~~and the three fiscal quarters~~ of ~~2019.~~2020. 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 ~~September 8, 2019.~~March 22, 2020.

~~Table of Contents~~

Based upon ~~our~~the 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.

Restricted Cash

As of ~~September 8, 2019,~~March 22, 2020, we had approximately ~~$140.9~~$140.1 million of restricted cash held for future principal and interest payments and other working capital requirements of our asset-backed securitization structure, ~~$36.2~~$48.4 million of restricted cash held in a three-month interest reserve as required by the related debt agreements and ~~$0.2~~$0.9 million of other restricted cash for a total of ~~$177.3~~$189.4 million of restricted cash and cash equivalents. As of ~~September 8, 2019,~~March 22, 2020, we also held ~~$68.7~~$88.2 million of advertising fund restricted cash and cash equivalents, which can only be used for activities that promote the Domino’s ~~Pizza~~ brand.

Table of Contents

Long-Term Debt

As of ~~September 8, 2019,~~March 22, 2020, we had approximately ~~$3.44~~$4.10 billion of long-term debt, of which ~~$35.9~~$43.4 million was classified as a current liability. Our fixed and floating rate notes from the recapitalizations we completed in 2019, 2018, 2017 and 2015 have original scheduled principal payments of ~~$8.8~~$31.5 million in the remainder of ~~2019, $35.3~~2020, $42.0 million in ~~each of 2020 and~~ 2021, ~~$888.0~~$897.0 million in 2022, ~~$26.3~~$33.0 million in each of 2023 and 2024, ~~$1.14~~$1.15 billion in 2025, ~~$14.0~~$20.8 million in 2026, ~~and $1.27~~$1.28 billion in ~~2027.~~2027, $6.8 million in 2028 and $614.3 million in 2029. As of ~~September 8, 2019,~~March 22, 2020, we had no outstanding borrowings under our variable funding notes and ~~$126.9~~$158.6 million available for borrowing, net of letters of credit issued of ~~$48.1~~$41.4 million. The letters of credit are primarily related to our casualty insurance programs and supply chain center leases. As discussed above, subsequent to the first quarter of 2020, we borrowed $158.0 million of the remaining availability under our variable funding notes. 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 repurchases.

Share Repurchase Programs

Our share repurchase programs have historically been funded by excess operating cash ~~flows. On February 14, 2018,~~flows, excess proceeds from our ~~Board of Directors authorized a share repurchase program to repurchase up to $750.0 million~~recapitalization transactions and borrowings under our variable funding notes.

During the first week of the ~~Company’s common stock. During the third~~first quarter of ~~2019,~~2020, we repurchased and retired ~~384,338~~271,064 shares of our common stock under our Board of Directors-approved share repurchase program for a total of approximately $93.7 million, or an average price of $243.79 per share. During the three fiscal quarters of 2019, we repurchased and retired 430,182 shares of our common stock under our Board of Directors-approved share repurchase program for a total of approximately $105.1 million, or an average price of $244.43 per share. As of September 8, 2019, we had a total remaining authorized amount for share repurchases of approximately $53.6$79.6 million.

During the third quarter of 2018, we repurchased and retired 397,490 shares of our common stock under our Board of Directors-approved share repurchase program for a total of approximately $109.1 million, or an average price of $274.53 per share. During the three fiscal quarters of 2018, we repurchased and retired 1,751,054 shares of our common stock under our Board of Directors-approved share repurchase program for a total of approximately $429.2 million, or an average price of $245.10 per share.

~~Subsequent to the third quarter, on October 4, 2019, the~~ 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~~on October 4, 2019. As of March 22, 2020, the Company had a total remaining ~~availability~~authorized amount for share repurchases of approximately ~~$53.6 million under~~$326.6 million.

During the ~~Company’s existing $750.0 million share repurchase program. Authorization~~first quarter of 2019, we repurchased and retired 33,549 shares for ~~the repurchase program may be modified, suspended, or discontinued at any time.~~approximately $8.1 million.

Dividends

On ~~June 28, 2019, the Company paid a $0.65 dividend to its shareholders of record as of June 14, 2019. During the third quarter of 2019, on July 10, 2019,~~February 19, 2020, the Company’s Board of Directors declared a ~~$0.65~~$0.78 per share quarterly dividend on its outstanding common stock for shareholders of record as of ~~September~~March 13, ~~2019,~~2020 which was paid ~~subsequent to the third quarter~~ on ~~September~~March 30, ~~2019.~~

2020. We had approximately $31.0 million accrued for common stock dividends at March 22, 2020.

Subsequent to the ~~third~~first quarter, on ~~October 4, 2019,~~April 21, 2020, the Company’s Board of Directors declared a ~~$0.65~~$0.78 per share quarterly dividend on its outstanding common stock for shareholders of record as of ~~December 13, 2019~~June 15, 2020 to be paid on ~~December 27, 2019.~~June 30, 2020.

~~Table of Contents~~

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

(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


(In millions)	First Quarter of 2020			First Quarter of 2019
Cash Flows Provided By (Used In)
Net cash provided by operating activities	$	95.4		$	97.0
Net cash used in investing activities		(17.9	)		(12.0	)
Net cash used in financing activities		(82.1	)		(55.1	)
Exchange rate changes		(1.0	)		0.1

Change in cash and cash equivalents, restricted cash and cash equivalents	$	(5.6	)	$	30.0

Operating Activities

Cash provided by operating activities ~~increased $62.1~~decreased $1.6 million in the ~~three fiscal quarters~~first quarter of ~~2019~~2020 due to the ~~positive~~negative impact of changes in operating assets and liabilities of ~~$32.9~~$32.2 million, partially offset by an increase in net income of ~~$21.1~~$29.0 million and higher

non-cash

amounts of ~~$8.2~~$1.6 million. The ~~positive~~negative 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~~in 2020 as well as the timing of collections on accounts receivable in 2020 as compared to ~~2018~~2019. These negative impacts of changes in operating assets and ~~was~~liabilities were partially offset by the ~~negative~~positive impact of changes in advertising fund assets and liabilities, restricted in ~~2019~~2020 as compared to ~~2018~~2019, due primarily to ~~higher spending~~the timing of ~~fund assets.~~advertising spend.

Investing Activities

Cash used in investing activities was ~~$3.1~~$17.9 million in the ~~three fiscal quarters~~first quarter of ~~2019. We used $42.7~~2020, which consisted primarily of $17.5 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 $30.2 million and proceeds from the sale of assets of $9.7 million, which primarily related to the Second Quarter Store Sale.

Cash used in investing activities was ~~$65.4~~$12.0 million in the ~~three fiscal quarters~~first quarter of ~~2018,~~2019, which consisted primarily of ~~$65.1~~$12.2 million of capital expenditures (driven primarily by investments in ~~supply chain centers,~~ technological initiatives and ~~U.S. Company-owned stores) and purchases~~supply chain centers).

Table of ~~restricted advertising fund investments of $50.2 million. These uses of cash were partially offset by maturities of restricted advertising fund investments of $44.0 million.~~Contents

Financing Activities

Cash used in financing activities was ~~$246.3~~$82.1 million in the ~~three fiscal quarters~~first quarter of ~~2019,~~2020, primarily related to ~~purchases~~the repurchase of approximately $79.6 million in common stock ~~of $105.1 million~~ under our Board of Directors-approved share repurchase program in the first week of the quarter, repayments of long-term debt of ~~$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 $53.6~~$10.8 million and tax payments for restricted stock upon vesting of ~~$5.8~~$1.8 million. These uses of cash were partially offset by proceeds from the exercise of stock options of $10.1 million.

Cash used in financing activities was ~~$172.1~~$55.1 million in the ~~three fiscal quarters~~first quarter 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~~2019, primarily related to repayments of long-term debt of ~~$595.1~~$49.0 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~~$40.0 million related to the repayment of ~~the~~ borrowings under our variable funding notes)~~, purchases~~ and the repurchase of approximately $8.1 million in common stock under our Board of $429.2 million, dividend payments to our shareholders of $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 $6.8 million in tax payments for restricted stock upon vesting.Directors-approved share repurchase program.

~~Table of Contents~~

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 under the section headed “Risk Factors” in this filing and in our other filings with the Securities and Exchange Commission, including under the section headed “Risk Factors” in our ~~Annual Report on~~2019 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;~~industry, including the food service and food delivery markets; our ability to manage difficulties associated with or related to the

COVID-19

pandemic and the effects of

COVID-19

on our business and supply chain; 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; the impact of new or improved technologies and alternative methods of delivery on consumer behavior; our ability to maintain good relationships with ~~our~~and attract new franchisees, and franchisees’ ability to profitably manage their ~~ongoing level of profitability;~~operations without negatively impacting our brand’s reputation; our ability to successfully implement cost-saving strategies; our ability and that of our franchisees to successfully operate in the current and future credit environment; changes in the level of consumer spending given general economic conditions, including interest rates, energy prices and consumer confidence; our ability and that of our franchisees to open new restaurants and keep existing restaurants in operation; changes in operating expenses resulting from changes in prices of food (particularly cheese), fuel and other commodity costs, labor, utilities, insurance, employee benefits and other operating costs; the impact that widespread illness, health epidemics or general health concerns, severe weather conditions and natural disasters may have on our business and the economies of the countries where we operate; changes in foreign currency exchange rates; our ability to retain or replace our executive officers and other key members of management and our ability to adequately staff our stores and supply chain centers with qualified personnel; our ability to find and/or retain suitable real estate for our stores and supply chain centers; changes in government legislation and regulations, including changes in laws and regulations regarding information privacy, payment methods consumer protection and ~~consumer protection;~~social media; adverse legal judgments or settlements; food-borne illness or contamination of products; data breaches, power loss, technological failures, user error or other cyber ~~risks;~~risks threatening us or our franchisees; the effect of war, terrorism, catastrophic events or ~~catastrophic events;~~climate change; our ability to pay dividends and repurchase shares; changes in consumer preferences, spending and traffic patterns and demographic trends; actions by activist investors; changes in accounting policies; and adequacy of our insurance coverage. In light of these risks, uncertainties and assumptions, the forward-looking events discussed in this filing might not occur. All forward-looking statements speak only as of the date of this filing and should be evaluated with an understanding of their inherent uncertainty. Except as required under federal securities laws and the rules and regulations of the Securities and Exchange Commission, or other applicable law, we will not undertake, and specifically disclaim, any obligation to publicly update or revise any forward-looking statements to reflect events or circumstances arising after the date of this filing, whether as a result of new information, future events or otherwise. You are cautioned not to place undue reliance on the forward-looking statements included in this filing or that may be made elsewhere from time to time by, or on behalf of, us. All forward-looking statements attributable to us are expressly qualified by these cautionary statements.

Table of Contents

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 ~~September 8, 2019,~~March 22, 2020, we are exposed to interest rate risk on borrowings under our floating rate notes and variable funding notes. As of ~~September 8, 2019,~~March 22, 2020, we had no outstanding borrowings under our variable funding notes. Subsequent to the first quarter of 2020, we borrowed $158.0 million of the remaining availability 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 ~~6.7% of our total revenues in the third quarter of 2019, 6.4% of our total revenues in the third quarter of 2018 and~~ 6.6% of our total revenues in the ~~three fiscal quarters~~first quarter of ~~2019~~2020 and ~~2018~~approximately 6.5% of our total revenues in the first quarter of 2019 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 ~~$14.4~~$5.1 million in the ~~three fiscal quarters~~first quarter of ~~2019.~~

2020.

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 ~~September 8, 2019,~~March 22, 2020, there were no changes in the Company’s internal 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.

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,~~

onOn 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 a $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 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.

~~There~~Except as set forth below, there have been no material changes ~~in the~~with respect to those risk factors previously disclosed in Item 1A “Risk Factors” in Part I of our ~~2018~~2019 Form

10-K.

Our operations and results could be adversely affected by the recent outbreak of the disease caused by the novel coronavirus

(COVID-19).

The recent outbreak of disease caused by the novel coronavirus

(COVID-19),

which has been declared a pandemic by the World Health Organization, has spread across the globe and is impacting worldwide economic activity. A public health pandemic such as

COVID-19

poses the risk that we and/or our employees, franchisees, supply chain centers, suppliers, customers and other partners may be, or may continue to be, prevented from conducting business activities for an indefinite period of time, including due to shutdowns, travel restrictions, social distancing requirements, stay at home orders and advisories and other restrictions that have been or may be suggested or mandated by governmental authorities, or due to the impact of the disease itself on the workforce of those businesses. In addition,

COVID-19

may impact the willingness of customers to purchase food prepared outside of the home. The

COVID-19

pandemic may also have the effect of heightening many of the other risks described in the ‘‘Risk Factors’’ section of our 2019 Form

10-K,

including but not limited to those relating to our growth strategy, our supply chain and increased food and labor costs, disruption in operations, loss of key employees, our indebtedness, general economic conditions and our international operations.

In response to governmental requirements, we and our franchisees have, among other measures, temporarily closed certain of our stores, modified certain stores’ hours and closed locations to

in-store

dining, and continue to monitor additional developments. We have also made additional operating changes to respond to changes in consumer behavior resulting from

COVID-19.

While it is not possible at this time to estimate the impact that

COVID-19

could have on our business, the continued spread of the virus and the measures taken by governments or by us in response have disrupted our operations and could disrupt our supply chain, including our access to face coverings and gloves for use in our operations, which could adversely impact our business, financial condition and results of operations. The

COVID-19

pandemic and mitigation measures have also had an adverse impact on global economic conditions, which could have an adverse effect on our business and financial condition. The Company’s sales and operating results may be affected by uncertain or changing economic and market conditions arising in connection with and in response to the

COVID-19

pandemic, including inflation, deflation, prolonged weak consumer demand, political instability or other changes. The significance of the operational and financial impact to the Company will depend on how long and widespread the disruptions caused by

COVID-19,

and the corresponding response to contain the virus and treat those affected by it, prove to be.

Table of Contents

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 #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


							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 #1 (December 30, 2019 to January 26, 2020)		272,092	$	293.62		271,064	$	326,552
Period #2 (January 27, 2020 to February 23, 2020)		2,093		272.41		—		326,552
Period #3 (February 24, 2020 to March 22, 2020)		2,763		342.55		—		326,552

Total		276,948	$	293.95		271,064	$	326,552

(1)	~~5,997~~5,884 shares in the ~~third~~first quarter of ~~2019~~2020 were purchased as part of the Company’s employee stock payroll deduction ~~plan~~plan. During the first quarter, the shares were purchased at an average price of ~~$245.21.~~$309.02.

(2)

As ~~previously disclosed, on February 14, 2018,~~of March 22, 2020, the ~~Company’s~~Company had a Board of ~~Directors authorized a $750.0 million~~Directors-approved share repurchase program ~~which has no expiration date. As of September 8, 2019, the Company had approximately $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~~our common stock, of which ~~has no expiration date. This repurchase program replaces the remaining availability~~$326.6 million remained available for future purchases of ~~approximately $53.6 million under the Company’s existing $750.0 million share repurchase program.~~our common stock. Authorization for the repurchase program may be modified, suspended, or discontinued at any time. The repurchase of shares in any particular period and the actual amount of such purchases remain at the discretion of the Board of Directors, and no assurance can be given that shares will be repurchased in the future.

Item 3. Defaults Upon Senior Securities.

None.

Item 4. Mine Safety Disclosures.

Not applicable.

Item 5. Other Information.

None.

~~Table of Contents~~

Item 6. Exhibits.


Exhibit Number		Description

	10.1	Third Addendum to Amended and Restated Employment Agreement dated as of January 30, 2020 by and among Domino’s Pizza, Inc., Domino’s, Inc., Domino’s Pizza LLC and David A. Brandon.

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

	101.SCH	Inline XBRL Taxonomy Extension Schema Document.

	101.CAL	Inline XBRL Taxonomy Extension Calculation Linkbase Document.

	101.LAB	Inline XBRL Taxonomy Extension Label Linkbase Document.

	101.PRE	Inline XBRL Taxonomy Extension Presentation Linkbase Document.

	101.DEF	Inline XBRL Taxonomy Extension Definition Linkbase Document.

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

2623

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.

2724


	At September 8, 2019								At March 22, 2020
			Fair Value Estimated Using								Fair Value Estimated Using
	Carrying		Level 1		Level 2		Level 3		Carrying		Level 1		Level 2		Level 3
	Amount		Inputs		Inputs		Inputs		Amount		Inputs		Inputs		Inputs
Cash equivalents	$	58,993	$	58,993	$	—	$	—	$	173,317	$	173,317	$	—	$	—
Restricted cash equivalents		104,424		104,424		—		—		106,225		106,225		—		—
Investments in marketable securities		10,851		10,851		—		—		10,989		10,989		—		—
Advertising fund cash equivalents, restricted		57,682		57,682		—		—		78,134		78,134		—		—
Advertising fund investments, restricted		20,000		20,000		—		—


	At December 29, 2019
			Fair Value Estimated Using
	Carrying		Level 1		Level 2		Level 3
	Amount		Inputs		Inputs		Inputs
Cash equivalents	$	180,459	$	180,459	$	—	$	—
Restricted cash equivalents		126,963		126,963		—		—
Investments in marketable securities		11,982		11,982		—		—
Advertising fund cash equivalents, restricted		67,851		67,851		—		—


	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		—		—


	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


	March 22, 2020				December 29, 2019
	Principal Amount		Fair Value		Principal Amount		Fair Value
2015 Ten-Year Fixed Rate Notes	$	772,000	$	711,784	$	774,000	$	804,960
2017 Five-Year Fixed Rate Notes		586,500		549,551		588,000		588,588
2017 Ten-Year Fixed Rate Notes		977,500		825,010		980,000		1,017,240
2017 Five-Year Floating Rate Notes		293,250		251,315		294,000		294,000
2018 7.5-Year Fixed Rate Notes		418,625		387,228		419,688		431,439
2018 9.25-Year Fixed Rate Notes		394,000		351,054		395,000		414,355
2019 Ten-Year Fixed Rate Notes		673,313		544,037		675,000		675,675


(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


	Fiscal Quarter Ended		Three Fiscal Quarters Ended		Fiscal Quarter Ended
	September 8,		September 8,		March 22,		March 24,
	2019		2019		2020		2019
Operating lease cost	$	9,150	$	29,464	$	9,582	$	10,796
Finance lease cost:
Amortization of right-of-use assets		254		763		249		254
Interest on lease liabilities		473		1,269		375		479

Total finance lease cost	$	727	$	2,032	$	624	$	733


	September 8,			December 30,			March 22,			December 29,
	2019			2018			2020			2019
Land and buildings	$	22,195		$	22,171		$	25,167		$	25,476
Accumulated depreciation and amortization		(7,441	)		(6,678	)		(8,083	)		(7,846	)

Finance lease assets, net	$	14,754		$	15,493		$	17,084		$	17,630

Current portion of long-term debt	$	685		$	643		$	1,390		$	1,394
Long-term debt, less current portion		15,922			16,363			17,616			18,263

Total principal payable on finance leases	$	16,607		$	17,006		$	19,006		$	19,657


	Fiscal Quarter Ended		Three Fiscal Quarters Ended		Fiscal Quarter Ended
	September 8,		September 8,		March 22,		March 2 4 ,
	2019		2019		2020		2019
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases	$	9,968	$	30,056	$	10,119	$	10,690
Operating cash flows from finance leases		473		1,269		375		479
Financing cash flows from finance leases		161		422		349		155
Right-of-use assets obtained in exchange for new lease obligations:
Right-of-use assets obtained in exchange for lease obligations:
Operating leases		23,434		49,802		8,982		12,977
Finance leases		—		—		—		—


	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


	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	%


(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

DOMINO’S PIZZA, INC.
(Registrant)

Date: ~~October 8, 2019~~April 23, 2020

/s/ Jeffrey D. Lawrence

Jeffrey D. Lawrence

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