Table of Contents
 
 
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 June 14, 202020, 2021
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from
to
                    
to
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
$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  
    No  
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to
Rule 
405 of
Regulation
S-T
(§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to
submit such
files).
Yes  
    No  
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a
non-accelerated
filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule
12b-2
of the Exchange Act.
Large accelerated filer
 
  
Accelerated filer
 
Non-accelerated
filer
Smaller reporting company
    
Non-accelerated
filer
Emerging growth company 
 
Smaller reporting 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  
    No  
As of July 9, 2020,15, 2021, Domino’s Pizza, Inc. had 39,347,21336,854,211 shares of common stock, par value $0.01 per share, outstanding.
 

Domino’s Pizza, Inc.
TABLE OF CONTENTS
 
Page No.
PART I.
 
Page No.FINANCIAL INFORMATION
     
PART I.
   
Item 1.
    
3
 
   
    
3
 
   
    
4
 
   
    
5
 
   
    
6
 
   
    
7
 
   
Item 2.
    
16
 
   
Item 3.
    
24
27
 
   
Item 4.
    
24
27
 
   
PART II.
OTHER INFORMATION
     
PART II.
   
Item 1.
    
25
28
 
   
Item 1A.
    
25
28
 
   
Item 2.
    
26
28
 
   
Item 3.
    
26
29
 
   
Item 4.
    
26
29
 
   
Item 5.
    
26
29
 
   
Item 6.
    
26
29
 
  
   
27
30
 
2

PART I. FINANCIAL INFORMATION
Item 1. Financial Statements.
Domino’s Pizza, Inc. and Subsidiaries
Condensed Consolidated Balance Sheets
(Unaudited)
         
(In thousands)
 
June 14, 2020
  
December 29, 2019 (1)
 
Assets
      
Current assets:
      
Cash and cash equivalents
 $
247,952
  $
190,615
 
Restricted cash and cash equivalents
  
238,233
   
209,269
 
Accounts receivable, net
  
232,114
   
210,260
 
Inventories
  
66,850
   
52,955
 
Prepaid expenses and other
  
28,873
   
19,129
 
Advertising fund assets, restricted
  
113,087
   
105,389
 
         
Total current assets
  
927,109
   
787,617
 
         
Property, plant and equipment:
      
Land and buildings
  
63,644
   
44,845
 
Leasehold and other improvements
  
170,685
   
164,071
 
Equipment
  
261,655
   
243,708
 
Construction in progress
  
28,890
   
42,705
 
         
  
524,874
   
495,329
 
Accumulated depreciation and amortization
  
(267,490
)  
(252,448
)
         
Property, plant and equipment, net
  
257,384
   
242,881
 
         
Other assets:
      
Operating lease
right-of-use
assets
  
227,114
   
228,785
 
Goodwill
  
15,061
   
15,093
 
Capitalized software, net
  
77,289
   
73,140
 
Other assets
  
69,517
   
24,503
 
Deferred income taxes
  
8,214
   
10,073
 
         
Total other assets
  
397,195
   
351,594
 
         
Total assets
 $
1,581,688
  $
1,382,092
 
         
Liabilities and stockholders’ deficit
      
Current liabilities:
      
Current portion of long-term debt
 $
42,999
  $
43,394
 
Accounts payable
  
102,896
   
111,101
 
Operating lease liabilities
  
36,883
   
33,318
 
Insurance reserves
  
23,495
   
23,735
 
Dividends payable
  
31,344
   
471
 
Advertising fund liabilities
  
108,859
   
101,921
 
Other accrued liabilities
  
113,392
   
139,891
 
         
Total current liabilities
  
459,868
   
453,831
 
         
Long-term liabilities:
      
Long-term debt, less current portion
  
4,128,576
   
4,071,055
 
Operating lease liabilities
  
198,868
   
202,731
 
Insurance reserves
  
37,185
   
34,675
 
Other accrued liabilities
  
40,097
   
35,559
 
         
Total long-term liabilities
  
4,404,726
   
4,344,020
 
         
Stockholders’ deficit:
      
Common stock
  
393
   
389
 
Additional
paid-in
capital
  
32,251
   
243
 
Retained deficit
  
(3,311,015
)  
(3,412,649
)
Accumulated other comprehensive loss
  
(4,535
)  
(3,742
)
         
Total stockholders’ deficit
  
(3,282,906
)  
(3,415,759
)
         
Total liabilities and stockholders’ deficit
 $
1,581,688
  $
1,382,092
 
         
 
(In thousands)  
June 20, 2021
  
January 3, 2021 (1)
 
Assets
         
Current assets:
         
Cash and cash equivalents
  $292,095  $168,821 
Restricted cash and cash equivalents
   184,695   217,453 
Accounts receivable, net
   235,954   244,560 
Inventories
   59,182   66,683 
Prepaid expenses and other
   43,785   24,169 
Advertising fund assets, restricted
   165,139   147,698 
   
 
 
  
 
 
 
Total current assets
   980,850   869,384 
   
 
 
  
 
 
 
Property, plant and equipment:
         
Land and buildings
   93,801   88,063 
Leasehold and other improvements
   189,094   186,456 
Equipment
   305,491   292,456 
Construction in progress
   9,650   13,014 
   
 
 
  
 
 
 
    598,036   579,989 
Accumulated depreciation and amortization
   (302,504  (282,625
   
 
 
  
 
 
 
Property, plant and equipment, net
   295,532   297,364 
   
 
 
  
 
 
 
Other assets:
         
Operating lease
right-of-use
assets
   220,845   228,268 
Goodwill
   15,034   15,061 
Capitalized software, net
   88,733   81,306 
Investments (Note 6)
   82,500   40,000 
Other assets
   36,636   33,881 
Deferred income taxes
   1,663   1,904 
   
 
 
  
 
 
 
Total other assets
   445,411   400,420 
   
 
 
  
 
 
 
Total assets
  $1,721,793  $1,567,168 
   
 
 
  
 
 
 
Liabilities and stockholders’ deficit
         
Current liabilities:
         
Current portion of long-term debt
  $54,769  $2,855 
Accounts payable
   104,515   94,499 
Operating lease liabilities
   36,542   35,861 
Insurance reserves
   27,463   26,377 
Dividends payable
   35,452   729 
Advertising fund liabilities
   157,513   141,175 
Other accrued liabilities
   138,100   169,323 
   
 
 
  
 
 
 
Total current liabilities
   554,354   470,819 
   
 
 
  
 
 
 
Long-term liabilities:
         
Long-term debt, less current portion
   5,026,765   4,116,018 
Operating lease liabilities
   195,926   202,268 
Insurance reserves
   40,895   37,125 
Other accrued liabilities
   35,996   35,244 
Deferred income taxes
   8,427   6,099 
   
 
 
  
 
 
 
Total long-term liabilities
   5,308,009   4,396,754 
   
 
 
  
 
 
 
Stockholders’ deficit:
         
Common stock
   369   389 
Additional
paid-in
capital
   7,771   5,122 
Retained deficit
   (4,146,702  (3,303,492
Accumulated other comprehensive loss
   (2,008  (2,424
   
 
 
  
 
 
 
Total stockholders’ deficit
   (4,140,570  (3,300,405
   
 
 
  
 
 
 
Total liabilities and stockholders’ deficit
  $1,721,793  $1,567,168 
   
 
 
  
 
 
 
 
(1)
The balance sheet at December 29, 2019January 3, 2021 has been derived from the audited consolidated financial statements at that date but does not include all of the information and footnotes required by accounting principles generally accepted in the United States for complete financial statements.
The accompanying notes are an integral part of these condensed consolidated statements.
3

Domino’s Pizza, Inc. and Subsidiaries
Condensed Consolidated Statements of Income
(Unaudited)
                 
 
Fiscal Quarter Ended
  
Two Fiscal Quarters Ended
 
(In thousands, except per share data)
 
June 14,
2020
  
June 16,
2019
  
June 14,
2020
  
June 16,
2019
 
Revenues:
            
U.S. Company-owned stores
 $
114,240
  $
105,001
  $
216,566
  $
228,451
 
U.S. franchise royalties and fees
  
113,098
   
95,594
   
217,844
   
192,302
 
Supply chain
  
539,141
   
467,577
   
1,051,841
   
939,677
 
International franchise royalties and fees
  
48,104
   
54,975
   
105,600
   
109,559
 
U.S. franchise advertising
  
105,440
   
88,500
   
201,274
   
177,621
 
                 
Total revenues
  
920,023
   
811,647
   
1,793,125
   
1,647,610
 
                 
Cost of sales:
            
U.S. Company-owned stores
  
87,831
   
80,366
   
167,219
   
175,906
 
Supply chain
  
475,101
   
414,610
   
928,658
   
832,744
 
                 
Total cost of sales
  
562,932
   
494,976
   
1,095,877
   
1,008,650
 
                 
Operating margin
  
357,091
   
316,671
   
697,248
   
638,960
 
                 
General and administrative
  
88,068
   
89,248
   
176,557
   
178,912
 
U.S. franchise advertising
  
105,440
   
88,500
   
201,274
   
177,621
 
                 
Income from operations
  
163,583
   
138,923
   
319,417
   
282,427
 
Interest income
  
640
   
922
   
1,572
   
1,615
 
Interest expense
  
(39,727
)  
(33,866
)  
(79,197
)  
(68,920
)
                 
Income before provision for income taxes
  
124,496
   
105,979
   
241,792
   
215,122
 
Provision for income taxes
  
5,828
   
13,620
   
1,522
   
30,113
 
                 
Net income
 $
118,668
  $
92,359
  $
240,270
  $
185,009
 
                 
Earnings per share:
            
Common stock - basic
 $
3.04
  $
2.25
  $
6.18
  $
4.52
 
Common stock - diluted
  
2.99
   
2.19
   
6.05
   
4.38
 
 
   
Fiscal Quarter Ended
  
Two Fiscal Quarters Ended
 
   
June 20,
  
June 14,
  
June 20,
  
June 14,
 
(In thousands, except per share data)  
2021
  
2020
  
2021
  
2020
 
Revenues:
                 
U.S. Company-owned stores
  $116,589  $114,240  $229,333  $216,566 
U.S. franchise royalties and fees
   126,836   113,098   251,322   217,844 
Supply chain
   602,962   539,141   1,171,300   1,051,841 
International franchise royalties and fees
   69,745   48,104   136,515   105,600 
U.S. franchise advertising
   116,340   105,440   227,700   201,274 
   
 
 
  
 
 
  
 
 
  
 
 
 
Total revenues
   1,032,472   920,023   2,016,170   1,793,125 
   
 
 
  
 
 
  
 
 
  
 
 
 
Cost of sales:
                 
U.S. Company-owned stores
   88,019   87,831   173,761   167,219 
Supply chain
   536,763   475,101   1,045,568   928,658 
   
 
 
  
 
 
  
 
 
  
 
 
 
Total cost of sales
   624,782   562,932   1,219,329   1,095,877 
   
 
 
  
 
 
  
 
 
  
 
 
 
Operating margin
   407,690   357,091   796,841   697,248 
   
 
 
  
 
 
  
 
 
  
 
 
 
General and administrative
   100,448   88,068   191,701   176,557 
U.S. franchise advertising
   116,340   105,440   227,700   201,274 
   
 
 
  
 
 
  
 
 
  
 
 
 
Income from operations
   190,902   163,583   377,440   319,417 
Other income
   —     —     2,500   —   
Interest income
   68   640   90   1,572 
Interest expense
   (45,877  (39,727  (85,299  (79,197
   
 
 
  
 
 
  
 
 
  
 
 
 
Income before provision for income taxes
   145,093   124,496   294,731   241,792 
Provision for income taxes
   28,474   5,828   60,351   1,522 
   
 
 
  
 
 
  
 
 
  
 
 
 
Net income
  $116,619  $118,668  $234,380  $240,270 
   
 
 
  
 
 
  
 
 
  
 
 
 
Earnings per share:
                 
Common stock - basic
  $3.10  $3.04  $6.14  $6.18 
Common stock - diluted
   3.06   2.99   6.06   6.05 
The accompanying notes are an integral part of these condensed consolidated statements.
4

Domino’s Pizza, Inc. and Subsidiaries
Condensed Consolidated Statements of Comprehensive Income
(Unaudited)
                 
 
Fiscal Quarter Ended
  
Two Fiscal Quarters Ended
 
(In thousands)
 
June 14,
2020
  
June 16,
2019
  
June 14,
2020
  
June 16,
2019
 
Net income
 $
118,668
  $
92,359
  $
240,270
  $
185,009
 
Currency translation adjustment
  
1,533
   
(16
)  
(793
)  
221
 
                 
Comprehensive income
 $
120,201
  $
92,343
  $
239,477
  $
185,230
 
                 
 
   
Fiscal Quarter Ended
   
Two Fiscal Quarters Ended
 
   
June 20,
   
June 14,
   
June 20,
   
June 14,
 
(In thousands)  
2021
   
2020
   
2021
   
2020
 
Net income
  $116,619   $118,668   $234,380   $240,270 
Currency translation adjustment
   230    1,533    416    (793
   
 
 
   
 
 
   
 
 
   
 
 
 
Comprehensive income
  $116,849   $120,201   $234,796   $239,477 
   
 
 
   
 
 
   
 
 
   
 
 
 
The accompanying notes are an integral part of these condensed consolidated statements.
5

Domino’s Pizza, Inc. and Subsidiaries
Condensed Consolidated Statements of Cash Flows
(Unaudited)
         
 
Two Fiscal Quarters Ended
 
(In thousands)
 
June 14,
2020
  
June 16,
2019
 
         
Cash flows from operating activities:
      
Net income
 $
240,270
  $
185,009
 
Adjustments to reconcile net income to net cash provided by operating activities:
      
Depreciation and amortization
  
28,789
   
27,850
 
Loss on sale/disposal of assets
  
544
   
2,829
 
Amortization of debt issuance costs
  
2,575
   
2,198
 
Provision for deferred income taxes
  
1,510
   
2,276
 
Non-cash
compensation expense
  
10,029
   
8,589
 
Excess tax benefits from equity-based compensation
  
(53,440
)  
(18,446
)
Provision for losses on accounts and notes receivable
  
1,592
   
550
 
Changes in operating assets and liabilities
  
(19,421
)  
(10,713
)
Changes in advertising fund assets and liabilities, restricted
  
(620
)  
1,411
 
         
Net cash provided by operating activities
  
211,828
   
201,553
 
         
Cash flows from investing activities:
      
Capital expenditures
  
(33,732
)  
(25,708
)
Purchase of investments (Note 9)
  
(40,000
)  
—  
 
Proceeds from sale of assets
  
6
   
8,161
 
Maturities of advertising fund investments, restricted
  
—  
   
15,152
 
Other
  
(485
)  
(132
)
         
Net cash used in investing activities
  
(74,211
)  
(2,527
)
         
Cash flows from financing activities:
      
Proceeds from issuance of long-term debt
  
158,000
   
—  
 
Repayments of long-term debt and finance lease obligations
  
(122,040
)  
(82,886
)
Proceeds from exercise of stock options
  
24,801
   
9,290
 
Purchases of common stock
  
(79,590
)  
(11,453
)
Tax payments for restricted stock upon vesting
  
(1,827
)  
(2,567
)
Payments of common stock dividends and equivalents
  
(30,266
)  
(26,680
)
         
Net cash used in financing activities
  
(50,922
)  
(114,296
)
         
Effect of exchange rate changes on cash
  
(253
)  
111
 
         
Change in cash and cash equivalents, restricted cash and cash equivalents
  
86,442
   
84,841
 
 
 
 
 
 
 
 
 
 
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
  
247,952
   
108,259
 
Restricted cash and cash equivalents, end of period
  
238,233
   
152,713
 
Cash and cash equivalents included in advertising fund assets, restricted, end of period
  
84,181
   
61,288
 
         
Cash and cash equivalents, restricted cash and cash equivalents and cash and cash equivalents included in advertising fund assets, restricted, end of period
 $
570,366
  $
322,260
 
         
 
   
Two Fiscal Quarters Ended
 
   
June 20,
  
June 14,
 
(In thousands)  
2021
  
2020
 
Cash flows from operating activities:
         
Net income
  $234,380  $240,270 
Adjustments to reconcile net income to net cash provided by operating
activities:
         
Depreciation and amortization
   33,641   28,789 
Loss on sale/disposal of assets
   456   544 
Amortization of debt issuance costs
   4,438   2,575 
Provision for deferred income taxes
   2,561   1,510 
Non-cash
equity-based compensation expense
   13,500   10,029 
Excess tax benefits from equity-based compensation
   (4,264  (53,440
Provision for losses on accounts and notes receivable
   296   1,592 
Unrealized gain on investments
   (2,500  —   
Changes in operating assets and liabilities
   (17,098  (19,421
Changes in advertising fund assets and liabilities, restricted
   30,005   (620
   
 
 
  
 
 
 
Net cash provided by operating activities
   295,415   211,828 
   
 
 
  
 
 
 
Cash flows from investing activities:
         
Capital expenditures
   (33,163  (33,732
Purchase of investments (Note 6)
   (40,000  (40,000
Other
   293   (479
   
 
 
  
 
 
 
Net cash used in investing activities
   (72,870  (74,211
   
 
 
  
 
 
 
Cash flows from financing activities:
         
Proceeds from issuance of long-term debt
   1,850,000   158,000 
Repayments of long-term debt and finance lease obligations
   (882,547  (122,040
Proceeds from exercise of stock options
   9,025   24,801 
Purchases of common stock
   (1,025,000  (79,590
Tax payments for restricted stock upon vesting
   (1,087  (1,827
Payments of common stock dividends and equivalents
   (36,432  (30,266
Cash paid for financing costs
   (14,938  —   
Other
   (244  —   
   
 
 
  
 
 
 
Net cash used in financing activities
   (101,223  (50,922
   
 
 
  
 
 
 
Effect of exchange rate changes on cash
   302   (253
   
 
 
  
 
 
 
Change in cash and cash equivalents, restricted cash and cash equivalents
   121,624   86,442 
   
 
 
  
 
 
 
 
 
 
 
 
 
 
 
 
Cash and cash equivalents, beginning of period
   168,821   190,615 
Restricted cash and cash equivalents, beginning of period
   217,453   209,269 
Cash and cash equivalents included in advertising fund assets, restricted, beginning of period
   115,872   84,040 
   
 
 
  
 
 
 
Cash and cash equivalents, restricted cash and cash equivalents and cash and cash equivalents included in advertising fund assets, restricted, beginning of period
   502,146   483,924 
   
 
 
  
 
 
 
 
 
 
 
 
 
 
 
 
Cash and cash equivalents, end of period
   292,095   247,952 
Restricted cash and cash equivalents, end of period
   184,695   238,233 
Cash and cash equivalents included in advertising fund assets, restricted, end of period
   146,980   84,181 
   
 
 
  
 
 
 
Cash and cash equivalents, restricted cash and cash equivalents and cash and cash equivalents included in advertising fund assets, restricted, end of period
  $623,770  $570,366 
   
 
 
  
 
 
 
The accompanying notes are an integral part of these condensed consolidated statements.
6

Domino’s Pizza, Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements
(Unaudited; tabular amounts in thousands, except percentages, share and per share amounts)
June 14, 202020, 2021
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 29, 2019January 3, 2021 included in the Company’s 20192020 Annual Report on Form
10-K,
filed with the Securities and Exchange Commission on February 20, 202025, 2021 (the “2019“2020 Form
10-K”)
.
In the opinion of management, all adjustments, consisting of normal recurring items, considered necessary for a fair statement have been included. Operating results for the fiscal quarter ended June 14, 202020, 2021 are not necessarily indicative of the results that may be expected for the fiscal year ending January 3,
2021
.2, 2022.
Updates to Significant Accounting Policies
The Company adopted Accounting Standards Codification 326,
Financial Instruments – Credit Losses
(“ASC 326”) in the first quarter of 2020. As a result, the Company updated its significant accounting policies for the measurement of credit losses below. Refer to Note 10 for information related to the impact of the adoption of ASC 326 on the Company’s condensed consolidated financial statements.
Allowances for Credit Losses
The Company closely monitors accounts and notes receivable balances and 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 allowances for accounts and notes receivable have not historically been material.
The Company also monitors its
off-balance
sheet exposures under its letters of credit, surety bonds and lease guarantees. None of these arrangements has had or is likely to have a material effect on the Company’s results of operations, financial condition, revenues, expenses or liquidity.
During the second quarter of 2020, a subsidiary of the Company acquired a
non-controlling
interest in Dash Brands Ltd., a privately-held business company limited by shares incorporated with limited liability under the laws of the British Virgin Islands (“Dash Brands”), for
$40.0 
million. Through its subsidiaries, Dash Brands serves as the Company’s master franchisee in China that owns and operates Domino’s Pizza stores in that market. As a result of the investment, the Company’s significant accounting policy related to equity investments without readily determinable fair values is stated below. Refer to Note 9 for information related to this investment and its impact on the Company’s condensed consolidated financial statements.
Equity investments without readily determinable fair values
Equity investments without readily determinable fair values are recorded at cost with adjustments for observable changes in prices resulting from orderly transactions for the identical or a similar investment of the same issuer or impairments and are classified as long-term other assets in the Company’s condensed consolidated balance sheet. Any adjustments to the carrying amount are recognized in other income (expense), net in the Company’s condensed consolidated statement of income.
The Company evaluates the potential impairment of its investments based on various analyses including financial results and operating trends, implied values from recent similar transactions and other relevant available information. If the carrying amount of the investment exceeds the estimated fair value of the investment, an impairment loss is recognized, and the investment is written down to its estimated fair value.
7

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. Intersegment revenues are comprised of sales of food, equipment and supplies from the supply chain segment to the Company-owned stores in the U.S. stores segment. Intersegment sales prices are market based.
The “Other” column as it relates to Segment Income below primarily includes corporate administrative costs that are not allocable to a reportable segment, including labor, computer expenses, professional fees, travel and entertainment, rent, insurance and other corporate administrative costs.
 
Fiscal Quarters Ended June 14, 2020 and June 16, 2019
 
 
U.S.
  
Supply
  
International
  
Intersegment
     
 
Stores
  
Chain
  
Franchise
  
Revenues
  
Other
  
Total
 
Revenues
                  
2020
 $
332,778
  $
570,104
  $
48,104
  $
(30,963
) $
—  
  $
920,023
 
2019
  
289,095
   
495,989
   
54,975
   
(28,412
)  
—  
   
811,647
 
Income from operations
                  
2020
 $
100,171
  $
52,461
  $
36,372
   
N/A
  $
(25,421
) $
163,583
 
2019
  
77,050
   
41,305
   
41,432
   
N/A
   
(20,864
)  
138,923
 
Segment Income
                  
2020
 $
102,934
  $
56,904
  $
36,410
   
N/A
  $
(12,555
) $
183,693
 
2019
  
82,006
   
45,382
   
41,491
   
N/A
   
(9,235
)  
159,644
 
   
Fiscal Quarters Ended June 20, 2021 and June 14, 2020
 
   
U.S.

Stores
   
Supply

Chain
   
International

Franchise
   
Intersegment

Revenues
  
Other
  
Total
 
Revenues
                            
2021
  $359,765   $635,592   $69,745   $(32,630 $—    $1,032,472 
2020
   332,778    570,104    48,104    (30,963  —     920,023 
Segment Income
                            
2021
  $111,847   $58,593   $56,365    N/A  $(9,627 $217,178 
2020
   102,934    56,904    36,410    N/A   (12,555  183,693 
   
Two Fiscal Quarters Ended June 20, 2021 and June 14, 2020
 
   
U.S.

Stores
   
Supply

Chain
   
International

Franchise
   
Intersegment

Revenues
  
Other
  
Total
 
Revenues
                            
2021
  $708,355   $1,234,769   $136,515   $(63,469 $—    $2,016,170 
2020
   635,684    1,111,743    105,600    (59,902  —     1,793,125 
Segment Income
                            
2021
  $219,283   $111,145   $110,833    N/A  $(15,715 $425,546 
2020
   191,211    108,341    79,914    N/A   (20,687  358,779 
7

 
Two Fiscal Quarters Ended June 14, 2020 and June 16, 2019
 
 
U.S.
  
Supply
  
International
  
Intersegment
     
 
Stores
  
Chain
  
Franchise
  
Revenues
  
Other
  
Total
 
Revenues
                  
2020
 $
635,684
  $
1,111,743
  $
105,600
  $
(59,902
) $
—  
  $
1,793,125
 
2019
  
598,374
   
1,001,670
   
109,559
   
(61,993
)  
—  
   
1,647,610
 
Income from operations
                  
2020
 $
185,581
  $
99,837
  $
79,832
   
N/A
  $
(45,833
) $
319,417
 
2019
  
157,664
   
83,327
   
84,186
   
N/A
   
(42,750
)  
282,427
 
Segment Income
                  
2020
 $
191,211
  $
108,341
  $
79,914
   
N/A
  $
(20,687
) $
358,779
 
2019
  
165,604
   
91,429
   
84,290
   
N/A
   
(19,628
)  
321,695
 
The following table reconciles Total Segment Income to consolidated income before provision for income taxes.
 
Fiscal Quarter Ended
  
Two Fiscal Quarters Ended
 
 
June 14,
  
June 16,
  
June 14,
  
June 16,
 
 
2020
  
2019
  
2020
  
2019
 
Total Segment Income
 $
183,693
  $
159,644
  $
358,779
  $
321,695
 
Depreciation and amortization
  
(14,757
)  
(14,060
)  
(28,789
)  
(27,850
)
Loss on sale/disposal of assets
  
(238
)  
(2,680
)  
(544
)  
(2,829
)
Non-cash
compensation expense
  
(5,115
)  
(3,981
)  
(10,029
)  
(8,589
)
                 
Income from operations
  
163,583
   
138,923
   
319,417
   
282,427
 
Interest income
  
640
   
922
   
1,572
   
1,615
 
Interest expense
  
(39,727
)  
(33,866
)  
(79,197
)  
(68,920
)
                 
Income before provision for income taxes
 $
124,496
  $
105,979
  $
241,792
  $
215,122
 
                 
   
Fiscal Quarter Ended
   
Two Fiscal Quarters Ended
 
   
June 20,

2021
   
June 14,

2020
   
June 20,

2021
   
June
14
,

202
0
 
Total Segment Income
  $217,178   $183,693   $425,546   $358,779 
Depreciation and amortization
   (17,176   (14,757   (33,641   (28,789
Loss on sale/disposal of assets
   (295   (238   (456   (544
Non-cash
equity-based compensation expense
   (8,296   (5,115   (13,500   (10,029
Recapitalization-related expenses
   (509   —      (509   —   
   
 
 
   
 
 
   
 
 
   
 
 
 
Income from operations
   190,902    163,583    377,440    319,417 
Other income
   —      —      2,500    —   
Interest income
   68    640    90    1,572 
Interest expense
   (45,877   (39,727   (85,299   (79,197
   
 
 
   
 
 
   
 
 
   
 
 
 
Income before provision for income taxes
  $145,093   $124,496   $294,731   $241,792 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
   
 
 
   
 
 
   
 
 
   
 
 
 
3. Earnings Per Share
 
Fiscal Quarter Ended
  
Two Fiscal Quarters Ended
 
 
June 14,
  
June 16,
  
June 14,
  
June 16,
 
 
2020
  
2019
  
2020
  
2019
 
Net income available to common stockholders - basic and diluted
 $
118,668
  $
92,359
  $
240,270
  $
185,009
 
                 
Basic weighted average number of shares
  
39,058,292
   
41,023,269
   
38,862,108
   
40,944,400
 
Earnings per share – basic
 $
3.04
  $
2.25
  $
6.18
  $
4.52
 
Diluted weighted average number of shares
  
39,746,479
   
42,236,507
   
39,688,663
   
42,219,649
 
Earnings per share – diluted
 $
2.99
  $
2.19
  $
6.05
  $
4.38
 
   
Fiscal Quarter Ended
   
Two Fiscal Quarters Ended
 
   
June 20,

2021
   
June 14,

2020
   
June 20,

2021
   
June 14,

2020
 
Net income available to common stockholders - basic and diluted
  $116,619   $118,668   $234,380   $240,270 
   
 
 
   
 
 
   
 
 
   
 
 
 
Basic weighted average number of shares
   37,590,369    39,058,292    38,145,297    38,862,108 
Earnings per share – basic
  $3.10   $3.04   $6.14   $6.18 
Diluted weighted average number of shares
   38,122,515    39,746,479    38,665,325    39,688,663 
Earnings per share – diluted
  $3.06   $2.99   $6.06   $6.05 
The denominator used in calculating diluted earnings per share for the second quarter of 2021 did not include 84,955
8
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 two fiscal quarters of 2021 did not include
92,689 options to purchase common stock
,
as the effect of including these options would have been anti-dilutive.
The denominators used in calculating diluted earnings per share for the second quarter and two fiscal quarters of 2021 each did not include 
64,110
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 two fiscal quarters of 2020 did not include 263 options to purchase common stock and 1,760 restricted stock awards, as the effect of including these options and awards would have been anti-dilutive. The denominators used in calculating diluted earnings per share for the second quarter and two fiscal quarters of 2020 each did not include 90,472 restricted performance shares, as the performance targets for these awards had not yet been met.
4. Stockholders’
Deficit
The denominators usedfollowing table summarizes changes in calculating diluted earnings per sharestockholders’ deficit for the second quarter andof 2021.
 
  
Common Stock
 
 
Additional

Paid-in

Capital
 
 
Retained

Deficit
 
 
Accumulated

Other

Comprehensive

Loss
 
 
  
Shares
 
 
Amount
 
Balance at March 28, 2021
   38,818,197  $388  $6,612  $(3,240,842 $(2,238
Net income
   —     —     —     116,619   —   
Dividends declared on common stock and equivalents ($0.94 per share)
   —     —     —     (34,680  —   
Issuance and cancellation of stock awards, net
   837   —     —     —     —   
Tax payments for restricted stock upon vesting
   (110  —     (43  —     —   
Purchases of common stock
   (2,012,596  (20  (12,181  (987,799  —   
Exercise of stock options
   47,243   1   5,331   —     —   
Non-cash
equity-based compensation expense
   —     —     8,296   —     —   
Other
   —     —     (244  —     —   
Currency translation adjustment
   —     —     —     —     230 
   
 
 
  
 
 
  
 
 
  
 
 
  
 
 
 
Balance at June 20, 2021
   36,853,571  $369  $7,771  $(4,146,702 $(2,008
   
 
 
  
 
 
  
 
 
  
 
 
  
 
 
 
8

The following table summarizes changes in stockholders’ deficit for the two fiscal quarters of 2019 each did not include 71,180 options2021.
               
Accumulated
 
   
Common Stock
  
Additional
     
Other
 
      
Paid-in
  
Retained
  
Comprehensive
 
   
Shares
  
Amount
  
Capital
  
Deficit
  
Loss
 
Balance at January 3, 2021
   38,868,350  $389  $5,122  $(3,303,492 $(2,424
Net income
   —     —     —     234,380   —   
Dividends declared on common stock and equivalents ($1.88 per share)
   —     —     —     (71,155  —   
Issuance and cancellation of stock awards, net
   (1,918  —     —     —     —   
Tax payments for restricted stock upon vesting
   (2,901  —     (1,087  —     —   
Purchases of common stock
   (2,078,466  (21  (18,544  (1,006,435  —   
Exercise of stock options
   68,506   1   9,024   —     —   
Non-cash
equity-based compensation expense
   —     —     13,500   —     —   
Other
   —     —     (244  —     —   
Currency translation adjustment
   —     —     —     —     416 
   
 
 
  
 
 
  
 
 
  
 
 
  
 
 
 
Balance at June 20, 2021
   36,853,571  $369  $7,771  $(4,146,702 $(2,008
   
 
 
  
 
 
  
 
 
  
 
 
  
 
 
 
On April 30, 2021, the Company entered into a $1.0 billion accelerated share repurchase agreement (the “ASR Agreement”) with a counterparty. Refer to purchaseNote 5 for additional information related to this transaction.
Subsequent to the end of the second quarter,
 on July 20, 2021, the Company’s Board of Directors authorized a new share repurchase program to repurchase up to $1.0 billion of the Company’s common stock. This repurchase program replaces the Company’s previously approved $1.0 billion share repurchase
program, which was fully utilized in connection with the ASR Agreement.
Also
on 
July 20, 2021
, the Company’s Board of Directors declared a $
0.94
 per share quarterly dividend on its outstanding common stock for shareholders of record as the effect of including these options would have been anti-dilutive. The denominators used in calculating diluted earnings per share for the second quarter and two fiscal quarters of 2019 each did not include 93,412 restricted performance shares, as the performance targets for these awards had not yet been met.
September 15, 2021
,
 to be paid on 
September 30, 2021
.
4. Changes in Stockholders’ Deficit
The following table summarizes changes in stockholders’ deficit for the second quarter of 2020.
 
Common Stock
  
Additional
Paid-in
  
Retained
  
Accumulated
Other
Comprehensive
 
 
Shares
  
Amount
  
Capital
  
Deficit
  
Loss
 
Balance at March 22, 2020
  
39,039,599
  $
390
  $
12,474
  $
(3,398,986
) $
(6,068
)
Net income
  
—  
   
—  
   
—  
   
118,668
   
—  
 
Dividends declared on common stock and equivalents ($0.78 per share)
  
—  
   
—  
   
—  
   
(30,697
)  
—  
 
Issuance and cancellation of stock awards, net
  
4,068
   
—  
   
—  
   
—  
   
—  
 
Tax payments for restricted stock upon vesting
  
(91
)  
—  
   
(31
)  
—  
   
—  
 
Exercise of stock options
  
303,637
   
3
   
14,693
   
—  
   
—  
 
Non-cash
compensation expense
  
—  
   
—  
   
5,115
   
—  
   
—  
 
Currency translation adjustment
  
—  
   
—  
   
—  
   
—  
   
1,533
 
                     
Balance at June 14, 2020
  
39,347,213
  $
393
  $
32,251
  $
(3,311,015
) $
(4,535
)
                     
                
Accumulated
 
   
Common Stock
   
Additional
     
Other
 
       
Paid-in
  
Retained
  
Comprehensive
 
   
Shares
  
Amount
   
Capital
  
Deficit
  
Loss
 
Balance at March 22, 2020
   39,039,599  $390   $12,474  $(3,398,986 $(6,068
Net income
   —     —      —     118,668   —   
Dividends declared on common stock and equivalents ($0.78 per share)
   —     —      —     (30,697  —   
Issuance and cancellation of stock awards, net
   4,068   —      —     —     —   
Tax payments for restricted stock upon vesting
   (91  —      (31  —     —   
Exercise of stock options
   303,637   3    14,693   —     —   
Non-cash
equity-based compensation expense
   —     —      5,115   —     —   
Currency translation adjustment
   —     —      —     —     1,533 
   
 
 
  
 
 
   
 
 
  
 
 
  
 
 
 
Balance at June 14, 2020
   39,347,213  $393   $32,251  $(3,311,015 $(4,535
   
 
 
  
 
 
   
 
 
  
 
 
  
 
 
 
The following table summarizes changes in stockholders’ deficit for the two fiscal quarters of 2020.
 
Common Stock
  
Additional
Paid-in

Capital
  
Retained
Deficit
  
Accumulated
Other
Comprehensive
 
 
Shares
  
Amount
 
Loss
 
Balance at December 29, 2019
  
38,934,009
  $
389
  $
243
  $
(3,412,649
) $
(3,742
)
Net income
  
—  
   
—  
   
—  
   
240,270
   
—  
 
Dividends declared on common stock and equivalents ($1.56 per share)
  
—  
   
—  
   
—  
   
(61,139
)  
—  
 
Issuance and cancellation of stock awards, net
  
5,713
   
—  
   
—  
   
—  
   
—  
 
Tax payments for restricted stock upon vesting
  
(6,020
)  
—  
   
(1,827
)  
—  
   
—  
 
Purchases of common stock
  
(271,064
)  
(3
)  
(988
)  
(78,599
)  
—  
 
Exercise of stock options
  
684,575
   
7
   
24,794
   
—  
   
—  
 
Non-cash
compensation expense
  
—  
   
—  
   
10,029
   
—  
   
—  
 
Adoption of ASC 326 (Note
10
)
  
—  
   
—  
   
—  
   
1,102
   
—  
 
Currency translation adjustment
  
—  
   
—  
   
—  
   
—  
   
(793
)
                     
Balance at June 14, 2020
  
39,347,213
  $
393
  $
32,251
  $
(3,311,015
) $
(4,535
)
                     
               
Accumulated
 
   
Common Stock
  
Additional
     
Other
 
      
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
   —     —     —     240,270   —   
Dividends declared on common stock and equivalents ($1.56 per share)
   —     —     —     (61,139  —   
Issuance and cancellation of stock awards, net
   5,713   —     —     —     —   
Tax payments for restricted stock upon vesting
   (6,020  —     (1,827  —     —   
Purchases of common stock
   (271,064  (3  (988  (78,599  
 
 
 
Exercise of stock options
   684,575   7   24,794   —     —   
Non-cash
equity-based compensation expense
   —     —     10,029   —     —   
Adoption of credit losses standard
            1,102   
 
 
 
Currency translation adjustment
   —     —     —     —     (793
   
 
 
  
 
 
  
 
 
  
 
 
  
 
 
 
Balance at June 14, 2020
   39,347,213  $393  $32,251  $(3,311,015 $(4,535
   
 
 
  
 
 
  
 
 
  
 
 
  
 
 
 
Subsequent to the second quarter, on July 15, 2020, the Company’s Board of Directors declared a $0.78 per share quarterly dividend on its outstanding common stock for shareholders of record as of September 15, 2020 to be paid on September 30, 2020.
9

5. Recapitalization
On April 16, 2021 (the “closing date”), the Company completed a recapitalization transaction (the “2021 Recapitalization”)
 in which certain of the Company’s subsidiaries issued new notes pursuant to an asset-backed securitization. The following table summarizes changesnew notes consist of $850.0 million Series
2021-1
2.662% Fixed Rate Senior Secured Notes,
Class A-2-I
with an anticipated term of 7.5 years (the “2021
A-2-I
Fixed Rate Notes”) and $1.0 billion Series
2021-1
3.151% Fixed Rate Senior Secured Notes,
Class A-2-II
with an anticipated term of 10 years (collectively with the 2021
A-2-I
Fixed Rate Notes, the “2021 Notes”) in stockholders’ deficitan offering exempt from registration under the Securities Act of 1933, as amended. As of June 20, 2021, the 2021 Notes had scheduled principal payments of $9.3 million in 2021, $18.5 million in each of 2022 through 2027, $804.8 million in 2028, $10.0 million in each of 2029 and 2030 and $905.0 million in 2031. Gross proceeds from the issuance of the 2021 Notes were $1.85 billion.
Concurrently, certain of the Company’s subsidiaries also issued a new variable funding note facility which allows for advances of up to $200.0 million of Series
2021-1
Variable Funding Senior Secured Notes,
Class A-1
Notes and certain other credit instruments, including letters of credit (the “2021 Variable Funding Notes”). The 2021 Variable Funding Notes were undrawn on the closing date. In connection with the issuance of the 2021 Variable Funding Notes, the Company’s previous $200.0 million variable funding note facility was canceled.
A portion of proceeds from the 2021 Recapitalization was used to repay the remaining $291.0 million in outstanding principal under the Company’s 2017 five-year floating rate notes and $582.0 million in outstanding principal under the Company’s 2017 five-year fixed rate notes, prefund a portion of the interest payable on the 2021 Notes and pay transaction fees and expenses. In connection with the repayment of the 2017 five-year floating rate notes and 2017 five-year fixed rate notes, the Company expensed approximately $2.0 million for the remaining unamortized debt issuance costs associated with these notes. Additionally, in connection with the 2021 Recapitalization, the Company capitalized $14.9 million of debt issuance costs, which are being amortized into interest expense over the 7.5 and
10-year
expected terms of the 2021 Notes.
As of the fourth quarter of 2020, the Company had a leverage ratio of less than 5.0x, and accordingly, did not make the previously scheduled debt amortization payment for its
then-outstanding 
notes beginning in the first quarter of 2021. Accordingly, all principal amounts of the Company’s outstanding notes were classified as long-term debt in the consolidated balance sheet as of January 3, 2021. Subsequent to the closing of the 2021 Recapitalization, the Company had a leverage ratio of greater than 5.0x and, accordingly, the Company resumed making the scheduled amortization payments on its notes in the second quarter of 2019.2021.
 
Common Stock
  
Additional
Paid-in
Capital
  
Retained
Deficit
  
Accumulated
Other
Comprehensive
 
 
Shares
  
Amount
 
Loss
 
Balance at March 24, 2019
  
41,083,890
  $
411
  $
5,464
  $
(2,976,848
) $
(4,192
)
Net income
  
—  
   
—  
   
—  
   
92,359
   
—  
 
Dividends declared on common stock and equivalents ($0.65 per share)
  
—  
   
—  
   
—  
   
(26,789
)  
—  
 
Issuance and cancellation of stock awards, net
  
(3,079
)  
—  
   
—  
   
—  
   
—  
 
Tax payments for restricted stock upon vesting
  
(377
)  
—  
   
(100
)  
—  
   
—  
 
Purchases of common stock
  
(12,295
)  
(1
)  
(3,308
)  
—  
   
—  
 
Exercise of stock options
  
164,219
   
2
   
4,751
   
—  
   
—  
 
Non-cash
compensation expense
  
—  
   
—  
   
3,981
   
—  
   
—  
 
Currency translation adjustment
  
—  
   
—  
   
—  
   
—  
   
(16
)
                     
Balance at June 16, 2019
  
41,232,358
  $
412
  $
10,788
  $
(2,911,278
) $
(4,208
)
                     
The following table summarizes changesOn April 30, 2021, the Company entered into
the
 $1.0 billion ASR Agreement
.
 Pursuant to the terms of the ASR Agreement, on May 3, 2021, the Company used a portion of the proceeds from the 2021 Recapitalization to pay the counterparty $1.0 billion in stockholders’ deficit forcash and received and retired 2,012,596
shares of its common stock. Final settlement of the two fiscal quartersASR Agreement occurred on July 21, 2021. In connection with the ASR Agreement, the Company received and retired a total of 2019.2,250,786 shares of its common stock at an average price of 
$444.29,
 
Common Stock
  
Additional
Paid-in
Capital
  
Retained
Deficit
  
Accumulated
Other
Comprehensive
 
 
Shares
  
Amount
 
Loss
 
Balance at December 30, 2018
  
40,977,561
  $
410
  $
569
  $
(3,036,471
) $
(4,429
)
Net income
  
—  
   
—  
   
—  
   
185,009
   
—  
 
Dividends declared on common stock and equivalents ($1.30 per share)
  
—  
   
—  
   
—  
   
(53,454
)  
—  
 
Issuance and cancellation of stock awards, net
  
5,161
   
—  
   
—  
   
—  
   
—  
 
Tax payments for restricted stock upon vesting
  
(9,441
)  
—  
   
(2,567
)  
—  
   
—  
 
Purchases of common stock
  
(45,844
)  
(1
)  
(5,090
)  
(6,362
)  
—  
 
Exercise of stock options
  
304,921
   
3
   
9,287
   
—  
   
—  
 
Non-cash
compensation expense
  
—  
   
—  
   
8,589
   
—  
   
—  
 
Currency translation adjustment
  
—  
   
—  
   
—  
   
—  
   
221
 
                     
Balance at June 16, 2019
  
41,232,358
  $
412
  $
10,788
  $
(2,911,278
) $
(4,208
)
                     
including the 2,012,596 shares of its common stock received and retired during the second quarter of 2021.
5.
6. Fair Value Measurements
Fair value measurements enable the reader of the financial statements to assess the inputs used to develop those measurements by establishing a hierarchy for ranking the quality and reliability of the information used to determine fair values. The Company classifies and discloses assets and liabilities carried at fair value in one of the following three categories:
Level 1: Quoted market prices in active markets for identical assets or liabilities.
Level 2: Observable market-based inputs or unobservable inputs that are corroborated by market data.
Level 3: Unobservable inputs that are not corroborated by market data.
Fair Value of Cash Equivalents and Investments
The fair values of the Company’s cash equivalents and investments in marketable securities are based on quoted prices in active markets for identical assets. The fair value of the Company’s Level 3 investment (Note 9) is not readily determinable. The fair value represents its cost with adjustments for observable changes in prices resulting from orderly transactions for the identical or a similar investment of the same issuer or impairments.
10

The following tables summarize the carrying amounts and estimated fair values of certain assets
at June 
14
,
2020
20, 2021 and December 
29
,
2019
:January 3, 2021:
 
At June 14, 2020
 
   
Fair Value Estimated Using
 
 
Carrying
  
Level 1
  
Level 2
  
Level 3
 
 
Amount
  
Inputs
  
Inputs
  
Inputs
 
Cash equivalents
 $
223,664
  $
223,664
  $
 —  
  $
—  
 
Restricted cash equivalents
  
167,319
   
167,319
   
—  
   
—  
 
Investments in marketable securities
  
11,278
   
11,278
   
—  
   
—  
 
Advertising fund cash equivalents, restricted
  
71,488
   
71,488
   
—  
   
—  
 
Investments (Note 9)
  
40,000
   
—  
   
—  
   
40,000
 
   
At June 20, 2021
 
       
Fair Value Estimated Using
 
   
Carrying
   
Level 1
   
Level 2
   
Level 3
 
   
Amount
   
Inputs
   
Inputs
   
Inputs
 
Cash equivalents
  $261,183   $261,183   $—     $—   
Restricted cash equivalents
   117,783    117,783    —      —   
Investments in marketable securities
   14,195    14,195    —      —   
Advertising fund cash equivalents, restricted
   129,810    129,810    —      —   
Investments
   82,500    —      —      82,500 
   
At January 3, 2021
 
       
Fair Value Estimated Using
 
   
Carrying
   
Level 1
   
Level 2
   
Level 3
 
   
Amount
   
Inputs
   
Inputs
   
Inputs
 
Cash equivalents
  $151,502   $151,502   $—     $—   
Restricted cash equivalents
   126,595    126,595    —      —   
Investments in marketable securities
   13,251    13,251    —      —   
Advertising fund cash equivalents, restricted
   104,197    104,197    —      —   
Investments
   40,000    —      —      40,000 
During the second quarter of 2020, a subsidiary of the Company acquired a
non-controlling
interest in Dash Brands Ltd., a privately-held business company limited by shares incorporated with limited liability under the laws of the British Virgin Islands (“Dash Brands”), for $40.0 million. Through its subsidiaries, Dash Brands serves as the Company’s master franchisee in China that owns and operates Domino’s Pizza stores in that market. The Company’s investment in Dash Brands’ senior ordinary shares, which are not
in-substance
common stock, represents an equity investment without a readily determinable fair value and is recorded at cost with adjustments for observable changes in prices resulting from orderly transactions for the identical or a similar investment of the same issuer or impairments.
In the first quarter of 2021, the Company invested an additional $40.0 million in Dash Brands based on Dash Brands’ achievement of certain
pre-established performance conditions. In the first quarter of 2021, the Company recorded a positive adjustment of 
$
2.5 million to the original carrying amount of $40.0 million resulting from the observable change in price from the valuation of the additional investment. This amount was recorded in other income in the Company’s condensed consolidated statements of income. The Company did not record any adjustments to the carrying amount of $82.5 million in the second quarter of 2021.
The following table summarizes the reconciliation of the carrying amount of the Company’s investment in Dash Brands from the opening balance at January 3, 2021 to the closing balance at June 20, 2021.
10
   
Two Fiscal Quarters of 2021
 
   
Carrying
Amount
           
Carrying
Amount
 
   
January 3,
       
Unrealized
   
June 20,
 
   
2021
   
Purchases
   
Gain
   
2021
 
Investments
  $40,000   $40,000   $2,500   $82,500 

 
At December 29, 2019
 
   
Fair Value Estimated Using
 
 
Carrying
Amount
  
Level 1
Inputs
  
Level 2
Inputs
  
Level 3
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
   
—  
   
—  
 
Company management
The estimated the approximate fair values of the 2015 fixed rate notes, the 2017 fixed and floating rate notes, the 2018 fixed rate notes and the 2019 fixed rate notes as follows:
 
June 14, 2020
  
December 29, 2019
 
 
Principal Amount
  
Fair Value
  
Principal Amount
  
Fair Value
 
2015
Ten-Year
Fixed Rate Notes
 $
770,000
  $
813,120
  $
774,000
  $
804,960
 
2017 Five-Year Fixed Rate Notes
  
585,000
   
587,340
   
588,000
   
588,588
 
2017
Ten-Year
Fixed Rate Notes
  
975,000
   
1,042,275
   
980,000
   
1,017,240
 
2017 Five-Year Floating Rate Notes
  
292,500
   
287,820
   
294,000
   
294,000
 
2018
7.5-Year
Fixed Rate Notes
  
417,563
   
441,782
   
419,688
   
431,439
 
2018
9.25-Year
Fixed Rate Notes
  
393,000
   
424,047
   
395,000
   
414,355
 
2019
Ten-Year
Fixed Rate Notes
  
671,625
   
699,833
   
675,000
   
675,675
 
TheCompany’s fixed and floating rate notes are classified as Level 2 measurements, as the Company estimates the fair value amount by using available market information. The Company obtained quotes from two separate brokerage firms that are knowledgeable about the Company’s fixed and floating rate notes and, at times, trade these notes. The Company also performed its own internal analysis based on the information gathered from public markets, including information on notes that are similar to those of the Company. However, considerable judgment is required to interpret market data to estimate fair value. Accordingly, the fair value estimates presented are not necessarily indicative of the amount that the Company or the debtholders could realize in a current market exchange. The use of different assumptions and/or estimation methodologies may have a material effect on the estimated fair values stated above.
below.
11

Management estimated the approximate fair values of the 2015 fixed rate notes, the 2017 fixed and floating rate notes, the 2018 fixed rate notes, the 2019 fixed rate notes and the 2021 fixed rate notes as follows:
   
June 20, 2021
   
January 3, 2021
 
   
Principal Amount
   
Fair Value
   
Principal Amount
   
Fair Value
 
2015
Ten-Year
Fixed Rate Notes
  $764,000   $802,200   $766,000   $809,662 
2017 Five-Year Fixed Rate Notes
   —      —      582,000    582,582 
2017
Ten-Year
Fixed Rate Notes
   967,500    1,032,323    970,000    1,035,960 
2017 Five-Year Floating Rate Notes
   —      —      291,000    291,000 
2018
7.5-Year
Fixed Rate Notes
   414,375    433,022    415,438    437,456 
2018
9.25-Year
Fixed Rate Notes
   390,000    422,370    391,000    422,280 
2019
Ten-Year
Fixed Rate Notes
   666,563    715,222    668,250    712,355 
2021
7.5-Year
Fixed Rate Notes
   850,000    872,950    —      —   
2021
Ten-Year
Fixed Rate Notes
   1,000,000    1,042,000    —      —   
The Company’s variable funding notes are a variable rate loan, and the fair value of this loan approximates book value based on the borrowing rates currently available for variable rate loans obtained from third party lending institutions. This fair value represents a Level 2 measurement. The Company had $58.0 million ofdid not have any outstanding borrowings under its variable funding notes at June 14, 2020 and, subsequent to the second quarter of 2020, repaid $15.0 million of these outstanding borrowings. The Company did 0t have any outstanding borrowings under its variable funding notes as of December 29, 2019.20, 2021 or January 3, 2021.
The fair values in the table above represent the fair value of such notes at June 14, 2020 and December 29, 2019. In light of the
COVID-19
pandemic (discussed further in Note 11), these fair values fluctuated significantly during the second quarter and may continue to fluctuate based on market conditions and other factors.
6.7. Revenue Disclosures
Contract Liabilities
Contract liabilities
primarily
consist of deferred franchise fees and deferred development fees. Changes in
deferred franchise fees and deferred development fees
for the two fiscal quarters of 2021 and the two fiscal quarters of 2020 were as follows:
 
Two Fiscal Quarters
 
Ended
 
 
June 14,
2020
  
June 16,
2019
 
Deferred franchise fees and deferred development fees at beginning of period $
20,463
  $
19,900
 
Revenue recognized during the period
  
(2,793
)  
(2,630
)
New deferrals due to cash received and other
  
3,092
   
1,807
 
         
Deferred franchise fees and deferred development fees at end of period $
20,762
  $
19,077
 
         
11

   
Two Fiscal Quarters Ended
 
   
June 20,
   
June 14,
 
   
2021
   
2020
 
Deferred franchise fees and deferred development fees at beginning of period
  $19,090   $20,463 
Revenue recognized during the period
   (2,691   (2,793
New deferrals due to cash received and other
   3,805    3,092 
   
 
 
   
 
 
 
Deferred franchise fees and deferred development fees at end of period
  $20,204   $20,762 
   
 
 
   
 
 
 
Advertising Fund Assets
As of June 14, 2020,20, 2021, advertising fund assets, restricted of $113.1$165.1 million consisted of $84.2$147.0 million of cash
and
cash equivalents, $23.4$16.2 million of accounts receivable and $5.5$1.9 million of prepaid expenses. As of June 14, 2020, advertising fund cash
 and
cash equivalents included $4.2 million of cash contributed from Company-owned stores that had not yet been expended.
As of December 29, 2019, advertising fund assets, restricted of $105.4 million consisted of $84.0 million of cash and cash equivalents, $15.3 million of accounts receivable and $6.1 million of prepaid expenses. As of December 29, 2019,20, 2021, advertising fund cash and cash equivalents included $3.5$7.6 million of cash contributed from U.S. Company-owned stores that had not yet been expended.
7. LeaseAs of January 3, 2021, advertising fund assets, restricted of $147.7 million consisted of $115.9 million of cash and cash equivalents, $27.0 million of accounts receivable and $4.8 million of prepaid expenses. As of January 3, 2021, advertising fund cash and cash equivalents included $6.5 million of cash contributed from U.S. Company-owned stores that had not yet been expended.
s
12

8. Leases
The Company leases certain retail store and supply chain center locations, supply chain vehicles, equipment and its corporate headquarters with expiration dates through 2041.
The components of operating and finance lease cost for the second quarter and two fiscal quarters of 20202021 and the second quarter and two fiscal quarters of 20192020 were as follows:
 
Fiscal Quarter Ended
  
Two Fiscal Quarters Ended
 
 
June 14,
2020
  
June 16,
2019
  
June 14,
2020
  
June 16,
2019
 
Operating lease cost
 $
10,250
  $
9,518
  $
19,832
  $
20,314
 
Finance lease cost:
            
Amortization of
right-of-use
assets
  
451
   
255
   
700
   
509
 
Interest on lease liabilities
  
897
   
317
   
1,272
   
796
 
                 
Total finance lease cost
 $
1,348
  $
572
  $
1,972
  $
1,305
 
                 
   
Fiscal Quarter Ended
   
Two Fiscal Quarters Ended
 
   
June 20,

2021
   
June 14,

2020
   
June 20,

2021
   
June 14,

2020
 
Operating lease cost
  $10,326   $10,250   $20,750   $19,832 
Finance lease cost:
                    
Amortization of
right-of-use
assets
   1,003    451    1,922    700 
Interest on lease liabilities
   722    897    1,748    1,272 
   
 
 
   
 
 
   
 
 
   
 
 
 
Total finance lease cost
  $1,725   $1,348   $3,670   $1,972 
   
 
 
   
 
 
   
 
 
   
 
 
 
Rent expense totaled $17.9 million and
$
36.1 million in the second quarter and two fiscal quarters of 2021, respectively. Rent expense totaled $16.2 million and $32.6 million in the second quarter and two fiscal quarters of 2020, respectively, and totaled $15.9 million and $32.3 million in the second quarter and two fiscal quarters of 2019, respectively. Rent expense includes operating lease cost, as well as expense for
non-lease
components including common area maintenance, real estate taxes and insurance for the Company’s real estate leases. Rent expense also includes the variable rate per mile driven and fixed maintenance charges for the Company’s supply chain center tractors and trailers and expense for short-term rentals.
Variable rent expense and rent expense for short-term leases were immaterial for the second quarter and two fiscal quarters of 2021 and 2020, and 2019, respectively
.
respectively.
Supplemental balance sheet information related to the Company’s finance leases as of June 14, 202020, 2021 and December 29, 2019January 3, 2021 was as follows:
 
June 14,
2020
  
December 29,
2019
 
Land and buildings
 $
44,067
  $
25,476
 
Accumulated depreciation and amortization
  
(8,544
)  
(7,846
)
         
Finance lease assets, net
 $
35,523
  $
17,630
 
         
Current portion of long-term debt
 $
999
  $
1,394
 
Long-term debt, less current portion
  
36,209
   
18,263
 
         
Total principal payable on finance leases
 $
37,208
  $
19,657
 
         
   
June 20,

2021
   
January 3,

2021
 
Land and buildings
  $73,822   $68,084 
Accumulated depreciation and amortization
   (11,979   (10,049
   
 
 
   
 
 
 
Finance lease assets, net
  $61,843   $58,035 
   
 
 
   
 
 
 
 
 
 
 
 
 
 
 
 
Current portion of long-term debt
  $3,269   $2,855 
Long-term debt, less current portion
   61,697    57,700 
   
 
 
   
 
 
 
Total principal payable on finance leases
  $64,966   $60,555 
   
 
 
   
 
 
 
As of June 14, 202020, 2021 and December 29, 2019,January 3, 2021, the weighted average remaining lease term and weighted average discount rate for the Company’s operating and finance leases were as follows:
 
June 14, 2020
  
December 29, 2019
 
 
Operating
Leases
  
Finance
Leases
  
Operating
Leases
  
Finance
Leases
 
Weighted average remaining lease term
  
7 years
   
17 years
   
8 years
   
14 years
 
Weighted average discount rate
  
3.8
%  
9.1
%  
3.8
%  
11.7
%
12

   
June 20, 2021
  
January 3, 2021
 
   
Operating

Leases
  
Finance

Leases
  
Operating

Leases
  
Finance

Leases
 
Weighted average remaining lease term
   7 years   15 years   7 years   16 years 
Weighted average discount rate
   3.7  6.5  3.7  6.8
Supplemental cash flow information related to leases for the second quarter and two fiscal quarters of
2020
2021 and the second quarter and two fiscal quarters of
2019
was 2020 were as follows:
 
Fiscal Quarter Ended
  
Two Fiscal Quarters Ended
 
 
June 14,
2020
  
June 16,
2019
  
June 14,
2020
  
June 16,
2019
 
Cash paid for amounts included in the measurement of lease liabilities:
            
Operating cash flows from operating leases
 $
10,048
  $
9,398
  $
20,167
  $
20,088
 
Operating cash flows from finance leases
  
897
   
317
   
1,272
   
796
 
Financing cash flows from finance leases
  
691
   
106
   
1,040
   
261
 
Right-of-use
assets obtained in exchange for new lease obligations:
            
Operating leases
  
6,596
   
13,391
   
15,578
   
26,368
 
Finance leases
  
18,746
   
—  
   
18,746
   
—  
 
   
Fiscal Quarter Ended
   
Two Fiscal Quarters Ended
 
   
June 20,

2021
   
June 14,

2020
   
June 20,

2021
   
June 14,

2020
 
Cash paid for amounts included in the measurement of lease liabilities:
                    
Operating cash flows from operating leases
  $9,105   $10,048   $19,292   $20,167 
Operating cash flows from finance leases
   722    897    1,748    1,272 
Financing cash flows from finance leases
   593    691    1,297    1,040 
Right-of-use
assets obtained in exchange for lease obligations:
                    
Operating leases
   6,681    6,596    11,353    15,578 
Finance leases
   5,261    18,746    5,660    18,746 
13

Maturities of lease liabilities as of June 14, 202020, 2021 were as follows:
 
Operating
Leases
  
Finance
Leases
 
2020
 $
25,756
  $
1,823
 
2021
  
42,035
   
4,493
 
2022
  
39,285
   
4,544
 
2023
  
33,914
   
4,602
 
2024
  
32,365
   
4,662
 
Thereafter
  
98,854
   
53,291
 
         
Total future minimum rental commitments
  
272,209
   
73,415
 
Less – amounts representing interest
  
(36,458
)  
(36,207
)
         
Total lease liabilities
 $
235,751
  $
37,208
 
         
   
Operating

Leases
   
Finance

Leases
 
2021
  $26,194   $3,996 
2022
   43,813    7,202 
2023
   38,220    6,722 
2024
   36,928    7,181 
2025
   30,470    6,983 
Thereafter
   89,142    74,290 
   
 
 
   
 
 
 
Total future minimum rental commitments
   264,767    106,374 
Less – amounts representing interest
   (32,299   (41,408
   
 
 
   
 
 
 
Total lease liabilities
  $232,468   $64,966 
   
 
 
   
 
 
 
As of June 14, 2020,20, 2021, the Company has additional leases for one supply chain center and certain supply chain tractors and trailers that had not yet commenced with estimated future minimum rental commitments of approximately $30.4 $51.1 
million. These leases are expected to commence in 20202021 and 2022 with lease terms of up to 15
16 years. These undiscounted amounts are not included in the 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 $14.9was $11.1 million and $12.6 million as of June 14, 2020.20, 2021 and January 3, 2021, respectively. The Company does not believe these arrangements have or are likely to have a material effect on its results of operations, financial condition, revenues, expenses or liquidity.
8.9. Supplemental Disclosures of Cash Flow Information
The Company had
non-cash
investing activities related to accruals for capital expenditures of $2.5$4.6 million at June 14, 202020, 2021 and $6.9$4.3 million at December 29, 2019.January 3, 2021. The Company also had less than $0.1 million of
non-cash
investing activities related to lease incentives in the two fiscal quarters of 2021.
9. Investment in Dash Brands10. Equity Incentive Plans
The Company’s current equity incentive plan, named the Domino’s Pizza, Inc. 2004 Equity Incentive Plan (the “2004 Equity Incentive Plan”), benefits certain of the Company’s employees and members of the Company’s Board of Directors. In the second quartertwo fiscal quarters of 2020,2021, the Company granted
non-qualified
stock options, restricted stock awards, restricted stock units and performance-based restricted stock units to certain employees and members of its Board of Directors under the 2004 Equity Incentive Plan. As a subsidiaryresult of the Company acquired a
non-controlling
interest in Dash Brands for
$40.0 million. This investment is an equity investment without a readily determinable fair value and is recorded at cost with adjustments for observable changes in prices
resulting from orderly transactions for the identical or a similar investment of the same issuer
or impairments within long-term other assets in the Company’s condensed consolidated balance sheet. The Company did not record any adjustments to the carrying amountcharacteristics and types of $40.0 millionawards granted to date in 2021 under the second quarter ended June 14, 2020. The Company is contractually required to invest an additional $40.0 million in Dash Brands in the first quarter of 2021
,
assuming certain performance conditions are satisfied
. If such performance conditions are not satisfied,2004 Equity Incentive Plan, the Company has included disclosure of the nature and terms of these awards granted in the two fiscal quarters of 2021, as well as the methods used to estimate their fair values below.
The cost of all employee stock options, as well as other equity-based compensation arrangements, is reflected in the condensed consolidated statements of income based on the estimated fair value of the awards and is amortized over the requisite service period of each award. All
non-cash
compensation expense amounts are recorded in general and administrative expense.
Stock Options
Stock options granted in fiscal 2021 were granted with an exercise price equal to the market price of the Company’s common stock at the date of the grant, expire
ten years from the date of grant and generally vest over three years from the date of
grant, generally subject to the holder’s continued employment. Additionally, all stock options granted become fully exercisable upon vesting. These awards also contain provisions for accelerated vesting upon the retirement eligibility of holders that have achieved specified service and age requirements. Management estimated the fair value of each option grant using the Black-Scholes option pricing method. The risk-free interest rate is based on the estimated expected life and is estimated based on U.S. Treasury Bond rates as of the grant date. The expected life is based on several factors, including, among other things, the vesting term and contractual term as well as historical experience. The expected volatility is based principally on the historical volatility of the Company’s
 share price.
 
to make such additional investment in its discretion.
13
14

10.
Other Equity-Based Compensation Arrangements
Restricted stock awards granted to members of the Company’s Board of Directors in fiscal 2021 were granted with a fair value equal to the market price of the Company’s stock on the grant date and vest
one year
from the date of grant, generally subject to the director’s continued service. These awards also contain provisions for accelerated vesting upon the retirement eligibility of holders that have achieved specified service and age requirements.
Restricted stock units granted in fiscal 2021 were granted with a fair value equal to the market price of the Company’s stock on the grant date. These restricted stock units are separated into
3
tranches and have time-based ratable vesting conditions with the last tranche of the award vesting
three years
from the grant date, generally subject to the holder’s continued employment. These awards also contain provisions for accelerated vesting upon the retirement eligibility of holders that have achieved specified service and age requirements
.
Performance-based restricted stock units granted in fiscal 2021 were granted with a fair value equal to the market price of the Company’s stock on the grant date, adjusted for the estimated fair value of the market condition included in the award. These performance-based restricted stock units may vest
three years
from the date of grant, generally subject to the holder’s continued employment, and have time and performance-based vesting conditions which provide for potential payouts of the target award amount between
0 percent and 200
percent, based on the Company’s three-year cumulative achievement as compared to the specified target performance conditions. The performance-based restricted stock units also include provisions for a potential modifier (upward or downward) based on the Company’s cumulative
three-year
common stock performance relative to that of a
pre-established
peer group. These awards also contain provisions for accelerated vesting of the time-based vesting condition upon the retirement eligibility of holders that have achieved specified service and age requirements. Management estimated the fair value of each performance-based restricted stock unit using a Monte-Carlo simulation pricing method. The risk-free interest rate is based on the estimated expected life and is estimated based on U.S. Treasury Bond rates as of the grant date. The Monte-Carlo simulation also includes assumptions for expected volatility based principally on the historical volatility of the Company’s share price, as well
as the correlation of the Company’s share price as compared to that of the
pre-established
peer group
.
11. New Accounting Pronouncements
Recently Adopted Accounting Standard
ASU
2016-13,
Accounting Standards Update (“ASU”)
2019-12,
Financial InstrumentsIncome TaxesCredit LossesSimplifying the Accounting for Income Taxes (Topic 326)740)
In June 2016,December 2019, the Financial Accounting Standards Board (“FASB”) issued ASU
2019-12,
Income Taxes (Topic 740): Simplifying the Accounting Standard Updatefor Income Taxes (“ASU”ASU
2019-12”) 2016-13, Financial Instruments – Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments
. ASC 326 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.
, which simplifies the accounting for income taxes. ASU
2019-12
is effective for fiscal years beginning after December 15, 2020, including applicable interim periods. The Company adopted this accounting standard as of December 30, 2019,in the first dayquarter of its 2020 fiscal year, using the modified retrospective approach2021, 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
)
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 that period. An adjustment to beginning retained deficit and a corresponding adjustment to the allowance for doubtful accounts and notes receivable of approximately $1.5 million was recorded on the date of adoption, representing the remeasurement of these accounts to
the
Company’s estimate for current expected credit losses. The adjustment to beginning retained deficit was also net of a $0.4 million adjustment to deferred income 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
2019-12,
Income Taxes – Simplifying the Accounting for Income Taxes (Topic 740)
In December 2019, the FASB issued
ASU 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes
(ASU
2019-12),
which simplifies the accounting for income taxes. ASU
2019-12
is effective for fiscal years beginning after December 15, 2020, including applicable interim 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.
ASU
2020-04,
Facilitation of the Effects of Reference Rate Reform on Financial Reporting (Topic 848)
In March 2020, the FASB issued ASU
2020-04,
ASU 2020-04, Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting (“ASU
2020-04”)
, which provides temporary optional expedients and exceptions for applying generally accepted accounting principles to contracts, hedging relationships and other transactions affected by reference rate reform. TheSubsequent to the closing of the 2021 Recapitalization, the Company’s floating rate notes and variable funding notes2021 Variable Funding Notes bear interest at fluctuating interest rates based on LIBOR. IfHowever, the associated loan documents contemplate a transition from LIBOR to secured overnight financing rate (“SOFR”) in the event that LIBOR ceases to exist,exist. If the Company may needfurther needs to renegotiate its loan documents, and the Company cannot predict what alternative index would be negotiated with its lenders. ASU
2020-04
is currently effective and upon adoption may be applied prospectively to contract modifications made on or before December 31, 2022. The Company is currently assessing the impact of adopting this standard but does not expect the adoption of this guidance to have a material impact on its condensed consolidated financial statementsstatements.
.
14
15

11.
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.
During the second quarter of 2020 in the midst of
the
COVID-19
pandemic, the Company
continued to
increase its U.S. Stores revenues.
Supply Chain also remained operational, with minimal interruptions due to COVID-19 and experienced higher volumes as a result of the increases in store sales.
However, the
COVID-19
pandemic negatively impacted the Company’s International Franchise revenues due to temporary store closures
in certain markets as well as
changes in operating procedures and store hours resulting from actions taken to increase social distancing across its international markets. The Company is
closely monitoring the impact of the pandemic on all aspects of its business and is
unable at this time to predict the
continued
impact that
COVID-19
will have on its business, financial position and operating results in future periods due to numerous uncertainties.
15

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 20202021 and 20192020 second quarters referenced herein represent the twelve-week periods ended June 20, 2021 and June 14, 2020, and June 16, 2019, respectively. The 20202021 and 20192020 two fiscal quarters referenced herein represent the twenty-four-week periods ended June 20, 2021 and June 14, 2020, respectively. In this section, we discuss the results of our operations for the second quarter and June 16, 2019, respectively.two fiscal quarters of 2021 as compared to the respective periods of 2020.
Overview
Domino’s is the largest pizza company in the world based on global retail sales, with a significant business in both delivery and carryout, and more than 17,10018,000 locations in over 90 markets.markets around the world as of June 20, 2021. Founded in 1960, our roots are in convenient pizza delivery, while a significant amount of our sales also come from carryout customers. We are a highly recognized global brand, and we focus on serving neighborhoods locally through our large global network of franchise owners and U.S. Company-owned stores. We are primarily a franchisor, with approximately 98% of Domino’s stores currently owned and operated by our independent franchisees. Franchising enables an individual to be his or her own employer and maintain control over all employment-related matters and pricing decisions, while also benefiting from the strength of the Domino’s global brand and operating system with limited capital investment by us.
The Domino’s business model is straightforward: Domino’s stores handcraft and serve quality food at a competitive price, with easy ordering access and efficient service, enhanced by our technological innovations. Our hand-tossed dough is made fresh and distributed to stores around the world by us and our franchisees.
Domino’s generates revenues and earnings by charging royalties and fees to our independent franchisees. The CompanyRoyalties are ongoing
percent-of-sales
fees for use of the Domino’s
®
brand marks. We also generatesgenerate revenues and earnings by selling food, equipment and supplies to franchisees through our supply chain operations, primarily in the U.S. and Canada, and by operating a number of our ownCompany-owned 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® Pizza
®
brand to master franchisees. These master franchisees are charged with developing their geographical area, and they canmay profit by
sub-franchising
and selling ingredientsfood and equipment to those
sub-franchisees,
as well as by running pizza stores directly.stores. We believe that everyone in the system can benefit, including the end consumer, who can feed their familypurchase Domino’s menu items for themselves and their family conveniently and economically.
Our financial results are driven largely by
The Domino’s business model can yield strong returns for our franchise owners and our Company-owned stores. It can also yield significant cash flows to us, through a consistent franchise royalty payment and supply chain revenue stream, with moderate capital expenditures. We have historically returned cash to shareholders through dividend payments and share repurchases. These factors emphasize our focus on our stakeholders, including our customers, team members, franchisees, communities and shareholders.
Second Quarter of 2021 Highlights
Global retail sales, excluding foreign currency impact (which includes total retail sales at our franchiseCompany-owned and Company-owned stores. Changes infranchised stores worldwide), increased 17.1% as compared to 2020. U.S. retail sales are driven by changesincreased 7.4% and international retail sales, excluding foreign currency impact, increased 29.5% as compared to 2020.
Same store sales increased 3.5% in our U.S. stores and increased 13.9% in our international stores.
Revenues increased 12.2%.
Income from operations increased 16.7%.
Net income decreased 1.7%.
Diluted earnings per share increased 2.3%.
Two Fiscal Quarters of 2021 Highlights
Global retail sales, excluding foreign currency impact, increased 15.6% as compared to 2020. U.S. retail sales increased 11.1% and international retail sales, excluding foreign currency impact, increased 20.6% as compared to 2020.
Same store sales increased 8.1% in our U.S. stores and increased 12.8% in our international stores.
Revenues increased 12.4%.
Income from operations increased 18.2%.
Net income decreased 2.5%.
Diluted earnings per share increased 0.2%.
16

During the second quarter and two fiscal quarters of 2021, we experienced global retail sales growth and U.S. and international same store sales growth. We believe our commitment to value, convenience, quality and new products continues to keep consumers engaged with the brand. We also continued our strong U.S. and international same store sales performance with 41 straight quarters of positive U.S. same store sales and 110 straight quarters of positive international same store counts.sales. We monitor bothcontinued to experience sustained increases in U.S. and international same store sales during the second quarter and two fiscal quarters of these metrics very closely,2021 resulting from evolving consumer trends during the
COVID-19
pandemic. Additionally, our U.S. supply chain experienced higher volumes from the increases in U.S. retail sales in the second quarter and two fiscal quarters of 2021. Our international retail sales in the second quarter of 2021 were also benefited by the reopening and resumption of normal store hours at certain of our international franchised stores that had been temporarily closed for portions of the second quarter of 2020 as they directly impacta result of the
COVID-19
pandemic. Our U.S. and international same store sales growth has been pressured by our revenues and profits, andfortressing strategy, which includes increasing store concentration in certain markets where we strive to consistently increase both metrics. Retail sales drive royalty payments from franchisees,compete, as well as from aggressive competitive activity.
We continued our global expansion with the opening of 238 net stores in the second quarter of 2021, bringing our
year-to-date
total to 413 net store openings. We had 35 net stores open in the U.S. and 203 net stores open internationally during the second quarter of 2021.
Overall, we believe our continued global store growth, along with our sales growth, emphasis on technology, operations, and marketing initiatives, have combined to strengthen our brand.
Statistical Measures
The tables below outline certain statistical measures we utilize to analyze our performance. This historical data is not necessarily indicative of results to be expected for any future period.
Global Retail Sales Growth (excluding foreign currency impact)
Global retail sales growth (excluding foreign currency impact) is a commonly used statistical measure in the quick-service restaurant industry that is important to understanding performance. Global retail sales growth refers to total worldwide retail sales at Company-owned store and supply chain revenues. Retailfranchise stores. We believe global retail sales information is useful in analyzing revenues because franchisees pay royalties and, in the U.S., advertising fees that are primarily impacted bybased on a percentage of franchise retail sales. We review comparable industry global retail sales information to assess business trends and to track the strengthgrowth of the Domino’s Pizza® brand,Pizza brand. In addition, supply chain revenues are directly impacted by changes in franchise retail sales in the resultsU.S. and Canada. Retail sales for franchise stores are reported to us by our franchisees and are not included in our revenues. Global retail sales growth, excluding foreign currency impact, is calculated as the change of our extensive advertising through various media channels,international local currency global retail sales against the impactcomparable period of technological innovationthe prior year.
Second
Quarter

of 2021
Second
Quarter

of 2020
Two Fiscal
Quarters

of 2021
Two Fiscal
Quarters

of 2020
U.S. stores
+7.4+19.9+11.1+12.4
International stores (excluding foreign currency impact)
+29.5(3.4)% +20.6+1.8
Total (excluding foreign currency impact)
+17.1+8.1+15.6+7.0
Same Store Sales Growth
Same store sales growth is a commonly used statistical measure in the quick-service restaurant industry that is important to understanding performance. Same store sales growth is calculated by including only sales from stores that also had sales in the comparable weeks of both years. International same store sales growth is calculated similarly to U.S. same store sales growth. Changes in international same store sales are reported on a constant dollar basis which reflects changes in international local currency sales.
Second
Quarter

of 2021
Second
Quarter

of 2020
Two Fiscal
Quarters

of 2021
Two Fiscal
Quarters

of 2020
U.S. Company-owned stores
(2.6)% +16.9+1.6+10.4
U.S. franchise stores
+3.9+16.0+8.5+8.7
U.S. stores
+3.5+16.1+8.1+8.8
International stores (excluding foreign currency impact)
+13.9+1.3+12.8+1.4
17

Store Growth Activity
Store counts and digital ordering, our abilitynet store growth are commonly used statistical measures in the quick-service restaurant industry that are important to execute our strong and proven business model and the overall global economic environment.understanding performance.
 
Second Quarter
of 2020
  
Second Quarter
of 2019
  
Two Fiscal
Quarters of 2020
  
Two Fiscal
Quarters of 2019
 
Global retail sales growth (versus prior year period, excluding foreign currency impact)
  
+8.1
%     
+8.4
%     
+7.0
%     
+8.4
%   
Same store sales growth (1):
                        
U.S. Company-owned stores
  
+16.9
%     
+2.1
%     
+10.4
%     
+2.6
%   
U.S. franchise stores
  
+16.0
%     
+3.1
%     
+8.7
%     
+3.5
%   
                                 
U.S. stores
  
+16.1
%     
+3.0
%     
+8.8
%     
+3.5
%   
International stores (excluding foreign currency impact)
  
+1.3
%     
+2.4
%     
+1.4
%     
+2.1
%   
Store counts (at end of period):
                        
U.S. Company-owned stores
  
346
      
333
                
U.S. franchise stores
  
5,849
      
5,612
                
                                 
U.S. stores
  
6,195
      
5,945
                
International stores
  
10,978
      
10,369
                
                                 
Total stores (2)
  
17,173
      
16,314
                
                                 
Income statement data:
                        
Total revenues
 $
920.0
   
100.0
% $
811.6
   
100.0
% $
1,793.1
   
100.0
% $
1,647.6
   
100.0
%
Cost of sales
  
562.9
   
61.2
%  
495.0
   
61.0
%  
1,095.9
   
61.1
%  
1,008.7
   
61.2
%
General and administrative
  
88.1
   
9.5
%  
89.2
   
11.0
%  
176.6
   
9.9
%  
178.9
   
10.9
%
U.S. franchise advertising
  
105.4
   
11.5
%  
88.5
   
10.9
%  
201.3
   
11.2
%  
177.6
   
10.8
%
                                 
Income from operations
  
163.6
   
17.8
%  
138.9
   
17.1
%  
319.4
   
17.8
%  
282.4
   
17.1
%
Interest expense, net
  
(39.1
)  
(4.3
)%  
(32.9
)  
(4.0
)%  
(77.6
)  
(4.3
)%  
(67.3
)  
(4.0
)%
                                 
Income before provision for income taxes
  
124.5
   
13.5
%  
106.0
   
13.1
%  
241.8
   
13.5
%  
215.1
   
13.1
%
Provision for income taxes
  
5.8
   
0.6
%  
13.6
   
1.7
%  
1.5
   
0.1
%  
30.1
   
1.9
%
                                 
Net income
 $
118.7
   
12.9
% $
92.4
   
11.4
% $
240.3
   
13.4
% $
185.0
   
11.2
%
                                 
   
U.S.

Company-

owned

Stores
   
U.S.

Franchise

Stores
  
Total

U.S.

Stores
  
International
Stores
  
Total
 
Store count at March 28, 2021
   364    6,027   6,391   11,428   17,819 
Openings
   2    37   39   217   256 
Closings (1)
   —      (4  (4  (14  (18
  
 
 
   
 
 
  
 
 
  
 
 
  
 
 
 
Store count at June 20, 2021
   366    6,060   6,426   11,631   18,057 
  
 
 
   
 
 
  
 
 
  
 
 
  
 
 
 
Second quarter 2021 net store growth
   2    33   35   203   238 
  
 
 
   
 
 
  
 
 
  
 
 
  
 
 
 
Trailing four quarters net store growth
   20    211   231   653   884 
  
 
 
   
 
 
  
 
 
  
 
 
  
 
 
 
(1)Same store sales growth is calculated for a given period by including only sales from stores that had sales in the comparable weeks of both years. International same store sales growth is calculated similarly to U.S. same store sales growth. Changes in international same store sales are reported excluding foreign currency impacts, which reflect changes in international local currency sales.
(2)Temporary store closures are not treated as store closures and affected stores are included in the ending store count. Based on information reported to us by our master franchisees, we estimate that as of June 20, 2021, there were fewer than 175 international stores temporarily closed.
16
Income Statement Data

   
Second Quarter

of 2021
  
Second Quarter

of 2020
  
Two Fiscal Quarters

of 2021
  
Two Fiscal Quarters

of 2020
 
U.S. Company-owned stores
  $116.6   $114.2   $229.3   $216.6  
U.S. franchise royalties and fees
   126.8    113.1    251.3    217.8  
Supply chain
   603.0    539.1    1,171.3    1,051.8  
International franchise royalties and fees
   69.7    48.1    136.5    105.6  
U.S. franchise advertising
   116.3    105.4    227.7    201.3  
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
 
Total revenues
   1,032.5   100.0  920.0   100.0  2,016.2   100.0  1,793.1   100.0
U.S. Company-owned stores
   88.0    87.8    173.8    167.2  
Supply chain
   536.8    475.1    1,045.6    928.7  
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
 
Total cost of sales
   624.8   60.5  562.9   61.2  1,219.3   60.5  1,095.9   61.1
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
 
Operating margin
   407.7   39.5  357.1   38.8  796.8   39.5  697.2   38.9
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
 
General and administrative
   100.4   9.7  88.1   9.5  191.7   9.5  176.6   9.9
U.S. franchise advertising
   116.3   11.3  105.4   11.5  227.7   11.3  201.3   11.2
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
 
Income from operations
   190.9   18.5  163.6   17.8  377.4   18.7  319.4   17.8
Other income
   —     0.0  —     0.0  2.5   0.1  —     0.0
Interest expense, net
   (45.8  (4.4)%   (39.1  (4.3)%   (85.2  (4.2)%   (77.6  (4.3)% 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
 
Income before provision for income taxes
   145.1   14.1  124.5   13.5  294.7   14.6  241.8   13.5
Provision for income taxes
   28.5   2.8  5.8   0.6  60.4   3.0  1.5   0.1
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
 
Net income
  $116.6   11.3 $118.7   12.9 $234.4   11.6 $240.3   13.4
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
 
During the second quarter and two fiscal quarters of 2020, we experienced global retail sales growth. Beginning at the end of the first quarter of 2020 through the date of this filing, customer ordering behavior during the
COVID-19
pandemic has resulted in a significant increase in U.S. same store sales. We did not experience significant temporary closures in our U.S. business. Additionally, our supply chain experienced minimal disruptions due to
COVID-19
and experienced higher volumes from the increases in store sales. However, during the same period, the
COVID-19
pandemic negatively impacted our international retail sales growth and same store sales growth due to temporary store closures and changes in operating procedures and store hours resulting from actions taken to increase social distancing across certain of the markets in which we operate. Our U.S. and international same store sales growth was also partially offset by our current strategy to increase store concentration in certain markets where we compete.
During the second quarter and two fiscal quarters of 2020, we also continued our global expansion with the opening of 84 net new stores in the second quarter of 2020, bringing our
year-to-date
total to 153. We opened 45 net new stores internationally and 39 net new stores in the U.S. during the second quarter of 2020. The
COVID-19
pandemic has had a negative impact on anticipated store openings in our international business due to delays in approvals and government restrictions in certain of the markets that our master franchisees operate. Overall, we believe this global store growth, along with our strong sales, emphasis on technology, operations, and marketing initiatives, have combined to strengthen our brand.
Global retail sales, excluding foreign currency impact, which includes total retail sales at franchise and Company-owned stores worldwide, increased 8.1% in the second quarter of 2020 and increased 7.0% in the two fiscal quarters of 2020. These increases were driven by U.S. and international same store sales growth as well as an increase in U.S. store counts during the trailing four quarters, but were partially offset by a significant number of temporary store closures in certain of our international markets as a result of the
COVID-19
pandemic. During the second quarter of 2020, we reached a peak of approximately 2,400 temporary store closures across our international markets. Based on information reported to us by our master franchisees, we estimate that as of June 14, 2020, there were fewer than 700 international stores temporarily closed. U.S. same store sales growth reflected a shift in consumer behavior across the restaurant industry toward delivery and carryout throughout the
COVID-19
pandemic as well as the sustained positive sales trends and the continued success of our products, marketing and technology platforms.
Total revenues increased $108.4 million, or 13.4%, in the second quarter of 2020 and increased $145.5 million, or 8.8%, in the two fiscal quarters of 2020. These increases were due primarily to higher global retail sales, which resulted in higher supply chain and U.S. franchise revenues. These increases in revenues were partially offset by lower international franchise revenues due to the temporary store closures in certain of our markets resulting from the
COVID-19
pandemic and the negative impact of changes in foreign currency exchange rates. U.S. Company-owned stores revenues increased in the second quarter of 2020 due to same store sales growth, but decreased in the two fiscal quarters of 2020 due to the sale of 59 Company-owned stores to certain of our existing U.S. franchisees during the second quarter of 2019 (the “2019 Store Sale”). These changes in revenues are described in more detail below.
Income from operations increased $24.7 million, or 17.8%, in the second quarter of 2020 and increased $37.0 million, or 13.1%, in the two fiscal quarters of 2020. These increases were primarily driven by higher royalty revenues from our U.S. franchised stores, as well as higher supply chain margins. Lower international franchise royalty revenues resulting primarily from temporary store closures in certain of our markets due to the
COVID-19
pandemic partially offset these increases.
Net income increased $26.3 million, or 28.5%, in the second quarter of 2020 and increased $55.3 million, or 29.9%, in the two fiscal quarters of 2020, driven by higher income from operations and lower tax expense resulting primarily from higher excess tax benefits from equity-based compensation. This increase in net income was partially offset by higher interest expense resulting from a higher average debt balance following our recapitalization transaction completed on November 19, 2019 (the “2019 Recapitalization”) and borrowings under our variable funding notes in the second quarter of 2020.
Revenues
 
Second Quarter
of 2020
  
Second Quarter
of 2019
  
Two Fiscal
Quarters of 2020
  
Two Fiscal
Quarters of 2019
 
U.S. Company-owned stores
 $
114.2
   
12.4
% $
105.0
   
12.9
% $
216.6
   
12.1
% $
228.5
   
13.9
%
U.S. franchise royalties and fees
  
113.1
   
12.3
%  
95.6
   
11.8
%  
217.8
   
12.1
%  
192.3
   
11.7
%
Supply chain
  
539.1
   
58.6
%  
467.6
   
57.6
%  
1,051.8
   
58.7
%  
939.7
   
57.0
%
International franchise royalties and fees
  
48.1
   
5.2
%  
55.0
   
6.8
%  
105.6
   
5.9
%  
109.6
   
6.6
%
U.S. franchise advertising
  
105.4
   
11.5
%  
88.5
   
10.9
%  
201.3
   
11.2
%  
177.6
   
10.8
%
                                 
Total revenues
 $
920.0
   
100.0
% $
811.6
   
100.0
% $
1,793.1
   
100.0
% $
1,647.6
   
100.0
%
                                 
   
Second Quarter

of 2021
  
Second Quarter

of 2020
  
Two Fiscal Quarters

of 2021
  
Two Fiscal Quarters

of 2020
 
U.S. Company-owned stores
  $116.6    11.3 $114.2    12.4 $229.3    11.3 $216.6    12.1
U.S. franchise royalties and fees
   126.8    12.3  113.1    12.3  251.3    12.5  217.8    12.1
Supply chain
   603.0    58.4  539.1    58.6  1,171.3    58.1  1,051.8    58.7
International franchise royalties and fees
   69.7    6.7  48.1    5.2  136.5    6.8  105.6    5.9
U.S. franchise advertising
   116.3    11.3  105.4    11.5  227.7    11.3  201.3    11.2
  
 
 
   
 
 
  
 
 
   
 
 
  
 
 
   
 
 
  
 
 
   
 
 
 
Total revenues
  $1,032.5    100.0 $920.0    100.0 $2,016.2    100.0 $1,793.1    100.0
  
 
 
   
 
 
  
 
 
   
 
 
  
 
 
   
 
 
  
 
 
   
 
 
 
Revenues primarily consist of retail sales from our Company-owned stores, royalties, advertising contributions royalties and fees from our U.S. franchised stores, royalties and fees from our international franchised stores and sales of food, equipment and supplies from our supply chain centers to substantially all of our U.S. franchised stores and certain international franchised stores. Company-owned store and franchised store revenues may vary from period to period due to changes in store count mix. Supply chain revenues may vary significantly from period to period as a result of fluctuations in commodity prices as well as the mix of products we sell.
1718

U.S. Stores Revenues
 
Second Quarter
of 2020
 
Second Quarter
of 2019
 
Two Fiscal
Quarters of 2020
 
Two Fiscal
Quarters of 2019
   
Second Quarter

of 2021
 
Second Quarter

of 2020
 
Two Fiscal Quarters

of 2021
 
Two Fiscal Quarters

of 2020
 
U.S. Company-owned stores
 $
114.2
   
34.3
% $
105.0
   
36.3
% $
216.6
   
34.1
% $
228.5
   
38.2
%  $116.6    32.4 $114.2    34.3 $229.3    32.4 $216.6    34.1
U.S. franchise royalties and fees
  
113.1
   
34.0
%  
95.6
   
33.1
%  
217.8
   
34.2
%  
192.3
   
32.1
%   126.8    35.3  113.1    34.0  251.3    35.5  217.8    34.2
U.S. franchise advertising
  
105.4
   
31.7
%  
88.5
   
30.6
%  
201.3
   
31.7
%  
177.6
   
29.7
%   116.3    32.3  105.4    31.7  227.7    32.1  201.3    31.7
                          
 
   
 
  
 
   
 
  
 
   
 
  
 
   
 
 
U.S. stores
 $
332.8
   
100.0
% $
289.1
   
100.0
% $
635.7
   
100.0
% $
598.4
   
100.0
%  $359.8    100.0 $332.8    100.0 $708.4    100.0 $635.7    100.0
                          
 
   
 
  
 
   
 
  
 
   
 
  
 
   
 
 
U.S. Company-Owned Stores
Revenues from U.S. Company-owned store operations increased $9.2$2.4 million, or 8.8%2.1%, in the second quarter of 2020 due primarily to same store sales growth, partially offset by lower revenues resulting from the 2019 Store Sale. Revenues from U.S. Company-owned store operations decreased $11.92021, and increased $12.7 million, or 5.2%5.9%, in the two fiscal quarters of 20202021, due primarily to an increase in the 2019 Store Sale, partially offset by higher revenuesaverage number of U.S. Company-owned stores open during the period, resulting from net store growth. Same store sales growth in the two fiscal quarters of 2021 also benefited U.S. Company-owned stores revenues. The decrease in U.S. Company-owned same store sales growth.in the second quarter of 2021 partially offset the increase in U.S. Company-owned stores revenues.
U.S. Company-owned same store sales decreased 2.6% in the second quarter of 2021 and increased 1.6% in the two fiscal quarters of 2021. U.S. Company-owned same store sales increased 16.9% in the second quarter of 2020 and increased 10.4% in the two fiscal quarters of 2020. Company-owned same store sales increased 2.1% in the second quarter of 2019 and increased 2.6% in the two fiscal quarters of 2019.
U.S. Franchise Royalties and Fees
Revenues from U.S. franchise royalties and fees increased $17.5$13.7 million, or 18.3%12.1%, in the second quarter of 20202021, and increased $25.5$33.5 million, or 13.3%15.4%, in the two fiscal quarters of 20202021, due primarily to higher same store sales growth and an increase in the average number of U.S. franchised stores open during the period, due toresulting from net store growth and, to a lesser extent, the 2019 Store Sale.growth. U.S. franchise royalties were also negatively impacted by $3.0 million in the second quarter and two fiscal quarters of 2020 related toas a result of funding we provided to our franchisees foras part of an effort to donate 10 million slices of pizza to people and organizations at the frontlines of the
COVID-19
pandemic in the franchisees’ local communities. U.S. franchise royalties and fees further benefited in both the second quarter and the two fiscal quarters of 2021 from an increase in revenues from fees paid by franchisees for the use of our technology platforms.
U.S. franchise same store sales increased 3.9% in the second quarter of 2021 and increased 8.5% in the two fiscal quarters of 2021. U.S. franchise same store sales increased 16.0% in the second quarter of 2020 and increased 8.7% in the two fiscal quarters of 2020. U.S. franchise same store sales increased 3.1% in the second quarter of 2019 and increased 3.5% in the two fiscal quarters of 2019.
U.S. Franchise Advertising
Revenues from U.S. franchise advertising increased $16.9$10.9 million, or 19.1%10.3%, in the second quarter of 20202021, and increased $23.7$26.4 million, or 13.3%13.1%, in the two fiscal quarters of 20202021, due primarily to higher same store sales growth and an increase in the average number of U.S. franchised stores open during the period, due toresulting from net store growth and, to a lesser extent, the 2019 Store Sale.growth.
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. franchised stores and certain international franchised stores. Supply chain revenues increased $71.6$63.9 million, or 15.3%11.8%, in the second quarter of 20202021, and increased $112.2$119.5 million, or 11.9%11.4%, in the two fiscal quarters of 2020. These increases were2021, due primarily due to higher volumes from increased orders resulting from U.S. franchise retail sales growth. Our market basket pricing to stores decreased 1.2%increased 5.5% during the second quarter of 2020,2021, which resulted in an estimated $6.4$29.7 million decreaseincrease in supply chain revenue.revenues. Our market basket pricing to stores increased 0.9%2.9% during the two fiscal quarters of 2020,2021, which resulted in an estimated $10.7$31.7 million increase in supply chain revenue.revenues.
International Franchise Royalties and Fee Revenues
Revenues from international franchise royalties and fees decreased $6.9increased $21.6 million, or 12.5%45.0%, in the second quarter of 20202021, and decreased $4.0increased $30.9 million, or 3.6%29.3%, in the two fiscal quarters of 2020. These decreases were2021 due primarily to temporaryhigher retail sales resulting from same store closuressales growth and an increase in the average number of international franchised stores open during the period, resulting from net store growth. These increases in retail sales were also benefited by the reopening and resumption of normal store hours and operating procedures at certain markets andof the Company’s international franchised stores that had been temporarily closed or affected by changes in operating procedures and store hours resulting from actions taken to increase social distancing across certainfor portions of the markets in which we operate due tosecond quarter of 2020 as a result of the
COVID-19
pandemic. The negativepositive impact of changes in foreign currency exchange rates of $2.3$4.0 million and $6.1 million in the second quarter of 20202021 and $3.7 milliontwo fiscal quarters of 2021, respectively, also contributed to the increases in international franchise royalties and fees revenues.
Excluding the impact of foreign currency exchange rates, international franchise same store sales increased 13.9% in the second quarter of 2021 and increased 12.8% in the two fiscal quarters of 2020 also contributed to the decrease in international royalties and fees revenues. These decreases were partially offset by same store sales growth.2021. Excluding the impact of changes in foreign currency exchange rates, international franchise same store sales increased 1.3% in the second quarter of 2020 and increased 1.4% in the two fiscal quarters of 2020. Excluding the impact of changes in foreign currency exchange rates, international franchise same store sales increased 2.4% in the second quarter of 2019 and increased 2.1% in the two fiscal quarters of 2019.
1819

Cost of Sales / Operating Margin
 
Second Quarter
of 2020
  
Second Quarter
of 2019
  
Two Fiscal
Quarters of 2020
  
Two Fiscal
Quarters of 2019
 
Consolidated revenues
 $
920.0
   
100.0
% $
811.6
   
100.0
% $
1,793.1
   
100.0
% $
1,647.6
   
100.0
%
Consolidated cost of sales
  
562.9
   
61.2
%  
495.0
   
61.0
%  
1,095.9
   
61.1
%  
1,008.7
   
61.2
%
                                 
Consolidated operating margin
 $
357.1
   
38.8
% $
316.7
   
39.0
% $
697.2
   
38.9
% $
639.0
   
38.8
%
                                 
   
Second Quarter

of 2021
  
Second Quarter

of 2020
  
Two Fiscal Quarters

of 2021
  
Two Fiscal Quarters

of 2020
 
Consolidated revenues
  $1,032.5    100.0 $920.0    100.0 $2,016.2    100.0 $1,793.1    100.0
Consolidated cost of sales
   624.8    60.5  562.9    61.2  1,219.3    60.5  1,095.9    61.1
  
 
 
   
 
 
  
 
 
   
 
 
  
 
 
   
 
 
  
 
 
   
 
 
 
Consolidated operating margin
  $407.7    39.5 $357.1    38.8 $796.8    39.5 $697.2    38.9
  
 
 
   
 
 
  
 
 
   
 
 
  
 
 
   
 
 
  
 
 
   
 
 
 
CostConsolidated cost of sales consists primarily of U.S. 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 $40.4$50.6 million, or 12.8%14.2%, in the second quarter of 20202021, and increased $58.2$99.6 million, or 9.1%14.3%, in the two fiscal quarters of 20202021, due primarily to higher U.S.global franchise revenues and higher supply chain volumes. Lower international franchise royalties and fee revenues negatively impacted the consolidated operating margin in the second quarter and two fiscal quarters of 2020.revenues. 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 decreased 0.2increased 0.7 percentage points in the second quarter of 20202021 and increased 0.10.6 percentage points in the two fiscal quarters of 2020.2021. U.S. Company-owned store operating margin increased 1.4 percentage points in both the second quarter and the two fiscal quarters of 2021. Supply chain operating margin decreased 0.40.9 percentage points in the second quarter of 20202021 and decreased 0.21.0 percentage pointspoint in the two fiscal quarters of 2020. Supply chain operating margin increased 0.6 percentage points in the second quarter of 2020 and increased 0.3 percentage points in the two fiscal quarters of 2020.2021. These changes in operating margin are more fully discusseddescribed below.
U.S. Company-Owned StoresStore Operating Margin
 
Second Quarter
of 2020
  
Second Quarter
of 2019
  
Two Fiscal
Quarters of 2020
  
Two Fiscal
Quarters of 2019
 
Revenues
 $
114.2
   
100.0
% $
105.0
   
100.0
% $
216.6
   
100.0
% $
228.5
   
100.0
%
Cost of sales
  
87.8
   
76.9
%  
80.4
   
76.5
%  
167.2
   
77.2
%  
175.9
   
77.0
%
                                 
Store operating margin
 $
26.4
   
23.1
% $
24.6
   
23.5
% $
49.3
   
22.8
% $
52.5
   
23.0
%
                                 
   
Second Quarter

of 2021
  
Second Quarter

of 2020
  
Two Fiscal Quarters

of 2021
  
Two Fiscal Quarters

of 2020
 
Revenues
  $116.6    100.0 $114.2    100.0 $229.3    100.0 $216.6    100.0
Cost of sales
   88.0    75.5  87.8    76.9  173.8    75.8  167.2    77.2
  
 
 
   
 
 
  
 
 
   
 
 
  
 
 
   
 
 
  
 
 
   
 
 
 
Store operating margin
  $28.6    24.5 $26.4    23.1 $55.6    24.2 $49.3    22.8
  
 
 
   
 
 
  
 
 
   
 
 
  
 
 
   
 
 
  
 
 
   
 
 
 
The U.S. Company-owned store operating margin (which does not include certain store-level costs such as royalties and advertising) increased $1.8$2.2 million, or 7.2%8.2%, in the second quarter of 20202021, due primarily to lower labor costs. U.S. Company-owned store operating margin increased $6.3 million, or 12.6%, in the two fiscal quarters of 2021, due primarily to higher same store sales partially offset by the 2019 Store Sale and higherlower labor costs. The U.S. Company-owned store operating margin decreased $3.2 million, or 6.1%, in the two fiscal quarters of 2020 due primarily to the 2019 Store Sale, partially offset by same store sales growth. Operating margin in both the second quarter and the two fiscal quarters of 2020 was also negatively impacted by higher labor costs, partially offset by higher same store sales. As a percentage of store revenues, the U.S. Company-owned store operating margin decreased 0.4increased 1.4 percentage points in both the second quarter of 2020 and decreased 0.2 percentage points in the two fiscal quarters of 2020.2021. These changes in operating margin as a percentage of revenues are discussed in more detail below.
Food costs decreased 1.2increased 1.8 percentage points to 25.7%27.5% in the second quarter of 20202021, due to higher food prices. Food costs increased 0.6 percentage points to 27.3% in the two fiscal quarters of 2021, due to higher food prices, partially offset by the leveraging of higher same store sales and lower food prices. Foodsales.
Labor costs decreased 0.34.5 percentage points to 26.7%27.4% in the second quarter of 2021, and decreased 2.6 percentage points to 27.9% in the two fiscal quarters of 20202021, due primarily to additional bonus pay incurred during the leveragingsecond quarter of higher same store sales, partially offset by higher food prices.2020 for frontline team members during the
COVID-19
pandemic.
LaborInsurance costs increased 2.50.6 percentage points to 31.9%3.9% in the second quarter of 20202021, and increased 0.3 percentage points to 30.5%3.6% in the two fiscal quarters of 2020 due primarily to additional bonus pay provided to front-line team members during the
COVID-192021.
pandemic. These increases were partially offset by reduced labor costs as a percentage of store revenues resulting from the 2019 Store Sale due to the high labor rates in the market in which the sold stores operated.
Occupancy costs decreased 0.9 percentage points to 6.9% in the second quarter of 2020 and decreased 0.2increased 0.5 percentage points to 7.4% in the second quarter of 2021, and increased 0.3 percentage points to 7.7% in the two fiscal quarters of 20202021, due primarily to lowerhigher rent costs.expense.
Supply Chain Operating Margin
 
Second Quarter
of 2020
  
Second Quarter
of 2019
  
Two Fiscal
Quarters of 2020
  
Two Fiscal
Quarters of 2019
 
Revenues
 $
539.1
   
100.0
% $
467.6
   
100.0
% $
1,051.8
   
100.0
% $
939.7
   
100.0
%
Cost of sales
  
475.1
   
88.1
%  
414.6
   
88.7
%  
928.7
   
88.3
%  
832.7
   
88.6
%
                                 
Supply chain operating margin
 $
64.0
   
11.9
% $
53.0
   
11.3
% $
123.2
   
11.7
% $
106.9
   
11.4
%
                                 
   
Second Quarter

of 2021
  
Second Quarter

of 2020
  
Two Fiscal Quarters

of 2021
  
Two Fiscal Quarters

of 2020
 
Revenues
  $603.0    100.0 $539.1    100.0 $1,171.3    100.0 $1,051.8    100.0
Cost of sales
   536.8    89.0  475.1    88.1  1,045.6    89.3  928.7    88.3
  
 
 
   
 
 
  
 
 
   
 
 
  
 
 
   
 
 
  
 
 
   
 
 
 
Supply chain operating margin
  $66.2    11.0 $64.0    11.9 $125.7    10.7 $123.2    11.7
  
 
 
   
 
 
  
 
 
   
 
 
  
 
 
   
 
 
  
 
 
   
 
 
 
19

The supplySupply chain operating margin increased $11.0$2.2 million, or 20.9%3.4%, in the second quarter of 20202021, and increased $16.3$2.5 million, or 15.2%2.1%, in the two fiscal quarters of 2020,2021, primarily driven by higher volumes from increased store orders. As a percentage of supply chain revenues, the supply chain operating margin increased 0.6decreased 0.9 percentage points in the second quarter of 20202021, and increased 0.3decreased 1.0 percentage pointspoint in the two fiscal quarters of 20202021, primarily due primarily to lowerhigher insurance, food and delivery costs. The increasecosts, as well as higher depreciation and amortization expense as a result of the new supply chain facilities that were opened in margin forfiscal 2020. These decreases in the two fiscal quarters of 2020 was partially offset by higher food costssupply chain operating margin as a percentage of supply chain revenues.revenues were partially offset by lower labor costs in the second quarter of 2021 as a result of higher sales leverage.
20

General and Administrative Expenses
General and administrative expenses decreased $1.1increased $12.3 million, or 1.3%14.1%, in the second quarter of 20202021, and decreased $2.3increased $15.1 million, or 1.3%8.6%, in the two fiscal quarters of 2020,2021, driven primarily by lower travel expenses,higher labor costs, including variable performance-based compensation and
non-cash
equity-based compensation expense. These increases were partially offset by higherlower professional fees. A $2.4 million
pre-tax
loss related tofees in both the 2019 Store Sale also contributed to the decreases.
second quarter and two fiscal quarters of 2021.
U.S. Franchise Advertising Expenses
U.S. franchise advertising expenses increased $16.9$10.9 million, or 19.1%10.3%, in the second quarter of 20202021, and increased $23.7$26.4 million, or 13.3%13.1%, in the two fiscal quarters of 2020 due to higher2021, consistent with the increase in U.S. franchise advertising revenues. U.S. franchise advertising costs are accrued and expensed when the related U.S. franchise advertising revenues are recognized, as our consolidated
not-for-profit
advertising fund is obligated to expend such revenues on advertising and these revenues cannot be used for general corporate purposes.
Other Income
Other income was $2.5 million in the two fiscal quarters of 2021, representing the unrealized gain recorded on the Company’s investment in Dash Brands (Note 6) resulting from the observable change in price from the valuation of the additional $40.0 million investment made in the first quarter of 2021.
Interest Expense, Net
Interest expense, net increased $6.2$6.7 million, or 18.6%17.2%, in the second quarter of 20202021, and increased $10.3$7.6 million, or 15.3%9.8%, in the two fiscal quarters of 20202021. These increases were driven primarily by higher average debt balancesborrowings resulting from our recapitalization transaction completed on April 16, 2021 (the “2021 Recapitalization”), offset in part by a lower weighted average borrowing rate in the 2019second quarter and two fiscal quarters of 2021. In connection with the 2021 Recapitalization, and borrowings under the Company’s variable funding noteswe recorded approximately $2.3 million of incremental interest expense in the second quarter of 2020.2021, primarily representing the expense for approximately $2.0 million of the remaining unamortized debt issuance costs associated with the 2017 five-year fixed rate notes and 2017 five-year floating rate notes, and approximately $0.3 million of additional interest expense incurred on the 2017 five-year fixed rate notes and 2017 five-year floating rate notes subsequent to the closing of the 2021 Recapitalization but prior to the repayment of the 2017 five-year fixed rate notes and 2017 five-year floating rate notes, resulting in the payment of interest on both the 2017 five-year fixed rate notes and 2017 five-year floating rate notes and the 2021 Notes (as defined below) for a short period of time.
The Company’s weighted average borrowing rate decreased to 3.8% in both the second quarter of 2021 and two fiscal quarters of 2021 from 3.9% in both the second quarter of 2020 and the two fiscal quarters of 2020, from 4.1% in both the second quarter and the two fiscal quarters of 2019, resulting from the lower interest rates on the debt outstanding in 2020 as compareddue to the same periods in 2019.2021 Recapitalization.
Provision for Income Taxes
Provision for income taxes decreased $7.8Income tax expense increased $22.7 million, or 57.2%388.6%, in the second quarter of 20202021, and decreased $28.6increased $58.9 million, or 94.9%3,865.2%, in the two fiscal quarters of 20202021, due primarily to higherlower excess tax benefits on equity-based compensation, which are recorded as a reduction to the income tax provision, partially offset byas well as higher
pre-tax
income. The Company recognized $23.0$3.4 million in excess tax benefits in the second quarter of 20202021 as compared to $9.9$23.0 million in the second quarter of 20192020, and recognized $53.4$4.3 million in excess tax benefits in the two fiscal quarters of 20202021 as compared to $18.4$53.4 million in the two fiscal quarters of 2019, resulting2020. These decreases in excess tax benefits resulted from a significant increasedecrease in stock options exercised in 2020the second quarter and two fiscal quarters of 2021 as compared to 2019.the same periods in 2020. The effective tax rate decreasedincreased to 19.6% during the second quarter of 2021 as compared to 4.7% in the second quarter of 2020 and decreased2020. The effective tax rate increased to 20.5% during the two fiscal quarters of 2021 as compared to 0.6% in the two fiscal quarters of 2020 as compared to 12.9% in the second quarter of 2019 and 14.0% in the two fiscal quarters of 2019.2020.
COVID-19
Impact
As of July 8, 2020, nearly all of our U.S. stores remain open, with dining rooms closed and stores deploying contactless delivery and carryout solutions. Based on information reported to us by our master franchisees, we estimate that as of July 8, 2020, there were fewer than 600 international stores temporarily closed.21
As discussed further in “Liquidity and Capital Resources”, given the market uncertainty arising from
COVID-19,
we took a precautionary measure and borrowed $158.0 million under our variable funding notes during the second quarter of 2020. We subsequently repaid $100.0 million of these borrowings during the second quarter of 2020. Subsequent to the second quarter of 2020, we repaid an additional $15.0 million under our variable funding notes.
In the two fiscal quarters of 2020, we made significant investments in our team members as a result of the
COVID-19
pandemic, including through enhanced sick pay policies and bonuses for our hourly corporate store and supply chain team members. While it is not possible at this time to estimate the full continued impact that
COVID-19
could have on our business, the continued spread of
COVID-19
and the measures taken by the governments of 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.
20

Segment Income
We evaluate the performance of our reportable segments and allocate resources to them based on earnings before interest, taxes, depreciation, amortization and other, referred to as Segment Income. Segment Income for each of our reportable segments is summarized in the table below. Other Segment Income primarily includes corporate administrative costs that are not allocable to an operating segment, including labor, computer expenses, professional fees, travel and entertainment, rent, insurance and other corporate administrative costs.
   
Second
Quarter

of 2021
   
Second
Quarter

of 2020
   
Two Fiscal
Quarters

of 2021
   
Two Fiscal
Quarters

of 2020
 
U.S. Stores
  $111.8   $102.9   $219.3   $191.2 
Supply Chain
   58.6    56.9    111.1    108.3 
International Franchise
   56.4    36.4    110.8    79.9 
Other
   (9.6   (12.6   (15.7   (20.7
U.S. Stores
U.S. stores Segment Income increased $8.9 million, or 8.7%, in the second quarter of 2021, primarily due to the $13.7 million increase in U.S. franchise royalties and fees revenues, as discussed above. U.S. stores Segment Income increased $28.1 million, or 14.7%, in the two fiscal quarters of 2021, primarily due to the $33.5 million increase in U.S. franchise royalties and fees revenues as discussed above. U.S. franchise revenues do not have a cost of sales component, so changes in these revenues have a disproportionate effect on U.S. stores Segment Income. U.S. franchise advertising costs are accrued and expensed when the related U.S. franchise advertising revenues are recognized and had no impact on U.S. stores Segment Income. The $2.2 million and $6.3 million increases in U.S. Company-owned store operating margins in the second quarter and two fiscal quarters of 2021 discussed above also contributed to the increases in U.S. stores Segment Income for the respective periods. These increases in U.S. stores Segment Income were partially offset by increased investments in technological initiatives for the respective periods.
Supply Chain
Supply chain Segment Income increased $1.7 million, or 3.0%, in the second quarter of 2021, primarily due to the $2.2 million increase in operating margin described above. Supply chain Segment Income increased $2.8 million, or 2.6%, in the two fiscal quarters of 2021, primarily due to the $2.5 million increase in operating margin described above.
International Franchise
International franchise Segment Income increased $20.0 million or 54.8%, in the second quarter of 2021, due primarily to the $21.6 million increase in international franchise royalties and fees revenues discussed above. The increase in international franchise Segment Income was partially offset by increased investments in technological initiatives in the second quarter of 2021. International franchise Segment Income increased $30.9 million, or 38.7%, in the two fiscal quarters of 2021, due primarily to the $30.9 million increase in international franchise royalties and fees revenues discussed above. International franchise revenues do not have a cost of sales component, so changes in these revenues have a disproportionate effect on international franchise Segment Income.
Other
Other Segment Income increased $3.0 million, or 23.3%, in the second quarter of 2021, and increased $5.0 million, or 24.0%, in the two fiscal quarters of 2021, due primarily to higher corporate administrative costs allocated to our segments as compared to 2020, as well as lower professional fees. The increase in allocated costs in the second quarter and two fiscal quarters of 2021 was due primarily to higher investments in technological initiatives to support technology for our U.S. and international franchise stores. Higher labor costs, including variable performance-based compensation expense, partially offset the increases in other Segment Income.
22

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 45multiple inventory turns per year.month. In addition, our sales are not typically seasonal, which further limits our working capital requirements. TheThese factors, coupled with 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, reducesreduce our working capital amounts. As of June 14, 2020,20, 2021, we had working capital of $224.8$234.2 million, excluding restricted cash and cash equivalents of $238.2$184.7 million, advertising fund assets, restricted, of $113.1$165.1 million and advertising fund liabilities of $108.9$157.5 million. Working capital includes total unrestricted cash and cash equivalents of $248.0$292.1 million.
Our primary source of liquidity is cash flows from operations and availability of borrowings under our variable funding notes. During the second quarter and two fiscal quarters of 2020,2021, we experienced increases in both U.S. and international same store sales versus the comparable periods in the prior year. Additionally, our internationalU.S. and U.S.international businesses grew store counts in the second quarter and the two fiscal quarters of 2020.2021. These factors contributed to our continued ability to generate positive operating cash flows. As of June 20, 2021, we had a variable funding note facility which allowed for advances of up to $200.0 million of Series
2021-1
Variable Funding Senior Secured Notes,
Class A-1
Notes and certain other credit instruments, including letters of credit (the “2021 Variable Funding Notes”). The letters of credit are primarily related to our casualty insurance programs and certain supply chain center leases. As of June 20, 2021, we had no outstanding borrowings and $157.5 million of available borrowing capacity under our 2021 Variable Funding Notes, net of letters of credit issued of $42.5 million.
We expect to continue to use our unrestricted cash and cash equivalents, cash flows from operations, excess cash from our recapitalization transactions and available borrowings under our variable funding notes to, among other things, fund working capital requirements, invest in our core business, service our indebtedness, pay dividends and repurchase shares of our common stock. We did not have any material commitments for capital expenditures as of June 14, 2020.
Based upon our current level of operations and anticipated growth, we believe that the cash generated from operations, our current unrestricted cash and cash equivalents and amounts available under our variable funding note facility will be adequate to meet our anticipated debt service requirements, capital expenditures and working capital needs for at least the next twelve months. Our ability to continue to fund these items and continue to reduceservice our debt could be adversely affected by the occurrence of any of the events described under “Risk Factors” in our filings with the Securities and Exchange Commission. 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 rateoutstanding senior notes and to service, extend or refinance our variable funding notes will be subject to future economic conditions and to financial, business and other factors, many of which are beyond our control.
Restricted Cash
As of June 14, 2020,20, 2021, we had approximately $188.7$136.9 million of restricted cash held for future principal and interest payments and other working capital requirements of our asset-backed securitization structure, (including $58.0 million related to our variable funding notes), $47.3$47.5 million of restricted cash held in a three-month interest reserve as required by the related debt agreements and $2.2$0.3 million of other restricted cash for a total of $238.2$184.7 million of restricted cash and cash equivalents. As of June 14, 2020,20, 2021, we also held $84.2$147.0 million of advertising fund restricted cash and cash equivalents, which can only be used for activities that promote the Domino’s Pizza brand.
Long-Term Debt
As of June 14, 2020,20, 2021, we had approximately $4.17$5.08 billion of totallong-term debt, of which $43.0$54.8 million was classified as a current liability. OurAs of June 20, 2021, our fixed and floating rate notes from the recapitalizations we completed in 2021, 2019, 2018, 2017 and 2015 havehad original scheduled principal payments of $21.0$25.8 million in the remainder of 2020, $42.0 million in 2021, $897.0 million in 2022, $33.0$51.5 million in each of 2022, 2023 and 2024, $1.15$1.17 billion in 2025, $20.8$39.3 million in 2026, $1.28$1.31 billion in 2027, $6.8$811.5 million in 2028, and $614.3$625.9 million in 2029.2029, $10.0 million in 2030 and $905.0 million in 2031.
In accordance with our debt agreements, the payment of principal on the outstanding senior notes may be suspended if our leverage ratio is less than or equal to 5.0x total debt to adjusted EBITDA, as defined in the related agreements, and no
catch-up
provisions are applicable. As of June 14,the fourth quarter of 2020, we had $58.0 milliona leverage ratio of less than 5.0x, and accordingly, did not make the previously scheduled debt amortization payment on our then-outstanding notes beginning in the first quarter of 2021. Accordingly, all principal amounts of our outstanding borrowings under our variable funding notes and $102.0 million available for borrowing, netwere classified as long-term debt in the consolidated balance sheet as of letters of credit issued of $40.0 million.January 3, 2021. Subsequent to the endclosing of the 2021 Recapitalization, we had a leverage ratio of greater than 5.0x, and accordingly, resumed making the previously scheduled debt amortization payment on our outstanding notes beginning in the second quarter of 2020,2021.
23

2021 Recapitalization
During the second quarter of 2021, on April 16, 2021 (the “closing date”), we repaid $15.0completed the 2021 Recapitalization in which certain of our subsidiaries issued new notes pursuant to our asset-backed securitization structure. The new notes consist of $850.0 million Series
2021-1
2.662% Fixed Rate Senior Secured Notes,
Class A-2-I
with an anticipated term of 7.5 years (the “2021
A-2-I
Fixed Rate Notes”), and $1.0 billion Series
2021-1
3.151% Fixed Rate Senior Secured Notes,
Class A-2-II
with an anticipated term of 10 years (collectively with the 2021
A-2-I
Fixed Rate Notes, the “2021 Notes”) in an offering exempt from registration under the Securities Act of 1933, as amended. As of June 20, 2021, the 2021 Notes had scheduled principal payments of $9.3 million in 2021, $18.5 million in each of 2022 through 2027, $804.8 million in 2028, $10.0 million in each of 2029 and 2030 and $905.0 million in 2031. Gross proceeds from the issuance of the 2021 Notes were $1.85 billion.
Concurrently, certain of our subsidiaries also issued the 2021 Variable Funding Notes, which allow for advances of up to $200.0 million of theseSeries
2021-1
Variable Funding Senior Secured Notes,
Class A-1
Notes and certain other credit instruments, including letters of credit. The 2021 Variable Funding Notes were undrawn on the closing date. In connection with the issuance of our 2021 Variable Funding Notes, our previous variable funding note facility was canceled.
A portion of proceeds from the 2021 Recapitalization was used to repay the remaining $291.0 million in outstanding borrowingsprincipal under our variable funding2017 five-year floating rate notes and $582.0 million in outstanding principal under our 2017 five-year fixed rate notes. AsThe proceeds were also used to
pre-fund
a portion of July 8, 2020,the interest payable on the 2021 Notes and pay transaction fees and expenses. In connection with the repayment of the 2017 five-year floating rate notes and 2017 five-year fixed rate notes, we had $117.0expensed approximately $2.0 million for the remaining unamortized debt issuance costs associated with these notes. Additionally, in connection with the 2021 Recapitalization, we capitalized $14.9 million of available borrowings under our $200.0 million variable funding notes, netdebt issuance costs, which are being amortized into interest expense over the 7.5 and
10-year
expected terms of letters of credit issued of $40.0 million and borrowings outstanding of $43.0 million. The letters of credit are primarily related to our casualty insurance programs and supply chain center leases. Borrowings under the variable funding notes are available to fund our working capital requirements, capital expenditures and, subject to other limitations, other2021 Notes. We used the remaining proceeds for general corporate purposes, including dividend payments andwhich primarily included a $1.0 billion accelerated share repurchases.
repurchase agreement (the “ASR Agreement”) with a counterparty. The ASR Agreement is described in additional detail below.
Share Repurchase Programs
Our share repurchase programs have historically been funded by excess operating cash flows, excess proceeds from our recapitalization transactions and borrowings under our variable funding notes. The Company’s Board of Directors authorized a share repurchase program to repurchase up to $1.0 billion of the Company’s common stock on October 4, 2019.
21

During the first week of the first quarter of 2020,2021, we repurchased and retired 271,06465,870 shares of our common stock in open market repurchases under our Board of Directors-approved share repurchase program for a total of approximately $79.6$25.0 million. We did notOur Board of Directors authorized a new share repurchase program to repurchase up to $1.0 billion of our common stock on February 24, 2021.
On April 30, 2021, we entered into the ASR Agreement. Pursuant to the terms of the ASR Agreement, on May 3, 2021, we used a portion of the proceeds from the 2021 Recapitalization to pay the counterparty $1.0 billion in cash and retire anyreceived and retired 2,012,596 shares of our common stock. Final settlement of the ASR Agreement occurred on July 21, 2021. In connection with the ASR Agreement, we received and retired a total of 2,250,786 shares of our common stock duringat an average price of $444.29, including the remainder2,012,596 shares of the first quarter orour common stock received and retired during the second quarter of 2020. As of June 14, 2020, the Company had a total remaining authorized amount for share repurchases of approximately $326.6 million.
2021.
DuringSubsequent to the end of the second quarter, on July 20, 2021, our Board of 2019, we repurchased and retired 12,295 sharesDirectors authorized a new share repurchase program to repurchase up to $1.0 billion of our common stock understock. This repurchase program replaces our Board of Directors-approvedpreviously approved $1.0 billion share repurchase program, for a total of approximately $3.3 million. Duringwhich was fully utilized in connection with the two fiscal quarters of 2019, we repurchased and retired 45,844 shares of our common stock under our Board of Directors-approved share repurchase program for a total of approximately $11.5 million.ASR Agreement.
Dividends
On March 30, 2020, the Company paid a $0.78 dividend to its shareholders of record as of March 13, 2020. During the second quarter of 2020, on April 21, 2020, the Company’s27, 2021, our Board of Directors declared a $0.78$0.94 per share quarterly dividend on itsour outstanding common stock for shareholders of record as of June 15, 2020,2021, which was paid on June 30, 2020.2021. We had approximately $35.5 million accrued for common stock dividends at June 20, 2021.
Subsequent to the end of the second quarter, on July 15, 2020, the Company’s20, 2021, our Board of Directors declared a $0.78$0.94 per share quarterly dividend on itsour outstanding common stock for shareholders of record as of September 15, 20202021, to be paid on September 30, 2020.2021.
24

Sources and Uses of Cash
The following table illustrates the main components of our cash flows:
         
(In millions)
 
Two Fiscal Quarters
of 2020
  
Two Fiscal Quarters
of 2019
 
Cash Flows Provided By (Used In)
      
Net cash provided by operating activities
 $
211.8
  $
201.6
 
Net cash used in investing activities
  
(74.2
)  
(2.5
)
Net cash used in financing activities
  
(50.9
)  
(114.3
)
Exchange rate changes
  
(0.3
)  
0.1
 
         
Change in cash and cash equivalents, restricted cash and cash equivalents
 $
86.4
  $
84.8
 
         
 
(In millions)  
Two Fiscal Quarters

of 2021
   
Two Fiscal Quarters

of 2020
 
Cash Flows Provided By (Used In)
    
Net cash provided by operating activities
  $295.4   $211.8 
Net cash used in investing activities
   (72.9   (74.2
Net cash used in financing activities
   (101.2   (50.9
Exchange rate changes
   0.3    (0.3
  
 
 
   
 
 
 
Change in cash and cash equivalents, restricted cash and cash equivalents
  $121.6   $86.4 
  
 
 
   
 
 
 
Operating Activities
Cash provided by operating activities increased $10.2$83.6 million in the two fiscal quarters of 20202021 primarily due to an increase in net income of $55.3 million and higher
non-cash
amounts of $0.7 million. These increases were partially offset by a $45.7 million negativethe positive impact of changes in operating assets and liabilities of $51.5 million. The positive impact of changes in operating assets and liabilities was primarily related to an increasethe timing of collections on accounts receivable and payments for accrued liabilities in our inventory balance during 20202021 as compared to 2019 resulting from increased supply chain volumes and additional inventory for supplies related to the
COVID-19
pandemic. An2020. The increase in our accounts receivable balance during 2020 as compared to 2019 due primarily to the increase in supply chain volumes and the timing of receipts also negatively impacted cash provided by operating activities during 2020was also due to a $30.6 million positive impact of changes in advertising fund assets and liabilities, restricted, in 2021 as compared to 2019.2020 due to the receipt of advertising contributions outpacing payments for advertising activities.
Investing Activities
Cash used in investing activities was $74.2$72.9 million in the two fiscal quarters of 2020,2021, which primarily consisted primarily of thean additional investment in Dash Brands (Note 6) of $40.0 million and $33.2 million of capital expenditures of $33.7 million (driven primarily by investments in technological initiatives, supply chain centers and corporate stores)store operations).
Cash used in investing activities was $2.5 million in the two fiscal quarters of 2019, which consisted primarily of $25.7 million of capital expenditures (driven primarily by investments in technological initiatives and supply chain centers). This use of cash was partially offset by maturities of advertising fund investments, restricted of $15.2 million and proceeds from the sale of assets of $8.2 million, which primarily related to the 2019 Store Sale.
Financing Activities
Cash used in financing activities was $50.9$101.2 million in the two fiscal quarters of 2020. We borrowed $158.0 million under our variable funding notes during the two fiscal quarters of 2020 and repaid $122.0 million of long-term debt (of which $100.0 million2021, primarily related to the repaymentrepurchase of borrowings under our variable funding notes). We also repurchased approximately $79.6 million$1.025 billion in common stock under our Board of Directors-approved share repurchase program in(including $1.0 billion under the first weekASR Agreement), repayments of 2020, madelong-term debt and finance lease obligations of $882.5 million, dividend payments to our shareholders of $30.3$36.4 million and made tax paymentscash paid for restricted stock upon vestingfinancing costs as part of $1.8the 2021 Recapitalization of $14.9 million. Of the total amount of repayments of long-term debt and finance lease obligations, $873.0 million represents the repayment of the remaining principal under our then-outstanding 2017 five-year floating rate notes and 2017 five-year fixed rate notes as part of the 2021 Recapitalization. These uses of cash were partially offset by proceeds from the exerciseour 2021 Recapitalization of stock options of $24.8 million.
Cash used in financing activities was $114.3 million in the two fiscal quarters of 2019, primarily related to repayments of long-term debt of $82.9 million (of which $65.0 million related to the repayment of borrowings under our variable funding notes), dividend payments to our shareholders of $26.7 million, purchases of common stock of $11.5 million under our Board of Directors-approved share repurchase program$1.85 billion and tax payments for restricted stock upon vesting of $2.6 million. These uses of cash were partially offset by proceeds from the exercise of stock options of $9.3$9.0 million.
Critical Accounting Policies and Estimates
For a description of the Company’s critical accounting policies and estimates, refer to “Part II—Item 7—Management’s Discussion and Analysis of Financial Condition and Results of Operations” in the 2020 Form
10-K.
The Company considers its most significant accounting policies and estimates to be revenue recognition, long-lived assets, insurance and legal matters, share-based payments and income taxes. There have been no material changes to the Company’s critical accounting policies and estimates since January 3, 2021.
22
25

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, our ability to service our indebtedness, our future cash flows, our operating performance, trends in our business and other descriptions of future events reflect the Company’s expectations based upon currently available information and data. While we believe these expectations and projections are based on reasonable assumptions, such forward-looking statements are inherently subject to risks, uncertainties and assumptions. Important factors that could cause actual results to differ materially from our expectations are more fully described under the section headed “Risk Factors” in this filing and in our other filings with the Securities and Exchange Commission, including under the section headed “Risk Factors” in our 20192020 Form
10-K10-K.
and in our Quarterly Report on Form
10-Q
for the quarterly period ended March 22, 2020. Actual results may differ materially from those expressed or implied in the forward-looking statements as a result of various factors, including but not limited to: our substantial increased indebtedness as a result of our recapitalization transactions and our ability to incur additional indebtedness or refinance or renegotiate key terms of that indebtedness in the future; the impact a downgrade in our credit rating may have on our business, financial condition and results of operations; our future financial performance and our ability to pay principal and interest on our indebtedness; our ability to manage difficulties associated with or related to the
COVID-19
pandemic and the effects of
COVID-19
on our business and supply chain; 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, 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; new product, digital ordering and concept developments by us, and other food-industry competitors; our ability to maintain good relationships with and attract new franchisees, and franchisees’ ability to profitablysuccessfully manage their operations without negatively impacting our royalty payments and fees or our brand’s reputation; our ability to successfully implement cost-saving strategies; our ability and that of our franchisees to successfully operate in the current and future credit environment; changes in the level of consumer spending given general economic conditions, including interest rates, energy prices and consumer confidence; our ability and that of our franchisees to open new restaurants and keep existing restaurants in operation; changes in operating expenses resulting from changes in prices of food (particularly cheese), fuel and other commodity costs, labor, utilities, insurance, employee benefits and other operating costs; the impact that widespread illness, health epidemics or general health concerns, severe weather conditions and natural disasters may have on our business and the economies of the countries where we operate; changes in foreign currency exchange rates; changes in income tax rates; our ability to retain or replace our executive officers and other key members of management and our ability to adequately staff our stores and supply chain centers with qualified personnel; our ability to find and/or retain suitable real estate for our stores and supply chain centers; changes in government legislation and regulations, including changes in laws and regulations regarding information privacy, payment methods consumer protection and 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 threatening us or our franchisees; the effect of war, terrorism, catastrophic events or climate change; our ability to pay dividends and repurchase shares; changes in consumer preferences,tastes, spending and traffic patterns and demographic trends; actions by activist investors; changes in accounting policies; and adequacy of our insurance coverage. In light of these risks, uncertainties and assumptions, the forward-looking events discussed in this filing might not occur. All forward-looking statements speak only as of the date of this filing and should be evaluated with an understanding of their inherent uncertainty. Except as required under federal securities laws and the rules and regulations of the Securities and Exchange Commission, or other applicable law, we will not undertake, and specifically disclaim, any obligation to publicly update or revise any forward-looking statements to reflect events or circumstances arising after the date of this filing, whether as a result of new information, future events or otherwise. You are cautioned not to place undue reliance on the forward-looking statements included in this filing or that may be made elsewhere from time to time by, or on behalf of, us. All forward-looking statements attributable to us are expressly qualified by these cautionary statements.
26
23

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 have issued fixed and floating rate notes and entered into variable funding notes and, at June 14, 2020,20, 2021, we are exposed to interest rate risk on borrowings under our floating rate notes and variable funding notes. As of June 14, 2020,20, 2021, we had $58.0 million ofno outstanding borrowings under our variable funding notes. Subsequent to the second quarter of 2020, we repaid $15.0 million of these borrowings. 2021 Variable Funding Notes.
Our floating rate notes and our variable funding notes2021 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. If2023. Our 2021 Variable Funding Notes loan documents contemplate a transition from LIBOR to secured overnight financing rate (“SOFR”) in the event that LIBOR ceases to exist, we may need to renegotiate our loan documentsexist. Because the composition and we cannot predict what alternative indexcharacteristics of SOFR are not the same as those of LIBOR, in such event, there can be no assurance that SOFR will perform the same way LIBOR would be negotiated with our lenders.have at any given time or for any applicable period. As a result, our interest expense could increase, in which event we may have difficulties making interest payments and funding our other fixed costs, and our available cash flow for general corporate requirements may be adversely affected.
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.risk, although we have not done so historically. We do not engage in speculative transactions or hold or issue financial instruments for trading purposes. In instances when we use fixed pricing agreements with our suppliers, these agreements cover our physical commodity needs, are not
net-settled
and are accounted for as normal purchases.
We have exposure to various foreign currency exchange rate fluctuations for revenues generated by our operations outside the U.S., which can adversely impact our net income and cash flows. Approximately 6.7% of our total revenues in the second quarter of 2021, approximately 6.8% of our total revenues in the two fiscal quarters of 2021, approximately 5.2% of our total revenues in the second quarter of 2020 and approximately 5.9% of our total revenues in the two fiscal quarters of 2020and approximately 6.8% of our total revenues in the second quarter of 2019 and approximately 6.6% of our total revenues in the two fiscal quarters 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 $9.3$12.1 million in the two fiscal quarters of 2020.
2021.
Item 4. Controls and Procedures.
Management, with the participation of the Company’s Chief Executive Officer (who is also serving as the Company’s interim principal financial officer), Richard E. Allison, Jr., 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
 and
 15d-15(e)
 under the Securities Exchange Act of 1934, as amended) as of the end of the period covered by this report. Based on that evaluation, Mr. Allison and Mr. Lawrence concluded that the Company’s disclosure controls and procedures were effective.
During the quarterly period ended June 14, 2020,20, 2021, there were no changes in the Company’s internal controlscontrol over financial reporting as defined in
Rules
 13a-15(f)
 and
 15d-15(f)
 under the Securities and Exchange Act of 1934, as amended,15d-15(f) that
have materially affected or are reasonably likely to materially affect the Company’s internal control over financial reporting.
2427

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.
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.practices.
While we may occasionally be party to large claims, including class action suits, we do not believe that any existing matters, individually or in the aggregate, will materially affect our financial position, results of operations or cash flows.
Item 1A. Risk Factors.
Except as set forth below, thereThere have been no material changes with respect to those risk factors previously disclosed in Item 1A “Risk Factors” in Part I of our 20192020 Form
10-K.
Our operations have been and are expected to continue to be adversely affected by the
COVID-19
pandemic, which could adversely affect our business, financial condition and results of operations as well.
The
COVID-19
pandemic 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 business’ workforces. 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,
including offering contactless delivery and carryout options to our customers. While it is not possible at this time to estimate the full impact that
COVID-19
could have on our business going forward, 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.
25

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.
c. Purchases of Equity Securities by the Issuer and Affiliated Purchasers.
Period
 
Total Number
of Shares
Purchased (1)
  
Average Price Paid
Per Share
  
Total Number of Shares
Purchased as Part of
Publicly Announced
Program (2)
  
Maximum
Approximate Dollar
Value of Shares that
May Yet Be Purchased
Under the Program
(in thousands)
 
Period #4 (March 22, 2020 to April 19, 2020)
  
1,067
  $
336.08
   
—  
  $
326,552
 
Period #5 (April 20, 2020 to May 17, 2020)
  
967
   
359.07
   
—  
   
326,552
 
Period #6 (May 18, 2020 to June 14, 2020)
  
957
   
385.99
   
—  
   
326,552
 
                 
Total
  
2,991
  $
359.48
   
—  
  $
326,552
 
                 
Period
  
Total Number
of Shares
Purchased (1)
  
Average Price Paid
Per Share
  
Total Number of Shares
Purchased as Part of
Publicly Announced
Program (2)
  
Maximum

Approximate Dollar
Value of Shares that
May Yet Be Purchased
Under the Program
(in thousands)
 
Period #4 (March 29, 2021 to April 25, 2021)
   1,017  $373.78   —    $1,000,000 
Period #5 (April 26, 2021 to May 23, 2021)
   2,013,806(2)   434.73(3)   2,012,596(2)   —   
Period #6 (May 24, 2021 to June 20, 2021)
   945   427.25   —     —   
  
 
 
  
 
 
  
 
 
  
 
 
 
Total
   2,015,768  $412.96   2,012,596  $—   
  
 
 
  
 
 
  
 
 
  
 
 
 
(1)2,991
3,172 shares in the second quarter of 20202021 were purchased as part of the Company’s employee stock payroll deduction planplan. During the second quarter, the shares were purchased at an average price of $359.48.$412.96.
(2)As of June 14, 2020,
On February 24, 2021, the Company had aCompany’s Board of Directors-approvedDirectors authorized a new share repurchase program forto repurchase up to $1.0 billion of ourthe Company’s common stock, of which $326.6 million remained available for future purchases of 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.
On April 30, 2021, the Company entered into the ASR Agreement. Pursuant to the terms of the ASR Agreement, on May 3, 2021, the Company received and retired 2,012,596 shares of its common stock. Final settlement of the ASR Agreement occurred on July 21, 2021. In connection with the ASR Agreement, the Company received and retired a total of 2,250,786 shares of its common stock at an average price of $444.29, including the 2,012,596 shares of its common stock received and retired during the second quarter of 2021.
Subsequent to the end of the second quarter, on July 20, 2021, the Company’s Board of Directors authorized a new share repurchase program to repurchase up to $1.0 billion of the Company’s common stock. This repurchase program replaces the Company’s previously approved $1.0 billion share repurchase program that was authorized by the Company’s Board of Directors on February 24, 2021 which was fully utilized in connection with the ASR Agreement.
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.
(3)
The average price paid per share of $434.73 for Period #5 (April 26, 2021 to May 23, 2021) excludes the average price paid per share for shares purchased under the ASR Agreement. Because the total number of shares ultimately delivered was not determined until the end of the applicable purchase period in the third quarter of 2021, the average purchase price per share was not determinable until July 21, 2021, subsequent to the end of the second quarter.
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Item 3. Defaults Upon Senior Securities.
None.
Item 4. Mine Safety Disclosures.
Not applicable.
Item 5. Other Information.
None.
Item 6. Exhibits.
Exhibit
Number
  
Description
    4.1  Sixth Supplement to the Amended and Restated Base Indenture, dated as of April 16, 2021, by and among Domino’s Pizza Master Issuer LLC, Domino’s SPV Canadian Holding Company Inc., Domino’s Pizza Distribution LLC and Domino’s IP Holder LLC, each as Co-Issuer, and Citibank, N.A., as Trustee and Securities Intermediary (Incorporated by reference to Exhibit 4.1 to the registrant’s Current Report on Form 8-K filed on April 20, 2021 (the “April 2021 8-K”)).
    4.2  Supplemental Indenture, dated April 16, 2021, among Domino’s Pizza Master Issuer LLC, Domino’s SPV Canadian Holding Company Inc., Domino’s Pizza Distribution LLC and Domino’s IP Holder LLC, each as Co-Issuer of Series 2021-1 2.662% Fixed Rate Senior Secured Notes, Class A-2-I and Series 2021-1 3.151% Fixed Rate Senior Secured Notes, Class A-2-II, and Citibank, N.A., as Trustee and Securities Intermediary (Incorporated by reference to Exhibit 4.2 to the April 2021 8-K).
  
  31.1
10.1
  Form of 2021 Employee Stock Option Agreement under the Amended Domino’s Pizza, Inc. 2004 Equity Incentive Plan.
  10.2Form of Performance-Based Restricted Stock Unit Award Agreement under the Amended Domino’s Pizza, Inc. 2004 Equity Incentive Plan.
  10.3Form of Restricted Stock Unit Award Agreement under the Amended Domino’s Pizza, Inc. 2004 Equity Incentive Plan.
  10.4Purchase Agreement, dated April 8, 2021, among Domino’s Pizza Master Issuer LLC, Domino’s SPV Canadian Holding Company Inc., Domino’s Pizza Distribution LLC and Domino’s IP Holder LLC, each as Co-Issuer, Domino’s SPV Guarantor LLC, Domino’s Pizza Franchising LLC, Domino’s Pizza International Franchising Inc., Domino’s Pizza Canadian Distribution ULC, Domino’s RE LLC and Domino’s EQ LLC, each as Guarantor, Domino’s Pizza LLC, as manager, the Company and Domino’s Inc., as parent companies, and Guggenheim Securities, LLC and Barclays Capital Inc., as initial purchasers (Incorporated by reference to Exhibit 99.1 to the registrant’s Current Report on Form 8-K filed on April 9, 2021).
  10.5Class A-1 Note Purchase Agreement, dated April 16, 2021, among Domino’s Pizza Master Issuer LLC, Domino’s SPV Canadian Holding Company Inc., Domino’s Pizza Distribution LLC and Domino’s IP Holder LLC, each as Co-Issuer, Domino’s SPV Guarantor LLC, Domino’s Pizza Franchising LLC, Domino’s Pizza International Franchising Inc., Domino’s Pizza Canadian Distribution ULC, Domino’s RE LLC and Domino’s EQ LLC, each as Guarantor, Domino’s Pizza LLC, as manager, certain conduit investors, financial institutions and funding agents, and Coöperatieve Rabobank U.A., New York Branch, as provider of letters of credit, as swingline lender and as administrative agent (Incorporated by reference to Exhibit 10.1 to the April 2021 8-K).
  10.6Amendment No. 3 to Amended and Restated Management Agreement, dated as of April 16, 2021, among Domino’s Pizza Master Issuer LLC, certain subsidiaries of Domino’s Pizza Master Issuer LLC party thereto, Domino’s SPV Guarantor LLC, Domino’s Pizza LLC, as manager and in its individual capacity, Domino’s Pizza NS Co., and Citibank, N.A., as Trustee (Incorporated by reference to Exhibit 10.2 to the April 2021 8-K).
  10.7Amendment No. 2 to Parent Company Support Agreement dated April 16, 2021 made by Domino’s Pizza, Inc. in favor of Citibank, N.A., as Trustee (Incorporated by reference to Exhibit 10.3 to the April 2021 8-K).
  10.8Fixed Dollar Accelerated Share Repurchase Transaction Confirmation, dated April 30, 2021 (Incorporated by reference to Exhibit 10.1 to the registrant’s Current Report on Form 8-K filed on May 3, 2021).
  10.9Separation Agreement dated as of May 19, 2021 between Domino’s Pizza LLC and Stuart A. Levy.
  31.1Certification 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.
  32.1  
  31.2
  32.1
101.INS  
  32.2
101.INS
XBRL Instance Document – The instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document.
101.SCH  
101.SCH
Inline XBRL Taxonomy Extension Schema Document.
101.CAL  
101.CAL
Inline XBRL Taxonomy Extension Calculation Linkbase Document.
101.LAB  
101.LAB
Inline XBRL Taxonomy Extension Label Linkbase Document.
101.PRE  
101.PRE
Inline XBRL Taxonomy Extension Presentation Linkbase Document.
101.DEF  
101.DEF
Inline XBRL Taxonomy Extension Definition Linkbase Document.
104  
104
Cover page Interactive Data File (formatted as Inline XBRL and contained in exhibit 101).
26
29

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.
 
DOMINO’S PIZZA, INC.
(Registrant)
Date: July 16, 2020
22, 2021 
/s/ Jeffrey D. LawrenceRichard E. Allison, Jr.
 
Jeffrey D. Lawrence
Richard E. Allison, Jr.
 
Executive Vice President, Chief FinancialExecutive Officer
(Principal Executive Officer and Principal Financial Officer)
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