(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

☒

☐

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

Regulation

S-T

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

files).

Yes

☒

☐

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

non-accelerated

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

12b-2

of the Exchange Act.


Large accelerated filer	☒	Accelerated filer	☐

Non-accelerated filer	☐	Smaller reporting company	☐
☐

~~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

☐

☒

As of July ~~9, 2020,~~15, 2021, Domino’s Pizza, Inc. had ~~39,347,213~~36,854,211 shares of common stock, par value $0.01 per share, outstanding.

Table of Contents

Domino’s Pizza, Inc.

TABLE OF CONTENTS


		Page No.
PART I.	~~Page No.~~FINANCIAL INFORMATION

~~PART I.~~	~~FINANCIAL INFORMATION~~

Item 1.	Financial Statements		3

	Condensed Consolidated Balance Sheets (Unaudited) – As of June ~~14, 2020~~20, 2021 and ~~December 29, 2019~~January 3, 2021		3

	Condensed Consolidated Statements of Income (Unaudited) – Fiscal quarters and two fiscal quarters ended June ~~14, 2020~~20, 2021 and June ~~16, 2019~~14, 2020		4

	Condensed Consolidated Statements of Comprehensive Income (Unaudited) – Fiscal quarters and two fiscal quarters ended June ~~14, 2020~~20, 2021 and June ~~16, 2019~~14, 2020		5

	Condensed Consolidated Statements of Cash Flows (Unaudited) ~~– Two~~–Two fiscal quarters ended June ~~14, 2020~~20, 2021 and June ~~16, 2019~~14, 2020		6

	Notes to Condensed Consolidated Financial Statements (Unaudited)		7

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

Item 3.	Quantitative and Qualitative Disclosures About Market Risk		24 27

Item 4.	Controls and Procedures		24 27

PART II.	OTHER INFORMATION
~~PART II.~~	~~OTHER INFORMATION~~

Item 1.	Legal Proceedings		25 28

Item 1A.	Risk Factors		25 28

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds		26 28

Item 3.	Defaults Upon Senior Securities		26 29

Item 4.	Mine Safety Disclosures		26 29

Item 5.	Other Information		26 29

Item 6.	Exhibits		26 29

SIGNATURES			27 30

Table of Contents

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, 2019~~January 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.

Table of Contents

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.

Table of Contents

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.

Table of Contents

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.

Table of Contents

Domino’s Pizza, Inc. and Subsidiaries

Notes to Condensed Consolidated Financial Statements

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

June ~~14, 2020~~20, 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, 2019~~January 3, 2021 included in the Company’s ~~2019~~2020 Annual Report on Form

10-K,

filed with the Securities and Exchange Commission on February ~~20, 2020~~25, 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, 2020~~20, 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.

~~Table of Contents~~

2. Segment Information

The following table summarizes revenues ~~income from operations~~ and earnings before interest, taxes, depreciation, amortization and other, which is the measure by which the Company allocates resources to its segments and which the Company refers to as Segment Income, for each of its reportable segments. 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

Table of Contents

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

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.

~~Table of Contents~~

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 used~~following table summarizes changes in ~~calculating diluted earnings per share~~stockholders’ deficit for the second quarter ~~and~~of 2021.


	Common Stock						Additional Paid-in Capital			Retained Deficit			Accumulated Other Comprehensive Loss
	Shares			Amount			Additional Paid-in Capital			Retained Deficit			Accumulated Other Comprehensive Loss
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	)

Table of Contents

The following table summarizes changes in stockholders’ deficit for the two fiscal quarters of ~~2019 each did not include 71,180 options~~2021.


													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 ~~purchase~~Note 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

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.

Table of Contents

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 changes~~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 ~~stockholders’ deficit~~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 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 changes~~On April 30, 2021, the Company entered into

the

$1.0 billion ASR Agreement

Pursuant to the terms of the ASR Agreement, on May 3, 2021, the Company used a portion of the proceeds from the 2021 Recapitalization to pay the counterparty $1.0 billion in ~~stockholders’ deficit for~~cash and received and retired 2,012,596

shares of its common stock. Final settlement of the ~~two fiscal quarters~~ASR 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.

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.

Table of Contents

The following tables summarize the carrying amounts and ~~estimated~~ fair values of certain assets

at June

~~2020~~

20, 2021 and ~~December~~

~~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.


	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

~~Table~~Fair Value of ~~Contents~~Debt

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

~~The~~Company’s fixed and floating rate notes are classified as Level 2 measurements, as the Company estimates the fair value amount by using available market information. The Company obtained quotes from two separate brokerage firms that are knowledgeable about the Company’s fixed and floating rate notes and, at times, trade these notes. The Company also performed its own internal analysis based on the information gathered from public markets, including information on notes that are similar to those of the Company. However, considerable judgment is required to interpret market data to estimate fair value. Accordingly, the fair value estimates presented are not necessarily indicative of the amount that the Company or the debtholders could realize in a current market exchange. The use of different assumptions and/or estimation methodologies may have a material effect on the estimated fair values stated ~~above.~~

below.

Table of Contents

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 of~~did 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

~~Table of Contents~~


	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. Lease~~As 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.

Table of Contents

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 ~~2020~~2021 and the second quarter and two fiscal quarters of ~~2019~~2020 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, 2020~~20, 2021 and ~~December 29, 2019~~January 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, 2020~~20, 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
%

~~Table of Contents~~


	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

Table of Contents

Maturities of lease liabilities as of June ~~14, 2020~~20, 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 ~~2020~~2021 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 $14.9~~was $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, 2020~~20, 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 Brands~~10. 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 quarter~~two 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 ~~subsidiary~~result 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 amount~~characteristics and types of ~~$40.0 million~~awards 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.~~

Table of Contents

~~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

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 Instruments~~Income Taxes – ~~Credit Losses~~Simplifying 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 Update~~for 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 ~~day~~quarter of ~~its 2020 fiscal year, using the modified retrospective approach~~2021, 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. ~~The~~Subsequent to the closing of the 2021 Recapitalization, the Company’s ~~floating rate notes and variable funding notes~~2021 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 need~~further 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 ~~statements~~statements.

Table of Contents

~~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.~~

~~Table of Contents~~

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

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

The ~~2020~~2021 and ~~2019~~2020 second quarters referenced herein represent the twelve-week periods ended June 20, 2021 and June 14, 2020, ~~and June 16, 2019,~~ respectively. The ~~2020~~2021 and ~~2019~~2020 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 ~~17,100~~18,000 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 Company~~Royalties are ongoing

percent-of-sales

fees for use of the Domino’s

brand marks. We also ~~generates~~generate revenues and earnings by selling food, equipment and supplies to franchisees through our supply chain operations, primarily in the U.S. and Canada, and by operating a number of ~~our own~~Company-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 ~~can~~may profit by

sub-franchising

and selling ~~ingredients~~food 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 family~~purchase 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 franchise~~Company-owned and ~~Company-owned stores. Changes in~~franchised stores worldwide), increased 17.1% as compared to 2020. U.S. retail sales ~~are driven by changes~~increased 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%.

Table of Contents

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 both~~continued 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 impact~~a result of the

COVID-19

pandemic. Our U.S. and international same store sales growth has been pressured by our ~~revenues and profits, and~~fortressing 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. Retail~~franchise stores. We believe global retail sales information is useful in analyzing revenues because franchisees pay royalties and, in the U.S., advertising fees that are ~~primarily impacted by~~based on a percentage of franchise retail sales. We review comparable industry global retail sales information to assess business trends and to track the ~~strength~~growth of the Domino’s ~~Pizza® brand,~~Pizza brand. In addition, supply chain revenues are directly impacted by changes in franchise retail sales in the ~~results~~U.S. and Canada. Retail sales for franchise stores are reported to us by our franchisees and are not included in our revenues. Global retail sales growth, excluding foreign currency impact, is calculated as the change of ~~our extensive advertising through various media channels,~~international local currency global retail sales against the ~~impact~~comparable period of ~~technological innovation~~the 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	%

Table of Contents

Store Growth Activity

Store counts and ~~digital ordering, our ability~~net 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.

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	%

~~Table of Contents~~

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

Table of Contents

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 $11.9~~2021, and increased $12.7 million, or ~~5.2%~~5.9%, in the two fiscal quarters of ~~2020~~2021, due primarily to an increase in the ~~2019 Store Sale, partially offset by higher revenues~~average 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 ~~2020~~2021, and increased ~~$25.5~~$33.5 million, or ~~13.3%~~15.4%, in the two fiscal quarters of ~~2020~~2021, 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 to~~resulting 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 to~~as a result of funding we provided to our franchisees ~~for~~as part of an effort to donate 10 million slices of pizza to people and organizations at the frontlines of the

COVID-19

pandemic in the franchisees’ local communities. U.S. franchise royalties and fees further benefited in both the 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 ~~2020~~2021, and increased ~~$23.7~~$26.4 million, or ~~13.3%~~13.1%, in the two fiscal quarters of ~~2020~~2021, 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 to~~resulting 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 ~~2020~~2021, and increased ~~$112.2~~$119.5 million, or ~~11.9%~~11.4%, in the two fiscal quarters of ~~2020. These increases were~~2021, 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 ~~decrease~~increase 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 $6.9~~increased $21.6 million, or ~~12.5%~~45.0%, in the second quarter of ~~2020~~2021, and ~~decreased $4.0~~increased $30.9 million, or ~~3.6%~~29.3%, in the two fiscal quarters of ~~2020. These decreases were~~2021 due primarily to ~~temporary~~higher retail sales resulting from same store ~~closures~~sales growth and an increase in the average number of international franchised stores open during the period, resulting from net store growth. These increases in retail sales were also benefited by the reopening and resumption of normal store hours and operating procedures at certain ~~markets and~~of 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 certain~~for portions of the ~~markets in which we operate due to~~second quarter of 2020 as a result of the

COVID-19

pandemic. The ~~negative~~positive impact of changes in foreign currency exchange rates of ~~$2.3~~$4.0 million and $6.1 million in the second quarter of ~~2020~~2021 and ~~$3.7 million~~two 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

Table of Contents

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	%

~~Cost~~Consolidated 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 ~~2020~~2021, and increased ~~$58.2~~$99.6 million, or ~~9.1%~~14.3%, in the two fiscal quarters of ~~2020~~2021, 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 0.2~~increased 0.7 percentage points in the second quarter of ~~2020~~2021 and increased ~~0.1~~0.6 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 ~~0.4~~0.9 percentage points in the second quarter of ~~2020~~2021 and decreased ~~0.2~~1.0 percentage ~~points~~point 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 discussed~~described below.

U.S. Company-Owned ~~Stores~~Store 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 ~~2020~~2021, 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 ~~higher~~lower 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 0.4~~increased 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 1.2~~increased 1.8 percentage points to ~~25.7%~~27.5% in the second quarter of ~~2020~~2021, 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. Food~~sales.

Labor costs decreased ~~0.3~~4.5 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 ~~2020~~2021, due primarily to additional bonus pay incurred during the ~~leveraging~~second quarter of ~~higher same store sales, partially offset by higher food prices.~~2020 for frontline team members during the

COVID-19

pandemic.

~~Labor~~Insurance costs increased ~~2.5~~0.6 percentage points to ~~31.9%~~3.9% in the second quarter of ~~2020~~2021, 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-19~~2021.

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 0.2~~increased 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 ~~2020~~2021, due primarily to ~~lower~~higher 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	%

~~Table of Contents~~

~~The supply~~Supply chain operating margin increased ~~$11.0~~$2.2 million, or ~~20.9%~~3.4%, in the second quarter of ~~2020~~2021, 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 0.6~~decreased 0.9 percentage points in the second quarter of ~~2020~~2021, and ~~increased 0.3~~decreased 1.0 percentage ~~points~~point in the two fiscal quarters of ~~2020~~2021, primarily due ~~primarily~~ to ~~lower~~higher insurance, food and delivery ~~costs. The increase~~costs, as well as higher depreciation and amortization expense as a result of the new supply chain facilities that were opened in ~~margin for~~fiscal 2020. These decreases in the ~~two fiscal quarters of 2020 was partially offset by higher food costs~~supply 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.

Table of Contents

General and Administrative Expenses

General and administrative expenses ~~decreased $1.1~~increased $12.3 million, or ~~1.3%~~14.1%, in the second quarter of ~~2020~~2021, and ~~decreased $2.3~~increased $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 ~~higher~~lower professional ~~fees. A $2.4 million~~

~~pre-tax~~

~~loss related to~~fees 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 ~~2020~~2021, and increased ~~$23.7~~$26.4 million, or ~~13.3%~~13.1%, in the two fiscal quarters of ~~2020 due to higher~~2021, 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 ~~2020~~2021, and increased ~~$10.3~~$7.6 million, or ~~15.3%~~9.8%, in the two fiscal quarters of ~~2020~~2021. These increases were driven ~~primarily~~ by higher average ~~debt balances~~borrowings 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 ~~2019~~second quarter and two fiscal quarters of 2021. In connection with the 2021 Recapitalization, ~~and borrowings under the Company’s variable funding notes~~we 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 compared~~due to the ~~same periods in 2019.~~2021 Recapitalization.

Provision for Income Taxes

~~Provision for income taxes decreased $7.8~~Income tax expense increased $22.7 million, or ~~57.2%~~388.6%, in the second quarter of ~~2020~~2021, and ~~decreased $28.6~~increased $58.9 million, or ~~94.9%~~3,865.2%, in the two fiscal quarters of ~~2020~~2021, due primarily to ~~higher~~lower excess tax benefits on equity-based compensation, which are recorded as a reduction to the income tax provision, ~~partially offset by~~as well as higher

pre-tax

income. The Company recognized ~~$23.0~~$3.4 million in excess tax benefits in the second quarter of ~~2020~~2021 as compared to ~~$9.9~~$23.0 million in the second quarter of ~~2019~~2020, and ~~recognized $53.4~~$4.3 million in excess tax benefits in the two fiscal quarters of ~~2020~~2021 as compared to ~~$18.4~~$53.4 million in the two fiscal quarters of ~~2019, resulting~~2020. These decreases in excess tax benefits resulted from a significant ~~increase~~decrease in stock options exercised in ~~2020~~the second quarter and two fiscal quarters of 2021 as compared to ~~2019.~~the same periods in 2020. The effective tax rate ~~decreased~~increased to 19.6% during the second quarter of 2021 as compared to 4.7% in the second quarter of ~~2020 and decreased~~2020. 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.

Table of Contents

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.

Table of Contents

Liquidity and Capital Resources

Historically, we have operated with minimal positive working capital or negative working capital, primarily because our receivable collection periods and inventory turn rates are faster than the normal payment terms on our current liabilities. We generally collect our receivables within three weeks from the date of the related sale and we generally experience ~~35 to 45~~multiple inventory turns per ~~year.~~month. In addition, our sales are not typically seasonal, which further limits our working capital requirements. ~~The~~These 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, ~~reduces~~reduce 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 ~~international~~U.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 ~~reduce~~service our debt could be adversely affected by the occurrence of any of the events described under “Risk Factors” in our filings with the Securities and Exchange Commission. There can be no assurance that our business will generate sufficient cash flows from operations or that future borrowings will be available under the variable funding notes or otherwise to enable us to service our indebtedness, or to make anticipated capital expenditures. Our future operating performance and our ability to service, extend or refinance our ~~fixed and floating rate~~outstanding senior notes and to service, extend or refinance our variable funding notes will be subject to future economic conditions and to financial, business and other factors, many of which are beyond our control.

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 ~~total~~long-term debt, of which ~~$43.0~~$54.8 million was classified as a current liability. ~~Our~~As of June 20, 2021, our fixed ~~and floating~~ rate notes from the recapitalizations we completed in 2021, 2019, 2018, 2017 and 2015 ~~have~~had 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 million~~a leverage ratio of less than 5.0x, and accordingly, did not make the previously scheduled debt amortization payment on our then-outstanding notes beginning in the first quarter of 2021. Accordingly, all principal amounts of our outstanding ~~borrowings under our variable funding~~ notes ~~and $102.0 million available for borrowing, net~~were 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 ~~end~~closing of the 2021 Recapitalization, we had a leverage ratio of greater than 5.0x, and accordingly, resumed making the previously scheduled debt amortization payment on our outstanding notes beginning in the second quarter of ~~2020,~~2021.

Table of Contents

2021 Recapitalization

During the second quarter of 2021, on April 16, 2021 (the “closing date”), we ~~repaid $15.0~~completed 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 ~~these~~Series

2021-1

Variable Funding Senior Secured Notes,

Class A-1

Notes and certain other credit instruments, including letters of credit. The 2021 Variable Funding Notes were undrawn on the closing date. In connection with the issuance of our 2021 Variable Funding Notes, our previous variable funding note facility was canceled.

A portion of proceeds from the 2021 Recapitalization was used to repay the remaining $291.0 million in outstanding ~~borrowings~~principal under our ~~variable funding~~2017 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 $117.0~~expensed approximately $2.0 million for the remaining unamortized debt issuance costs associated with these notes. Additionally, in connection with the 2021 Recapitalization, we capitalized $14.9 million of ~~available borrowings under our $200.0 million variable funding notes, net~~debt 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, other~~2021 Notes. We used the remaining proceeds for general corporate purposes, ~~including dividend payments and~~which 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.~~

~~Table of Contents~~

During the first ~~week of the first~~ quarter of ~~2020,~~2021, we repurchased and retired ~~271,064~~65,870 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 not~~Our Board of Directors authorized a new share repurchase program to repurchase up to $1.0 billion of our common stock on February 24, 2021.

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

~~During~~Subsequent to the end of the second quarter, on July 20, 2021, our Board of ~~2019, we repurchased and retired 12,295 shares~~Directors authorized a new share repurchase program to repurchase up to $1.0 billion of our common ~~stock under~~stock. This repurchase program replaces our ~~Board of Directors-approved~~previously approved $1.0 billion share repurchase program, ~~for a total of approximately $3.3 million. During~~which 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’s~~27, 2021, our Board of Directors declared a ~~$0.78~~$0.94 per share quarterly dividend on ~~its~~our 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’s~~20, 2021, our Board of Directors declared a ~~$0.78~~$0.94 per share quarterly dividend on ~~its~~our outstanding common stock for shareholders of record as of September 15, ~~2020~~2021, to be paid on September 30, ~~2020.~~2021.

Table of Contents

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 ~~2020~~2021 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 negative~~the 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 increase~~the timing of collections on accounts receivable and payments for accrued liabilities in ~~our inventory balance during 2020~~2021 as compared to ~~2019 resulting from increased supply chain volumes and additional inventory for supplies related to the~~

~~COVID-19~~

~~pandemic. An~~2020. 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 2020~~was 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 ~~the~~an 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 million~~2021, primarily related to the ~~repayment~~repurchase 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 week~~ASR Agreement), repayments of ~~2020, made~~long-term debt and finance lease obligations of $882.5 million, dividend payments ~~to our shareholders~~ of ~~$30.3~~$36.4 million and ~~made tax payments~~cash paid for ~~restricted stock upon vesting~~financing costs as part of ~~$1.8~~the 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 exercise~~our 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.

Table of Contents

Forward-Looking Statements

This filing contains various forward-looking statements about the Company within the meaning of the Private Securities Litigation Reform Act of 1995 (the “Act”) that are based on current management expectations that involve substantial risks and uncertainties which could cause actual results to differ materially from the results expressed in, or implied by, these forward-looking statements. The following cautionary statements are being made pursuant to the provisions of the Act and with the intention of obtaining the benefits of the “safe harbor” provisions of the Act. You can identify forward-looking statements by the use of words such as “anticipates,” “believes,” “could,” “should,” “estimates,” “expects,” “intends,” “may,” “will,” “plans,” “predicts,” “projects,” “seeks,” “approximately,” “potential,” “outlook” and similar terms and phrases that concern our strategy, plans or intentions, including references to assumptions. These forward-looking statements address various matters including information concerning future results of operations and business strategy, our anticipated profitability, estimates in same store sales growth, the growth of our U.S. and international business, 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 ~~2019~~2020 Form

~~10-K~~10-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 ~~profitably~~successfully manage their operations without negatively impacting our royalty payments and fees or our brand’s reputation; our ability to successfully implement cost-saving strategies; our ability and that of our franchisees to successfully operate in the current and future credit environment; changes in the level of consumer spending given general economic conditions, including interest rates, energy prices and consumer confidence; our ability and that of our franchisees to open new restaurants and keep existing restaurants in operation; changes in operating expenses resulting from changes in prices of food (particularly cheese), fuel and other commodity costs, labor, utilities, insurance, employee benefits and other operating costs; the impact that widespread illness, health epidemics or general health concerns, severe weather conditions and natural disasters may have on our business and the economies of the countries where we operate; changes in foreign currency exchange rates; changes in income tax rates; our ability to retain or replace our executive officers and other key members of management and our ability to adequately staff our stores and supply chain centers with qualified personnel; our ability to find and/or retain suitable real estate for our stores and supply chain centers; changes in government legislation and regulations, including changes in laws and regulations regarding information privacy, payment methods 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.

Table of Contents

Item 3. Quantitative and Qualitative Disclosures About Market Risk.

Market Risk

We do not engage in speculative transactions nor do we hold or issue financial instruments for trading purposes. In connection with the recapitalizations of our business, we 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 of~~no 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 notes~~2021 Variable Funding Notes bear interest at fluctuating interest rates based on LIBOR.

There is currently uncertainty around whether LIBOR will continue to exist after ~~2021. If~~2023. Our 2021 Variable Funding Notes loan documents contemplate a transition from LIBOR to secured overnight financing rate (“SOFR”) in the event that LIBOR ceases to ~~exist, we may need to renegotiate our loan documents~~exist. Because the composition and ~~we cannot predict what alternative index~~characteristics of SOFR are not the same as those of LIBOR, in such event, there can be no assurance that SOFR will perform the same way LIBOR would ~~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 2020~~and 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 ~~controls~~control over financial reporting as defined in

Rules

13a-15(f)

~~and~~

~~15d-15(f)~~

~~under the Securities~~ and ~~Exchange Act of 1934, as amended,~~15d-15(f) that

have materially affected or are reasonably likely to materially affect the Company’s internal control over financial reporting.

2427

Table of Contents

PART II. OTHER INFORMATION

Item 1. Legal Proceedings.

We are a party to lawsuits, revenue agent reviews by taxing authorities and administrative proceedings in the ordinary course of business which include, without limitation, workers’ compensation, general liability, automobile and franchisee claims. We are also subject to suits related to employment ~~practices as well as intellectual property, including patents.~~

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, there~~There have been no material changes with respect to those risk factors previously disclosed in Item 1A “Risk Factors” in Part I of our ~~2019~~2020 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.~~

~~Table of Contents~~

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

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

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 ~~2020~~2021 were purchased as part of the Company’s employee stock payroll deduction ~~plan~~plan. 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 a~~Company’s Board of ~~Directors-approved~~Directors authorized a new share repurchase program ~~for~~to repurchase up to $1.0 billion of ~~our~~the 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.

Table of Contents

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.

10.2		Form of Performance-Based Restricted Stock Unit Award Agreement under the Amended Domino’s Pizza, Inc. 2004 Equity Incentive Plan.

10.3		Form of Restricted Stock Unit Award Agreement under the Amended Domino’s Pizza, Inc. 2004 Equity Incentive Plan.

10.4		Purchase 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).

10.5		Class 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).

10.6		Amendment 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).

10.7		Amendment 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).

10.8		Fixed 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).

10.9		Separation Agreement dated as of May 19, 2021 between Domino’s Pizza LLC and Stuart A. Levy.

31.1		Certification by Richard E. Allison, Jr. pursuant to Rule 13a-14(a) and 15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002, relating to Domino’s Pizza, Inc.

32.1
	~~31.2~~			~~Certification by Jeffrey D. Lawrence pursuant to Rule 13a-14(a) and 15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002, relating to Domino’s Pizza, Inc.~~

	~~32.1~~			Certification by Richard E. Allison, Jr. pursuant to Section 1350, Chapter 63 of Title 18, United States Code, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, relating to Domino’s Pizza, Inc.

101.INS
	~~32.2~~			Certification by Jeffrey D. Lawrence pursuant to Section 1350, Chapter 63 of Title 18, United States Code, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, relating to Domino’s Pizza, Inc.

	~~101.INS~~			XBRL Instance Document – The 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).

Table of Contents

SIGNATURES

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


		DOMINO’S PIZZA, INC. (Registrant)

Date: July ~~16, 2020~~	22, 2021	/s/ ~~Jeffrey D. Lawrence~~Richard E. Allison, Jr.
		~~Jeffrey D. Lawrence~~ Richard E. Allison, Jr.
		~~Executive Vice President,~~ Chief ~~Financial~~Executive Officer (Principal Executive Officer and Principal Financial Officer)

2730


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)


(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


	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


	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


	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	)


	Common Stock						Additional Paid-in Capital			Retained Deficit			Accumulated Other Comprehensive
	Shares			Amount			Additional Paid-in Capital			Retained 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 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	)


	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 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		—		—


	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


	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


	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 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	%


	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	)


(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