10-Q
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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

 

FORM 10-Q

 

(Mark One)

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

For the quarterly period ended June 19, 2022

OR

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

For the transition period from to

Commission file number: 001-32242

 

Domino’s Pizza, Inc.

(Exact Name of Registrant as Specified in Its Charter)

 

Delaware

 

38-2511577

(State or Other Jurisdiction of

Incorporation or Organization)

 

(I.R.S. Employer

Identification No.)

30 Frank Lloyd Wright Drive

Ann Arbor, Michigan

 

48105

(Address of Principal Executive Offices)

 

(Zip Code)

(734) 930-3030

(Registrant’s Telephone Number, Including Area Code)

 

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

Title of Each Class

Trading Symbol

Name of Each Exchange on Which Registered

Domino’s Pizza, Inc. Common Stock, $0.01 par value

DPZ

New York Stock Exchange

Indicate by check mark whether registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

 

Large accelerated filer

 

 

Accelerated filer

 

Non-accelerated filer

 

 

Smaller reporting company

 

Emerging growth company

 

 

 

 

 

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

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes No ☒

As of July 14, 2022, Domino’s Pizza, Inc. had 35,885,105 shares of common stock, par value $0.01 per share, outstanding.

 

 


 

Domino’s Pizza, Inc.

TABLE OF CONTENTS

 

 

 

 

 

Page No.

PART I.

 

FINANCIAL INFORMATION

 

 

 

 

 

Item 1.

 

Financial Statements

 

3

 

 

 

 

 

Condensed Consolidated Balance Sheets (Unaudited) – As of June 19, 2022 and January 2, 2022

 

3

 

 

 

 

 

Condensed Consolidated Statements of Income (Unaudited) – Fiscal quarters and two fiscal quarters ended June 19, 2022 and June 20, 2021

 

4

 

 

 

 

 

Condensed Consolidated Statements of Comprehensive Income (Unaudited) – Fiscal quarters and two fiscal quarters ended June 19, 2022 and June 20, 2021

 

5

 

 

 

 

 

Condensed Consolidated Statements of Cash Flows (Unaudited) – Two fiscal quarters ended June 19, 2022 and June 20, 2021

 

6

 

 

 

 

 

Notes to Condensed Consolidated Financial Statements (Unaudited)

 

7

 

 

 

Item 2.

 

Management’s Discussion and Analysis of Financial Condition and Results of Operations

 

14

 

 

 

Item 3.

 

Quantitative and Qualitative Disclosures About Market Risk

 

25

 

 

 

Item 4.

 

Controls and Procedures

 

25

 

 

 

PART II.

 

OTHER INFORMATION

 

 

 

 

 

Item 1.

 

Legal Proceedings

 

26

 

 

 

Item 1A.

 

Risk Factors

 

26

 

 

 

Item 2.

 

Unregistered Sales of Equity Securities and Use of Proceeds

 

26

 

 

 

Item 3.

 

Defaults Upon Senior Securities

 

26

 

 

 

Item 4.

 

Mine Safety Disclosures

 

26

 

 

 

Item 5.

 

Other Information

 

26

 

 

 

Item 6.

 

Exhibits

 

27

 

 

SIGNATURES

 

28

 

2


 

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements.

Domino’s Pizza, Inc. and Subsidiaries

Condensed Consolidated Balance Sheets

(Unaudited)

(In thousands)

 

June 19, 2022

 

 

January 2, 2022 (1)

 

Assets

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

Cash and cash equivalents

 

$

114,353

 

 

$

148,160

 

Restricted cash and cash equivalents

 

 

158,215

 

 

 

180,579

 

Accounts receivable, net

 

 

274,957

 

 

 

255,327

 

Inventories

 

 

70,201

 

 

 

68,328

 

Prepaid expenses and other

 

 

45,645

 

 

 

27,242

 

Advertising fund assets, restricted

 

 

182,499

 

 

 

180,904

 

Total current assets

 

 

845,870

 

 

 

860,540

 

Property, plant and equipment:

 

 

 

 

 

 

Land and buildings

 

 

108,245

 

 

 

108,372

 

Leasehold and other improvements

 

 

195,834

 

 

 

193,572

 

Equipment

 

 

322,079

 

 

 

312,772

 

Construction in progress

 

 

27,161

 

 

 

27,815

 

 

 

 

653,319

 

 

 

642,531

 

Accumulated depreciation and amortization

 

 

(339,507

)

 

 

(318,466

)

Property, plant and equipment, net

 

 

313,812

 

 

 

324,065

 

Other assets:

 

 

 

 

 

 

Operating lease right-of-use assets

 

 

222,780

 

 

 

210,702

 

Goodwill

 

 

16,153

 

 

 

15,034

 

Capitalized software, net

 

 

103,137

 

 

 

95,558

 

Investments

 

 

125,840

 

 

 

125,840

 

Other assets

 

 

40,652

 

 

 

37,968

 

Deferred income taxes

 

 

2,386

 

 

 

2,109

 

Total other assets

 

 

510,948

 

 

 

487,211

 

Total assets

 

$

1,670,630

 

 

$

1,671,816

 

Liabilities and stockholders' deficit

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

Current portion of long-term debt

 

$

55,654

 

 

$

55,588

 

Accounts payable

 

 

99,465

 

 

 

91,547

 

Operating lease liabilities

 

 

41,682

 

 

 

37,155

 

Insurance reserves

 

 

32,157

 

 

 

32,588

 

Dividends payable

 

 

40,624

 

 

 

918

 

Advertising fund liabilities

 

 

175,069

 

 

 

173,737

 

Other accrued liabilities

 

 

130,798

 

 

 

199,208

 

Total current liabilities

 

 

575,449

 

 

 

590,741

 

Long-term liabilities:

 

 

 

 

 

 

Long-term debt, less current portion

 

 

4,989,578

 

 

 

5,014,638

 

Operating lease liabilities

 

 

194,674

 

 

 

184,471

 

Insurance reserves

 

 

36,213

 

 

 

36,913

 

Other accrued liabilities

 

 

48,724

 

 

 

50,667

 

Deferred income taxes

 

 

6,301

 

 

 

3,922

 

Total long-term liabilities

 

 

5,275,490

 

 

 

5,290,611

 

Stockholders' deficit:

 

 

 

 

 

 

Common stock

 

 

359

 

 

 

361

 

Additional paid-in capital

 

 

3,589

 

 

 

840

 

Retained deficit

 

 

(4,180,367

)

 

 

(4,207,917

)

Accumulated other comprehensive loss

 

 

(3,890

)

 

 

(2,820

)

Total stockholders' deficit

 

 

(4,180,309

)

 

 

(4,209,536

)

Total liabilities and stockholders' deficit

 

$

1,670,630

 

 

$

1,671,816

 

 

(1) The condensed consolidated balance sheet at January 2, 2022 has been derived from the audited consolidated financial statements at that date but does not include all of the information and footnotes required by accounting principles generally accepted in the United States for complete financial statements.

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

3


 

Domino’s Pizza, Inc. and Subsidiaries

Condensed Consolidated Statements of Income

(Unaudited)

 

 

Fiscal Quarter Ended

 

 

Two Fiscal Quarters Ended

 

 

 

June 19,

 

 

June 20,

 

 

June 19,

 

 

June 20,

 

(In thousands, except per share data)

 

2022

 

 

2021

 

 

2022

 

 

2021

 

Revenues:

 

 

 

 

 

 

 

 

 

 

 

 

U.S. Company-owned stores

 

$

112,502

 

 

$

116,589

 

 

$

216,397

 

 

$

229,333

 

U.S. franchise royalties and fees

 

 

128,098

 

 

 

126,836

 

 

 

250,383

 

 

 

251,322

 

Supply chain

 

 

646,586

 

 

 

602,962

 

 

 

1,256,133

 

 

 

1,171,300

 

International franchise royalties and fees

 

 

66,915

 

 

 

69,745

 

 

 

135,748

 

 

 

136,515

 

U.S. franchise advertising

 

 

111,081

 

 

 

116,340

 

 

 

217,670

 

 

 

227,700

 

Total revenues

 

 

1,065,182

 

 

 

1,032,472

 

 

 

2,076,331

 

 

 

2,016,170

 

Cost of sales:

 

 

 

 

 

 

 

 

 

 

 

 

U.S. Company-owned stores

 

 

94,065

 

 

 

88,019

 

 

 

181,440

 

 

 

173,761

 

Supply chain

 

 

584,852

 

 

 

536,763

 

 

 

1,140,002

 

 

 

1,045,568

 

Total cost of sales

 

 

678,917

 

 

 

624,782

 

 

 

1,321,442

 

 

 

1,219,329

 

Gross margin

 

 

386,265

 

 

 

407,690

 

 

 

754,889

 

 

 

796,841

 

General and administrative

 

 

97,070

 

 

 

100,448

 

 

 

194,564

 

 

 

191,701

 

U.S. franchise advertising

 

 

111,081

 

 

 

116,340

 

 

 

217,670

 

 

 

227,700

 

Income from operations

 

 

178,114

 

 

 

190,902

 

 

 

342,655

 

 

 

377,440

 

Other income

 

 

 

 

 

 

 

 

 

 

 

2,500

 

Interest income

 

 

219

 

 

 

68

 

 

 

268

 

 

 

90

 

Interest expense

 

 

(44,851

)

 

 

(45,877

)

 

 

(91,723

)

 

 

(85,299

)

Income before provision for income taxes

 

 

133,482

 

 

 

145,093

 

 

 

251,200

 

 

 

294,731

 

Provision for income taxes

 

 

30,989

 

 

 

28,474

 

 

 

57,743

 

 

 

60,351

 

Net income

 

$

102,493

 

 

$

116,619

 

 

$

193,457

 

 

$

234,380

 

Earnings per share:

 

 

 

 

 

 

 

 

 

 

 

 

Common stock - basic

 

$

2.85

 

 

$

3.10

 

 

$

5.38

 

 

$

6.14

 

Common stock - diluted

 

 

2.82

 

 

 

3.06

 

 

 

5.32

 

 

 

6.06

 

 

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

 

 

 

4


 

Domino’s Pizza, Inc. and Subsidiaries

Condensed Consolidated Statements of Comprehensive Income

(Unaudited)

 

 

 

Fiscal Quarter Ended

 

 

Two Fiscal Quarters Ended

 

 

 

June 19,

 

 

June 20,

 

 

June 19,

 

 

June 20,

 

(In thousands)

 

2022

 

 

2021

 

 

2022

 

 

2021

 

Net income

 

$

102,493

 

 

$

116,619

 

 

$

193,457

 

 

$

234,380

 

Currency translation adjustment

 

 

(1,684

)

 

 

230

 

 

 

(1,070

)

 

 

416

 

Comprehensive income

 

$

100,809

 

 

$

116,849

 

 

$

192,387

 

 

$

234,796

 

 

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

5


 

Domino’s Pizza, Inc. and Subsidiaries

Condensed Consolidated Statements of Cash Flows

(Unaudited)

 

 

 

Two Fiscal Quarters Ended

 

 

 

June 19,

 

 

June 20,

 

(In thousands)

 

2022

 

 

2021

 

Cash flows from operating activities:

 

 

 

 

 

 

Net income

 

$

193,457

 

 

$

234,380

 

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

 

 

 

 

 

 

Depreciation and amortization

 

 

37,093

 

 

 

33,641

 

Loss on sale/disposal of assets

 

 

448

 

 

 

456

 

Amortization of debt issuance costs

 

 

2,631

 

 

 

4,438

 

Provision for deferred income taxes

 

 

2,490

 

 

 

2,561

 

Non-cash equity-based compensation expense

 

 

15,738

 

 

 

13,500

 

Excess tax benefits from equity-based compensation

 

 

(174

)

 

 

(4,264

)

Provision for losses on accounts and notes receivable

 

 

2,326

 

 

 

296

 

Unrealized gain on investments

 

 

 

 

 

(2,500

)

Changes in operating assets and liabilities

 

 

(102,935

)

 

 

(17,098

)

Changes in advertising fund assets and liabilities, restricted

 

 

2,341

 

 

 

30,005

 

Net cash provided by operating activities

 

 

153,415

 

 

 

295,415

 

Cash flows from investing activities:

 

 

 

 

 

 

Capital expenditures

 

 

(32,664

)

 

 

(33,163

)

Purchase of investments

 

 

 

 

 

(40,000

)

Purchase of franchise operations and other assets

 

 

(6,814

)

 

 

 

Other

 

 

(435

)

 

 

293

 

Net cash used in investing activities

 

 

(39,913

)

 

 

(72,870

)

Cash flows from financing activities:

 

 

 

 

 

 

Proceeds from issuance of long-term debt

 

 

 

 

 

1,850,000

 

Repayments of long-term debt and finance lease obligations

 

 

(27,528

)

 

 

(882,547

)

Proceeds from exercise of stock options

 

 

526

 

 

 

9,025

 

Purchases of common stock

 

 

(97,661

)

 

 

(1,025,000

)

Tax payments for restricted stock upon vesting

 

 

(2,395

)

 

 

(1,087

)

Payments of common stock dividends and equivalents

 

 

(39,662

)

 

 

(36,432

)

Cash paid for financing costs

 

 

 

 

 

(14,938

)

Other

 

 

 

 

 

(244

)

Net cash used in financing activities

 

 

(166,720

)

 

 

(101,223

)

Effect of exchange rate changes on cash

 

 

(635

)

 

 

302

 

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

 

 

(53,853

)

 

 

121,624

 

 

 

 

 

 

 

 

Cash and cash equivalents, beginning of period

 

 

148,160

 

 

 

168,821

 

Restricted cash and cash equivalents, beginning of period

 

 

180,579

 

 

 

217,453

 

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

 

 

161,741

 

 

 

115,872

 

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

 

 

490,480

 

 

 

502,146

 

 

 

 

 

 

 

 

Cash and cash equivalents, end of period

 

 

114,353

 

 

 

292,095

 

Restricted cash and cash equivalents, end of period

 

 

158,215

 

 

 

184,695

 

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

 

 

164,059

 

 

 

146,980

 

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

 

$

436,627

 

 

$

623,770

 

 

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

6


 

Domino’s Pizza, Inc. and Subsidiaries

Notes to Condensed Consolidated Financial Statements

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

June 19, 2022

 

 

1. Basis of Presentation

The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States for interim financial information and with the instructions to Form 10-Q and Rule 10-01 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by accounting principles generally accepted in the United States for complete financial statements. For further information, refer to the consolidated financial statements and footnotes for the fiscal year ended January 2, 2022 included in the Company’s 2021 Annual Report on Form 10-K, filed with the Securities and Exchange Commission on March 1, 2022 (the “2021 Form 10-K”).

In the opinion of management, all adjustments, consisting of normal recurring items, considered necessary for a fair statement have been included. Operating results for the fiscal quarter and two fiscal quarters ended June 19, 2022 are not necessarily indicative of the results that may be expected for the fiscal year ending January 1, 2023.

 

2. Segment Information

 

The following tables summarize revenues and earnings before interest, taxes, depreciation, amortization and other, which is the measure by which the Company allocates resources to its segments and which the Company refers to as Segment Income, for each of its reportable segments. Intersegment revenues are comprised of sales of food, equipment and supplies from the supply chain segment to the Company-owned stores in the U.S. stores segment. Intersegment sales prices are market based. The “Other” column as it relates to Segment Income below primarily includes corporate administrative costs that are not allocable to a reportable segment, including labor, computer expenses, professional fees, travel and entertainment, rent, insurance and other corporate administrative costs.

 

 

Fiscal Quarters Ended June 19, 2022 and June 20, 2021

 

 

 

U.S.

 

 

Supply

 

 

International

 

 

Intersegment

 

 

 

 

 

 

 

 

 

Stores

 

 

Chain

 

 

Franchise

 

 

Revenues

 

 

Other

 

 

Total

 

Revenues

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

2022

 

$

351,681

 

 

$

683,298

 

 

$

66,915

 

 

$

(36,712

)

 

$

 

 

$

1,065,182

 

2021

 

 

359,765

 

 

 

635,592

 

 

 

69,745

 

 

 

(32,630

)

 

 

 

 

 

1,032,472

 

Segment Income

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

2022

 

$

104,055

 

 

$

53,633

 

 

$

52,890

 

 

N/A

 

 

$

(5,621

)

 

$

204,957

 

2021

 

 

111,847

 

 

 

58,593

 

 

 

56,365

 

 

N/A

 

 

 

(9,627

)

 

 

217,178

 

 

 

 

Two Fiscal Quarters Ended June 19, 2022 and June 20, 2021

 

 

 

U.S.

 

 

Supply

 

 

International

 

 

Intersegment

 

 

 

 

 

 

 

 

 

Stores

 

 

Chain

 

 

Franchise

 

 

Revenues

 

 

Other

 

 

Total

 

Revenues

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

2022

 

$

684,450

 

 

$

1,325,260

 

 

$

135,748

 

 

$

(69,127

)

 

$

 

 

$

2,076,331

 

2021

 

 

708,355

 

 

 

1,234,769

 

 

 

136,515

 

 

 

(63,469

)

 

 

 

 

 

2,016,170

 

Segment Income

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

2022

 

$

201,347

 

 

$

99,982

 

 

$

107,936

 

 

N/A

 

 

$

(13,331

)

 

$

395,934

 

2021

 

 

219,283

 

 

 

111,145

 

 

 

110,833