10-Q 1 dpz-20220911.htm 10-Q 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 September 11, 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 October 6, 2022, Domino’s Pizza, Inc. had 35,399,379 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 September 11, 2022 and January 2, 2022

 

3

 

 

 

 

 

Condensed Consolidated Statements of Income (Unaudited) – Fiscal quarters and three fiscal quarters ended September 11, 2022 and September 12, 2021

 

4

 

 

 

 

 

Condensed Consolidated Statements of Comprehensive Income (Unaudited) – Fiscal quarters and three fiscal quarters ended September 11, 2022 and September 12, 2021

 

5

 

 

 

 

 

Condensed Consolidated Statements of Cash Flows (Unaudited) – Three fiscal quarters ended September 11, 2022 and September 12, 2021

 

6

 

 

 

 

 

Notes to Condensed Consolidated Financial Statements (Unaudited)

 

7

 

 

 

Item 2.

 

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

 

15

 

 

 

Item 3.

 

Quantitative and Qualitative Disclosures About Market Risk

 

26

 

 

 

Item 4.

 

Controls and Procedures

 

26

 

 

 

PART II.

 

OTHER INFORMATION

 

 

 

 

 

Item 1.

 

Legal Proceedings

 

27

 

 

 

Item 1A.

 

Risk Factors

 

27

 

 

 

Item 2.

 

Unregistered Sales of Equity Securities and Use of Proceeds

 

27

 

 

 

Item 3.

 

Defaults Upon Senior Securities

 

27

 

 

 

Item 4.

 

Mine Safety Disclosures

 

27

 

 

 

Item 5.

 

Other Information

 

27

 

 

 

Item 6.

 

Exhibits

 

28

 

 

SIGNATURES

 

29

 

2


 

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements.

Domino’s Pizza, Inc. and Subsidiaries

Condensed Consolidated Balance Sheets

(Unaudited)

(In thousands)

 

September 11, 2022

 

 

January 2, 2022 (1)

 

Assets

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

Cash and cash equivalents

 

$

114,776

 

 

$

148,160

 

Restricted cash and cash equivalents

 

 

184,564

 

 

 

180,579

 

Accounts receivable, net

 

 

242,775

 

 

 

255,327

 

Inventories

 

 

72,586

 

 

 

68,328

 

Prepaid expenses and other

 

 

30,497

 

 

 

27,242

 

Advertising fund assets, restricted

 

 

181,200

 

 

 

180,904

 

Total current assets

 

 

826,398

 

 

 

860,540

 

Property, plant and equipment:

 

 

 

 

 

 

Land and buildings

 

 

106,907

 

 

 

108,372

 

Leasehold and other improvements

 

 

197,462

 

 

 

193,572

 

Equipment

 

 

329,687

 

 

 

312,772

 

Construction in progress

 

 

26,874

 

 

 

27,815

 

 

 

 

660,930

 

 

 

642,531

 

Accumulated depreciation and amortization

 

 

(349,643

)

 

 

(318,466

)

Property, plant and equipment, net

 

 

311,287

 

 

 

324,065

 

Other assets:

 

 

 

 

 

 

Operating lease right-of-use assets

 

 

217,739

 

 

 

210,702

 

Goodwill

 

 

16,153

 

 

 

15,034

 

Capitalized software, net

 

 

105,541

 

 

 

95,558

 

Investments

 

 

125,840

 

 

 

125,840

 

Other assets

 

 

41,260

 

 

 

37,968

 

Deferred income taxes

 

 

2,191

 

 

 

2,109

 

Total other assets

 

 

508,724

 

 

 

487,211

 

Total assets

 

$

1,646,409

 

 

$

1,671,816

 

Liabilities and stockholders' deficit

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

Current portion of long-term debt

 

$

55,787

 

 

$

55,588

 

Accounts payable

 

 

91,299

 

 

 

91,547

 

Operating lease liabilities

 

 

40,823

 

 

 

37,155

 

Insurance reserves

 

 

32,971

 

 

 

32,588

 

Dividends payable

 

 

39,632

 

 

 

918

 

Advertising fund liabilities

 

 

173,345

 

 

 

173,737

 

Other accrued liabilities

 

 

144,880

 

 

 

199,208

 

Total current liabilities

 

 

578,737

 

 

 

590,741

 

Long-term liabilities:

 

 

 

 

 

 

Long-term debt, less current portion

 

 

5,097,292

 

 

 

5,014,638

 

Operating lease liabilities

 

 

190,248

 

 

 

184,471

 

Insurance reserves

 

 

38,145

 

 

 

36,913

 

Other accrued liabilities

 

 

49,455

 

 

 

50,667

 

Deferred income taxes

 

 

9,077

 

 

 

3,922

 

Total long-term liabilities

 

 

5,384,217

 

 

 

5,290,611

 

Stockholders' deficit:

 

 

 

 

 

 

Common stock

 

 

354

 

 

 

361

 

Additional paid-in capital

 

 

587

 

 

 

840

 

Retained deficit

 

 

(4,313,643

)

 

 

(4,207,917

)

Accumulated other comprehensive loss

 

 

(3,843

)

 

 

(2,820

)

Total stockholders' deficit

 

 

(4,316,545

)

 

 

(4,209,536

)

Total liabilities and stockholders' deficit

 

$

1,646,409

 

 

$

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

 

 

Three Fiscal Quarters Ended

 

 

 

September 11,

 

 

September 12,

 

 

September 11,

 

 

September 12,

 

(In thousands, except per share data)

 

2022

 

 

2021

 

 

2022

 

 

2021

 

Revenues:

 

 

 

 

 

 

 

 

 

 

 

 

U.S. Company-owned stores

 

$

112,388

 

 

$

108,416

 

 

$

328,785

 

 

$

337,749

 

U.S. franchise royalties and fees

 

 

128,878

 

 

 

121,624

 

 

 

379,261

 

 

 

372,946

 

Supply chain

 

 

646,082

 

 

 

588,819

 

 

 

1,902,215

 

 

 

1,760,119

 

International franchise royalties and fees

 

 

67,055

 

 

 

70,553

 

 

 

202,803

 

 

 

207,068

 

U.S. franchise advertising

 

 

114,193

 

 

 

108,578

 

 

 

331,863

 

 

 

336,278

 

Total revenues

 

 

1,068,596

 

 

 

997,990

 

 

 

3,144,927

 

 

 

3,014,160

 

Cost of sales:

 

 

 

 

 

 

 

 

 

 

 

 

U.S. Company-owned stores

 

 

98,589

 

 

 

86,932

 

 

 

280,029

 

 

 

260,693

 

Supply chain

 

 

588,157

 

 

 

525,858

 

 

 

1,728,159

 

 

 

1,571,426

 

Total cost of sales

 

 

686,746

 

 

 

612,790

 

 

 

2,008,188

 

 

 

1,832,119

 

Gross margin

 

 

381,850

 

 

 

385,200

 

 

 

1,136,739

 

 

 

1,182,041

 

General and administrative

 

 

91,205

 

 

 

96,342

 

 

 

285,769

 

 

 

288,043

 

U.S. franchise advertising

 

 

114,193

 

 

 

108,578

 

 

 

331,863

 

 

 

336,278

 

Income from operations

 

 

176,452

 

 

 

180,280

 

 

 

519,107

 

 

 

557,720

 

Other income

 

 

 

 

 

 

 

 

 

 

 

2,500

 

Interest income

 

 

833

 

 

 

48

 

 

 

1,101

 

 

 

138

 

Interest expense

 

 

(45,437

)

 

 

(45,523

)

 

 

(137,160

)

 

 

(130,822

)

Income before provision for income taxes

 

 

131,848

 

 

 

134,805

 

 

 

383,048

 

 

 

429,536

 

Provision for income taxes

 

 

31,344

 

 

 

14,403

 

 

 

89,087

 

 

 

74,754

 

Net income

 

$

100,504

 

 

$

120,402

 

 

$

293,961

 

 

$

354,782

 

Earnings per share:

 

 

 

 

 

 

 

 

 

 

 

 

Common stock - basic

 

$

2.82

 

 

$

3.29

 

 

$

8.20

 

 

$

9.43

 

Common stock - diluted

 

 

2.79

 

 

 

3.24

 

 

 

8.11

 

 

 

9.30

 

 

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

 

 

Three Fiscal Quarters Ended

 

 

 

September 11,

 

 

September 12,

 

 

September 11,

 

 

September 12,

 

(In thousands)

 

2022

 

 

2021

 

 

2022

 

 

2021

 

Net income

 

$

100,504

 

 

$

120,402

 

 

$

293,961

 

 

$

354,782

 

Currency translation adjustment

 

 

47

 

 

 

(404

)

 

 

(1,023

)

 

 

12

 

Comprehensive income

 

$

100,551

 

 

$

119,998

 

 

$

292,938

 

 

$

354,794

 

 

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)

 

 

 

Three Fiscal Quarters Ended

 

 

 

September 11,

 

 

September 12,

 

(In thousands)

 

2022

 

 

2021

 

Cash flows from operating activities:

 

 

 

 

 

 

Net income

 

$

293,961

 

 

$

354,782

 

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

 

 

 

 

 

 

Depreciation and amortization

 

 

56,026

 

 

 

50,219

 

Loss on sale/disposal of assets

 

 

475

 

 

 

493

 

Amortization of debt issuance costs

 

 

3,937

 

 

 

5,770

 

Provision for deferred income taxes

 

 

5,912

 

 

 

4,831

 

Non-cash equity-based compensation expense

 

 

21,590

 

 

 

19,453

 

Excess tax benefits from equity-based compensation

 

 

(907

)

 

 

(18,258

)

Provision for losses on accounts and notes receivable

 

 

2,870

 

 

 

532

 

Unrealized gain on investments

 

 

 

 

 

(2,500

)

Changes in operating assets and liabilities

 

 

(49,288

)

 

 

20,212

 

Changes in advertising fund assets and liabilities, restricted

 

 

(4,422

)

 

 

49,067

 

Net cash provided by operating activities

 

 

330,154

 

 

 

484,601

 

Cash flows from investing activities:

 

 

 

 

 

 

Capital expenditures

 

 

(50,508

)

 

 

(50,652

)

Purchase of investments

 

 

 

 

 

(40,000

)

Purchase of franchise operations and other assets

 

 

(6,814

)

 

 

 

Other

 

 

(1,375

)

 

 

306

 

Net cash used in investing activities

 

 

(58,697

)

 

 

(90,346

)

Cash flows from financing activities:

 

 

 

 

 

 

Proceeds from issuance of long-term debt

 

 

120,000

 

 

 

1,850,000

 

Repayments of long-term debt and finance lease obligations

 

 

(41,441

)

 

 

(896,193

)

Proceeds from exercise of stock options

 

 

1,296

 

 

 

15,948

 

Purchases of common stock

 

 

(293,739

)

 

 

(1,104,687

)

Tax payments for restricted stock upon vesting

 

 

(10,691

)

 

 

(6,817

)

Payments of common stock dividends and equivalents

 

 

(79,689

)

 

 

(71,218

)

Cash paid for financing costs

 

 

 

 

 

(14,938

)

Other

 

 

 

 

 

(244

)

Net cash used in financing activities

 

 

(304,264

)

 

 

(228,149

)

Effect of exchange rate changes on cash

 

 

(611

)

 

 

58

 

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

 

 

(33,418

)

 

 

166,164

 

 

 

 

 

 

 

 

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

 

 

114,776

 

 

 

295,352

 

Restricted cash and cash equivalents, end of period

 

 

184,564

 

 

 

206,274

 

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

 

 

157,722

 

 

 

166,684

 

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

 

$

457,062

 

 

$

668,310

 

 

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)

September 11, 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 three fiscal quarters ended September 11, 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 September 11, 2022 and September 12, 2021

 

 

 

U.S.

 

 

Supply

 

 

International

 

 

Intersegment

 

 

 

 

 

 

 

 

 

Stores

 

 

Chain

 

 

Franchise

 

 

Revenues

 

 

Other

 

 

Total

 

Revenues

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

2022

 

$

355,459

 

 

$

683,267

 

 

$

67,055

 

 

$

(37,185

)

 

$

 

 

$

1,068,596

 

2021

 

 

338,618

 

 

 

619,840

 

 

 

70,553

 

 

 

(31,021

)

 

 

 

 

 

997,990

 

Segment Income

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

2022

 

$

100,529

 

 

$

49,892

 

 

$

53,762

 

 

N/A

 

 

$

(2,919

)

 

$

201,264

 

2021

 

 

101,968

 

 

 

53,579

 

 

 

57,311

 

 

N/A

 

 

 

(10,010

)

 

 

202,848

 

 

 

 

Three Fiscal Quarters Ended September 11, 2022 and September 12, 2021

 

 

 

U.S.

 

 

Supply

 

 

International

 

 

Intersegment

 

 

 

 

 

 

 

 

 

Stores

 

 

Chain

 

 

Franchise

 

 

Revenues

 

 

Other

 

 

Total

 

Revenues