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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 March 27, 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 April 21, 2022, Domino’s Pizza, Inc. had 36,045,067 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 March 27, 2022 and January 2, 2022

 

3

 

 

 

 

 

Condensed Consolidated Statements of Income (Unaudited) – Fiscal quarters ended March 27, 2022 and March 28, 2021

 

4

 

 

 

 

 

Condensed Consolidated Statements of Comprehensive Income (Unaudited) – Fiscal quarters ended March 27, 2022 and March 28, 2021

 

5

 

 

 

 

 

Condensed Consolidated Statements of Cash Flows (Unaudited) – Fiscal quarters ended March 27, 2022 and March 28, 2021

 

6

 

 

 

 

 

Notes to Condensed Consolidated Financial Statements (Unaudited)

 

7

 

 

 

Item 2.

 

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

 

13

 

 

 

Item 3.

 

Quantitative and Qualitative Disclosures About Market Risk

 

22

 

 

 

Item 4.

 

Controls and Procedures

 

22

 

 

 

PART II.

 

OTHER INFORMATION

 

 

 

 

 

Item 1.

 

Legal Proceedings

 

23

 

 

 

Item 1A.

 

Risk Factors

 

23

 

 

 

Item 2.

 

Unregistered Sales of Equity Securities and Use of Proceeds

 

23

 

 

 

Item 3.

 

Defaults Upon Senior Securities

 

23

 

 

 

Item 4.

 

Mine Safety Disclosures

 

23

 

 

 

Item 5.

 

Other Information

 

23

 

 

 

Item 6.

 

Exhibits

 

24

 

 

SIGNATURES

 

25

 

2


 

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements.

Domino’s Pizza, Inc. and Subsidiaries

Condensed Consolidated Balance Sheets

(Unaudited)

(In thousands)

 

March 27, 2022

 

 

January 2, 2022 (1)

 

Assets

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

Cash and cash equivalents

 

$

164,962

 

 

$

148,160

 

Restricted cash and cash equivalents

 

 

168,241

 

 

 

180,579

 

Accounts receivable, net

 

 

246,978

 

 

 

255,327

 

Inventories

 

 

77,711

 

 

 

68,328

 

Prepaid expenses and other

 

 

27,857

 

 

 

27,242

 

Advertising fund assets, restricted

 

 

175,488

 

 

 

180,904

 

Total current assets

 

 

861,237

 

 

 

860,540

 

Property, plant and equipment:

 

 

 

 

 

 

Land and buildings

 

 

108,426

 

 

 

108,372

 

Leasehold and other improvements

 

 

195,355

 

 

 

193,572

 

Equipment

 

 

318,504

 

 

 

312,772

 

Construction in progress

 

 

26,652

 

 

 

27,815

 

 

 

 

648,937

 

 

 

642,531

 

Accumulated depreciation and amortization

 

 

(329,290

)

 

 

(318,466

)

Property, plant and equipment, net

 

 

319,647

 

 

 

324,065

 

Other assets:

 

 

 

 

 

 

Operating lease right-of-use assets

 

 

209,099

 

 

 

210,702

 

Goodwill

 

 

16,153

 

 

 

15,034

 

Capitalized software, net

 

 

96,790

 

 

 

95,558

 

Investments

 

 

125,840

 

 

 

125,840

 

Other assets

 

 

43,009

 

 

 

37,968

 

Deferred income taxes

 

 

2,247

 

 

 

2,109

 

Total other assets

 

 

493,138

 

 

 

487,211

 

Total assets

 

$

1,674,022

 

 

$

1,671,816

 

Liabilities and stockholders' deficit

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

Current portion of long-term debt

 

$

55,632

 

 

$

55,588

 

Accounts payable

 

 

92,353

 

 

 

91,547

 

Operating lease liabilities

 

 

37,384

 

 

 

37,155

 

Insurance reserves

 

 

31,658

 

 

 

32,588

 

Dividends payable

 

 

40,632

 

 

 

918

 

Advertising fund liabilities

 

 

168,161

 

 

 

173,737

 

Other accrued liabilities

 

 

169,004

 

 

 

199,208

 

Total current liabilities

 

 

594,824

 

 

 

590,741

 

Long-term liabilities:

 

 

 

 

 

 

Long-term debt, less current portion

 

 

5,002,092

 

 

 

5,014,638

 

Operating lease liabilities

 

 

182,369

 

 

 

184,471

 

Insurance reserves

 

 

38,689

 

 

 

36,913

 

Other accrued liabilities

 

 

49,825

 

 

 

50,667

 

Deferred income taxes

 

 

4,865

 

 

 

3,922

 

Total long-term liabilities

 

 

5,277,840

 

 

 

5,290,611

 

Stockholders' deficit:

 

 

 

 

 

 

Common stock

 

 

360

 

 

 

361

 

Additional paid-in capital

 

 

3,545

 

 

 

840

 

Retained deficit

 

 

(4,200,341

)

 

 

(4,207,917

)

Accumulated other comprehensive loss

 

 

(2,206

)

 

 

(2,820

)

Total stockholders' deficit

 

 

(4,198,642

)

 

 

(4,209,536

)

Total liabilities and stockholders' deficit

 

$

1,674,022

 

 

$

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

 

 

 

March 27,

 

 

March 28,

 

(In thousands, except per share data)

 

2022

 

 

2021

 

Revenues:

 

 

 

 

 

 

U.S. Company-owned stores

 

$

103,895

 

 

$

112,744

 

U.S. franchise royalties and fees

 

 

122,285

 

 

 

124,486

 

Supply chain

 

 

609,547

 

 

 

568,338

 

International franchise royalties and fees

 

 

68,833

 

 

 

66,770

 

U.S. franchise advertising

 

 

106,589

 

 

 

111,360

 

Total revenues

 

 

1,011,149

 

 

 

983,698

 

Cost of sales:

 

 

 

 

 

 

U.S. Company-owned stores

 

 

87,375

 

 

 

85,742

 

Supply chain

 

 

555,150

 

 

 

508,805

 

Total cost of sales

 

 

642,525

 

 

 

594,547

 

Operating margin

 

 

368,624

 

 

 

389,151

 

General and administrative

 

 

97,494

 

 

 

91,253

 

U.S. franchise advertising

 

 

106,589

 

 

 

111,360

 

Income from operations

 

 

164,541

 

 

 

186,538

 

Other income

 

 

 

 

 

2,500

 

Interest income

 

 

49

 

 

 

22

 

Interest expense

 

 

(46,872

)

 

 

(39,422

)

Income before provision for income taxes

 

 

117,718

 

 

 

149,638

 

Provision for income taxes

 

 

26,754

 

 

 

31,877

 

Net income

 

$

90,964

 

 

$

117,761

 

Earnings per share:

 

 

 

 

 

 

Common stock - basic

 

$

2.53

 

 

$

3.04

 

Common stock - diluted

 

 

2.50

 

 

 

3.00

 

 

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

 

 

 

March 27,

 

 

March 28,

 

(In thousands)

 

2022

 

 

2021

 

Net income

 

$

90,964

 

 

$

117,761

 

Currency translation adjustment

 

 

614

 

 

 

186

 

Comprehensive income

 

$

91,578

 

 

$

117,947

 

 

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)

 

 

 

Fiscal Quarter Ended

 

 

 

March 27,

 

 

March 28,

 

(In thousands)

 

2022

 

 

2021

 

Cash flows from operating activities:

 

 

 

 

 

 

Net income

 

$

90,964

 

 

$

117,761

 

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

 

 

 

 

 

 

Depreciation and amortization

 

 

18,976

 

 

 

16,465

 

Loss on sale/disposal of assets

 

 

195

 

 

 

161

 

Amortization of debt issuance costs

 

 

1,319

 

 

 

1,203

 

Provision for deferred income taxes

 

 

1,319

 

 

 

1,578

 

Non-cash equity-based compensation expense

 

 

7,265

 

 

 

5,204

 

Excess tax benefits from equity-based compensation

 

 

(86

)

 

 

(914

)

Provision for losses on accounts and notes receivable

 

 

1,462

 

 

 

180

 

Unrealized gain on investments

 

 

 

 

 

(2,500

)

Changes in operating assets and liabilities

 

 

(34,718

)

 

 

(1,634

)

Changes in advertising fund assets and liabilities, restricted

 

 

(7,907

)

 

 

15,347

 

Net cash provided by operating activities

 

 

78,789

 

 

 

152,851

 

Cash flows from investing activities:

 

 

 

 

 

 

Capital expenditures

 

 

(12,454

)

 

 

(16,561

)

Purchase of investments

 

 

 

 

 

(40,000

)

Purchase of franchise operations and other assets

 

 

(6,814

)

 

 

 

Other

 

 

(1,368

)

 

 

121

 

Net cash used in investing activities

 

 

(20,636

)

 

 

(56,440

)

Cash flows from financing activities:

 

 

 

 

 

 

Repayments of long-term debt and finance lease obligations

 

 

(13,861

)

 

 

(704

)

Proceeds from exercise of stock options

 

 

266

 

 

 

3,693

 

Purchases of common stock

 

 

(47,661

)

 

 

(25,000

)

Tax payments for restricted stock upon vesting

 

 

(789

)

 

 

(1,044

)

Payments of common stock dividends and equivalents

 

 

(51

)

 

 

(64

)

Net cash used in financing activities

 

 

(62,096

)

 

 

(23,119

)

Effect of exchange rate changes on cash

 

 

374

 

 

 

161

 

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

 

 

(3,569

)

 

 

73,453

 

 

 

 

 

 

 

 

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

 

 

164,962

 

 

 

267,719

 

Restricted cash and cash equivalents, end of period

 

 

168,241

 

 

 

176,029

 

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

 

 

153,708

 

 

 

131,851

 

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

 

$

486,911

 

 

$

575,599

 

 

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)

March 27, 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 ended March 27, 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 March 27, 2022 and March 28, 2021

 

 

 

U.S.

 

 

Supply

 

 

International

 

 

Intersegment

 

 

 

 

 

 

 

 

 

Stores

 

 

Chain

 

 

Franchise

 

 

Revenues

 

 

Other

 

 

Total

 

Revenues

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

2022

 

$

332,769

 

 

$

641,962

 

 

$

68,833

 

 

$

(32,415

)

 

$

 

 

$

1,011,149

 

2021

 

 

348,590

 

 

 

599,177

 

 

 

66,770

 

 

 

(30,839

)

 

 

 

 

 

983,698

 

Segment Income

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

2022

 

$

97,292

 

 

$

46,349

 

 

$

55,046

 

 

N/A

 

 

$

(7,710

)

 

$

190,977

 

2021

 

 

107,436

 

 

 

52,552

 

 

 

54,468

 

 

N/A

 

 

 

(6,088

)

 

 

208,368

 

 

The following table reconciles total Segment Income to consolidated income before provision for income taxes.

 

 

 

Fiscal Quarter Ended

 

 

 

March 27,

 

 

March 28,

 

 

 

2022

 

 

2021

 

Total Segment Income

 

$

190,977

 

 

$

208,368

 

Depreciation and amortization

 

 

(18,976

)

 

 

(16,465

)

Loss on sale/disposal of assets

 

 

(195

)

 

 

(161

)

Non-cash equity-based compensation expense

 

 

(7,265

)

 

 

(5,204

)

Income from operations

 

 

164,541

 

 

 

186,538

 

Other income

 

 

 

 

 

2,500

 

Interest income

 

 

49

 

 

 

22

 

Interest expense

 

 

(46,872

)

 

 

(39,422

)

Income before provision for income taxes

 

$

117,718

 

 

$

149,638

 

 

3. Earnings Per Share

 

 

 

Fiscal Quarter Ended

 

 

 

March 27,

 

 

March 28,

 

 

 

2022

 

 

2021

 

Net income available to common stockholders - basic and diluted

 

$

90,964

 

 

$

117,761

 

Basic weighted average number of shares

 

 

36,000,896

 

 

 

38,700,225

 

Earnings per share – basic

 

$

2.53

 

 

$

3.04

 

Diluted weighted average number of shares

 

 

36,435,038

 

 

 

39,208,383

 

Earnings per share – diluted

 

$

2.50

 

 

$

3.00

 

 

7


 

The denominators used in calculating diluted earnings per share for common stock for the fiscal quarters ended March 27, 2022 and March 28, 2021 do not include the following because the effect of including these shares would be anti-dilutive or because the performance targets for these awards had not yet been met:

 

 

 

Fiscal Quarter Ended

 

 

 

March 27,

 

 

March 28,

 

 

 

2022

 

 

2021

 

Anti-dilutive shares underlying stock-based awards

 

 

 

 

 

 

   Stock options

 

 

74,152

 

 

 

51,490

 

   Restricted stock awards and units

 

 

469

 

 

 

 

Performance condition not met

 

 

 

 

 

 

   Restricted stock awards and units

 

 

42,777

 

 

 

65,967

 

 

4. Stockholders’ Deficit

The following table summarizes the changes in stockholders’ deficit for the first quarter of 2022.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Accumulated

 

 

 

 

 

 

 

 

 

Additional

 

 

 

 

 

Other

 

 

 

Common Stock

 

 

Paid-in

 

 

Retained

 

 

Comprehensive

 

 

 

Shares

 

 

Amount

 

 

Capital

 

 

Deficit

 

 

Loss

 

Balance at January 2, 2022

 

 

36,138,273

 

 

$

361

 

 

$

840

 

 

$

(4,207,917

)

 

$

(2,820

)

Net income

 

 

 

 

 

 

 

 

 

 

 

90,964

 

 

 

 

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

 

 

 

 

 

 

 

 

 

 

 

(39,765

)

 

 

 

Issuance and cancellation of stock awards, net

 

 

340

 

 

 

 

 

 

 

 

 

 

 

 

 

Tax payments for restricted stock upon vesting

 

 

(1,875

)

 

 

 

 

 

(789

)

 

 

 

 

 

 

Purchases of common stock

 

 

(100,810

)

 

 

(1

)

 

 

(4,037

)

 

 

(43,623

)

 

 

 

Exercise of stock options

 

 

1,445

 

 

 

 

 

 

266

 

 

 

 

 

 

 

Non-cash equity-based compensation expense

 

 

 

 

 

 

 

 

7,265

 

 

 

 

 

 

 

Currency translation adjustment

 

 

 

 

 

 

 

 

 

 

 

 

 

 

614

 

Balance at March 27, 2022

 

 

36,037,373

 

 

$

360

 

 

$

3,545

 

 

$

(4,200,341

)

 

$

(2,206

)

 

Subsequent to the end of the first quarter of 2022, on April 26, 2022, the Company’s Board of Directors declared a $1.10 per share quarterly dividend on its outstanding common stock for shareholders of record as of June 15, 2022 to be paid on June 30, 2022.

 

The following table summarizes the changes in stockholders’ deficit for the first quarter of 2021.