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

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

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.

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,~~April 20, 2023, Domino’s Pizza, Inc. had ~~35,885,105~~35,339,030 shares of common stock, par value $0.01 per share, outstanding.

(1) The condensed consolidated balance sheet at January ~~2, 2022~~1, 2023 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.

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

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~~1, 2023 included in the Company’s ~~2021~~2022 Annual Report on Form 10-K, filed with the Securities and Exchange Commission on ~~March 1, 2022~~February 23, 2023 (the ~~“2021~~“2022 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~~March 26, 2023 are not necessarily indicative of the results that may be expected for the fiscal year ending ~~January 1,~~December 31, 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														Fiscal Quarters Ended March 26, 2023 and March 27, 2022
	U.S.		Supply		International		Intersegment								U.S.		Supply		International		Intersegment
	Stores		Chain		Franchise		Revenues			Other			Total		Stores		Chain		Franchise		Revenues			Other			Total
Revenues
2023															$	330,501	$	650,124	$	69,671	$	(25,898	)	$	—		$	1,024,398
2022	$	684,450	$	1,325,260	$	135,748	$	(69,127	)	$	—		$	2,076,331		332,769		641,962		68,833		(32,415	)		—			1,011,149
2021		708,355		1,234,769		136,515		(63,469	)		—			2,016,170
Segment Income
2023															$	112,683	$	48,515	$	58,139	N/A			$	(15,722	)	$	203,615
2022	$	201,347	$	99,982	$	107,936	N/A			$	(13,331	)	$	395,934		97,292		46,349		55,046	N/A				(7,710	)		190,977
2021		219,283		111,145		110,833	N/A				(15,715	)		425,546

In the first quarter of 2023, the Company changed its allocation methodology for certain costs which support certain internally developed software used across the Company’s franchise system. This allocation methodology change was implemented in order to reflect the way the chief operating decision maker allocates resources to the Company’s reportable segments and evaluates segment profitability, including the costs of internally developed software.

The change in allocation methodology of certain software development costs resulted in an estimated increase in U.S. stores Segment Income of $10.1 million, an estimated increase in international franchise Segment Income of $2.0 million and an estimated decrease in other Segment Income of $12.1 million in the first quarter of 2023. The change in allocation methodology of certain software development costs had no impact on revenues, supply chain Segment Income or total Segment Income. The change in allocation methodology for certain software development costs is a prospective change and the comparative information has not been restated.

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

Fiscal Quarter Ended

Two Fiscal Quarters Ended

June 19,

June 20,

June 19,

June 20,

2022

2021

2022

2021

Total Segment Income

$
204,957

$
217,178

$
395,934

$
425,546

Depreciation and amortization

(18,117
)

(17,176
)

(37,093
)

(33,641
)
Loss on sale/disposal of assets

(253
)

(295
)

(448
)

(456
)
Non-cash equity-based compensation expense

(8,473
)

(8,296
)

(15,738
)

(13,500
)
Recapitalization-related expenses

—

(509
)

—

(509
)
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

3. Earnings Per Share


	Fiscal Quarter Ended				Two Fiscal Quarters Ended				Fiscal Quarter Ended
	June 19,		June 20,		June 19,		June 20,		March 26,		March 27,
	2022		2021		2022		2021		2023		2022
Net income available to common stockholders - basic and diluted	$	102,493	$	116,619	$	193,457	$	234,380	$	104,770	$	90,964
Basic weighted average number of shares		35,915,102		37,590,369		35,957,999		38,145,297		35,391,624		36,000,896
Earnings per share – basic	$	2.85	$	3.10	$	5.38	$	6.14	$	2.96	$	2.53
Diluted weighted average number of shares		36,296,277		38,122,515		36,368,297		38,665,325		35,708,938		36,435,038
Earnings per share – diluted	$	2.82	$	3.06	$	5.32	$	6.06	$	2.93	$	2.50

The denominators used in calculating diluted earnings per share for common stock for the fiscal quarters ended March 26, 2023 and ~~two fiscal quarters each ended June 19,~~March 27, 2022 ~~and June 20, 2021~~ do not include the following because the effect of including these shares would be anti-dilutive or because the performance ~~condition~~targets for these awards had not yet been met:


	Fiscal Quarter Ended				Two Fiscal Quarters Ended				Fiscal Quarter Ended
	June 19,		June 20,		June 19,		June 20,		March 26,		March 27,
	2022		2021		2022		2021		2023		2022
Anti-dilutive shares underlying stock-based awards
Stock options		120,540		84,955		120,540		92,689		231,459		74,152
Restricted stock awards and units		67,677		—		346		—		26,975		469
Performance condition not met
Restricted stock awards and units		42,710		64,110		42,710		64,110		60,068		42,777

4. Stockholders’ Deficit

The following table summarizes the changes in stockholders’ deficit for the ~~second~~first quarter of ~~2022.~~2023.


													Accumulated															Accumulated
							Additional						Other									Additional						Other
	Common Stock						Paid-in			Retained			Comprehensive			Common Stock						Paid-in			Retained			Comprehensive
	Shares			Amount			Capital			Deficit			Loss			Shares			Amount			Capital			Deficit			Loss
Balance at March 27, 2022		36,037,373		$	360		$	3,545		$	(4,200,341	)	$	(2,206	)
Balance at January 1, 2023																	35,419,718		$	354		$	9,693		$	(4,194,418	)	$	(4,694	)
Net income		—			—			—			102,493			—			—			—			—			104,770			—
Dividends declared on common stock and equivalents ($1.10 per share)		—			—			—			(39,603	)		—
Dividends declared on common stock and equivalents ($1.21 per share)																	—			—			—			(43,005	)		—
Issuance and cancellation of stock awards, net		13,866			—			—			—			—			14,495			—			—			—			—
Tax payments for restricted stock upon vesting		(3,950	)		—			(1,606	)		—			—			(5,073	)		—			(1,553	)		—			—
Purchases of common stock		(148,248	)		(1	)		(7,083	)		(42,916	)		—			(100,515	)		(1	)		(14,547	)		(15,802	)		—
Exercise of stock options		605			—			260			—			—			1,508			—			343			—			—
Non-cash equity-based compensation expense		—			—			8,473			—			—			—			—			7,538			—			—
Currency translation adjustment		—			—			—			—			(1,684	)		—			—			—			—			(451	)
Balance at June 19, 2022		35,899,646		$	359		$	3,589		$	(4,180,367	)	$	(3,890	)
Balance at March 26, 2023																	35,330,133		$	353		$	1,474		$	(4,148,455	)	$	(5,145	)

~~The following table summarizes the changes in stockholders’ deficit for the two fiscal quarters 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

—

—

—

193,457

—

Dividends declared on common stock and equivalents
($2.20 per share)

—

—

—

(79,368
)

—

Issuance and cancellation of stock awards, net

14,206

—

—

—

—

Tax payments for restricted stock upon vesting

(5,825
)

—

(2,395
)

—

—

Purchases of common stock

(249,058
)

(2
)

(11,120
)

(86,539
)

—

Exercise of stock options

2,050

—

526

—

—

Non-cash equity-based compensation expense

—

—

15,738

—

—

Currency translation adjustment

—

—

—

—

(1,070
)
Balance at June 19, 2022

35,899,646

$
359

$
3,589

$
(4,180,367
)

$
(3,890
)

Subsequent to the end of the ~~second~~first quarter of ~~2022,~~2023, on ~~July 19, 2022~~April 25, 2023, the Company’s Board of Directors declared a $~~1.10~~1.21 per share quarterly dividend on its outstanding common stock for shareholders of record as of ~~September~~June 15, ~~2022~~2023 to be paid on ~~September~~June 30, ~~2022~~2023.

The following table summarizes the changes in stockholders’ deficit for the ~~second~~first quarter of ~~2021.~~2022.


													Accumulated															Accumulated
							Additional						Other									Additional						Other
	Common Stock						Paid-in			Retained			Comprehensive			Common Stock						Paid-in			Retained			Comprehensive
	Shares			Amount			Capital			Deficit			Loss			Shares			Amount			Capital			Deficit			Loss
Balance at March 28, 2021		38,818,197		$	388		$	6,612		$	(3,240,842	)	$	(2,238	)
Balance at January 2, 2022																	36,138,273		$	361		$	840		$	(4,207,917	)	$	(2,820	)
Net income		—			—			—			116,619			—			—			—			—			90,964			—
Dividends declared on common stock and equivalents ($0.94 per share)		—			—			—			(34,680	)		—
Dividends declared on common stock and equivalents ($1.10 per share)																	—			—			—			(39,765	)		—
Issuance and cancellation of stock awards, net		837			—			—			—			—			340			—			—			—			—
Tax payments for restricted stock upon vesting		(110	)		—			(43	)		—			—			(1,875	)		—			(789	)		—			—
Purchases of common stock		(2,012,596	)		(20	)		(12,181	)		(987,799	)		—			(100,810	)		(1	)		(4,037	)		(43,623	)		—
Exercise of stock options		47,243			1			5,331			—			—			1,445			—			266			—			—
Non-cash equity-based compensation expense		—			—			8,296			—			—			—			—			7,265			—			—
Other		—			—			(244	)		—			—
Currency translation adjustment		—			—			—			—			230			—			—			—			—			614
Balance at June 20, 2021		36,853,571		$	369		$	7,771		$	(4,146,702	)	$	(2,008	)
Balance at March 27, 2022																	36,037,373		$	360		$	3,545		$	(4,200,341	)	$	(2,206	)

~~The following table summarizes the changes in stockholders’ deficit for the two fiscal quarters of 2021.~~

6. Revenue Disclosures

Contract Liabilities

Contract liabilities primarily consist of deferred franchise fees and deferred development fees. Deferred franchise fees and deferred development fees of $~~5.5~~5.6 million and $~~5.4~~5.5 million were included in current other accrued liabilities as of ~~June 19, 2022~~March 26, 2023 and January ~~2, 2022,~~1, 2023, respectively. Deferred franchise fees and deferred development fees of $~~23.8~~22.3 million and $~~24.3~~22.7 million were included in long-term other accrued liabilities as of ~~June 19, 2022~~March 26, 2023 and January ~~2, 2022,~~1, 2023, respectively.

Changes in deferred franchise fees and deferred development fees for the ~~two fiscal quarters~~first quarter of ~~2022~~2023 and the ~~two fiscal quarters~~first quarter of ~~2021~~2022 were as follows:

Two Fiscal Quarters Ended

June 19,

June 20,

2022

2021

Deferred franchise fees and deferred development fees at beginning of period

$
29,694

$
19,090

Revenue recognized during the period

(2,855
)

(2,691
)
New deferrals due to cash received and other

2,448

3,805

Deferred franchise fees and deferred development fees at end of period

$
29,287

$
20,204


	Fiscal Quarter Ended
	March 26,			March 27,
	2023			2022
Deferred franchise fees and deferred development fees, beginning of period	$	28,225		$	29,694
Revenue recognized during the period		(1,448	)		(1,420	)
New deferrals due to cash received and other		1,162			1,159
Deferred franchise fees and deferred development fees, end of period	$	27,939		$	29,433

As of ~~June 19, 2022,~~March 26, 2023, advertising fund assets, restricted of $~~182.5~~139.9 million consisted of $~~164.1~~119.8 million of cash and cash equivalents, $~~13.5~~13.2 million of accounts receivable and $~~4.9~~6.9 million of prepaid expenses. As of ~~June 19, 2022,~~March 26, 2023, advertising fund cash and cash equivalents included $~~7.4~~3.3 million of cash contributed from U.S. Company-owned stores that had not yet been expended.

As of January ~~2, 2022,~~1, 2023, advertising fund assets, restricted of $~~180.9~~162.7 million consisted of $~~161.7~~143.6 million of cash and cash equivalents, $~~14.5~~13.1 million of accounts receivable and $~~4.7~~6.0 million of prepaid expenses. As of January ~~2, 2022,~~1, 2023, advertising fund cash and cash equivalents included $~~7.2~~4.8 million of cash contributed from U.S. Company-owned stores that had not yet been expended.

Subsequent to the end of the first quarter of 2023, as of March 27, 2023, Domino's National Advertising Fund Inc., the Company’s consolidated not-for-profit advertising subsidiary, effectuated a temporary reduction of 0.25% to its standard 6.0% advertising contribution, which is anticipated to be in effect for at least one year. Concurrently, the Company also increased the U.S. digital per-transaction technology fees that are recognized as the related U.S. franchise retail sales occur by $0.08 to $0.395 for the same time period.

7. 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~~first quarter ~~and two fiscal quarters~~ of ~~2022~~2023 and the ~~second~~first quarter ~~and two fiscal quarters~~ of ~~2021~~2022 were as follows:


	Fiscal Quarter Ended				Two Fiscal Quarters Ended				Fiscal Quarter Ended
	June 19,		June 20,		June 19,		June 20,		March 26,		March 27,
	2022		2021		2022		2021		2023		2022
Operating lease cost	$	10,789	$	10,326	$	21,064	$	20,750	$	10,808	$	10,275
Finance lease cost:
Amortization of right-of-use assets		1,195		1,003		2,403		1,922		1,199		1,208
Interest on lease liabilities		732		722		1,836		1,748		983		1,104
Total finance lease cost	$	1,927	$	1,725	$	4,239	$	3,670	$	2,182	$	2,312

Rent expense totaled $~~19.0~~19.3 million and $~~37.9~~18.9 million in the ~~second~~first quarter of 2023 and ~~two fiscal quarters~~the first quarter of 2022, ~~respectively. Rent expense totaled $17.9~~ ~~million and $36.1~~ ~~million in the second quarter and two fiscal quarters of 2021,~~ respectively. Rent expense includes operating lease cost, as well as expense for non-lease components including common area maintenance, real estate taxes and ~~other costs~~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. Rent expense for certain short-term supply chain center tractor and trailer rentals was $~~1.6~~1.4 million and $~~3.8~~2.2 million in the ~~second~~first quarter of 2023 and ~~two fiscal quarters~~the first quarter of 2022, ~~respectively. Rent expense for short-term supply chain center tractor and trailer rentals was $2.0~~ ~~million and $3.8~~ ~~million in the second quarter and two fiscal quarters of 2021,~~ respectively. Variable rent expense and rent expense for other short-term leases were immaterial in both the ~~second~~first quarter of 2023 and ~~two fiscal quarters~~the first quarter of ~~2022 and 2021.~~2022.

Supplemental balance sheet information related to the Company’s finance leases as of ~~June 19, 2022~~March 26, 2023 and January ~~2, 2022~~1, 2023 was as follows:


	June 19,			January 2,			March 26,			January 1,
	2022			2022			2023			2023
Land and buildings	$	86,839		$	86,965		$	83,824		$	83,902
Equipment								2,501			1,606
Finance lease assets								86,325			85,508
Accumulated depreciation and amortization		(16,804	)		(14,423	)		(20,591	)		(19,405	)
Finance lease assets, net	$	70,035		$	72,542		$	65,734		$	66,103

Current portion of long-term debt	$	4,154		$	4,088		$	3,728		$	3,313
Long-term debt, less current portion		70,309			72,250			70,276			70,886
Total principal payable on finance leases	$	74,463		$	76,338		$	74,004		$	74,199

As of ~~June 19, 2022~~March 26, 2023 and January ~~2, 2022,~~1, 2023, the weighted average remaining lease term and weighted average discount rate for the Company’s operating and finance leases were as follows:

June 19, 2022

January 2, 2022

March 26, 2023

January 1, 2023

Operating

Finance

Operating

Finance

Operating

Finance

Operating

Finance

Leases

Weighted average remaining lease term

7 years

15 years

7 years

15 years

7 years

14 years

7 years

14 years

Weighted average discount rate

3.6%

5.8%

3.5%

5.8%

4.0%

6.1%

3.9%

6.0%

Supplemental cash flow information related to leases for the ~~second~~first quarter ~~and two fiscal quarters~~ of ~~2022~~2023 and the ~~second~~first quarter ~~and two fiscal quarters~~ of ~~2021~~2022 were as follows:


	Fiscal Quarter Ended				Two Fiscal Quarters Ended				Fiscal Quarter Ended
	June 19,		June 20,		June 19,		June 20,		March 26,		March 27,
	2022		2021		2022		2021		2023		2022
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases	$	7,858	$	9,105	$	18,495	$	19,292	$	10,320	$	10,637
Operating cash flows from finance leases		732		722		1,836		1,748		983		1,104
Financing cash flows from finance leases		792		593		1,778		1,297		1,024		986
Right-of-use assets obtained in exchange for lease obligations:
Operating leases		23,407		6,681		31,164		11,353		9,305		7,758
Finance leases		0		5,261		0		5,660		872		—

Maturities of lease liabilities as of ~~June 19, 2022~~March 26, 2023 were as follows:


	Operating			Finance			Operating			Finance
	Leases			Leases			Leases			Leases
2022	$	29,410		$	4,722
2023		43,207			7,523		$	35,586		$	5,893
2024		42,579			8,100			43,630			8,232
2025		37,063			7,919			38,817			8,048
2026		34,410			8,615			37,110			8,733
2027								30,478			8,008
Thereafter		79,923			77,842			85,253			68,420
Total future minimum rental commitments		266,592			114,721			270,874			107,334
Less – amounts representing interest		(30,236	)		(40,258	)
Less, amounts representing interest								(39,834	)		(33,330	)
Total lease liabilities	$	236,356		$	74,463		$	231,040		$	74,004

As of ~~June 19, 2022,~~March 26, 2023, the Company had additional leases for ~~one supply chain center,~~ one storage warehouse facility and certain supply chain ~~tractors~~ and ~~trailers~~U.S. Company-owned store vehicles that had not yet commenced with estimated future minimum rental commitments of ~~approximately~~ $~~61.1~~40.9 million. These leases are expected to commence in ~~2022~~2023 and ~~2023~~2024 with lease terms of up to 1611 years. These undiscounted amounts are not included in the table above.

The Company has guaranteed lease payments related to certain franchisees’ ~~and others'~~ lease arrangements. The maximum amount of potential future payments under these guarantees was $~~7.9~~23.3 million and $~~9.1~~24.5 million as of ~~June 19, 2022~~March 26, 2023 and January ~~2, 2022,~~1, 2023, 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. Supplemental Disclosures of Cash Flow Information

The Company had non-cash investing activities related to accruals for capital expenditures of $~~5.8~~6.9 million at ~~June 19, 2022~~March 26, 2023 and $~~5.4~~6.9 million at January ~~2, 2022. The~~1, 2023. As of March 26, 2023, the Company ~~also~~ had ~~less than~~ $~~0.1~~0.3 million ofin non-cash ~~investing activities~~financing activity related to ~~lease incentives in~~accruals for excise taxes on share repurchases during the ~~two fiscal quarters~~first quarter of ~~both 2022 and 2021.~~2023.

9. Company-owned Store Transactions

During the first quarter of ~~2022,~~2023, the Company ~~purchased~~ refranchised one U.S. Company-owned store for proceeds of less than $230.1 ~~U.S. franchised stores from certain~~million. The pre-tax refranchising loss associated with the sale of the ~~Company~~’~~s existing U.S. franchisees for~~related assets and liabilities, including goodwill, was approximately $~~6.8~~0.1 ~~million, which included $~~million. The refranchising loss associated with the sale of this store was recorded in refranchising loss in the Company’s condensed consolidated statements of income.~~4.0~~ ~~million of intangibles, $1.7~~ ~~million of equipment and leasehold improvements and $1.1~~ ~~million of goodwill.~~

~~10.~~12

10. New Accounting Pronouncements

Accounting Standards Not Yet Adopted

The Company has considered all new accounting standards issued by the Financial Accounting Standards Board (“FASB”). The Company has not yet ~~adopted~~completed its assessment of the following ~~standard.~~standards.

Accounting Standards Update (“ASU”) 2020-04, Facilitation of the Effects of Reference Rate Reform on Financial Reporting, updated by ASU 2022-06, Deferral of the Sunset Date of Topic 848 (“ASU 2022-06”)

In March 2020, the FASB issued 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 Company’s 2021 variable funding notes bear interest at fluctuating interest rates based on LIBOR. However, the associated loan documents ~~contemplate~~provide that after the date on which the administrator for LIBOR permanently or indefinitely ceases to provide all available settings of U.S. dollar LIBOR, any new advances under the 2021 variable funding notes that would otherwise have borne interest based on LIBOR, as well as any existing LIBOR advances for which the interest period has expired, will instead bear interest at a forward-looking term rate based on the Secured Overnight Financing Rate (“Term SOFR”), plus a spread adjustment. The loan documents also permit the lenders to affect a transition from LIBOR to ~~secured overnight financing rate (“SOFR”) in the event that LIBOR ceases~~Term SOFR at an earlier date, subject to ~~exist.~~certain conditions. The Company’s 2022 variable funding notes bear interest at fluctuating interest rates based on Term SOFR. ASU 2020-04, as updated by ASU 2022-06, may currently be adopted and may be applied prospectively to contract modifications made on or before December 31, ~~2022.~~2024. The Company does not expect the adoption of this guidance to have a material impact on its condensed consolidated financial statements.

ASU 2022-03, Fair Value Measurement (Topic 820): Fair Value Measurement of Equity Securities Subject to Contractual Sale Restrictions

In June 2022, the FASB issued ASU 2022-03, Fair Value Measurement (Topic 820): Fair Value Measurement of Equity Securities Subject to Contractual Sale Restrictions (“ASU 2022-03”), which clarifies and amends the guidance of measuring the fair value of equity securities subject to contractual sale restrictions. ASU 2022-03 also requires disclosure of the fair value of equity securities subject to contractual sale restrictions, the nature and remaining duration of the restrictions and the circumstances that could cause a lapse in the restrictions. The Company’s investment in DPC Dash (Note 5) is subject to contractual restrictions that prohibit the sale of the security for 360 days following its initial public offering. ASU 2022-03 is effective for fiscal years beginning after December 15, 2023, including applicable interim periods and early adoption is permitted. The Company will adopt this accounting standard in the second quarter of 2023 and does not expect the adoption of this guidance to have a material impact on its condensed consolidated financial statements.

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 2023 and 2022 ~~and 2021 second~~first quarters referenced herein represent the twelve-week periods ended ~~June 19,~~March 26, 2023 and March 27, 2022, ~~and June 20, 2021, respectively. The 2022 and 2021 two fiscal quarters referenced herein represent the twenty-four-week periods ended June 19, 2022 and June 20, 2021,~~ respectively. In this section, we discuss the results of our operations for the ~~second~~first quarter ~~and two fiscal quarters~~ of ~~2022~~2023 as compared to the ~~second~~first quarter ~~and two fiscal quarters~~ of ~~2021.~~2022.

Overview

Domino’s is the largest pizza company in the world, with more than ~~19,200~~20,000 locations in over 90 markets around the world as of ~~June 19, 2022,~~March 26, 2023, and operates two distinct service models within its stores with a significant business in both delivery and carryout. Founded in 1960, ~~our roots are in convenient pizza delivery, while a significant amount of our sales also come from carryout customers. We~~we are a highly recognized global brand, and we focus on value while serving neighborhoods locally through our large ~~worldwide~~ network of franchise owners and ~~U.S.~~ Company-owned ~~stores.~~stores through both the delivery and carryout service models. We are primarily a franchisor, with approximately ~~98%~~99% of Domino’s global 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~~franchisees as of ~~the Domino’s global brand and operating system with limited capital investment by us.~~March 26, 2023.

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. ~~Royalties are ongoing percent-of-sales fees for use of the Domino’s~~® ~~brand marks.~~ We also 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 Company-owned stores in the ~~United States.~~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® brand to master franchisees. These master franchisees are charged with developing their geographical area, and they may profit by sub-franchising and selling food and equipment to those sub-franchisees, as well as by running pizza ~~stores.~~stores directly. We believe that everyone in the system can benefit, including the end consumer, who can purchase Domino’s menu items for themselves and their family conveniently and economically.

Our financial results are driven largely by retail sales at our franchised and Company-owned stores. Changes in retail sales are driven by changes in same store sales and store counts. We monitor both of these metrics very closely, as they directly impact our revenues and profits, and we strive to consistently increase both metrics. Retail sales drive royalty payments from franchisees, as well as Company-owned store and supply chain revenues. Retail sales are primarily impacted by the strength of the Domino’s Pizza brand, the results of our extensive advertising through various media channels, the impact of technological innovation and digital ordering, our ability to execute our strong and proven business model and the overall global economic environment.

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~~flow 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.~~ repurchases since becoming a publicly-traded company in 2004.We believe we have a proven business model for success, which includes leading with technology, service and product innovation and leveraging our global scale, which has historically ~~driven~~provided strong returns for our shareholders.

~~Second~~First Quarter of ~~2022~~2023 Highlights

•

Global retail sales, excluding foreign currency impact (which includes total retail sales at Company-owned and franchised stores worldwide), increased ~~1.5%~~5.9% as compared to the ~~second~~first quarter of ~~2021.~~2022. U.S. retail sales ~~declined 0.6%~~increased 5.1% and international retail sales, excluding foreign currency impact, increased ~~3.7%~~6.5% as compared to the ~~second~~first quarter of ~~2021.~~2022.

•

Same store sales ~~declined 2.9%~~increased 3.6% in our U.S. stores and ~~declined 2.2%~~increased 1.2% in our international stores (excluding foreign currency impact).

•

Revenues increased ~~3.2%~~1.3%.

•

Income from operations ~~decreased 6.7%~~increased 7.9%.

•

Net income ~~decreased 12.1%~~increased 15.2%.

•

Diluted earnings per share ~~decreased 7.8%~~increased 17.2%.

~~Two Fiscal Quarters of 2022 Highlights~~

•

Global retail sales, excluding foreign currency impact (which includes total retail sales at Company-owned and franchised stores worldwide), increased 2.5% as compared to the two fiscal quarters of 2021. U.S. retail sales declined 1.0% and international retail sales, excluding foreign currency impact, increased 6.0% as compared to the two fiscal quarters of 2021.

•

~~Same store sales declined 3.3% in our U.S. stores and declined 0.5% in our international stores (excluding foreign currency impact).~~

•

~~Revenues increased 3.0%.~~

•

~~Income from operations decreased 9.2%.~~

•

~~Net income decreased 17.5%.~~

•

~~Diluted earnings per share decreased 12.2%.~~

Excluding the negative impact of foreign currency, Domino’s experienced global retail sales growth during the ~~second~~first quarter ~~and two fiscal quarters~~ of ~~2022. We believe our commitment to value, convenience, quality and new products continues to keep consumers engaged with the brand.~~2023. U.S. same store sales ~~declined 2.9% and 3.3%~~increased 3.6% in the ~~second~~first quarter ~~and two fiscal quarters~~ of ~~2022, respectively,~~2023, rolling over ~~increases~~a decline in U.S. same store sales of ~~3.5% and 8.1%~~3.6% in the ~~second~~first quarter ~~and two fiscal quarters~~ of ~~2021, respectively.~~2022. The ~~decline~~increase in U.S. same store sales ~~in the second quarter and two fiscal quarters of 2022~~ was primarily attributable to lower order counts due in part to labor shortages affecting store hours and staffing levels in many of our markets and economic stimulus activity in the U.S in the second quarter and two fiscal quarters of 2021 in response to the COVID-19 pandemic which did not recur in the respective periods of 2022. These decreases were partially offset by a higher average ticket per transaction resulting from ~~higher~~increases in menu and national offer pricing. In the U.S., we also launched our newest menu item, Domino’s Loaded Tots, in the first quarter of 2023. Additionally, during the first quarter of 2023, we experienced higher supply chain revenues attributable to increases in market basket pricing ~~as well as more items purchased per transaction and increases~~ to ~~our average delivery fee.~~stores. International same store sales (excluding foreign currency impact) ~~declined 2.2% and 0.5% in~~increased 1.2% during the ~~second~~first quarter ~~and two fiscal quarters~~ of ~~2022, respectively,~~2023, rolling over ~~increases~~an increase in international same store sales (excluding foreign currency impact) of ~~13.9% and 12.8%~~1.2% in the second quarter and two fiscal quarters of 2021, respectively. The decline in same store sales (excluding foreign currency impact) in the second quarter and two fiscal quarters of 2022 in our international business was driven in part by a value added tax holiday in the United Kingdom in the second quarter of 2021 that did not recur in the secondfirst quarter of 2022. Our U.S. and international same store sales (excluding foreign currency impact) continue to be pressured by our fortressing strategy, which includes increasing store concentration in certain markets where we compete, as well as from aggressive competitive activity.

During the second quarter and two fiscal quarters of 2022, we experienced significant inflationary pressures in our commodity, labor and fuel costs resulting from the macroeconomic environment in the U.S., which had a significant impact on our overall operating results as compared to the respective periods of fiscal 2021.

We continued our global expansion with the opening of ~~233~~128 net stores in the ~~second~~first quarter of ~~2022, bringing our year-to-date total to 446.~~2023. We had 22 net stores open in the U.S. and ~~211~~106 net stores open internationally during the ~~second~~first quarter of ~~2022.~~2023.

Overall, we believe our continued global store growth, along with our global retail sales growth (excluding foreign currency impact), 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 refers to total worldwide retail sales at Company-owned and ~~franchise~~franchised 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 based on a percentage of franchise retail sales. We review comparable industry global retail sales information to assess business trends and to track the growth of the Domino’s Pizza brand. In addition, supply chain revenues are directly impacted by changes in franchise retail sales in the U.S. and Canada. Retail sales for ~~franchise~~franchised 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 international local currency global retail sales against the comparable period of the prior year.

Second Quarter
of 2022

Second Quarter
of 2021

Two Fiscal Quarters
of 2022

Two Fiscal Quarters
of 2021
U.S. stores

(0.6)%

+7.4%

(1.0)%

+11.1%
International stores (excluding foreign currency impact)

+3.7%

+29.5%

+6.0%

+20.6%
Total (excluding foreign currency impact)

+1.5%

+17.1%

+2.5%

+15.6%


	First Quarter of 2023	First Quarter of 2022
U.S. stores	+ 5.1%	(1.4)%
International stores (excluding foreign currency impact)	+ 6.5%	+ 8.4%
Total (excluding foreign currency impact)	+ 5.9%	+ 3.6%

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 for a given period by including only sales from stores that also had sales in the comparable weeks of both ~~years.~~periods. 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,~~on a constant dollar basis, which ~~reflect~~reflects changes in international local currency sales.

Second Quarter
of 2022

Second Quarter
of 2021

Two Fiscal Quarters
of 2022

Two Fiscal Quarters
of 2021
U.S. Company-owned stores (1)

(9.2)%

(2.6)%

(9.8)%

+1.6%
U.S. franchise stores (1)

(2.5)%

+3.9%

(2.9)%

+8.5%
U.S. stores

(2.9)%

+3.5%

(3.3)%

+8.1%
International stores (excluding foreign currency impact)

(2.2)%

+13.9%

(0.5)%

+12.8%

~~(1) During the first quarter of 2022, we purchased 23 U.S. franchised stores from certain of our existing U.S. franchisees (the “2022 Store Purchase”). The same~~ Same store sales growth for ~~these~~transferred stores is reflected in ~~U.S. Company-owned stores in the second quarter and two fiscal quarters of 2022.~~their current classification.


	First Quarter of 2023	First Quarter of 2022
U.S. Company-owned stores	+ 7.3%	(10.5)%
U.S. franchise stores	+ 3.4%	(3.2)%
U.S. stores	+ 3.6%	(3.6)%
International stores (excluding foreign currency impact)	+ 1.2%	+ 1.2%

Store Growth Activity

~~Store counts and net~~Net store growth ~~are~~is a commonly used statistical ~~measures~~measure in the quick-service restaurant industry that ~~are~~is important to understanding performance. Net store growth is calculated by netting gross store openings with gross store closures during the period. Transfers between Company-owned stores and franchised stores are excluded from the calculation of net store growth.

U.S.
Company-
owned
Stores

U.S.
Franchise
Stores

Total
U.S.
Stores

International Stores

Total

Store count at March 27, 2022

400

6,197

6,597

12,464

19,061

Openings

1

23

24

249

273

Closings (1)

—

(2
)

(2
)

(38
)

(40
)
Store count at June 19, 2022

401

6,218

6,619

12,675

19,294

Second quarter 2022 net store growth

1

21

22

211

233

Trailing four quarters net store growth (2)

12

181

193

1,044

1,237


	U.S. Company- owned Stores			U.S. Franchise Stores			Total U.S. Stores			International Stores			Total
Store count at January 1, 2023		286			6,400			6,686			13,194			19,880
Openings		1			24			25			143			168
Closings		(1	)		(2	)		(3	)		(37	)		(40	)
Transfers		(1	)		1			—			—			—
Store count at March 26, 2023		285			6,423			6,708			13,300			20,008
First quarter 2023 net store growth		—			22			22			106			128
Trailing four quarters net store growth		—			111			111			836			947

(1) 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 19, 2022, there were fewer than 150 international stores temporarily closed.

~~(2) Trailing four quarters net store growth does not include the effect of transfers associated with the 2022 Store Purchase.~~

Income Statement Data


	Second Quarter of 2022		Second Quarter of 2021		Two Fiscal Quarters of 2022		Two Fiscal Quarters of 2021		First Quarter of 2023					First Quarter of 2022
Revenues:
U.S. Company-owned stores	$112.5		$116.6		$216.4		$229.3		$	84.9				$	103.9
U.S. franchise royalties and fees	128.1		126.8		250.4		251.3			132.9					122.3
Supply chain	646.6		603.0		1,256.1		1,171.3			624.2					609.5
International franchise royalties and fees	66.9		69.7		135.7		136.5			69.7					68.8
U.S. franchise advertising	111.1		116.3		217.7		227.7			112.7					106.6
Total revenues	1,065.2	100.0%	1,032.5	100.0%	2,076.3	100.0%	2,016.2	100.0%		1,024.4		100.0	%		1,011.1		100.0	%
Cost of sales:
U.S. Company-owned stores	94.1		88.0		181.4		173.8			70.6					87.4
Supply chain	584.9		536.8		1,140.0		1,045.6			568.3					555.2
Total cost of sales	678.9	63.7%	624.8	60.5%	1,321.4	63.6%	1,219.3	60.5%		638.9		62.4	%		642.5		63.5	%
Gross margin	386.3	36.3%	407.7	39.5%	754.9	36.4%	796.8	39.5%		385.5		37.6	%		368.6		36.5	%
General and administrative	97.1	9.2%	100.4	9.7%	194.6	9.4%	191.7	9.5%		95.2		9.3	%		97.5		9.7	%
U.S. franchise advertising	111.1	10.4%	116.3	11.3%	217.7	10.5%	227.7	11.3%		112.7		11.0	%		106.6		10.5	%
Refranchising loss										0.1		0.0	%		—		0.0	%
Income from operations	178.1	16.7%	190.9	18.5%	342.7	16.5%	377.4	18.7%		177.5		17.3	%		164.5		16.3	%
Other income	—	0.0%	—	0.0%	—	0.0%	2.5	0.1%
Interest expense, net	(44.6)	(4.2)%	(45.8)	(4.4)%	(91.5)	(4.4)%	(85.2)	(4.2)%		(44.2	)	(4.3	)%		(46.8	)	(4.7	)%
Income before provision for income taxes	133.5	12.5%	145.1	14.1%	251.2	12.1%	294.7	14.6%		133.3		13.0	%		117.7		11.6	%
Provision for income taxes	31.0	2.9%	28.5	2.8%	57.7	2.8%	60.4	3.0%		28.6		2.8	%		26.8		2.6	%
Net income	$102.5	9.6%	$116.6	11.3%	$193.50	9.3%	$234.4	11.6%	$	104.8		10.2	%	$	91.0		9.0	%

Revenues


	Second Quarter of 2022				Second Quarter of 2021				Two Fiscal Quarters of 2022				Two Fiscal Quarters of 2021				First Quarter of 2023				First Quarter of 2022
U.S. Company-owned stores	$	112.5	10.6	%	$	116.6	11.3	%	$	216.4	10.4	%	$	229.3	11.3	%	$	84.9	8.3	%	$	103.9	10.3	%
U.S. franchise royalties and fees		128.1	12.0	%		126.8	12.3	%		250.4	12.1	%		251.3	12.5	%		132.9	13.0	%		122.3	12.1	%
Supply chain		646.6	60.7	%		603.0	58.4	%		1,256.1	60.5	%		1,171.3	58.1	%		624.2	60.9	%		609.5	60.3	%
International franchise royalties and fees		66.9	6.3	%		69.7	6.7	%		135.7	6.5	%		136.5	6.8	%		69.7	6.8	%		68.8	6.8	%
U.S. franchise advertising		111.1	10.4	%		116.3	11.3	%		217.7	10.5	%		227.7	11.3	%		112.7	11.0	%		106.6	10.5	%
Total revenues	$	1,065.2	100.0	%	$	1,032.5	100.0	%	$	2,076.3	100.0	%	$	2,016.2	100.0	%	$	1,024.4	100.0	%	$	1,011.1	100.0	%

Revenues primarily consist of retail sales from our Company-owned stores, royalties and fees and advertising contributions ~~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.

U.S. Stores Revenues


	Second Quarter of 2022				Second Quarter of 2021				Two Fiscal Quarters of 2022				Two Fiscal Quarters of 2021				First Quarter of 2023				First Quarter of 2022
U.S. Company-owned stores	$	112.5	32.0	%	$	116.6	32.4	%	$	216.4	31.6	%	$	229.3	32.4	%	$	84.9	25.7	%	$	103.9	31.2	%
U.S. franchise royalties and fees		128.1	36.4	%		126.8	35.3	%		250.4	36.6	%		251.3	35.5	%		132.9	40.2	%		122.3	36.8	%
U.S. franchise advertising		111.1	31.6	%		116.3	32.3	%		217.7	31.8	%		227.7	32.1	%		112.7	34.1	%		106.6	32.0	%
U.S. stores	$	351.7	100.0	%	$	359.8	100.0	%	$	684.5	100.0	%	$	708.4	100.0	%
Total U.S. Stores																	$	330.5	100.0	%	$	332.8	100.0	%

U.S. Company-owned Stores

Revenues from U.S. Company-owned store operations decreased ~~$4.1~~$19.0 million, or ~~3.5%~~18.3%, in the ~~second~~first quarter of ~~2022, and decreased $12.9 million, or 5.6%, in the two fiscal quarters of 2022~~2023 primarily due to a ~~decline in U.S. Company-owned same store sales. These decreases were partially offset by an increase~~decrease in the average number of U.S. Company-owned stores open during the period resulting from ~~net~~the refranchising of 114 U.S. Company-owned stores in Arizona and Utah in the fourth quarter of 2022 to certain of our U.S. franchisees (the “2022 Store Sale”). This decrease was partially offset by higher same store ~~growth~~sales, and to a lesser extent, our purchase of 23 U.S. franchise stores in Michigan in the ~~2022 Store Purchase.~~

first quarter of 2022. U.S. Company-owned same store sales ~~declined 9.2% and 9.8%~~increased 7.3% in the ~~second~~first quarter of 2023 and ~~two fiscal quarters of 2022, respectively. U.S. Company-owned same store sales declined 2.6%~~decreased 10.5% in the ~~second~~first quarter of ~~2021 and increased 1.6% in the two fiscal quarters of 2021.~~2022.

U.S. Franchise Royalties and Fees

Revenues from U.S. franchise royalties and fees increased ~~$1.3~~$10.6 million, or ~~1.0%~~8.7%, in the ~~second~~first quarter of ~~2022~~2023 primarily due to ~~an increase in revenues from fees paid by franchisees for the use of our technology platforms, as well as~~ an increase in the average number of U.S. franchised stores open during the period resulting from net store ~~growth. These increases in revenues were partially offset by a decline in U.S. franchise same store sales. Revenues from U.S. franchise royalties~~growth and ~~fees decreased $0.9 million, or 0.4%, in~~ the ~~two fiscal quarters of~~ 2022 ~~due primarily to a decline in U.S. franchise~~Store Sale, higher same store sales and ~~was partially offset by~~ an increase in ~~revenues from~~ fees paid by our franchisees for the use of our technology ~~platforms, as well as~~platforms. U.S. franchise same store sales increased 3.4% in the first quarter of 2023 and decreased 3.2% in the first quarter of 2022.

U.S. Franchise Advertising

Revenues from U.S. franchise advertising increased $6.1 million, or 5.8%, in the first quarter of 2023 due to an increase in the average number of U.S. franchised stores open during the period resulting from net store ~~growth. Revenues from U.S. franchise royalties~~growth and ~~fees were negatively impacted by~~ the 2022 Store ~~Purchase in both the second quarter and two fiscal quarters of 2022.~~

~~U.S. franchise~~Sale, as well as higher same store sales declined 2.5% and 2.9% in the second quarter and two fiscal quarters of 2022, respectively. U.S. franchise same store sales increased 3.9% and 8.5% in the second quarter and two fiscal quarters of 2021, respectively.

~~U.S. Franchise Advertising~~

~~Revenues from U.S. franchise advertising decreased $5.3~~sales. These increases were partially offset by approximately $0.9 million or 4.5%, in the second quarter of 2022, and decreased $10.0 million, or 4.4%, in the two fiscal quarters of 2022 due primarily to a decline in U.S. franchise same store sales and to a lesser extent, the 2022 Store Purchase. Approximately $2.6 million and $5.1 millionmore in advertising incentives related to certain brand promotions in the ~~second~~first quarter ~~and two fiscal quarters~~ of ~~2022, respectively, also contributed~~2023 as compared to the ~~decreases~~first quarter of 2022.

Supply Chain

Supply chain revenues increased $14.7 million, or 2.4%, in ~~U.S. franchise advertising revenues. These decreases were~~the first quarter of 2023 due to higher market basket pricing to stores; however, this increase was partially offset by lower order volumes at our U.S. franchised stores in the first quarter of 2023. The market basket pricing change, a statistical measure utilized by management, is calculated as the percentage change of the market basket purchased by an average U.S. store (based on average weekly unit sales) from our U.S. supply chain centers against the comparable period of the prior year. We believe this measure is important to understanding Company performance because as our market basket prices fluctuate, our revenues, cost of sales and gross margin percentages in our supply chain segment also fluctuate. Our market basket pricing to stores increased 4.6% during the first quarter of 2023, which resulted in an estimated $25.1 million increase in supply chain revenues.

International Franchise Royalties and Fee Revenues

Revenues from international franchise royalties and fees increased $0.8 million, or 1.2%, in the first quarter of 2023 due primarily to same store sales growth (excluding foreign currency impact) and an increase in the average number of ~~U.S.~~international franchised stores open during the period, resulting from net store growth.

~~Supply Chain~~

Supply chain revenues increased $43.6 million, or 7.2%, in the second quarter of 2022, and increased $84.8 million, or 7.2%, in the two fiscal quarters of 2022 due to higher market basket pricing to stores, partially offset by lower order volumes at our U.S. franchise stores during the respective periods. Our market basket pricing to stores increased 15.2% during the second quarter of 2022, which resulted in an estimated $77.1 million increase in supply chain revenues. Our market basket pricing to stores increased 13.6% during the two fiscal quarters of 2022 which resulted in an estimated $133.2 million increase in supply chain revenues.

~~International Franchise Royalties and Fee Revenues~~

Revenues from international franchise royalties and fees decreased $2.8 million, or 4.1%, in the second quarter of 2022, and decreased $0.8 million, or 0.6%, in the two fiscal quarters of 2022 due primarily to the The negative impact of changes in foreign currency exchange rates of ~~$5.9 million and $10.1~~$4.3 million in the ~~second~~first quarter ~~and two fiscal quarters~~ of ~~2022, respectively. A decline in international same store sales (excluding foreign currency impact) in~~2023 partially offset the ~~second quarter and two fiscal quarters of 2022 also contributed to the decreases~~increase in international franchise ~~revenues~~royalties and fees revenues. The impact of changes in ~~the respective periods. An increase in the average number of~~foreign currency exchange rates on international franchise ~~stores open during~~royalty revenues, a statistical measure utilized by management, is calculated as the ~~respective periods,~~difference in international franchise royalty revenues resulting from ~~net store growth, partially offset~~translating current year local currency results to U.S. dollars at current year exchange rates as compared to prior year exchange rates. We believe this measure is important to understanding Company performance given the ~~declines~~significant variability in ~~revenues.~~international franchise royalty revenues that can be driven by changes in foreign currency exchange rates.

Excluding the impact of foreign currency exchange rates, international franchise same store sales ~~declined 2.2% and 0.5%~~increased 1.2% in the ~~second~~first quarter of 2023 and ~~two fiscal quarters of 2022, respectively. Excluding the impact of foreign currency exchange rates, international franchise same store sales~~ increased ~~13.9% and 12.8%~~1.2% in the ~~second~~first quarter ~~and two fiscal quarters~~ of ~~2021, respectively.~~2022.

1817

Cost of Sales / Gross Margin

Second Quarter
of 2022

Second Quarter
of 2021

Two Fiscal Quarters
of 2022

Two Fiscal Quarters
of 2021

Consolidated revenues

$
1,065.2

100.0
%

$
1,032.5

100.0
%

$
2,076.3

100.0
%

$
2,016.2

100.0
%
Consolidated cost of sales

678.9

63.7
%

624.8

60.5
%

1,321.4

63.6
%

1,219.3

60.5
%
Consolidated gross margin

$
386.3

36.3
%

$
407.7

39.5
%

$
754.9

36.4
%

$
796.8

39.5
%


	First Quarter of 2023				First Quarter of 2022
Total revenues	$	1,024.4	100.0	%	$	1,011.1	100.0	%
Total cost of sales		638.9	62.4	%		642.5	63.5	%
Gross margin	$	385.5	37.6	%	$	368.6	36.5	%

Consolidated cost of sales consists 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 gross margin (which we define as revenues less cost of sales) ~~decreased $21.4~~increased $16.9 million, or ~~5.3%~~4.6%, in the ~~second~~first quarter of ~~2022, and decreased $42.0 million, or 5.3%, in the two fiscal quarters of 2022~~2023, due primarily to ~~lower U.S. Company-owned store revenues, as well as~~ higher ~~food, labor and delivery costs and lower~~ global franchise revenues. Franchise revenues do not have a cost of sales component, so changes in these revenues have a disproportionate effect on gross margin. Additionally, as our market basket prices fluctuate, our revenues and gross margin percentages in our supply chain segment also fluctuate; however, actual product-level dollar ~~gross~~ margins remain unchanged.

As a percentage of revenues, the consolidated gross margin ~~decreased 3.2~~increased 1.1 percentage points in the ~~second~~first quarter of ~~2022, and decreased 3.1 percentage points in the two fiscal quarters of 2022.~~2023. U.S. Company-owned store gross margin ~~decreased 8.1~~increased 1.0 percentage point in the first quarter of 2023. Supply chain gross margin increased 0.1 percentage points in the ~~second~~first quarter of ~~2022, and decreased 8.0 percentage points in the two fiscal quarters of 2022. Supply chain gross margin decreased 1.5 percentage points in both the second quarter and two fiscal quarters of 2022.~~2023. These changes in gross margin are described in more detail below.

U.S. Company-Owned Store Gross Margin

Second Quarter
of 2022

Second Quarter
of 2021

Two Fiscal Quarters
of 2022

Two Fiscal Quarters
of 2021

Revenues

$
112.5

100.0
%

$
116.6

100.0
%

$
216.4

100.0
%

$
229.3

100.0
%
Cost of sales

94.1

83.6
%

88.0

75.5
%

181.4

83.8
%

173.8

75.8
%
Store gross margin

$
18.4

16.4
%

$
28.6

24.5
%

$
35.0

16.2
%

$
55.6

24.2
%


	First Quarter of 2023				First Quarter of 2022
Revenues	$	84.9	100.0	%	$	103.9	100.0	%
Cost of sales		70.6	83.1	%		87.4	84.1	%
Store gross margin	$	14.3	16.9	%	$	16.5	15.9	%

U.S. Company-owned store gross margin (which does not include certain store-level costs such as royalties and advertising) decreased ~~$10.1~~$2.2 million, or ~~35.5%~~13.2%, in the ~~second~~first quarter of ~~2022, and decreased $20.6 million, or 37.1%, in the two fiscal quarters of 2022~~2023, due primarily to ~~lower same store sales, as well as higher food costs.~~the 2022 Store Sale. As a percentage of store revenues, the U.S. Company-owned store gross margin ~~decreased 8.1~~increased 1.0 percentage ~~points~~point in the ~~second~~first quarter of ~~2022, and decreased 8.0 percentage points in the two fiscal quarters of 2022.~~2023. These changes in gross margin as a percentage of revenues are discussed in additional detail below.

•

Food costs ~~increased 4.1~~decreased 1.5 percentage points to ~~31.6%~~29.4% in the ~~second~~first quarter of 2023 driven primarily by higher sales leverage as a result of increases in menu and national offer pricing as well as the impact of the 2022 ~~and~~Store Sale due to higher average food costs in the markets in which the sold stores operated.

•

Labor costs increased ~~4.0~~0.5 percentage points to 31.3% in the ~~two fiscal quarters of 2022 as a result of higher food basket prices.~~

•

~~Labor costs increased 1.6 percentage points to 29.0% in the second~~first quarter of ~~2022, and increased 2.0 percentage points to 29.9% in the two fiscal quarters of 2022~~2023 due primarily to continued investments in frontline team member wage rates in our U.S. Company-owned stores ~~as well as lower sales leverage. These increases were partially offset by lower headcount attributable to labor shortages affecting store hours and staffing levels in many of our markets.~~

•

~~Occupancy costs, including rent, telephone, utilities and depreciation, increased 1.6 percentage points to 9.0%~~ in the ~~second~~first quarter of ~~2022, and increased 1.3 percentage points to 9.0% in the two fiscal quarters of 2022 due primarily to lower sales leverage.~~

•

Insurance costs increased 0.7 percentage points to 4.6% in the second quarter of 2022, and increased 0.8 percentage points to 4.4% in the two fiscal quarters of 2022 due primarily to unfavorable claims experience, as well as lower sales leverage.2023.

Supply Chain Gross Margin


	Second Quarter of 2022				Second Quarter of 2021				Two Fiscal Quarters of 2022				Two Fiscal Quarters of 2021				First Quarter of 2023				First Quarter of 2022
Revenues	$	646.6	100.0	%	$	603.0	100.0	%	$	1,256.1	100.0	%	$	1,171.3	100.0	%	$	624.2	100.0	%	$	609.5	100.0	%
Cost of sales		584.9	90.5	%		536.8	89.0	%		1,140.0	90.8	%		1,045.6	89.3	%		568.3	91.0	%		555.2	91.1	%
Supply chain gross margin	$	61.7	9.5	%	$	66.2	11.0	%	$	116.1	9.2	%	$	125.7	10.7	%	$	55.9	9.0	%	$	54.4	8.9	%

Supply chain gross margin ~~decreased $4.5~~increased $1.5 million, or ~~6.7%~~2.8%, in the ~~second~~first quarter of ~~2022, and decreased $9.6 million, or 7.6%, in the two fiscal quarters of 2022 due primarily to higher labor and delivery costs.~~2023. As a percentage of supply chain revenues, the supply chain gross margin ~~decreased 1.5~~increased 0.1 percentage points in ~~both~~ the ~~second~~first quarter ~~and two fiscal quarters~~ of ~~2022~~2023, due primarily to procurement productivity. This increase was partially offset by higher food ~~and delivery costs. The increases in food and delivery~~ costs as a percentage of supply chain revenues resulted from macroeconomic inflationary pressures in the U.S., as well as lower sales leverage. Lower insurance expense resulting from favorable claims experience partially offset the decreases in supply chain gross margin as a percentage of supply chain revenues in the second quarter of 2022.revenues.

General and Administrative Expenses

General and administrative expenses decreased ~~$3.4~~$2.3 million, or ~~3.4%~~2.4%, in the ~~second~~first quarter of ~~2022~~2023, driven primarily by lower ~~labor costs,~~professional fees and travel costs. These decreases were partially offset by higher professional fees and travel expenses. General and administrative expenses increased $2.9 million, or 1.5%, in the two fiscal quarters of 2022 driven primarily by higher professional fees, travel expenses, non-cash equity-based compensation expense and amortization expense for capitalized software. These increases were partially offset by lower labor costs.

U.S. Franchise Advertising Expenses

U.S. franchise advertising expenses ~~decreased $5.3~~increased $6.1 million, or ~~4.5%~~5.8%, in the ~~second~~first quarter of ~~2022, and decreased $10.0 million, or 4.4%, in the two fiscal quarters of 2022~~2023, consistent with the ~~decreases~~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 other activities that promote the Domino’s brand, and these revenues cannot be used for general corporate purposes.

~~Other Income~~

During the first quarter of 2021, we recorded a $2.5 million unrealized gain on our investment in DPC Dash (Note 5) resulting from the observable change in price from the valuation of our additional $40.0 million investment. We did not record any adjustments to the carrying amount in the second quarter or two fiscal quarters of 2022, or the second quarter of 2021.

Interest Expense, Net

Interest expense, net decreased ~~$1.2~~$2.7 million, or ~~2.6%~~5.7%, in the ~~second~~first quarter of 2022 driven primarily by approximately $2.3 million of incremental interest expense recorded in the second quarter of 2021 in connection with our recapitalization transaction completed on April 16, 2021 (the “2021 Recapitalization”), partially offset by higher average borrowings resulting from the 2021 Recapitalization. Interest expense, net increased $6.2 million, or 7.3%, in the two fiscal quarters of 20222023 driven by higher ~~average borrowings resulting from the 2021 Recapitalization.~~

~~The Company’s~~interest income on our cash equivalents. Our weighted average borrowing rate ~~was~~increased to 3.8% in ~~both~~ the ~~second~~first quarter ~~and two fiscal quarters~~ of ~~2022 and 2021.~~2023 from 3.7% in the first quarter of 2022.

Provision for Income Taxes

~~Income tax expense~~Provision for income taxes increased ~~$2.5~~$1.8 million, or ~~8.8%~~6.7%, in the ~~second~~first quarter of ~~2022~~2023 due to a higher effective tax rate, and was partially offset by a decrease in income before provision for income taxes. The effective tax rate increased to 23.2% during the second quarter of 2022 as compared to 19.6% in the second quarter of 2021. Income tax expense decreased $2.6 million, or 4.3%, in the two fiscal quarters of 2022 due to a decrease in income before provision for income taxes, ~~but was~~ partially offset by a ~~higher~~lower effective tax rate. The effective tax rate ~~increased~~decreased to ~~23.0%~~21.4% during the ~~two fiscal quarters~~first quarter of ~~2022~~2023 as compared to ~~20.5%~~22.7% in the ~~two fiscal quarters~~first quarter of ~~2021. The higher effective tax rate in the second quarter and two fiscal quarters of~~ 2022, ~~was~~ driven in part by a ~~2.2~~higher foreign derived intangible income deduction and 1.4 percentage point change in excess tax benefits from equity-based compensation, which are recorded as a reduction to the income tax provision, in the second quarter and two fiscal quarters of 2022, respectively. The decreases in excess tax benefits from equity-based compensation were a result of fewer stock option exercises in the second quarter and two fiscal quarters of 2022 as compared to the respective periods in 2021. The increase in the effective tax rate was also a result of lowerhigher foreign tax credits.

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 a reportable segment, including labor, computer expenses, professional fees, travel and entertainment, rent, insurance and other corporate administrative costs.

In the first quarter of 2023, we changed our allocation methodology for certain costs which support certain internally developed software used across our franchise system. The change in allocation methodology of certain software development costs resulted in an estimated increase in U.S. stores Segment Income of $10.1 million, an estimated increase in international franchise Segment Income of $2.0 million and an estimated decrease in other Segment Income of $12.1 million in the first quarter of 2023.

Second Quarter
of 2022

Second Quarter
of 2021

Two Fiscal Quarters
of 2022

Two Fiscal Quarters
of 2021

U.S. stores

$
104.1

$
111.8

$
201.3

$
219.3

Supply chain

53.6

58.6

100.0

111.1

International franchise

52.9

56.4

107.9

110.8

Other

(5.6
)

(9.6
)

(13.3
)

(15.7
)


	First Quarter of 2023			First Quarter of 2022
U.S. stores	$	112.7		$	97.3
Supply chain		48.5			46.3
International franchise		58.1			55.0
Other		(15.7	)		(7.7	)

U.S. Stores

U.S. stores Segment Income ~~decreased $7.8~~increased $15.4 million, or ~~7.0%~~15.8%, in the ~~second~~first quarter of ~~2022,~~2023, primarily due to the ~~$10.1 million decrease~~change in ~~U.S. Company-owned store gross margin, and was partially offset by the $1.3 million increase in~~allocation methodology for certain software development costs, as well as higher U.S. franchise royalties and fees revenues, each as discussed above. ~~U.S. stores Segment Income decreased $17.9 million, or 8.2%, in~~These increases were partially offset by the ~~two fiscal quarters of 2022, primarily due to the $20.6~~$2.2 million decrease in U.S. Company-owned store gross margin, ~~as well as the $0.9 million decrease in U.S. franchise royalties and fees revenues, each~~ as discussed above. U.S. franchise revenues do not have a cost of sales component, ~~therefore~~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.

Supply Chain

Supply chain Segment Income ~~decreased $5.0~~increased $2.2 million, or ~~8.5%~~4.7%, in the ~~second~~first quarter of ~~2022,~~2023, primarily due to the ~~$4.5~~$1.5 million ~~decrease~~increase in supply chain gross margin ~~discussed above. Supply chain Segment Income decreased $11.2 million, or 10.0%, in the two fiscal quarters of 2022, primarily due to the $9.6 million decrease in supply chain gross margin discussed~~described above.

International Franchise

International franchise Segment Income ~~decreased $3.5~~increased $3.1 million, or ~~6.2%~~5.6%, in the ~~second~~first quarter of ~~2022,~~2023, primarily due to the ~~$2.8 million decrease~~change in allocation methodology for certain software development costs as well as higher international franchise royalties and fees revenues, discussed above. International franchise Segment Income decreased $2.9 million, or 2.6%, in the two fiscal quarters of 2022, primarily due to the $0.8 million decrease in international franchise royalties and fees revenueseach as discussed above. International franchise revenues do not have a cost of sales component, ~~therefore~~so changes in these revenues have a disproportionate effect on international franchise Segment Income.

Other

Other Segment Income ~~increased $4.0~~decreased $8.0 million, or ~~41.6%~~103.9%, in the ~~second~~first quarter of ~~2022, and increased $2.4 million, or 15.2%,~~2023, due primarily to the change in ~~the two fiscal quarters of 2022, primarily due to lower~~allocation methodology for certain software development costs, as well as higher labor ~~costs~~cost. These increases were partially offset by ~~higher~~lower professional fees and travel ~~expenses in the respective periods.~~costs.

Liquidity and Capital Resources

Historically, our receivable collection periods and inventory turn rates are faster than the normal payment terms on our current liabilities resulting in efficient deployment of working capital. We generally collect our receivables within three weeks from the date of the related sale and we generally experience multiple inventory turns per month. In addition, our sales are not typically seasonal, which further limits variations in our working capital requirements. These factors allow us to manage our working capital and our ongoing cash flows from operations to invest in our business and other strategic opportunities, pay dividends and repurchase and retire shares of our common stock. As of ~~June 19, 2022,~~March 26, 2023, we had working capital of ~~$104.8~~$97.2 million, excluding restricted cash and cash equivalents of ~~$158.2~~$170.8 million, advertising fund assets, restricted, of ~~$182.5~~$139.9 million and advertising fund liabilities of ~~$175.1~~$136.6 million. Working capital includes total unrestricted cash and cash equivalents of ~~$114.4~~$154.2 million.

Our primary ~~source~~sources of liquidity isare cash flows from operations and availability of borrowings under our ~~variable funding notes.~~2022 and 2021 Variable Funding Notes (as defined below). During the ~~second~~first quarter of 2023, we experienced an increase in both U.S. and ~~two fiscal quarters of 2022, we continued to increase global retail~~international same store sales (excluding foreign currency impact)~~, which~~ versus the comparable periods in the prior year. Additionally, both our U.S. and international businesses grew store counts during the first quarter of 2023. These factors contributed to our continued ~~our~~ ability to generate positive operating cash flows. AsIn addition to our cash flows from operations, we have two variable funding note facilities. The facilities include our Series 2022-1 Variable Funding Senior Secured Notes, Class A-1 Notes (the “2022 Variable Funding Notes”), which allows for advances of ~~June 19, 2022, we had a~~up to $120.0 million, as well as our 2021 variable funding note facility (the “2021 Variable Funding Notes,” and, together with the 2022 Variable Funding Notes, the “2022 and 2021 Variable Funding Notes”), which ~~allowed~~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”).~~credit. The letters of credit ~~are~~ primarily ~~related~~relate to our casualty insurance programs and certain supply chain center leases. As of ~~June 19, 2022,~~March 26, 2023, we had no outstanding borrowings and ~~$155.8~~$277.8 million of available borrowing capacity under our 2022 and 2021 Variable Funding Notes, net of letters of credit issued of $44.2 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~~2022 and 2021 Variable Funding Notes to, among other things, fund working capital requirements, invest in our core business and other strategic opportunities, service our indebtedness, pay dividends and repurchase shares of our common stock.

Our ability to continue to fund these items and continue to service our debt could be adversely affected by the occurrence of any of the events described under “Risk Factors” in our ~~2021~~2022 Form 10-K. There can be no assurance that our business will generate sufficient cash flows from operations or that future borrowings will be available under our ~~variable funding notes~~2022 and 2021 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 outstanding senior notes and to service, extend or refinance our ~~variable funding notes~~2022 and 2021 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 19, 2022,~~March 26, 2023, we had ~~$110.6~~$119.8 million of restricted cash held for future principal and interest payments and other working capital requirements of our asset-backed securitization structure, ~~$47.4~~$50.8 million of restricted cash held in a three-month interest reserve as required by the related debt agreements and $0.2 million of other restricted cash for a total of ~~$158.2~~$170.8 million of restricted cash and cash equivalents. As of ~~June 19, 2022,~~March 26, 2023, we also held ~~$164.1~~$119.8 million of advertising fund restricted cash and cash equivalents, which can only be used for activities that promote the Domino’s brand.

Long-Term Debt

As of ~~June 19, 2022,~~March 26, 2023, we had approximately ~~$5.05~~$5.01 billion of long-term debt, of which ~~$55.7~~$55.2 million was classified as a current liability. As of ~~June 19, 2022,~~March 26, 2023, our fixed rate notes from the recapitalizations we completed in 2021, 2019, 2018, 2017 and 2015 had original scheduled principal payments of ~~$25.8~~$38.6 million in the remainder of ~~2022,~~2023, $51.5 million in ~~each of 2023 and~~ 2024, $1.17 billion in 2025, $39.3 million in 2026, $1.31 billion in 2027, $811.5 million in 2028, $625.9 million in 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 the fourth quarter of 2020, we had a leverage ratio of less than 5.0x, and accordingly, did not make the previously scheduled debt amortization payment on our then-outstanding notes in the first quarter of 2021. Subsequent to the 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 notes beginning in the second quarter of 2021.

The notes are subject to certain financial and non-financial covenants, including a debt service coverage ratio calculation. The covenant requires a minimum coverage ratio of 1.75x total debt service to securitized net cash flow, as defined in the related agreements. In the event that certain covenants are not met, the notes may become due and payable on an accelerated schedule.

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.~~2022 and 2021 Variable Funding Notes. On July 20, 2021, our Board of Directors authorized a share repurchase program to repurchase up to $1.0 billion of our common stock.

During the ~~second~~first quarter of ~~2022,~~2023, we repurchased and retired ~~148,248~~100,515 shares of our common stock under our Board of Directors-approved share repurchase program for a total of approximately $50.0 million. During the two fiscal quarters of 2022, we repurchased and retired 249,058 shares of our common stock under our Board of Directors-approved share repurchase program for a total of approximately $97.7$30.1 million. As of ~~June 19, 2022,~~March 26, 2023, we had a total remaining authorized amount for share repurchases of approximately ~~$606.4~~$380.3 million.

Dividends

On ~~April 26, 2022,~~February 21, 2023, our Board of Directors declared a ~~$1.10~~$1.21 per share quarterly dividend on our outstanding common stock for shareholders of record as of March 15, 2023, which was paid on March 30, 2023. We had approximately $43.8 million accrued for common stock dividends at March 26, 2023. Subsequent to the end of the first quarter, on April 25, 2023, our Board of Directors declared a $1.21 per share quarterly dividend on our outstanding common stock for shareholders of record as of June 15, ~~2022, which was~~2023, to be paid on June 30, 2022. We had approximately $40.6 million accrued for common stock dividends at June 19, 2022. Subsequent to the end of the second quarter, on July 19, 2022, our Board of Directors declared a $1.10 per share quarterly dividend on our outstanding common stock for shareholders of record as of September 15, 2022 to be paid on September 30, 2022.2023.

Sources and Uses of Cash

The following table illustrates the main components of our cash flows:


(In millions)	Two Fiscal Quarters of 2022			Two Fiscal Quarters of 2021			First Quarter of 2023			First Quarter of 2022
Cash flows provided by (used in)
Net cash provided by operating activities	$	153.4		$	295.4		$	114.7		$	78.8
Net cash used in investing activities		(39.9	)		(72.9	)		(19.6	)		(20.6	)
Net cash used in financing activities		(166.7	)		(101.2	)		(45.3	)		(62.1	)
Effect of exchange rate changes on cash		(0.6	)		0.3			(0.2	)		0.4
Change in cash and cash equivalents, restricted cash and cash equivalents	$	(53.9	)	$	121.6		$	49.6		$	(3.6	)

Operating Activities

Cash provided by operating activities ~~decreased $142.0~~increased $35.9 million in the ~~two fiscal quarters~~first quarter of ~~2022,~~2023, primarily due to the ~~negative~~positive impact of changes in operating assets and liabilities of ~~$81.7~~$42.5 million. The ~~negative~~positive impact of changes in operating assets and liabilities primarily related to the timing of payments on accrued liabilities ~~income taxes and prepaid expenses,~~ as well as the timing and pricing of ~~collections on accounts receivable~~inventory in the ~~two fiscal quarters~~first quarter of ~~2022~~2023 as compared to the ~~two fiscal quarters~~first quarter of ~~2021.~~2022. The ~~decrease~~increase in cash provided by operating activities was ~~also due to~~partially offset by a ~~$27.7~~$14.4 million negative impact of changes in advertising fund assets and liabilities, restricted, in the ~~two fiscal quarters~~first quarter of ~~2022~~2023 as compared to the ~~two fiscal quarters~~first quarter of ~~2021~~2022 due to payments for advertising activities outpacing receipts for advertising contributions. Additionally, net income ~~decreased $40.9 million. However,~~increased $13.8 million; however, this ~~decrease in net income~~ included ~~an $8.3~~a $6.0 million ~~increase~~decrease in non-cash adjustments, resulting in an overall ~~decrease~~increase to cash provided by operating activities in the ~~two fiscal quarters~~first quarter of ~~2022~~2023 as compared to the ~~two fiscal quarters~~first quarter of ~~2021~~2022 of ~~$32.6~~$7.8 million.

Investing Activities

Cash used in investing activities was ~~$39.9~~$19.6 million in the ~~two fiscal quarters~~first quarter of ~~2022,~~2023, which primarily consisted of ~~$32.7~~$19.0 million of capital expenditures (driven primarily by investments in technological initiatives, supply chain centers and corporate store operations). ~~As a result of the 2022 Store Purchase, we also acquired 23 U.S. franchise stores from certain of our existing U.S. franchisees in the first quarter of 2022 for $6.8 million.~~

Financing Activities

Cash used in financing activities was ~~$166.7~~$45.3 million in the ~~two fiscal quarters~~first quarter of ~~2022,~~2023, which primarily consisted of the repurchase of approximately ~~$97.7~~$30.1 million in common stock under our Board of Directors-approved share repurchase program, ~~dividend payments of $39.7 million,~~ repayments of long-term debt and finance lease obligations of ~~$27.5~~$13.9 million and tax payments for the vesting of restricted stock of ~~$2.4~~$1.6 million. These uses of cash were partially offset by proceeds from the exercise of stock options of ~~$0.5~~$0.3 million.

Critical Accounting Estimates

For a description of the Company’s critical accounting estimates, refer to “Part II—Item 7—Management’s Discussion and Analysis of Financial Condition and Results of Operations” in the ~~2021~~2022 Form 10-K. The Company considers its most significant accounting policies and estimates to be long-lived assets, casualty insurance reserves and income taxes. There have been no material changes to the Company’s critical accounting estimates since January ~~2, 2022.~~1, 2023.

2321

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, store growth and the growth of our U.S. and international business in general, 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 ~~2021~~2022 Form ~~10-K.~~10-K for the fiscal year ended January 1, 2023. 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; 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 successfully implement our growth strategy; labor shortages or changes in operating expenses resulting from increases in prices of food (particularly cheese), fuel and other commodity costs, labor, utilities, insurance, employee benefits and other operating costs or negative economic conditions; our ability to manage difficulties associated with or related to the ongoing COVID-19 pandemic and the effects of COVID-19 and related regulations and policies on our business and supply chain, including impacts on the availability of labor; labor shortages or 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 effectiveness of our advertising, operations and promotional initiatives; shortages, interruptions or disruptions in the supply or delivery of fresh food products and store equipment; ~~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;~~ the impact of social media and other consumer-oriented technologies on our business, brand and reputation; 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 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;~~confidence or negative economic conditions in general; our ability and that of our franchisees to open new restaurants and keep existing restaurants in ~~operation;~~operation and maintain demand for new stores; 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 and consumer protection and social media; adverse legal judgments or settlements; food-borne illness or contamination of products or food ~~tampering;~~tampering or other events that may impact our reputation; data breaches, power loss, technological failures, user error or other cyber risks threatening us or our franchisees; the impact that environmental, social and governance matters may have on our business and reputation; the effect of war, terrorism, catastrophic events or climate change; our ability to pay dividends and repurchase shares; changes in consumer 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.

2422

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 rate notes and entered into ~~variable funding notes~~our 2022 and 2021 Variable Funding Notes and, at ~~June 19, 2022,~~March 26, 2023, we are exposed to interest rate risk on borrowings under our ~~variable funding notes.~~2022 and 2021 Variable Funding Notes. As of ~~June 19, 2022,~~March 26, 2023, we had no outstanding borrowings under our 2021 and 2022 Variable Funding Notes.

Our 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 2023.~~ Our 2021 Variable Funding Notes loan documents ~~contemplate~~provide that after the date on which the administrator for LIBOR permanently or indefinitely ceases to provide all available settings of U.S. dollar LIBOR, any new advances under the 2021 Variable Funding Notes that would otherwise have borne interest based on LIBOR, as well as any existing LIBOR advances for which the interest period has expired, will instead bear interest at a forward-looking term rate based on the Secured Overnight Financing Rate (“Term SOFR”), plus a spread adjustment, that in each case have been selected or recommended by the Board of Governors of the Federal Reserve System or the Federal Reserve Bank of New York. The loan documents also permit the lenders to affect a transition from LIBOR to ~~secured overnight financing rate (“SOFR”) in the event that LIBOR ceases~~Term SOFR at an earlier date, subject to ~~exist.~~certain conditions. Because the composition and characteristics of Term SOFR are not the same as those of LIBOR, ~~in such event,~~ there can be no assurance that Term SOFR will perform the same way LIBOR would 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. Additionally, a rising interest rate environment could result in higher interest expense due on borrowings under our 2021 Variable Funding Notes, as well as on our 2022 Variable Funding Notes, which bear interest at fluctuating interest rates that are based on Term SOFR.

Our ~~fixed rate~~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. Our existing fixed rate notes have various maturities such that we would not be required to refinance all of our debt at one time. Refer to the original scheduled principal payments disclosed within the Liquidity and Capital Resources section.

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. Severe increases in commodity prices or food costs, including as a result of inflation, could affect the global and U.S. economies and could also adversely impact our business, financial condition or results of operations. We may periodically enter into financial instruments to manage this 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.

Foreign Currency Exchange Risk

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 6.3% of our total revenues in the second quarter of 2022, approximately 6.5% of our total revenues in the two fiscal quarters of 2022, approximately 6.7% of our total revenues in the second quarter of 2021 and approximately 6.8% of our total revenues in the ~~two fiscal quarters~~first quarter of ~~2021~~2023 and the first quarter of 2022 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 risk. AWe estimate that a hypothetical 10% adverse change in the foreign currency rates for our international markets would have resulted in a negative impact on royalty revenues of approximately ~~$12.1~~$6.1 million in the ~~two fiscal quarters~~first quarter of ~~2022.~~2023.

Item 4. Controls and Procedures.

Management, with the participation of the Company’s Chief Executive Officer, Russell J. Weiner, and Executive Vice President and Chief Financial Officer, Sandeep Reddy, 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 the Securities Exchange Act of 1934, as amended) as of the end of the period covered by this report. Based on that evaluation, Mr. Weiner and Mr. Reddy concluded that the Company’s disclosure controls and procedures were effective.

During the quarterly period ended ~~June 19, 2022,~~March 26, 2023, there were no changes in the Company’s internal control over financial reporting as defined in Rules 13a-15(f) and 15d-15(f) that have materially affected or are reasonably likely to materially affect the Company’s internal control over financial reporting.

2523

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.

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.

There have been no material changes with respect to those risk factors previously disclosed in Item 1A “Risk Factors” in Part I of our ~~2021~~2022 Form 10-K.

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

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

Maximum
Approximate Dollar

Total Number of Shares

Value of Shares that

Total Number

Purchased as Part of

May Yet Be Purchased

of Shares

Average Price Paid

Publicly Announced

Under the Program (2)

Period

Purchased (1)

Per Share

Program (2)

(in thousands)

Period #4 (March 28, 2022
   to April 24, 2022)

1,250

$
397.58

—

$
656,437

Period #5 (April 25, 2022
   to May 22, 2022)

149,858

337.36

148,248

606,437

Period #6 (May 23, 2022
   to June 19, 2022)

1,089

361.36

—

606,437

Total

152,197

$
338.03

148,248

$
606,437


							Maximum Approximate Dollar
					Total Number of Shares		Value of Shares that
	Total Number				Purchased as Part of		May Yet Be Purchased
	of Shares		Average Price Paid		Publicly Announced		Under the Program (2)
Period	Purchased (1)		Per Share		Program (2)		(in thousands)
Period #1 (January 2, 2023 to January 29, 2023)		1,521	$	339.16		—	$	410,358
Period #2 (January 30, 2023 to February 26, 2023)		1,308		355.60		—		410,358
Period #3 (February 27, 2023 to March 26, 2023)		103,707		299.29		100,515		380,275
Total		106,536	$	300.55		100,515	$	380,275


(1)	~~3,949~~6,021 shares in the ~~second~~first quarter of ~~2022~~2023 were purchased as part of the Company’s employee stock payroll deduction plan. During the ~~second~~first quarter of 2023, the shares were purchased at an average price of ~~$366.29.~~$321.69.
(2)	On July 20, 2021, the Company’s Board of Directors authorized a share repurchase program to repurchase up to $1.0 billion of the Company’s common stock. As of ~~June 19, 2022, $606.4~~March 26, 2023, $380.3 million remained available for future purchases of the Company’s common stock under this share repurchase program.
	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.

Item 3. Defaults Upon Senior Securities.

None.

Item 4. Mine Safety Disclosures.

Not applicable.

Item 5. Other Information.

None.

2624

Item 6. Exhibits.


Exhibit Number		Description
10.1		~~Form of Restricted Stock Unit Award Agreement (two-year vesting with acceleration events) under the~~ Amended and Restated Domino’s Pizza, Inc. ~~2004 Equity Incentive Plan.~~Employee Stock Payroll Deduction Plan dated as of February 21, 2023.
10.2		Form of 2023 Performance-Based Restricted Stock Unit Award Agreement ~~(three-year vesting with acceleration events)~~ under the Amended Domino’s Pizza, Inc. 2004 Equity Incentive Plan.
10.3		Form of ~~Indemnification Agreement.~~2023 Restricted Stock Unit Award Agreement (three-year vesting) under the Amended Domino’s Pizza, Inc. 2004 Equity Incentive Plan.
10.4		Form of 2023 Employee Stock Option Agreement under the Amended Domino’s Pizza, Inc. 2004 Equity Incentive Plan.
10.5		Form of 2023 Restricted Stock Unit Award Agreement (three vesting dates) under the Amended Domino’s Pizza, Inc. 2004 Equity Incentive Plan.
10.6		Form of 2023 Restricted Stock Unit Award Agreement (two vesting dates) under the Amended Domino’s Pizza, Inc. 2004 Equity Incentive Plan.
10.7		Form of 2023 Restricted Stock Unit Award Agreement for Directors under the Amended Domino’s Pizza, Inc. 2004 Equity Incentive Plan.
31.1		Certification ~~by Russell J. Weiner pursuant to Rule 13a-14(a) and 15d-14(a), as adopted~~of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002, relating to Domino’s Pizza, Inc.
31.2		Certification ~~by Sandeep Reddy pursuant to Rule 13a-14(a) and 15d-14(a), as adopted~~of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002, relating to Domino’s Pizza, Inc.
32.1		Certification ~~by Russell J. Weiner~~of Chief Executive Officer 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.
32.2		Certification ~~by Sandeep Reddy~~of Chief Financial Officer 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		Inline XBRL Taxonomy Extension Schema Document.
101.CAL		Inline XBRL Taxonomy Extension Calculation Linkbase Document.
101.LAB		Inline XBRL Taxonomy Extension Label Linkbase Document.
101.PRE		Inline XBRL Taxonomy Extension Presentation Linkbase Document.
101.DEF		Inline XBRL Taxonomy Extension Definition Linkbase Document.
104		Cover page Interactive Data File (formatted as Inline XBRL and contained in exhibit 101).

2725

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 21, 2022~~April 27, 2023	/s/ Sandeep Reddy
	Sandeep Reddy
		Executive Vice President, Chief Financial Officer (Principal Financial Officer)

2826


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)


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


(In thousands)	June 19, 2022			January 2, 2022 (1)			March 26, 2023			January 1, 2023 (1)
Assets
Current assets:
Cash and cash equivalents	$	114,353		$	148,160		$	154,193		$	60,356
Restricted cash and cash equivalents		158,215			180,579			170,798			191,289
Accounts receivable, net		274,957			255,327			259,163			257,492
Inventories		70,201			68,328			69,278			81,570
Prepaid expenses and other		45,645			27,242			34,381			37,287
Advertising fund assets, restricted		182,499			180,904			139,926			162,660
Total current assets		845,870			860,540			827,739			790,654
Property, plant and equipment:
Land and buildings		108,245			108,372			105,581			105,659
Leasehold and other improvements		195,834			193,572			173,959			172,725
Equipment		322,079			312,772			342,408			333,787
Construction in progress		27,161			27,815			19,192			22,536
		653,319			642,531			641,140			634,707
Accumulated depreciation and amortization		(339,507	)		(318,466	)		(342,262	)		(332,472	)
Property, plant and equipment, net		313,812			324,065			298,878			302,235
Other assets:
Operating lease right-of-use assets		222,780			210,702			219,630			219,202
Goodwill		16,153			15,034			11,688			11,763
Capitalized software, net		103,137			95,558			113,150			108,354
Investments		125,840			125,840			125,840			125,840
Deferred income tax assets, net								1,869			1,926
Other assets		40,652			37,968			42,596			42,247
Deferred income taxes		2,386			2,109
Total other assets		510,948			487,211			514,773			509,332
Total assets	$	1,670,630		$	1,671,816		$	1,641,390		$	1,602,221
Liabilities and stockholders' deficit
Liabilities and stockholders’ deficit
Current liabilities:
Current portion of long-term debt	$	55,654		$	55,588		$	55,228		$	54,813
Accounts payable		99,465			91,547			93,547			89,715
Operating lease liabilities		41,682			37,155			36,847			34,877
Insurance reserves		32,157			32,588			30,309			31,435
Dividends payable		40,624			918			43,783			866
Advertising fund liabilities		175,069			173,737			136,578			157,909
Other accrued liabilities		130,798			199,208			160,073			167,006
Total current liabilities		575,449			590,741			556,365			536,621
Long-term liabilities:
Long-term debt, less current portion		4,989,578			5,014,638			4,955,228			4,967,420
Operating lease liabilities		194,674			184,471			194,193			195,244
Insurance reserves		36,213			36,913			38,030			40,179
Deferred income tax liabilities								4,760			7,761
Other accrued liabilities		48,724			50,667			44,587			44,061
Deferred income taxes		6,301			3,922
Total long-term liabilities		5,275,490			5,290,611			5,236,798			5,254,665
Stockholders' deficit:
Stockholders’ deficit:
Common stock		359			361			353			354
Additional paid-in capital		3,589			840			1,474			9,693
Retained deficit		(4,180,367	)		(4,207,917	)		(4,148,455	)		(4,194,418	)
Accumulated other comprehensive loss		(3,890	)		(2,820	)		(5,145	)		(4,694	)
Total stockholders' deficit		(4,180,309	)		(4,209,536	)
Total liabilities and stockholders' deficit	$	1,670,630		$	1,671,816
Total stockholders’ deficit								(4,151,773	)		(4,189,065	)
Total liabilities and stockholders’ deficit							$	1,641,390		$	1,602,221


	Two Fiscal Quarters Ended						Fiscal Quarter Ended
	June 19,			June 20,			March 26,			March 27,
(In thousands)	2022			2021			2023			2022
Cash flows from operating activities:
Net income	$	193,457		$	234,380		$	104,770		$	90,964
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization		37,093			33,641			18,170			18,976
Refranchising loss								149			—
Loss on sale/disposal of assets		448			456			275			195
Amortization of debt issuance costs		2,631			4,438			1,292			1,319
Provision for deferred income taxes		2,490			2,561
(Benefit) provision for deferred income taxes								(3,439	)		1,319
Non-cash equity-based compensation expense		15,738			13,500			7,538			7,265
Excess tax benefits from equity-based compensation		(174	)		(4,264	)
Excess tax deficiencies (benefits) from equity-based compensation								298			(86	)
Provision for losses on accounts and notes receivable		2,326			296			572			1,462
Unrealized gain on investments		0			(2,500	)
Changes in operating assets and liabilities		(102,935	)		(17,098	)		7,388			(34,718	)
Changes in advertising fund assets and liabilities, restricted		2,341			30,005			(22,331	)		(7,907	)
Net cash provided by operating activities		153,415			295,415			114,682			78,789
Cash flows from investing activities:
Capital expenditures		(32,664	)		(33,163	)		(19,031	)		(12,454	)
Purchase of investments		0			(40,000	)
Purchase of franchise operations and other assets		(6,814	)		0			—			(6,814	)
Other		(435	)		293			(572	)		(1,368	)
Net cash used in investing activities		(39,913	)		(72,870	)		(19,603	)		(20,636	)
Cash flows from financing activities:
Proceeds from issuance of long-term debt		0			1,850,000
Repayments of long-term debt and finance lease obligations		(27,528	)		(882,547	)		(13,899	)		(13,861	)
Proceeds from exercise of stock options		526			9,025			343			266
Purchases of common stock		(97,661	)		(1,025,000	)		(30,083	)		(47,661	)
Tax payments for restricted stock upon vesting		(2,395	)		(1,087	)		(1,553	)		(789	)
Payments of common stock dividends and equivalents		(39,662	)		(36,432	)		(89	)		(51	)
Cash paid for financing costs		0			(14,938	)
Other		0			(244	)
Net cash used in financing activities		(166,720	)		(101,223	)		(45,281	)		(62,096	)
Effect of exchange rate changes on cash		(635	)		302			(186	)		374
Change in cash and cash equivalents, restricted cash and cash equivalents		(53,853	)		121,624			49,612			(3,569	)

Cash and cash equivalents, beginning of period		148,160			168,821			60,356			148,160
Restricted cash and cash equivalents, beginning of period		180,579			217,453			191,289			180,579
Cash and cash equivalents included in advertising fund assets, restricted, beginning of period		161,741			115,872			143,559			161,741
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			395,204			490,480

Cash and cash equivalents, end of period		114,353			292,095			154,193			164,962
Restricted cash and cash equivalents, end of period		158,215			184,695			170,798			168,241
Cash and cash equivalents included in advertising fund assets, restricted, end of period		164,059			146,980			119,825			153,708
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		$	444,816		$	486,911


	At June 19, 2022								At March 26, 2023
			Fair Value Estimated Using								Fair Value Estimated Using
	Carrying		Level 1		Level 2		Level 3		Carrying		Level 1		Level 2		Level 3
	Amount		Inputs		Inputs		Inputs		Amount		Inputs		Inputs		Inputs
Cash equivalents	$	76,381	$	76,381	$	—	$	—	$	112,975	$	112,975	$	—	$	—
Restricted cash equivalents		117,426		117,426		—		—		122,896		122,896		—		—
Investments in marketable securities		13,740		13,740		—		—		14,622		14,622		—		—
Advertising fund cash equivalents, restricted		150,752		150,752		—		—		100,768		100,768		—		—
Investments		125,840		—		—		125,840		125,840		—		—		125,840


Large accelerated filer	☒	Accelerated filer	☐
Non-accelerated filer	☐	Smaller reporting company	☐
Emerging growth company	☐


		Page No.
PART I.	FINANCIAL INFORMATION

Item 1.	Financial Statements	3

	Condensed Consolidated Balance Sheets (Unaudited) – As of ~~June 19, 2022~~March 26, 2023 and January ~~2, 2022~~1, 2023	3

	Condensed Consolidated Statements of Income (Unaudited) – Fiscal quarters ended March 26, 2023 and ~~two fiscal quarters ended June 19,~~March 27, 2022 ~~and June 20, 2021~~	4

	Condensed Consolidated Statements of Comprehensive Income (Unaudited) – Fiscal quarters ended March 26, 2023 and ~~two fiscal quarters ended June 19,~~March 27, 2022 ~~and June 20, 2021~~	5

	Condensed Consolidated Statements of Cash Flows (Unaudited) – ~~Two fiscal~~Fiscal quarters ended ~~June 19,~~March 26, 2023 and March 27, 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	2523

Item 4.	Controls and Procedures	2523

PART II.	OTHER INFORMATION

Item 1.	Legal Proceedings	2624

Item 1A.	Risk Factors	2624

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	2624

Item 3.	Defaults Upon Senior Securities	2624

Item 4.	Mine Safety Disclosures	2624

Item 5.	Other Information	2624

Item 6.	Exhibits	2725

SIGNATURES		2826


	At January 2, 2022
			Fair Value Estimated Using
	Carrying		Level 1		Level 2		Level 3
	Amount		Inputs		Inputs		Inputs
Cash equivalents	$	87,384	$	87,384	$	—	$	—
Restricted cash equivalents		115,185		115,185		—		—
Investments in marketable securities		15,433		15,433		—		—
Advertising fund cash equivalents, restricted		140,115		140,115		—		—
Investments		125,840		—		—		125,840


	At January 1, 2023
			Fair Value Estimated Using
	Carrying		Level 1		Level 2		Level 3
	Amount		Inputs		Inputs		Inputs
Cash equivalents	$	23,779	$	23,779	$	—	$	—
Restricted cash equivalents		117,212		117,212		—		—
Investments in marketable securities		13,395		13,395		—		—
Advertising fund cash equivalents, restricted		124,496		124,496		—		—
Investments		125,840		—		—		125,840


	Two Fiscal Quarters Ended June 20, 2021
	Carrying Amount						Carrying Amount
	January 3,				Unrealized		June 20,
	2021		Purchases		Gain		2021
Investments	$	40,000	$	40,000	$	2,500	$	82,500


	June 19, 2022				January 2, 2022				March 26, 2023				January 1, 2023
	Principal Amount		Fair Value		Principal Amount		Fair Value		Principal Amount		Fair Value		Principal Amount		Fair Value
2015 Ten-Year Notes	$	756,000	$	737,856	$	760,000	$	777,480	$	750,000	$	730,500	$	752,000	$	717,408
2017 Ten-Year Notes		957,500		901,008		962,500		1,000,038		950,000		900,600		952,500		875,348
2018 7.5-Year Notes		410,125		395,361		412,250		420,907		406,938		393,102		408,000		385,968
2018 9.25-Year Notes		386,000		368,244		388,000		407,788		383,000		366,531		384,000		355,584
2019 Ten-Year Notes		659,813		589,872		663,188		693,031		654,750		588,620		656,438		564,536
2021 7.5-Year Notes		841,500		720,324		845,750		849,133		835,125		725,724		837,250		695,755
2021 Ten-Year Notes		990,000		832,590		995,000		1,017,885		982,500		828,248		985,000		792,925