10-Q
Table of Contents
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Table of Contents
 
 
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
 
 
FORM
10-Q
 
 
(Mark One)
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 20, 2021
OR
 
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from
                    
to
                    
Commission file number:
001-32242
 
 
Domino’s Pizza, Inc.
(Exact Name of Registrant as Specified in Its Charter)
 
 
 
Delaware
 
38-2511577
(State or Other Jurisdiction of
Incorporation or Organization)
 
(I.R.S. Employer
Identification No.)
   
30 Frank Lloyd Wright Drive
Ann Arbor, Michigan
 
48105
(Address of Principal Executive Offices)
 
(Zip Code)
(734)
930-3030
(Registrant’s Telephone Number, Including Area Code)
 
 
Securities registered pursuant to Section 12(b) of the Exchange Act:
 
Title of Each Class
 
Trading
Symbol
 
Name of Each Exchange
on Which Registered
Domino’s Pizza, Inc. Common Stock, $0.01 par value
 
DPZ
 
New York Stock Exchange
Indicate by check mark whether registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes  ☒    No  ☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to
Rule 405 of
Regulation S-T
(§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to
submit such
 
files).
    
Yes  ☒    No  ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a
non-accelerated
filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule
12b-2
of the Exchange Act.
 
Large accelerated filer  
   Accelerated filer  
       
Non-accelerated
filer
     Smaller reporting company  
 
 
 
 
 
 
 
 
 
 
 
Emerging growth company 
 
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.  ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule
12b-2
of the Exchange Act).    
 
Yes  ☐    No  
As of July 15, 2021, Domino’s Pizza, Inc. had 36,854,211 shares of common stock, par value $0.01 per share, outstanding.
 
 
 

Domino’s Pizza, Inc.
TABLE OF CONTENTS
 
 
 
 
  
Page No.
 
PART I.
 
FINANCIAL INFORMATION
  
     
     
Item 1.
 
  
 
3
 
     
 
 
  
 
3
 
     
 
 
  
 
4
 
     
 
 
  
 
5
 
     
 
 
  
 
6
 
     
 
 
  
 
7
 
     
Item 2.
 
  
 
16
 
     
Item 3.
 
  
 
27
 
     
Item 4.
 
  
 
27
 
     
PART II.
 
OTHER INFORMATION
  
     
     
Item 1.
 
  
 
28
 
     
Item 1A.
 
  
 
28
 
     
Item 2.
 
  
 
28
 
     
Item 3.
 
  
 
29
 
     
Item 4.
 
  
 
29
 
     
Item 5.
 
  
 
29
 
     
Item 6.
 
  
 
29
 
   
  
 
30
 
 
2

Table of Contents
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements.
Domino’s Pizza, Inc. and Subsidiaries
Condensed Consolidated Balance Sheets
(Unaudited)
 
(In thousands)   
June 20, 2021
   
January 3, 2021 (1)
 
Assets
                
Current assets:
                
Cash and cash equivalents
   $ 292,095     $ 168,821  
Restricted cash and cash equivalents
     184,695       217,453  
Accounts receivable, net
     235,954       244,560  
Inventories
     59,182       66,683  
Prepaid expenses and other
     43,785       24,169  
Advertising fund assets, restricted
     165,139       147,698  
    
 
 
   
 
 
 
Total current assets
     980,850       869,384  
    
 
 
   
 
 
 
Property, plant and equipment:
                
Land and buildings
     93,801       88,063  
Leasehold and other improvements
     189,094       186,456  
Equipment
     305,491       292,456  
Construction in progress
     9,650       13,014  
    
 
 
   
 
 
 
       598,036       579,989  
Accumulated depreciation and amortization
     (302,504     (282,625
    
 
 
   
 
 
 
Property, plant and equipment, net
     295,532       297,364  
    
 
 
   
 
 
 
Other assets:
                
Operating lease
right-of-use
assets
     220,845       228,268  
Goodwill
     15,034       15,061  
Capitalized software, net
     88,733       81,306  
Investments (Note 6)
     82,500       40,000  
Other assets
     36,636       33,881  
Deferred income taxes
     1,663       1,904  
    
 
 
   
 
 
 
Total other assets
     445,411       400,420  
    
 
 
   
 
 
 
Total assets
   $ 1,721,793     $ 1,567,168  
    
 
 
   
 
 
 
Liabilities and stockholders’ deficit
                
Current liabilities:
                
Current portion of long-term debt
   $ 54,769     $ 2,855  
Accounts payable
     104,515       94,499  
Operating lease liabilities
     36,542       35,861  
Insurance reserves
     27,463       26,377  
Dividends payable
     35,452       729  
Advertising fund liabilities
     157,513       141,175  
Other accrued liabilities
     138,100       169,323  
    
 
 
   
 
 
 
Total current liabilities
     554,354       470,819  
    
 
 
   
 
 
 
Long-term liabilities:
                
Long-term debt, less current portion
     5,026,765       4,116,018  
Operating lease liabilities
     195,926       202,268  
Insurance reserves
     40,895       37,125  
Other accrued liabilities
     35,996       35,244  
Deferred income taxes
     8,427       6,099  
    
 
 
   
 
 
 
Total long-term liabilities
     5,308,009       4,396,754  
    
 
 
   
 
 
 
Stockholders’ deficit:
                
Common stock
     369       389  
Additional
paid-in
capital
     7,771       5,122  
Retained deficit
     (4,146,702     (3,303,492
Accumulated other comprehensive loss
     (2,008     (2,424
    
 
 
   
 
 
 
Total stockholders’ deficit
     (4,140,570     (3,300,405
    
 
 
   
 
 
 
Total liabilities and stockholders’ deficit
   $ 1,721,793     $ 1,567,168  
    
 
 
   
 
 
 
 
(1)
The balance sheet at January 3, 2021 has been derived from the audited consolidated financial statements at that date but does not include all of the information and footnotes required by accounting principles generally accepted in the United States for complete financial statements.
The accompanying notes are an integral part of these condensed consolidated statements.
 
3

Table of Contents
Domino’s Pizza, Inc. and Subsidiaries
Condensed Consolidated Statements of Income
(Unaudited)
 
    
Fiscal Quarter Ended
   
Two Fiscal Quarters Ended
 
    
June 20,
   
June 14,
   
June 20,
   
June 14,
 
(In thousands, except per share data)   
2021
   
2020
   
2021
   
2020
 
Revenues:
                                
U.S. Company-owned stores
   $ 116,589     $ 114,240     $ 229,333     $ 216,566  
U.S. franchise royalties and fees
     126,836       113,098       251,322       217,844  
Supply chain
     602,962       539,141       1,171,300       1,051,841  
International franchise royalties and fees
     69,745       48,104       136,515       105,600  
U.S. franchise advertising
     116,340       105,440       227,700       201,274  
    
 
 
   
 
 
   
 
 
   
 
 
 
Total revenues
     1,032,472       920,023       2,016,170       1,793,125  
    
 
 
   
 
 
   
 
 
   
 
 
 
Cost of sales:
                                
U.S. Company-owned stores
     88,019       87,831       173,761       167,219  
Supply chain
     536,763       475,101       1,045,568       928,658  
    
 
 
   
 
 
   
 
 
   
 
 
 
Total cost of sales
     624,782       562,932       1,219,329       1,095,877  
    
 
 
   
 
 
   
 
 
   
 
 
 
Operating margin
     407,690       357,091       796,841       697,248  
    
 
 
   
 
 
   
 
 
   
 
 
 
General and administrative
     100,448       88,068       191,701       176,557  
U.S. franchise advertising
     116,340       105,440       227,700       201,274  
    
 
 
   
 
 
   
 
 
   
 
 
 
Income from operations
     190,902       163,583       377,440       319,417  
Other income
     —         —         2,500       —    
Interest income
     68       640       90       1,572  
Interest expense
     (45,877     (39,727     (85,299     (79,197
    
 
 
   
 
 
   
 
 
   
 
 
 
Income before provision for income taxes
     145,093       124,496       294,731       241,792  
Provision for income taxes
     28,474       5,828       60,351       1,522  
    
 
 
   
 
 
   
 
 
   
 
 
 
Net income
   $ 116,619     $ 118,668     $ 234,380     $ 240,270  
    
 
 
   
 
 
   
 
 
   
 
 
 
Earnings per share:
                                
Common stock - basic
   $ 3.10     $ 3.04     $ 6.14     $ 6.18  
Common stock - diluted
     3.06       2.99       6.06       6.05  
The accompanying notes are an integral part of these condensed consolidated statements.
 
4

Table of Contents
Domino’s Pizza, Inc. and Subsidiaries
Condensed Consolidated Statements of Comprehensive Income
(Unaudited)
 
    
Fiscal Quarter Ended
    
Two Fiscal Quarters Ended
 
    
June 20,
    
June 14,
    
June 20,
    
June 14,
 
(In thousands)   
2021
    
2020
    
2021
    
2020
 
Net income
   $ 116,619      $ 118,668      $ 234,380      $ 240,270  
Currency translation adjustment
     230        1,533        416        (793
    
 
 
    
 
 
    
 
 
    
 
 
 
Comprehensive income
   $ 116,849      $ 120,201      $ 234,796      $ 239,477  
    
 
 
    
 
 
    
 
 
    
 
 
 
The accompanying notes are an integral part of these condensed consolidated statements.
 
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Table of Contents
Domino’s Pizza, Inc. and Subsidiaries
Condensed Consolidated Statements of Cash Flows
(Unaudited)
 
    
Two Fiscal Quarters Ended
 
    
June 20,
   
June 14,
 
(In thousands)   
2021
   
2020
 
Cash flows from operating activities:
                
Net income
   $ 234,380     $ 240,270  
Adjustments to reconcile net income to net cash provided by operating
activities:
                
Depreciation and amortization
     33,641       28,789  
Loss on sale/disposal of assets
     456       544  
Amortization of debt issuance costs
     4,438       2,575  
Provision for deferred income taxes
     2,561       1,510  
Non-cash
equity-based compensation expense
     13,500       10,029  
Excess tax benefits from equity-based compensation
     (4,264     (53,440
Provision for losses on accounts and notes receivable
     296       1,592  
Unrealized gain on investments
     (2,500     —    
Changes in operating assets and liabilities
     (17,098     (19,421
Changes in advertising fund assets and liabilities, restricted
     30,005       (620
    
 
 
   
 
 
 
Net cash provided by operating activities
     295,415       211,828  
    
 
 
   
 
 
 
Cash flows from investing activities:
                
Capital expenditures
     (33,163     (33,732
Purchase of investments (Note 6)
     (40,000     (40,000
Other
     293       (479
    
 
 
   
 
 
 
Net cash used in investing activities
     (72,870     (74,211
    
 
 
   
 
 
 
Cash flows from financing activities:
                
Proceeds from issuance of long-term debt
     1,850,000       158,000  
Repayments of long-term debt and finance lease obligations
     (882,547     (122,040
Proceeds from exercise of stock options
     9,025       24,801  
Purchases of common stock
     (1,025,000     (79,590
Tax payments for restricted stock upon vesting
     (1,087     (1,827
Payments of common stock dividends and equivalents
     (36,432     (30,266
Cash paid for financing costs
     (14,938     —    
Other
     (244     —    
    
 
 
   
 
 
 
Net cash used in financing activities
     (101,223     (50,922
    
 
 
   
 
 
 
Effect of exchange rate changes on cash
     302       (253
    
 
 
   
 
 
 
Change in cash and cash equivalents, restricted cash and cash equivalents
     121,624       86,442  
    
 
 
   
 
 
 
 
 
 
 
 
 
 
 
 
Cash and cash equivalents, beginning of period
     168,821       190,615  
Restricted cash and cash equivalents, beginning of period
     217,453       209,269  
Cash and cash equivalents included in advertising fund assets, restricted, beginning of period
     115,872       84,040  
    
 
 
   
 
 
 
Cash and cash equivalents, restricted cash and cash equivalents and cash and cash equivalents included in advertising fund assets, restricted, beginning of period
     502,146       483,924  
    
 
 
   
 
 
 
 
 
 
 
 
 
 
 
 
Cash and cash equivalents, end of period
     292,095       247,952  
Restricted cash and cash equivalents, end of period
     184,695       238,233  
Cash and cash equivalents included in advertising fund assets, restricted, end of period
     146,980       84,181  
    
 
 
   
 
 
 
Cash and cash equivalents, restricted cash and cash equivalents and cash and cash equivalents included in advertising fund assets, restricted, end of period
   $ 623,770     $ 570,366  
    
 
 
   
 
 
 
The accompanying notes are an integral part of these condensed consolidated statements.
 
6

Table of Contents
Domino’s Pizza, Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements
(Unaudited; tabular amounts in thousands, except percentages, share and per share amounts)
June 20, 2021
1. Basis of Presentation and Updates to Significant Accounting Policies
The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States for interim financial information and with the instructions to Form
10-Q
and Rule
10-01
of Regulation
S-X.
Accordingly, they do not include all of the information and footnotes required by accounting principles generally accepted in the United States for complete financial statements. For further information, refer to the consolidated financial statements and footnotes for the fiscal year ended January 3, 2021 included in the Company’s 2020 Annual Report on Form
10-K,
filed with the Securities and Exchange Commission on February 25, 2021 (the “2020 Form
10-K”)
.
In the opinion of management, all adjustments, consisting of normal recurring items, considered necessary for a fair statement have been included. Operating results for the fiscal quarter ended June 20, 2021 are not necessarily indicative of the results that may be expected for the fiscal year ending January 2, 2022.
2. Segment Information
The following table summarizes 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 20, 2021 and June 14, 2020
 
    
U.S.

Stores
    
Supply

Chain
    
International

Franchise
    
Intersegment

Revenues
   
Other
   
Total
 
Revenues
                                                   
2021
   $ 359,765      $ 635,592      $ 69,745      $ (32,630   $ —       $ 1,032,472  
2020
     332,778        570,104        48,104        (30,963     —         920,023  
Segment Income
                                                   
2021
   $ 111,847      $ 58,593      $ 56,365        N/A     $ (9,627   $ 217,178  
2020
     102,934        56,904        36,410        N/A       (12,555     183,693  
 
    
Two Fiscal Quarters Ended June 20, 2021 and June 14, 2020
 
    
U.S.

Stores
    
Supply

Chain
    
International

Franchise
    
Intersegment

Revenues
   
Other
   
Total
 
Revenues
                                                   
2021
   $ 708,355      $ 1,234,769      $ 136,515      $ (63,469   $ —       $ 2,016,170  
2020
     635,684        1,111,743        105,600        (59,902     —         1,793,125  
Segment Income
                                                   
2021
   $ 219,283      $ 111,145      $ 110,833        N/A     $ (15,715   $ 425,546  
2020
     191,211        108,341        79,914        N/A       (20,687     358,779  
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Table of Contents
The following table reconciles Total Segment Income to consolidated income before provision for income taxes.
 
    
Fiscal Quarter Ended
    
Two Fiscal Quarters Ended
 
    
June 20,

2021
    
June 14,

2020
    
June 20,

2021
    
June
14
,

202
0
 
Total Segment Income
   $ 217,178      $ 183,693      $ 425,546      $ 358,779  
Depreciation and amortization
     (17,176      (14,757      (33,641      (28,789
Loss on sale/disposal of assets
     (295      (238      (456      (544
Non-cash
equity-based compensation expense
     (8,296      (5,115      (13,500      (10,029
Recapitalization-related expenses
     (509      —          (509      —    
    
 
 
    
 
 
    
 
 
    
 
 
 
Income from operations
     190,902        163,583        377,440        319,417  
Other income
     —          —          2,500        —    
Interest income
     68        640        90        1,572  
Interest expense
     (45,877      (39,727      (85,299      (79,197
    
 
 
    
 
 
    
 
 
    
 
 
 
Income before provision for income taxes
   $ 145,093      $ 124,496      $ 294,731      $ 241,792  
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
    
 
 
    
 
 
    
 
 
    
 
 
 
3. Earnings Per Share
 
    
Fiscal Quarter Ended
    
Two Fiscal Quarters Ended
 
    
June 20,

2021
    
June 14,

2020
    
June 20,

2021
    
June 14,

2020
 
Net income available to common stockholders - basic and diluted
   $ 116,619      $ 118,668      $ 234,380      $ 240,270  
    
 
 
    
 
 
    
 
 
    
 
 
 
Basic weighted average number of shares
     37,590,369        39,058,292        38,145,297        38,862,108  
Earnings per share – basic
   $ 3.10      $ 3.04      $ 6.14      $ 6.18  
Diluted weighted average number of shares
     38,122,515        39,746,479        38,665,325        39,688,663  
Earnings per share – diluted
   $ 3.06      $ 2.99      $ 6.06      $ 6.05  
The denominator used in calculating diluted earnings per share for the second quarter of 2021 did not include 84,955
 
options to purchase common stock, as the effect of including these options would have been anti-dilutive. The denominator used in calculating diluted earnings per share for the two fiscal quarters of 2021 did not include
92,689 options to purchase common stock
,
as the effect of including these options would have been anti-dilutive.
The denominators used in calculating diluted earnings per share for the second quarter and two fiscal quarters of 2021 each did not include 
64,110
restricted performance shares, as the performance targets for these awards had not yet been met.
The denominator used in calculating diluted earnings per share for the two fiscal quarters of 2020 did not include 263 options to purchase common stock and 1,760 restricted stock awards, as the effect of including these options and awards would have been anti-dilutive. The denominators used in calculating diluted earnings per share for the second quarter and two fiscal quarters of 2020 each did not include 90,472 restricted performance shares, as the performance targets for these awards had not yet been met.
4. Stockholders’
Deficit
The following table summarizes changes in stockholders’ deficit for the second quarter of 2021.
 
 
  
Common Stock
 
 
Additional

Paid-in

Capital
 
 
Retained

Deficit
 
 
Accumulated

Other

Comprehensive

Loss
 
 
  
Shares
 
 
Amount
 
Balance at March 28, 2021
     38,818,197     $ 388     $ 6,612     $ (3,240,842   $ (2,238
Net income
     —         —         —         116,619       —    
Dividends declared on common stock and equivalents ($0.94 per share)
     —         —         —         (34,680     —    
Issuance and cancellation of stock awards, net
     837       —         —         —         —    
Tax payments for restricted stock upon vesting
     (110     —         (43     —         —    
Purchases of common stock
     (2,012,596     (20     (12,181     (987,799     —    
Exercise of stock options
     47,243       1       5,331       —         —    
Non-cash
equity-based compensation expense
     —         —         8,296       —         —    
Other
     —         —         (244     —         —    
Currency translation adjustment
     —         —         —         —         230  
    
 
 
   
 
 
   
 
 
   
 
 
   
 
 
 
Balance at June 20, 2021
     36,853,571     $ 369     $ 7,771     $ (4,146,702   $ (2,008
    
 
 
   
 
 
   
 
 
   
 
 
   
 
 
 
 
8

Table of Contents
The following table summarizes changes in stockholders’ deficit for the two fiscal quarters of 2021.
 
                            
Accumulated
 
    
Common Stock
   
Additional
         
Other
 
          
Paid-in
   
Retained
   
Comprehensive
 
    
Shares
   
Amount
   
Capital
   
Deficit
   
Loss
 
Balance at January 3, 2021
     38,868,350     $ 389     $ 5,122     $ (3,303,492   $ (2,424
Net income
     —         —         —         234,380       —    
Dividends declared on common stock and equivalents ($1.88 per share)
     —         —         —         (71,155     —    
Issuance and cancellation of stock awards, net
     (1,918     —         —         —         —    
Tax payments for restricted stock upon vesting
     (2,901     —         (1,087     —         —    
Purchases of common stock
     (2,078,466     (21     (18,544     (1,006,435     —    
Exercise of stock options
     68,506       1       9,024       —         —    
Non-cash
equity-based compensation expense
     —         —         13,500       —         —    
Other
     —         —         (244     —         —    
Currency translation adjustment
     —         —         —         —         416  
    
 
 
   
 
 
   
 
 
   
 
 
   
 
 
 
Balance at June 20, 2021
     36,853,571     $ 369     $ 7,771     $ (4,146,702   $ (2,008
    
 
 
   
 
 
   
 
 
   
 
 
   
 
 
 
On April 30, 2021, the Company entered into a $1.0 billion accelerated share repurchase agreement (the “ASR Agreement”) with a counterparty. Refer to Note 5 for additional information related to this transaction.
Subsequent to the end of the second quarter,
 on July 20, 2021, the Company’s Board of Directors authorized a new share repurchase program to repurchase up to $1.0 billion of the Company’s common stock. This repurchase program replaces the Company’s previously approved $1.0 billion share repurchase
program, which was fully utilized in connection with the ASR Agreement.
Also
on 
July 20, 2021
, the Company’s Board of Directors declared a $
0.94
 per share quarterly dividend on its outstanding common stock for shareholders of record as of 
September 15, 2021
,
 to be paid on 
September 30, 2021
.
The following table summarizes changes in stockholders’ deficit for the second quarter of 2020.
                             
Accumulated
 
    
Common Stock
    
Additional
         
Other
 
           
Paid-in
   
Retained
   
Comprehensive
 
    
Shares
   
Amount
    
Capital
   
Deficit
   
Loss
 
Balance at March 22, 2020
     39,039,599     $ 390      $ 12,474     $ (3,398,986   $ (6,068
Net income
     —         —          —         118,668       —    
Dividends declared on common stock and equivalents ($0.78 per share)
     —         —          —         (30,697     —    
Issuance and cancellation of stock awards, net
     4,068       —          —         —         —    
Tax payments for restricted stock upon vesting
     (91     —          (31     —         —    
Exercise of stock options
     303,637       3        14,693       —         —    
Non-cash
equity-based compensation expense
     —         —          5,115       —         —    
Currency translation adjustment
     —         —          —         —         1,533  
    
 
 
   
 
 
    
 
 
   
 
 
   
 
 
 
Balance at June 14, 2020
     39,347,213     $ 393      $ 32,251     $ (3,311,015   $ (4,535
    
 
 
   
 
 
    
 
 
   
 
 
   
 
 
 
The following table summarizes changes in stockholders’ deficit for the two fiscal quarters of 2020.
                            
Accumulated
 
    
Common Stock
   
Additional
         
Other
 
          
Paid-in
   
Retained
   
Comprehensive
 
    
Shares
   
Amount
   
Capital
   
Deficit
   
Loss
 
Balance at December 29, 2019
     38,934,009     $ 389     $ 243     $ (3,412,649   $ (3,742
Net income
     —         —         —         240,270       —    
Dividends declared on common stock and equivalents ($1.56 per share)
     —         —         —         (61,139     —    
Issuance and cancellation of stock awards, net
     5,713       —         —         —         —    
Tax payments for restricted stock upon vesting
     (6,020     —         (1,827     —         —    
Purchases of common stock
     (271,064     (3     (988     (78,599    
 
 
 
Exercise of stock options
     684,575       7       24,794       —         —    
Non-cash
equity-based compensation expense
     —         —         10,029       —         —    
Adoption of credit losses standard
    
     
     
      1,102      
 
 
 
Currency translation adjustment
     —         —         —         —         (793
    
 
 
   
 
 
   
 
 
   
 
 
   
 
 
 
Balance at June 14, 2020
     39,347,213     $ 393     $ 32,251     $ (3,311,015   $ (4,535
    
 
 
   
 
 
   
 
 
   
 
 
   
 
 
 
 
9

5. Recapitalization
On April 16, 2021 (the “closing date”), the Company completed a recapitalization transaction (the “2021 Recapitalization”)
 in which certain of the Company’s subsidiaries issued new notes pursuant to an asset-backed securitization. The new notes consist of $850.0 million Series
2021-1
2.662% Fixed Rate Senior Secured Notes,
Class A-2-I
with an anticipated term of 7.5 years (the “2021
A-2-I
Fixed Rate Notes”) and $1.0 billion Series
2021-1
3.151% Fixed Rate Senior Secured Notes,
Class A-2-II
with an anticipated term of 10 years (collectively with the 2021
A-2-I
Fixed Rate Notes, the “2021 Notes”) in an offering exempt from registration under the Securities Act of 1933, as amended. As of June 20, 2021, the 2021 Notes had scheduled principal payments of $9.3 million in 2021, $18.5 million in each of 2022 through 2027, $804.8 million in 2028, $10.0 million in each of 2029 and 2030 and $905.0 million in 2031. Gross proceeds from the issuance of the 2021 Notes were $1.85 billion.
Concurrently, certain of the Company’s subsidiaries also issued a new variable funding note facility which allows for advances of up to $200.0 million of Series
2021-1
Variable Funding Senior Secured Notes,
Class A-1
Notes and certain other credit instruments, including letters of credit (the “2021 Variable Funding Notes”). The 2021 Variable Funding Notes were undrawn on the closing date. In connection with the issuance of the 2021 Variable Funding Notes, the Company’s previous $200.0 million variable funding note facility was canceled.
A portion of proceeds from the 2021 Recapitalization was used to repay the remaining $291.0 million in outstanding principal under the Company’s 2017 five-year floating rate notes and $582.0 million in outstanding principal under the Company’s 2017 five-year fixed rate notes, prefund a portion of the interest payable on the 2021 Notes and pay transaction fees and expenses. In connection with the repayment of the 2017 five-year floating rate notes and 2017 five-year fixed rate notes, the Company expensed approximately $2.0 million for the remaining unamortized debt issuance costs associated with these notes. Additionally, in connection with the 2021 Recapitalization, the Company capitalized $14.9 million of debt issuance costs, which are being amortized into interest expense over the 7.5 and
10-year
expected terms of the 2021 Notes.
As of the fourth quarter of 2020, the Company had a leverage ratio of less than 5.0x, and accordingly, did not make the previously scheduled debt amortization payment for its
then-outstanding 
notes beginning in the first quarter of 2021. Accordingly, all principal amounts of the Company’s outstanding notes were classified as long-term debt in the consolidated balance sheet as of January 3, 2021. Subsequent to the closing of the 2021 Recapitalization, the Company had a leverage ratio of greater than 5.0x and, accordingly, the Company resumed making the scheduled amortization payments on its notes in the second quarter of 2021.
On April 30, 2021, the Company entered into
the
 $1.0 billion ASR Agreement
.
 Pursuant to the terms of the ASR Agreement, on May 3, 2021, the Company used a portion of the proceeds from the 2021 Recapitalization to pay the counterparty $1.0 billion in cash and received and retired 2,012,596
shares of its common stock. Final settlement of the ASR Agreement occurred on July 21, 2021. In connection with the ASR Agreement, the Company received and retired a total of 2,250,786 shares of its common stock at an average price of 
$444.29,
 
including the 2,012,596 shares of its common stock received and retired during the second quarter of 2021.
6. Fair Value Measurements
Fair value measurements enable the reader of the financial statements to assess the inputs used to develop those measurements by establishing a hierarchy for ranking the quality and reliability of the information used to determine fair values. The Company classifies and discloses assets and liabilities carried at fair value in one of the following three categories:
Level 1: Quoted market prices in active markets for identical assets or liabilities.
Level 2: Observable market-based inputs or unobservable inputs that are corroborated by market data.
Level 3: Unobservable inputs that are not corroborated by market data.
Fair Value of Cash Equivalents and Investments
The fair values of the Company’s cash equivalents and investments in marketable securities are based on quoted prices in active markets for identical assets. The fair value of the Company’s Level 3 investment is not readily determinable. The fair value represents its cost with adjustments for observable changes in prices resulting from orderly transactions for the identical or a similar investment of the same issuer or impairments.
 
10

Table of Contents
The following tables summarize the carrying amounts and fair values of certain assets at June 20, 2021 and January 3, 2021:
 
    
At June 20, 2021
 
           
Fair Value Estimated Using
 
    
Carrying
    
Level 1
    
Level 2
    
Level 3
 
    
Amount
    
Inputs
    
Inputs
    
Inputs
 
Cash equivalents
   $ 261,183      $ 261,183      $ —        $ —    
Restricted cash equivalents
     117,783        117,783        —          —    
Investments in marketable securities
     14,195        14,195        —          —    
Advertising fund cash equivalents, restricted
     129,810        129,810        —          —    
Investments
     82,500        —          —          82,500  
 
    
At January 3, 2021
 
           
Fair Value Estimated Using
 
    
Carrying
    
Level 1
    
Level 2
    
Level 3
 
    
Amount
    
Inputs
    
Inputs
    
Inputs
 
Cash equivalents
   $ 151,502      $ 151,502      $ —        $ —    
Restricted cash equivalents
     126,595        126,595        —          —    
Investments in marketable securities
     13,251        13,251        —          —    
Advertising fund cash equivalents, restricted
     104,197        104,197        —          —    
Investments
     40,000        —          —          40,000  
During the second quarter of 2020, a subsidiary of the Company acquired a
non-controlling
interest in Dash Brands Ltd., a privately-held business company limited by shares incorporated with limited liability under the laws of the British Virgin Islands (“Dash Brands”), for $40.0 million. Through its subsidiaries, Dash Brands serves as the Company’s master franchisee in China that owns and operates Domino’s Pizza stores in that market. The Company’s investment in Dash Brands’ senior ordinary shares, which are not
in-substance
common stock, represents an equity investment without a readily determinable fair value and is recorded at cost with adjustments for observable changes in prices resulting from orderly transactions for the identical or a similar investment of the same issuer or impairments.
In the first quarter of 2021, the Company invested an additional $40.0 million in Dash Brands based on Dash Brands’ achievement of certain
pre-established performance conditions. In the first quarter of 2021, the Company recorded a positive adjustment of 
$
 
2.5 million to the original carrying amount of $40.0 million resulting from the observable change in price from the valuation of the additional investment. This amount was recorded in other income in the Company’s condensed consolidated statements of income. The Company did not record any adjustments to the carrying amount of $82.5 million in the second quarter of 2021.
The following table summarizes the reconciliation of the carrying amount of the Company’s investment in Dash Brands from the opening balance at January 3, 2021 to the closing balance at June 20, 2021.
 
    
Two Fiscal Quarters of 2021
 
    
Carrying
Amount
                  
Carrying
Amount
 
    
January 3,
           
Unrealized
    
June 20,
 
    
2021
    
Purchases
    
Gain
    
2021
 
Investments
   $ 40,000      $ 40,000      $ 2,500      $ 82,500  
Fair Value of Debt
The estimated fair values of the Company’s fixed and floating rate notes are classified as Level 2 measurements, as the Company estimates the fair value amount by using available market information. The Company obtained quotes from two separate brokerage firms that are knowledgeable about the Company’s fixed and floating rate notes and, at times, trade these notes. The Company also performed its own internal analysis based on the information gathered from public markets, including information on notes that are similar to those of the Company. However, considerable judgment is required to interpret market data to estimate fair value. Accordingly, the fair value estimates presented are not necessarily indicative of the amount that the Company or the debtholders could realize in a current market exchange. The use of different assumptions and/or estimation methodologies may have a material effect on the estimated fair values stated
below.
 
11

Management estimated the approximate fair values of the 2015 fixed rate notes, the 2017 fixed and floating rate notes, the 2018 fixed rate notes, the 2019 fixed rate notes and the 2021 fixed rate notes as follows:
 
    
June 20, 2021
    
January 3, 2021
 
    
Principal Amount
    
Fair Value
    
Principal Amount
    
Fair Value
 
2015
Ten-Year
Fixed Rate Notes
   $ 764,000      $ 802,200      $ 766,000      $ 809,662  
2017 Five-Year Fixed Rate Notes
     —          —          582,000        582,582  
2017
Ten-Year
Fixed Rate Notes
     967,500        1,032,323        970,000        1,035,960  
2017 Five-Year Floating Rate Notes
     —          —          291,000        291,000  
2018
7.5-Year
Fixed Rate Notes
     414,375        433,022        415,438        437,456  
2018
9.25-Year
Fixed Rate Notes
     390,000        422,370        391,000        422,280  
2019
Ten-Year
Fixed Rate Notes
     666,563        715,222        668,250        712,355  
2021
7.5-Year
Fixed Rate Notes
     850,000        872,950        —          —    
2021
Ten-Year
Fixed Rate Notes
     1,000,000        1,042,000        —          —    
The Company’s variable funding notes are a variable rate loan, and the fair value of this loan approximates book value based on the borrowing rates currently available for variable rate loans obtained from third party lending institutions. This fair value represents a Level 2 measurement. The Company did not have any outstanding borrowings under its variable funding notes at June 20, 2021 or January 3, 2021.
7. Revenue Disclosures
Contract Liabilities
Contract liabilities primarily consist of deferred franchise fees and deferred development fees. Changes in deferred franchise fees and deferred development fees for the two fiscal quarters of 2021 and the two fiscal quarters of 2020 were as follows:
 
    
Two Fiscal Quarters Ended
 
    
June 20,
    
June 14,
 
    
2021
    
2020
 
Deferred franchise fees and deferred development fees at beginning of period
   $ 19,090      $ 20,463  
Revenue recognized during the period
     (2,691      (2,793
New deferrals due to cash received and other
     3,805        3,092  
    
 
 
    
 
 
 
Deferred franchise fees and deferred development fees at end of period
   $ 20,204      $ 20,762  
    
 
 
    
 
 
 
Advertising Fund Assets
As of June 20, 2021, advertising fund assets, restricted of $165.1 million consisted of $147.0 million of cash and cash equivalents, $16.2 million of accounts receivable and $1.9 million of prepaid expenses. As of June 20, 2021, advertising fund cash and cash equivalents included $7.6 million of cash contributed from U.S. Company-owned stores that had not yet been expended.
As of January 3, 2021, advertising fund assets, restricted of $147.7 million consisted of $115.9 million of cash and cash equivalents, $27.0 million of accounts receivable and $4.8 million of prepaid expenses. As of January 3, 2021, advertising fund cash and cash equivalents included $6.5 million of cash contributed from U.S. Company-owned stores that had not yet been expended.
 
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Table of Contents
8. Leases
The Company leases certain retail store and supply chain center locations, supply chain vehicles, equipment and its corporate headquarters with expiration dates through 2041.
The components of operating and finance lease cost for the second quarter and two fiscal quarters of 2021 and the second quarter and two fiscal quarters of 2020 were as follows:
 
    
Fiscal Quarter Ended
    
Two Fiscal Quarters Ended
 
    
June 20,

2021
    
June 14,

2020
    
June 20,

2021
    
June 14,

2020
 
Operating lease cost
   $ 10,326      $ 10,250      $ 20,750      $ 19,832  
Finance lease cost:
                                   
Amortization of
right-of-use
assets
     1,003        451        1,922        700  
Interest on lease liabilities
     722        897        1,748        1,272  
    
 
 
    
 
 
    
 
 
    
 
 
 
Total finance lease cost
   $ 1,725      $ 1,348      $ 3,670      $ 1,972  
    
 
 
    
 
 
    
 
 
    
 
 
 
Rent expense totaled $17.9 million and
$
36.1 million in the second quarter and two fiscal quarters of 2021, respectively. Rent expense totaled $16.2 million and $32.6 million in the second quarter and two fiscal quarters of 2020, respectively. Rent expense includes operating lease cost, as well as expense for
non-lease
components including common area maintenance, real estate taxes and insurance for the Company’s real estate leases. Rent expense also includes the variable rate per mile driven and fixed maintenance charges for the Company’s supply chain center tractors and trailers and expense for short-term rentals. Variable rent expense and rent expense for short-term leases were immaterial for the second quarter and two fiscal quarters of 2021 and 2020, respectively.
Supplemental balance sheet information related to the Company’s finance leases as of June 20, 2021 and January 3, 2021 was as follows:
 
    
June 20,

2021
    
January 3,

2021
 
Land and buildings
   $ 73,822      $ 68,084  
Accumulated depreciation and amortization
     (11,979      (10,049
    
 
 
    
 
 
 
Finance lease assets, net
   $ 61,843      $ 58,035  
    
 
 
    
 
 
 
 
 
 
 
 
 
 
 
 
Current portion of long-term debt
   $ 3,269      $ 2,855  
Long-term debt, less current portion
     61,697        57,700  
    
 
 
    
 
 
 
Total principal payable on finance leases
   $ 64,966      $ 60,555  
    
 
 
    
 
 
 
As of June 20, 2021 and January 3, 2021, the weighted average remaining lease term and weighted average discount rate for the Company’s operating and finance leases were as follows:
 
    
June 20, 2021
   
January 3, 2021
 
    
Operating

Leases
   
Finance

Leases
   
Operating

Leases
   
Finance

Leases
 
Weighted average remaining lease term
     7 years       15 years       7 years       16 years  
Weighted average discount rate
     3.7     6.5     3.7     6.8
Supplemental cash flow information related to leases for the second quarter and two fiscal quarters of 2021 and the second quarter and two fiscal quarters of 2020 were as follows:
 
 
  
Fiscal Quarter Ended
 
  
Two Fiscal Quarters Ended
 
 
  
June 20,

2021
 
  
June 14,

2020
 
  
June 20,

2021
 
  
June 14,

2020
 
Cash paid for amounts included in the measurement of lease liabilities:
  
     
  
     
  
     
  
     
Operating cash flows from operating leases
   $ 9,105      $ 10,048      $ 19,292      $ 20,167  
Operating cash flows from finance leases
     722        897        1,748        1,272  
Financing cash flows from finance leases
     593        691        1,297        1,040  
Right-of-use
assets obtained in exchange for lease obligations:
                                   
Operating leases
     6,681        6,596        11,353        15,578  
Finance leases
     5,261        18,746        5,660        18,746  
 
13

Maturities of lease liabilities as of June 20, 2021 were as follows:
 
    
Operating

Leases
    
Finance

Leases
 
2021
   $ 26,194      $ 3,996  
2022
     43,813        7,202  
2023
     38,220        6,722  
2024
     36,928        7,181  
2025
     30,470        6,983  
Thereafter
     89,142        74,290  
    
 
 
    
 
 
 
Total future minimum rental commitments
     264,767        106,374  
Less – amounts representing interest
     (32,299      (41,408
    
 
 
    
 
 
 
Total lease liabilities
   $ 232,468      $ 64,966  
    
 
 
    
 
 
 
As of June 20, 2021, the Company has additional leases for one supply chain center and certain supply chain tractors and trailers that had not yet commenced with estimated future minimum rental commitments of approximately $51.1 
million. These leases are expected to commence in 2021 and 2022 with lease terms of up to 
16 years. These undiscounted amounts are not included in the table above.
The Company has guaranteed lease payments related to certain franchisees’ lease arrangements. The maximum amount of potential future payments under these guarantees was $11.1 million and $12.6 million as of June 20, 2021 and January 3, 2021, respectively. The Company does not believe these arrangements have or are likely to have a material effect on its results of operations, financial condition, revenues, expenses or liquidity.
9. Supplemental Disclosures of Cash Flow Information
The Company had
non-cash
investing activities related to accruals for capital expenditures of $4.6 million at June 20, 2021 and $4.3 million at January 3, 2021. The Company also had less than $0.1 million of
non-cash
investing activities related to lease incentives in the two fiscal quarters of 2021.
10. Equity Incentive Plans
The Company’s current equity incentive plan, named the Domino’s Pizza, Inc. 2004 Equity Incentive Plan (the “2004 Equity Incentive Plan”), benefits certain of the Company’s employees and members of the Company’s Board of Directors. In the two fiscal quarters of 2021, the Company granted
non-qualified
stock options, restricted stock awards, restricted stock units and performance-based restricted stock units to certain employees and members of its Board of Directors under the 2004 Equity Incentive Plan. As a result of the changes to the characteristics and types of awards granted to date in 2021 under the 2004 Equity Incentive Plan, the Company has included disclosure of the nature and terms of these awards granted in the two fiscal quarters of 2021, as well as the methods used to estimate their fair values below.
The cost of all employee stock options, as well as other equity-based compensation arrangements, is reflected in the condensed consolidated statements of income based on the estimated fair value of the awards and is amortized over the requisite service period of each award. All
non-cash
compensation expense amounts are recorded in general and administrative expense.
Stock Options
Stock options granted in fiscal 2021 were granted with an exercise price equal to the market price of the Company’s common stock at the date of the grant, expire
ten years from the date of grant and generally vest over three years from the date of
grant, generally subject to the holder’s continued employment. Additionally, all stock options granted become fully exercisable upon vesting. These awards also contain provisions for accelerated vesting upon the retirement eligibility of holders that have achieved specified service and age requirements. Management estimated the fair value of each option grant using the Black-Scholes option pricing method. The risk-free interest rate is based on the estimated expected life and is estimated based on U.S. Treasury Bond rates as of the grant date. The expected life is based on several factors, including, among other things, the vesting term and contractual term as well as historical experience. The expected volatility is based principally on the historical volatility of the Company’s
 share price.
 
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Table of Contents
Other Equity-Based Compensation Arrangements
Restricted stock awards granted to members of the Company’s Board of Directors in fiscal 2021 were granted with a fair value equal to the market price of the Company’s stock on the grant date and vest
 
one year
from the date of grant, generally subject to the director’s continued service. These awards also contain provisions for accelerated vesting upon the retirement eligibility of holders that have achieved specified service and age requirements.
Restricted stock units granted in fiscal 2021 were granted with a fair value equal to the market price of the Company’s stock on the grant date. These restricted stock units are separated into
three
tranches and have time-based ratable vesting conditions with the last tranche of the award vesting
three years
from the grant date, generally subject to the holder’s continued employment. These awards also contain provisions for accelerated vesting upon the retirement eligibility of holders that have achieved specified service and age requirements
.
Performance-based restricted stock units granted in fiscal 2021 were granted with a fair value equal to the market price of the Company’s stock on the grant date, adjusted for the estimated fair value of the market condition included in the award. These performance-based restricted stock units may vest
three years
from the date of grant, generally subject to the holder’s continued employment, and have time and performance-based vesting conditions which provide for potential payouts of the target award amount between
zero percent and two hundred
percent, based on the Company’s three-year cumulative achievement as compared to the specified target performance conditions. The performance-based restricted stock units also include provisions for a potential modifier (upward or downward) based on the Company’s cumulative
three-year
 
common stock performance relative to that of a
pre-established
peer group. These awards also contain provisions for accelerated vesting of the time-based vesting condition upon the retirement eligibility of holders that have achieved specified service and age requirements. Management estimated the fair value of each performance-based restricted stock unit using a Monte-Carlo simulation pricing method. The risk-free interest rate is based on the estimated expected life and is estimated based on U.S. Treasury Bond rates as of the grant date. The Monte-Carlo simulation also includes assumptions for expected volatility based principally on the historical volatility of the Company’s share price, as well
as the correlation of the Company’s share price as compared to that of the
pre-established
peer group
.
11. New Accounting Pronouncements
Recently Adopted Accounting Standard
Accounting Standards Update (“ASU”)
2019-12,
Income Taxes – Simplifying the Accounting for Income Taxes (Topic 740)
In December 2019, the Financial Accounting Standards Board (“FASB”) issued ASU
2019-12,
Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes (“ASU
2019-12”)
, which simplifies the accounting for income taxes. ASU
2019-12
is effective for fiscal years beginning after December 15, 2020, including applicable interim periods. The Company adopted this accounting standard in the first quarter of 2021, and it did not have a material impact on its condensed consolidated financial statements.
Accounting Standards Not Yet Adopted
The Company has considered all new accounting standards issued by the FASB. The Company has not yet completed its assessment of the following standard.
ASU
2020-04,
Facilitation of the Effects of Reference Rate Reform on Financial Reporting (Topic 848)
In March 2020, the FASB issued ASU
2020-04,
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. Subsequent to the closing of the 2021 Recapitalization, the Company’s 2021 Variable Funding Notes bear interest at fluctuating interest rates based on LIBOR. However, the associated loan documents contemplate a transition from LIBOR to secured overnight financing rate (“SOFR”) in the event that LIBOR ceases to exist. If the Company further needs to renegotiate its loan documents, the Company cannot predict what alternative index would be negotiated with its lenders. ASU
2020-04
is currently effective and upon adoption may be applied prospectively to contract modifications made on or before December 31, 2022. The Company is currently assessing the impact of adopting this standard but does not expect the adoption of this guidance to have a material impact on its condensed consolidated financial statements.
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Table of Contents
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.
(Unaudited; tabular amounts in millions, except percentages and store data)
The 2021 and 2020 second quarters referenced herein represent the twelve-week periods ended June 20, 2021 and June 14, 2020, respectively. The 2021 and 2020 two fiscal quarters referenced herein represent the twenty-four-week periods ended June 20, 2021 and June 14, 2020, respectively. In this section, we discuss the results of our operations for the second quarter and two fiscal quarters of 2021 as compared to the respective periods of 2020.
Overview
Domino’s is the largest pizza company in the world based on global retail sales, with a significant business in both delivery and carryout, and more than 18,000 locations in over 90 markets around the world as of June 20, 2021. Founded in 1960, our roots are in convenient pizza delivery, while a significant amount of our sales also come from carryout customers. We are a highly recognized global brand, and we focus on serving neighborhoods locally through our large global network of franchise owners and U.S. Company-owned stores. We are primarily a franchisor, with approximately 98% of Domino’s stores currently owned and operated by our independent franchisees. Franchising enables an individual to be his or her own employer and maintain control over all employment-related matters and pricing decisions, while also benefiting from the strength of the Domino’s global brand and operating system with limited capital investment by us.
The Domino’s business model is straightforward: Domino’s stores handcraft and serve quality food at a competitive price, with easy ordering access and efficient service, enhanced by our technological innovations. Our hand-tossed dough is made fresh and distributed to stores around the world by us and our franchisees.
Domino’s generates revenues and earnings by charging royalties and fees to our 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 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. 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.
The Domino’s business model can yield strong returns for our franchise owners and our Company-owned stores. It can also yield significant cash flows to us, through a consistent franchise royalty payment and supply chain revenue stream, with moderate capital expenditures. We have historically returned cash to shareholders through dividend payments and share repurchases. These factors emphasize our focus on our stakeholders, including our customers, team members, franchisees, communities and shareholders.
Second Quarter of 2021 Highlights
 
 
 
Global retail sales, excluding foreign currency impact (which includes total retail sales at Company-owned and franchised stores worldwide), increased 17.1% as compared to 2020. U.S. retail sales increased 7.4% and international retail sales, excluding foreign currency impact, increased 29.5% as compared to 2020.
 
 
 
Same store sales increased 3.5% in our U.S. stores and increased 13.9% in our international stores.
 
 
 
Revenues increased 12.2%.
 
 
 
Income from operations increased 16.7%.
 
 
 
Net income decreased 1.7%.
 
 
 
Diluted earnings per share increased 2.3%.
Two Fiscal Quarters of 2021 Highlights
 
 
 
Global retail sales, excluding foreign currency impact, increased 15.6% as compared to 2020. U.S. retail sales increased 11.1% and international retail sales, excluding foreign currency impact, increased 20.6% as compared to 2020.
 
 
 
Same store sales increased 8.1% in our U.S. stores and increased 12.8% in our international stores.
 
 
 
Revenues increased 12.4%.
 
 
 
Income from operations increased 18.2%.
 
 
 
Net income decreased 2.5%.
 
 
 
Diluted earnings per share increased 0.2%.
 
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Table of Contents
During the second quarter and two fiscal quarters of 2021, we experienced global retail sales growth and U.S. and international same store sales growth. We believe our commitment to value, convenience, quality and new products continues to keep consumers engaged with the brand. We also continued our strong U.S. and international same store sales performance with 41 straight quarters of positive U.S. same store sales and 110 straight quarters of positive international same store sales. We continued to experience sustained increases in U.S. and international same store sales during the second quarter and two fiscal quarters of 2021 resulting from evolving consumer trends during the
COVID-19
pandemic. Additionally, our U.S. supply chain experienced higher volumes from the increases in U.S. retail sales in the second quarter and two fiscal quarters of 2021. Our international retail sales in the second quarter of 2021 were also benefited by the reopening and resumption of normal store hours at certain of our international franchised stores that had been temporarily closed for portions of the second quarter of 2020 as a result of the
COVID-19
pandemic. Our U.S. and international same store sales growth has been pressured by our fortressing strategy, which includes increasing store concentration in certain markets where we compete, as well as from aggressive competitive activity.
We continued our global expansion with the opening of 238 net stores in the second quarter of 2021, bringing our
year-to-date
total to 413 net store openings. We had 35 net stores open in the U.S. and 203 net stores open internationally during the second quarter of 2021.
Overall, we believe our continued global store growth, along with our sales growth, emphasis on technology, operations, and marketing initiatives, have combined to strengthen our brand.
Statistical Measures
The tables below outline certain statistical measures we utilize to analyze our performance. This historical data is not necessarily indicative of results to be expected for any future period.
Global Retail Sales Growth (excluding foreign currency impact)
Global retail sales growth (excluding foreign currency impact) is a commonly used statistical measure in the quick-service restaurant industry that is important to understanding performance. Global retail sales growth refers to total worldwide retail sales at Company-owned and franchise stores. We believe global retail sales information is useful in analyzing revenues because franchisees pay royalties and, in the U.S., advertising fees that are 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 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 2021
   
Second
Quarter

of 2020
   
Two Fiscal
Quarters

of 2021
   
Two Fiscal
Quarters

of 2020
 
U.S. stores
     +7.4     +19.9     +11.1     +12.4
International stores (excluding foreign currency impact)
     +29.5     (3.4 )%      +20.6     +1.8
  
 
 
   
 
 
   
 
 
   
 
 
 
Total (excluding foreign currency impact)
     +17.1     +8.1     +15.6     +7.0
Same Store Sales Growth
Same store sales growth is a commonly used statistical measure in the quick-service restaurant industry that is important to understanding performance. Same store sales growth is calculated by including only sales from stores that also had sales in the comparable weeks of both years. International same store sales growth is calculated similarly to U.S. same store sales growth. Changes in international same store sales are reported on a constant dollar basis which reflects changes in international local currency sales.
 
    
Second
Quarter

of 2021
   
Second
Quarter

of 2020
   
Two Fiscal
Quarters

of 2021
   
Two Fiscal
Quarters

of 2020
 
U.S. Company-owned stores
     (2.6 )%      +16.9     +1.6     +10.4
U.S. franchise stores
     +3.9     +16.0     +8.5     +8.7
  
 
 
   
 
 
   
 
 
   
 
 
 
U.S. stores
     +3.5     +16.1     +8.1     +8.8
International stores (excluding foreign currency impact)
     +13.9     +1.3     +12.8     +1.4
 
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Table of Contents
Store Growth Activity
Store counts and net store growth are commonly used statistical measures in the quick-service restaurant industry that are important to understanding performance.
 
    
U.S.

Company-

owned

Stores
    
U.S.

Franchise

Stores
   
Total

U.S.

Stores
   
International
Stores
   
Total
 
Store count at March 28, 2021
     364        6,027       6,391       11,428       17,819  
Openings
     2        37       39       217       256  
Closings (1)
     —          (4     (4     (14     (18
  
 
 
    
 
 
   
 
 
   
 
 
   
 
 
 
Store count at June 20, 2021
     366        6,060       6,426       11,631       18,057  
  
 
 
    
 
 
   
 
 
   
 
 
   
 
 
 
Second quarter 2021 net store growth
     2        33       35       203       238  
  
 
 
    
 
 
   
 
 
   
 
 
   
 
 
 
Trailing four quarters net store growth
     20        211       231       653       884  
  
 
 
    
 
 
   
 
 
   
 
 
   
 
 
 
 
(1)
Temporary store closures are not treated as store closures and affected stores are included in the ending store count. Based on information reported to us by our master franchisees, we estimate that as of June 20, 2021, there were fewer than 175 international stores temporarily closed.
Income Statement Data
 
    
Second Quarter

of 2021
   
Second Quarter

of 2020
   
Two Fiscal Quarters

of 2021
   
Two Fiscal Quarters

of 2020
 
U.S. Company-owned stores
   $ 116.6     </