DOMINOS PIZZA INC Management report and analysis of the financial situation and operating results. (Form 10-K)

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Overview

Our fiscal year typically includes 52 weeks, comprised of three twelve-week
quarters and one sixteen-week quarter. Every five or six years our fiscal year
includes an extra (or 53rd) week in the fourth quarter. Fiscal 2021 and 2019
each consisted of 52 weeks and fiscal 2020 consisted of 53 weeks.

In this section, we discuss the results of our operations for the year ended
January 2, 2022 compared to the year ended January 3, 2021. For a discussion of
the year ended January 3, 2021 compared to the year ended December 29, 2019,
please refer to Part II, Item 7, "Management's Discussion and Analysis of
Financial Condition and Results of Operations" in our Annual Report on Form 10-K
for the year ended January 3, 2021.

Company Description

Domino's is the largest pizza company in the world, with more than 18,800
locations in over 90 markets around the world as of January 2, 2022, 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. Although we are a highly-recognized global brand, we
focus on value while serving neighborhoods locally through our large network of
franchise owners and Company-owned stores.

Our 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. We also generate revenues and earnings by selling food,
equipment and supplies to franchisees, 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 can profit by sub-franchising and
selling food and equipment to those sub-franchisees, as well as by running pizza
stores directly. We believe that everyone in the system can benefit, including
the end consumer, who can feed their family conveniently and economically.

Our financial results are driven largely by retail sales at our franchise 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.

Our business model can yield strong returns for our franchise owners and our
Company-owned stores. It can also yield significant cash 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 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 provided strong returns
for our shareholders

Critical accounting estimates

The following discussion and analysis of financial condition and results of
operations is based on our consolidated financial statements, which have been
prepared in accordance with accounting principles generally accepted in the
United States. The preparation of these financial statements requires our
management to make estimates and judgments that affect the reported amounts of
assets, liabilities, revenues and expenses and related disclosures of contingent
assets and liabilities. On an ongoing basis, our management evaluates its
estimates, including those related to long-lived assets, casualty insurance
reserves and income taxes. We base our estimates on historical experience and on
various other assumptions that we believe are reasonable under the
circumstances, the results of which form the basis for making judgments about
the carrying values of assets and liabilities that are not readily apparent from
other sources. Actual results may differ from those estimates, and changes in
estimates could materially affect our results of operations and financial
condition for any particular period.


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We believe that our most critical accounting estimates are:

Long-lived assets

We record long-lived assets, including property, plant and equipment and
capitalized software, at cost. For acquisitions of franchise operations, we
estimate the fair values of the assets and liabilities acquired based on
physical inspection of assets, historical experience and other information
available to us regarding the acquisition. We depreciate and amortize long-lived
assets using useful lives determined by us based on historical experience and
other information available to us. Our estimates of the useful lives of our
long-lived assets have not changed during the periods presented. We evaluate the
potential impairment of long-lived assets at least annually or whenever events
or changes in circumstances indicate that the carrying amount of the assets may
not be recoverable. Our periodic evaluation is based on various analyses,
including, on an annual basis, the projection of undiscounted cash flows. If we
determine that the carrying amount of an asset (or asset group) may not be
recoverable, we compare the net carrying value of the asset group to the
undiscounted net cash flows to be generated from the use and eventual
disposition of that asset group. For Company-owned stores, we perform related
impairment tests on an operating market basis, which we have determined to be
the lowest level for which identifiable cash flows are largely independent of
other cash flows. If the carrying amount of a long-lived asset exceeds the
amount of the expected future undiscounted cash flows of that asset, we estimate
the fair value of the asset. If the carrying amount of the asset exceeds the
estimated fair value of the asset, an impairment loss is recognized, and the
asset is written down to its estimated fair value.

We have not made any significant changes in the methodology used to project the
future market cash flows of Company-owned stores during the years presented.
Same store sales fluctuations and the rates at which operating costs will
fluctuate in the future are key factors in determining projected cash flows used
to evaluate recoverability of the related assets. If our same store sales
significantly decline or if operating costs increase and we are unable to
recover these costs, the carrying value of our Company-owned stores, by market,
may be unrecoverable and we may be required to recognize an impairment charge.
There were no triggering events in 2021, 2020 or 2019, and accordingly, we did
not record any impairment losses on long-lived assets in 2021, 2020 and 2019.

Damage insurance reserves

For certain periods prior to December 1998 and for periods after December 2001,
we maintain insurance coverage for workers' compensation, general liability and
owned and non-owned auto liabilities. We are generally responsible for up to
$2.0 million per occurrence under these retention programs for workers'
compensation and general liability, depending on policy year and line of
coverage. We are generally responsible for up to between $500,000 and $5.5
million per occurrence under these retention programs for owned and non-owned
automobile liabilities, depending on policy year and line of coverage. The
related insurance reserves are based on undiscounted independent actuarial
estimates, which are based on historical information along with assumptions
about future events. There is inherent uncertainty in the ultimate cost for
known claims under our insurance coverages, and for incidents that have occurred
that will be subject to a claim, but have yet to be reported to us. Analyses of
historical trends and actuarial valuation methods are utilized to estimate the
ultimate claim costs for claims incurred as of the balance sheet date and for
claims incurred but not yet reported. When estimating these liabilities, several
factors are considered, including the severity, duration and frequency of
claims, legal cost associated with claims, healthcare trends and projected
inflation.

Our methodology for determining our exposure has remained consistent throughout
the years presented. Management believes that the various assumptions developed,
and actuarial methods used to determine our casualty insurance reserves are
reasonable and provide meaningful data that management uses to make its best
estimate of our exposure to these risks. Changes in assumptions for such factors
as medical costs and legal actions, as well as changes in actual experience,
could cause our estimates to change in the near term which could result in an
increase or decrease in the related expense in future periods. A 10% change in
our casualty insurance liability at January 2, 2022 would have affected our
income before provision for income taxes by approximately $5.6 million in 2021.
We had accruals for casualty insurance reserves of $56.5 million and $54.6
million at January 2, 2022 and January 3, 2021, respectively.



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Income taxes

The U.S. Federal statutory income tax rate was 21% in each of 2021, 2020 and
2019. Our Federal income tax provision calculated based on the Federal statutory
rate was $131.4 million, $116.6 million and $101.4 million in 2021, 2020 and
2019, respectively.

We recognize deferred tax assets and liabilities based on the differences
between the financial statement carrying amounts and the tax basis of assets and
liabilities. We measure deferred taxes using current enacted tax rates that will
apply in the years in which we expect the temporary differences to be recovered
or paid. Judgment is required in determining the provision for income taxes,
related reserves and deferred taxes. These include establishing a valuation
allowance related to the ability to realize certain deferred tax assets, if
necessary. On an ongoing basis, management will assess whether it remains more
likely than not that the deferred tax assets will be realized. Our accounting
for deferred taxes represents our best estimate of future events. Except with
respect to certain foreign tax credits and interest deductibility in separately
filed states, our deferred tax assets assume that we will generate sufficient
taxable income in specific tax jurisdictions, based on our estimates and
assumptions. As of January 2, 2022 and January 3, 2021, we had total foreign tax
credits of $10.2 million and $6.6 million, respectively, each of which were
fully offset with a corresponding valuation allowance. We also had valuation
allowances related to interest deductibility in separately filed states of $1.2
million and $1.0 million as of January 2, 2022 and January 3, 2021,
respectively. We believe our remaining deferred tax assets will be realized.
Changes in our current estimates due to unanticipated events could have a
material impact on our financial condition and results of operations.

Fiscal 2021 Highlights

Global retail sales, excluding foreign currency impact (which includes total
retail sales at Company-owned and franchised stores worldwide) increased 8.9% as
compared to 2020. U.S. retail sales increased 4.3% and international retail
sales, excluding foreign currency impact, increased 13.9% as compared to 2020.
•
Same store sales increased 3.5% in our U.S. stores and increased 8.0% in our
international stores.
•
Our revenues increased 5.8%.
•
Our income from operations increased 7.5%.
•
Our net income increased 3.9%.
•
Our diluted earnings per share increased 9.3%.
•
The inclusion of the 53rd week in 2020 negatively impacted our results as
compared to the prior year.

During 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 launched our newest side item in the U.S., Domino's Oven-Baked
Dips in three unique flavors including Cheesy Marinara, Five Cheese and Baked
Apple to pair with our Domino's Bread Twists.

Same store sales in the U.S. continue to be positively affected by changes in
consumer ordering behavior observed since the onset of the COVID-19 pandemic,
but have been pressured in part in recent quarters due to labor shortages
affecting store hours and staffing levels in many of our markets, as well as a
waning in the level of economic stimulus activity in fiscal 2021 in the U.S. as
compared to the prior year. Our strong international same store sales
performance continued with 112 straight quarters of positive international same
store sales. We also continued to experience sustained increases in retail sales
during fiscal 2021 resulting from evolving consumer trends, as well as the
reopening and resumption of normal store hours and operating procedures at
certain of our international franchised stores that had been temporarily closed
or affected by changes in operating procedures and store hours for portions of
fiscal 2020 as a result of the COVID-19 pandemic. Our U.S. and international
same store sales results continue to be impacted by our fortressing strategy,
which includes increasing store concentration in certain markets where we
compete, as well as from aggressive competitive activity.

During 2021, we continued our global expansion with the opening of 1,204 net
stores. We had 205 net stores open in the U.S. comprised of 214 store openings
and 9 closures. We had 999 net stores open internationally comprised of 1,094
store openings and 95 closures.

We remained focused on improving the customer experience through our technology
initiatives, including through our GPS delivery tracking technology, which
allows customers to monitor the progress of their food, from the preparation
stages to the time it is in the oven to the time it arrives at their doors.
Additionally, we offer contactless carryout nationwide - via Domino's Carside
Delivery®, which customers can choose when placing a prepaid online order. Our
emphasis on technological innovation helped the Domino's system generate more
than half of global retail sales from digital channels in 2021. Overall, we
believe our global store growth, strong sales, emphasis on technology,
operations and marketing initiatives have combined to strengthen our brand.


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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 currency effect)

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. Global retail
sales growth in 2021 and 2020 reflect the impact of the 53rd week in 2020.

                                                     2021           2020    

2019

U.S. stores                                            +4.3%         +17.6% 

+6.9%

International stores (excluding foreign
currency impact)                                      +13.9%          +8.8% 

+9.0%

Total (excluding foreign currency impact)              +8.9%         +13.2%          +8.0%



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 for a given period 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. The 53rd week in fiscal 2020 had no impact on reported
same store sales growth amounts.

                                                            2021     2020    2019
U.S. Company-owned stores                                  (3.6)%   +11.0%   +2.8%
U.S. franchise stores                                       +3.9%   +11.5%   +3.2%
U.S. stores                                                 +3.5%   +11.5%   +3.2%

International stores (excluding currency effect) +8.0% +4.4%

 +1.9%



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-         U.S.          Total
                                        owned        Franchise        U.S.        International
                                        Stores        Stores         Stores           Stores           Total
Store count at December 30, 2018            390           5,486        5,876               10,038       15,914
Openings                                     12             253          265                  939        1,204
Closings                                     (1 )           (14 )        (15 )                (83 )        (98 )
Transfers                                   (59 )            59            -                    -            -
Store count at December 29, 2019            342           5,784        6,126               10,894       17,020
Openings                                     22             218          240                  718          958
Closings                                     (1 )           (10 )        (11 )               (323 )       (334 )
Store count at January 3, 2021              363           5,992        6,355               11,289       17,644
Openings                                     13             201          214                1,094        1,308
Closings                                     (1 )            (8 )         (9 )                (95 )       (104 )
Store count at January 2, 2022              375           6,185        6,560               12,288       18,848




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Income Statement Data
(tabular amounts in millions, except percentages)

                                       2021                       2020                       2019
U.S. Company-owned stores      $   479.0                  $   485.6                  $   453.6
U.S. franchise royalties and
fees                               539.9                      503.2                      428.5
Supply chain                     2,561.0                    2,416.7                    2,104.9
International franchise
royalties and fees                 298.0                      249.8                      241.0
U.S. franchise advertising         479.5                      462.2                      390.8
Total revenues                   4,357.4       100.0 %      4,117.4       100.0 %      3,618.8       100.0 %
U.S. Company-owned stores          374.1                      379.6                      346.2
Supply chain                     2,295.0                    2,143.3                    1,870.1
Total cost of sales              2,669.1        61.3 %      2,522.9        61.3 %      2,216.3        61.2 %
Operating margin                 1,688.2        38.7 %      1,594.5        38.7 %      1,402.5        38.8 %
General and administrative         428.3         9.8 %        406.6         9.9 %        382.3        10.6 %
U.S. franchise advertising         479.5        11.0 %        462.2        11.2 %        390.8        10.8 %
Income from operations             780.4        17.9 %        725.6        17.6 %        629.4        17.4 %
Other income                        36.8         0.8 %            -         0.0 %            -         0.0 %
Interest expense, net             (191.5 )      (4.3 )%      (170.5 )      (4.1 )%      (146.8 )      (4.1 )%
Income before provision for
income taxes                       625.7        14.4 %        555.1        13.5 %        482.6        13.3 %
Provision for income taxes         115.2         2.7 %         63.8         1.6 %         81.9         2.3 %
Net income                     $   510.5        11.7 %    $   491.3        11.9 %    $   400.7        11.1 %



2021 compared to 2020
(tabular amounts in millions, except percentages)

Revenues

                                                     2021                      2020
U.S. Company-owned stores                    $   479.0        11.0 %   $   485.6        11.8 %
U.S. franchise royalties and fees                539.9        12.4 %       503.2        12.2 %
Supply Chain                                   2,561.0        58.8 %     2,416.7        58.7 %
International franchise royalties and fees       298.0         6.8 %       249.8         6.1 %
U.S. franchise advertising                       479.5        11.0 %       462.2        11.2 %
Total revenues                               $ 4,357.4       100.0 %   $ 4,117.4       100.0 %



Revenues primarily consist of retail sales from our Company-owned stores,
royalties and fees and advertising contributions 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
as a result of fluctuations in commodity prices as well as the mix of products
we sell.

Consolidated revenues increased $240.0 million, or 5.8%, in 2021 due primarily
to higher global retail sales, which resulted in higher supply chain revenues,
international franchise royalties and fees, U.S. franchise royalties and fees,
and U.S. franchise advertising revenues. These increases were partially offset
by the inclusion of the 53rd week in 2020 which positively impacted revenues in
2020 by an estimated $88.4 million. These changes in revenues are described in
more detail below.


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U.S. Stores Revenues

                                            2021                      2020
U.S. Company-owned stores           $   479.0        32.0 %   $   485.6        33.4 %
U.S. franchise royalties and fees       539.9        36.0 %       503.2        34.7 %
U.S. franchise advertising              479.5        32.0 %       462.2        31.9 %
Total U.S. stores revenues          $ 1,498.4       100.0 %   $ 1,451.0       100.0 %



U.S. Company-owned Stores

Revenues from U.S. Company-owned store operations decreased $6.6 million, or
1.4%, in 2021 due primarily to an estimated $10.6 million impact of the 53rd
week in fiscal 2020, as well as a decrease in U.S. Company-owned same store
sales. U.S. Company-owned same store sales declined 3.6% in 2021 and increased
11.0% in 2020. These decreases in 2021 were partially offset by an increase in
the average number of U.S. Company-owned stores open during the period resulting
from net store growth.

we Royalties and Franchise Fees

Revenues from U.S. franchise royalties and fees increased $36.7 million, or
7.3%, in 2021, due primarily to higher same store sales and an increase in the
average number of U.S. franchised stores open during the period resulting from
net store growth. Revenues were also benefited by approximately $3.0 million
related to funding we provided to our franchisees for an effort to donate 10
million slices of pizza to people and organizations at the frontlines of the
COVID-19 pandemic in the franchisees' local communities during 2020 which did
not recur in 2021. U.S. franchise same store sales increased 3.9% in 2021 and
increased 11.5% in 2020. U.S. franchise royalties and fees further benefited
from an increase in revenues from fees paid by franchisees for the use of our
technology platforms. These increases were partially offset by an estimated
$11.4 million impact of the 53rd week in fiscal 2020.

Franchise advertising in the United States

Revenues from U.S. franchise advertising increased $17.3 million, or 3.7%, in
2021 due primarily to higher same store sales and an increase in the average
number of U.S. franchised stores open during the year resulting from net store
growth. These increases were partially offset by an estimated $10.4 million
impact of the 53rd week in fiscal 2020 as well as approximately $9.3 million in
advertising incentives related to the Domino's Surprise FreesTM promotion in
2021.

Supply Chain

Supply chain revenues increased $144.3 million or 6.0% in 2021 due primarily to
higher volumes resulting from retail sales growth. Our market basket pricing to
stores increased 3.3% during 2021, which resulted in an estimated $66.3 million
increase in supply chain revenues. These increases were partially offset by an
estimated $49.6 million impact of the 53rd week in fiscal 2020.

International Franchise Royalties and Fees

Revenues from international franchise operations increased $48.3 million, or
19.3%, in 2021 due primarily to higher retail sales resulting from same store
sales growth and an increase in the average number of international franchised
stores open during the period resulting from net store growth. The reopening and
resumption of normal store hours and operating procedures at certain of the
Company's international franchised stores that had been temporarily closed or
affected by changes in operating procedures and store hours for portions of 2020
as a result of the COVID-19 pandemic also contributed to the increase in
revenues. Excluding the impact of foreign currency exchange rates, international
same store sales increased 8.0% in 2021 and increased 4.4% in 2020. Changes in
foreign currency exchange rates positively impacted revenue from international
royalties and fees by approximately $4.9 million in 2021. These increases were
partially offset by an estimated $6.4 million impact of the 53rd week in fiscal
2020.


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Cost of sales / Operating margin

                                        2021                      2020
Consolidated revenues           $ 4,357.4       100.0 %   $ 4,117.4       100.0 %
Consolidated cost of sales        2,669.1        61.3 %     2,522.9        61.3 %
Consolidated operating margin   $ 1,688.2        38.7 %   $ 1,594.5        38.7 %



Consolidated cost of sales consists primarily 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. We estimate that the 53rd week resulted in an increase of approximately
$50.6 million to consolidated cost of sales in fiscal 2020.

Consolidated operating margin (which we define as revenues less cost of sales)
increased $93.7 million, or 5.9%, in 2021 due primarily to higher global
franchise revenues and higher supply chain volumes. Franchise revenues do not
have a cost of sales component, so changes in these revenues have a
disproportionate effect on the operating margin. These increases were partially
offset by an estimated $37.8 million impact on consolidated operating margin
related to the 53rd week in fiscal 2020.

As a percentage of revenues, the consolidated operating margin was flat at 38.7%
in 2021 and 2020. Company-owned store operating margin increased 0.1 percentage
points in 2021 and supply chain operating margin decreased 0.9 percentage points
in 2021. These changes in operating margin are described in more detail below.

American societyOwn store operating margin

                                2021                    2020
Revenues                 $ 479.0       100.0 %   $ 485.6       100.0 %
Cost of sales              374.1        78.1 %     379.6        78.2 %
Store operating margin   $ 104.9        21.9 %   $ 106.0        21.8 %



U.S. Company-owned store operating margin (which does not include other
store-level costs such as royalties and advertising) decreased $1.1 million, or
1.0%, in 2021 due primarily to lower same store sales, as well an estimated $3.2
million impact of the 53rd week in 2020. Higher food and occupancy costs also
contributed to the decrease in U.S. Company-owned store operating margin. These
decreases were partially offset by lower labor costs. As a percentage of store
revenues, the store operating margin increased 0.1 percentage points in 2021.
These changes in operating margin as a percentage of revenues are discussed in
more detail below.

Labor costs decreased 1.9 percentage points to 29.0% in 2021 due primarily to
additional bonus pay incurred during 2020 for frontline team members, as well as
lower team member headcount in 2021. These decreases in labor costs were
partially offset by continued investments in frontline team member wage rates in
our U.S. Company-owned stores in 2021.
•
Food costs increased 1.1 percentage points to 28.1% in 2021, due to higher food
basket prices.
•
Occupancy costs, which include rent, telephone, utilities and depreciation,
increased 0.6 percentage points to 8.0% in 2021 due primarily to lower sales
leverage.

Supply chain operating margin

                                        2021                      2020
Revenues                        $ 2,561.0       100.0 %   $ 2,416.7       100.0 %
Cost of sales                     2,295.0        89.6 %     2,143.3       

88.7% Supply chain operating margin $266.0 10.4% $273.3 11.3%



Supply chain operating margin decreased $7.4 million, or 2.7%, in 2021 due
primarily to an estimated $6.4 million impact of the 53rd week in 2020, as well
as higher labor and delivery costs. These decreases were partially offset by
higher volumes. As a percentage of supply chain revenues, the supply chain
operating margin decreased 0.9 percentage points in 2021, due primarily to
higher labor and delivery costs.


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General and administrative expenses

General and administrative expenses increased $21.7 million, or 5.3%, in 2021
driven primarily by higher labor costs, including non-cash equity-based
compensation expense. Higher travel and event costs also contributed to the
increase in general and administrative expenses. These increases were partially
offset by lower professional fees and an estimated $5.6 million impact of the
53rd week in 2020.

we Franchise ad spend

U.S. franchise advertising expenses increased $17.3 million, or 3.7%, in 2021
due to higher U.S. franchise advertising revenues as discussed above. This
increase was partially offset by an estimated $10.4 million impact of the 53rd
week in 2020. 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 to promote the Domino's brand and these
revenues cannot be used for general corporate purposes.

Other income

Other income was $36.8 million in 2021, representing the unrealized gains
recorded on the Company's investment in DPC Dash resulting from the observable
changes in price from the valuation of the Company's additional $40.0 million
investment made in the first quarter of 2021 and the additional $9.1 million
investment made in the fourth quarter of 2021.

Interest expense, net

Interest expense, net, increased $20.9 million, or 12.3%, in 2021 driven
primarily by higher average borrowings resulting from the 2021 Recapitalization.
In connection with the 2021 Recapitalization, we recorded $2.3 million of
incremental interest expense in the second quarter of 2021, primarily
representing the expense for $2.0 million of the remaining unamortized debt
issuance costs associated with the 2017 Five-Year Fixed Rate Notes and 2017
Floating Rate Notes (each defined in the "2017 Recapitalization" section,
below), and $0.3 million of additional interest expense incurred on the 2017
Five-Year Fixed Rate Notes and 2017 Floating Rate Notes subsequent to the
closing of the 2021 Recapitalization but prior to the repayment of the 2017
Five-Year Fixed Rate Notes and 2017 Floating Rate Notes, resulting in the
payment of interest on both the 2017 Five-Year Fixed Rate Notes and 2017
Floating Rate Notes and the 2021 Notes (as defined in the "2021
Recapitalization" section, below) for a short period of time. This increase was
partially offset by an estimated $2.6 million impact of the 53rd week in 2020.

Our weighted average borrowing rate decreased to 3.8% in 2021, from 3.9% in 2020, due to lower interest rates on outstanding debt in 2021 compared to the same periods in 2020.

Provision for income taxes

Provision for income taxes increased $51.4 million, or 80.5%, in 2021 and the
effective tax rate increased to 18.4% in 2021 as compared to 11.5% in 2020 due
primarily to lower excess tax benefits on equity-based compensation, which are
recorded as a reduction to the income tax provision. Excess tax benefits from
equity-based compensation were $18.9 million in 2021 and were $60.4 million in
2020. The decrease in excess tax benefits resulted from a significant decrease
in stock options exercised in 2021 as compared to 2020. Higher pre-tax income
also resulted in an increase in the provision for income taxes. These increases
were partially offset by an estimated $4.0 million related to the 53rd week of
2020.


                                       39
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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.

                             2021      2020
U.S. Stores               $ 454.9     $ 435.1
Supply Chain                229.9       238.4
International Franchise     241.9       197.6
Other                       (42.9 )     (53.3 )



U.S. Stores

U.S. stores Segment Income increased $19.8 million, or 4.5%, in 2021, primarily
as a result of the increase in revenues from U.S. franchise royalties and fees
of $36.7 million discussed above. U.S. franchise revenues do not have a cost of
sales component, 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. The increase in U.S. stores Segment
Income was partially offset by increased investments in technological
initiatives as well as the $1.1 million decrease in U.S. Company-owned store
operating margin discussed above.

Supply chain

Supply chain segment revenue decline $8.5 millioni.e. 3.6%, in 2021 mainly due to the $7.4 million decrease in the supply chain operating margin described above.

International Franchise

International franchise Segment Income increased $44.3 million, or 22.4%, in
2021 due primarily to the $48.3 million increase in international franchise
revenues discussed above. International franchise revenues do not have a cost of
sales component, so changes in these revenues have a disproportionate effect on
international franchise Segment Income. The increase in international franchise
Segment Income driven by higher revenues was partially offset by increased
investments in technological initiatives.

Other

Other Segment Income increased $10.3 million, or 19.4%, in 2021 due primarily to
higher corporate administrative costs allocated to our segments as compared to
2020. The increase in allocated costs in 2021 was due primarily to higher
investments in technological initiatives to support technology for our U.S. and
international franchise stores. Lower professional fees also contributed to the
increase in other segment income. These increases were partially offset by
higher labor and travel costs.

New accounting statements

The impact of new accounting pronouncements adopted and the estimated impact of
new accounting pronouncements that we will adopt in future years is included in
Note 1 to the consolidated financial statements.


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Impact of COVID-19

From January 2, 2022almost all of our we stores were open, with stores rolling out contactless delivery and transportation solutions. Based on the information provided to us by our master franchisees, we estimate that at January 2, 2022there were fewer than 50 international stores temporarily closed.

During the COVID-19 pandemic, we made certain investments related to safety and
cleaning equipment, enhanced sick pay and compensation for frontline team
members and support for our franchisees and their communities. While we have
seen an increase in sales in certain markets during the COVID-19 pandemic,
including increased sales related to heightened reliance on delivery and
carryout businesses, future sales are not possible to estimate and it is unclear
whether and to what extent sales will return to more normalized levels if and
when consumer behavior and general economic and business activity return to
pre-pandemic levels. While it is not possible at this time to estimate the full
continued impact that COVID-19 could have on our business, the continued spread
of COVID-19 and the measures taken by the governments of countries affected
could disrupt our continuing operations and supply chain and, as a result, could
adversely impact our business, financial condition or results of operations.

Cash 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 January 2,
2022, we had working capital of $82.1 million, excluding restricted cash and
cash equivalents of $180.6 million, advertising fund assets, restricted, of
$180.9 million and advertising fund liabilities of $173.7 million. Working
capital includes total unrestricted cash and cash equivalents of $148.2 million.

Our primary source of liquidity is cash flows from operations and availability
of borrowings under our variable funding notes. During 2021, we experienced
increases in both U.S. and international same store sales versus the comparable
periods in the prior year. Additionally, our U.S. and international businesses
grew store counts in 2021. These factors contributed to our continued ability to
generate positive operating cash flows. The Company has a variable funding note
facility which allows for advances of up to $200.0 million of 2021 Variable
Funding Notes (defined in the "2021 Recapitalization" section, below). The
letters of credit are primarily related to our casualty insurance programs and
certain supply chain center leases. As of January 2, 2022, we had no outstanding
borrowings and $155.8 million of available borrowing capacity under our 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 2021 Variable Funding Notes to, among other
things, fund working capital requirements, invest in our core business and other
strategic opportunities, pay dividends and repurchase and retire 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 in
Item 1A. Risk Factors. There can be no assurance that our business will generate
sufficient cash flows from operations or that future borrowings will be
available under the 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 the
2021, 2019, 2018, 2017 and 2015 Notes and to service, extend or refinance the
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.


                                       41
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Restricted cash

As of January 2, 2022, we had $133.2 million of restricted cash and cash
equivalents held for future principal and interest payments and other working
capital requirements of our asset-backed securitization structure, $47.2 million
of restricted cash equivalents 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 $180.6 million of restricted cash and cash equivalents. As
of January 2, 2022, we also held $161.7 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

2021 Recapitalization

On April 16, 2021, we completed the 2021 Recapitalization in which certain of
our subsidiaries issued notes pursuant to an asset-backed securitization. The
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 7.5-Year
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 (the "2021 Ten-Year Notes",
and, collectively with the 2021 7.5-Year Notes, the "2021 Notes"). Gross
proceeds from the issuance of the 2021 Notes were $1.85 billion.

Concurrently, certain of our 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"). In
connection with the issuance of the 2021 Variable Funding Notes, our 2019
variable funding notes were canceled.

The proceeds from the 2021 Recapitalization was used to repay the remaining
$291.0 million in outstanding principal under our 2017 Floating Rate Notes and
$582.0 million in outstanding principal under our 2017 Five-Year Fixed Rate
Notes, prefund a portion of the interest payable on the 2021 Notes, pay
transaction fees and expenses and repurchase and retire shares of our common
stock. Additional information related to the 2021 Recapitalization is included
in Note 3 to our consolidated financial statements.

Recapitalization 2019

On November 19, 2019, we completed the 2019 Recapitalization in which certain of
our subsidiaries issued $675.0 million Series 2019-1 3.668% Fixed Rate Senior
Secured Notes, Class A-2 with an anticipated term of 10 years (the "2019 Notes")
pursuant to an asset-backed securitization. Concurrently, we also issued the
2019 variable funding notes. Gross proceeds from the issuance of the 2019 Notes
was $675.0 million. Additional information related to the 2019 Recapitalization
is included in Note 3 to our consolidated financial statements.

The proceeds from the 2019 Recapitalization were used to prefund a portion of
the principal and interest payable on the 2019 Notes, pay transaction fees and
expenses and repurchase and retire shares of our common stock. In connection
with the 2019 Recapitalization, we capitalized $8.1 million of debt issuance
costs, which are being amortized into interest expense over the expected term of
the 2019 Notes.

2018 Recapitalization

On April 24, 2018, we completed the 2018 Recapitalization in which certain of
our subsidiaries issued notes pursuant to an asset-backed securitization. The
notes consist of $425.0 million Series 2018-1 4.116% Fixed Rate Senior Secured
Notes, Class A-2-I with an anticipated term of 7.5 years (the "2018 7.5-Year
Notes"), and $400.0 million Series 2018-1 4.328% Fixed Rate Senior Secured
Notes, Class A-2-II with an anticipated term of 9.25 years (the "2018 9.25-Year
Notes" and, collectively with the 2018 7.5-Year Notes, the "2018 Notes") in an
offering exempt from registration under the Securities Act of 1933, as amended.
Gross proceeds from the issuance of the 2018 Notes were $825.0 million.
Additional information related to the 2018 Recapitalization is included in Note
3 to our consolidated financial statements.


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Recapitalization 2017

On July 24, 2017, we completed the 2017 Recapitalization in which certain of our
subsidiaries issued notes pursuant to an asset-backed securitization. The notes
consisted of $300.0 million Series 2017-1 Floating Rate Senior Secured Notes,
Class A-2-I with an anticipated term of five years (the "2017 Floating Rate
Notes"), $600.0 million Series 2017-1 3.082% Fixed Rate Senior Secured Notes,
Class A-2-II with an anticipated term of five years (the "2017 Five-Year Fixed
Rate Notes"), and $1.0 billion Series 2017-1 4.118% Fixed Rate Senior Secured
Notes, Class A-2-III with an anticipated term of 10 years (the "2017 Ten-Year
Fixed Rate Notes" and, collectively with the 2017 Floating Rate Notes and the
2017 Five-Year Fixed Rate Notes, the "2017 Notes"). The interest rate on the
2017 Floating Rate Notes was payable at a rate equal to LIBOR plus 125 basis
points. Gross proceeds from the issuance of the 2017 Notes were $1.9 billion.
The 2017 Floating Rate Notes and the 2017 Five-Year Fixed Rate Notes were repaid
in connection with the 2021 Recapitalization. Additional information related to
the 2017 Recapitalization is included in Note 3 to our consolidated financial
statements.

2015 Recapitalization

On October 21, 2015, we completed the 2015 Recapitalization in which certain of
our subsidiaries issued notes pursuant to an asset-backed securitization. The
notes consisted of $500.0 million of Series 2015-1 3.484% Fixed Rate Senior
Secured Notes, Class A-2-I (the "2015 Five-Year Notes"), $800.0 million Series
2015-1 4.474% Fixed Rate Senior Secured Notes, Class A-2-II (the "2015 Ten-Year
Notes" and collectively with the 2015 Five-Year Notes, the "2015 Notes"). Gross
proceeds from the issuance of the 2015 Notes were $1.3 billion. The 2015
Five-Year Notes were repaid in connection with the 2018 Recapitalization.
Additional information related to the 2015 Recapitalization is included in Note
3 to our consolidated financial statements.

Notes 2021, 2019, 2018, 2017 and 2015

The 2021 Tickets, 2019 Tickets, 2018 Tickets, 2017 Tickets and 2015 Tickets are collectively referred to as the “Tickets”.

The Notes have original scheduled principal payments of $51.5 million in each of
2022, 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. However, 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, as defined, to adjusted
EBITDA, as defined, 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
beginning in the first quarter of 2021. Accordingly, all principal amounts of
the then 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 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.

Leases

We lease certain retail store and supply chain center locations, supply chain
vehicles, various equipment and our World Resource Center under leases with
expiration dates through 2041. Refer to Note 5 to the consolidated financial
statements for additional information regarding our leases, including future
minimum rental commitments.


                                       43
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Capital expenditure

In the past three years, we have spent approximately $268.5 million on capital
expenditures. In 2021, we spent $94.2 million on capital expenditures which
primarily related to investments in our technology initiatives, including our
proprietary internally developed point-of-sale system (Domino's PULSE), our
internal enterprise systems and our digital ordering platform, our supply chain
centers, new Company-owned stores and asset upgrades for our existing
Company-owned stores and other assets. We did not have any material commitments
for capital expenditures as of January 2, 2022.

Investments

During the second quarter of 2020, we acquired a non-controlling interest in DPC
Dash (formerly Dash Brands Ltd.), a privately-held company limited by shares
incorporated with limited liability under the laws of the British Virgin
Islands, for $40.0 million. Through its subsidiaries, DPC Dash serves as the
Company's master franchisee in China that owns and operates Domino's Pizza
stores in that market. Our investment in DPC Dash's 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, we invested an additional $40.0 million in DPC
Dash based on DPC Dash's achievement of certain pre-established performance
conditions and 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, resulting in a net carrying
amount of $82.5 million as of the end of the first quarter of 2021. We did not
record any adjustments to the carrying amount of $82.5 million in the second or
third quarter of 2021. In the fourth quarter of 2021, we invested an additional
$9.1 million in DPC Dash and recorded a positive adjustment of $34.3 million to
the carrying amount of $82.5 million resulting from the observable change in
price from the valuation of the additional investment.

Share buyback 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. We used cash of $1.32 billion in
2021, $304.6 million in 2020 and $699.0 million in 2019 for share repurchases.

On October 4, 2019, our Board of Directors authorized a share repurchase program
to repurchase up to $1.0 billion of the Company's common stock. On February 24,
2021, our Board of Directors authorized a new share repurchase program to
repurchase up to $1.0 billion of the Company's common stock, which was fully
utilized in connection with the ASR Agreement, described below. On April 30,
2021, we entered into an accelerated share repurchase agreement with a
counterparty (the "ASR Agreement"). Pursuant to the terms of the ASR Agreement,
on May 3, 2021, we 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 our common stock. Final settlement of the ASR Agreement occurred on
July 21, 2021. In connection with the ASR Agreement, we received and retired a
total of 2,250,786 shares of our common stock at an average price of $444.29,
including the 2,012,596 shares of our common stock received and retired during
the second quarter of 2021. On July 20, 2021, our Board of Directors authorized
a new share repurchase program to repurchase up to $1.0 billion of our common
stock. This repurchase program replaced our previously approved $1.0 billion
share repurchase program, which was fully utilized in connection with the ASR
Agreement.

We have had $704.1 million remaining under this authorization to buy back shares at
January 2, 2022. Subsequent to the end of fiscal 2021, we repurchased and withdrew an additional 100,810 common shares for $47.7 million.

Dividends

We declared dividends of $139.6 million (or $3.76 per share) in 2021, $122.2
million (or $3.12 per share) in 2020 and $105.6 million (or $2.60 per share) in
2019. We paid dividends of $139.4 million, $121.9 million and $105.7 million in
2021, 2020 and 2019, respectively.

At February 24, 2022the Company’s Board of Directors declared a quarterly dividend of $1.10 per common share payable on March 30, 2022 to shareholders of record at the close of business on March 15, 2022.

                                       44
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Sources and uses of species

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

                                                                   Fiscal Year Ended
(In millions)                                            January 2, 2022       January 3, 2021
Cash flows provided by (used in)
Net cash provided by operating activities               $           654.2     $           592.8
Net cash used in investing activities                              (142.7 )              (128.9 )
Net cash used in financing activities                              (522.8 )              (446.4 )
Effect of exchange rate changes on cash                              (0.3 )                 0.8
Change in cash and cash equivalents, restricted cash
and cash equivalents                                    $           (11.7 )   $            18.2



Operating Activities

Cash provided by operating activities increased $61.4 million in 2021 primarily
due to the positive impact of changes in operating assets and liabilities of
$63.9 million. The positive impact of changes in operating assets and
liabilities related to the timing of collections on accounts receivable,
payments on accounts payable and accrued liabilities and income tax payments in
2021 as compared to 2020. The increase in cash provided by operating activities
was also due to a $16.4 million positive impact of changes in advertising fund
assets and liabilities, restricted, in 2021 as compared to 2020 due to the
receipt of advertising contributions outpacing payments for advertising
activities. Additionally, while net income increased $19.2 million, this was
comprised of a $38.2 million increase in non-cash transactions, resulting in an
overall decrease to cash provided by operating activities in 2021 as compared to
2020 of $18.9 million.

We are focused on continued improvement in our net income and operating cash flow and management expects to continue to generate positive cash flow from operations for the foreseeable future.

Investing activities

Cash used in investing activities was $142.7 million in 2021 which consisted
primarily of capital expenditures of $94.2 million (driven primarily by
investments in technological initiatives, supply chain centers and Company-owned
stores) and our investments in DPC Dash of $49.1 million.

Cash used in investing activities was $128.9 million in 2020, which consisted
primarily of capital expenditures of $88.8 million (driven primarily by
investments in supply chain centers, technological initiatives and Company-owned
stores) and our investment in DPC Dash of $40.0 million.

Fundraising activities

Cash used in financing activities was $522.8 million in 2021. We completed the
2021 Recapitalization and issued $1.85 billion under the 2021 Notes. We made
$910.2 million of payments on our long-term debt (of which $291.0 million
related to the repayment of outstanding principal under our 2017 Floating Rate
Notes and $582.0 million related the repayment of outstanding principal under
our 2017 Five-Year Fixed Rate Notes in connection with the 2021
Recapitalization). We also repurchased and retired $1.32 billion in shares of
our common stock under our Board of Directors-approved share repurchase program
(including $1.0 billion under the ASR Agreement). We also made dividend payments
to our shareholders of $139.4 million, paid $14.9 million in financing cost
associated with our 2021 Recapitalization and made tax payments for restricted
stock upon vesting of $6.8 million. These uses of cash were partially offset by
proceeds from the exercise of stock options of $19.7 million.

Cash used in financing activities was $446.4 million in 2020. We borrowed $158.0
million under our 2019 variable funding note facility and repaid $202.1 million
of long-term debt (of which $158.0 million related to the repayment of
borrowings under our 2019 variable funding notes). We also repurchased $304.6
million in common stock under our Board of Directors-approved share repurchase
program, made dividend payments to our shareholders of $121.9 million and made
tax payments for restricted stock upon vesting of $6.8 million. These uses of
cash were partially offset by proceeds from the exercise of stock options of
$31.0 million.


                                       45
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Impact of inflation

Given the inflation rates in fiscal 2021, there have been and may continue to be
increases in food costs and labor costs which have and could further impact our
profitability and that of our franchisees and which could impact the opening of
new U.S. and international franchised stores and adversely affect our operating
results. Factors such as inflation, increased food costs, increased labor and
employee health and benefit costs, increased rent costs and increased energy
costs may adversely affect our operating costs and profitability and those of
our franchisees and could result in menu price increases. The impact of
inflation is described with respect to our market basket pricing to stores and
our labor cost, in the discussion of supply chain revenues and operating margin,
above. Severe increases in inflation could affect the global and U.S. economies
and could have an adverse impact on our business, financial condition and
results of operations. Further discussion on the impact of commodities and other
cost pressures is included above, as well as in Item 7A. Quantitative and
Qualitative Disclosures About Market Risk.


                                       46
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SAFETY STATEMENT UNDER THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995

This Form 10-K includes 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.

These forward-looking statements generally can be identified by the use of words
such as "anticipate," "believe," "could," "should," "estimate," "expect,"
"intend," "may," "will," "plan," "predict," "project," "seek," "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, the expected demand for future
pizza delivery, our expectation that we will meet the terms of our agreement
with our third-party supplier of pizza cheese, our belief that alternative
third-party suppliers are available for our key ingredients in the event we are
required to replace any of our supply partners, our intention to continue to
enhance and grow online ordering, digital marketing and technological
capabilities, our expectation that there will be no material environmental
compliance-related capital expenditures, our plans to expand U.S. and
international operations in many of the markets where we currently operate and
in selected new markets, our expectation that the contribution rate for
advertising fees payable to DNAF will remain in place for the foreseeable
future, and the availability of our borrowings under the 2021 Variable Funding
Notes for, among other things, funding working capital requirements, paying
capital expenditures and funding other general corporate purposes, including
payment of dividends.

Forward-looking statements relating to our anticipated profitability, estimates
in same store sales growth, the growth of our U.S. and international business,
ability to service our indebtedness, our future cash flows, our operating
performance, trends in our business and other descriptions of future events
reflect management'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 about us, including the risk factors
listed under Item 1A. Risk Factors, as well as other cautionary language in this
Form 10-K.

Actual results may differ materially from those expressed or implied by the forward-looking statements due to a variety of factors, including, but not limited to, the following:

our substantial increased indebtedness as a result of the 2021 Recapitalization,
2019 Recapitalization, 2018 Recapitalization, 2017 Recapitalization and 2015
Recapitalization 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;
•
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;

                                       47
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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;
•
our ability and that of our franchisees to open new restaurants and keep
existing restaurants in operation;
•
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 or regulation, 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;
•
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 taste, 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 Form 10-K might not occur. All forward-looking
statements speak only as of the date of this Form 10-K 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, 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 Form 10-K,
whether as a result of new information, future events or otherwise.

Readers are cautioned not to place undue reliance on the forward-looking
statements included in this Form 10-K 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.

                                       48

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