Domino's Equity Research Report

The University of Texas at Dallas

2016 Spring

Securities Analysis Competition

NYSE: DPZ Recommendation: Sell

Industry: QSR – Pizza Current Price: $138.62

Sector: Consumer Discretionary Target Price: $112.47

This report is published for education purposes

only by students competing in the Spring 2016

Security Analysis Competition

*Target share price for the next 6 months

Closing Price: 138.62$

52- Week High-Low: $ 139.42- $ 98.60

Shares Outstanding: 50.32M

EPS (LTM): 3.55$

Market Cap: $ 6.98B

LTM Dividend Yield: 1.10%

Short Interest: 7.45%

Beta: 0.80

EV/ EBITDA: 20.6 x

P/E: 39.1 x

Insitutional Holdings: 94.50%

Insider Holdings: 0.40%

Market Profile

Investment Highlights We initiate our coverage on Domino’s Pizza (DPZ) with a Sell

recommendation derived from a price target of $112.47, representing a

potential downside of 19%. Our recommendation is primarily driven by the

following:

It Started With the Turnaround. In 2010, Domino’s changed their

business model, revamping their recipes and increasing innovative

technology. Although not the first company to have online ordering,

Domino’s has adapted better and more quickly to consumers’ desire

for more easily accessible digital ordering. In addition, Domino’s

continues their innovation with the advent of the Domino’s Ultimate

Delivery Vehicle (DXP) and the Domino’s Robotic Unit (DRU).

The Fleeting Nature of Same Store Sales Growth. Domino’s posted

strong domestic same store sales (SSS) growth of 12% in 2015 versus

SSS growth of 7.5% in 2014. The firm had international SSS growth of

7.8% in 2015 versus 6.9% in 2014. However, SSS growth has been

historically volatile; facing this record-high SSS growth will be

difficult for the company and future expectations of growth.

High Debt Load on Their Shoulders. Since IPO, Domino’s has had a

large amount of debt. The company has refinanced three times in the

last ten years, increasing total debt to $2.24 billion. This is in addition

to their existing negative equity. Furthermore, Domino’s has low cash

flows and cash on hand, making it difficult for the company to pay

back debt without interrupting operations. There is a high probability

that they will have to refinance their debt, and at a higher interest rate.

Key Financials FY 2015 FY 2016E FY 2017E

Revenue: 2,217$ 2,419$ 2,661$

Op. Margin: 405 446 487

Net Margin: 193 207 235

EPS: 3.58 3.87 4.42

ROA: 36.3% 37.3% 37.3%

ROIC: 70.2% 81.2% 81.2%

Valuation Method Weight Price

DCF Valuation 50% 112.51$

P/E Valuation 50% 112.43$

Implied Valuation 112.47$

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Apr-15 May-15 Jun-15 Jul-15 Aug-15 Sep-15 Oct-15 Nov-15 Dec-15 Jan-16 Feb-16 Mar-16 Apr-16

Historical Share Price

NYSE:DPZ - Share Pricing ^SPX - Share Pricing Price Target

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Source: Bloomberg

Source: RestaurantNews

Source: Investor Presentation

Top Markets Store Count Potential Store Count % Saturation

U.K./ Ireland 881 1,200 73.4%

Australia/

New Zealand653 900 72.6%

S. Korea 415 500 83.0%

Japan 384 850 45.2%

Canada 384 650 59.1%

France 250 1,000 25.0%

Netherlands 170 300 56.7%

Spain 153 350 43.7%

Taiwan 130 150 86.7%

Developed Markets

Top Markets Store Count Potential Store Count % Saturation

India 950 1,800 52.8%

Mexico 610 700 87.1%

Turkey 457 700 65.3%

Saudi Arabia 154 250 61.6%

Malaysia 142 350 40.6%

Brazil 129 500 25.8%

Emerging Markets

Source: Bloomberg, Team Research

Business Description

Domino’s Pizza Inc. (DPZ) is the second largest pizza chain in the world,

trailing behind Pizza Hut, but is the leader in pizza deliveries. The company

was established in 1960 by brothers Tom and James Monaghan, and was sold

to Bain Capital in 1998. Subsequently, in 2007, the company went public and

Bain Capital sold their interest in 2010. Domino’s is currently headquartered

near Ann Arbor, Michigan in the Domino’s Farms Office Park. Domino’s

currently has over 12,500 locations in approximately 80 countries worldwide,

with the largest international market being in India. Domestically, Domino’s

biggest revenue driver is their supply chain which accounts for 62% of

consolidated revenues, or $1.38 billion. This business model has allowed them

to oversee the quality, type of equipment, and food they serve on a consistent

basis. The company plans on expanding their international reach by offering

items specialized to the region they are in. In 2012, Domino’s started

incorporating mobile technology into their ordering system by introducing

their app in the Amazon, Apple, and Google online stores.

Company Strategies

Supply Chain – Domino’s supply chain model, which accounts for

62% of consolidated revenues, enables the company to implement a

universal standardized product throughout all its stores, and create an

additional stream of revenue. Additionally, Domino’s incentivizes

franchisees to procure supplies from the company through a profit

sharing agreement of 50%.

Keeping it Simple – Domino’s focuses their efforts on products they

currently serve, rather than spending their resources on launching and

promoting new products. Within the past 3 years, they have only

introduced 2 new items. Domino’s encourages their franchisees to

emphasize on the basics of quality pizza and quick delivery.

Progress in Technology – Domino’s has progressively taken strides to

incorporate various forms of technology on their platforms, ranging

anywhere from apps to voice recognition software. Recently, they

launched AnyWare, a system where customers can order via text,

tweet, or voice on various platforms. Domino’s has capitalized on the

shift in consumer ordering preferences, with over 50% of orders made

digitally.

Renovation of Stores – Domino’s has introduced a new Pizza Theater

design where customers can watch their pizza being made from order

to completion. This goes in line with the marketing concept of

complete transparency. These renovations allow them to

contemporize their image and keep up with changing trends.

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Source: Proxy Statement




Source: Team Research

Management & Culture

Domino’s executive board consists of the Chairman of the Board of

Directors, CEO, CFO, presidents of U.S. operations, and international

operations followed by nine Executive Vice Presidents, and seven Directors.

The leadership team brings an extensive variety of experiences, which

allows them to lead the company in a positive direction.

Since CEO, J. Patrick Doyle, came in to leadership, shares in Domino’s have

considerably risen in value, as he pushed for rapid international expansion.

He was recognized as the

Number 1 Best CEO of 2011

by CNBC and his approval

ratings remain positive as

he transformed Domino’s from a pizza company to a technology company.

Russell J. Weiner, the Chief Marketing Officer and President of Domino’s

USA, came to Domino’s in 2008 from PepsiCo. Weiner saw a need in

Domino’s for a new marketing strategy when he arrived, and he came up with

an idea that Domino’s should use radical honesty to gain the trust of

consumers. Domino’s released a series of self-critical advertisements that used

this idea and they experienced improved results starting in the first quarter of

2010.

Industry Overview and Competitive Positioning

Threat of New Entrants (Moderate-High)

There is high domestic market saturation. In the previous three years, nearly

3,000 new pizza restaurants were created in the United States, bringing it to a

total of 74,812. There are few barriers to entry due to low capital requirements

and a low interest rate environment that provides easier access to funding.

Also, there is limited amounts of governmental regulations on local pizza

restaurants and small chains. The majority of regulations these restaurants

have to comply with are health and safety concerns, which are numerous but

low-cost.

However, there is still high pricing competition, as the trend in bigger chains

is to offer more discounts and deals. New entrants are forced to respond at

the cost of their revenues, which affects their return on investment and give

new entrants a cost disadvantage. There is a reliability on speedy distribution

channels and high quality ingredients, leading to increases in respect to the

cost-burden on small chain and independent stores. There is high brand

“Smart hustle and results-driven. Demanding and

customer-focused. Passionate and innovative. Fun

with a family feel.” - Domino’s Company Culture

Name Age Position

J. Patrick Doyle 52 President/CEO

Jeffrey D. Lawrence 42 CFO & EVP

Richard E. Allison, Jr 49 President

Scott R. Hinshaw 53 EVP

Russell J. Weiner 47 President

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Source: WSJ, Team Research


Source: Wired

awareness and brand loyalty. The pizza industry is primarily dominated by

established brands, such as Domino’s, Pizza Hut, Papa John’s, and Little

Caesars. These brands claim a large portion of customers due to the brand

recognition that consumers strongly recognize.

Bargaining Powers of Buyers (High)

There is high price sensitivity, especially in the aftermath of the recession.

Buyers want the best pizza for the cheapest price. Since there is low product

differentiation, buyers are willing to sacrifice quality for savings. With the

higher availability of digital ordering, buyers are able to easily assess which

restaurants offer better discounts.

Bargaining Powers of Suppliers (Low)

The switching costs to alternative suppliers is low, and there is a large number

of suppliers, thus putting pressure on them to be competitive in terms of

quality. Some buyers have contracts with fees for early termination, but these

fees are a small cost when compared to the purchased volume. Additionally,

many pizza chains have long-term relationships with suppliers, which brings

down costs for the buyers and also puts pressure on suppliers to keep this

consistent revenue stream. With a large labor supply and very few labor

unions in the pizza industry, the labor force does not have leverage against

their employers, resulting in relatively low labor costs that are reflected in

product prices.

Threat of Substitutes (High)

The pizza segment is a relatively small faction of the entire QSR sector which

results in readily available replacements for consumers. Many restaurants are

offering delivery options which cuts into the competitive edge of pizza

restaurants. There is also a growing trend towards fast-casual restaurants,

which is a disadvantage for most pizza chains, as they are quick-service

restaurants. There is a trend towards a healthier diet, negatively impacting the

pizza industry. In the pizza industry, there is low differentiation in products,

so consumers have a wide variety of choice.

Competitive Rivalry (High)

There is strong market competition between not only major brands, but also

between local chains. Smaller local and family-owned chains minimize the

profit share of the larger brands. In an attempt to grow customer loyalty, the

larger brands are launching loyalty programs to counteract the adverse effects

of the low switching cost. Pizza restaurants have traditionally low margins,

due to a high cost of sales and lower pricing in order to compete with other

restaurants. High concentration of pizza restaurants, up to 3.87 stores per

10,000 people, creates an even more competitive market where consumers

have many choices in their local areas.

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0

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1990 1995 2000 2005 2010 2015

Percentage of Obese Adults


7%

5%

6%

7%

8%

4%

3%

5%

8%

12%

2011

2012

2013

2014

2015

Same Store Sales Growth

International Domestic


93%

7%

Revenue by Geographic Segment

Domestic International

Technological Trends

The pizza industry in 2015 had a decrease in total sales by .05%, based off

PMQ 2016 Pizza Power Report, and an average same store sales decrease of

2.34% This negatively impacts Independent chains (with fewer than 10 stores),

which had total sales drop by 5.01% and average sales drop by 3.21%. The

pizza market as a whole has seen a decrease in independent chains market

share from 41% to 39% from 2014 to 2015.

The negative shift in the demand for independent chains is attributable to the

positive shift of consumer spending to digital platforms. Millennials are the

largest share of the consumers of pizza, and they prefer ordering online. These

trends towards digital ordering are lost on independent chains that are slow

to adapt to this electronic environment. This coupled with the value priced

menu has increased Domino’s same store sales by 12%. Approximately half

of Domino’s orders now come through one of its twelve digital platforms,

even by tweeting an emoji of pizza. Domino’s CEO Patrick Doyle told

investors that digital ordering leads to higher volumes and repeat customers.

Digital ordering is growing 300% faster than dine-in traffic, and mobile

ordering is now 23% of all food ordering.

Health Trends

Consumers are also trending towards what they perceive as healthy foods.

This perception is based on the idea that food labels and ingredient lists

should be eligible to the layman. With growing trends towards organic, non-

GMO, and gluten free foods, restaurants that do not follow these trends are

less likely to get repeat customers. The best example of this is Chipotle, which

has created a menu of non-GMO and humanely-raised meat. This allows

consumers to believe that they are eating healthy food, even though the

average calorie count for a burrito is over 900 calories. An example of this

within the industry is with Papa John’s revealing that their vegetables are

freshly cut in restaurants and meats have no fillers. They even go so far as to

disclose the material that the pizza box is made out of. Although the essence

of the product hasn’t changed, the transparent disclosure of ingredient puts

Papa John’s in a good light with the customer. A study by Janet Polvy and

Peter Herman published in Science Direct found that when people perceive

the food as healthier, they eat 35% more than the food they perceive as

unhealthy. Rising health concerns lie primarily within the U.S., which is

where a significant portion of the companies’ revenue is generated.

Source: Bloomberg


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Source: Bloomberg

Source: Bloomberg





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Strengths

Weaknesses

Threats

SWOT


Investment Summary

We initiate our report with a Sell recommendation on Domino’s Pizza with a

target price of $112.47. Our price target came from the use of a Discounted

Cash Flow Analysis and Relative Valuation. Our recommendation is based

upon Domino’s large amount of debt, changing consumer preferences

towards fast-casual, and high valuation multiples.

Adding Debt Through Refinancing – Since Domino’s went public in 2004,

they have had a large amount of debt on their balance sheet. Over time, this

debt has increased approximately 200% through three refinancing deals. This

debt is troublesome because of the lack of strong cash flows that Domino’s

generates. Only recently has the company had a positive net change in cash

over $20 million. Although the likelihood of refinancing remains high in the

future, if the deal were to not go through, Domino’s would be severely

negatively impacted, as it has the potential to decrease the company’s

earning’s power. Furthermore, the company has negative equity, and has had

a history of working with this retained deficit. Taking out additional debt,

while paying extremely high one-time special dividends during two of its

three recapitalization deals, seems to imply that Domino’s is taking needless

risks.

Fast-Casual Upwards Trend – The QSR industry has been growing slower in

the past several quarters because of changing consumer preferences. There

has been, and continues to be, a shift towards fast-casual restaurants. These

restaurants offer slightly higher quality food and no stigma attached to quick-

service, or “fast food.” This shift is based on how consumers perceive the fact

that a slight increase in price offers a better quality of food. Furthermore, these

restaurants offer an atmosphere that is generally not found in quick-service

restaurants, geared towards a more family-friendly environment.

Over-valued – In fiscal year 2015, Domino’s had its best record to date. Their

same-store sales growth for domestic companies reached a new high. Shortly

after the company released its earnings in Q4, the stock price shot up

approximately 30% in just a few days. This led to a higher P/E ratio of about

39x, when Domino’s usual P/E range is between 28x-32x, and their

competitors’ P/E’s are around 29x. In almost all other multiples, Domino’s is

trading at a significant premium relative to its competitors. Domino’s growth

factors seem to have been priced into the stock, but we do not see these factors

as being sustainable.

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Financial Analysis

The financial analysis table highlights Domino’s net income margin growth

and the EBITDA margin growth. The growth in net income margin stems

from continued Same Store Sales growth on both the domestic and

international fronts, as well as new store expansion. With these large net

income growths over the years, we expect that Domino’s will continue to hit

economies of scale and increase its EBITDA margin by lowering its average

costs. Improvements in SG&A margin is due to higher efficiency, as Domino’s

continues to digitalize their operations through their PULSE point of sale

system and online ordering access points.

We expect that the ROA and ROC will arrive at 37.3% and 89.2%, respectively,

next year. The firm has utilized its assets and capital more effectively over the

year, which, in turn, increased return for their shareholders. We expect these

to gradually improve with increased use of technology.

The low short term liquidity ratios indicates weakness in the company. A

majority of the cash is used to further growth operations, such as new store

creation and restructuring existing stores (Pizza Theater design). This

increases risk due to Domino’s high debt load and subsequent interest

payments. Without enough cash on hand, Domino’s will not be able to pay

back their debt when it all comes due. Thus, this long-term debt, while

financing current operations and reducing credit crunch risk, may negatively

impact future cash flows.

Financial Ratios FY11A FY12A FY13A FY14A FY15A FY16E FY17E FY18E

Profitability Ratios

Return on Assets % 34.5% 36.8% 39.1% 39.2% 36.3% 37.3% 37.3% 37.3%

Return on Capital % 67.2% 75.6% 83.2% 83.3% 70.2% 81.2% 81.2% 81.2%

Efficiency Ratios

Accounts Receivable Turnover 19.7x 18.5x 18.0x 17.8x 17.7x 18.3x 19.1x 18.9x

Accounts Payable Turnover 18.7x 16.0x 15.6x 16.5x 15.9x 17.2x 17.2x 17.2x

Margin Analysis

Gross Margin % 28.5% 29.9% 30.5% 29.8% 30.8% 30.8% 30.8% 30.8%

SG&A Margin % 12.8% 13.0% 13.0% 12.2% 12.5% 12.4% 12.5% 12.6%

EBITDA Margin % 17.1% 18.1% 18.6% 19.1% 19.4% 19.6% 19.5% 19.5%

Net Income Margin % 6.4% 6.7% 7.9% 8.2% 8.7% 18.4% 18.3% 18.5%

Short Term Liquidity

Current Ratio 1.7x 1.3x 1.4x 1.6x 1.6x 1.1x 1.1x 1.1x

Cash Ratio 0.8x 0.8x 0.8x 0.7x 0.8x 0.7x 0.7x 0.7x

Coverage Ratios

Total Debt/EBITDA 5.1x 5.2x 4.6x 3.9x 5.2x 3.0x 3.0x 3.0x

Net Debt/EBITDA 5.0x 5.0x 4.5x 3.9x 4.9x 2.9x 2.9x 2.9x

EBITDA / Interest Exp. 3.1x 3.0x 3.8x 4.4x 4.3x 4.4x 4.4x 4.4x

Leverage Ratios

Total Debt/Capital 600.9% 692.9% 624.0% 532.9% 508.6% 417.9% 417.9% 417.9%

Total Liabilities/Total Assets 351.7% 379.3% 345.6% 304.5% 325.1% 248.6% 248.6% 248.6%

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Perpetuity Growth Method

Terminal Value: 9,004,188

Terminal Growth Rate 2.5%

PV of Terminal Value 6,872,116

Present Value of FCFF: 1,254,319

Implied Enterprise Value 8,126,435

Less: Debt & Capital Leases (2,240,793)

Plus: Cash & Cash Equivalent 321,982

Less: Pension: -

Implied Equity Value 6,207,624

Dilued Share Outstanding 55,172

Implied Share Price 112.51$

Premium/(Discount) to Current -18.8%

One of the biggest risks is Domino’s high debt load, shown through the

historical Net Debt/EBITDA ratios. This multiple over 4x indicates concern for

a company. Our projections have this ratio decreasing to approximately 2.9x

due to an assumption that Domino’s would pay off a significant portion of

their debt in the near future.

Valuation

To value Domino’s, we primarily utilized two valuation methodologies. We

incorporated a Discounted Cash Flow Model, and a Company Comparable

Analysis in order to take advantage of both the intrinsic and relative valuation

methods. As a result, we reached our target share price subsequently.

DCF Model (50%) – Our valuation model projects FCF for the next 5 fiscal

years and assumes a terminal growth rate of 2.5%. As part of the quick-service

restaurant industry, Domino’s has revealed to be less cyclical and volatile

compared to the market. We used an effective tax rate of 37%. Additionally,

we project that Domino’s will grow in line with the expected U.S. GDP of

2.5%.

Weighted Average Cost of Capital (WACC) – For our calculation of WACC,

we used a risk-free rate of 2.2% as stated on the 20-year Treasury bond and a

5.2% market risk premium. The cost of equity is estimated using the CAPM

model using the rates from above. We obtained a beta of 0.8 because of the

less cyclical nature of the company as demonstrated through their historical

performance. Additionally, we based Domino’s cost of equity on their market

value, rather than their book value, as the company has negative common

equity on their balance sheet. To find the cost of debt, we used the BBB-

default spread and added it to the 20-year Treasury rate. By weighting debt

and equity by their market values, we calculated a WACC of 5.55%.

Relative Valuation (50%) – Our set of comparable companies consists of

Domino’s direct competitors in the QSR Pizza industry, as well as high-

growth companies in the overall QSR industry. We removed companies that

were incompatible with Domino’s business model. Our relative valuation

emphasized P/E multiples. We used the 75th percentile P/E for Domino’s due

to their outperformance against the industry average.

Comparable P/E 32.4 x

Diluted EPS (DPZ) 3.47$

Implied Price (DPZ) 112.43$

P/E Valuation

Multiple Turn Price

2016E EBITDA 13.0x 138.21

2017E EBITDA 11.8x 103.69

Comparable Valuation

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Source: Capital IQ


FR

OR2

MR2 MR1

OR1

Impact

Pro

bab

ility

Sensitivity Valuation Factors

Investment Risks

Financial Risk:

Higher Availability of Liquidity (FR) – Domino’s, as of January 3rd, 2016, had

$2.24 billion dollars’ worth of debt. Without a recapitalization, Domino’s

would be forced to pay off their large debt all at once. However, if credit

availability remains high, and the Federal Reserve does not raise interest rates,

Domino’s can continue to refinance their debt obligations with no significant

negative impact on operations.

Market Risks:

Bullish Global Economic Conditions (MR1) – If the global economy grows

quickly compared to the current sluggishness, people will have more

discretionary income. This could lead to an increase in income allocation

towards eating out, which, in turn, would increase traffic per store and

enhance the overall QSR industry performance.

Independent Chains Continue to Underperform (MR2) – Independent chains are

losing market share, and this market share is being absorbed by major chains.

This contributed to Domino’s stellar same store sales growth in the last year.

Operational Risks

Implementation of Technological Improvements (OR1) – If Domino’s recent

innovations in technology exceed expectations, it could improve operating

efficiency. It would enable them to take cost-cutting measures as human

capital would become less of a necessity.

Success from Pizza Theater Design (OR2) – Successful implementation of the

Pizza Theater Design could increase customer traffic in Domino’s stores,

leading to higher sales volume as well as increased same store sales growth.

Terminal FCF Growth Rate

11251.3% 1.5% 1.8% 2.0% 2.3% 2.5% 2.8% 3.0% 3.3% 3.5%

4.6% 124.47$ 136.96$ 151.91$ 170.10$ 192.72$ 221.64$ 259.88$ 312.82$ 390.98$

4.8% 111.05 121.42 133.65 148.27 166.08 188.22 216.52 253.95 305.77

5.1% 99.56 108.28 118.44 130.41 144.72 162.15 183.82 211.52 248.15

5.3% 89.63 97.05 105.59 115.52 127.24 141.25 158.31 179.52 206.64

5.6% 80.97 87.33 94.59 102.95 112.68 124.14 137.86 154.56 175.32

5.8% 73.35 78.85 85.08 92.19 100.37 109.89 121.12 134.54 150.89

6.1% 66.60 71.39 76.78 82.88 89.84 97.85 107.17 118.16 131.31

6.3% 60.58 64.79 69.48 74.76 80.73 87.54 95.38 104.51 115.27

6.6% 55.19 58.90 63.02 67.62 72.78 78.63 85.30 92.97 101.91

Dis

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nt

Rat

e

(WA

CC

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Appendices

Table of Contents

Appendix 1: Management & Governance ........................................................................................................................... 11

Appendix 2: Shares Outstanding Ownership ..................................................................................................................... 12

Appendix 3: 2016 Macro Outlook ......................................................................................................................................... 13

Appendix 4: Income Statement ............................................................................................................................................. 14

Appendix 5: Balance Sheet ..................................................................................................................................................... 15

Appendix 6: Statement of Cash Flows ................................................................................................................................. 16

Appendix 7: Debt Schedule ................................................................................................................................................... 17

Appendix 8: Balance Sheet and Cash Flow Statement Drivers ........................................................................................ 10

Appendix 9: Expense Assumptions ...................................................................................................................................... 19

Appendix 10: Revenue Assumptions ................................................................................................................................... 20

Appendix 11: PULSE Point of Sale System.......................................................................................................................... 21

Appendix 12: Domino’s and Competitors SWOT .............................................................................................................. 22

Appendix 13: WACC .............................................................................................................................................................. 23

Appendix 14: DCF ................................................................................................................................................................... 23

Appendix 15: Comparable Companies ................................................................................................................................ 24

Appendix 16: Comprehensive Ratio Analysis .................................................................................................................... 25

Appendix 17: Recent Litigation ............................................................................................................................................. 26

Appendix 18: Sensitivity Analyses ....................................................................................................................................... 27

Works Cited ............................................................................................................................................................................. 28

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Appendix 1: Management & Governance

Company Executives

Board of Directors

Name Age Position Compensation Role Start DateDavid A. Brandon 63 Chairman of the Board of Directors 03/1999

J. Patrick Doyle 52 President, Chief Executive Officer and Director $3,644,550.00 03/2010

Jeffrey D. Lawrence 42 Chief Financial Officer and Executive Vice President $733,283.00 08/2015

Eric B. Anderson 43 Executive Vice President of International Operations 01/2016

Richard E. Allison, Jr 49 President, International $1,302,950.00 10/2014

Troy A. Ellis 50 Executive Vice President, Supply Chain Services 06/2015

Stanley J. Gage 49 Executive Vice President, Team USA 08/2014

Scott R. Hinshaw 53 Executive Vice President, Franchise Operations and Development $806,981.00 01/2008

Lynn M. Liddle 59 Executive Vice President, Communications, Investor Relations and Legislative Affairs 11/2002

Kenneth B. Rollin 49 Executive Vice President, General Counsel 01/2008

James G. Stansik 60 Executive Vice President, Franchise Relations 01/2008

J. Kevin Vasconi 55 Executive Vice President and Chief Information Officer 03/2012

Russell J. Weiner 47 President, Domino’s USA $1,302,950.00 09/2008

Judith L. Werthauser 50 Executive Vice President, PeopleFirst 01/2016

C. Andrew Ballard 43 Director 07/2015

Andrew B. Balson 49 Director 03/2009

Diana F. Cantor 58 Director 10/2005

Richard L. Federico 61 Director 02/2011

James A. Goldman 57 Director 03/2010

Vernon “Bud” O. Hamilton 73 Director 05/2005

Gregory A. Trojan 56 Director 03/2010

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Appendix 2: Shares Outstanding Ownership

Ownership by shares outstanding held (top 15): Bloomberg

Ownership by country: Bloomberg

Board of Directors Bloomberg

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Appendix 3: 2016 Macro Outlook

In 2015, global economic activity remained weak, as the U.S. economy increased GDP at a muted 2.4% while global

economies only grew at 3.1%. In the beginning of 2016, many countries were affected by the uncertainty affecting

China’s poor financial services and housing economy. However, according to the IMF, global growth is forecasted

to increase after 2017 and beyond. The macro environment has been impacted by much uncertainty from both

domestic and global factors, which predictably leads to an uncertain outlook.

Fluctuating Energy and Commodity Prices Commodity prices declined sharply in the second half of 2015. Strong production of output from the members of

OPEC, Russia, and the United States have lowered the price of oil to under $30 per barrel in the last 3 months, and

the price is currently around $40. Energy spending by households that make less than $50,000 was 21% of earnings

in a study by Bank of America/Merrill Lynch in 2012. Households making more than $50,000 spent around 9% of

their earnings. Consumers making a lower income have a higher marginal propensity to consume and are more

likely to spend this extra income as oil prices remain low.

Strong Dollar and Interest Rates Foreign currency conversion continues to be a major problem for domestic companies with international exposure.

Economies in Asia and Europe are looking to expand monetary policy to stimulate demand, driving a higher

variance between the U.S. dollar and other currencies. Both the Central Bank of Japan and the European Central

Bank implemented negative interest rates. This provides more uncertainty over the next year, as Goldman Sachs

continues its bullish-dollar stance. Domestically, the Federal Reserve System raised the interest rate by 0.25% at the

end of 2015, and had predicted four equal increases over the course of 2016. However, due to the economic

uncertainty in the global environment, the Fed agreed to hold off on increasing the interest rate in the foreseeable

future.

14 | P a g e

Appendix 4: Income Statement

Inco

me

Stat

emen

t

(In th

ousa

nds,

exce

pt p

er sh

are a

mou

nts)

FY 06

AFY

07A

FY 08

AFY

09A

FY 10

AFY

11A

FY 12

AFY

13A

FY 14

AFY

15A

FY 16

EFY

17E

FY 18

EFY

19E

FY 20

E

Reve

nues

:

Dom

estic

Com

pany

-Ow

ned

Stor

es:

$

393,

406

$

394,

585

$

357,

703

$

335,

779

$

345,

636

$

336,

349

$

323,

652

$

337,

414

$

348,

497

$

396

,916

40

2,53

7$

418,

709

$

43

2,56

4$

450,

029

$

45

5,35

7$

Dom

estic

Fran

chise

:

1

57,7

41

158,

050

153

,858

15

7,78

0

1

73,3

45

187,

007

195

,000

21

2,36

9

2

30,1

92

272,

808

292,

223

31

3,63

7

335,

976

35

8,16

8

379,

971

Dom

estic

Supp

ly C

hain

:

7

62,7

82

783,

330

771

,106

76

3,73

3

8

75,5

17

927,

904

942

,219

1,00

9,85

1

-

-

-

-

-

-

-

Inte

rnat

iona

l Fra

nchi

se

-

-

-

-

-

-

-

-

15

2,62

1

1

63,6

43

192,

006

22

1,81

0

257,

176

29

8,38

9

349,

428

Inte

rnat

iona

l:

1

23,3

90

126,

905

142

,447

14

6,76

5

1

76,3

96

200,

933

217

,568

24

2,58

9

-

-

-

-

-

-

-

Supp

ly C

hain

:

-

-

-

-

-

-

-

-

1,26

2,52

3

1,3

83,1

61

1,53

2,16

8

1,

706,

480

1,89

7,40

5

2,

101,

892

2,30

7,72

8

Tota

l Rev

enue

:

1,4

37,3

19

1,

462,

870

1

,425

,114

1,40

4,05

7

1,5

70,8

94

1,

652,

193

1

,678

,439

1,80

2,22

3

1,9

93,8

33

2

,216

,528

2,41

8,93

4

2,6

60,6

36

2

,923

,122

3,2

08,4

77

3

,492

,484

Cost

of S

ales

:

Dom

estic

Com

pany

-Ow

ned

Stor

es:

312

,130

31

7,73

0

2

98,8

57

274,

474

278

,297

26

7,06

6

2

47,3

91

256,

596

267

,385

29

9,29

4 30

7,17

3

322,

445

32

7,05

9

340,

714

34

7,48

0

Dom

estic

Supp

ly C

hain

:

6

81,7

00

710,

894

699

,669

68

0,42

7

7

78,5

10

831,

665

843

,329

89

9,86

0

-

-

-

-

-

-

-

Inte

rnat

iona

l:

58,9

58

55,

392

63

,327

6

2,18

0

75,4

98

82,

946

86

,381

9

6,79

3

-

-

-

-

-

-

-

Supp

ly C

hain

:

-

-

-

-

-

-

-

-

1,13

1,68

2

1,2

34,1

03

1,36

5,57

7

1,

519,

230

1,68

6,35

9

1,

874,

407

2,05

5,65

7

Tota

l Cos

t of S

ales

:

1,0

52,7

88

1,

084,

016

1

,061

,853

1,01

7,08

1

1,1

32,3

05

1,

181,

677

1

,177

,101

1,25

3,24

9

1,3

99,0

67

1

,533

,397

1,67

2,75

0

1,8

41,6

75

2

,013

,418

2,2

15,1

21

2

,403

,137

Gene

ral a

nd A

dmin

istra

tive:

170

,334

18

4,94

4

1

68,2

31

197,

467

210

,887

21

1,37

1

2

19,0

07

235,

163

249

,405

27

7,69

2 30

0,65

7

331,

933

36

8,63

7

404,

494

44

0,96

5

Tota

l Ope

ratin

g Exp

ense

s:

1,2

23,1

22

1,

268,

960

1

,230

,084

1,21

4,54

8

1,3

43,1

92

1,

393,

048

1

,396

,108

1,48

8,41

2

1,6

48,4

72

1

,811

,089

1,9

73,4

08

2

,173

,608

2,3

82,0

55

2

,619

,615

2,8

44,1

02

Gros

s Pro

fit:

384

,531

37

8,85

4

3

63,2

61

386,

976

438

,589

47

0,51

6

5

01,3

38

548,

974

594

,766

68

3,13

1

7

46,1

84

818,

961

909

,704

99

3,35

7

1,0

89,3

47

Gros

s Mar

gin:

36.5

%34

.9%

34.2

%38

.0%

38.7

%39

.8%

42.6

%43

.8%

42.5

%44

.6%

44.6

%44

.5%

45.2

%44

.8%

45.3

%

Inco

me

From

Ope

ratio

ns:

214

,197

19

3,91

0

1

95,0

30

189,

509

227

,702

25

9,14

5

2

82,3

31

313,

811

345

,361

40

5,43

9

4

45,5

26

487,

028

541

,067

58

8,86

3

6

48,3

82

EBIT

Mar

gin

14.9

%13

.3%

13.7

%13

.5%

14.5

%15

.7%

16.8

%17

.4%

17.3

%18

.3%

18.4

%18

.3%

18.5

%18

.4%

18.6

%

Othe

r Exp

ense

s (In

com

e):

Inte

rest

Inco

me:

(1

,239

)

(5,3

17)

(2

,746

)

(6

83)

(

244)

(296

)

(30

4)

(1

60)

(

143)

(313

)(4

32)

(495

)

(6

14)

(542

)

(4

23)

Inte

rest

Expe

nse:

55

,011

13

0,37

4

1

14,9

06

110,

945

96

,810

9

1,63

5

1

01,4

48

88,

872

86

,881

99,5

37

117,

621

11

4,98

2

112,

886

10

1,55

7

86,3

90

Othe

r:

-

13,

294

-

(5

6,27

5)

(7,8

09)

-

-

-

-

-

-

-

-

-

-

Tota

l Oth

er Ex

pens

es:

53

,772

13

8,35

1

1

12,1

60

53,

987

88

,757

9

1,33

9

1

01,1

44

88,

712

86

,738

99,2

24

117,

188

114

,487

11

2,27

1

1

01,0

15

85

,967

Inco

me

(Los

s) B

efor

e Pr

ovisi

on fo

r Inc

ome

Taxe

s:

1

60,4

25

55,

559

82

,870

13

5,52

2

1

38,9

45

167,

806

181

,187

22

5,09

9

2

58,6

23

306,

215

328,

338

37

2,54

1

428,

795

48

7,84

8

562,

415

EBT M

argi

n

Prov

ision

for I

ncom

e Ta

xes:

54

,198

1

7,67

7

28,8

99

55,

778

51

,028

6

2,44

5

68,7

95

82,

114

96

,036

11

3,42

6 12

1,62

1

137,

994

15

8,83

1

180,

705

20

8,32

6

Net I

ncom

e (L

oss)

for t

he P

erio

d:

1

06,2

27

37,

882

53

,971

7

9,74

4

87,9

17

105,

361

112

,392

14

2,98

5

1

62,5

87

192,

789

206

,717

23

4,54

7

2

69,9

64

307,

143

354

,089

Effe

ctive

Tax R

ate:

33.8

%31

.8%

34.9

%41

.2%

36.7

%37

.2%

38.0

%36

.5%

37.1

%37

.0%

37.0

%37

.0%

37.0

%37

.0%

37.0

%

Basic

Earn

ings

/ (Lo

ss) P

er Sh

are

(EPS

): $

1.

68

$

0

.61

$

0.93

$

1.3

9 $

1.

50

$

1

.79

$

1.99

$

2.5

8 $

2.

96

3.58

$

3.87

4.42

5.12

5.86

6.81

Dilu

ted

Earn

ings

/ (Lo

ss) P

er Sh

are

(EPS

): $

1.

65

$

0

.59

$

0.93

$

1.3

8 $

1.

45

$

1

.71

1.91

$

$

2.48

$

2.8

6 3.

47$

3.

75

4.

28

4.

96

5.

68

6.

59

Wei

ghte

d Ba

sic Sh

ares

Out

stan

ding

:

63,1

39,0

73

62,

176,

568

57

,755

,519

5

7,40

9,44

8

58,4

67,7

69

58,

918,

038

56

,419

,645

5

5,34

5,55

4

54,9

18,4

71

53,8

28,6

09

53,4

67,9

11

53,1

07,2

12

52,7

46,5

14

52,3

85,8

16

52,0

25,1

17

Wei

ghte

d Di

lute

d Sh

ares

Out

stan

ding

:

64,5

41,0

79

63,

785,

124

58

,339

,535

5

7,82

7,69

7

60,8

15,8

98

61,

653,

519

58

,997

,476

5

7,72

0,99

8

56,9

31,2

26

55,5

32,9

55

55,1

72,2

57

54,8

11,5

58

54,4

50,8

60

54,0

90,1

62

53,7

29,4

63

Cash

Div

iden

ds P

er Sh

are:

$

0.48

$

-

$

-

$

-

$

-

$

-

$

3

.00

$

0.80

$

1.0

0 1.

24$

1.

52$

1.

52$

1.

52$

1.

52$

1.

52$

Hist

orica

l Pr

ojec

ted

15 | P a g e

Appendix 5: Balance Sheet

Bal

ance

Sh

ee

t

(In

th

ou

san

ds,

exc

ept

per

sh

are

am

ou

nts

)FY

06A

FY 0

7AFY

08A

FY 0

9AFY

10A

FY 1

1AFY

12A

FY 1

3AFY

14A

FY 1

5AFY

16E

FY 1

7EFY

18E

FY 1

9EFY

20E

ASS

ETS:

Cu

rre

nt

Ass

ets

:

Cas

h a

nd

Cas

h E

qu

ival

en

ts:

$

38,2

22

$

11,3

44

$

45,3

72

$

42,3

92

$

47,9

45

$

50,2

92

$

54,8

13

$

14,3

83

$

30,8

55

$

1

33,4

49

$

1

99,5

75

$

2

76,9

95

$

3

57,9

89

$

1

50,0

00

$

1

65,0

00

Re

stri

cte

d C

ash

-

80

,951

78

,871

91

,141

85

,530

92

,612

60

,015

125

,453

120

,954

180

,940

130

,000

130

,000

150

,000

150

,000

165

,000

Acc

ou

nts

Re

ceiv

able

, Ne

t o

f R

ese

rve

s:

65

,697

68

,446

69

,390

76

,273

80

,410

87

,200

94

,103

105

,779

118

,395

131

,582

132

,544

145

,788

164

,175

180

,202

200

,937

Inve

nto

rie

s

22

,803

24

,931

24

,342

25

,890

26

,998

30

,702

31

,061

30

,321

37

,944

3

6,86

1

4

0,06

8

4

4,11

4

4

8,22

8

5

3,05

9

5

7,56

3

No

tes

Re

ceiv

able

, Ne

t o

f R

ese

rve

s

99

4

44

0

63

0

1

,079

1

,509

94

5

1

,858

1

,823

-

-

-

-

-

-

-

Pre

pai

d E

xpe

nse

s an

d O

the

r:

13

,835

11

,098

6

,236

6

,155

9

,760

12

,232

11

,210

18

,376

32

,569

2

0,64

6

2

3,68

1

2

6,08

3

2

9,77

6

3

4,05

5

3

6,97

3

Ad

vert

isin

g Fu

nd

Ass

ets

, Re

stri

cte

d:

18,8

80

20,6

83

20,3

77

25,1

16

36,1

34

36,2

81

37,9

17

44,6

95

72,0

55

99,

159

99,

159

99,

159

99,

159

99,

159

99,

159

De

ferr

ed

Inco

me

Tax

es:

5,8

74

8,9

89

9,0

33

10,6

22

16,7

52

16,5

79

15,2

90

10,7

10

9,8

57

-

1

0,37

1

1

0,37

1

1

0,37

1

1

0,37

1

1

0,37

1

Ass

et

He

ld-F

or-

Sale

:-

-

-

-

-

-

-

-

5

,732

-

-

-

-

-

-

Tota

l Cu

rre

nt

Ass

ets

:

166

,305

226

,882

254

,251

278

,668

305

,038

326

,843

306

,267

351

,540

428

,361

602

,637

635

,398

732

,511

859

,697

676

,846

735

,003

Pro

pe

rty,

Pla

nt,

an

d E

qu

ipm

en

t:

Lan

d a

nd

Bu

ild

ings

:

21

,831

21

,899

22

,063

21

,825

23

,211

23

,714

24

,460

23

,423

25

,859

2

9,06

4

Leas

eh

old

an

d O

the

r Im

pro

vem

en

ts:

83,5

03

86,9

09

83,3

62

83,1

90

83,4

51

79,5

18

80,2

79

90,5

08

99,8

04

1

11,0

71

Equ

ipm

en

t:

162

,142

176

,667

167

,470

170

,202

175

,125

171

,726

168

,452

174

,667

178

,378

186

,405

Co

nst

ruct

ion

in P

rogr

ess

:

2

,132

2

,361

1

,881

4

,499

4

,028

6

,052

9

,967

8

,900

6

,179

9,63

3

Tota

l Gro

ss P

rop

ert

y, P

lan

t an

d E

qu

ipm

en

t:

269

,608

287

,836

274

,776

279

,716

285

,815

281

,010

283

,158

297

,498

310

,220

336

,173

Acc

um

ula

ted

De

pre

ciat

ion

an

d A

mo

rtiz

atio

n:

(15

2,46

4)

(

164,

946)

(16

6,34

6)

(

176,

940)

(18

8,43

1)

(

188,

610)

(19

1,71

3)

(

199,

914)

(19

6,17

4)

(

204,

283)

Ne

t P

rop

ert

y, P

lan

t an

d E

qu

ipm

en

t:

117

,144

122

,890

108

,430

102

,776

97

,384

92

,400

91

,445

97

,584

114

,046

131

,890

160

,302

191

,552

228

,809

269

,703

317

,709

Oth

er

Ass

ets

:

Inve

stm

en

ts in

Mar

keta

ble

Se

curi

tie

s, R

est

rict

ed

:

1

,340

1

,924

1

,258

1

,406

1

,193

1

,538

2

,097

3

,269

4

,586

6,05

4

6,05

4

6,05

4

6,05

4

6,05

4

6,05

4

No

tes

Re

ceiv

able

s, L

ess

Cu

rre

nt

Po

rtio

n, N

et

of

Re

serv

es:

57

6

74

0

1

,742

1

,936

2

,668

5

,070

3

,028

89

4 -

-

-

-

-

-

-

De

ferr

ed

Fin

anci

ng

Co

sts,

Ne

t o

f A

ccu

mu

late

d A

mo

riza

tio

n:

8,7

70

33,1

39

24,4

57

17,2

66

12,2

74

16,0

51

34,7

87

28,6

93

-

-

-

-

-

-

-

Go

od

wil

l:

21

,319

20

,772

17

,675

17

,606

17

,356

16

,649

16

,598

16

,598

16

,297

1

6,09

7

1

6,09

7

1

6,09

7

1

6,09

7

1

6,09

7

1

6,09

7

Cap

ital

ize

d S

oft

war

e, N

et

of

Acc

um

ula

ted

Am

ort

izat

ion

:

16

,142

10

,130

3

,672

3

,233

7

,788

8

,176

11

,387

14

,464

20

,562

2

8,50

5

2

8,50

5

2

8,50

5

2

8,50

5

2

8,50

5

2

8,50

5

Oth

er

Ass

ets

, ne

t o

f A

ccu

mu

late

d A

mo

rtiz

atio

n:

8,6

25

10,8

77

9,2

60

9,0

24

8,4

90

8,9

58

8,6

35

9,0

46

10,0

06

8,

797

9,

172

9,

172

9,

172

9,

172

9,

172

De

ferr

ed

Inco

me

Tax

es:

39,9

82

45,8

10

43,0

49

21,8

46

8,6

46

4,8

58

3,9

53

3,1

67

2,4

75

5,

865

4,

064

4,

064

4,

064

4,

064

4,

064

Tota

l Oth

er

Ass

ets

:96

,754

123,

392

10

1,11

3

72,3

17

58

,415

61,3

00

80,4

85

76,1

31

53,9

26

65,

318

63,

891

63,

891

63,

891

63,

891

63,

891

Tota

l Ass

ets

:

380

,203

473

,164

463

,794

453

,761

460

,837

480

,543

478

,197

525

,255

596

,333

799

,845

859

,591

987

,954

1

,152

,398

1

,010

,440

1

,116

,604

LIA

BIL

ITIE

S A

ND

STO

CK

HO

LDER

'S D

EFIC

IT

Cu

rre

nt

Liab

ilit

ies:

Acc

ou

nts

Pay

able

:

55

,036

60

,411

56

,906

64

,120

56

,602

69

,714

77

,414

83

,408

86

,552

106

,927

9

7,02

3

106

,821

116

,783

128

,482

139

,387

Acc

rue

d C

om

pe

nsa

tio

n:

21,6

93

13,3

30

10,3

83

17,1

68

27,4

18

21,6

91

21,8

43

23,6

53

23,6

18

32,

999

29,

877

32,

908

36,

063

39,

660

43,

059

Acc

rue

d In

tere

st:

19,4

99

18,7

00

17,8

34

17,5

00

16,0

28

15,7

75

15,0

35

14,3

75

14,0

08

20,

459

24,

355

26,

826

29,

398

32,

330

35,

100

Acc

rue

d In

com

e T

axe

s:

78

6

1

,583

1

,167

18

3

-

-

-

-

-

-

-

-

-

-

-

Insu

ran

ce R

ese

rve

s:

8

,979

9

,134

10

,056

12

,032

13

,767

13

,023

12

,964

13

,297

14

,465

1

7,59

7

1

4,46

5

1

4,46

5

1

4,46

5

1

4,46

5

1

4,46

5

Div

ide

nd

s P

ayab

le:

-

-

-

-

-

-

1,5

02

11,8

49

14,3

51

557

5

57

557

5

57

557

5

57

Lega

l Re

serv

es:

-

-

-

-

6,6

48

10,0

69

5,0

25

4,9

59

-

-

-

-

-

-

-

Ad

vert

isin

g Fu

nd

Lia

bil

itie

s:

18

,880

20

,683

20

,377

25

,116

36

,134

36

,281

37

,917

44

,695

72

,055

9

9,15

9

9

9,15

9

9

9,15

9

9

9,15

9

9

9,15

9

9

9,15

9

Oth

er

Acc

rue

d L

iab

ilit

ies:

28,8

51

36,3

55

32,4

91

32,9

34

28,6

94

29,7

18

33,4

49.0

0

34

,231

39

,994

3

8,95

2

4

7,58

5

5

2,41

3

5

7,43

9

6

3,16

7

6

8,58

0

Tota

l Cu

rre

nt

Liab

ilit

ies:

1

53,7

24

1

60,1

96

1

49,2

14

1

69,0

53

1

85,2

91

1

96,2

71

2

05,1

49

2

30,4

67

2

65,0

43

3

16,6

50

3

13,0

21

3

33,1

48

3

53,8

64

3

77,8

20

4

00,3

07

Lon

g-Te

rm L

iab

ilit

ies:

Re

volv

er:

-

-

-

-

-

-

-

-

-

-

12,0

00

25

,797

39,6

67

53

,799

67,8

13

Lon

g-Te

rm D

eb

t:

741

,597

1,

720,

083

1,70

4,78

4

1,

572,

833

1,45

2,15

6

1,

451,

273

1,56

0,79

2

1,

536,

443

1,50

1,16

4

2

,240

,793

2

,180

,993

2

,141

,593

2

,102

,193

1

,715

,712

1

,531

,991

Insu

ran

ce R

ese

rve

s:

22

,054

20

,459

20

,369

15

,127

17

,438

21

,334

24

,195

25

,528

26

,951

2

3,31

4

2

6,95

1

2

6,95

1

2

6,95

1

2

6,95

1

2

6,95

1

De

ferr

ed

Inco

me

Tax

es:

-

-

14,0

50

17

,742

-

5,

021

7,

001

7,

827

5,

588

-

5,72

3

5,72

3

5,72

3

5,72

3

5,72

3

Oth

er

Acc

rue

d L

iab

ilit

ies:

27,7

21

22,5

65

-

-

16,6

03

16,3

83

16,5

83

15,1

92

17,0

52

19,

339

15,

144

15,

144

15,

144

15,

144

15,

144

Tota

l Lo

ng-

Term

Lia

bil

itie

s:

791

,372

1,

763,

107

1,73

9,20

3

1,

605,

702

1,48

6,19

7

1,

494,

011

1,60

8,57

1

1,

584,

990

1,55

0,75

5

2

,283

,446

2

,240

,811

2

,215

,207

2

,189

,678

1

,817

,328

1

,647

,622

Tota

l Lia

bil

itie

s:

945

,096

1,

923,

303

1,88

8,41

7

1,

774,

755

1,67

1,48

8

1,

690,

282

1,81

3,72

0

1,

815,

457

1,81

5,79

8

2

,600

,096

2

,553

,831

2

,548

,355

2

,543

,542

2

,195

,148

2

,047

,929

Sto

ckh

old

ers

' De

fici

t:

Co

mm

on

Sto

ck &

AP

IC:

1

34,5

61

597

2,4

23

25,0

73

46,1

33

577

2,2

27

1,2

27

30,1

17

7,

440

21,

648

35,

856

50,

063

64,

271

78,

479

Pre

ferr

ed

Sto

ck:

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-

Re

tain

ed

De

fici

t:

(

701,

520)

(

1,44

4,93

8)

(1,

421,

705)

(

1,34

1,96

1)

(1,

254,

044)

(

1,20

7,91

5)

(1,

335,

364)

(

1,28

9,44

5)

(1,

246,

921)

(

1,80

4,14

3)

(1,

712,

340)

(

1,59

2,70

8)

(1,

437,

659)

(

1,24

5,43

1)

(1,

006,

257)

Acc

um

ula

ted

Oth

er

Co

mp

reh

en

sive

Lo

ss:

2,0

66

(5,7

98)

(5,3

41)

(4,1

06)

(2,7

40)

(2,4

01)

(2,3

86)

(1,9

84)

(2,6

61)

(3,

548)

(3,

548)

(3,

548)

(3,

548)

(3,

548)

(3,

548)

Tota

l Sto

ckh

old

ers

' De

fici

t:

(

564,

893)

(

1,45

0,13

9)

(1,

424,

623)

(

1,32

0,99

4)

(1,

210,

651)

(

1,20

9,73

9)

(1,

335,

523)

(

1,29

0,20

2)

(1,

219,

465)

(

1,80

0,25

1)

(1,

694,

241)

(

1,56

0,40

1)

(1,

391,

144)

(

1,18

4,70

8)

(

931,

326)

Tota

l Lia

bil

itie

s an

d S

tock

ho

lde

rs' D

efi

cit:

3

80,2

03

4

73,1

64

4

63,7

94

4

53,7

61

4

60,8

37

4

80,5

43

4

78,1

97

5

25,2

55

5

96,3

33

7

99,8

45

8

59,5

91

9

87,9

54

1,1

52,3

98

1,0

10,4

40

1,1

16,6

04

His

tori

cal

Pro

ject

ed

16 | P a g e

Appendix 6: Statement of Cash Flows

Cash

Flo

w S

tate

men

t

(In

thou

sand

s, e

xcep

t per

sha

re a

mou

nts)

FY 0

6AFY

07A

FY 0

8AFY

09A

FY 1

0AFY

11A

FY 1

2AFY

13A

FY 1

4AFY

15A

FY 1

6EFY

17E

FY 1

8EFY

19E

FY 2

0E

Cash

Flo

ws

From

Ope

rati

ng A

ctiv

itie

s:

Net

Inco

me:

$

10

6,22

7 $

37

,882

$

53,

971

$

79,7

44

$

8

7,91

7 $

105,

361

$

11

2,39

2 $

142,

985

$

16

2,58

7 $

192

,789

$

206

,717

$

234

,547

$

269

,964

$

307

,143

$

354

,089

Adj

ustm

ents

to R

econ

cile

Net

Inco

me

to N

et C

ash

Prov

ided

by

Ope

rati

ng

Act

ivit

ies:

Dep

reci

atio

n an

d A

mor

tiza

tion

:

32

,266

31

,176

28

,377

24

,064

24

,052

24

,042

23

,171

25

,783

35

,788

3

2,43

4

2

9,02

7

3

1,92

8

3

2,15

4

3

5,29

3

3

4,92

5

Gai

ns o

n D

ebt E

xtin

guis

hmen

t:

-

-

-

(5

6,27

5)

(7

,809

)

-

-

-

-

-

-

-

-

-

-

(Gai

ns) L

osse

s on

Sal

e/ D

ispo

sal o

f Ass

ets:

(2,6

78)

(7

66)

(1

3,75

2)

1

,843

40

3

(2

,436

)

54

0

36

7

(1

,107

)

3

16

-

-

-

-

-

Prov

isio

n (B

enef

it) f

or L

osse

s on

Acc

ount

s and

Not

es R

ecei

vabl

e:

(728

)

2

,358

7

,714

1

,542

6

4

1

,428

46

2

(1

,257

)

(570

)

(1

,084

)

-

-

-

-

-

Prov

isio

n (B

enef

it) f

or d

efer

red

Inco

me

Taxe

s:

(615

)

(5

,564

)

2

,046

19

,476

6

,027

8

,169

4

,193

6

,055

(132

)

1,71

3

(2

,846

)

-

-

-

-

Am

orti

zati

on o

f Def

erre

d Fi

nanc

ing

Cost

s, D

ebt D

isco

unt a

nd O

ther

:

3

,380

38

,612

11

,103

9

,621

7

,837

6

,190

14

,596

6

,094

5

,746

1

2,39

3

-

-

-

-

-

Non

-Cas

h Co

mpe

nsat

ion

Expe

nse:

5,2

18

8,4

05

9,0

59

17,2

54

13,3

70

13,9

54

17,6

21

21,9

87

17,5

87

17,

623

14,

208

14,

208

14,

208

14,

208

14,

208

Tax

Impa

ct F

rom

Equ

ity-

Base

d Co

mpe

nsat

ion:

-

-

-

(383

)

(2

,100

)

(15,

589)

(1

6,22

0)

(19,

498)

(2

7,58

3)

(17,

775)

(9,9

15)

(9,9

15)

(9,9

15)

(9,9

15)

(9,9

15)

Oth

er:

-

-

-

-

-

-

(5

31)

-

-

-

-

-

-

-

-

Chan

ges

in O

pera

ting

Ass

ets

and

Liab

iliti

es:

Dec

reas

e (I

ncre

ase)

in A

ccou

nts R

ecei

vabl

e:

68

7

(4

,337

)

(10,

304)

(7,2

35)

(3,3

95)

(7,7

13)

(6,9

17)

(1

1,00

1)

(12,

710)

(1

3,67

8)

(962

)

(13,

244)

(1

8,38

7)

(16,

027)

(2

0,73

5)

Dec

reas

e (I

ncre

ase)

in In

vent

orie

s, P

repa

id E

xpen

ses

and

Oth

er:

1,0

39

(1,5

03)

1,2

45

(1,0

50)

(2,3

57)

(4,9

04)

(7

03)

(2

42)

(1

1,82

7)

(2

,262

)

(6

,242

)

(6

,449

)

(7

,806

)

(9

,111

)

(7

,422

)

Incr

ease

(Dec

reas

e) in

Acc

ount

s Pay

able

and

Acc

rued

Lia

bilit

ies:

(1

0,51

2)

(20,

983)

(1

5,29

3)

16

,666

51

8

21

,419

24

,914

21

,867

22

,776

6

9,03

2

(4

,693

)

1

7,09

6

1

7,56

0

2

0,35

9

1

9,08

9

Incr

ease

(Dec

reas

e) in

Insu

ranc

e Re

serv

es:

(1,2

81)

(1,0

92)

1,0

91

(3,9

96)

3,7

98

3,1

52

2,8

02

849

1,7

84

285

50

5

-

-

-

-

Net

Cas

h Pr

ovid

ed b

y O

pera

ting

Act

ivit

ies:

1

33,0

03

8

4,18

8

75

,257

101

,271

128,

325

1

53,0

73

17

6,32

0

193

,989

192,

339

2

91,7

86

2

25,8

00

2

68,1

71

2

97,7

78

3

41,9

51

3

84,2

39

Cash

Flo

ws

From

Inve

stin

g A

ctiv

itie

s:

Capi

tal E

xpen

ditu

res:

(2

0,20

4)

(42,

415)

(1

9,41

1)

(22,

870)

(2

5,42

1)

(24,

349)

(2

9,26

7)

(40,

387)

(7

0,09

3)

(63,

282)

(5

7,43

9)

(63,

178)

(6

9,41

1)

(76,

187)

(8

2,93

1)

Proc

eeds

from

Sal

e of

Ass

ets:

14,3

69

13,3

54

28,8

74

3,7

30

2,7

37

6,0

31

2,9

88

4,5

18

9,1

60

12,

724

-

-

-

-

-

Proc

eeds

from

Sal

e of

Equ

ity

Inve

stm

ent:

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-

Chan

ge in

Res

tric

ted

Cash

:

-

(8

0,95

1)

2

,080

(12,

270)

5,6

11

(7,0

82)

32,5

97

(6

5,43

8)

4

,499

(59,

986)

50,

940

-

(20,

000)

-

(15,

000)

Net

Rep

aym

ents

of N

otes

Rec

eiva

ble:

868

285

-

-

-

-

-

-

-

-

-

-

-

-

-

Oth

er:

(9

65)

258

549

(1,4

81)

(1,3

07)

(1,5

41)

1,0

30

1,5

74

(1,0

09)

1,

252

(3

75)

4,

827

5,

026

5,

728

5,

413

Net

Cas

h Pr

ovid

ed b

y (u

sed

in) I

nves

ting

Act

ivit

ies:

(5,9

32)

(109

,469

)

12

,092

(32,

891)

(1

8,38

0)

(26,

941)

7,3

48

(9

9,73

3)

(57,

443)

(10

9,29

2)

(6

,874

)

(58,

351)

(8

4,38

5)

(70,

459)

(9

2,51

8)

Cash

Flo

ws

from

Fin

anci

ng A

ctiv

itie

s:

Proc

eeds

from

Issu

ance

of L

ong-

Term

Deb

t:

100

,000

2,5

24,9

38

3,0

00

60,9

95

2,8

61

-

1,

575,

000

-

-

1,3

05,0

00

-

-

-

492

,819

305

,079

Repa

ymen

ts o

f Lon

g-Te

rm D

ebt a

nd C

apit

al L

ease

Obl

igat

ion:

(9

5,28

4)

(1,5

47,2

01)

(1

8,31

2)

(1

36,6

79)

(116

,760

)

(890

)

(1,4

65,5

09)

(2

4,34

9)

(12,

332)

(56

4,40

3)

(59,

800)

(3

9,40

0)

(39,

400)

(87

9,30

0)

(

488,

800)

Cash

Pai

d fo

r Fin

anci

ng C

osts

:

(250

)

(60,

337)

(2

78)

(5

52)

4,5

48

563

-

-

9,0

28

4,

814

-

-

-

-

-

Proc

eeds

from

Issu

ance

of C

omm

on S

tock

:

4

,641

5

,724

4

,452

4

,376

9

,450

33

,524

8

,945

9

,451

27

,583

1

7,77

5

1

2,00

0

1

2,00

0

1

2,00

0

1

2,00

0

1

2,00

0

Proc

eeds

from

Exe

rcis

e of

Sto

ck O

ptio

ns:

4,9

02

4,6

69

1,0

37

758

2,1

00

15,5

89

16,2

20

19,4

98

(8

2,40

7)

(

738,

557)

-

-

-

-

-

Tax

Bene

fit f

rom

Sto

ck O

ptio

ns:

5,0

75

22,1

13

272

383

(5,3

84)

(165

,007

)

(88,

238)

(9

7,13

2)

(7

,927

)

(7

,431

)

-

-

-

-

-

Purc

hase

of C

omm

on S

tock

:

(1

45,0

00)

(5

4,54

8)

(42,

976)

-

(1

,082

)

(3

,504

)

(5

,845

)

(8

,031

)

(52,

843)

(8

0,32

9)

(85,

000)

(8

5,00

0)

(85,

000)

(8

5,00

0)

(85,

000)

Com

mon

Sto

ck D

ivid

ends

and

Equ

ival

ents

:

(29,

841)

(896

,972

)

-

-

-

(3,7

60)

(185

,484

)

(34,

241)

-

(17,

367)

(2

0,00

0)

(20,

000)

(2

0,00

0)

(20,

000)

(2

0,00

0)

Div

iden

d Pa

yabl

e

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-

Capi

tal C

ontr

ibut

ion

and

Oth

er:

-

-

(7

26)

(77)

-

-

(3

2,53

8)

-

-

(438

)

-

-

-

-

-

Net

Cas

h us

ed in

Fin

anci

ng A

ctiv

itie

s:

(1

55,7

57)

(1,6

14)

(5

3,53

1)

(70,

796)

(104

,267

)

(1

23,4

85)

(177

,449

)

(1

34,8

04)

(118

,898

)

(80,

936)

(15

2,80

0)

(

132,

400)

(13

2,40

0)

(

479,

481)

(27

6,72

1)

Effe

ct o

f Exc

hang

e Ra

te C

hang

es o

n Ca

sh a

nd C

ash

Equi

vale

nts:

(11)

17

210

(5

67)

(1

25)

(3

00)

(1,6

98)

118

474

1,

036

-

-

-

-

-

Incr

ease

(Dec

reas

e) In

Cas

h an

d Ca

sh E

quiv

alen

ts:

(2

8,69

7)

(26,

878)

34,0

28

(2,9

80)

5,5

53

2,3

47

4,5

21

(4

0,43

0)

16

,472

102

,594

6

6,12

6

7

7,42

0

8

0,99

4

(

207,

989)

15,

000

Cash

and

Cas

h Eq

uiva

lent

s, A

t Beg

inni

ng o

f Per

iod:

66,9

19

38,2

22

11,3

44

45,3

72

42,3

92

47,9

45

50,2

92

54,8

13

14,3

83

30,

855

1

33,4

49

1

99,5

75

2

76,9

95

3

57,9

89

1

50,0

00

Cash

and

Cas

h Eq

uiva

lent

s, A

t End

of P

erio

d: $

38

,222

$

11,

344

$

45,3

72

$

4

2,39

2 $

47

,945

$

50,

292

$

54,8

13

$

1

4,38

3 $

30

,855

$

133,

449

$

1

99,5

75

$

2

76,9

95

$

3

57,9

89

$

1

50,0

00

$

1

65,0

00

His

tori

cal

Proj

ecte

d

17 | P a g e

Appendix 7: Debt Schedule

Debt

Sche

dule

(In th

ousa

nds,

exce

pt p

er sh

are a

mou

nts)

FY 06

AFY

07A

FY 08

AFY

09A

FY 10

AFY

11A

FY 12

AFY

13A

FY 14

AFY

15A

FY 16

EFY

17E

FY 18

EFY

19E

FY 20

E

Min

imum

Cas

h Ba

lanc

e13

0,00

0

130,

000

15

0,00

0

150,

000

16

5,00

0

Net c

hang

e in

Cas

h, B

efor

e Ad

ditio

nal B

orro

win

g66

,126

77

,420

80

,994

(7

00,8

08)

(290

,079

)

Endi

ng C

ash

Bala

nce,

Bef

ore

Addi

tiona

l Bor

row

ing

199,

575

27

6,99

5

357,

989

(3

42,8

19)

(140

,079

)

Addi

tiona

l Bor

row

ing R

equi

red

-

-

-

492,

819

30

5,07

9

Tota

l Ban

k Loa

ns +

Fina

nce

Leas

es74

1,59

7

1,

720,

083

1,70

4,78

4

1,

572,

833

1,45

2,15

6

1,

451,

273

1,56

0,79

2

1,

536,

443

1,50

1,16

4

2,

240,

793

2,18

0,99

3

2,

141,

593

2,10

2,19

3

1,

715,

712

1,53

1,99

1

Aver

age

Bala

nce

NA1,

230,

840

1,71

2,43

4

1,

638,

809

1,51

2,49

5

1,

451,

715

1,50

6,03

3

1,

548,

618

1,51

8,80

4

1,

870,

979

2,21

0,89

3

2,

161,

293

2,12

1,89

3

1,

908,

952

1,62

3,85

1

Inte

rest

Expe

nse

NA13

0,37

4

11

4,90

6

11

0,94

5

96

,810

91

,635

10

1,44

8

88

,872

86

,881

99

,537

11

7,62

1

114,

982

11

2,88

6

101,

557

86

,390

Effe

ctive

Inte

rest

Rat

eNA

10.6

%6.

7%6.

8%6.

4%6.

3%6.

7%5.

7%5.

7%5.

3%5.

3%5.

3%5.

3%5.

3%5.

3%

Tota

l Cas

h + S

hort-

term

Inve

stm

ents

38,2

22

92,2

95

124,

243

133,

533

133,

475

142,

904

114,

828

139,

836

151,

809

314,

389

32

9,57

5

406,

995

50

7,98

9

300,

000

33

0,00

0

Aver

age

Bala

nce

NA65

,259

10

8,26

9

12

8,88

8

13

3,50

4

13

8,19

0

12

8,86

6

12

7,33

2

14

5,82

3

23

3,09

9

321,

982

36

8,28

5

457,

492

40

3,99

4

315,

000

Inte

rest

Inco

me

NA5,

317

2,74

6

68

3

244

29

6

304

16

0

143

31

3

432

49

5

614

54

2

423

Effe

ctive

Inte

rest

Rat

eNA

8.1%

2.5%

0.5%

0.2%

0.2%

0.2%

0.1%

0.1%

0.1%

0.1%

0.1%

0.1%

0.1%

0.1%

Hist

orica

l Pr

ojec

ted

18 | P a g e

Appendix 8: Balance Sheet and Cash Flow Statement Drivers

Bala

nce

Shee

t and

Cas

h Fl

ow S

tate

men

t Driv

ers

FY 0

6AFY

07A

FY 0

8AFY

09A

FY 1

0AFY

11A

FY 1

2AFY

13A

FY 1

4AFY

15A

FY 1

6EFY

17E

FY 1

8EFY

19E

FY 2

0E

Acco

unts

Rec

eiva

ble,

Net

of R

eser

ves %

LTM

Rev

enue

:4.

9%4.

6%4.

8%5.

2%5.

0%5.

1%5.

4%5.

5%5.

6%5.

6%5.

5%5.

5%5.

6%5.

6%5.

8%

Days

Sal

es O

utst

andi

ng (D

SO):

17.8

16

.7

17.7

18

.9

18.2

18

.5

19.7

20

.2

20.5

2

0.6

20.

0

2

0.0

20.

5

2

0.5

21.

0

Rece

ivab

les T

urno

ver:

20.5

x21

.8 x

20.7

x19

.3 x

20.1

x19

.7 x

18.5

x18

.0 x

17.8

x17

.7 x

18.3

x19

.1 x

18.9

x18

.6 x

18.3

x

Cost

of S

ales

:

1,0

52,7

88

1

,084

,016

1,0

61,8

53

1

,017

,081

1,1

32,3

05

1

,181

,677

1,1

77,1

01

1

,253

,249

1,3

99,0

67

1

,533

,397

1,

672,

750

1,84

1,67

5

2,

013,

418

2,21

5,12

1

2,

403,

137

Inve

ntor

ies:

Inve

ntor

y %

LTM

CO

GS:

2.2%

2.2%

2.3%

2.5%

2.3%

2.4%

2.6%

2.4%

2.4%

2.4%

2.4%

2.4%

2.4%

2.4%

2.4%

Days

of I

nven

tory

on

Hand

:

8

.2

8.0

8

.5

9.0

8

.5

8.9

9

.6

8.9

8

.9

8.9

8

.7

8.7

8

.7

8.7

8

.7

Inve

ntor

y Tu

rnov

er:

44.8

x45

.4 x

43.1

x40

.5 x

42.8

x41

.0 x

38.1

x40

.8 x

41.0

x41

.0 x

41.7

x41

.7 x

41.7

x41

.7 x

41.7

x

Prep

aid

Expe

nses

and

Oth

er %

of L

TM O

pEx:

1.1%

0.9%

0.5%

0.5%

0.7%

0.9%

0.8%

1.2%

2.0%

1.1%

1.2%

1.2%

1.3%

1.3%

1.3%

Defe

rred

Inco

me

Taxe

s Ass

ets O

ther

:

39,9

82

45,

810

43

,049

2

1,84

6

8,6

46

4

,858

3,9

53

3

,167

2,4

75

5

,865

4,0

64

4

,064

4,0

64

4

,064

4,0

64

Defe

rred

Inco

me

Taxe

s Ass

ets C

urre

nt:

5

,874

8,9

89

9

,033

10,6

22

16,

752

16

,579

1

5,29

0

10,7

10

-

9,8

57

10

,371

10,3

71

10

,371

10,3

71

10

,371

Acco

unts

Pay

able

% LT

M C

OGS

:5.

5%5.

3%5.

5%5.

9%5.

3%5.

3%6.

2%6.

4%6.

1%6.

3%5.

8%5.

8%5.

8%5.

8%5.

8%

Days

Pay

able

Out

stan

ding

(DPO

)

20

.0

19.4

20

.2

21.7

19

.5

19.5

22

.8

23.4

22

.2

23.

0

2

1.2

21.

2

2

1.2

21.

2

2

1.2

Paya

bles

Tur

nove

r:18

.3 x

18.8

x18

.1 x

16.8

x18

.8 x

18.7

x16

.0 x

15.6

x16

.5 x

15.9

x17

.2 x

17.2

x17

.2 x

17.2

x17

.2 x

Accr

ued

Com

pens

atio

n:

21,6

93

13,

330

10

,383

1

7,16

8

27,4

18

21,

691

21

,843

2

3,65

3

32,9

99

23

,618

29

,877

32

,908

36

,063

39

,660

43

,059

%of

LTM

OpE

x1.

8%1.

1%0.

8%1.

4%2.

0%1.

6%1.

6%1.

6%2.

0%1.

3%1.

5%1.

5%1.

5%1.

5%1.

5%

Accr

ued

Inte

rest

:

19,4

99

18,

700

17

,834

1

7,50

0

16,0

28

15,

775

15

,035

1

4,37

5

20,4

59

14

,008

24

,355

26

,826

29

,398

32

,330

35

,100

%of

LTM

OpE

x1.

6%1.

5%1.

4%1.

4%1.

2%1.

1%1.

1%1.

0%1.

2%0.

8%1.

2%1.

2%1.

2%1.

2%1.

2%

Accr

ued

Inco

me

Taxe

s:

7

86

1

,583

1,1

67

183

-

-

-

-

-

-

-

-

-

-

-

%of

LTM

OpE

x0.

1%0.

1%0.

1%0.

0% N

/A

N/A

N

/A

N/A

N

/A

N/A

N

/A

N/A

N

/A

N/A

N

/A

Oth

er A

ccru

ed Li

abili

ties:

28

,851

3

6,35

5

32,4

91

32,

934

28

,694

2

9,71

8

33,4

49

34,

231

38

,952

39,9

94

47,5

85

52,4

13

57,4

39

63,1

67

68,5

80

%of

LTM

OpE

x2.

4%2.

9%2.

6%2.

7%2.

1%2.

1%2.

4%2.

3%2.

4%2.

2%2.

4%2.

4%2.

4%2.

4%2.

4%

Tota

l Acc

rued

Liab

ilitie

s:

70,8

29

69,

968

61

,875

6

7,78

5

72,1

40

67,

184

70

,327

7

2,25

9

92,4

10

77

,620

1

01,8

17

112

,146

1

22,9

00

135

,157

1

46,7

39

5.8%

5.5%

5.0%

5.6%

5.4%

4.8%

5.0%

4.9%

5.6%

4.3%

5.2%

5.2%

5.2%

5.2%

5.2%

Defe

rred

Inco

me

Taxe

s Lia

bilit

ies:

-

-

14

,050

1

7,74

2

-

5

,021

7,0

01

7

,827

-

5

,588

5,7

23

5

,723

5,7

23

5

,723

5,7

23

Insu

ranc

e Re

serv

es C

urre

nt:

8

,979

9,1

34

10

,056

1

2,03

2

13,7

67

13,

023

12

,964

1

3,29

7

17,5

97

14

,465

14,4

65

14

,465

14,4

65

14

,465

14,4

65

Insu

ranc

e Re

serv

es Lo

ng-T

erm

:

22,0

54

20,

459

20

,369

1

5,12

7

17,4

38

21,

334

24

,195

2

5,52

8

23,3

14

26

,951

26,9

51

26

,951

26,9

51

26

,951

26,9

51

Hist

oric

al

Proj

ecte

d

19 | P a g e

Appendix 9: Expense Assumptions

Expe

nse

Ass

umpt

ions

FY 0

6AFY

07A

FY 0

8AFY

09A

FY 1

0AFY

11A

FY 1

2AFY

13A

FY 1

4AFY

15A

FY 1

6EFY

17E

FY 1

8EFY

19E

FY 2

0E

Cost

of S

ales

:

Dom

esti

c Co

mpa

ny-O

wne

d St

ore:

312

318

299

275

278

267

247

257

267

299

30

7

32

2

32

7

34

1

34

7

Tota

l DCO

Mar

gin

79.3

%80

.5%

83.6

%81

.7%

80.5

%79

.4%

76.4

%76

.1%

76.7

%75

.4%

76.3

%77

.0%

75.6

%75

.7%

76.3

%

Tota

l DCO

Mar

gin

Impr

ovem

ent

(1.2

%)

(3.0

%)

1.8%

1.2%

1.1%

3.0%

0.4%

(0.7

%)

1.3%

(0.9

%)

(0.7

%)

1.4%

(0.1

%)

(0.6

%)

Food

:

10

3

10

3

9

9

8

7

9

5

9

5

8

8

9

3

9

9

1

04

109

117

115

122

128

Mar

gin

Stor

e Re

venu

es26

.2%

26.1

%27

.6%

25.8

%27

.4%

28.3

%27

.1%

27.6

%28

.3%

26.1

%27

.1%

27.9

%26

.7%

27.2

%28

.1%

Mar

gin

Impr

ovem

ent

1.8%

0.1%

(1.5

%)

1.8%

(1.6

%)

(0.9

%)

1.2%

(0.5

%)

(0.7

%)

2.2%

(1.0

%)

(0.8

%)

1.2%

(0.5

%)

(0.9

%)

Labo

r and

Oth

er R

elat

ed:

118

122

114

108

106

98

92

94

98

115

11

6.74

121.

01

12

4.15

127.

81

12

7.96

Mar

gin

Stor

e Re

venu

es30

.1%

30.8

%32

.0%

32.3

%30

.6%

29.0

%28

.4%

28.0

%28

.0%

29.1

%29

.0%

28.9

%28

.7%

28.4

%28

.1%

Mar

gin

Impr

ovem

ent

(0.5

%)

(0.7

%)

(1.2

%)

(0.3

%)

1.7%

1.6%

0.6%

0.4%

0.0%

(1.1

%)

0.1%

0.1%

0.2%

0.3%

0.3%

Occ

upan

cy a

nd O

ther

Rel

ated

:

5

0

4

7

4

3

4

1

3

8

3

5

3

1

3

1

3

2

32

32

33

33

34

34

Mar

gin

Stor

e Re

venu

es12

.6%

11.9

%12

.1%

12.2

%10

.9%

10.3

%9.

5%9.

3%9.

2%8.

1%7.

9%7.

8%7.

7%7.

5%7.

4%

Mar

gin

Impr

ovem

ent

(0.9

%)

0.7%

(0.2

%)

(0.1

%)

1.3%

0.6%

0.8%

0.2%

0.1%

1.1%

0.2%

0.1%

0.1%

0.2%

0.1%

Insu

ranc

e:12

12

12

12

12

12

10

9

9

16

17

18

19

20

20

Mar

gin

Stor

e Re

venu

es3.

1%3.

1%3.

3%3.

5%3.

6%3.

7%3.

1%2.

8%2.

7%4.

0%4.

1%4.

2%4.

3%4.

4%4.

5%

Mar

gin

Impr

ovem

ent

0.3%

0.0%

(0.2

%)

(0.2

%)

(0.1

%)

(0.1

%)

0.6%

0.3%

0.1%

(1.3

%)

(0.1

%)

(0.1

%)

(0.1

%)

(0.1

%)

(0.1

%)

Oth

er:

29

34

31

27

28

27

27

28

30

32

33

34

36

37

37

Mar

gin

Stor

e Re

venu

es7.

3%8.

6%8.

6%7.

9%8.

0%8.

1%8.

3%8.

4%8.

5%8.

1%8.

2%8.

2%8.

2%8.

2%8.

2%

Mar

gin

Impr

ovem

ent

(1.3

%)

0.1%

0.6%

(0.1

%)

(0.1

%)

(0.2

%)

(0.0

%)

(0.2

%)

0.4%

(0.1

%)

0.0%

0.0%

0.0%

0.0%

Dom

esti

c Su

pply

Cha

in:

682

711

700

680

779

832

843

900

-

-

-

-

-

-

-

Mar

gin

89.4

%90

.8%

90.7

%89

.1%

88.9

%89

.6%

89.5

%89

.1%

-

-

-

-

-

-

-

Mar

gin

Impr

ovem

ent

(1.4

%)

0.0%

1.6%

0.2%

(0.7

%)

0.1%

0.4%

-

-

-

-

-

-

-

Inte

rnat

iona

l Sto

res:

59

55

63

62

76

83

86

97

-

-

-

-

-

-

-

Mar

gin

47.8

%43

.7%

44.5

%42

.4%

42.8

%41

.3%

39.7

%39

.9%

-

-

-

-

-

-

-

Mar

gin

Impr

ovem

ent

4.2%

(0.8

%)

2.1%

(0.4

%)

1.5%

1.6%

(0.2

%)

-

-

-

-

-

-

-

Supp

ly C

hain

:

74

1

76

6

76

3

74

3

85

4

91

5

93

0

99

7

1

,132

1,23

4 1,

366

1,

519

1,

686

1,

874

2,

056

Mar

gin

89.7

%90

.8%

90.8

%89

.1%

88.9

%89

.6%

89.4

%89

.1%

89.6

%89

.2%

89.1

%89

.0%

88.9

%89

.2%

89.1

%

Mar

gin

Impr

ovem

ent

(1.1

%)

0.0%

1.7%

0.2%

(0.7

%)

0.2%

0.3%

(0.6

%)

0.4%

0.1%

0.1%

0.2%

(0.3

%)

0.1%

Tota

l :

1

,053

1

,084

1

,062

1

,017

1

,132

1

,182

1

,177

1

,253

1

,399

1,53

3

1,67

3

1,84

2

2,01

3

2,21

5

2,40

3

Mar

gin

(Tot

al R

even

ue)

73.2

%74

.1%

74.5

%72

.4%

72.1

%71

.5%

70.1

%69

.5%

70.2

%69

.2%

69.2

%69

.2%

68.9

%69

.0%

68.8

%

Mar

gin

Impr

ovem

ent

(0.9

%)

(0.4

%)

2.1%

0.4%

0.6%

1.4%

0.6%

(0.6

%)

1.0%

0.0%

(0.1

%)

0.3%

(0.2

%)

0.2%

YoY

Gro

wth

:3.

0%(2

.0%

)(4

.2%

)11

.3%

4.4%

(0.4

%)

6.5%

11.6

%9.

6%9.

1%10

.1%

9.3%

10.0

%8.

5%

Gen

eral

& A

dmin

istr

ativ

e:

Adv

erti

sing

:

3

8

3

9

3

5

3

3

3

0

2

9

2

8

3

0

2

9

32

33

33

33

37

40

Mar

gin

2.7%

2.7%

2.5%

2.4%

1.9%

1.7%

1.6%

1.6%

1.5%

1.4%

1.3%

1.2%

1.1%

1.1%

1.1%

Mar

gin

Impr

ovem

ent

0.0%

0.2%

0.1%

0.4%

0.2%

0.1%

0.0%

0.2%

0.0%

0.1%

0.1%

0.1%

0.0%

0.0%

YoY

Gro

wth

:1.

3%(9

.3%

)(6

.5%

)(8

.5%

)(5

.6%

)(3

.2%

)7.

2%(2

.0%

)10

.3%

1.6%

1.8%

1.0%

9.8%

8.9%

Oth

er:

132

146

133

165

181

183

191

206

220

246

26

8

29

9

33

5

36

8

40

1

Mar

gin

9.2%

10.0

%9.

3%11

.7%

11.5

%11

.1%

11.4

%11

.4%

11.1

%11

.1%

11.1

%11

.2%

11.5

%11

.5%

11.5

%

Mar

gin

Impr

ovem

ent

(0.8

%)

0.7%

(2.4

%)

0.2%

0.4%

(0.3

%)

(0.0

%)

0.4%

(0.0

%)

(0.2

%)

(0.1

%)

(0.2

%)

0.0%

(0.0

%)

YoY

Gro

wth

:10

.7%

(9.0

%)

23.8

%9.

8%1.

2%4.

6%7.

4%7.

2%11

.5%

9.1%

11.4

%12

.2%

9.7%

9.0%

Tota

l:

17

0

18

5

16

8

19

8

21

1

21

1

21

9

23

5

24

9

2

78

301

332

369

404

441

Mar

gin

(Tot

al R

even

ue)

11.8

%12

.6%

11.8

%14

.1%

13.4

%12

.8%

13.0

%13

.0%

12.5

%12

.5%

12.4

%12

.5%

12.6

%12

.6%

12.6

%

Mar

gin

Impr

ovem

ent

(0.8

%)

0.8%

(2.3

%)

0.6%

0.6%

(0.3

%)

(0.0

%)

0.5%

(0.0

%)

0.1%

(0.0

%)

(0.1

%)

0.0%

(0.0

%)

YoY

Gro

wth

:8.

6%(9

.0%

)17

.4%

6.8%

0.2%

3.6%

7.4%

6.0%

11.3

%8.

3%10

.4%

11.1

%9.

7%9.

0%

Tota

l Ope

rati

ng E

xpen

ses:

1,2

23

1,2

69

1,2

30

1,2

15

1,3

43

1,3

93

1,3

96

1,4

89

1,6

49

1,

811

1,

973

2,

174

2,

382

2,

620

2,

844

Mar

gin

(Tot

al R

even

ue)

85.1

%86

.7%

86.3

%86

.5%

85.5

%84

.3%

83.2

%82

.6%

82.7

%81

.7%

81.6

%81

.7%

81.5

%81

.6%

81.4

%

Mar

gin

Impr

ovem

ent

(1.6

%)

0.4%

(0.2

%)

1.0%

1.2%

1.1%

0.6%

(0.1

%)

1.0%

0.1%

(0.1

%)

0.2%

(0.2

%)

0.2%

YoY

Gro

wth

:3.

7%(3

.1%

)(1

.3%

)10

.6%

3.7%

0.2%

6.6%

10.7

%9.

9%9.

0%10

.1%

9.6%

10.0

%8.

6%

His

tori

cal

Proj

ecte

d

20 | P a g e

Appendix 10: Revenue Assumptions

Rev

enu

e A

ssu

mp

tio

ns

FY 0

6AFY

07A

FY 0

8AFY

09A

FY 1

0AFY

11A

FY 1

2AFY

13A

FY 1

4AFY

15A

FY 1

6EFY

17E

FY 1

8EFY

19E

FY 2

0E

Sam

e St

ore

Sal

es G

row

th:

Dom

est

ic C

om

pan

y-O

wne

d St

ores

:

YoY

Gro

wth

Rat

e(2

.2%

)1.

0%(2

.2%

)0.

9%9.

7%4.

1%1.

3%3.

9%6.

2%12

.2%

3.5%

3.5%

3.0%

2.5%

2.0%

Dom

est

ic F

ranc

hise

Sto

res:

YoY

Gro

wth

Rat

e(4

.4%

)(2

.1%

)(5

.2%

)0.

6%10

.0%

3.4%

3.2%

5.5%

7.7%

11.9

%4.

0%4.

0%3.

5%3.

0%2.

5%

Dom

est

ic S

tore

s:

YoY

Gro

wth

Rat

e(4

.1%

)(1

.7%

)(4

.9%

)0.

5%9.

9%3.

5%3.

1%5.

4%7.

5%12

.0%

3.5%

3.5%

3.0%

2.5%

2.0%

Inte

rnat

iona

l Sto

res:

YoY

Gro

wth

Rat

e4.

0%6.

7%6.

2%4.

3%6.

9%6.

8%5.

2%6.

2%6.

9%7.

8%6.

5%5.

5%5.

5%5.

0%5.

5%

Sto

re C

ou

nts

:

Dom

est

ic C

om

pan

y-O

wne

d St

ore:

571

571

489

466

454

394

388

390

377

384

3

76

378

3

79

385

3

82

YoY

Gro

wth

Rat

e0.

0%(1

4.4%

)(4

.7%

)(2

.6%

)(1

3.2%

)(1

.5%

)0.

5%(3

.3%

)1.

9%(2

.0%

)0.

5%0.

3%1.

5%(0

.8%

)

Dom

est

ic F

ranc

hise

Sto

res:

4,5

72

4,5

84

4,5

58

4,4

61

4,4

75

4,5

13

4,5

40

4,5

96

4,6

90

4,

816

4,

960

5,

119

5,

298

5,

484

5,

676

YoY

Gro

wth

Rat

e0.

3%(0

.6%

)(2

.1%

)0.

3%0.

8%0.

6%1.

2%2.

0%2.

7%3.

0%3.

2%3.

5%3.

5%3.

5%

Doe

mst

ic S

tore

s:

5

,143

5

,155

5

,047

4

,927

4

,929

4

,907

4

,928

4

,986

5

,067

5,20

0

5,33

7

5,49

7

5,67

8

5,86

9

6,05

8

YoY

Gro

wth

Rat

e0.

2%(2

.1%

)(2

.4%

)0.

0%(0

.4%

)0.

4%1.

2%1.

6%2.

6%2.

6%3.

0%3.

3%3.

4%3.

2%

Inte

rnat

iona

l Sto

res:

3,2

23

3,4

69

3,7

26

4,0

72

4,4

22

4,8

35

5,2

37

5,9

00

6,5

62

7,

330

8,

078

8,

845

9,

721

10,

741

11,

923

YoY

Gro

wth

Rat

e7.

6%7.

4%9.

3%8.

6%9.

3%8.

3%12

.7%

11.2

%11

.7%

10.2

%9.

5%9.

9%10

.5%

11.0

%

Tota

l Sto

res:

8,3

66

8,6

24

8,7

73

8,9

99

9,3

51

9,7

42

10,1

65

10,8

86

11,6

29

12,

530

13,

414

14,

342

15,

398

16,

610

17,

981

YoY

Gro

wth

Rat

e3.

1%1.

7%2.

6%3.

9%4.

2%4.

3%7.

1%6.

8%7.

7%7.

1%6.

9%7.

4%7.

9%8.

3%

Ave

rage

Sal

es P

er

Sto

re:

Dom

est

ic C

om

pan

y-O

wne

d St

ore:

6

88,9

67

6

91,0

68

7

31,4

93

7

20,6

01

7

61,2

33

8

53,5

53

8

34,2

78

8

65,1

28

9

24,4

03

1,0

33,5

94

1,06

9,66

6

1,

107,

104

1,14

0,31

8

1,

168,

826

1,19

2,20

2

YoY

Gro

wth

Rat

e0.

3%5.

8%(1

.5%

)5.

6%12

.1%

(2.3

%)

3.7%

6.9%

11.8

%3.

5%3.

5%3.

0%2.

5%2.

0%

Dom

est

ic F

ranc

hise

Sto

res:

34,4

93

34,4

90

33,7

65

35,3

73

38,7

26

41,4

36

42,9

52

46,2

14

49,0

83

56,

645

58,9

10

61

,267

63,4

11

65

,313

66,9

46

YoY

Gro

wth

Rat

e(0

.0%

)(2

.1%

)4.

8%9.

5%7.

0%3.

7%7.

6%6.

2%15

.4%

4.0%

4.0%

3.5%

3.0%

2.5%

Doe

mst

ic S

tore

s:

107

,155

107

,216

101

,367

100

,183

105

,275

106

,644

105

,256

110

,269

114

,210

128

,788

133

,332

138

,048

142

,240

145

,849

148

,820

YoY

Gro

wth

Rat

e0.

1%(5

.5%

)(1

.2%

)5.

1%1.

3%(1

.3%

)4.

8%3.

6%12

.8%

3.5%

3.5%

3.0%

2.5%

2.0%

Dom

est

ic S

uppl

y C

hai

n:16

6,84

2

170,

877

16

9,17

5

171,

195

19

5,64

2

205,

606

20

7,53

3

219,

735

24

3,30

5

260,

901

28

0,46

9

302,

906

32

5,62

4

348,

418

37

1,06

5

YoY

Gro

wth

Rat

e2.

4%(1

.0%

)1.

2%14

.3%

5.1%

0.9%

5.9%

10.7

%7.

2%7.

5%8.

0%7.

5%7.

0%6.

5%

Inte

rnat

iona

l Fra

nchi

se S

tore

s:

18

,771

19

,112

19

,619

19

,008

20

,647

22

,316

22

,933

22

,661

.02

23,2

55

22,

319

23,7

70

25

,077

26,4

57

27

,779

29,3

07

YoY

Gro

wth

Rat

e1.

8%2.

7%(3

.1%

)8.

6%8.

1%2.

8%(1

.2%

)2.

6%(4

.0%

)6.

5%5.

5%5.

5%5.

0%5.

5%

Inte

rnat

iona

l Sup

ply

Ch

ain:

19,5

16

17,4

69

18,5

99

17,0

43

19,2

45

19,2

35

18,6

18

18,4

58

18,5

00

17,

271

17,4

44

17

,619

17,7

07

17

,803

16,9

13

YoY

Gro

wth

Rat

e(1

0.5%

)6.

5%(8

.4%

)12

.9%

(0.1

%)

(3.2

%)

(0.9

%)

0.2%

(6.6

%)

1.0%

1.0%

0.5%

0.5%

(5.0

%)

Inte

rnat

iona

l Sto

res:

38,2

87

36,5

81

38,2

18

36,0

51

39,8

91

41,5

51

41,5

51

41,1

19

41,7

56

39,

591

42,1

64

44

,483

46,9

30

49

,276

51,9

86

YoY

Gro

wth

Rat

e(4

.5%

)4.

5%(5

.7%

)10

.7%

4.2%

(0.0

%)

(1.0

%)

1.5%

(5.2

%)

6.5%

5.5%

5.5%

5.0%

5.5%

Tota

l:

171

,803

169

,631

162

,442

156

,028

167

,982

169

,585

165

,125

165

,561

171

,451

176

,887

180

,323

185

,508

189

,833

193

,163

194

,236

YoY

Gro

wth

Rat

e(1

.3%

)(4

.2%

)(3

.9%

)7.

7%1.

0%(2

.6%

)0.

3%3.

6%3.

2%1.

9%2.

9%2.

3%1.

8%0.

6%

Tota

l Op

erat

ing

Rev

enu

e:

Dom

est

ic C

om

pan

y-O

wne

d St

ore:

393

395

358

336

346

336

324

337

349

397

4

03

419

4

33

450

4

55

YoY

Gro

wth

Rat

e0.

3%(9

.4%

)(6

.1%

)2.

9%(2

.7%

)(3

.7%

)4.

2%3.

3%13

.9%

1.4%

4.0%

3.3%

4.0%

1.2%

Dom

est

ic F

ranc

hise

:

15

8

15

8

15

4

15

8

17

3

18

7

19

5

21

2

23

0

2

73

292

314

336

358

380

YoY

Gro

wth

Rat

e0.

3%(2

.7%

)2.

5%9.

8%7.

9%4.

3%8.

9%8.

4%18

.5%

7.1%

7.3%

7.1%

6.6%

6.1%

Doe

mst

ic S

tore

s:

55

1

55

3

51

2

49

4

51

9

52

3

51

9

55

0

57

9

6

70

695

7

32

769

8

08

835

YoY

Gro

wth

Rat

e0.

3%(7

.4%

)(3

.5%

)5.

1%0.

8%(0

.9%

)6.

0%5.

3%15

.7%

3.7%

5.4%

4.9%

5.2%

3.4%

Dom

est

ic S

uppl

y C

hai

n:76

3

78

3

77

1

76

4

87

6

92

8

94

2

1

,010

1

,141

1,25

7 1,

391

1,

551

1,

725

1,

911

2,

106

YoY

Gro

wth

Rat

e2.

7%(1

.6%

)(1

.0%

)14

.6%

6.0%

1.5%

7.2%

13.0

%10

.1%

10.7

%11

.5%

11.3

%10

.7%

10.2

%

Inte

rnat

iona

l Fra

nchi

se:

61

66

73

77

91

108

120

134

153

164

19

2

22

2

25

7

29

8

34

9

YoY

Gro

wth

Rat

e9.

6%10

.3%

5.9%

18.0

%18

.2%

11.3

%11

.3%

14.1

%7.

2%17

.4%

15.5

%15

.9%

16.0

%17

.1%

Inte

rnat

iona

l Sup

ply

Ch

ain:

63

61

69

69

85

93

98

109

121

127

14

1

15

6

17

2

19

1

20

2

YoY

Gro

wth

Rat

e(3

.7%

)14

.4%

0.1%

22.6

%9.

3%4.

8%11

.7%

11.5

%4.

3%11

.3%

10.6

%10

.4%

11.1

%5.

5%

Inte

rnat

iona

l Sto

res:

123

127

142

147

176

201

218

243

274

290

3

33

378

4

29

490

5

51

YoY

Gro

wth

Rat

e2.

8%12

.2%

3.1%

20.2

%13

.9%

8.3%

11.5

%12

.9%

5.9%

14.7

%13

.4%

13.7

%14

.1%

12.6

%

Tota

l:1,

437

1,

463

1,

425

1,

404

1,

571

1,

652

1,

679

1,

802

1,

994

2,

216

2,

419

2,

661

2,

923

3,

208

3,

492

YoY

Gro

wth

Rat

e1.

8%(2

.6%

)(1

.5%

)11

.9%

5.2%

1.6%

7.4%

10.6

%11

.2%

9.1%

10.0

%9.

9%9.

8%8.

9%

His

tori

cal

Pro

ject

ed

21 | P a g e

Appendix 11: PULSE Point of Sale System

Domino’s computerized management information systems are designed to improve operating efficiencies, provide

corporate management with timely access to financial and marketing data and reduce store and corporate

administrative time and expense. Domino’s has installed Domino’s PULSE™, their proprietary point-of-sale

system, in every Company-owned store in the United States and significantly all of their domestic franchise stores.

Some enhanced features of Domino’s PULSE™ over their previous point-of-sale system include:

• Touch screen ordering, which improves accuracy and facilitates more efficient order taking;

• Delivery driver routing system, which improves delivery efficiency;

• Improved administrative and reporting capabilities, which enable store managers to better focus on store

operations and customer satisfaction; and

• Enhanced online ordering capability, including Pizza Tracker which was introduced in 2007.

30%

11%

59%

2015

43%

21%

36%

2011

22 | P a g e

Appendix 12: Domino’s and Competitors SWOT

Strengths, Weaknesses, Opportunities, and Threats Analysis

Dominos Pizza Hut Papa Johns

What are your business

advantages?

12 Ordering Platforms, 25%

marketshare for Delivery

Strong Brand name, High brand

loyaltyStrong brand reliability and loyalty

What are your core

competencies?

Fast Deliveries and Strong

marketing Strategies

Menu variety and consistent

quality

Higher quality toppings than

competitors (fresh dough, no meat

Where are you making the

most money?

Strong Global Supply Chain (64%)

fulfills 99% of Franchises orders

60% of money comes through

company sales and 40% through

Most of the revenue comes from

company-owned restaurant sales

What are you doing well?U.S. same store sales 10.7%

International store count growth

Their emerging market sales

growth has been increasing by 4%-

Maintaining a high quality in food

provided

What areas are you

avoiding?

Avoiding limited time products,

only creating stable menu

Avoiding international expansion

in the African markets

Avoiding major international

expansion (low international store

What are you doing poorly?

Underpenetration in the Chinese

market and other developed

countries

Opened 355 stores in Chinese

market and same store sales in

China declined 5% for FY 15 and

Ineffective catering to

international markets

Where are you losing

money?

Large currency conversion

headwinds from international

Their franchises and licensing

fees revenues dropped by $4M in

Multiple historical lawsuits

(underpaying drivers, false

What needs improvement?Further focus on markets with

strong demand

Further focus on the China

Division and other international

More rapid growth to keep up with

competitors

Any beneficial trends?22 consecutive years of positive

same store sales internationally

Pizza searches in Google are

increasing

Population is growing more aware

of healthy/whole foods

Niches that competitors are

missing?

Growing market share by

acquiring and converting

The dessert menu is the strongest

among pizza chains, partnering

Responding well to a growing

health conscious market

New technologies?

New PULSE POS drives supply

chain effeciency

Innovating delivery technology

New eye tracking technology

creates pizza based on

subconcious desires and eye

Implementation of new payment

systems for iphone and android

that incorporates Google Wallet

New needs of customers?

Offering gluten free and thin crust

pizza for health conscious

consumer

Offering $5 flavor menu - provides

low prices on quality items

Big dinner boxes created for large

Offering "lighter choices" pizza

with less cheese, fresher

ingredients for health conscious

Aggressive competitors? QSR Market very competitive QSR Market very competitive QSR Market very competitive

Successful competitors?Pizza hut has 14.8 % of pizza

shares

Dominos is the biggest

competator with an increasing

market share over the last 5 years

Pizza hut has 14.8 % of pizza

shares

Dominos has 13.5%

Negative economic

conditions?

High risk of commodities pricing

on cheese, which is their biggest

expense

Increasing minimum wage would

decrease profits on company

owned stores which make up a

High risk of commodities pricing

on cheese, which is their biggest

expense

Government regulation?

Government Regulation of

Labeling of food products could

increase costs



increase costs



increase costs

Changing business

climate?

Consumers seeking more fast-

casual/upscale dining options





Vulnerabilities?Changing consumer preference

(healthy)

Supplier scandal over expired

meat sales lead to a decrease in

High royalty and advertising fees

could lower possibility of

Stre

ngt

hs

We

akn

ess

es

Op

po

rtu

nit

ies

Thre

ats

23 | P a g e





Perpetuity Growth Method

Terminal Value: 9,004,188

Terminal Growth Rate 2.5%

PV of Terminal Value 6,872,116

Present Value of FCFF: 1,254,319

Implied Enterprise Value 8,126,435

Less: Debt & Capital Leases (2,240,793)

Plus: Cash & Cash Equivalent 321,982

Less: Pension: -

Implied Equity Value 6,207,624

Dilued Share Outstanding 55,172

Implied Share Price 112.51$

Premium/(Discount) to Current -18.8%

Appendix 13: Cost of Capital

WACC – Domino’s Pizza Inc. ($ in Millions Except Per Share and Per Unit Data)

Appendix 14: Discounted Cash Flow Analysis

Cost of Capital Weight

Risk-free rate 2.2%

Market Risk Premium 5.2%

Beta 0.80

Cost of Equity 6.3% 74.7%

After-tax Cost of Debt 3.3% 25.3%

Cost of Preferred Stock 0.0%

WACC 5.55%

Historical Projected

Cash Flow & DCF Model FY11 A FY12 A FY13 A FY14 A FY15 A FY16 E FY17 E FY18 E FY19 E FY20 E

After-tax EBIT 280,682 306,828 340,872 370,983 408,481

Depreciation 29,027 31,928 32,154 35,293 34,925

Net change in Working Capital (11,392) (2,596) (8,633) (4,778) (9,068)

Capital Expenditure (57,439) (63,178) (69,411) (76,187) (82,931)

FCFF 240,878 272,981 294,982 325,311 351,406

% Growth Rate 13.3% 8.1% 10.3% 8.0%

Present Value of FCFF 228,206 245,014 250,832 262,069 268,198

Sum of PV of FCFF 1,254,319

Terminal Value 9,004,188

Normal Discount Period 1.0 2.0 3.0 4.0 5.0

Mid-year Convention Method 0.5 1.5 2.5 3.5 4.5

24 | P a g e

Op

era

tin

g S

tasti

cs

Cap

italizati

on

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jecte

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roje

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8$

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50

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34

$

392

$

387

$

383

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161

$

92

$

95

$

(13.5

%)

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%)

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%21.0

%29.5

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%

Chip

otle

Mexi

can G

rill,

Inc.

CM

G469.0

9

13,8

72

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01

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42

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Jack

in the B

ox

Inc.

JAC

K68.4

6

2,3

74

3,1

53

1,5

40

1,6

08

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132

(1.6

%)

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%20.1

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%

Papa J

ohn's

Inte

rnatio

nal I

nc.

PZZA

57.4

2

2,1

62

2,4

18

1,6

37

1,7

16

1,8

02

177

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98

5.0

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%

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c.

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84

2,9

65

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71

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93

1,4

05

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85

(1.2

%)

7.0

%5.7

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%

Do

min

o's

Piz

za

DP

Z138.6

2$

6,9

11

$

9,0

18

$

2,2

17

$

2,4

19

$

2,6

61

$

438

$

475

$

519

$

193

$

207

$

235

$

10.0

%9.3

%13.5

%19.8

%19.6

%19.5

%

Maxi

mum

469.0

9$

33,3

23

$

36,6

27

$

13,1

05

$

13,4

72

$

13,3

17

$

2,7

84

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65

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71

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93

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1,4

05

$

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$

18.0

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%114.5

%21.2

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%

75th

Perc

entil

e274.8

6

18,7

35

19,0

64

6,6

52

6,6

25

7,1

72

1,3

66

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57

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81

680

484

655

11.2

%30.5

%40.4

%21.0

%23.9

%26.3

%

Me

dia

n75.1

5

4,0

16

5,1

49

2,2

76

2,2

62

2,4

31

393

395

417

155

140

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1.9

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%17.3

%18.3

%

25th

Perc

entil

e45.8

1

2,3

21

2,9

69

1,6

13

1,5

34

1,4

70

260

290

303

100

91

98

(4.6

%)

2.9

%5.2

%13.7

%10.6

%13.9

%

Min

imum

10.9

8

2,1

62

2,4

18

1,5

40

1,3

12

1,1

34

177

187

202

75

91

95

(13.5

%)

(1.0

%)

4.0

%10.8

%9.7

%11.2

%

Valu

ati

on

Sta

sti

cs

Cap

italizati

on

En

terp

rise

Valu

e /

En

terp

rise

Valu

e /

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are

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Mu

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2015

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2015

2016E

2017E

The W

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om

pany

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N10.9

8$

2,9

50

$

5,0

49

$

2.7

x3.8

x4.5

x12.9

x13.0

x13.2

x22.4

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x27.5

x

Chip

otle

Mexi

can G

rill,

Inc.

CM

G469.0

9

13,8

72

13,2

09

2.9

x3.0

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x16.8

x31.1

x79.6

x36.4

x

Panera

Bre

ad C

om

pany

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210.1

1

5,0

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x

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in the B

ox

Inc.

JAC

K68.4

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53

2.0

x2.0

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x11.0

x9.7

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x16.9

x

Papa J

ohn's

Inte

rnatio

nal I

nc.

PZZA

57.4

2

2,1

62

2,4

18

1.5

x1.4

x1.3

x13.7

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x

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! B

rands, In

c.

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4

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x

Do

min

o's

Piz

za

DP

Z138.6

2$

6,9

11

$

9,0

18

$

4.1

x3.7

x3.4

x20.6

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x17.4

x39.9

x35.8

x31.4

x

Maxi

mum

469.0

9$

33,3

23

$

36,6

27

$

2.9

x3.8

x4.5

x14.8

x31.4

x16.8

x36.3

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x

75th

Perc

entil

e274.8

6

18,7

35

19,0

64

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dia

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5

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x

25th

Perc

entil

e45.8

1

2,3

21

2,9

69

1.8

x1.8

x1.6

x12.4

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x23.6

x22.2

x19.7

x

Min

imum

10.9

8

2,1

62

2,4

18

1.5

x1.4

x1.3

x11.0

x9.7

x9.3

x22.4

x19.3

x16.9

x

Appendix 15: Comparable Companies

25 | P a g e

Appendix 16: Comprehensive Ratio Analysis

Financial Ratios FY06A FY07A FY08A FY09A FY10A FY11A FY12A FY13A FY14A FY15A FY16E FY17E FY18E FY19E FY20E

Profitability Ratios

Return on Assets 31.8% 29.1% 26.6% 25.8% 31.1% 34.5% 36.8% 39.1% 39.2% 36.3% 37.3% 37.3% 37.3% 37.3% 37.3%

Return on Invested Capital 66.4% 55.7% 45.3% 44.6% 57.7% 67.2% 75.6% 83.2% 83.3% 70.2% 81.2% 81.2% 81.2% 81.2% 81.2%

Efficiency Ratios

Accounts Receivable Turnover 20.5x 21.8x 20.7x 19.3x 20.1x 19.7x 18.5x 18.0x 17.8x 17.7x 18.3x 19.1x 18.9x 18.6x 18.3x

Days Sales Outstanding 17.7 16.7 17.6 19.2 18.2 18.5 19.7 20.2 20.5 20.9 20.0 20.0 20.5 20.5 21.0

Accounts Payable Turnover 18.3x 18.8x 18.1x 16.8x 18.8x 18.7x 16.0x 15.6x 16.5x 15.9x 17.2x 17.2x 17.2x 17.2x 17.2x

Days Payable Outstanding 20.0 19.4 20.0 21.7 19.5 19.5 22.8 23.4 22.2 23.0 21.2 21.2 21.2 21.2 21.2

Inventory Turnover 44.8x 45.4x 43.1x 40.5x 42.8x 41.0x 38.1x 40.8x 41.0x 41.0x 41.7x 41.7x 41.7x 41.7x 41.7x

Days Inventory Outstanding 8.1 8.0 8.4 9.2 8.5 8.9 9.5 8.9 8.9 9.0 8.7 8.7 8.7 8.7 8.7

Cash Conversion Cycle 5.9 5.4 5.9 6.4 7.3 8.0 6.5 5.7 7.4 6.5 7.5 7.5 8.0 8.0 8.5

Margin Analysis

Gross Margin 26.8% 25.9% 25.5% 27.6% 27.9% 28.5% 29.9% 30.5% 29.8% 30.8% 30.8% 30.8% 31.1% 31.0% 31.2%

SG&A Margin 11.9% 12.3% 11.5% 14.0% 13.4% 12.8% 13.0% 13.0% 12.2% 12.5% 12.4% 12.5% 12.6% 12.6% 12.6%

EBITDA Margin 16.7% 18.4% 16.4% 15.2% 16.1% 17.1% 18.1% 18.6% 19.1% 19.4% 19.6% 19.5% 19.5% 19.5% 19.6%

EBIT Margin 14.9% 13.6% 14.0% 13.5% 14.5% 15.7% 16.8% 17.4% 17.6% 18.3% 18.4% 18.3% 18.5% 18.4% 18.6%

Net Income Margin 7.4% 2.6% 3.8% 5.7% 5.6% 6.4% 6.7% 7.9% 8.2% 8.7% 7.4% 7.4% 7.4% 7.4% 7.4%

Short Term Liquidity

Current Ratio 1.1x 1.3x 1.7x 1.3x 1.6x 1.7x 1.3x 1.4x 1.6x 1.6x 1.1x 1.1x 1.1x 1.1x 1.1x

Quick Ratio 0.7x 0.5x 0.8x 0.5x 0.7x 0.7x 0.6x 0.5x 0.6x 0.7x 0.9x 0.9x 0.9x 0.9x 0.9x

Cash Ratio 0.9x 0.5x 0.5x 0.5x 0.7x 0.8x 0.8x 0.8x 0.7x 0.8x 0.7x 0.7x 0.7x 0.7x 0.7x

Coverage Ratios

Total Debt/EBITDA 3.1x 6.4x 7.3x 7.4x 5.8x 5.1x 5.2x 4.6x 3.9x 5.2x 3.0x 3.0x 3.0x 3.0x 3.0x

Net Debt/EBITDA 2.9x 6.4x 7.1x 7.2x 5.6x 5.0x 5.0x 4.5x 3.9x 4.9x 2.9x 2.9x 2.9x 2.9x 2.9x

EBITDA/Interest Expense 4.4x 2.1x 2.0x 1.9x 2.6x 3.1x 3.0x 3.8x 4.4x 4.3x 4.4x 4.4x 4.4x 4.4x 4.4x

EBIT/Interest Expense 3.9x 1.5x 1.7x 1.7x 2.4x 2.8x 2.8x 3.5x 4.0x 4.1x 3.9x 3.9x 3.9x 3.9x 3.9x

Leverage Ratios

Total Debt/Equity NM NM NM NM NM NM NM NM NM NM NM NM NM NM NM

Total Debt/Capital 419.7% 637.2% 608.5% 624.5% 601.3% 600.9% 692.9% 624.0% 532.9% 508.6% 419.7% 419.7% 419.7% 419.7% 419.7%

Total Liabilities/Total Assets 248.6% 406.5% 407.2% 391.1% 362.7% 351.7% 379.3% 345.6% 304.5% 325.1% 248.6% 248.6% 248.6% 248.6% 248.6%

26 | P a g e

Appendix 17: Recent Litigation

In August 2012, Ruth Christopher, 65, and her husband Devavaram Christopher, 70, were hit by a Domino's

delivery driver who had hydro-planed and crashed into their car on Major Drive. Police found that wet pavement

and a bald tire caused the delivery driver to hydroplane into traffic. Ruth later died and Devavaram is left with

permanent brain damage. Domino's was sued and was awarded 32 million dollars by a jury. This decision was

overturned by a higher court as Domino’s already paid the family 6 million dollars in a pre-trial settlement. This

along with the fact that Domino’s does not control the day to day operations of franchisees and has put in the

company handbook that drivers vehicles should be checked periodically.

27 | P a g e

Appendix 18: Sensitivity Analyses

FCF & WACC

Same Store Sales

28 | P a g e

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