Good morning. My name is Johanna, and I will be your conference operator today. At this time, I would like to welcome everyone to the Q3 Financial Results Earnings Call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question and answer session. (Operator Instructions) Thank you. Lynn Liddle, you may begin your conference.

Thanks, Johanna. I appreciate it. Welcome, everybody. We are very excited to be announcing our third quarter earnings this morning. With us, I have our usual folks. Patrick Doyle, our President and CEO and Mike Lawton, our Chief Financial Officer. They have some prepared remarks that they will make. Then we will open up to Q&A. Usual rules apply. We are asking since this is an investor call, that members of the media remain in listen-only mode. Then I will direct you all to our Safe Harbor statement in the press release in the event that any forward-looking remarks are made today. With that, I am happy to turn it over to Mike.

Thank you, Lynn, and good morning everyone. I am pleased to report that once again, we delivered solid results for our shareholders during the quarter. Our international and domestic divisions posted strong same-store sales growth. We opened significant number of new stores and our adjusted EPS grew 23.5% over the prior year. Our global retail sales, which are the total retail sales at franchise and company-owned stores worldwide, grew 13.8%. When we exclude the positive impact of foreign currency, global retail sales grew by 12.4%. The drivers of this growth included domestic same-store sales, which rose 7.7% in the quarter, lapping a positive 5.4% from last year. This was comprised of franchisee same-store sales, which were up 7.8% and company-owned stores, which were up 6.1%, due to stronger order and ticket growth. We are pleased to report that we opened 14 net domestic stores in the quarter, consisting of 23 store openings and 9 closures. During the trailing four quarters, we opened 77 net domestic stores. Our international division had another strong quarter as same-store sales grew 7.1%, lapping our prior-year quarter increase of 5%. In the third quarter, our international division grew by 146 stores, made up of 160 store openings and 14 closures. For the trailing four quarters, we opened 638 net international stores. Turning to revenues, total revenues were up 42.5 million or 10.5% from the prior year. This increase was primarily a result of three factors. First, higher supply chain revenues from increased supply chain center volumes, higher commodity prices, specifically cheese and increased sales of equipment and supplies to our stores as our store reimaging program accelerates. Second, higher international royalty and supply chain revenues from increased same-store sales and store count growth. Third, higher domestic franchise royalty revenues, again, from higher same-store sales and…

Thanks Mike. Third quarter was certainly one that we are proud of. We are driving some strong momentum with our formula of great people and food, our focus on service and our industry leading technology. Our franchisees are delivering excellent store growth worldwide and we are pleased that they have embraced our Pizza Theater store image in neighborhoods around the world. Before moving onto the details about what a great quarter we had, I want to take a minute to highlight some other positive news we announced this morning. As I said, people were main ingredient to the success of this quarter and to our strong past record. Domino's has some of the best people in our industry, from franchisees to team members to leadership. That's why I am pleased to announce that some of the industries' most proven and effective leaders are assuming key roles on our biggest businesses. Russell Weiner came to us from Pepsi in 2008 as our Chief Marketing Officer. Since then, he has been a linchpin of our success in turning around the domestic Domino's brand. Creativity, research-based decision making and strong franchise relationships are his hallmarks. Russell has been promoted to President, Domino's U.S.A, and will now also lead our U.S. franchise and corporate operations in addition to marketing. Rich Allison, who has led a team in our international division that has greatly outperformed the sector as they did once again this quarter, has been promoted to President, Domino's International. He has done terrific things for our business in the four short years he has been with us, opening over 1,800 stores in 10 countries during that time and solidifying great relationships with our international master franchisees. My colleague here with me today, our CFO, Mike Lawton, will now additionally assume the leadership of…

(Operator Instructions) Your first question comes from John Glass with Morgan Stanley. Your line is now open.

Thanks. Good morning. First, Patrick, you talked about the remodels and you are about 10% through. Can you talk about the response you have seen from them if you are willing to talk about sales lift or maybe you could speak about their success qualitatively at least?

Yes. Sure. The answer is, we are a little over 10% now on the system domestically; we are higher than that outside of the U.S. As we do individual reimages the answer is we see a modest increase from those stores. Our belief is that as the system becomes largely reimaged, that it is going to continue to drive kind of the momentum that we have in the business. It takes a little bit of time, we are seeing some lift in those stores that get reimaged, but we think the real gain from that is going to be as we get the whole system done, everybody is seeing kind of this new image around Domino's that continues to drive the brand and momentum that we got in the business.

Thanks. You mentioned pricing was a small piece. Overall, there has been some incremental pricing taken. Can you just quantify how much was that in aggregate? Was it material versus last quarter or did that explain any of the acceleration in comp? Was it small enough that it kind of blended down to not material?

No. What I would say, John, is we are not going to give the absolute specifics on that. It was a nice mix between orders and ticket. What I would say though is, even within the ticket, some of that is selling more food, so with the specialty chicken out there, some of the reason the ticket is up is simply that we are selling more food in each order than we were previously and a little bit of it is pricing.

Great. Thanks very much.

Your next question comes from the line of Alton Stump with Longbow Research. Your line is open.

Thank you. Good morning and great job on the quarter.

Thank you.

If I missed this I apologize, but did you update us on what percentage of your U.S. sales came from digital in 3Q?

Yes. We are still right in the mid-40s, so this is what we have always seen as we kind of get gains in the fourth quarter every year and into the first quarter of the following year. In kind of the spring and summer as people move away from their homes, they are out about a little bit more, we have generally seen that kind of flatten out, so we are still kind of in that 45% range that we have been in, which is kind of expected. Then generally what happens is, we get into the fourth quarter of the year and we start to see it move up again.

Then if I could follow to that segueing obviously technology has been a key share gain driver for you guys for a couple years now. It would seem like the pace of that is picking up steam though and you of course talked on several different points that you have made improvements to your platform whether the iPad or the iPhone apps. Is there anything sort of that was incremental just in 3Q versus the first half of the year that you think really helped to provide a comp lift whether through higher tickets or more frequent orders associated with technology?

No. I think, go back to the answer around mix, I mean, this is the time of the year that mix isn't necessarily growing versus the previous quarter. It has grown materially versus the year ago quarter, but the real gain on digital is from frequency. I mean, it's ultimately about the better retention of customers, better frequency of orders from customers. As they have a better experience with Domino's, we get more orders from them. That's really what drives it more than anything else. What I would say and what you are seeing from us is, we are absolutely determined that we are going to maintain and grow our leadership in digital ordering and we are absolutely not standing still and voice ordering is kind of the newest step in that and we are really pleased with 200,000 orders now having used the voice capabilities without having promoted it and now we have gone on air and it is yet one more way in which we believe we have absolutely got the best digital ordering platform in the space and it's another way that we think we are continuing to extend our leadership there.

That is great. Thanks so much Patrick.

Your next question comes from the line of Alex Slagle with Jefferies. Your line is open.

Thanks. It is actually a question, sort of a follow-up on John's question before that touched on the pricing and mix. I would like to get a handle on how you managed commodity inflation so well in the third quarter specifically on the corporate domestic stores, I was just surprised to see cost of goods flat year-over-year even after another big inflationary quarter on cheese costs here in the third quarter and any comments you have on that. What was different about this quarter versus previous quarters?

Yes. You know, I think it goes back to kind of the mix. We had good order count growth, we had good ticket growth, we had kind of the increased amount of food within the basket selling chicken, which is good for our cost of goods and for the overall profitability of the business and it's really about the balance of those things that we think we got it.

As well as levering some of the cost beyond just food cost because of the higher sales levels.

Okay. Thank you.

Your next question comes from Jeffrey Bernstein with Barclays. Your line is now open.

Great. Thank you very much. Congrats to management on the promotions. It seems very well deserved. You know, just on the U.S., the category in general seems pretty clear you are taking share, hard to actually tell where the share comes from, but it would seem safe to say from independents and your national competitors. I am just wondering, Patrick, whether you have any updated data on where the category is now in terms of growth. I think in the past you have said maybe 1% or 2%, and what you are seeing if you have any data in terms of independents whether it is just their unit counts. It would just seem like, in this type of environment where you are taking such meaningful share, you would expect to see some closures on that front. Then I had a follow-up.

Yes. I don't know if there is really a material change in kind of where we think the category is and kind of the competitive environment. I think category is continuing to grow slowly and still is. You have seen, I think a little bit of ticket growth from us now and from some of our competitors, so I think that is playing in and may continue to play in a little bit more as we go forward depending on kind of what happens with cost pressures overall in the business. I guess the other thing I would say is, in terms of the competition and store closures and all of that, capital was pretty available right now and it's part of why you are starting to see a little bit of acceleration in our store growth. It's a function of unit economics continuing to make good progress over the last few years, but the markets for lending and for capital to franchisees have come around nicely. You all were asking questions a year ago about the reimage process and what it affects. Our store growth, and our answer then was maybe at the margin it would a little bit, but overall we didn't think it was going too much and I think that is playing out the way we expected it to. Partly that's because of availability of capital for the franchisees to get these reimages done and where they choose to relocate, they can do that as well and generate some store growth, so I think that has got to be playing out a little bit with the competition as well, which is there is some availability of capital again and that may be allowing some people to hang in there that may not be getting the same kind of results that we are.

Understood. Then Mike, you mentioned, Patrick, at the end of your prepared remarks, just your cash usage and the repo and dividend balance. I did not know whether there was any update. I think you are probably now down below or at or below that 4.5 times level from a leverage standpoint, whether it's still status quo and you are happy to see that leverage ratio fall further or Patrick…?

We have stopped amortizing the debt, so while it may continue to fall a little bit further if we are able to continue to grow our operating results. It won't fall further, because of deleveraging through repayment and debt. At this point, there is really not much more to update you on.

Got it. Is there any comment on FX? Just seems like for the rest of 2014 and into 2015, at least where rates currently stand? The impact it might be having on you going forward?

Yes. For the third quarter, the impact of FX was slightly positive, but relatively small. We have raised our cents and the dollar - has strengthened a little bit, which again would lead us at this point in time towards, say, in fourth quarter now like would be a big impact.

Thank you.

Your next question comes from the line of Brian Bittner with Oppenheimer. Your line is open.

Thanks. Congrats to everybody on the promotions.

Thanks.

I have got a follow-up question just on the balance sheet. Most of my operational questions have been answered. I think a third of the debt becomes redeemable sometime next year. Can you remind us exactly when that is and also remind us what type of interest rate you need to see on new debt to actually execute anything on that front?

Okay. Well, the debt that you referred to has a rate of 5.25%, and we could call roughly a third of our outstanding in July of next year. In terms of what rate, we need to see. That would be a function of what kind of duration we were looking on the debt. There is certainly issuance cost that goes along with that it is not really something I can give you specific rate on other than it's obviously going to be better 5.25%, so we will see at that point in time what kind of tenure you could get on the debts, what it means in terms of what it would do for the other two-thirds, it would still remain and we will keep an eye on.

Okay. Great. Thanks.

Your next question comes from the line of the Chris O'Cull with KeyBanc. Your line is now open.

Great. Thanks good morning. Patrick, some operators have talked about loyalty programs having higher spend, frequency and satisfaction than orders that are placed online. Can you guys talk about Domino's opportunities with either a loyalty or a rewards program?

Yes. I mean, it is certainly something that we have looked at. Right now what's driving our frequency and growth is, we think just given people a better experience overall, but it's certainly something we have looked at. Our impression at least from comments that have been made at Papa John's that has worked for them, so it is certainly something that we keep an eye on, but overall we are obviously pretty darn happy with our results and our mix of orders and ticket and all that, but it's something we will keep an eye on.

Then just as a follow-up, I guess, the other competitor, Pizza Hut, has fallen behind in terms of getting conversion to online ordering. If they were to be more aggressive, let's say in the fourth quarter to try to drive online ordering usage, how would the company respond? How would Domino's respond to something like that in terms of or I mean, what's the risk of that, I guess, to the category?

Actually, I not only don't think it's a risk. I think it's more an upside. I often talked about the fact that I really think that the biggest think that is going on in the category is the larger players, largely driven by digital have been taking share from the smaller players and I know that Pizza Hut has had a couple of bumps, but I think in their latest release they talked about now being at 40% of their off-premise sale something like that, so they are not in a bad shape in a bad way there and I think what the real opportunity is that as the three largest players continue to show that this is a better way for customers to do business with us, we are going to have an opportunity to grow the category hopefully, but also continue to take some share from the people that can't kind of put up a platform of the quality that we are able to do. We certainly take pride in what we have done and want to make sure that we main leadership in this area, but I still believe that the greater gap is going to be between what the three biggest players are able to do with digital versus everybody else rather than what we are able to do necessarily versus our other national players, national competitors who are in the same digital space. I think as they continue to advance, it's going to continue to move people across the digital ordering and I think that plays to us.

Okay. Great. Thanks guys.

Hi, guys. Can you give us an update on what percent of company stores are reimaged?

Yes. We are today at, I think, the percentage it has got to be about 30%, something like that. Coming along nicely, we are ahead versus the overall system and expect to be done prior to the whole system being completed, so moving along pretty nicely there.

Okay. Then is there an opportunity, I know you guys have talked about that you like where you are at on your franchise mix today, but is there an opportunity to do some refranchising?

You know, I don't think you are going to see us do that. We have always said, we are going to be opportunistic, but that can be opportunistic buying or selling. The size that we are in today, I think, with our corporate store unit is good, it is generating reasonable returns for us, for our shareholders, it is where we develop our people and our leadership. It is where we test things and it needs to be a scaled business in order to do that, so I think we are in pretty good shape there. As we move into the mode of more and more hopefully store growth in our system, it is something we got to do with our corporate stores as well, so I don't think you are going to see major change there. Overall, I think we are in a reasonable range on our corporate stores, and no, I would not expect material refranchising of those stores.

Okay. Excellent. Thank you.

Thank you.

Your next question comes from John Ivankoe with JPMorgan. Your line is now open.

Well, John?

Sorry. Hello?

Good morning. You weren't coming through.

Can you hear me?

Yes.

I was saying on the Domino's website, it looks like a two-topping Pan is being offered at $8.99. I think it was previously $7.99, so is that correct? If so, when was that change made? Similarly, had there been an increase in delivery fees at all?

Yes. We are actually, I think, we are taking a $1 more on the pan, and it's an amazing product and clearly I think we could support that. You have seen our national promotion remain consistent, but we really believe we have got the best hand-made pan pizza out there. The demand is there for it. Deliveries of few franchisees have done it and that is kind of just market opportunistic. We obviously at cost pressures, we look at what is happening with our competition, but we certainly haven't taken much there. Most stores have not increased anything there. A few certainly have opportunistically, but not materially.

Okay. Then internationally, usually very, very strong, but looking at the opportunities it does seem like India maybe demand slowed in recent quarters, so can you talk about the color maybe you are getting from your franchisee there on demand and what is being done to get the same-store sales moving in a positive direction again?

Yes, so what hasn't slowed at all is store growth. In fact, store growth continues to get stronger and stronger, because the cash on cash returns on the stores there are really terrific. The whole restaurant industry, I think, in India has seen slower same-store sales growth. In fact most folks have been a little bit negative over the course of the last year or two. We have certainly felt that as well and the team is doing a great job of continuing to bringing along, we have launched some new products and doing a number of things to try to drive that, but we clearly need to see the economy get a little bit more robust over there again. It's still growing and still going pretty nicely, but it is not growing as much as it was three or four years ago and you have had some inflation over there, which I think has affected consumer behavior there a little bit as well. Overall, I will tell you, I remain very, very bullish on India and where it is and where it is continue to go. Certainly, our partners over there Jubilant FoodWorks, have not taken their foot off the gas at all in terms of continuing to grow the system there.

Okay. Great. Thanks and congrats on a good quarter.

Thanks, John.

Your next question comes from the line of Steve Anderson with Miller Tabak. Your line is open.

Good morning. A quick question on commodities, you left your outlook for this year unchanged at 4% to 6%. Looking at some of the dairy prices and some of the pork prices, the two areas you looked at in terms of higher cost, both, it looks like they have been plateauing if not actually starting to decline. Do you think it is a little early or do you think you can give a little insight onto where you think 2015 will end up?

2015 is, we will talk about that on our Investor Day in January, when we have got a little more visibility. We will give you what we think is our best guess of what is going to happen at that point in time, but to your point you made in the last couple of weeks both, pork and cheese have moderated a little bit and hopefully that's the start of something good, but can't go much beyond that at this point in time.

I understand. Thank you.

Your next question comes from the line of David Meis with Citadel. Your line is open.

Hi, guys. Congrats on a great quarter. Just one quick question on, apologies if you guys had already answered this, but how much of the growth is coming from increased commodity prices versus through same-store sales and volume uptick?

Yes. We haven't given an exact number on the mix on that. It's a nice mix of orders and ticket. Then I would say within ticket, it's a mix of selling more food in each order and actual price increase. The price increase is pretty modest in there when you kind of look at it along with selling some more food, so haven't given the exacts or not going to give the exacts for competitive reasons, what I would tell you is, it's a nice mix of orders and ticket.

Okay. That's helpful. Thanks a lot guys and congrats again.

Thanks, David.

Your next question comes from the line of Peter Saleh with Telsey Advisory. Your line is open.

Great. Thanks and congrats on the quarter. Just wanted to ask, for this quarter I know the World Cup overlapped better majority of this quarter. Did you see any, I guess, positive momentum from the World Cup?

Peter, we get just a little bit from the World Cup, when it comes around, but I would tell you it is not really material within the overall. There are a few markets that field a bit more, but every time it comes around, we are kind of looking at it trying to figure out how was it played in each market and it always depends to great extent on where it is being played. There are time zones, where frankly it doesn't have much effect, because it's the middle of the night or it is breakfast for people depending on where it is, so the answer is helps a little bit at the margin, but not a really big effect.

Great. Then, Patrick, I know you have talked about in the past about 1,000-store potential left in the US. Any thoughts on update on that, is that still a good number? Any thoughts on an acceleration of new unit growth potentially next year?

Yes. It's still a good number. It is still something that we think is very possible. Like you have seen, if you look at our kind of four-quarter trailing or 12-month trailing net store growth in the U.S., you have seen it kind of continue to move upwards as we talked about before. Our goal is to continue to accelerate a little bit off of the growth we have had and it has been kind of playing out that way and we think we are doing it the right way. We are doing it because store economics continue to get better, our franchisees continue to get stronger and strong. Their income statements look better, their balance sheets are stronger and that gives them an opportunity to build stores, so they are actually still stores out there to be built. The 1,000 is, I think, a reasonable number to continue to look at as same-store sales grow and the population in the U.S. continues to grow at about 1% a year. That feels pretty good to us.

Great. Thank you very much.

Thank you. Your final question comes from the line of Paul Westra with Stifel. Your line is now open.

Great. Thanks. A question on really any granularity you might be able to give us on your technology investments and maybe any G&A investments. Obviously, you are holding that line pretty tight. Clearly, results are very strong, so I am just curious about maybe the ability to maybe invest more in infrastructure that might be able to garner results for the longer term.

I think, one thing I would point out is that a very significant amount of our CapEx, well over a third in each of the last two or three years has gone into technology. Most of that has been on areas of support, either our proprietary point of sale system or e-commerce as opposed to the core systems of the company, so we are doing some of what you suggest. As far as the increases in G&A, we are pretty tight on what we do with what you could call back office or G&A and kind of the negative terminology you might use it for. Most of what our increases have been, it has all been to support the growth of the international business or the growth of the IT area. If you are able to see our office, you would see that we are not shy about adding into IT, if it's something that's going to help us grow our revenue. I think what you are suggesting is we are certainly on the same track and we would continue to do so.

Great. Thank you.

Thanks, Paul.

Thank you, everybody, for your time today. I look forward to reporting our year end results in February.