U.S. Markets closed
  • S&P 500

    4,538.43
    -38.67 (-0.84%)
     
  • Dow 30

    34,580.08
    -59.71 (-0.17%)
     
  • Nasdaq

    15,085.47
    -295.85 (-1.92%)
     
  • Russell 2000

    2,159.31
    -47.02 (-2.13%)
     
  • Crude Oil

    66.22
    -0.28 (-0.42%)
     
  • Gold

    1,782.10
    +21.40 (+1.22%)
     
  • Silver

    22.45
    +0.17 (+0.76%)
     
  • EUR/USD

    1.1317
    +0.0012 (+0.1019%)
     
  • 10-Yr Bond

    1.3430
    -0.1050 (-7.25%)
     
  • Vix

    30.67
    +2.72 (+9.73%)
     
  • GBP/USD

    1.3235
    -0.0067 (-0.5029%)
     
  • USD/JPY

    112.8000
    -0.4090 (-0.3613%)
     
  • BTC-USD

    49,474.84
    -4,200.29 (-7.83%)
     
  • CMC Crypto 200

    1,367.14
    -74.62 (-5.18%)
     
  • FTSE 100

    7,122.32
    -6.89 (-0.10%)
     
  • Nikkei 225

    28,029.57
    +276.20 (+1.00%)
     

Denny’s Corporation Reports Results for Fourth Quarter and Full Year 2020

  • Oops!
    Something went wrong.
    Please try again later.
·30 min read
In this article:
  • Oops!
    Something went wrong.
    Please try again later.

SPARTANBURG, S.C., Feb. 16, 2021 (GLOBE NEWSWIRE) -- Denny’s Corporation (NASDAQ: DENN), franchisor and operator of one of America's largest franchised full-service restaurant chains, today reported results for its fourth quarter and full year ended December 30, 2020 and provided a business update on the impact of the COVID-19 pandemic on the Company’s operations.

John Miller, Chief Executive Officer, stated, “While 2020 was a year of unprecedented challenges, Denny's operators diligently protected the health and well-being of our guests and restaurant teams, while embracing innovative solutions like curbside pickup, drive up ordering and outdoor dining in an ever-evolving environment. We have since entered 2021 with confidence in our team's ability to continue navigating near-term headwinds and remain optimistic for the anticipated economic recovery. Our confidence is supported by an increasing distribution of vaccines, fiscal stimulus that should benefit our franchisees and consumers, and our rollout of two new virtual concepts where test results have been favorable and suggest a high degree of incremental transactions.”

Fourth Quarter 2020 Highlights

  • Total Operating Revenue was $80.1 million.

  • Domestic system-wide same-store sales** decreased 32.9%.

  • Opened four franchise restaurants, including one international location.

  • Completed five remodels at franchised restaurants.

  • Operating Loss was $1.1 million.

  • Franchise Operating Margin* was $21.4 million, or 45.2% of franchise and license revenue, and Company Restaurant Operating Margin* was $1.4 million, or 4.3% of company restaurant sales.

  • Net Income was $2.4 million, or $0.04 per diluted share.

  • Adjusted Net Loss* was $3.0 million, or $0.05 per diluted share.

  • Adjusted EBITDA* was $8.0 million.

  • Approximately $2.0 million of Adjusted EBITDA* was attributable to an additional operating week.

  • Cash provided by (used in) operating, investing, and financing activities was $8.5 million, $3.4 million, and ($19.2) million, respectively.

  • Adjusted Free Cash Flow* was $2.1 million.

Full Year 2020 Highlights

  • Total Operating Revenue was $288.6 million.

  • Domestic system-wide same-store sales** decreased 31.4%.

  • Opened 20 franchise restaurants, including 8 international locations.

  • Completed 22 remodels, including 20 at franchised restaurants.

  • Operating Income was $6.7 million.

  • Franchise Operating Margin* was $76.1 million, or 44.6% of franchise and license revenue, and Company Restaurant Operating Margin* was $3.6 million, or 3.0% of company restaurant sales.

  • Net Loss was $5.1 million, or $0.08 per diluted share.

  • Adjusted Net Loss* was $7.2 million, or $0.12 per diluted share.

  • Adjusted EBITDA* was $26.6 million.

  • Cash provided by (used in) operating, investing, and financing activities was ($3.1) million, $4.7 million, and ($1.0) million, respectively.

  • Adjusted Free Cash Flow* was $1.6 million.

Current Trends

Following a consistent level of domestic system-wide same-store sales** performance in October and November, December results were significantly impacted by reinstated stay-at-home orders and additional capacity restrictions. As these restrictions began to ease during January and February, domestic system-wide same-store sales** improved as compared to the equivalent periods in 2019.

Average unit volumes of off-premise sales have more than doubled since the beginning of the COVID-19 pandemic, supported by temporarily waived delivery fees, curbside service programs, and shareable family meal packs.

In an effort to provide greater transparency due to the COVID-19 pandemic, Denny's is providing the following tables that present monthly results for 2020 and 2021 compared to the equivalent fiscal months in 2019:

Domestic System-Wide Same-Store Sales** Compared to 2019 Fiscal Periods:

Fiscal Year 2020: (31%)

Fiscal Year
2021: (29%)1

Q1: (6%)

Q2: (57%)

Q3: (34%)

Q4: (33%)

Jan

Feb

Mar

Apr

May

Jun

Jul

Aug

Sep

Oct

Nov

Dec

Jan

Feb1

3

%

2

%

(19

%)

(76

%)

(65

%)

(41

%)

(39

%)

(35

%)

(28

%)

(26

%)

(27

%)

(41

%)

(31

%)

(25

%)

1. Preliminary results through the first two weeks of fiscal February.



Domestic System Same-Store Sales
** Compared to 2019 Fiscal Periods and Domestic Average Units for 2020 and 2021 Fiscal Periods

(Open Dining Rooms vs Closed Dining Rooms):

Q2 2020

Q3 2020

Q4 2020

Q1 2021

Apr

May

Jun

Jul

Aug

Sep

Oct

Nov

Dec

Jan

Feb1

Open
Dining Rooms

(74%)

(47%)

(33%)

(36%)

(29%)

(24%)

(24%)

(23%)

(26%)

(15%)

(15%)

2

222

1,087

1,244

1,044

1,127

1,289

1,239

891

927

1,010

Closed
Dining Rooms

(76%)

(69%)

(68%)

(55%)

(47%)

(39%)

(33%)

(42%)

(61%)

(55%)

(42%)

1,060

938

327

237

444

369

207

256

586

531

444

Temporary
Closures

480

378

120

47

35

22

19

20

31

46

50

1. Preliminary results through the first two weeks of fiscal February.

Domestic System Same-Store Sales** Compared to 2019 Fiscal Periods and Domestic Average Units for 2020 and 2021 Fiscal Periods
(24/7 Units vs Limited Hour Units):

Q2 2020

Q3 2020

Q4 2020

Q1 2021

Apr

May

Jun

Jul

Aug

Sep

Oct

Nov

Dec

Jan

Feb1

24/7 Units

(68%)

(57%)

(30%)

(31%)

(25%)

(19%)

(18%)

(18%)

(30%)

(20%)

(14%)

185

323

435

458

472

496

516

538

516

519

528

Limited Hour
Units

(78%)

(69%)

(47%)

(44%)

(41%)

(34%)

(31%)

(33%)

(49%)

(38%)

(33%)

877

837

979

1,023

1,016

1,000

980

957

961

939

926

Temporary
Closures

480

378

120

47

35

22

19

20

31

46

50

1. Preliminary results through the first two weeks of fiscal February.

Domestic Capacity Restrictions as of February 12, 20211:

% of Domestic System

75% Capacity or Social Distancing

25

%

50% - 66% Capacity

31

%

25% - 33% Capacity

15

%

Off-Premise Only

26

%

No Restrictions

1

%

Temporarily Closed

2

%

Total

100

%

1. Preliminary results.

Fourth Quarter Results

Denny’s total operating revenue was $80.1 million compared to $113.8 million in the prior year quarter. Franchise and license revenue was $47.2 million compared to $65.0 million in the prior year quarter. Company restaurant sales were $32.9 million compared to $48.8 million in the prior year quarter. These changes were primarily due to the impact of the COVID-19 pandemic on sales and fewer equivalent units, partially offset by an additional operating week.

Franchise Operating Margin* was $21.4 million, or 45.2% of franchise and license revenue, compared to $31.8 million, or 48.9%, in the prior year quarter. This change in margin was primarily due to the impact of the COVID-19 pandemic on sales and fewer equivalent units, partially offset by an additional operating week.

Company Restaurant Operating Margin* was $1.4 million, or 4.3% of company restaurant sales, compared to $8.7 million, or 17.7%, in the prior year quarter. This change in margin was primarily due to the impact of the COVID-19 pandemic on sales and fewer equivalent units, partially offset by approximately $1.0 million of favorable reserve adjustments and tax credits related to the CARES Act and an additional operating week.

Total general and administrative expenses were $20.5 million, compared to $15.4 million in the prior year quarter. This change was primarily due to an increase in share-based compensation expense, partially offset by a $3.1 million improvement in corporate administrative expenses from cost savings initiatives and previous reductions in personnel due to the COVID-19 pandemic including approximately $0.9 million in tax credits related to the CARES Act.

Interest expense, net was $4.6 million, compared to $3.6 million in the prior year quarter, with the increase primarily due to higher interest related to the Company's recent debt amendments and the amortization of dedesignated interest rate swap losses from accumulated other comprehensive loss, net. Denny’s ended the quarter with $225.4 million of total debt outstanding, including $210.0 million of borrowings under its credit facility.

The benefit from income taxes was $0.1 million, compared to a tax provision of $5.1 million in the prior year quarter, reflecting an effective tax rate of 2.7%. Approximately $0.5 million in net cash refunds were received during the quarter.

Net income was $2.4 million, or $0.04 per diluted share, compared to net income of $18.6 million, or $0.31 per diluted share, in the prior year quarter. Adjusted Net Loss* per diluted share was $0.05 compared to Adjusted Net Income* per diluted share of $0.23 in the prior year quarter.

Adjusted Free Cash Flow* and Capital Allocation

Denny’s Adjusted Free Cash Flow* in the quarter was $2.1 million after investing $1.5 million in cash capital expenditures, including maintenance capital.

Business Outlook

Given the dynamic and evolving impact of the COVID-19 pandemic on the Company's operations and uncertainty about the timing and extent of an anticipated recovery, the Company cannot reasonably provide a business outlook for the fiscal year ending December 29, 2021 at this time.

* Please refer to the Reconciliation of Net Income (Loss) and Net Cash Provided by (Used in) Operating Activities to Non-GAAP Financial Measures, as well as the Reconciliation of Operating Income (Loss) to Non-GAAP Financial Measures included in the following tables.

** Same-store sales include sales at company restaurants and non-consolidated franchised and licensed restaurants that were open the same period in the noted prior period. Total operating revenue is limited to company restaurant sales and royalties, advertising revenue, fees and occupancy revenue from non-consolidated franchised and licensed restaurants. Accordingly, domestic franchise same-store sales and domestic system-wide same-store sales should be considered as a supplement to, not a substitute for, the Company's results as reported under GAAP.

Conference Call and Webcast Information

Denny’s will provide further commentary on the results for the fourth quarter ended December 30, 2020 on its quarterly investor conference call today, Tuesday, February 16, 2021 at 4:30 p.m. Eastern Time. Interested parties are invited to listen to a live broadcast of the conference call accessible through the investor relations section of Denny’s website at investor.dennys.com.

About Denny’s

Denny's Corporation is the franchisor and operator of one of America's largest franchised full-service restaurant chains, based on the number of restaurants. As of December 30, 2020, Denny’s had 1,650 franchised, licensed, and company restaurants around the world including 146 restaurants in Canada, Puerto Rico, Mexico, the Philippines, New Zealand, Honduras, the United Arab Emirates, Costa Rica, Guam, Guatemala, El Salvador, Indonesia, and the United Kingdom. For further information on Denny's, including news releases, links to SEC filings, and other financial information, please visit the Denny's investor relations website at investor.dennys.com.

Cautionary Language Regarding Forward-Looking Statements

The Company urges caution in considering its current trends and any outlook on earnings disclosed in this press release. In addition, certain matters discussed in this release may constitute forward-looking statements. These forward-looking statements, which reflect management's best judgment based on factors currently known, are intended to speak only as of the date such statements are made and involve risks, uncertainties, and other factors that may cause the actual performance of Denny’s Corporation, its subsidiaries, and underlying restaurants to be materially different from the performance indicated or implied by such statements. Words such as “expect”, “anticipate”, “believe”, “intend”, “plan”, “hope”, "will", and variations of such words and similar expressions are intended to identify such forward-looking statements. Except as may be required by law, the Company expressly disclaims any obligation to update these forward-looking statements to reflect events or circumstances after the date of this release or to reflect the occurrence of unanticipated events. Factors that could cause actual performance to differ materially from the performance indicated by these forward-looking statements include, among others: the rapidly evolving COVID-19 pandemic and related containment measures, including the potential for further operational disruption from government mandates affecting restaurants; economic, public health, social and political conditions that impact consumer confidence and spending with respect to social unrest and the COVID-19 pandemic; competitive pressures from within the restaurant industry; the level of success of the Company’s operating initiatives and advertising and promotional efforts; adverse publicity; health concerns arising from food-related pandemics, outbreaks of flu viruses or other diseases; changes in business strategy or development plans; terms and availability of capital; regional weather conditions; overall changes in the general economy (including with regard to energy costs), particularly at the retail level; political environment (including acts of war and terrorism); and other factors from time to time set forth in the Company’s SEC reports and other filings, including but not limited to the discussion in Management’s Discussion and Analysis and the risks identified in Item 1A. Risk Factors contained in the Company’s Annual Report on Form 10-K for the year ended December 25, 2019 (and in the Company’s subsequent Quarterly Reports on Form 10-Q and Current Reports on Form 8-K).

DENNY’S CORPORATION

Condensed Consolidated Balance Sheets

(Unaudited)

(In thousands)

12/30/20

12/25/19

Assets

Current assets

Cash and cash equivalents

$

3,892

$

3,372

Investments

2,272

3,649

Receivables, net

21,349

27,488

Assets held for sale

1,125

1,925

Other current assets

20,028

16,299

Total current assets

48,666

52,733

Property, net

86,154

97,626

Financing lease right-of-use assets, net

9,830

11,720

Operating lease right-of-use assets, net

139,534

158,550

Goodwill

36,884

36,832

Intangible assets, net

51,559

53,956

Deferred income taxes, net

23,210

14,718

Other noncurrent assets, net

35,112

34,252

Total assets

$

430,949

$

460,387

Liabilities

Current liabilities

Current finance lease liabilities

$

1,839

$

1,674

Current operating lease liabilities

16,856

16,344

Accounts payable

12,021

20,256

Other current liabilities

46,462

57,307

Total current liabilities

77,178

95,581

Long-term liabilities

Long-term debt

210,000

240,000

Noncurrent finance lease liabilities

13,530

14,779

Noncurrent operating lease liabilities

137,534

152,750

Other

123,153

95,341

Total long-term liabilities

484,217

502,870

Total liabilities

561,395

598,451

Shareholders' deficit

Common stock

640

1,094

Paid-in capital

123,833

603,980

Deficit

(194,514

)

(189,398

)

Accumulated other comprehensive loss, net of tax

(60,405

)

(33,960

)

Treasury stock

(519,780

)

Total shareholders' deficit

(130,446

)

(138,064

)

Total liabilities and shareholders' deficit

$

430,949

$

460,387

Debt Balances

(In thousands)

12/30/20

12/25/19

Credit facility revolver due 2022

$

210,000

$

240,000

Finance lease liabilities

15,369

16,453

Total debt

$

225,369

$

256,453


DENNY’S CORPORATION

Condensed Consolidated Statements of Operations

(Unaudited)

Quarter Ended

(In thousands, except per share amounts)

12/30/20

12/25/19

Revenue:

Company restaurant sales

$

32,892

$

48,803

Franchise and license revenue

47,213

65,033

Total operating revenue

80,105

113,836

Costs of company restaurant sales, excluding depreciation and amortization

31,475

40,147

Costs of franchise and license revenue, excluding depreciation and amortization

25,861

33,261

General and administrative expenses

20,451

15,359

Depreciation and amortization

3,909

4,227

Operating (gains), losses and other charges, net

(511

)

(5,721

)

Total operating costs and expenses, net

81,185

87,273

Operating income (loss)

(1,080

)

26,563

Interest expense, net

4,645

3,570

Other nonoperating expense (income), net

(8,022

)

(652

)

Income before income taxes

2,297

23,645

Provision for (benefit from) income taxes

(62

)

5,086

Net income

$

2,359

$

18,559

Basic net income per share

$

0.04

$

0.32

Diluted net income per share

$

0.04

$

0.31

Basic weighted average shares outstanding

64,898

58,406

Diluted weighted average shares outstanding

65,467

60,343

Comprehensive income

$

3,159

$

26,506

General and Administrative Expenses

Quarter Ended

(In thousands)

12/30/20

12/25/19

Corporate administrative expenses

$

9,833

$

12,923

Share-based compensation

5,976

(448

)

Incentive compensation

3,046

2,096

Deferred compensation valuation adjustments

1,596

788

Total general and administrative expenses

$

20,451

$

15,359


DENNY’S CORPORATION

Condensed Consolidated Statements of Operations

(Unaudited)

Fiscal Year Ended

(In thousands, except per share amounts)

12/30/20

12/25/19

Revenue:

Company restaurant sales

$

118,160

$

306,377

Franchise and license revenue

170,445

235,012

Total operating revenue

288,605

541,389

Costs of company restaurant sales, excluding depreciation and amortization

114,569

258,396

Costs of franchise and license revenue, excluding depreciation and amortization

94,348

120,326

General and administrative expenses

55,040

69,018

Depreciation and amortization

16,161

19,846

Operating (gains), losses and other charges, net

1,808

(91,180

)

Total operating costs and expenses, net

281,926

376,406

Operating income

6,679

164,983

Interest expense, net

17,965

18,547

Other nonoperating expense (income), net

(4,171

)

(2,763

)

Income (loss) before income taxes

(7,115

)

149,199

Provision for (benefit from) income taxes

(1,999

)

31,789

Net income (loss)

$

(5,116

)

$

117,410

Basic net income (loss) per share

$

(0.08

)

$

1.96

Diluted net income (loss) per share

$

(0.08

)

$

1.90

Basic weighted average shares outstanding

60,812

59,944

Diluted weighted average shares outstanding

60,812

61,833

Comprehensive income (loss)

$

(31,561

)

$

87,596

General and Administrative Expenses

Fiscal Year Ended

(In thousands)

12/30/20

12/25/19

Corporate administrative expenses

$

41,135

$

50,319

Share-based compensation

7,948

6,694

Incentive compensation

4,351

9,425

Deferred compensation valuation adjustments

1,606

2,580

Total general and administrative expenses

$

55,040

$

69,018


DENNY’S CORPORATION

Reconciliation of Net Income (Loss) and Net Cash Provided by (Used in) Operating Activities to Non-GAAP Financial Measures

(Unaudited)

The Company believes that, in addition to GAAP measures, certain non-GAAP financial measures are appropriate indicators to assist in the evaluation of operating performance and liquidity on a period-to-period basis. The Company uses Adjusted EBITDA, Adjusted Free Cash Flow, Adjusted Net Income (Loss) and Adjusted Net Income (Loss) Per Share internally as performance measures for planning purposes, including the preparation of annual operating budgets, and for compensation purposes, including incentive compensation for certain employees. Adjusted EBITDA is also used in the calculation of financial covenant ratios in accordance with the Company’s credit facility. Adjusted Free Cash Flow is also used as a non-GAAP liquidity measure by Management to assess the Company’s ability to generate cash and plan for future operating and capital actions. Management believes that the presentation of Adjusted EBITDA, Adjusted Net Income (Loss), Adjusted Net Income (Loss) Per Share and Adjusted Free Cash Flow provide useful information to investors and analysts about the Company’s operating results, financial condition or cash flows. However, each of these non-GAAP financial measures should be considered as a supplement to, not a substitute for, operating income (loss), net income (loss), net cash provided by (used in) operating activities, or other financial performance and liquidity measures prepared in accordance with U.S. generally accepted accounting principles.

Quarter Ended

Fiscal Year Ended

(In thousands, except per share amounts)

12/30/20

12/25/19

12/30/20

12/25/19

Net income (loss)

$

2,359

$

18,559

$

(5,116

)

$

117,410

Provision for (benefit from) income taxes

(62

)

5,086

(1,999

)

31,789

Operating (gains), losses and other charges, net

(511

)

(5,721

)

1,808

(91,180

)

Other nonoperating expense (income), net

(8,022

)

(652

)

(4,171

)

(2,763

)

Share-based compensation

5,976

(448

)

7,948

6,694

Deferred compensation plan valuation adjustments

1,596

788

1,606

2,580

Interest expense, net

4,645

3,570

17,965

18,547

Depreciation and amortization

3,909

4,227

16,161

19,846

Cash payments for restructuring charges and exit costs

(575

)

(529

)

(2,981

)

(2,581

)

Cash payments for share-based compensation

(1,354

)

(4,578

)

(3,559

)

Adjusted EBITDA

$

7,961

$

24,880

$

26,643

$

96,783

Net cash provided by (used in) operating activities

$

8,473

$

11,301

$

(3,137

)

$

43,327

Capital expenditures

(1,486

)

(1,329

)

(6,962

)

(13,975

)

Acquisition of restaurants and real estate

(1,864

)

(11,320

)

Cash payments for restructuring charges and exit costs

(575

)

(529

)

(2,981

)

(2,581

)

Cash payments for share-based compensation

(1,354

)

(4,578

)

(3,559

)

Deferred compensation plan valuation adjustments

1,596

788

1,606

2,580

Other nonoperating expense (income), net

(8,022

)

(652

)

(4,171

)

(2,763

)

Gains on investments

6

1

123

180

Gains (losses) on early extinguishment of debt and leases

(181

)

(153

)

(224

)

4

Amortization of deferred financing costs

(285

)

(152

)

(876

)

(608

)

Gains (losses) on interest rate swap derivatives, net

6,349

2,164

Interest expense, net

4,645

3,570

17,965

18,547

Cash interest expense, net (1)

(4,912

)

(3,332

)

(18,047

)

(17,551

)

Deferred income tax expense

(6,486

)

(6,411

)

(3,981

)

(16,005

)

Decrease in tax valuation allowance

3,041

2,935

3,041

2,935

Provision for (benefit from) income taxes

(62

)

5,086

(1,999

)

31,789

Income taxes received (paid), net

539

(6,294

)

(6

)

(24,147

)

Changes in operating assets and liabilities

816

9,096

23,691

22,937

Adjusted Free Cash Flow

$

2,102

$

12,061

$

1,628

$

29,790


(1)

Includes cash interest expense, net and cash payments of approximately $0.8 million and $1.9 million for dedesignated interest rate swap derivatives for the quarter and year ended December 30, 2020, respectively.


DENNY’S CORPORATION

Reconciliation of Net Income (Loss) and Net Cash Provided by (Used in) Operating Activities to Non-GAAP Financial Measures

(Unaudited)

Quarter Ended

Fiscal Year Ended

(In thousands, except per share amounts)

12/30/20

12/25/19

12/30/20

12/25/19

Adjusted EBITDA

$

7,961

$

24,880

$

26,643

$

96,783

Cash interest expense, net (1)

(4,912

)

(3,332

)

(18,047

)

(17,551

)

Cash received (paid) for income taxes, net

539

(6,294

)

(6

)

(24,147

)

Cash paid for capital expenditures

(1,486

)

(3,193

)

(6,962

)

(25,295

)

Adjusted Free Cash Flow

$

2,102

$

12,061

$

1,628

$

29,790

Quarter Ended

Fiscal Year Ended

(In thousands, except per share amounts)

12/30/20

12/25/19

12/30/20

12/25/19

Net income (loss)

$

2,359

$

18,559

$

(5,116

)

$

117,410

(Gains) losses on interest rate swap derivatives, net

(6,349

)

(2,164

)

(Gains) losses on sales of assets and other, net

(2,418

)

(6,111

)

(4,678

)

(93,608

)

Impairment charges

1,564

4,083

Tax effect (2)

1,848

1,571

706

24,057

Adjusted Net Income (Loss)

$

(2,996

)

$

14,019

$

(7,169

)

$

47,859

Diluted weighted average shares outstanding

64,898

60,343

60,812

61,833

Diluted Net Income (Loss) Per Share

$

0.04

$

0.31

$

(0.08

)

$

1.90

Adjustments Per Share

$

(0.09

)

$

(0.08

)

$

(0.04

)

$

(1.13

)

Adjusted Net Income (Loss) Per Share

$

(0.05

)

$

0.23

$

(0.12

)

$

0.77


(1)

Includes cash interest expense, net and cash payments of approximately $0.8 million and $1.9 million for dedesignated interest rate swap derivatives for the quarter and year ended December 30, 2020, respectively.

(2)

Tax adjustments for the quarter ended December 30, 2020 reflect an effective tax rate of 25.7%. Tax adjustments for the year ended December 30, 2020 are calculated using an effective tax rate of 25.6%. Tax adjustments for the gains on sales of assets and other, net for the quarter and year ended December 25, 2019 are calculated using an effective tax rate of 25.7%.


DENNY’S CORPORATION

Reconciliation of Operating Income (Loss) to Non-GAAP Financial Measures

(Unaudited)

The Company believes that, in addition to GAAP measures, certain other non-GAAP financial measures are appropriate indicators to assist in the evaluation of restaurant-level operating efficiency and performance of ongoing restaurant-level operations. The Company uses Restaurant-level Operating Margin, Company Restaurant Operating Margin and Franchise Operating Margin internally as performance measures for planning purposes, including the preparation of annual operating budgets, and these three non-GAAP measures are used to evaluate operating effectiveness.

The Company defines Restaurant-level Operating Margin as operating income (loss) excluding the following three items: general and administrative expenses, depreciation and amortization, and operating (gains), losses and other charges, net. Restaurant-level Operating Margin is presented as a percent of total operating revenue. The Company excludes general and administrative expenses, which include primarily non-restaurant-level costs associated with support of company and franchised restaurants and other activities at their corporate office. The Company excludes depreciation and amortization expense, substantially all of which is related to company restaurant-level assets, because such expenses represent historical sunk costs which do not reflect current cash outlays for the restaurants. The Company excludes special items, included within operating (gains), losses and other charges, net, to provide investors with a clearer perspective of its ongoing operating performance and a more relevant comparison to prior period results.

Restaurant-level Operating Margin is the total of Company Restaurant Operating Margin and Franchise Operating Margin. The Company defines Company Restaurant Operating Margin as company restaurant sales less costs of company restaurant sales (which include product costs, company restaurant level payroll and benefits, occupancy costs, and other operating costs including utilities, repairs and maintenance, marketing and other expenses) and presents it as a percent of company restaurant sales. The Company defines Franchise Operating Margin as franchise and license revenue (which includes franchise royalties and other non-food and beverage revenue streams such as initial franchise fees, advertising revenue and occupancy revenue) less costs of franchise and license revenue and presents it as a percent of franchise and license revenue.

These non-GAAP financial measures provide a meaningful comparison between periods and enable investors to focus on the performance of restaurant-level operations by excluding revenues and costs unrelated to food and beverage sales in addition to corporate general and administrative expense, depreciation and amortization, and operating (gains), losses and other charges, net. However, each of these non-GAAP financial measures should be considered as a supplement to, not a substitute for, operating income (loss), net income (loss) or other financial performance measures prepared in accordance with U.S. generally accepted accounting principles. Restaurant-level Operating Margin, Company Restaurant Operating Margin and Franchise Operating Margin do not accrue directly to the benefit of shareholders because of the aforementioned excluded items, and are not indicative of the overall results for the Company.

Quarter Ended

Fiscal Year Ended

(In thousands)

12/30/20

12/25/19

12/30/20

12/25/19

Operating income (loss)

$

(1,080

)

$

26,563

$

6,679

$

164,983

General and administrative expenses

20,451

15,359

55,040

69,018

Depreciation and amortization

3,909

4,227

16,161

19,846

Operating (gains), losses and other charges, net

(511

)

(5,721

)

1,808

(91,180

)

Restaurant-level Operating Margin

$

22,769

$

40,428

$

79,688

$

162,667

Restaurant-level Operating Margin consists of:

Company Restaurant Operating Margin (1)

$

1,417

$

8,656

$

3,591

$

47,981

Franchise Operating Margin (2)

21,352

31,772

76,097

114,686

Restaurant-level Operating Margin

$

22,769

$

40,428

$

79,688

$

162,667


(1)

Company Restaurant Operating Margin is calculated as operating income plus general and administrative expenses; depreciation and amortization; operating (gains), losses and other charges, net; and costs of franchise and license revenue; less franchise and license revenue.

(2)

Franchise Operating Margin is calculated as operating income plus general and administrative expenses; depreciation and amortization; operating (gains), losses and other charges, net; and costs of company restaurant sales; less company restaurant sales.


DENNY’S CORPORATION

Operating Margins

(Unaudited)

Quarter Ended

(In thousands)

12/30/20

12/25/19

Company restaurant operations: (1)

Company restaurant sales

$

32,892

100.0%

$

48,803

100.0%

Costs of company restaurant sales:

Product costs

8,275

25.2%

11,849

24.3%

Payroll and benefits

14,614

44.4%

18,331

37.6%

Occupancy

2,712

8.2%

3,030

6.2%

Other operating costs:

Utilities

1,333

4.1%

1,443

3.0%

Repairs and maintenance

680

2.1%

1,050

2.2%

Marketing

1,133

3.4%

1,838

3.8%

Other direct costs

2,728

8.3%

2,606

5.3%

Total costs of company restaurant sales

$

31,475

95.7%

$

40,147

82.3%

Company restaurant operating margin (non-GAAP) (2)

$

1,417

4.3%

$

8,656

17.7%

Franchise operations: (3)

Franchise and license revenue:

Royalties

$

19,039

40.3%

$

29,071

44.7%

Advertising revenue

15,060

31.9%

21,562

33.2%

Initial and other fees

2,399

5.1%

2,291

3.5%

Occupancy revenue

10,715

22.7%

12,109

18.6%

Total franchise and license revenue

$

47,213

100.0%

$

65,033

100.0%

Costs of franchise and license revenue:

Advertising costs

$

15,060

31.9%

$

21,561

33.2%

Occupancy costs

6,636

14.1%

7,788

12.0%

Other direct costs

4,165

8.8%

3,912

6.0%

Total costs of franchise and license revenue

$

25,861

54.8%

$

33,261

51.1%

Franchise operating margin (non-GAAP) (2)

$

21,352

45.2%

$

31,772

48.9%

Total operating revenue (4)

$

80,105

100.0%

$

113,836

100.0%

Total costs of operating revenue (4)

57,336

71.6%

73,408

64.5%

Restaurant-level operating margin (non-GAAP) (4)(2)

$

22,769

28.4%

$

40,428

35.5%

Other operating expenses: (4)(2)

General and administrative expenses

$

20,451

25.5%

$

15,359

13.5%

Depreciation and amortization

3,909

4.9%

4,227

3.7%

Operating (gains), losses and other charges, net

(511

)

(0.6)%

(5,721

)

(5.0)%

Total other operating expenses

$

23,849

29.8%

$

13,865

12.2%

Operating income (loss) (4)

$

(1,080

)

(1.3)%

$

26,563

23.3%

(1)

As a percentage of company restaurant sales.

(2)

Other operating expenses such as general and administrative expenses and depreciation and amortization relate to both company and franchise operations and are not allocated to costs of company restaurant sales and costs of franchise and license revenue. As such, operating margin is considered a non-GAAP financial measure. Operating margins should be considered as a supplement to, not as a substitute for, operating income (loss), net income (loss) or other financial measures prepared in accordance with U.S. generally accepted accounting principles.

(3)

As a percentage of franchise and license revenue.

(4)

As a percentage of total operating revenue.


DENNY’S CORPORATION

Operating Margins

(Unaudited)

Fiscal Year Ended

(In thousands)

12/30/20

12/25/19

Company restaurant operations: (1)

Company restaurant sales

$

118,160

100.0%

$

306,377

100.0%

Costs of company restaurant sales:

Product costs

29,816

25.2%

74,720

24.4%

Payroll and benefits

51,684

43.7%

118,806

38.8%

Occupancy

11,241

9.5%

18,613

6.1%

Other operating costs:

Utilities

5,148

4.4%

10,359

3.4%

Repairs and maintenance

2,608

2.2%

6,792

2.2%

Marketing

3,904

3.3%

11,195

3.7%

Other direct costs

10,168

8.6%

17,911

5.8%

Total costs of company restaurant sales

$

114,569

97.0%

$

258,396

84.3%

Company restaurant operating margin (non-GAAP) (2)

$

3,591

3.0%

$

47,981

15.7%

Franchise operations: (3)

Franchise and license revenue:

Royalties

$

67,501

39.6%

$

108,813

46.3%

Advertising revenue

53,745

31.5%

81,144

34.5%

Initial and other fees

7,332

4.3%

6,541

2.8%

Occupancy revenue

41,867

24.6%

38,514

16.4%

Total franchise and license revenue

$

170,445

100.0%

$

235,012

100.0%

Costs of franchise and license revenue:

Advertising costs

$

53,745

31.5%

$

81,144

34.5%

Occupancy costs

26,732

15.7%

25,806

11.0%

Other direct costs

13,871

8.1%

13,376

5.7%

Total costs of franchise and license revenue

$

94,348

55.4%

$

120,326

51.2%

Franchise operating margin (non-GAAP) (2)

$

76,097

44.6%

$

114,686

48.8%

Total operating revenue (4)

$

288,605

100.0%

$

541,389

100.0%

Total costs of operating revenue (4)

208,917

72.4%

378,722

70.0%

Restaurant-level operating margin (non-GAAP) (4)(2)

$

79,688

27.6%

$

162,667

30.0%

Other operating expenses: (4)(2)

General and administrative expenses

$

55,040

19.1%

$

69,018

12.7%

Depreciation and amortization

16,161

5.6%

19,846

3.7%

Operating (gains), losses and other charges, net

1,808

0.6%

(91,180

)

(16.8)%

Total other operating expenses

$

73,009

25.3%

$

(2,316

)

(0.4)%

Operating income (4)

$

6,679

2.3%

$

164,983

30.5%

(1)

As a percentage of company restaurant sales.

(2)

Other operating expenses such as general and administrative expenses and depreciation and amortization relate to both company and franchise operations and are not allocated to costs of company restaurant sales and costs of franchise and license revenue. As such, operating margin is considered a non-GAAP financial measure. Operating margin should be considered as a supplement to, not as a substitute for, operating income (loss), net income (loss) or other financial measures prepared in accordance with U.S. generally accepted accounting principles.

(3)

As a percentage of franchise and license revenue.

(4)

As a percentage of total operating revenue.


DENNY’S CORPORATION

Statistical Data

(Unaudited)

Changes in Same-Store Sales (1)

Quarter Ended

Fiscal Year Ended

(increase (decrease) vs. prior year)

12/30/20

12/25/19

12/30/20

12/25/19

Company Restaurants

(34.9)%

0.5%

(36.7)%

1.9%

Domestic Franchised Restaurants

(32.8)%

1.8%

(30.9)%

2.0%

Domestic System-wide Restaurants

(32.9)%

1.7%

(31.4)%

2.0%

Average Unit Sales

Quarter Ended

Fiscal Year Ended

(In thousands)

12/30/20

12/25/19

12/30/20

12/25/19

Company Restaurants

$

499

$

695

$

1,812

$

2,477

Franchised Restaurants

$

314

$

427

$

1,181

$

1,669

Franchised

Restaurant Unit Activity

Company

& Licensed

Total

Ending Units September 23, 2020

66

1,598

1,664

Units Opened

4

4

Units Closed

(1)

(17)

(18)

Net Change

(1)

(13)

(14)

Ending Units December 30, 2020

65

1,585

1,650

Equivalent Units

Fourth Quarter 2020

66

1,594

1,660

Fourth Quarter 2019

70

1,634

1,704

Net Change

(4)

(40)

(44)

Franchised

Restaurant Unit Activity

Company

& Licensed

Total

Ending Units December 25, 2019

68

1,635

1,703

Units Opened

20

20

Units Closed

(3)

(70)

(73)

Net Change

(3)

(50)

(53)

Ending Units December 30, 2020

65

1,585

1,650

Equivalent Units

Year-to-Date 2020

65

1,614

1,679

Year-to-Date 2019

124

1,578

1,702

Net Change

(59)

36

(23)

(1)


Same-store sales include sales at company restaurants and non-consolidated franchised and licensed restaurants that were open the same period in the prior year. Total operating revenue is limited to company restaurant sales and royalties, advertising revenue, fees and occupancy revenue from non-consolidated franchised and licensed restaurants. Accordingly, domestic franchise same-store sales and domestic system-wide same-store sales should be considered as a supplement to, not a substitute for, the Company's results as reported under GAAP.

CONTACT: Investor Contact: Curt Nichols 877-784-7167 Media Contact: Hadas Streit, Allison+Partners 646-428-0629