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Denny’s Corporation Reports Results for Second Quarter 2022

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Denny's Corporation
Denny's Corporation

SPARTANBURG, S.C., Aug. 02, 2022 (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 second quarter ended June 29, 2022 and provided a business update on the Company’s operations.

Kelli Valade, Chief Executive Officer and President, stated, "We were pleased to have delivered Adjusted EBITDA* within our guided range despite the many inflationary pressures weighing on our performance and impacting consumer trends as we moved through the second quarter. While there is a level of volatility within the macroeconomic environment, we take pride in Denny’s being an iconic brand that is cycle-tested and resilient with deeply embedded value attributes. Moreover, our company has a solid foundation with significant competitive advantages that we believe can help us unlock shareholder value.”

Ms. Valade continued, "Last month, we welcomed the Keke’s Breakfast Café team and franchisees to the Denny’s family. We believe Keke’s has attractive unit economics and strong potential within the fast-growing A.M. eatery segment which provides expansion opportunities as a complementary concept to the Denny's brand. We are excited to have Keke’s as part of our restaurant portfolio.”

Second Quarter 2022 Highlights

  • Total operating revenue grew 8.3% to $115.0 million compared to the prior year quarter.

  • Domestic system-wide same-store sales** grew 2.5% compared to the equivalent fiscal period in 2021, including a 2.4% increase at domestic franchised restaurants and a 3.8% increase at company restaurants.

  • Opened four franchised restaurants, including one international location.

  • Completed 11 remodels, including 7 franchised restaurants.

  • Operating income was $13.9 million compared to $18.3 million in the prior year quarter.

  • Franchise Operating Margin* was $30.6 million, or 46.4% of franchise and license revenue, and Company Restaurant Operating Margin* was $4.3 million, or 8.8% of company restaurant sales.

  • Net income was $23.0 million, or $0.37 per diluted share.

  • Adjusted Net Income* and Adjusted Net Income Per Share* were $7.0 million and $0.11, respectively.

  • Adjusted EBITDA* was $17.2 million.

  • Cash provided by (used in) operating, investing, and financing activities was $16.7 million, ($2.9) million, and ($18.5) million, respectively.

  • Adjusted Free Cash Flow* was $6.6 million.

  • Repurchased $37.4 million of common stock.

Second Quarter Results

Denny’s total operating revenue increased 8.3% to $115.0 million compared to $106.2 million in the prior year quarter.

Franchise and license revenue was $65.9 million compared to $58.6 million in the prior year quarter. Royalties were $28.8 million compared to $27.1 million in the prior year quarter. Advertising revenue was $19.5 million compared to $18.6 million in the prior year quarter. Initial and other fees were $7.8 million, including $5.7 million related to the kitchen modernization rollout, compared to $2.1 million in the prior year. Occupancy revenue was $9.8 million compared to $10.8 million in the prior year quarter.

Company restaurant sales were $49.2 million compared to $47.6 million in the prior year quarter. This increase was primarily due to price increases and changes in product mix.

Franchise Operating Margin* was $30.6 million, or 46.4% of franchise and license revenue, compared to $29.9 million, or 51.0%, in the prior year quarter. This margin dollar increase was primarily due to the improvement in sales performance at franchised restaurants. The margin rate was impacted by approximately 450 basis points due to the kitchen modernization rollout.

Company Restaurant Operating Margin* was $4.3 million, or 8.8% of company restaurant sales, compared to $9.8 million, or 20.5%, in the prior year quarter. This margin change was primarily due to approximately $2.3 million of unfavorable legal reserve adjustments and commodity and labor inflation, partially offset by the improvement in sales performance at company restaurants.

Total general and administrative expenses were $16.6 million, compared to $17.5 million in the prior year quarter. This improvement was primarily due to a benefit from deferred compensation valuation adjustments and a reduction in corporate incentive compensation, partially offset by an increase in corporate administrative expenses.

The provision for income taxes was $7.8 million, reflecting an effective tax rate of 25.3%. Approximately $4.2 million in cash taxes were paid during the quarter.

Net income was $23.0 million, or $0.37 per diluted share, compared to net loss of $0.8 million, or $0.01 per diluted share, in the prior year quarter. Adjusted Net Income* per share was $0.11 compared to $0.18 in the prior year quarter.

Denny’s ended the quarter with $199.0 million of total debt outstanding, including $187.0 million of borrowings under its credit facility.

Adjusted Free Cash Flow* and Capital Allocation

Denny’s generated $6.6 million of Adjusted Free Cash Flow* in the quarter after investing $3.0 million in cash capital expenditures, including the remodel of four company restaurants and facilities maintenance.

During the quarter, the Company allocated $37.4 million to share repurchases resulting in approximately $168 million remaining under its existing repurchase authorization.

Business Outlook

The following expectations for the fiscal third quarter ending September 28, 2022, inclusive of Keke's Breakfast Café, reflect management's expectations that the current consumer and economic environment will not change materially.

  • Denny's domestic system-wide same-store sales** between 0% and 2%.

  • Consolidated total general and administrative expenses between $17.5 million and $18.5 million, including approximately $2 million related to share-based compensation expense.

  • Consolidated Adjusted EBITDA* between $19 million and $21 million.

* Please refer to the Reconciliation of Net Income and Net Cash Provided by (Used In) Operating Activities to Non-GAAP Financial Measures, as well as the Reconciliation of Operating Income to Non-GAAP Financial Measures included in the following tables. The Company is not able to reconcile the forward-looking non-GAAP estimates set forth above to their most directly comparable U.S. generally accepted accounting principles (GAAP) estimates without unreasonable efforts because it is unable to predict, forecast or determine the probable significance of the items impacting these estimates, including gains, losses and other charges, with a reasonable degree of accuracy. Accordingly, the most directly comparable forward-looking GAAP estimates are not provided.

** Same-store sales include sales at company restaurants and non-consolidated franchised and licensed restaurants that were open during the comparable periods noted. 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 second quarter ended June 29, 2022 on its quarterly investor conference call today, Tuesday, August 2, 2022 at 4:30 p.m. Eastern Time. Interested parties are invited to listen to a live broadcast of the conference call accessible through the Denny's investor relations 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 June 29, 2022, Denny’s had 1,631 franchised, licensed, and company restaurants around the world including 154 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.

About Keke’s Breakfast Café

Keke’s Breakfast Café is the franchisor and operator of a full-service A.M. eatery concept, currently consisting of 52 domestic restaurants in Florida, including 44 franchised locations. For further information on Keke’s, please visit kekes.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 evolving COVID-19 pandemic and related containment measures, including the potential for further operational disruption from government mandates affecting restaurants; economic, public health and political conditions that impact consumer confidence and spending, including COVID-19; commodity and labor inflation; the ability to effectively staff restaurants; the Company's ability to maintain adequate levels of liquidity for its cash needs, including debt obligations, payment of dividends, planned share repurchases and capital expenditures as well as the ability of its customers, suppliers, franchisees and lenders to access sources of liquidity to provide for their own cash needs; competitive pressures from within the restaurant industry; the Company's ability to integrate and derive the expected benefits from our acquisition of Keke's Breakfast Cafe; 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 and geopolitical events (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 29, 2021 (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)

6/29/22

 

12/29/21

Assets

 

 

 

Current assets

 

 

 

Cash and cash equivalents

$

1,360

 

 

$

30,624

 

Investments

 

3,529

 

 

 

2,551

 

Receivables, net

 

23,193

 

 

 

19,621

 

Inventories

 

12,208

 

 

 

5,060

 

Assets held for sale

 

1,319

 

 

 

 

Prepaid and other current assets

 

7,829

 

 

 

11,393

 

Total current assets

 

49,438

 

 

 

69,249

 

Property, net

 

92,934

 

 

 

91,176

 

Financing lease right-of-use assets, net

 

7,103

 

 

 

7,709

 

Operating lease right-of-use assets, net

 

124,176

 

 

 

128,727

 

Goodwill

 

36,884

 

 

 

36,884

 

Intangible assets, net

 

49,581

 

 

 

50,226

 

Deferred financing costs, net

 

2,654

 

 

 

2,971

 

Deferred income taxes, net

 

 

 

 

11,502

 

Other noncurrent assets

 

30,048

 

 

 

37,083

 

Total assets

$

392,818

 

 

$

435,527

 

 

 

 

 

Liabilities

 

 

 

Current liabilities

 

 

 

Current finance lease liabilities

$

1,896

 

 

$

1,952

 

Current operating lease liabilities

 

15,051

 

 

 

15,829

 

Accounts payable

 

16,675

 

 

 

15,595

 

Other current liabilities

 

56,680

 

 

 

64,146

 

Total current liabilities

 

90,302

 

 

 

97,522

 

Long-term liabilities

 

 

 

Long-term debt

 

187,000

 

 

 

170,000

 

Noncurrent finance lease liabilities

 

10,117

 

 

 

10,744

 

Noncurrent operating lease liabilities

 

121,807

 

 

 

126,296

 

Liability for insurance claims, less current portion

 

7,386

 

 

 

8,438

 

Deferred income taxes, net

 

1,994

 

 

 

 

Other noncurrent liabilities

 

32,920

 

 

 

87,792

 

Total long-term liabilities

 

361,224

 

 

 

403,270

 

Total liabilities

 

451,526

 

 

 

500,792

 

 

 

 

 

Shareholders' deficit

 

 

 

Common stock

 

650

 

 

 

642

 

Paid-in capital

 

138,347

 

 

 

135,596

 

Deficit

 

(71,583

)

 

 

(116,441

)

Accumulated other comprehensive loss, net

 

(46,281

)

 

 

(54,470

)

Treasury stock

 

(79,841

)

 

 

(30,592

)

Total shareholders' deficit

 

(58,708

)

 

 

(65,265

)

Total liabilities and shareholders' deficit

$

392,818

 

 

$

435,527

 

 

 

 

 

Debt Balances

Credit facility revolver due 2026

$

187,000

 

 

$

170,000

 

Finance lease liabilities

 

12,013

 

 

 

12,696

 

Total debt

$

199,013

 

 

$

182,696

 

 

 

 

 

 

 

 

 


DENNY’S CORPORATION

Condensed Consolidated Statements of Operations

(Unaudited)

 

 

 

 

 

Quarter Ended

($ in thousands, except per share amounts)

6/29/22

 

6/30/21

Revenue:

 

 

 

Company restaurant sales

$

49,167

 

 

$

47,572

 

Franchise and license revenue

 

65,850

 

 

 

58,593

 

Total operating revenue

 

115,017

 

 

 

106,165

 

Costs of company restaurant sales, excluding depreciation and amortization

 

44,828

 

 

 

37,813

 

Costs of franchise and license revenue, excluding depreciation and amortization

 

35,265

 

 

 

28,735

 

General and administrative expenses

 

16,623

 

 

 

17,548

 

Depreciation and amortization

 

3,590

 

 

 

3,897

 

Operating (gains), losses and other charges, net

 

846

 

 

 

(113

)

Total operating costs and expenses, net

 

101,152

 

 

 

87,880

 

Operating income

 

13,865

 

 

 

18,285

 

Interest expense, net

 

2,878

 

 

 

4,066

 

Other nonoperating expense (income), net

 

(19,795

)

 

 

16,251

 

Income (loss) before income taxes

 

30,782

 

 

 

(2,032

)

Provision for (benefit from) income taxes

 

7,779

 

 

 

(1,204

)

Net income (loss)

$

23,003

 

 

$

(828

)

 

 

 

 

Net income (loss) per share - basic

$

0.37

 

 

$

(0.01

)

Net income (loss) per share - diluted

$

0.37

 

 

$

(0.01

)

 

 

 

 

Basic weighted average shares outstanding

 

62,306

 

 

 

65,294

 

Diluted weighted average shares outstanding

 

62,430

 

 

 

65,294

 

 

 

 

 

Comprehensive income (loss)

$

25,411

 

 

$

(578

)

 

 

 

 

General and Administrative Expenses

 

Corporate administrative expenses

$

13,162

 

 

$

10,345

 

Share-based compensation

 

3,505

 

 

 

3,388

 

Incentive compensation

 

1,639

 

 

 

3,032

 

Deferred compensation valuation adjustments

 

(1,683

)

 

 

783

 

Total general and administrative expenses

$

16,623

 

 

$

17,548

 

 

 

 

 

 

 

 

 


DENNY’S CORPORATION

Condensed Consolidated Statements of Operations

(Unaudited)

 

 

 

 

 

Two Quarters Ended

($ in thousands, except per share amounts)

6/29/22

 

6/30/21

Revenue:

 

 

 

Company restaurant sales

$

93,143

 

 

$

81,141

 

Franchise and license revenue

 

124,981

 

 

 

105,600

 

Total operating revenue

 

218,124

 

 

 

186,741

 

Costs of company restaurant sales, excluding depreciation and amortization

 

83,453

 

 

 

67,977

 

Costs of franchise and license revenue, excluding depreciation and amortization

 

65,934

 

 

 

52,493

 

General and administrative expenses

 

33,581

 

 

 

34,495

 

Depreciation and amortization

 

7,138

 

 

 

7,558

 

Operating (gains), losses and other charges, net

 

846

 

 

 

419

 

Total operating costs and expenses, net

 

190,952

 

 

 

162,942

 

Operating income

 

27,172

 

 

 

23,799

 

Interest expense, net

 

5,838

 

 

 

8,343

 

Other nonoperating income, net

 

(39,410

)

 

 

(13,797

)

Income before income taxes

 

60,744

 

 

 

29,253

 

Provision for income taxes

 

15,886

 

 

 

6,900

 

Net income

$

44,858

 

 

$

22,353

 

 

 

 

 

Net income per share - basic

$

0.71

 

 

$

0.34

 

Net income per share - diluted

$

0.71

 

 

$

0.34

 

 

 

 

 

Basic weighted average shares outstanding

 

62,822

 

 

 

65,273

 

Diluted weighted average shares outstanding

 

63,003

 

 

 

65,789

 

 

 

 

 

Comprehensive income

$

53,047

 

 

$

25,678

 

 

 

 

 

General and Administrative Expenses

 

Corporate administrative expenses

$

24,545

 

 

$

21,217

 

Share-based compensation

 

7,520

 

 

 

6,860

 

Incentive compensation

 

3,758

 

 

 

5,118

 

Deferred compensation valuation adjustments

 

(2,242

)

 

 

1,300

 

Total general and administrative expenses

$

33,581

 

 

$

34,495

 

 

 

 

 

 

 

 

 


DENNY’S CORPORATION

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

(Unaudited)

The Company believes that, in addition to U.S. generally accepted accounting principles (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 and Adjusted Net Income 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, Adjusted Net Income 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, net income (loss), net income (loss) per share, net cash provided by operating activities, or other financial performance and liquidity measures prepared in accordance with GAAP.

 

Quarter Ended

 

Two Quarters Ended

($ in thousands)

6/29/22

 

6/30/21

 

6/29/22

 

6/30/21

Net income (loss)

$

23,003

 

 

$

(828

)

 

$

44,858

 

 

$

22,353

 

Provision for (benefit from) income taxes

 

7,779

 

 

 

(1,204

)

 

 

15,886

 

 

 

6,900

 

Operating (gains), losses and other charges, net

 

846

 

 

 

(113

)

 

 

846

 

 

 

419

 

Other nonoperating expense (income), net

 

(19,795

)

 

 

16,251

 

 

 

(39,410

)

 

 

(13,797

)

Share-based compensation expense

 

3,505

 

 

 

3,388

 

 

 

7,520

 

 

 

6,860

 

Deferred compensation plan valuation adjustments

 

(1,683

)

 

 

783

 

 

 

(2,242

)

 

 

1,300

 

Interest expense, net

 

2,878

 

 

 

4,066

 

 

 

5,838

 

 

 

8,343

 

Depreciation and amortization

 

3,590

 

 

 

3,897

 

 

 

7,138

 

 

 

7,558

 

Cash payments for restructuring charges and exit costs

 

(208

)

 

 

(869

)

 

 

(381

)

 

 

(1,274

)

Cash payments for share-based compensation

 

(2,693

)

 

 

(69

)

 

 

(5,147

)

 

 

(1,565

)

Adjusted EBITDA

$

17,222

 

 

$

25,302

 

 

$

34,906

 

 

$

37,097

 

 

 

 

 

 

 

 

 


DENNY’S CORPORATION

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

(Unaudited)

 

 

Quarter Ended

 

Two Quarters Ended

($ in thousands)

6/29/22

 

6/30/21

 

6/29/22

 

6/30/21

Net cash provided by operating activities

$

16,673

 

 

$

33,136

 

 

$

9,609

 

 

$

43,371

 

Capital expenditures

 

(2,993

)

 

 

(1,525

)

 

 

(5,771

)

 

 

(3,108

)

Cash payments for restructuring charges and exit costs

 

(208

)

 

 

(869

)

 

 

(381

)

 

 

(1,274

)

Cash payments for share-based compensation

 

(2,693

)

 

 

(69

)

 

 

(5,147

)

 

 

(1,565

)

Deferred compensation plan valuation adjustments

 

(1,683

)

 

 

783

 

 

 

(2,242

)

 

 

1,300

 

Other nonoperating expense (income), net

 

(19,795

)

 

 

16,251

 

 

 

(39,410

)

 

 

(13,797

)

Gains (losses) on investments

 

(158

)

 

 

5

 

 

 

(223

)

 

 

(3

)

Gains (losses) on early termination of debt and leases

 

 

 

 

106

 

 

 

(24

)

 

 

72

 

Amortization of deferred financing costs

 

(159

)

 

 

(344

)

 

 

(317

)

 

 

(688

)

Gains (losses) and amortization on interest rate swap derivatives, net

 

21,671

 

 

 

(17,227

)

 

 

41,924

 

 

 

12,506

 

Interest expense, net

 

2,878

 

 

 

4,066

 

 

 

5,838

 

 

 

8,343

 

Cash interest expense, net (1)

 

(3,449

)

 

 

(4,455

)

 

 

(7,175

)

 

 

(9,041

)

Deferred income tax (expense) benefit

 

(6,330

)

 

 

1,888

 

 

 

(10,766

)

 

 

(2,211

)

Provision for (benefit from) income taxes

 

7,779

 

 

 

(1,204

)

 

 

15,886

 

 

 

6,900

 

Income taxes paid, net

 

(4,195

)

 

 

(1,521

)

 

 

(4,644

)

 

 

(1,942

)

Changes in operating assets and liabilities

 

 

 

 

 

 

 

Receivables

 

(148

)

 

 

(404

)

 

 

3,419

 

 

 

(757

)

Inventories

 

2,380

 

 

 

111

 

 

 

7,148

 

 

 

98

 

Other current assets

 

(112

)

 

 

(1,383

)

 

 

(3,563

)

 

 

(6,677

)

Other noncurrent assets

 

(2,040

)

 

 

1,116

 

 

 

(6,125

)

 

 

1,317

 

Operating lease assets and liabilities

 

222

 

 

 

217

 

 

 

466

 

 

 

821

 

Accounts payable

 

(864

)

 

 

(3,800

)

 

 

1,541

 

 

 

(5,620

)

Accrued payroll

 

(1,754

)

 

 

(3,696

)

 

 

5,721

 

 

 

(1,992

)

Accrued taxes

 

337

 

 

 

(814

)

 

 

338

 

 

 

(434

)

Other accrued liabilities

 

(2,485

)

 

 

(3,454

)

 

 

5,003

 

 

 

(4,649

)

Other noncurrent liabilities

 

3,711

 

 

 

887

 

 

 

6,211

 

 

 

2,036

 

Adjusted Free Cash Flow

$

6,585

 

 

$

17,801

 

 

$

17,316

 

 

$

23,006

 

 

 

 

 

 

 

 

 

(1) Includes cash interest expense, net and cash payments of approximately $0.7 million and $1.7 million for dedesignated interest rate swap derivatives for the quarter and year-to-date periods ended June 29, 2022, respectively. Includes cash interest expense, net and cash payments of approximately $0.8 million and $1.6 million for dedesignated interest rate swap derivatives for the quarter and year-to-date periods ended June 30, 2021, respectively.

DENNY’S CORPORATION

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

(Unaudited)

 

 

Quarter Ended

 

Two Quarters Ended

($ in thousands, except per share amounts)

6/29/22

 

6/30/21

 

6/29/22

 

6/30/21

Adjusted EBITDA

$

17,222

 

 

$

25,302

 

 

$

34,906

 

 

$

37,097

 

Cash interest expense, net (1)

 

(3,449

)

 

 

(4,455

)

 

 

(7,175

)

 

 

(9,041

)

Cash paid for income taxes, net

 

(4,195

)

 

 

(1,521

)

 

 

(4,644

)

 

 

(1,942

)

Cash paid for capital expenditures

 

(2,993

)

 

 

(1,525

)

 

 

(5,771

)

 

 

(3,108

)

Adjusted Free Cash Flow

$

6,585

 

 

$

17,801

 

 

$

17,316

 

 

$

23,006

 

 

 

 

 

 

 

 

 

Net income (loss)

$

23,003

 

 

$

(828

)

 

$

44,858

 

 

$

22,353

 

Gains (losses) and amortization on interest rate swap derivatives, net

 

(21,671

)

 

 

17,227

 

 

 

(41,924

)

 

 

(12,506

)

Gains on sales of assets and other, net

 

(99

)

 

 

(65

)

 

 

(245

)

 

 

(1,007

)

Impairment charges

 

266

 

 

 

 

 

 

266

 

 

 

 

Tax effect (2)

 

5,451

 

 

 

(4,756

)

 

 

10,979

 

 

 

3,189

 

Adjusted Net Income

$

6,950

 

 

$

11,578

 

 

$

13,934

 

 

$

12,029

 

 

 

 

 

 

 

 

 

Adjusted diluted weighted average shares outstanding

 

62,430

 

 

 

65,829

 

 

 

63,003

 

 

 

65,789

 

 

 

 

 

 

 

 

 

Net Income (Loss) Per Share - Diluted

$

0.37

 

 

$

(0.01

)

 

$

0.71

 

 

$

0.34

 

Adjustments Per Share

$

(0.26

)

 

$

0.19

 

 

$

(0.49

)

 

$

(0.16

)

Adjusted Net Income Per Share

$

0.11

 

 

$

0.18

 

 

$

0.22

 

 

$

0.18

 

 

 

 

 

 

 

 

 

(1) Includes cash interest expense, net and cash payments of approximately $0.7 million and $1.7 million for dedesignated interest rate swap derivatives for the quarter and year-to-date periods ended June 29, 2022, respectively. Includes cash interest expense, net and cash payments of approximately $0.8 million and $1.6 million for dedesignated interest rate swap derivatives for the quarter and year-to-date periods ended June 30, 2021, respectively.

(2) Tax adjustments for the quarter and year-to-date periods ended June 29, 2022 reflect an effective tax rates of 25.3% and 26.2%, respectively. Tax adjustments for the quarter and year-to-date periods ended June 30, 2021 reflect an effective tax rates of 27.7% and 23.6%, respectively.

DENNY’S CORPORATION

Reconciliation of Operating Income 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 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 and other 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, net income 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

 

Two Quarters Ended

($ in thousands)

6/29/22

 

6/30/21

 

6/29/22

 

6/30/21

Operating income

$

13,865

 

 

$

18,285

 

 

$

27,172

 

 

$

23,799

 

General and administrative expenses

 

16,623

 

 

 

17,548

 

 

 

33,581

 

 

 

34,495

 

Depreciation and amortization

 

3,590

 

 

 

3,897

 

 

 

7,138

 

 

 

7,558

 

Operating (gains), losses and other charges, net

 

846

 

 

 

(113

)

 

 

846

 

 

 

419

 

Restaurant-level Operating Margin

$

34,924

 

 

$

39,617

 

 

$

68,737

 

 

$

66,271

 

 

 

 

 

 

 

 

 

Restaurant-level Operating Margin consists of:

 

 

 

 

 

 

 

Company Restaurant Operating Margin (1)

$

4,339

 

 

$

9,759

 

 

$

9,690

 

 

$

13,164

 

Franchise Operating Margin (2)

 

30,585

 

 

 

29,858

 

 

 

59,047

 

 

 

53,107

 

Restaurant-level Operating Margin

$

34,924

 

 

$

39,617

 

 

$

68,737

 

 

$

66,271

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(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)

6/29/22

 

6/30/21

Company restaurant operations: (1)

 

 

 

 

 

Company restaurant sales

$

49,167

 

100.0

%

 

$

47,572

 

100.0

%

Costs of company restaurant sales:

 

 

 

 

 

Product costs

 

13,168

 

26.8

%

 

 

11,447

 

24.1

%

Payroll and benefits

 

18,336

 

37.3

%

 

 

16,970

 

35.7

%

Occupancy

 

3,782

 

7.7

%

 

 

2,844

 

6.0

%

Other operating costs:

 

 

 

 

 

Utilities

 

1,650

 

3.4

%

 

 

1,390

 

2.9

%

Repairs and maintenance

 

889

 

1.8

%

 

 

635

 

1.3

%

Marketing

 

1,330

 

2.7

%

 

 

1,365

 

2.9

%

Other direct costs

 

5,673

 

11.5

%

 

 

3,162

 

6.6

%

Total costs of company restaurant sales

$

44,828

 

91.2

%

 

$

37,813

 

79.5

%

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

$

4,339

 

8.8

%

 

$

9,759

 

20.5

%

 

 

 

 

 

 

Franchise operations: (3)

 

 

 

 

 

Franchise and license revenue:

 

 

 

 

 

Royalties

$

28,759

 

43.7

%

 

$

27,117

 

46.3

%

Advertising revenue

 

19,486

 

29.6

%

 

 

18,600

 

31.7

%

Initial and other fees

 

7,779

 

11.8

%

 

 

2,066

 

3.5

%

Occupancy revenue

 

9,826

 

14.9

%

 

 

10,810

 

18.4

%

Total franchise and license revenue

$

65,850

 

100.0

%

 

$

58,593

 

100.0

%

 

 

 

 

 

 

Costs of franchise and license revenue:

 

 

 

 

 

Advertising costs

$

19,486

 

29.6

%

 

$

18,600

 

31.7

%

Occupancy costs

 

6,064

 

9.2

%

 

 

6,879

 

11.7

%

Other direct costs

 

9,715

 

14.8

%

 

 

3,256

 

5.6

%

Total costs of franchise and license revenue

$

35,265

 

53.6

%

 

$

28,735

 

49.0

%

Franchise operating margin (non-GAAP) (2)

$

30,585

 

46.4

%

 

$

29,858

 

51.0

%

 

 

 

 

 

 

Total operating revenue (4)

$

115,017

 

100.0

%

 

$

106,165

 

100.0

%

Total costs of operating revenue (4)

 

80,093

 

69.6

%

 

 

66,548

 

62.7

%

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

$

34,924

 

30.4

%

 

$

39,617

 

37.3

%

 

 

 

 

 

 

Other operating expenses: (4)(2)

 

 

 

 

 

General and administrative expenses

$

16,623

 

14.5

%

 

$

17,548

 

16.5

%

Depreciation and amortization

 

3,590

 

3.1

%

 

 

3,897

 

3.7

%

Operating (gains), losses and other charges, net

 

846

 

0.7

%

 

 

(113

)

(0.1

)%

Total other operating expenses

$

21,059

 

18.3

%

 

$

21,332

 

20.1

%

 

 

 

 

 

 

Operating income (4)

$

13,865

 

12.1

%

 

$

18,285

 

17.2

%

 

 

 

 

 

 

(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, 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)

 

 

 

 

 

Two Quarters Ended

($ in thousands)

6/29/22

 

6/30/21

Company restaurant operations: (1)

 

 

 

 

 

Company restaurant sales

$

93,143

 

100.0

%

 

$

81,141

 

100.0

%

Costs of company restaurant sales:

 

 

 

 

 

Product costs

 

24,412

 

26.2

%

 

 

19,719

 

24.3

%

Payroll and benefits

 

35,422

 

38.0

%

 

 

29,935

 

36.9

%

Occupancy

 

7,022

 

7.5

%

 

 

5,694

 

7.0

%

Other operating costs:

 

 

 

 

 

Utilities

 

3,227

 

3.5

%

 

 

2,615

 

3.2

%

Repairs and maintenance

 

1,714

 

1.8

%

 

 

1,168

 

1.4

%

Marketing

 

2,537

 

2.7

%

 

 

2,332

 

2.9

%

Other direct costs

 

9,119

 

9.8

%

 

 

6,514

 

8.0

%

Total costs of company restaurant sales

$

83,453

 

89.6

%

 

$

67,977

 

83.8

%

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

$

9,690

 

10.4

%

 

$

13,164

 

16.2

%

 

 

 

 

 

 

Franchise operations: (3)

 

 

 

 

 

Franchise and license revenue:

 

 

 

 

 

Royalties

$

55,284

 

44.2

%

 

$

47,961

 

45.4

%

Advertising revenue

 

37,692

 

30.2

%

 

 

32,711

 

31.0

%

Initial and other fees

 

12,286

 

9.8

%

 

 

3,904

 

3.7

%

Occupancy revenue

 

19,719

 

15.8

%

 

 

21,024

 

19.9

%

Total franchise and license revenue

$

124,981

 

100.0

%

 

$

105,600

 

100.0

%

 

 

 

 

 

 

Costs of franchise and license revenue:

 

 

 

 

 

Advertising costs

$

37,692

 

30.2

%

 

$

32,711

 

31.0

%

Occupancy costs

 

12,441

 

10.0

%

 

 

13,418

 

12.7

%

Other direct costs

 

15,801

 

12.6

%

 

 

6,364

 

6.0

%

Total costs of franchise and license revenue

$

65,934

 

52.8

%

 

$

52,493

 

49.7

%

Franchise operating margin (non-GAAP) (2)

$

59,047

 

47.2

%

 

$

53,107

 

50.3

%

 

 

 

 

 

 

Total operating revenue (4)

$

218,124

 

100.0

%

 

$

186,741

 

100.0

%

Total costs of operating revenue (4)

 

149,387

 

68.5

%

 

 

120,470

 

64.5

%

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

$

68,737

 

31.5

%

 

$

66,271

 

35.5

%

 

 

 

 

 

 

Other operating expenses: (4)(2)

 

 

 

 

 

General and administrative expenses

$

33,581

 

15.4

%

 

$

34,495

 

18.5

%

Depreciation and amortization

 

7,138

 

3.3

%

 

 

7,558

 

4.0

%

Operating (gains), losses and other charges, net

 

846

 

0.4

%

 

 

419

 

0.2

%

Total other operating expenses

$

41,565

 

19.1

%

 

$

42,472

 

22.7

%

 

 

 

 

 

 

Operating income (4)

$

27,172

 

12.5

%

 

$

23,799

 

12.7

%

 

 

 

 

 

 

(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, 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) vs. Prior Year

Quarter Ended

 

Two Quarters Ended

(Increase (decrease))

6/29/22

 

6/30/21

 

6/29/22

 

6/30/21

Company Restaurants

 

3.8

%

 

 

172.1

%

 

 

14.9

%

 

 

46.8

%

Domestic Franchised Restaurants

 

2.4

%

 

 

113.2

%

 

 

11.2

%

 

 

30.8

%

Domestic System-wide Restaurants

 

2.5

%

 

 

117.0

%

 

 

11.5

%

 

 

31.9

%

 

 

 

 

 

 

 

 

Average Unit Sales

Quarter Ended

 

Two Quarters Ended

($ in thousands)

6/29/22

 

6/30/21

 

6/29/22

 

6/30/21

Company Restaurants

$

761

 

 

$

732

 

 

$

1,443

 

 

$

1,257

 

Franchised Restaurants

$

442

 

 

$

416

 

 

$

846

 

 

$

742

 

 

 

 

 

 

 

 

 

 

 

 

Franchised

 

 

 

 

Restaurant Unit Activity

Company

 

& Licensed

 

Total

 

 

Ending Units March 30, 2022

 

65

 

 

 

1,569

 

 

 

1,634

 

 

 

Units Opened

 

 

 

 

4

 

 

 

4

 

 

 

Units Closed

 

 

 

 

(7

)

 

 

(7

)

 

 

Net Change

 

 

 

 

(3

)

 

 

(3

)

 

 

Ending Units June 29, 2022

 

65

 

 

 

1,566

 

 

 

1,631

 

 

 

 

 

 

 

 

 

 

 

Equivalent Units

 

 

 

 

 

 

 

Second Quarter 2022

 

64

 

 

 

1,567

 

 

 

1,631

 

 

 

Second Quarter 2021

 

65

 

 

 

1,582

 

 

 

1,647

 

 

 

Net Change

 

(1

)

 

 

(15

)

 

 

(16

)

 

 

 

 

 

 

 

 

 

 

 

 

 

Franchised

 

 

 

 

Restaurant Unit Activity

Company

 

& Licensed

 

Total

 

 

Ending Units December 29, 2021

 

65

 

 

 

1,575

 

 

 

1,640

 

 

 

Units Opened

 

 

 

 

9

 

 

 

9

 

 

 

Units Closed

 

 

 

 

(18

)

 

 

(18

)

 

 

Net Change

 

 

 

 

(9

)

 

 

(9

)

 

 

Ending Units June 29, 2022

 

65

 

 

 

1,566

 

 

 

1,631

 

 

 

 

 

 

 

 

 

 

 

Equivalent Units

 

 

 

 

 

 

 

Year-to-Date 2022

 

64

 

 

 

1,570

 

 

 

1,634

 

 

 

Year-to-Date 2021

 

65

 

 

 

1,583

 

 

 

1,648

 

 

 

Net Change

 

(1

)

 

 

(13

)

 

 

(14

)

 

 

 

 

 

 

 

 

 

 

(1) Same-store sales include sales at company restaurants and non-consolidated franchised and licensed restaurants that were open during the comparable periods noted. 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