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Denny’s Corporation Reports Results For Second Quarter 2020

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SPARTANBURG, S.C., July 28, 2020 (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 24, 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, "Through enhanced health and safety training and protocols, Denny's team members continue to work together to protect our guests, employees, and suppliers to serve our communities. I am especially encouraged by their willingness to pivot to new operational standards with respect to our off-premise, curbside, outdoor dining, or dine-in channels, proving that 'We Love to Feed People' during both good and challenging times. These actions, coupled with easing dine-in restrictions, resulted in a sequential increase in sales over the course of the second quarter. Although many states have since reinstated dine-in restrictions due to an increase in COVID-19 cases, we have not experienced a significant drop in sales. We attribute our stabilization to our dedicated Denny's team members who are innovative and eager to adapt to their environment."

Miller continued, "During the second quarter, we provided additional financial relief to franchisees, while remaining focused on cost savings. Subsequent to the quarter, we closed on an opportunistic capital raise to further fortify what I believe is one of the strongest balance sheets in the industry. As we look ahead, we believe we are well-positioned to effectively navigate further impacts of the pandemic while preparing for eventual and future growth."

Second Quarter 2020 Highlights

  • Total Operating Revenue was $40.2 million.

  • Domestic system-wide same-store sales** decreased 56.9%.

  • Completed 3 remodels, including 2 at franchised restaurants.

  • Operating Loss was $13.5 million.

  • Franchise Operating Margin* was $9.8 million, or 39.1% of franchise and license revenue, and Company Restaurant Operating Margin* was ($4.5) million, or (29.6%) of company restaurant sales.

  • Net Loss was $23.0 million, or $0.41 per diluted share.

  • Adjusted Net Loss* was $13.7 million, or $0.25 per diluted share.

  • Adjusted EBITDA* was ($5.1) million.

  • Adjusted Free Cash Flow* was ($11.5) million.

Current Trends

Domestic system-wide same-store sales** sequentially improved on a weekly basis during the second quarter ended June 24, 2020, as compared to the equivalent weeks of 2019. During the second quarter, dine-in restrictions continued to ease with most restaurants operating with streamlined menus and reduced operating hours. Due to the recent significant increase in COVID-19 cases, various states reinstated dining room closures, and the Company experienced a slight decline in domestic system-wide same-store sales** in fiscal July.

In an effort to provide greater transparency due to COVID-19, Denny's is providing the following tables that present second and third quarter weekly results compared to the equivalent fiscal weeks in 2019:

Domestic System-Wide Same-Store Sales** for the Weeks Ended:

Fiscal April: (76%)

Fiscal May: (65%)

Fiscal June: (41%)

4/01

4/08

4/15

4/22

4/29

5/06

5/13

5/20

5/27

6/03

6/10

6/17

6/24

(79

%)

(78

%)

(76

%)

(72

%)

(72

%)

(68

%)

(63

%)

(60

%)

(55

%)

(47

%)

(39

%)

(37

%)

(29

%)


Fiscal July: (39%)1

7/01

7/08

7/15

7/221

(33%)

(42%)

(41%)

(41%)

1. Preliminary results

Number of Domestic Restaurants Operating with Open Dining Rooms for the Weeks Ended:

Fiscal April

Fiscal May

Fiscal June

4/01

4/08

4/15

4/22

4/29

5/06

5/13

5/20

5/27

6/03

6/10

6/17

6/24

7

2

2

2

11

339

521

646

967

1,116

1,234

1,355

1,424


Fiscal July

7/01

7/08

7/15

7/22

1,430

1,124

1,032

1,035

Average unit volumes of off-premise sales have almost doubled from February 2020 to July 2020, supported by temporarily waived delivery fees, new “Dine-Thru” curbside service programs, and recently launched shareable family meal packs.

As of July 22, 2020, 97% of domestic Denny's restaurants were operating, most with take-out and delivery options, streamlined menus, and reduced operating hours, which impacted same-store sales** results. Also as of July 22, 2020, 55 Denny's restaurants remain temporarily closed, including 47 domestic franchise restaurants and 8 international franchise restaurants. Additionally, 1,035 domestic restaurants were operating with open dining rooms with capacity limitations across 28 states.

Liquidity

On July 6, 2020, the Company raised net proceeds of $69.6 million that were used to pay down its credit facility through the issuance and sale of 8.0 million shares of common stock. Subsequent to these two transactions, the Company had approximately $12.0 million of cash on hand and $237.0 million outstanding on the credit facility, or approximately $100 million of total available liquidity after considering the current liquidity covenant.

Pursuant to the underwriting agreement, the Company also granted the underwriters a 30-day option to purchase up to an additional 1.2 million shares of common stock, and currently expects the option will expire unexercised.

Second Quarter Results

Denny’s total operating revenue was $40.2 million compared to $151.9 million in the prior year quarter. Franchise and license revenue was $25.0 million compared to $56.4 million in the prior year quarter. Company restaurant sales were $15.1 million compared to $95.4 million in the prior year quarter. These changes were primarily due to the impact of COVID-19 on sales, the Company's refranchising and development strategy which was substantially complete by the end of 2019, and the related $3.0 million royalty abatement in the second fiscal quarter of 2020.

Franchise Operating Margin* was $9.8 million, or 39.1% of franchise and license revenue, compared to $27.6 million, or 48.8%, in the prior year quarter. This margin decrease was primarily driven by the impact of COVID-19 on sales and the related $3.0 million royalty abatement, partially offset by an increase in occupancy margin from additional leases and subleases to franchisees as a result of the Company's refranchising and development strategy in 2019.

Company Restaurant Operating Margin* was ($4.5) million, or (29.6%) of company restaurant sales, compared to $15.6 million, or 16.4%, in the prior year quarter. This margin decrease was primarily due to the impact of COVID-19 on sales, as well as fewer equivalent units through the Company's refranchising and development strategy.

Total general and administrative expenses were $13.2 million, compared to $18.5 million in the prior year quarter. This change was due to reductions in performance-based incentive compensation, personnel costs, and share-based compensation expense, partially offset by market valuation changes in the Company's deferred compensation plan liabilities.

Interest expense, net was $4.9 million, compared to $5.4 million in the prior year quarter, primarily due to a reduction in financing leases. Denny’s ended the quarter with $323.1 million of total debt outstanding, including $307.0 million of borrowings under its credit facility.

During the quarter, the Company recorded $11.5 million of other non-cash, nonoperating expenses related to the discontinuance of hedge accounting for a portion of its interest rate hedges. The expenses include a $7.4 million reclassification of amounts previously recorded in accumulated other comprehensive loss, net to expense, $3.8 million related to changes in fair value associated with the portion of interest rate hedges for which hedge accounting was discontinued, and $0.3 million of expense recognized related to amounts remaining in accumulated other comprehensive loss, net that will be recognized in other nonoperating expense (income), net over the remaining term of the interest rate hedges for which hedge accounting was discontinued.

The benefit from income taxes was $5.1 million, reflecting an effective tax rate of 18.1%. Approximately $0.1 million in cash taxes was paid during the quarter.

Net loss was $23.0 million, or $0.41 per diluted share, compared to net income of $34.2 million, or $0.55 per diluted share, in the prior year quarter. Adjusted Net Loss* per diluted share was $0.25 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 after investing $1.7 million in cash capital expenditures, including maintenance capital and remodels, was ($11.5) million.

Business Outlook

On March 16, 2020, the Company announced that it had withdrawn its guidance for the fiscal year ending on December 30, 2020. Given the dynamic and evolving impact of the COVID-19 pandemic on the Company's operations and substantial uncertainty about future performance, the Company cannot reasonably provide an updated business outlook at this time.

* Please refer to the Reconciliation of Net Income (Loss) 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 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.

Conference Call and Webcast Information

Denny’s will provide further commentary on the results for the second quarter ended June 24, 2020 on its quarterly investor conference call today, Tuesday, July 28, 2020 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. A replay of the call may be accessed at the same location later in the day and will remain available for 30 days.

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 24, 2020, Denny’s had 1,683 franchised, licensed, and company restaurants around the world including 147 restaurants in Canada, Puerto Rico, Mexico, the Philippines, New Zealand, Honduras, the United Arab Emirates, Costa Rica, Guam, Guatemala, the United Kingdom, El Salvador, Indonesia, and Aruba. 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 and political conditions that impact consumer confidence and spending, including COVID-19; 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)

6/24/20

12/25/19

Assets

Current assets

Cash and cash equivalents

$

21,077

$

3,372

Investments

2,240

3,649

Receivables, net

19,049

27,488

Assets held for sale

1,973

1,925

Other current assets

18,674

16,299

Total current assets

63,013

52,733

Property, net

93,759

97,626

Financing lease right-of-use assets, net

10,672

11,720

Operating lease right-of-use assets, net

149,169

158,550

Goodwill

36,884

36,832

Intangible assets, net

52,681

53,956

Deferred income taxes, net

28,597

14,718

Other noncurrent assets, net

33,928

34,252

Total assets

$

468,703

$

460,387

Liabilities

Current liabilities

Current finance lease liabilities

$

1,987

$

1,674

Current operating lease liabilities

18,479

16,344

Accounts payable

18,901

20,256

Other current liabilities

37,390

57,307

Total current liabilities

76,757

95,581

Long-term liabilities

Long-term debt

307,000

240,000

Noncurrent finance lease liabilities

14,144

14,779

Noncurrent operating lease liabilities

146,080

152,750

Other

142,229

95,341

Total long-term liabilities

609,453

502,870

Total liabilities

686,210

598,451

Shareholders' deficit

Common stock

1,097

1,094

Paid-in capital

600,936

603,980

Deficit

(203,350

)

(189,398

)

Accumulated other comprehensive loss, net of tax

(62,217

)

(33,960

)

Treasury stock

(553,973

)

(519,780

)

Total shareholders' deficit

(217,507

)

(138,064

)

Total liabilities and shareholders' deficit

$

468,703

$

460,387

Debt Balances

(In thousands)

6/24/20

12/25/19

Credit facility revolver due 2022

$

307,000

$

240,000

Finance lease liabilities

16,131

16,453

Total debt

$

323,131

$

256,453


DENNY’S CORPORATION

Condensed Consolidated Statements of Operations

(Unaudited)

Quarter Ended

(In thousands, except per share amounts)

6/24/20

6/26/19

Revenue:

Company restaurant sales

$

15,128

$

95,447

Franchise and license revenue

25,033

56,437

Total operating revenue

40,161

151,884

Costs of company restaurant sales, excluding depreciation and amortization

19,606

79,830

Costs of franchise and license revenue, excluding depreciation and amortization

15,244

28,871

General and administrative expenses

13,153

18,453

Depreciation and amortization

4,058

5,048

Operating (gains), losses and other charges, net

1,627

(26,433

)

Total operating costs and expenses, net

53,688

105,769

Operating income (loss)

(13,527

)

46,115

Interest expense, net

4,947

5,382

Other nonoperating expense (income), net

9,565

(273

)

Income (loss) before income taxes

(28,039

)

41,006

Provision for (benefit from) income taxes

(5,074

)

6,767

Net income (loss)

$

(22,965

)

$

34,239

Basic net income (loss) per share

$

(0.41

)

$

0.57

Diluted net income (loss) per share

$

(0.41

)

$

0.55

Basic weighted average shares outstanding

55,686

60,290

Diluted weighted average shares outstanding

55,686

62,082

Comprehensive income (loss)

$

(18,550

)

$

23,625

General and Administrative Expenses

Quarter Ended

(In thousands)

6/24/20

6/26/19

Corporate administrative expenses

$

9,701

$

12,436

Share-based compensation

1,511

2,713

Incentive compensation

1

2,919

Deferred compensation valuation adjustments

1,940

385

Total general and administrative expenses

$

13,153

$

18,453


DENNY’S CORPORATION

Condensed Consolidated Statements of Operations

(Unaudited)

Two Quarters Ended

(In thousands, except per share amounts)

6/24/20

6/26/19

Revenue:

Company restaurant sales

$

57,419

$

193,992

Franchise and license revenue

79,437

109,303

Total operating revenue

136,856

303,295

Costs of company restaurant sales, excluding depreciation and amortization

55,724

163,943

Costs of franchise and license revenue, excluding depreciation and amortization

44,414

55,929

General and administrative expenses

20,895

37,264

Depreciation and amortization

8,204

11,281

Operating (gains), losses and other charges, net

3,100

(35,368

)

Total operating costs and expenses, net

132,337

233,049

Operating income

4,519

70,246

Interest expense, net

8,898

10,789

Other nonoperating expense (income), net

12,328

(1,696

)

Income (loss) before income taxes

(16,707

)

61,153

Provision for (benefit from) income taxes

(2,755

)

11,424

Net income (loss)

$

(13,952

)

$

49,729

Basic net income (loss) per share

$

(0.25

)

$

0.82

Diluted net income (loss) per share

$

(0.25

)

$

0.79

Basic weighted average shares outstanding

55,993

60,970

Diluted weighted average shares outstanding

55,993

62,937

Comprehensive income (loss)

$

(42,209

)

$

26,962

General and Administrative Expenses

Two Quarters Ended

(In thousands)

6/24/20

6/26/19

Corporate administrative expenses

$

21,482

$

25,305

Share-based compensation

(26

)

4,966

Incentive compensation

15

5,457

Deferred compensation valuation adjustments

(576

)

1,536

Total general and administrative expenses

$

20,895

$

37,264


DENNY’S CORPORATION

Reconciliation of Net 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 operating performance 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 bonuses for certain employees. Adjusted EBITDA is also used to evaluate the ability to service debt because the excluded charges do not have an impact on prospective debt servicing capability and these adjustments are contemplated in the Company's credit facility for the computation of its debt covenant ratios. The Company defines Adjusted Free Cash Flow for a given period as Adjusted EBITDA less the cash portion of interest expense net of interest income, capital expenditures, and cash taxes. Management believes that the presentation of Adjusted Free Cash Flow provides useful information to investors because it represents a liquidity measure used to evaluate, among other things, operating effectiveness and is used in decisions regarding the allocation of resources. 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 and liquidity measures prepared in accordance with U.S. generally accepted accounting principles.

Quarter Ended

Two Quarters Ended

(In thousands, except per share amounts)

6/24/20

6/26/19

6/24/20

6/26/19

Net income (loss)

$

(22,965

)

$

34,239

$

(13,952

)

$

49,729

Provision for (benefit from) income taxes

(5,074

)

6,767

(2,755

)

11,424

Operating (gains), losses and other charges, net

1,627

(26,433

)

3,100

(35,368

)

Other nonoperating expense (income), net

9,565

(273

)

12,328

(1,696

)

Share-based compensation

1,511

2,713

(26

)

4,966

Deferred compensation plan valuation adjustments

1,940

385

(576

)

1,536

Interest expense, net

4,947

5,382

8,898

10,789

Depreciation and amortization

4,058

5,048

8,204

11,281

Cash payments for restructuring charges and exit costs

(690

)

(629

)

(1,374

)

(1,380

)

Cash payments for share-based compensation

(3,211

)

(3,531

)

Adjusted EBITDA

$

(5,081

)

$

27,199

$

10,636

$

47,750

Cash interest expense, net

(4,717

)

(5,122

)

(8,437

)

(10,270

)

Cash paid for income taxes, net

(53

)

(11,625

)

(277

)

(11,992

)

Cash paid for capital expenditures

(1,658

)

(3,668

)

(4,476

)

(11,483

)

Adjusted Free Cash Flow

$

(11,509

)

$

6,784

$

(2,554

)

$

14,005

Quarter Ended

Two Quarters Ended

(In thousands, except per share amounts)

6/24/20

6/26/19

6/24/20

6/26/19

Net income (loss)

$

(22,965

)

$

34,239

$

(13,952

)

$

49,729

Losses on interest rate swap derivatives

11,466

11,466

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

12

(26,839

)

(1,058

)

(36,314

)

Impairment charges

2,181

Tax effect (1)

(2,168

)

6,935

(2,396

)

9,384

Adjusted Net Income (Loss)

$

(13,655

)

$

14,335

$

(3,759

)

$

22,799

Diluted weighted average shares outstanding

55,686

62,082

55,993

62,937

Diluted Net Income (Loss) Per Share

$

(0.41

)

$

0.55

$

(0.25

)

$

0.79

Adjustments Per Share

$

0.16

$

(0.32

)

$

0.18

$

(0.43

)

Adjusted Net Income (Loss) Per Share

$

(0.25

)

$

0.23

$

(0.07

)

$

0.36


(1

)

Tax adjustments for the reclassification of losses related to derivatives are calculated using an effective tax rate of 25.7% for the quarter and year-to-date periods ended June 24, 2020. Tax adjustments for all other items for the quarter and year-to-date periods ended June 24, 2020 are calculated using an effective rate of 5.4% and 8.8%, respectively. Tax adjustments for the gains on sales of assets and other, net for the quarter and year-to-date periods ended June 26, 2019 are calculated using an effective tax rate of 25.8%.


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 Total 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 Total 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. Total 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.

Total 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. Total 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)

6/24/20

6/26/19

6/24/20

6/26/19

Operating income (loss)

$

(13,527

)

$

46,115

$

4,519

$

70,246

General and administrative expenses

13,153

18,453

20,895

37,264

Depreciation and amortization

4,058

5,048

8,204

11,281

Operating (gains), losses and other charges, net

1,627

(26,433

)

3,100

(35,368

)

Total Operating Margin

$

5,311

$

43,183

$

36,718

$

83,423

Total Operating Margin consists of:

Company Restaurant Operating Margin (1)

$

(4,478

)

$

15,617

$

1,695

$

30,049

Franchise Operating Margin (2)

9,789

27,566

35,023

53,374

Total Operating Margin

$

5,311

$

43,183

$

36,718

$

83,423


(1

)

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

(2

)

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

DENNY’S CORPORATION

Operating Margins

(Unaudited)

Quarter Ended

(In thousands)

6/24/20

6/26/19

Company restaurant operations: (1)

Company restaurant sales

$

15,128

100.0

%

$

95,447

100.0

%

Costs of company restaurant sales:

Product costs

4,305

28.5

%

23,363

24.5

%

Payroll and benefits

8,039

53.1

%

36,866

38.6

%

Occupancy

2,728

18.0

%

5,498

5.8

%

Other operating costs:

Utilities

1,098

7.3

%

3,106

3.3

%

Repairs and maintenance

428

2.8

%

2,080

2.2

%

Marketing

607

4.0

%

3,239

3.4

%

Other direct costs

2,401

15.9

%

5,678

5.9

%

Total costs of company restaurant sales

$

19,606

129.6

%

$

79,830

83.6

%

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

$

(4,478

)

(29.6

)%

$

15,617

16.4

%

Franchise operations: (3)

Franchise and license revenue:

Royalties

$

6,719

26.8

%

$

26,672

47.3

%

Advertising revenue

7,232

28.9

%

19,884

35.2

%

Initial and other fees

1,346

5.4

%

1,755

3.1

%

Occupancy revenue

9,736

38.9

%

8,126

14.4

%

Total franchise and license revenue

$

25,033

100.0

%

$

56,437

100.0

%

Costs of franchise and license revenue:

Advertising costs

$

7,232

28.9

%

$

19,884

35.2

%

Occupancy costs

5,829

23.3

%

5,512

9.8

%

Other direct costs

2,183

8.7

%

3,475

6.2

%

Total costs of franchise and license revenue

$

15,244

60.9

%

$

28,871

51.2

%

Franchise operating margin (non-GAAP) (2)

$

9,789

39.1

%

$

27,566

48.8

%

Total operating revenue (4)

$

40,161

100.0

%

$

151,884

100.0

%

Total costs of operating revenue (4)

34,850

86.8

%

108,701

71.6

%

Total operating margin (non-GAAP) (4)(2)

$

5,311

13.2

%

$

43,183

28.4

%

Other operating expenses: (4)(2)

General and administrative expenses

$

13,153

32.8

%

$

18,453

12.1

%

Depreciation and amortization

4,058

10.1

%

5,048

3.3

%

Operating (gains), losses and other charges, net

1,627

4.1

%

(26,433

)

(17.4

)%

Total other operating expenses

$

18,838

46.9

%

$

(2,932

)

(1.9

)%

Operating income (loss) (4)

$

(13,527

)

(33.7

)%

$

46,115

30.4

%

(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)

Two Quarters Ended

(In thousands)

6/24/20

6/26/19

Company restaurant operations: (1)

Company restaurant sales

$

57,419

100.0

%

$

193,992

100.0

%

Costs of company restaurant sales:

Product costs

14,435

25.1

%

47,268

24.4

%

Payroll and benefits

25,145

43.8

%

76,698

39.5

%

Occupancy

5,891

10.3

%

11,282

5.8

%

Other operating costs:

Utilities

2,534

4.4

%

6,478

3.3

%

Repairs and maintenance

1,217

2.1

%

3,968

2.0

%

Marketing

1,726

3.0

%

6,946

3.6

%

Other direct costs

4,776

8.3

%

11,303

5.8

%

Total costs of company restaurant sales

$

55,724

97.0

%

$

163,943

84.5

%

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

$

1,695

3.0

%

$

30,049

15.5

%

Franchise operations: (3)

Franchise and license revenue:

Royalties

$

30,566

38.5

%

$

51,912

47.5

%

Advertising revenue

24,758

31.2

%

38,826

35.5

%

Initial and other fees

3,043

3.8

%

2,894

2.6

%

Occupancy revenue

21,070

26.5

%

15,671

14.3

%

Total franchise and license revenue

$

79,437

100.0

%

$

109,303

100.0

%

Costs of franchise and license revenue:

Advertising costs

$

24,758

31.2

%

$

38,826

35.5

%

Occupancy costs

13,238

16.7

%

10,761

9.8

%

Other direct costs

6,418

8.1

%

6,342

5.8

%

Total costs of franchise and license revenue

$

44,414

55.9

%

$

55,929

51.2

%

Franchise operating margin (non-GAAP) (2)

$

35,023

44.1

%

$

53,374

48.8

%

Total operating revenue (4)

$

136,856

100.0

%

$

303,295

100.0

%

Total costs of operating revenue (4)

100,138

73.2

%

219,872

72.5

%

Total operating margin (non-GAAP) (4)(2)

$

36,718

26.8

%

$

83,423

27.5

%

Other operating expenses: (4)(2)

General and administrative expenses

$

20,895

15.3

%

$

37,264

12.3

%

Depreciation and amortization

8,204

6.0

%

11,281

3.7

%

Operating (gains), losses and other charges, net

3,100

2.3

%

(35,368

)

(11.7

)%

Total other operating expenses

$

32,199

23.5

%

$

13,177

4.3

%

Operating income (4)

$

4,519

3.3

%

$

70,246

23.2

%

(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 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

Two Quarters Ended

(increase (decrease) vs. prior year)

6/24/20

6/26/19

6/24/20

6/26/19

Company Restaurants

(64.9

)%

4.4

%

(35.9

)%

2.9

%

Domestic Franchised Restaurants

(56.1

)%

3.7

%

(28.4

)%

2.5

%

Domestic System-wide Restaurants

(56.9

)%

3.8

%

(29.1

)%

2.5

%

Average Unit Sales

Quarter Ended

Two Quarters Ended

(In thousands)

6/24/20

6/26/19

6/24/20

6/26/19

Company Restaurants

$

246

$

612

$

890

$

1,193

Franchised Restaurants

$

183

$

419

$

589

$

821

Franchised

Restaurant Unit Activity

Company

& Licensed

Total

Ending Units March 25, 2020

67

1,628

1,695

Units Opened

3

3

Units Closed

(15

)

(15

)

Net Change

(12

)

(12

)

Ending Units June 24, 2020

67

1,616

1,683

Equivalent Units

Second Quarter 2020

62

1,622

1,684

Second Quarter 2019

156

1,543

1,699

Net Change

(94

)

79

(15

)

Franchised

Restaurant Unit Activity

Company

& Licensed

Total

Ending Units December 25, 2019

68

1,635

1,703

Units Opened

11

11

Units Closed

(1

)

(30

)

(31

)

Net Change

(1

)

(19

)

(20

)

Ending Units June 24, 2020

67

1,616

1,683

Equivalent Units

Year-to-Date 2020

64

1,627

1,691

Year-to-Date 2019

163

1,539

1,702

Net Change

(99

)

88

(11

)

(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