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Denny’s Corporation Reports Results For Second Quarter 2021

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SPARTANBURG, S.C., Aug. 03, 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 second quarter ended June 30, 2021 and provided a business update on the Company’s operations.

John Miller, Chief Executive Officer, stated, “We are simply delighted to welcome guests back now that all of our operating domestic dining rooms are open while still providing them with the convenience of our off-premise options. With the easing of restrictions, the rollout of our two new virtual brands, The Burger Den and The Meltdown, along with the perseverance of our entire organization, both June and July domestic system-wide same-store sales** surpassed 2019 pre-pandemic levels. We are encouraged by the potential for additional sales growth as we overcome staffing challenges and return to 24/7 operations across our system."

Second Quarter 2021 Highlights

  • Total operating revenue increased 164.3% to $106.2 million, primarily due to the COVID-19 recovery.

  • Domestic system-wide same-store sales** decreased 1.2% compared to the equivalent fiscal period in 2019, including a 1.5% decrease at domestic franchised restaurants and a 1.9% increase at company restaurants.

  • Domestic system-wide same-store sales** increased 117.0% compared to the equivalent fiscal period in 2020.

  • Opened three franchised restaurants, including one international location.

  • Operating income (loss) was $18.3 million compared to ($13.5) million in the prior year quarter.

  • Franchise Operating Margin* was $29.9 million, or 51.0% of franchise and license revenue, and Company Restaurant Operating Margin* was $9.8 million, or 20.5% of company restaurant sales.

  • Net loss was $0.8 million, or $0.01 per diluted share.

  • Adjusted Net Income* was $11.6 million, or $0.18 per share.

  • Adjusted EBITDA* was $25.3 million compared to ($5.1) million in the prior year quarter.

  • Cash provided by (used in) operating, investing, and financing activities was $33.1 million, ($1.2) million, and ($35.6) million, respectively.

  • Adjusted Free Cash Flow* was $17.8 million compared to ($11.5) million in the prior year quarter.

  • Provided guidance for the fiscal third quarter 2021.

Current Trends

Domestic system-wide same-store sales** for the second quarter ended June 30, 2021, continued to trend toward pre-pandemic levels. Fiscal periods June and July surpassed 2019 sales levels at both company and domestic franchise restaurants. With all operating dining rooms open, off-premise sales, inclusive of virtual brands, have remained strong at approximately 24% of total sales compared to 12% pre-pandemic.

Additionally, during the second quarter the Company substantially completed the rollout of its first virtual brand, The Burger Den, to over 1,100 domestic locations and began a phased rollout of its second virtual brand, The Meltdown, to approximately half of the domestic system. Transactions for these two virtual brands are highly incremental and leverage labor during underutilized dayparts.

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 2021 compared to the equivalent fiscal periods in 2019:

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

Domestic System-Wide Same-Store Sales**

Fiscal Year 2021

Jan

Feb

Mar

Apr

May

Jun

Jul 1

System

(31%)

(25%)

(9%)

(2%)

(3%)

1%

3%

24/7 Units

(20%)

(16%)

2%

11%

11%

14%

15%

Limited Hour Units

(38%)

(32%)

(16%)

(11%)

(12%)

(8%)

(7%)


Domestic Average Units

Fiscal Year 2021

Jan

Feb

Mar

Apr

May

Jun

Jul 1

System

1,504

1,501

1,501

1,499

1,498

1,497

1,495

24/7 Units

519

532

569

566

561

566

576

Limited Hour Units

939

928

912

920

926

920

909

Temporary Closures

46

41

20

13

11

11

10

Second Quarter Results

Denny’s total operating revenue increased 164.3% to $106.2 million compared to $40.2 million in the prior year quarter. Franchise and license revenue was $58.6 million compared to $25.0 million in the prior year quarter. Company restaurant sales were $47.6 million compared to $15.1 million in the prior year quarter. These changes were primarily due to reduced dine-in restrictions and fewer temporary closures related to the COVID-19 pandemic in the current period as compared to the prior year period.

Franchise Operating Margin* was $29.9 million, or 51.0% of franchise and license revenue, compared to $9.8 million, or 39.1%, in the prior year quarter. This margin increase was primarily due to the improvement in sales performance at franchised restaurants, partially offset by fewer equivalent units.

Company Restaurant Operating Margin* was $9.8 million, or 20.5% of company restaurant sales, compared to ($4.5) million, or (29.6%), in the prior year quarter. This change in margin was primarily due to the improvement in sales performance at company restaurants in addition to lower payroll and benefits costs due to staffing challenges. Additionally, the Company recorded approximately $0.6M in favorable reserve adjustments and tax credits related to the CARES Act.

Total general and administrative expenses were $17.5 million, compared to $13.2 million in the prior year quarter. This change was primarily due to increases in both performance-based incentive compensation and share-based compensation expense in addition to temporary cost reductions during the prior year quarter. These increases were partially offset by market valuation changes in the Company's deferred compensation plan liabilities compared to the prior year quarter as well as approximately $0.5 million in tax credits related to the CARES Act.

Denny’s ended the quarter with $194.9 million of total debt outstanding, including $180.0 million of borrowings under its credit facility. Subsequent to the end of the second quarter, the Company paid down an additional $5 million on its revolving credit facility, bringing the current outstanding balance to $175.0 million.

The benefit from income taxes was $1.2 million, compared to $5.1 million in the prior year quarter, reflecting an effective tax rate of 59.3%. Approximately $1.5 million in cash taxes were paid during the quarter.

Net loss was $0.8 million, or $0.01 per diluted share, compared to net loss of $23.0 million, or $0.41 per diluted share, in the prior year quarter. Adjusted Net Income* per share was $0.18 compared to Adjusted Net Loss* per share of $0.25 in the prior year quarter.

Adjusted Free Cash Flow* and Capital Allocation

Denny’s generated $17.8 million of Adjusted Free Cash Flow* after investing $1.5 million in cash capital expenditures, including maintenance capital.

Business Outlook

The following expectations for the fiscal third quarter ending September 29, 2021 reflect management's expectations that the current economic environment will not change materially:

  • Domestic system-wide same-store sales** growth between 2% and 4% compared to the equivalent fiscal period in 2019.

  • Total general and administrative expenses between $17 million and $18 million, including approximately $3.5 million related to share-based compensation.

  • Adjusted EBITDA* between $22 million and $24 million.

* 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. The Company is not able to reconcile the forward-looking non-GAAP estimates set forth above to their most directly comparable 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 30, 2021 on its quarterly investor conference call today, Tuesday, August 3, 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 June 30, 2021, Denny’s had 1,645 franchised, licensed, and company restaurants around the world including 149 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 30, 2020 (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)

6/30/21

12/30/20

Assets

Current assets

Cash and cash equivalents

$

10,882

$

3,892

Investments

2,069

2,272

Receivables, net

20,407

21,349

Inventories

1,280

1,181

Assets held for sale

1,621

1,125

Prepaid and other current assets

12,168

18,847

Total current assets

48,427

48,666

Property, net

82,490

86,154

Financing lease right-of-use assets, net

9,437

9,830

Operating lease right-of-use assets, net

135,229

139,534

Goodwill

36,884

36,884

Intangible assets, net

50,892

51,559

Deferred financing costs, net

1,727

2,414

Deferred income taxes, net

19,854

23,210

Other noncurrent assets

33,407

32,698

Total assets

$

418,347

$

430,949

Liabilities

Current liabilities

Current finance lease liabilities

$

1,637

$

1,839

Current operating lease liabilities

16,348

16,856

Accounts payable

14,376

12,021

Other current liabilities

55,251

46,462

Total current liabilities

87,612

77,178

Long-term liabilities

Long-term debt

180,000

210,000

Noncurrent finance lease liabilities

13,265

13,530

Noncurrent operating lease liabilities

132,959

137,534

Liability for insurance claims, less current portion

9,602

10,309

Other noncurrent liabilities

94,332

112,844

Total long-term liabilities

430,158

484,217

Total liabilities

517,770

561,395

Shareholders' deficit

Common stock

642

640

Paid-in capital

129,176

123,833

Deficit

(172,161

)

(194,514

)

Accumulated other comprehensive loss, net

(57,080

)

(60,405

)

Total shareholders' deficit

(99,423

)

(130,446

)

Total liabilities and shareholders' deficit

$

418,347

$

430,949

Debt Balances

(In thousands)

6/30/21

12/30/20

Credit facility revolver due 2022

$

180,000

$

210,000

Finance lease liabilities

14,902

15,369

Total debt

$

194,902

$

225,369


DENNY’S CORPORATION

Condensed Consolidated Statements of Operations

(Unaudited)

Quarter Ended

(In thousands, except per share amounts)

6/30/21

6/24/20

Revenue:

Company restaurant sales

$

47,572

$

15,128

Franchise and license revenue

58,593

25,033

Total operating revenue

106,165

40,161

Costs of company restaurant sales, excluding depreciation and amortization

37,813

19,606

Costs of franchise and license revenue, excluding depreciation and amortization

28,735

15,244

General and administrative expenses

17,548

13,153

Depreciation and amortization

3,897

4,058

Operating (gains), losses and other charges, net

(113

)

1,627

Total operating costs and expenses, net

87,880

53,688

Operating income (loss)

18,285

(13,527

)

Interest expense, net

4,066

4,947

Other nonoperating expense, net

16,251

9,565

Loss before income taxes

(2,032

)

(28,039

)

Benefit from income taxes

(1,204

)

(5,074

)

Net loss

$

(828

)

$

(22,965

)

Basic net loss per share

$

(0.01

)

$

(0.41

)

Diluted net loss per share

$

(0.01

)

$

(0.41

)

Basic weighted average shares outstanding

65,294

55,686

Diluted weighted average shares outstanding

65,294

55,686

Comprehensive loss

$

(578

)

$

(18,550

)

General and Administrative Expenses

Quarter Ended

(In thousands)

6/30/21

6/24/20

Corporate administrative expenses

$

10,345

$

9,701

Share-based compensation

3,388

1,511

Incentive compensation

3,032

1

Deferred compensation valuation adjustments

783

1,940

Total general and administrative expenses

$

17,548

$

13,153


DENNY’S CORPORATION

Condensed Consolidated Statements of Operations

(Unaudited)

Two Quarters Ended

(In thousands, except per share amounts)

6/30/21

6/24/20

Revenue:

Company restaurant sales

$

81,141

$

57,419

Franchise and license revenue

105,600

79,437

Total operating revenue

186,741

136,856

Costs of company restaurant sales, excluding depreciation and amortization

67,977

55,724

Costs of franchise and license revenue, excluding depreciation and amortization

52,493

44,414

General and administrative expenses

34,495

20,895

Depreciation and amortization

7,558

8,204

Operating (gains), losses and other charges, net

419

3,100

Total operating costs and expenses, net

162,942

132,337

Operating income

23,799

4,519

Interest expense, net

8,343

8,898

Other nonoperating expense (income), net

(13,797

)

12,328

Income (loss) before income taxes

29,253

(16,707

)

Provision for (benefit from) income taxes

6,900

(2,755

)

Net income (loss)

$

22,353

$

(13,952

)

Basic net income (loss) per share

$

0.34

$

(0.25

)

Diluted net income (loss) per share

$

0.34

$

(0.25

)

Basic weighted average shares outstanding

65,273

55,993

Diluted weighted average shares outstanding

65,789

55,993

Comprehensive income (loss)

$

25,678

$

(42,209

)

General and Administrative Expenses

Two Quarters Ended

(In thousands)

6/30/21

6/24/20

Corporate administrative expenses

$

21,217

$

21,482

Share-based compensation

6,860

(26

)

Incentive compensation

5,118

15

Deferred compensation valuation adjustments

1,300

(576

)

Total general and administrative expenses

$

34,495

$

20,895


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

Two Quarters Ended

(In thousands)

6/30/21

6/24/20

6/30/21

6/24/20

Net income (loss)

$

(828

)

$

(22,965

)

$

22,353

$

(13,952

)

Provision for (benefit from) income taxes

(1,204

)

(5,074

)

6,900

(2,755

)

Operating (gains), losses and other charges, net

(113

)

1,627

419

3,100

Other nonoperating expense (income), net

16,251

9,565

(13,797

)

12,328

Share-based compensation expense (benefit)

3,388

1,511

6,860

(26

)

Deferred compensation plan valuation adjustments

783

1,940

1,300

(576

)

Interest expense, net

4,066

4,947

8,343

8,898

Depreciation and amortization

3,897

4,058

7,558

8,204

Cash payments for restructuring charges and exit costs

(869

)

(690

)

(1,274

)

(1,374

)

Cash payments for share-based compensation

(69

)

(1,565

)

(3,211

)

Adjusted EBITDA

$

25,302

$

(5,081

)

$

37,097

$

10,636


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

Two Quarters Ended

(In thousands)

6/30/21

6/24/20

6/30/21

6/24/20

Net cash provided by (used in) operating activities

$

33,136

$

(9,859

)

$

43,371

$

(7,958

)

Capital expenditures

(1,525

)

(1,658

)

(3,108

)

(4,476

)

Cash payments for restructuring charges and exit costs

(869

)

(690

)

(1,274

)

(1,374

)

Cash payments for share-based compensation

(69

)

(1,565

)

(3,211

)

Deferred compensation plan valuation adjustments

783

1,940

1,300

(576

)

Other nonoperating expense (income), net

16,251

9,565

(13,797

)

12,328

Gains (losses) on investments

5

(25

)

(3

)

91

Gains (losses) on termination of leases

106

(25

)

72

(53

)

Amortization of deferred financing costs

(344

)

(188

)

(688

)

(340

)

Gains (losses) on interest rate swap derivatives, net

(17,227

)

(11,466

)

12,506

(11,466

)

Interest expense, net

4,066

4,947

8,343

8,898

Cash interest expense, net (1)

(4,455

)

(4,717

)

(9,041

)

(8,437

)

Deferred income tax (expense) benefit

1,888

1,128

(2,211

)

3,705

Provision for (benefit from) income taxes

(1,204

)

(5,074

)

6,900

(2,755

)

Income taxes paid, net

(1,521

)

(53

)

(1,942

)

(277

)

Changes in operating assets and liabilities

Receivables

(404

)

6,473

(757

)

(9,342

)

Inventories

111

(179

)

98

(175

)

Other current assets

(1,383

)

6,704

(6,677

)

2,593

Other noncurrent assets

1,116

1,472

1,317

(106

)

Operating lease assets and liabilities

217

(1,787

)

821

(1,769

)

Accounts payable

(3,800

)

(6,928

)

(5,620

)

537

Accrued payroll

(3,696

)

(1,264

)

(1,992

)

11,519

Accrued taxes

(814

)

(259

)

(434

)

712

Other accrued liabilities

(3,454

)

214

(4,649

)

6,551

Other noncurrent liabilities

887

220

2,036

2,827

Adjusted Free Cash Flow

$

17,801

$

(11,509

)

$

23,006

$

(2,554

)


(1

)

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 (Used in) Operating Activities to Non-GAAP Financial Measures

(Unaudited)

Quarter Ended

Two Quarters Ended

(In thousands)

6/30/21

6/24/20

6/30/21

6/24/20

Adjusted EBITDA

$

25,302

$

(5,081

)

$

37,097

$

10,636

Cash interest expense, net (1)

(4,455

)

(4,717

)

(9,041

)

(8,437

)

Cash paid for income taxes, net

(1,521

)

(53

)

(1,942

)

(277

)

Cash paid for capital expenditures

(1,525

)

(1,658

)

(3,108

)

(4,476

)

Adjusted Free Cash Flow

$

17,801

$

(11,509

)

$

23,006

$

(2,554

)

Quarter Ended

Two Quarters Ended

(In thousands, except per share amounts)

6/30/21

6/24/20

6/30/21

6/24/20

Net income (loss)

$

(828

)

$

(22,965

)

$

22,353

$

(13,952

)

(Gains) losses on interest rate swap derivatives, net

17,227

11,466

(12,506

)

11,466

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

(65

)

12

(1,007

)

(1,058

)

Impairment charges

2,181

Tax effect (2)

(4,756

)

(2,168

)

3,189

(2,396

)

Adjusted Net Income (Loss)

$

11,578

$

(13,655

)

$

12,029

$

(3,759

)

Adjusted diluted weighted average shares outstanding

65,829

55,686

65,789

55,993

Diluted Net Income (Loss) Per Share

$

(0.01

)

$

(0.41

)

$

0.34

$

(0.25

)

Adjustments Per Share

$

0.19

$

0.16

$

(0.16

)

$

0.18

Adjusted Net Income (Loss) Per Share

$

0.18

$

(0.25

)

$

0.18

$

(0.07

)


(1

)

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 30, 2021 reflect an effective tax rate of 27.7% and 23.6%, respectively. 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.


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

Two Quarters Ended

(In thousands)

6/30/21

6/24/20

6/30/21

6/24/20

Operating income (loss)

$

18,285

$

(13,527

)

$

23,799

$

4,519

General and administrative expenses

17,548

13,153

34,495

20,895

Depreciation and amortization

3,897

4,058

7,558

8,204

Operating (gains), losses and other charges, net

(113

)

1,627

419

3,100

Restaurant-level Operating Margin

$

39,617

$

5,311

$

66,271

$

36,718

Restaurant-level Operating Margin consists of:

Company Restaurant Operating Margin (1)

$

9,759

$

(4,478

)

$

13,164

$

1,695

Franchise Operating Margin (2)

29,858

9,789

53,107

35,023

Restaurant-level Operating Margin

$

39,617

$

5,311

$

66,271

$

36,718


(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)

6/30/21

6/24/20

Company restaurant operations: (1)

Company restaurant sales

$

47,572

100.0

%

$

15,128

100.0

%

Costs of company restaurant sales:

Product costs

11,447

24.1

%

4,305

28.5

%

Payroll and benefits

16,970

35.7

%

8,039

53.1

%

Occupancy

2,844

6.0

%

2,728

18.0

%

Other operating costs:

Utilities

1,390

2.9

%

1,098

7.3

%

Repairs and maintenance

635

1.3

%

428

2.8

%

Marketing

1,365

2.9

%

607

4.0

%

Other direct costs

3,162

6.6

%

2,401

15.9

%

Total costs of company restaurant sales

$

37,813

79.5

%

$

19,606

129.6

%

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

$

9,759

20.5

%

$

(4,478

)

(29.6

)%

Franchise operations: (3)

Franchise and license revenue:

Royalties

$

27,117

46.3

%

$

6,719

26.8

%

Advertising revenue

18,600

31.7

%

7,232

28.9

%

Initial and other fees

2,066

3.5

%

1,346

5.4

%

Occupancy revenue

10,810

18.4

%

9,736

38.9

%

Total franchise and license revenue

$

58,593

100.0

%

$

25,033

100.0

%

Costs of franchise and license revenue:

Advertising costs

$

18,600

31.7

%

$

7,232

28.9

%

Occupancy costs

6,879

11.7

%

5,829

23.3

%

Other direct costs

3,256

5.6

%

2,183

8.7

%

Total costs of franchise and license revenue

$

28,735

49.0

%

$

15,244

60.9

%

Franchise operating margin (non-GAAP) (2)

$

29,858

51.0

%

$

9,789

39.1

%

Total operating revenue (4)

$

106,165

100.0

%

$

40,161

100.0

%

Total costs of operating revenue (4)

66,548

62.7

%

34,850

86.8

%

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

$

39,617

37.3

%

$

5,311

13.2

%

Other operating expenses: (4)(2)

General and administrative expenses

$

17,548

16.5

%

$

13,153

32.8

%

Depreciation and amortization

3,897

3.7

%

4,058

10.1

%

Operating (gains), losses and other charges, net

(113

)

(0.1

)%

1,627

4.1

%

Total other operating expenses

$

21,332

20.1

%

$

18,838

46.9

%

Operating income (loss) (4)

$

18,285

17.2

%

$

(13,527

)

(33.7

)%

(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 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)

6/30/21

6/24/20

Company restaurant operations: (1)

Company restaurant sales

$

81,141

100.0

%

$

57,419

100.0

%

Costs of company restaurant sales:

Product costs

19,719

24.3

%

14,435

25.1

%

Payroll and benefits

29,935

36.9

%

25,145

43.8

%

Occupancy

5,694

7.0

%

5,891

10.3

%

Other operating costs:

Utilities

2,615

3.2

%

2,534

4.4

%

Repairs and maintenance

1,168

1.4

%

1,217

2.1

%

Marketing

2,332

2.9

%

1,726

3.0

%

Other direct costs

6,514

8.0

%

4,776

8.3

%

Total costs of company restaurant sales

$

67,977

83.8

%

$

55,724

97.0

%

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

$

13,164

16.2

%

$

1,695

3.0

%

Franchise operations: (3)

Franchise and license revenue:

Royalties

$

47,961

45.4

%

$

30,566

38.5

%

Advertising revenue

32,711

31.0

%

24,758

31.2

%

Initial and other fees

3,904

3.7

%

3,043

3.8

%

Occupancy revenue

21,024

19.9

%

21,070

26.5

%

Total franchise and license revenue

$

105,600

100.0

%

$

79,437

100.0

%

Costs of franchise and license revenue:

Advertising costs

$

32,711

31.0

%

$

24,758

31.2

%

Occupancy costs

13,418

12.7

%

13,238

16.7

%

Other direct costs

6,364

6.0

%

6,418

8.1

%

Total costs of franchise and license revenue

$

52,493

49.7

%

$

44,414

55.9

%

Franchise operating margin (non-GAAP) (2)

$

53,107

50.3

%

$

35,023

44.1

%

Total operating revenue (4)

$

186,741

100.0

%

$

136,856

100.0

%

Total costs of operating revenue (4)

120,470

64.5

%

100,138

73.2

%

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

$

66,271

35.5

%

$

36,718

26.8

%

Other operating expenses: (4)(2)

General and administrative expenses

$

34,495

18.5

%

$

20,895

15.3

%

Depreciation and amortization

7,558

4.0

%

8,204

6.0

%

Operating (gains), losses and other charges, net

419

0.2

%

3,100

2.3

%

Total other operating expenses

$

42,472

22.7

%

$

32,199

23.5

%

Operating income (4)

$

23,799

12.7

%

$

4,519

3.3

%

(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 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. 2019)

6/30/21

6/30/21

Company Restaurants

1.9

%

(10.6

)%

Domestic Franchised Restaurants

(1.5

)%

(10.2

)%

Domestic System-wide Restaurants

(1.2

)%

(10.2

)%

Changes in Same-Store Sales (1)

Quarter Ended

Two Quarters Ended

(Increase (decrease) vs. prior year)

6/30/21

6/24/20

6/30/21

6/24/20

Company Restaurants

172.1

%

(64.9

)%

46.8

%

(35.9

)%

Domestic Franchised Restaurants

113.2

%

(56.1

)%

30.8

%

(28.4

)%

Domestic System-wide Restaurants

117.0

%

(56.9

)%

31.9

%

(29.1

)%

Average Unit Sales

Quarter Ended

Two Quarters Ended

(In thousands)

6/30/21

6/24/20

6/30/21

6/24/20

Company Restaurants

$

732

$

246

$

1,257

$

890

Franchised Restaurants

$

416

$

183

$

742

$

589

Franchised

Restaurant Unit Activity

Company

& Licensed

Total

Ending Units March 31, 2021

65

1,584

1,649

Units Opened

3

3

Units Closed

(7

)

(7

)

Net Change

(4

)

(4

)

Ending Units June 30, 2021

65

1,580

1,645

Equivalent Units

Second Quarter 2021

65

1,582

1,647

Second Quarter 2020

62

1,622

1,684

Net Change

3

(40

)

(37

)

Franchised

Restaurant Unit Activity

Company

& Licensed

Total

Ending Units December 30, 2020

65

1,585

1,650

Units Opened

6

6

Units Closed

(11

)

(11

)

Net Change

(5

)

(5

)

Ending Units June 30, 2021

65

1,580

1,645

Equivalent Units

Year-to-Date 2021

65

1,583

1,648

Year-to-Date 2020

64

1,627

1,691

Net Change

1

(44

)

(43

)

(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