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Denny’s Corporation Reports Results For Third Quarter 2020

Denny's Corporation
·26 min read

SPARTANBURG, S.C., Oct. 27, 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 third quarter ended September 23, 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, "I am encouraged by our sequential sales improvement over the course of the third quarter, despite the continued disproportionate impact of the COVID-19 pandemic on the full-service restaurant industry. This progress would not have been possible without the continued dedication of all Denny's team members who remain focused on health and safety protocols as they implement innovations, such as enhancements to our Denny's on Demand platform, curbside ordering, and outdoor dining. During the third quarter, we also launched a new streamlined menu consisting of well-known classic dishes and new seasonal items. I am confident that Denny's is well-positioned to effectively navigate through the pandemic while preparing for future growth."

Third Quarter 2020 Highlights

  • Total Operating Revenue was $71.6 million.

  • Domestic system-wide same-store sales** decreased 33.6%.

  • Operating Income was $3.2 million.

  • Franchise Operating Margin* was $19.7 million, or 45.0% of franchise and license revenue, and Company Restaurant Operating Margin* was $0.5 million, or 1.7% of company restaurant sales.

  • Net Income was $6.5 million, or $0.10 per diluted share.

  • Adjusted Net Income* was $0.4 million, or $0.01 per diluted share.

  • Adjusted EBITDA* was $8.0 million.

  • Adjusted Free Cash Flow* was $2.1 million.

Current Trends

Domestic system-wide same-store sales** sequentially improved on a monthly basis during the third quarter ended September 23, 2020, as compared to the equivalent periods during 2019, despite approximately 25% of the domestic system in California being limited to off-premise only sales channels.

Average unit volumes of off-premise sales have increased over 95% since the beginning of the COVID-19 pandemic, supported by temporarily waived delivery fees, curbside service programs, and shareable family meal packs.

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

Domestic System-Wide Same-Store Sales** for 2020 Fiscal Periods:

Q1: (6%)

Q2: (57%)

Q3: (34%)

Q4

Jan

Feb

Mar

Apr

May

Jun

Jul

Aug

Sep

Oct1

3

%

2

%

(19

%)

(76

%)

(65

%)

(41

%)

(39

%)

(35

%)

(28

%)

(26

%)

1. Preliminary results

Domestic Same-Store Sales** and Domestic Average Units for 2020 Fiscal Periods
(Open Dining Rooms vs Off-Premise Only):

Q2

Q3

Q4

Apr

May

Jun

Jul

Aug

Sep

Oct1

Open Dining Rooms

(74%)

(47%)

(33%)

(36%)

(29%)

(24%)

(24%)

2

222

1,087

1,244

1,044

1,127

1,289

Off-Premise Only

(76%)

(69%)

(68%)

(55%)

(47%)

(39%)

(33%)

1,060

938

327

237

444

369

207

Temporary Closures

480

378

120

47

35

22

19

1. Preliminary results

Average Domestic Capacity Restrictions for Fiscal October 20201:

Number of Units

% of Domestic System

25% Capacity

229

84

%

50-75% Capacity

667

Social Distancing

378

Off-Premise Only

207

14

%

No Restrictions

15

1

%

Temporarily Closed

19

1

%

Total

1,515

100

%

1. Preliminary results

Third Quarter Results

Denny’s total operating revenue was $71.6 million compared to $124.3 million in the prior year quarter. Franchise and license revenue was $43.8 million compared to $60.7 million in the prior year quarter. Company restaurant sales were $27.8 million compared to $63.6 million in the prior year quarter. These changes were primarily due to the impact of the COVID-19 pandemic on sales and the Company's refranchising and development strategy which was substantially complete by the end of 2019.

Franchise Operating Margin* was $19.7 million, or 45.0% of franchise and license revenue, compared to $29.5 million, or 48.7%, in the prior year quarter. This margin decrease was primarily driven by the impact of the COVID-19 pandemic on sales.

Company Restaurant Operating Margin* was $0.5 million, or 1.7% of company restaurant sales, compared to $9.3 million, or 14.6%, in the prior year quarter. This margin decrease was primarily due to the impact of the COVID-19 pandemic on sales, as well as fewer equivalent units through the Company's refranchising and development strategy, partially offset by approximately $1.5 million of favorable reserve adjustments and tax credits related to the CARES Act.

Total general and administrative expenses were $13.7 million, compared to $16.4 million in the prior year quarter. This change was primarily due to cost savings initiatives and previous reductions in personnel due to the COVID-19 pandemic as well as approximately $0.8 million in tax credits related to the CARES Act.

Interest expense, net was $4.4 million, compared to $4.2 million in the prior year quarter, with the increase primarily due to the amortization of dedesignated interest rate swap losses from accumulated other comprehensive loss, net. Denny’s ended the quarter with $245.8 million of total debt outstanding, including $230.0 million of borrowings under its credit facility.

The provision for income taxes was $0.8 million, compared to $15.3 million in the prior year quarter, reflecting an effective tax rate of 11.2%. This decrease was primarily due to the significant gains in the prior year quarter from the Company's refranchising and development strategy. Approximately $0.3 million in cash taxes were paid during the quarter.

Net income was $6.5 million, or $0.10 per diluted share, compared to net income of $49.1 million, or $0.80 per diluted share, in the prior year quarter. Adjusted Net Income* per diluted share was $0.01 compared to Adjusted Net Income* per diluted share of $0.18 in the prior year quarter.

Adjusted Free Cash Flow* and Capital Allocation

Denny’s Adjusted Free Cash Flow* in the quarter after investing $1.0 million in cash capital expenditures, including maintenance capital, was $2.1 million.

Business Outlook

Based on third quarter results and management's expectation that the current business conditions will not materially decline, the Company is providing full year 2020 (53 operating weeks) guidance for the fiscal year ending December 30, 2020.

  • Domestic system-wide same-store sales** between 70% and 75% of prior year.

  • Total general and administrative expenses between $51 and $54 million, including approximately $7 million related to share-based compensation expense.

  • Adjusted EBITDA* of at least $28 million.

  • Cash tax refunds between $5 and $7 million.

  • Cash capital expenditures between $6 and $8 million.

  • Adjusted Free Cash Flow* of at least $10 million.

* Please refer to the Reconciliation of Net Income (Loss) to Non-GAAP Financial Measures, as well as the Reconciliation of Operating Income 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 third quarter ended September 23, 2020 on its quarterly investor conference call today, Tuesday, October 27, 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.

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 September 23, 2020, Denny’s had 1,664 franchised, licensed, and company restaurants around the world including 145 restaurants in Canada, Puerto Rico, Mexico, the Philippines, New Zealand, Honduras, the United Arab Emirates, Costa Rica, Guam, Guatemala, El Salvador, Indonesia, and the United Kingdom. For further information on Denny's, including news releases, links to SEC filings, and other financial information, please visit the Denny's investor relations website at investor.dennys.com.

Cautionary Language Regarding Forward-Looking Statements

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


DENNY’S CORPORATION

Condensed Consolidated Balance Sheets

(Unaudited)

(In thousands)

9/23/20

12/25/19

Assets

Current assets

Cash and cash equivalents

$

11,217

$

3,372

Investments

2,266

3,649

Receivables, net

20,637

27,488

Assets held for sale

3,206

1,925

Other current assets

19,855

16,299

Total current assets

57,181

52,733

Property, net

89,466

97,626

Financing lease right-of-use assets, net

10,284

11,720

Operating lease right-of-use assets, net

145,302

158,550

Goodwill

36,884

36,832

Intangible assets, net

52,100

53,956

Deferred income taxes, net

27,047

14,718

Other noncurrent assets, net

32,533

34,252

Total assets

$

450,797

$

460,387

Liabilities

Current liabilities

Current finance lease liabilities

$

1,963

$

1,674

Current operating lease liabilities

18,253

16,344

Accounts payable

10,898

20,256

Other current liabilities

41,346

57,307

Total current liabilities

72,460

95,581

Long-term liabilities

Long-term debt

230,000

240,000

Noncurrent finance lease liabilities

13,805

14,779

Noncurrent operating lease liabilities

142,110

152,750

Other

130,793

95,341

Total long-term liabilities

516,708

502,870

Total liabilities

589,168

598,451

Shareholders' deficit

Common stock

1,178

1,094

Paid-in capital

672,502

603,980

Deficit

(196,873

)

(189,398

)

Accumulated other comprehensive loss, net of tax

(61,205

)

(33,960

)

Treasury stock

(553,973

)

(519,780

)

Total shareholders' deficit

(138,371

)

(138,064

)

Total liabilities and shareholders' deficit

$

450,797

$

460,387

Debt Balances

(In thousands)

9/23/20

12/25/19

Credit facility revolver due 2022

$

230,000

$

240,000

Finance lease liabilities

15,768

16,453

Total debt

$

245,768

$

256,453


DENNY’S CORPORATION

Condensed Consolidated Statements of Operations

(Unaudited)

Quarter Ended

(In thousands, except per share amounts)

9/23/20

9/25/19

Revenue:

Company restaurant sales

$

27,849

$

63,582

Franchise and license revenue

43,795

60,676

Total operating revenue

71,644

124,258

Costs of company restaurant sales, excluding depreciation and amortization

27,370

54,306

Costs of franchise and license revenue, excluding depreciation and amortization

24,073

31,136

General and administrative expenses

13,694

16,395

Depreciation and amortization

4,048

4,338

Operating (gains), losses and other charges, net

(781

)

(50,091

)

Total operating costs and expenses, net

68,404

56,084

Operating income

3,240

68,174

Interest expense, net

4,422

4,188

Other nonoperating expense (income), net

(8,477

)

(415

)

Income before income taxes

7,295

64,401

Provision for income taxes

818

15,279

Net income

$

6,477

$

49,122

Basic net income per share

$

0.10

$

0.83

Diluted net income per share

$

0.10

$

0.80

Basic weighted average shares outstanding

63,793

59,430

Diluted weighted average shares outstanding

64,027

61,189

Comprehensive income

$

7,489

$

34,128

General and Administrative Expenses

Quarter Ended

(In thousands)

9/23/20

9/25/19

Corporate administrative expenses

$

9,820

$

12,091

Share-based compensation

1,998

2,176

Incentive compensation

1,290

1,872

Deferred compensation valuation adjustments

586

256

Total general and administrative expenses

$

13,694

$

16,395


DENNY’S CORPORATION

Condensed Consolidated Statements of Operations

(Unaudited)

Three Quarters Ended

(In thousands, except per share amounts)

9/23/20

9/25/19

Revenue:

Company restaurant sales

$

85,268

$

257,574

Franchise and license revenue

123,232

169,979

Total operating revenue

208,500

427,553

Costs of company restaurant sales, excluding depreciation and amortization

83,094

218,249

Costs of franchise and license revenue, excluding depreciation and amortization

68,487

87,065

General and administrative expenses

34,589

53,659

Depreciation and amortization

12,252

15,619

Operating (gains), losses and other charges, net

2,319

(85,459

)

Total operating costs and expenses, net

200,741

289,133

Operating income

7,759

138,420

Interest expense, net

13,320

14,977

Other nonoperating expense (income), net

3,851

(2,111

)

Income (loss) before income taxes

(9,412

)

125,554

Provision for (benefit from) income taxes

(1,937

)

26,703

Net income (loss)

$

(7,475

)

$

98,851

Basic net income (loss) per share

$

(0.13

)

$

1.64

Diluted net income (loss) per share

$

(0.13

)

$

1.58

Basic weighted average shares outstanding

59,350

60,457

Diluted weighted average shares outstanding

59,350

62,370

Comprehensive income (loss)

$

(34,720

)

$

61,090

General and Administrative Expenses

Three Quarters Ended

(In thousands)

9/23/20

9/25/19

Corporate administrative expenses

$

31,302

$

37,396

Share-based compensation

1,972

7,142

Incentive compensation

1,305

7,329

Deferred compensation valuation adjustments

10

1,792

Total general and administrative expenses

$

34,589

$

53,659


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, net income (loss) or other financial performance and liquidity measures prepared in accordance with U.S. generally accepted accounting principles.

Quarter Ended

Three Quarters Ended

(In thousands, except per share amounts)

9/23/20

9/25/19

9/23/20

9/25/19

Net income (loss)

$

6,477

$

49,122

$

(7,475

)

$

98,851

Provision for (benefit from) income taxes

818

15,279

(1,937

)

26,703

Operating (gains), losses and other charges, net

(781

)

(50,091

)

2,319

(85,459

)

Other nonoperating expense (income), net

(8,477

)

(415

)

3,851

(2,111

)

Share-based compensation

1,998

2,176

1,972

7,142

Deferred compensation plan valuation adjustments

586

256

10

1,792

Interest expense, net

4,422

4,188

13,320

14,977

Depreciation and amortization

4,048

4,338

12,252

15,619

Cash payments for restructuring charges and exit costs

(1,032

)

(672

)

(2,406

)

(2,052

)

Cash payments for share-based compensation

(13

)

(28

)

(3,224

)

(3,559

)

Adjusted EBITDA

$

8,046

$

24,153

$

18,682

$

71,903

Cash interest expense, net (1)

(4,698

)

(3,949

)

(13,135

)

(14,219

)

Cash paid for income taxes, net

(268

)

(5,861

)

(545

)

(17,853

)

Cash paid for capital expenditures

(1,000

)

(10,619

)

(5,476

)

(22,102

)

Adjusted Free Cash Flow

$

2,080

$

3,724

$

(474

)

$

17,729

Quarter Ended

Three Quarters Ended

(In thousands, except per share amounts)

9/23/20

9/25/19

9/23/20

9/25/19

Net income (loss)

$

6,477

$

49,122

$

(7,475

)

$

98,851

(Gains) losses on interest rate swap derivatives

(7,281

)

4,185

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

(1,202

)

(51,183

)

(2,260

)

(87,497

)

Impairment charges

338

2,519

Tax effect (2)

2,093

13,226

(1,142

)

22,610

Adjusted Net Income (Loss)

$

425

$

11,165

$

(4,173

)

$

33,964

Diluted weighted average shares outstanding

64,027

61,189

59,350

62,370

Diluted Net Income (Loss) Per Share

$

0.10

$

0.80

$

(0.13

)

$

1.58

Adjustments Per Share

$

(0.09

)

$

(0.62

)

$

0.06

$

(1.04

)

Adjusted Net Income (Loss) Per Share

$

0.01

$

0.18

$

(0.07

)

$

0.54


(1

)

Includes cash interest expense, net and cash payments of approximately $0.6 million and $1.1 million for dedesignated interest rate swap derivatives for the quarter and year-to-date periods ended September 23, 2020.

(2

)

Tax adjustments are calculated using an effective tax rate of 25.7% for the quarter and year-to-date periods ended September 23, 2020. Tax adjustments for the gains on sales of assets and other, net for the quarter and year-to-date periods ended September 25, 2019 are calculated using an effective tax rate of 25.8%.


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 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, 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

Three Quarters Ended

(In thousands)

9/23/20

9/25/19

9/23/20

9/25/19

Operating income

$

3,240

$

68,174

$

7,759

$

138,420

General and administrative expenses

13,694

16,395

34,589

53,659

Depreciation and amortization

4,048

4,338

12,252

15,619

Operating (gains), losses and other charges, net

(781

)

(50,091

)

2,319

(85,459

)

Total Operating Margin

$

20,201

$

38,816

$

56,919

$

122,239

Total Operating Margin consists of:

Company Restaurant Operating Margin (1)

$

479

$

9,276

$

2,174

$

39,325

Franchise Operating Margin (2)

19,722

29,540

54,745

82,914

Total Operating Margin

$

20,201

$

38,816

$

56,919

$

122,239


(1

)

Company Restaurant Operating Margin is calculated as operating income 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 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)

9/23/20

9/25/19

Company restaurant operations: (1)

Company restaurant sales

$

27,849

100.0

%

$

63,582

100.0

%

Costs of company restaurant sales:

Product costs

7,106

25.5

%

15,603

24.5

%

Payroll and benefits

11,925

42.8

%

23,777

37.4

%

Occupancy

2,638

9.5

%

4,301

6.8

%

Other operating costs:

Utilities

1,281

4.6

%

2,438

3.8

%

Repairs and maintenance

711

2.6

%

1,774

2.8

%

Marketing

1,045

3.8

%

2,411

3.8

%

Other direct costs

2,664

9.6

%

4,002

6.3

%

Total costs of company restaurant sales

$

27,370

98.3

%

$

54,306

85.4

%

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

$

479

1.7

%

$

9,276

14.6

%

Franchise operations: (3)

Franchise and license revenue:

Royalties

$

17,896

40.9

%

$

27,830

45.9

%

Advertising revenue

13,927

31.8

%

20,756

34.2

%

Initial and other fees

1,890

4.3

%

1,356

2.2

%

Occupancy revenue

10,082

23.0

%

10,734

17.7

%

Total franchise and license revenue

$

43,795

100.0

%

$

60,676

100.0

%

Costs of franchise and license revenue:

Advertising costs

$

13,927

31.8

%

$

20,757

34.2

%

Occupancy costs

6,858

15.7

%

7,257

12.0

%

Other direct costs

3,288

7.5

%

3,122

5.1

%

Total costs of franchise and license revenue

$

24,073

55.0

%

$

31,136

51.3

%

Franchise operating margin (non-GAAP) (2)

$

19,722

45.0

%

$

29,540

48.7

%

Total operating revenue (4)

$

71,644

100.0

%

$

124,258

100.0

%

Total costs of operating revenue (4)

51,443

71.8

%

85,442

68.8

%

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

$

20,201

28.2

%

$

38,816

31.2

%

Other operating expenses: (4)(2)

General and administrative expenses

$

13,694

19.1

%

$

16,395

13.2

%

Depreciation and amortization

4,048

5.7

%

4,338

3.5

%

Operating (gains), losses and other charges, net

(781

)

(1.1

)%

(50,091

)

(40.3

)%

Total other operating expenses

$

16,961

23.7

%

$

(29,358

)

(23.6

)%

Operating income (4)

$

3,240

4.5

%

$

68,174

54.9

%

(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)

Three Quarters Ended

(In thousands)

9/23/20

9/25/19

Company restaurant operations: (1)

Company restaurant sales

$

85,268

100.0

%

$

257,574

100.0

%

Costs of company restaurant sales:

Product costs

21,541

25.3

%

62,871

24.4

%

Payroll and benefits

37,070

43.5

%

100,475

39.0

%

Occupancy

8,529

10.0

%

15,583

6.0

%

Other operating costs:

Utilities

3,815

4.5

%

8,916

3.5

%

Repairs and maintenance

1,928

2.3

%

5,742

2.2

%

Marketing

2,771

3.2

%

9,357

3.6

%

Other direct costs

7,440

8.7

%

15,305

5.9

%

Total costs of company restaurant sales

$

83,094

97.5

%

$

218,249

84.7

%

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

$

2,174

2.5

%

$

39,325

15.3

%

Franchise operations: (3)

Franchise and license revenue:

Royalties

$

48,462

39.3

%

$

79,742

46.9

%

Advertising revenue

38,685

31.4

%

59,582

35.1

%

Initial and other fees

4,933

4.0

%

4,250

2.5

%

Occupancy revenue

31,152

25.3

%

26,405

15.5

%

Total franchise and license revenue

$

123,232

100.0

%

$

169,979

100.0

%

Costs of franchise and license revenue:

Advertising costs

$

38,685

31.4

%

$

59,583

35.1

%

Occupancy costs

20,096

16.3

%

18,018

10.6

%

Other direct costs

9,706

7.9

%

9,464

5.6

%

Total costs of franchise and license revenue

$

68,487

55.6

%

$

87,065

51.2

%

Franchise operating margin (non-GAAP) (2)

$

54,745

44.4

%

$

82,914

48.8

%

Total operating revenue (4)

$

208,500

100.0

%

$

427,553

100.0

%

Total costs of operating revenue (4)

151,581

72.7

%

305,314

71.4

%

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

$

56,919

27.3

%

$

122,239

28.6

%

Other operating expenses: (4)(2)

General and administrative expenses

$

34,589

16.6

%

$

53,659

12.6

%

Depreciation and amortization

12,252

5.9

%

15,619

3.7

%

Operating (gains), losses and other charges, net

2,319

1.1

%

(85,459

)

(20.0

)%

Total other operating expenses

$

49,160

23.6

%

$

(16,181

)

(3.8

)%

Operating income (4)

$

7,759

3.7

%

$

138,420

32.4

%

(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 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)

Quarter Ended

Three Quarters Ended

(increase (decrease) vs. prior year)

9/23/20

9/25/19

9/23/20

9/25/19

Company Restaurants

(40.2

)%

(0.2

)%

(37.4

)%

2.1

%

Domestic Franchised Restaurants

(33.1

)%

1.2

%

(30.1

)%

2.0

%

Domestic System-wide Restaurants

(33.6

)%

1.1

%

(30.7

)%

2.1

%

Average Unit Sales

Quarter Ended

Three Quarters Ended

(In thousands)

9/23/20

9/25/19

9/23/20

9/25/19

Company Restaurants

$

423

$

640

$

1,313

$

1,820

Franchised Restaurants

$

282

$

421

$

868

$

1,242

Franchised

Restaurant Unit Activity

Company

& Licensed

Total

Ending Units June 24, 2020

67

1,616

1,683

Units Opened

5

5

Units Closed

(1

)

(23

)

(24

)

Net Change

(1

)

(18

)

(19

)

Ending Units September 23, 2020

66

1,598

1,664

Equivalent Units

Third Quarter 2020

66

1,608

1,674

Third Quarter 2019

99

1,603

1,702

Net Change

(33

)

5

(28

)

Franchised

Restaurant Unit Activity

Company

& Licensed

Total

Ending Units December 25, 2019

68

1,635

1,703

Units Opened

16

16

Units Closed

(2

)

(53

)

(55

)

Net Change

(2

)

(37

)

(39

)

Ending Units September 23, 2020

66

1,598

1,664

Equivalent Units

Year-to-Date 2020

65

1,620

1,685

Year-to-Date 2019

141

1,560

1,701

Net Change

(76

)

60

(16

)

(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