U.S. markets close in 31 minutes
  • S&P 500

    3,668.72
    -24.51 (-0.66%)
     
  • Dow 30

    29,337.04
    -253.37 (-0.86%)
     
  • Nasdaq

    10,860.04
    -7.89 (-0.07%)
     
  • Russell 2000

    1,666.01
    -13.58 (-0.81%)
     
  • Crude Oil

    76.83
    -1.91 (-2.43%)
     
  • Gold

    1,635.60
    -20.00 (-1.21%)
     
  • Silver

    18.45
    -0.46 (-2.43%)
     
  • EUR/USD

    0.9621
    -0.0067 (-0.69%)
     
  • 10-Yr Bond

    3.8780
    +0.1810 (+4.90%)
     
  • GBP/USD

    1.0696
    -0.0161 (-1.48%)
     
  • USD/JPY

    144.5790
    +1.2590 (+0.88%)
     
  • BTC-USD

    19,169.79
    +195.50 (+1.03%)
     
  • CMC Crypto 200

    440.37
    +7.27 (+1.68%)
     
  • FTSE 100

    7,020.95
    +2.35 (+0.03%)
     
  • Nikkei 225

    26,431.55
    -722.28 (-2.66%)
     

Denny’s Corporation Reports Results for Third Quarter 2021

·28 min read

SPARTANBURG, S.C., Nov. 02, 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 third quarter ended September 29, 2021 and provided a business update on the Company’s operations.

John Miller, Chief Executive Officer, stated, "Our third quarter domestic system-wide same-store sales** were impacted due to increasing COVID-19 case counts during the period, however we are encouraged to see sales returning in October as cases have improved. Additionally, we gained great momentum through the launch of our revamped Dennys.com website and Denny's mobile app, our multicultural recruitment tour and the successful refinancing of our credit facility. Looking ahead, we are excited about initiating the next phase of our technology transformation with the rollout out of a new restaurant technology platform, in addition to beginning our new kitchen modernization initiative that will propel our menu innovation."

Third Quarter 2021 Highlights

  • Total operating revenue increased 44.9% to $103.8 million, primarily due to the COVID-19 recovery as compared to the prior year quarter.

  • Domestic system-wide same-store sales** decreased 0.1% compared to the equivalent fiscal period in 2019, including a 0.3% decrease at domestic franchised restaurants and a 1.9% increase at company restaurants.

  • Domestic system-wide same-store sales** increased 50.2% compared to the equivalent fiscal period in 2020.

  • Opened seven franchised restaurants, including four international locations.

  • Operating income was $17.7 million compared to $3.2 million in the prior year quarter.

  • Franchise Operating Margin* was $29.9 million, or 52.1% of franchise and license revenue, and Company Restaurant Operating Margin* was $7.9 million, or 17.0% of company restaurant sales.

  • Net income was $12.3 million, or $0.19 per diluted share.

  • Adjusted Net Income* was $10.5 million, or $0.16 per share.

  • Adjusted EBITDA* was $24.4 million compared to $8.0 million in the prior year quarter.

  • Cash provided by (used in) operating, investing, and financing activities was $19.9 million, ($1.9) million, and ($18.6) million, respectively.

  • Adjusted Free Cash Flow* was $14.3 million compared to $2.1 million in the prior year quarter.

  • Provided guidance for full year 2021.

Current Trends

As COVID-19 cases subsided in fiscal October, domestic system-wide same-store sales** returned to pre-pandemic levels. However, labor availability continues to impact the Company's effective operating hours with approximately 45% of domestic restaurants currently open 24/7. Off-premise sales have remained strong at approximately 23% of total sales, compared to the pre-pandemic trend of 12%, supported by our two new virtual brands, The Burger Den and The Meltdown.

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**

System Year-to-Date October 2021 1: (6%)

Jan

Feb

Mar

Apr

May

Jun

Jul

Aug

Sep

Oct 1

System

(31%)

(25%)

(9%)

(2%)

(3%)

1%

3%

(2%)

(1%)

1%

24/7 Units

(20%)

(16%)

2%

11%

11%

14%

15%

9%

9%

10%

Limited Hour Units

(38%)

(32%)

(16%)

(11%)

(12%)

(8%)

(7%)

(10%)

(10%)

(9%)

1. October results are preliminary.

Domestic Average Units

Jan

Feb

Mar

Apr

May

Jun

Jul

Aug

Sep

Oct 1

System

1,504

1,501

1,501

1,499

1,498

1,497

1,495

1,493

1,495

1,494

24/7 Units

519

532

569

566

561

566

576

590

626

665

Limited Hour Units

939

928

912

920

926

920

909

894

861

822

Temporary Closures

46

41

20

13

11

11

10

9

8

7

1. October results are preliminary.


Third Quarter Results

Denny’s total operating revenue increased 44.9% to $103.8 million compared to $71.6 million in the prior year quarter. Franchise and license revenue was $57.3 million compared to $43.8 million in the prior year quarter. Company restaurant sales were $46.5 million compared to $27.8 million in the prior year quarter. These changes were primarily due to dine-in restrictions related to the COVID-19 pandemic in the prior year quarter.

Franchise Operating Margin* was $29.9 million, or 52.1% of franchise and license revenue, compared to $19.7 million, or 45.0%, 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 $7.9 million, or 17.0% of company restaurant sales, compared to $0.5 million, or 1.7%, in the prior year quarter. This margin increase was primarily due to improvements in sales performance and the leveraging benefit of lower staffing at company restaurants.

Total general and administrative expenses were $16.5 million, compared to $13.7 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.

The provision for income taxes was $4.1 million, compared to $0.8 million in the prior year quarter, reflecting an effective tax rate of 25.0%. Approximately $3.7 million in cash taxes were paid during the quarter.

Net income was $12.3 million, or $0.19 per diluted share, compared to $6.5 million, or $0.10 per diluted share, in the prior year quarter. Adjusted Net Income* per share was $0.16 compared to $0.01 in the prior year quarter.

Denny’s ended the quarter with $184.8 million of total debt outstanding, including $170.0 million of borrowings under its credit facility.

Adjusted Free Cash Flow* and Capital Allocation

Denny’s generated $14.3 million of Adjusted Free Cash Flow* after investing $2.2 million in cash capital expenditures, including maintenance capital.

In August 2021, the Company announced it had refinanced its amended and restated $350 million revolving credit facility to a new five-year $400 million credit facility. With the enhanced flexibility provided by the new credit facility, the Company relaunched its multi-year share repurchase program and allocated $6.6 million to share repurchases during the quarter.

Between the end of the third quarter and October 29, 2021, the Company allocated an additional $6.8 million to share repurchases resulting in approximately $235 million remaining under its existing repurchase authorization.

Technology Transformation and Kitchen Modernization Initiatives

Recently, the Company announced the next phase of its technology transformation, which included a revamped Dennys.com website and Denny's mobile app, bringing a more personalized and seamless digital experience with smart upsell and cross-sell capabilities. In addition, the Company intends to initiate the rollout of a new cloud-based restaurant technology platform throughout the domestic system which will allow for enhancements such as waitlist and table management, as well as lay the foundation for future technology initiatives to further enhance the guest experience. The rollout is expected to begin during the first half of 2022 and be substantially completed by the end of 2023.

The Company intends to upgrade and improve its kitchen equipment throughout the domestic system. The rollout is expected to begin during the first quarter of 2022 and be substantially completed by the end of 2022. This investment is expected to yield long-term benefits through menu enhancements across all dayparts but especially the dinner daypart with new comfort food offerings. The new equipment is also expected to provide immediate benefits through increased kitchen efficiency and productivity while also reducing food waste.

The total estimated domestic franchise investment for both the cloud-based restaurant technology platform and the kitchen equipment package is approximately $65 million. To assist franchisees, the Company has committed to investing approximately $10 million towards the cost and installation and has also negotiated favorable financing terms on behalf of its franchisees for the remaining cost.

Business Outlook

The following full year 2021 estimates reflect management's expectations that the current economic environment will not change materially:

  • Domestic system-wide same-store sales** decline of approximately 5% compared to 2019.

  • Total general and administrative expenses between $67 million and $69 million, including approximately $13.5 million related to share-based compensation.

  • Adjusted EBITDA* between $84 million and $86 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 third quarter ended September 29, 2021 on its quarterly investor conference call today, Tuesday, November 2, 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 September 29, 2021, Denny’s had 1,647 franchised, licensed, and company restaurants around the world including 153 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)

9/29/21

12/30/20

Assets

Current assets

Cash and cash equivalents

$

10,203

$

3,892

Investments

2,082

2,272

Receivables, net

16,903

21,349

Inventories

1,230

1,181

Assets held for sale

1,627

1,125

Prepaid and other current assets

14,550

18,847

Total current assets

46,595

48,666

Property, net

81,897

86,154

Financing lease right-of-use assets, net

9,403

9,830

Operating lease right-of-use assets, net

131,616

139,534

Goodwill

36,884

36,884

Intangible assets, net

50,559

51,559

Deferred financing costs, net

3,123

2,414

Deferred income taxes, net

18,069

23,210

Other noncurrent assets

32,878

32,698

Total assets

$

411,024

$

430,949

Liabilities

Current liabilities

Current finance lease liabilities

$

2,016

$

1,839

Current operating lease liabilities

15,907

16,856

Accounts payable

15,152

12,021

Other current liabilities

56,985

46,462

Total current liabilities

90,060

77,178

Long-term liabilities

Long-term debt

170,000

210,000

Noncurrent finance lease liabilities

12,825

13,530

Noncurrent operating lease liabilities

129,409

137,534

Liability for insurance claims, less current portion

9,037

10,309

Other noncurrent liabilities

89,330

112,844

Total long-term liabilities

410,601

484,217

Total liabilities

500,661

561,395

Shareholders' deficit

Common stock

642

640

Paid-in capital

132,436

123,833

Deficit

(159,896

)

(194,514

)

Accumulated other comprehensive loss, net

(56,256

)

(60,405

)

Treasury Stock

(6,563

)

Total shareholders' deficit

(89,637

)

(130,446

)

Total liabilities and shareholders' deficit

$

411,024

$

430,949

Debt Balances

Credit facility revolver due 2026

$

170,000

$

210,000

Finance lease liabilities

14,841

15,369

Total debt

$

184,841

$

225,369


DENNY’S CORPORATION
Condensed Consolidated Statements of Operations
(Unaudited)

Quarter Ended

(In thousands, except per share amounts)

9/29/21

9/23/20

Revenue:

Company restaurant sales

$

46,470

$

27,849

Franchise and license revenue

57,324

43,795

Total operating revenue

103,794

71,644

Costs of company restaurant sales, excluding depreciation and amortization

38,569

27,370

Costs of franchise and license revenue, excluding depreciation and amortization

27,469

24,073

General and administrative expenses

16,497

13,694

Depreciation and amortization

3,822

4,048

Operating (gains), losses and other charges, net

(215

)

(781

)

Total operating costs and expenses, net

86,142

68,404

Operating income

17,652

3,240

Interest expense, net

3,671

4,422

Other nonoperating income, net

(2,368

)

(8,477

)

Income before income taxes

16,349

7,295

Provision for income taxes

4,084

818

Net income

$

12,265

$

6,477

Basic net income per share

$

0.19

$

0.10

Diluted net income per share

$

0.19

$

0.10

Basic weighted average shares outstanding

65,447

63,793

Diluted weighted average shares outstanding

65,829

64,027

Comprehensive income

$

13,089

$

7,489

General and Administrative Expenses

Corporate administrative expenses

$

11,157

$

9,820

Share-based compensation

3,352

1,998

Incentive compensation

1,893

1,290

Deferred compensation valuation adjustments

95

586

Total general and administrative expenses

$

16,497

$

13,694


DENNY’S CORPORATION
Condensed Consolidated Statements of Operations
(Unaudited)

Three Quarters Ended

(In thousands, except per share amounts)

9/29/21

9/23/20

Revenue:

Company restaurant sales

$

127,611

$

85,268

Franchise and license revenue

162,924

123,232

Total operating revenue

290,535

208,500

Costs of company restaurant sales, excluding depreciation and amortization

106,546

83,094

Costs of franchise and license revenue, excluding depreciation and amortization

79,962

68,487

General and administrative expenses

50,992

34,589

Depreciation and amortization

11,380

12,252

Operating (gains), losses and other charges, net

204

2,319

Total operating costs and expenses, net

249,084

200,741

Operating income

41,451

7,759

Interest expense, net

12,014

13,320

Other nonoperating expense (income), net

(16,165

)

3,851

Income (loss) before income taxes

45,602

(9,412

)

Provision for (benefit from) income taxes

10,984

(1,937

)

Net income (loss)

$

34,618

$

(7,475

)

Basic net income (loss) per share

$

0.53

$

(0.13

)

Diluted net income (loss) per share

$

0.53

$

(0.13

)

Basic weighted average shares outstanding

65,413

59,350

Diluted weighted average shares outstanding

65,814

59,350

Comprehensive income (loss)

$

38,767

$

(34,720

)

General and Administrative Expenses

Corporate administrative expenses

$

32,374

$

31,302

Share-based compensation

10,212

1,972

Incentive compensation

7,011

1,305

Deferred compensation valuation adjustments

1,395

10

Total general and administrative expenses

$

50,992

$

34,589


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

Three Quarters Ended

(In thousands)

9/29/21

9/23/20

9/29/21

9/23/20

Net income (loss)

$

12,265

$

6,477

$

34,618

$

(7,475

)

Provision for (benefit from) income taxes

4,084

818

10,984

(1,937

)

Operating (gains), losses and other charges, net

(215

)

(781

)

204

2,319

Other nonoperating expense (income), net

(2,368

)

(8,477

)

(16,165

)

3,851

Share-based compensation expense

3,352

1,998

10,212

1,972

Deferred compensation plan valuation adjustments

95

586

1,395

10

Interest expense, net

3,671

4,422

12,014

13,320

Depreciation and amortization

3,822

4,048

11,380

12,252

Cash payments for restructuring charges and exit costs

(274

)

(1,032

)

(1,548

)

(2,406

)

Cash payments for share-based compensation

(13

)

(1,565

)

(3,224

)

Adjusted EBITDA

$

24,432

$

8,046

$

61,529

$

18,682


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

Three Quarters Ended

(In thousands)

9/29/21

9/23/20

9/29/21

9/23/20

Net cash provided by (used in) operating activities

$

19,858

$

(3,652

)

$

63,229

$

(11,610

)

Capital expenditures

(2,213

)

(1,000

)

(5,321

)

(5,476

)

Cash payments for restructuring charges and exit costs

(274

)

(1,032

)

(1,548

)

(2,406

)

Cash payments for share-based compensation

(13

)

(1,565

)

(3,224

)

Deferred compensation plan valuation adjustments

95

586

1,395

10

Other nonoperating expense (income), net

(2,368

)

(8,477

)

(16,165

)

3,851

Gains on investments

14

26

11

117

Gains (losses) on early termination of debt and leases

(20

)

10

52

(43

)

Amortization of deferred financing costs

(258

)

(251

)

(946

)

(591

)

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

2,265

7,281

14,771

(4,185

)

Interest expense, net

3,671

4,422

12,014

13,320

Cash interest expense, net (1)

(4,195

)

(4,698

)

(13,236

)

(13,135

)

Deferred income tax (expense) benefit

(1,502

)

(1,200

)

(3,713

)

2,505

Provision for (benefit from) income taxes

4,084

818

10,984

(1,937

)

Income taxes paid, net

(3,696

)

(268

)

(5,638

)

(545

)

Changes in operating assets and liabilities

Receivables

(3,425

)

1,877

(4,182

)

(7,465

)

Inventories

(49

)

(90

)

49

(265

)

Other current assets

2,381

1,272

(4,296

)

3,865

Other noncurrent assets

(296

)

(368

)

1,021

(474

)

Operating lease assets and liabilities

329

538

1,150

(1,231

)

Accounts payable

(740

)

8,003

(6,360

)

8,540

Accrued payroll

530

(2,780

)

(1,462

)

8,739

Accrued taxes

(819

)

(1,683

)

(1,253

)

(971

)

Other accrued liabilities

(1,241

)

(39

)

(5,890

)

6,512

Other noncurrent liabilities

2,197

2,798

4,233

5,625

Adjusted Free Cash Flow

$

14,328

$

2,080

$

37,334

$

(474

)


(1)

Includes cash interest expense, net and cash payments of approximately $0.8 million and $2.3 million for dedesignated interest rate swap derivatives for the quarter and year-to-date periods ended September 29, 2021, respectively. 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, 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

Three Quarters Ended

(In thousands, except per share amounts)

9/29/21

9/23/20

9/29/21

9/23/20

Adjusted EBITDA

$

24,432

$

8,046

$

61,529

$

18,682

Cash interest expense, net (1)

(4,195

)

(4,698

)

(13,236

)

(13,135

)

Cash paid for income taxes, net

(3,696

)

(268

)

(5,638

)

(545

)

Cash paid for capital expenditures

(2,213

)

(1,000

)

(5,321

)

(5,476

)

Adjusted Free Cash Flow

$

14,328

$

2,080

$

37,334

$

(474

)

Net income (loss)

$

12,265

$

6,477

$

34,618

$

(7,475

)

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

(2,265

)

(7,281

)

(14,771

)

4,185

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

(93

)

(1,202

)

(1,100

)

(2,260

)

Impairment charges

338

2,519

Tax effect (2)

636

2,093

3,825

(1,142

)

Adjusted Net Income (Loss)

$

10,543

$

425

$

22,572

$

(4,173

)

Diluted weighted average shares outstanding

65,829

64,027

65,814

59,350

Diluted Net Income (Loss) Per Share

$

0.19

$

0.10

$

0.53

$

(0.13

)

Adjustments Per Share

$

(0.03

)

$

(0.09

)

$

(0.19

)

$

0.06

Adjusted Net Income (Loss) Per Share

$

0.16

$

0.01

$

0.34

$

(0.07

)


(1)

Includes cash interest expense, net and cash payments of approximately $0.8 million and $2.3 million for dedesignated interest rate swap derivatives for the quarter and year-to-date periods ended September 29, 2021, respectively. 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, respectively.

(2)

Tax adjustments for the quarter and year-to-date periods ended September 29, 2021 reflect an effective tax rate of 27.0% and 24.1%, respectively. Tax adjustments are calculated using an effective tax rate of 25.7% for the quarter and year-to-date periods ended September 23, 2020.

DENNY’S CORPORATION
Reconciliation of Operating Income to Non-GAAP Financial Measures
(Unaudited)

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

The Company defines Restaurant-level Operating Margin as operating income (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

Three Quarters Ended

(In thousands)

9/29/21

9/23/20

9/29/21

9/23/20

Operating income

$

17,652

$

3,240

$

41,451

$

7,759

General and administrative expenses

16,497

13,694

50,992

34,589

Depreciation and amortization

3,822

4,048

11,380

12,252

Operating (gains), losses and other charges, net

(215

)

(781

)

204

2,319

Restaurant-level Operating Margin

$

37,756

$

20,201

$

104,027

$

56,919

Restaurant-level Operating Margin consists of:

Company Restaurant Operating Margin (1)

$

7,901

$

479

$

21,065

$

2,174

Franchise Operating Margin (2)

29,855

19,722

82,962

54,745

Restaurant-level Operating Margin

$

37,756

$

20,201

$

104,027

$

56,919


(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)

9/29/21

9/23/20

Company restaurant operations: (1)

Company restaurant sales

$

46,470

100.0

%

$

27,849

100.0

%

Costs of company restaurant sales:

Product costs

11,430

24.6

%

7,106

25.5

%

Payroll and benefits

17,404

37.5

%

11,925

42.8

%

Occupancy

3,013

6.5

%

2,638

9.5

%

Other operating costs:

Utilities

1,660

3.6

%

1,281

4.6

%

Repairs and maintenance

722

1.6

%

711

2.6

%

Marketing

1,239

2.7

%

1,045

3.8

%

Other direct costs

3,101

6.7

%

2,664

9.6

%

Total costs of company restaurant sales

$

38,569

83.0

%

$

27,370

98.3

%

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

$

7,901

17.0

%

$

479

1.7

%

Franchise operations: (3)

Franchise and license revenue:

Royalties

$

27,336

47.7

%

$

17,896

40.9

%

Advertising revenue

18,215

31.8

%

13,927

31.8

%

Initial and other fees

1,442

2.5

%

1,890

4.3

%

Occupancy revenue

10,331

18.0

%

10,082

23.0

%

Total franchise and license revenue

$

57,324

100.0

%

$

43,795

100.0

%

Costs of franchise and license revenue:

Advertising costs

$

18,216

31.8

%

$

13,927

31.8

%

Occupancy costs

6,445

11.2

%

6,858

15.7

%

Other direct costs

2,808

4.9

%

3,288

7.5

%

Total costs of franchise and license revenue

$

27,469

47.9

%

$

24,073

55.0

%

Franchise operating margin (non-GAAP) (2)

$

29,855

52.1

%

$

19,722

45.0

%

Total operating revenue (4)

$

103,794

100.0

%

$

71,644

100.0

%

Total costs of operating revenue (4)

66,038

63.6

%

51,443

71.8

%

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

$

37,756

36.4

%

$

20,201

28.2

%

Other operating expenses: (4)(2)

General and administrative expenses

$

16,497

15.9

%

$

13,694

19.1

%

Depreciation and amortization

3,822

3.7

%

4,048

5.7

%

Operating (gains), losses and other charges, net

(215

)

(0.2

)

%

(781

)

(1.1

)

%

Total other operating expenses

$

20,104

19.4

%

$

16,961

23.7

%

Operating income (4)

$

17,652

17.0

%

$

3,240

4.5

%


(1)

As a percentage of company restaurant sales.

(2)

Other operating expenses such as general and administrative expenses and depreciation and amortization relate to both company and franchise operations and are not allocated to costs of company restaurant sales and costs of franchise and license revenue. As such, operating margin is considered a non-GAAP financial measure. Operating 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)

Three Quarters Ended

(In thousands)

9/29/21

9/23/20

Company restaurant operations: (1)

Company restaurant sales

$

127,611

100.0

%

$

85,268

100.0

%

Costs of company restaurant sales:

Product costs

31,149

24.4

%

21,541

25.3

%

Payroll and benefits

47,339

37.1

%

37,070

43.5

%

Occupancy

8,707

6.8

%

8,529

10.0

%

Other operating costs:

Utilities

4,275

3.4

%

3,815

4.5

%

Repairs and maintenance

1,890

1.5

%

1,928

2.3

%

Marketing

3,571

2.8

%

2,771

3.2

%

Other direct costs

9,615

7.5

%

7,440

8.7

%

Total costs of company restaurant sales

$

106,546

83.5

%

$

83,094

97.5

%

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

$

21,065

16.5

%

$

2,174

2.5

%

Franchise operations: (3)

Franchise and license revenue:

Royalties

$

75,297

46.2

%

$

48,462

39.3

%

Advertising revenue

50,926

31.3

%

38,685

31.4

%

Initial and other fees

5,346

3.3

%

4,933

4.0

%

Occupancy revenue

31,355

19.2

%

31,152

25.3

%

Total franchise and license revenue

$

162,924

100.0

%

$

123,232

100.0

%

Costs of franchise and license revenue:

Advertising costs

$

50,927

31.3

%

$

38,685

31.4

%

Occupancy costs

19,863

12.2

%

20,096

16.3

%

Other direct costs

9,172

5.6

%

9,706

7.9

%

Total costs of franchise and license revenue

$

79,962

49.1

%

$

68,487

55.6

%

Franchise operating margin (non-GAAP) (2)

$

82,962

50.9

%

$

54,745

44.4

%

Total operating revenue (4)

$

290,535

100.0

%

$

208,500

100.0

%

Total costs of operating revenue (4)

186,508

64.2

%

151,581

72.7

%

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

$

104,027

35.8

%

$

56,919

27.3

%

Other operating expenses: (4)(2)

General and administrative expenses

$

50,992

17.6

%

$

34,589

16.6

%

Depreciation and amortization

11,380

3.9

%

12,252

5.9

%

Operating (gains), losses and other charges, net

204

0.1

%

2,319

1.1

%

Total other operating expenses

$

62,576

21.5

%

$

49,160

23.6

%

Operating income (4)

$

41,451

14.3

%

$

7,759

3.7

%


(1)

As a percentage of company restaurant sales.

(2)

Other operating expenses such as general and administrative expenses and depreciation and amortization relate to both company and franchise operations and are not allocated to costs of company restaurant sales and costs of franchise and license revenue. As such, operating margin is considered a non-GAAP financial measure. Operating margin should be considered as a supplement to, not as a substitute for, operating income (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) vs. 2019

Quarter Ended

Three Quarters Ended

(Increase (decrease))

9/29/21

9/29/21

Company Restaurants

1.9

%

(6.4

)

%

Domestic Franchised Restaurants

(0.3

)

%

(6.7

)

%

Domestic System-wide Restaurants

(0.1

)

%

(6.7

)

%

Changes in Same-Store Sales (1) vs. Prior Year

Quarter Ended

Three Quarters Ended

(Increase (decrease))

9/29/21

9/23/20

9/29/21

9/23/20

Company Restaurants

67.7

%

(40.2

)

%

54.1

%

(37.4

)

%

Domestic Franchised Restaurants

48.9

%

(33.1

)

%

37.2

%

(30.1

)

%

Domestic System-wide Restaurants

50.2

%

(33.6

)

%

38.3

%

(30.7

)

%

Average Unit Sales

Quarter Ended

Three Quarters Ended

(In thousands)

9/29/21

9/23/20

9/29/21

9/23/20

Company Restaurants

$

717

$

423

$

1,974

$

1,313

Franchised Restaurants

$

424

$

282

$

1,166

$

868

Franchised

Restaurant Unit Activity

Company

& Licensed

Total

Ending Units June 30, 2021

65

1,580

1,645

Units Opened

7

7

Units Closed

(5

)

(5

)

Net Change

2

2

Ending Units September 29, 2021

65

1,582

1,647

Equivalent Units

Third Quarter 2021

65

1,578

1,643

Third Quarter 2020

66

1,608

1,674

Net Change

(1

)

(30

)

(31

)

Franchised

Restaurant Unit Activity

Company

& Licensed

Total

Ending Units December 30, 2020

65

1,585

1,650

Units Opened

13

13

Units Closed

(16

)

(16

)

Net Change

(3

)

(3

)

Ending Units September 29, 2021

65

1,582

1,647

Equivalent Units

Year-to-Date 2021

65

1,581

1,646

Year-to-Date 2020

65

1,620

1,685

Net Change

(39

)

(39

)


(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