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DENNY’S CORPORATION REPORTS RESULTS FOR THIRD QUARTER 2014

- Domestic System-Wide Same-Store Sales Increases 2.4% with Company Same-Store Sales Growing 4.1% -
- Generated $12.8 million of Free Cash Flow* and Repurchased 1.2 Million Shares -
- Raises 2014 Annual Guidance -

SPARTANBURG, S.C., October 27, 2014 - 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 24, 2014.

Third Quarter Summary

Domestic system-wide same-store sales increased 2.4%, comprised of a 4.1% increase at company restaurants and 2.1% increase at domestic franchised restaurants.
Opened nine franchised restaurants including one non-traditional and two international locations.
Completed 35 remodels including five at company restaurants.
Adjusted EBITDA* of $20.6 million, or 17.6% of total operating revenue, increased $1.4 million compared with the prior year quarter.
Net Income of $8.3 million, or $0.10 per diluted share, increased 18.7% compared with the prior year.
Adjusted Net Income per Share* of $0.10 increased 29.2% compared with the prior year quarter.
Generated $12.8 million of Free Cash Flow* after remodel investments at company restaurants.
Repurchased 1.2 million shares for $8.0 million with 4.3 million authorized shares remaining.

*
Adjusted Net Income excludes debt refinancing charges, impairment charges and gains on sales of assets and other. Please refer to the historical reconciliation of Net Income to Adjusted Net Income, Adjusted Net Income per Share, Adjusted EBITDA and Free Cash Flow included in the following tables.


John Miller, President and Chief Executive Officer, stated, “We are pleased to achieve our strongest quarter of system-wide same-store sales in the last two and a half years. In addition, our company restaurants achieved the highest quarterly same-store sales increase in the last eight years. Given the strength of our results and the solid start to the fourth quarter, we are positioned to produce our highest annual system-wide same-store sales growth since 2006. Our brand revitalization continues to drive improvements in our menu, service and atmosphere as we evolve the business to meet the expectations of our guests. The impact of our newly launched Heritage remodel program contributed to our company restaurants ability to grow sustainable same-store guest traffic for a third consecutive quarter. As we look to the balance of the year, we remain focused on driving long-term shareholder value through our brand revitalization strategy and are energized about growing the Denny's brand.”





Third Quarter Results

Denny’s total operating revenue, including company restaurant sales and franchise and license revenue, was $117.0 million resulting from a reduction in company restaurant sales offset by higher franchise and license revenue. Franchise and license revenue was $34.2 million compared with $33.9 million due to an increase in royalty revenue resulting from the increase in same-store sales and twelve additional equivalent franchised restaurants, partially offset by a decrease in occupancy revenue. Company restaurant sales were $82.8 million compared with $83.4 million due to four fewer equivalent company restaurants. The reduction in equivalent company restaurants includes the impact of the previously announced temporary closure for the reconstruction of the highest volume restaurant located in Las Vegas and temporary closures for remodeling restaurants. The decrease in company restaurant sales was partially offset by a 4.1% increase in same-store sales during the quarter.
Denny’s opened nine franchised restaurants in the third quarter of this year, including two international locations and one non-traditional location. Denny's closed thirteen franchised restaurants bringing the total restaurant count to 1,689, comprised of 160 company restaurants and 1,529 franchised restaurants.
Franchise operating margin was $22.9 million, or 66.9% of franchise and license revenue, an increase of 1.1 percentage points. This improvement was primarily due to an increase in royalties. Company restaurant operating margin of $11.0 million, or 13.3% of company restaurant sales, increased 1.0 percentage point. The increase in company margin was primarily driven by a reduction in payroll and benefits and product costs, which were partially offset by an increase in other operating costs and the previously mentioned temporary restaurant closure in Las Vegas. In the third quarter of 2013, this high volume restaurant generated pre-tax operating income of $0.7 million on sales of $2.1 million.

Total general and administrative expenses of $13.4 million improved by $0.3 million compared to the prior year. Depreciation and amortization expense of $5.2 million was flat to the prior year. Net operating gains, losses and other charges, which include restructuring charges, exit costs, impairment charges and gains or losses on the sale of assets, increased $0.4 million in the quarter. Interest expense of $2.3 million decreased $0.2 million primarily due to the expiration of capital leases. In the third quarter, the provision for income taxes was $4.1 million, reflecting an effective tax rate of 33.0%. Due to the use of net operating loss and tax credit carryforwards, the Company paid $1.4 million in cash taxes during the third quarter.

Denny's third quarter net income of $8.3 million, or $0.10 per diluted share, increased 18.7% compared to prior year quarter net income of $7.0 million, or $0.08 per diluted share. Adjusted net income* of $8.5 million grew 22.2% compared to prior year quarter adjusted net income* of $7.0 million. Adjusted Net Income per Share* of $0.10 increased 29.2% compared with the prior year quarter Adjusted Net Income per Share* of $0.08.

Denny’s generated $12.8 million of Free Cash Flow* in the third quarter, after spending $4.4 million on capital expenditures, including five remodels at company restaurants. During the quarter, the Company repurchased 1.2 million shares for $8.0 million. At the end of the third quarter, the Company had 4.3 million shares under the current authorized share repurchase program remaining to be purchased. Denny’s ended the third quarter with $171.7 million of total debt outstanding, including $97.0 million of borrowings under the revolving line of credit and $55.5 million of term loan debt outstanding.





Business Outlook

Mark Wolfinger, Executive Vice President, Chief Administrative Officer and Chief Financial Officer, commented, “We are pleased with our ability to grow our earnings per share as we overcame the temporary closing of our highest volume restaurant. The revitalization of our highly franchised business has enabled us to grow profitability while generating significant Free Cash Flow* to support reinvestment in the brand and our company restaurants, as well as return value to our shareholders. The Company has repurchased 20.7 million shares since initiating its share repurchase strategy in November 2010. We look forward to continuing to accelerate remodels in our company restaurants as well as reopening our highest volume restaurant on the Las Vegas Strip. Due to our strong performance, we are raising our annual guidance again for company same-store sales and Adjusted EBITDA. ”

Key considerations impacting the Company’s outlook for 2014 include:
53 operating weeks (14 in the fourth quarter) compared to 52 operating weeks in 2013.
The highest volume company operated restaurant, located on the Las Vegas Strip, is closed for reconstruction and is expected to reopen by the end of 2014. During the year ended ended December 25, 2013, this restaurant generated $7.9 million of sales and $2.9 million of pre-tax operating income.

Based on year-to-date results and management’s expectations at this time, Denny’s is updating the Company's financial guidance for full year 2014, including increasing expectations for Company Same-Store Sales and Adjusted EBITDA*, in addition to updating expectations for other selected components.


Component
Full Year 2014 Guidance
 
Previous**
Current
Domestic Franchise Same-Store Sales
1.0% to 2.0%
1.5% to 2.0%
Company Same-Store Sales
2.5% to 3.5%
3.5% to 4.0%
New Restaurant Openings
40 - 45 (All Franchised)
Low End of Range
Net Restaurant Growth
5 - 15
Low End of Range
Total General and Administrative Expenses (includes Share-Based Compensation)
$56M to $58M
No Change
Adjusted EBITDA*
$78M to $80M
$79M to $81M
Cash Capital Expenditures
$20M to $22M
$21M to $22M
Depreciation and Amortization Expense
$20.5M to $21.5M
No Change
Interest Expense, net
$9.0M to $9.5M
No Change
Effective Income Tax Rate
(Cash Taxes)
34% to 38%
($3.5M to $4.5M)
34% to 36%
($3.5M to $4.5M)
Free Cash Flow*
$45M to $48M
$46M to $48M
 
*
Please refer to the historical reconciliation of Net Income to Adjusted Net Income, Adjusted Net Income per Share, Adjusted EBITDA and Free Cash Flow included in the following tables.
**
As announced in Second Quarter 2014 Earnings Release on July 28, 2014.





Conference Call and Webcast Information

Denny’s will provide further commentary on the results for the third quarter ended September 24, 2014 on its quarterly investor conference call today, Monday, October 27, 2014 at 4:30 p.m. ET.  Interested parties are invited to listen to a live broadcast of the conference call accessible through the investor relations section of Denny’s website at investor.dennys.com. A replay of the call may be accessed at the same location later in the day and will remain available for 30 days.

About Denny’s

Denny's is the franchisor and operator of one of America's largest franchised full-service restaurant chains, based on the number of restaurants. Denny’s currently has 1,689 franchised, licensed, and company restaurants around the world with combined sales of $2.5 billion including 1,586 restaurants in the United States and 103 restaurants in Canada, Costa Rica, Mexico, Honduras, Guam, Curaçao, Puerto Rico, Dominican Republic, El Salvador, Chile and New Zealand. As of September 24, 2014, 1,529 of Denny’s restaurants were franchised and 160 restaurants were company operated. 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.




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 its 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 “expects”, “anticipates”, “believes”, “intends”, “plans”, “hopes”, 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 competitive pressures from within the restaurant industry; the level of success of the Company’s strategic and operating initiatives; advertising and promotional efforts; adverse publicity; changes in business strategy or development plans; terms and availability of capital; regional weather conditions; overall changes in the general economy, 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, 2013 (and in the Company’s subsequent quarterly reports on Form 10-Q).  



Investor Contact:
Whit Kincaid
 
877-784-7167
 
 
Media Contact:
Liz DiTrapano, ICR
 
646-277-1226








DENNY’S CORPORATION
Condensed Consolidated Balance Sheets
(Unaudited)
 
 
 
 
 
 
 
(In thousands)
9/24/2014
 
12/25/2013
Assets
 
 
 
 
Current assets
 
 
 
 
 
Cash and cash equivalents
$
1,450

 
$
2,943

 
 
Receivables
14,759

 
17,321

 
 
Current deferred tax asset
22,021

 
23,264

 
 
Other current assets
9,072

 
10,298

 
 
 
Total current assets
47,302

 
53,826

 
Property, net
109,268

 
105,620

 
Goodwill
31,451

 
31,451

 
Intangible assets, net
46,683

 
47,925

 
Noncurrent deferred tax asset
21,604

 
28,290

 
Other noncurrent assets
27,971

 
28,665

 
 
 
Total assets
$
284,279

 
$
295,777

 
 
 
 
 
 
 
Liabilities
 
 
 
 
Current liabilities
 
 
 
 
 
Current maturities of long-term debt
$
3,750

 
$
3,000

 
 
Current maturities of capital lease obligations
3,802

 
4,150

 
 
Accounts payable
16,408

 
14,237

 
 
Other current liabilities
50,220

 
52,698

 
 
 
Total current liabilities
74,180

 
74,085

 
Long-term liabilities
 
 
 
 
 
Long-term debt, less current maturities
148,750

 
150,000

 
 
Capital lease obligations, less current maturities
15,422

 
15,923

 
 
Other
43,500

 
47,338

 
 
 
Total long-term liabilities
207,672

 
213,261

 
 
 
Total liabilities
281,852

 
287,346

 
 
 
 
 
 
 
Shareholders' equity
 
 
 
 
 
Common stock
1,055

 
1,050

 
 
Paid-in capital
570,705

 
567,505

 
 
Deficit
(447,899
)
 
(470,946
)
 
 
Accumulated other comprehensive loss, net of tax
(17,138
)
 
(16,842
)
 
 
Treasury stock
(104,296
)
 
(72,336
)
 
 
 
Total shareholders' equity
2,427

 
8,431

 
 
 
Total liabilities and shareholders' equity
$
284,279

 
$
295,777

 
 
 
 
 
 
 
Debt Balances
(In thousands)
9/24/2014
 
12/25/2013
Credit facility term loan and revolver due 2018
$
152,500

 
$
153,000

Capital leases
19,224

 
20,073

 
Total debt
$
171,724

 
$
173,073








DENNY’S CORPORATION
Condensed Consolidated Statements of Comprehensive Income
(Unaudited)
 
 
 
 
 
 
 
 
 
Quarter Ended
(In thousands, except per share amounts)
9/24/2014
 
9/25/2013
Revenue:
 
 
 
 
Company restaurant sales
$
82,827

 
$
83,371

 
Franchise and license revenue
34,205

 
33,904

 
 
Total operating revenue
117,032

 
117,275

Costs of company restaurant sales
71,803

 
73,088

Costs of franchise and license revenue
11,309

 
11,599

General and administrative expenses
13,439

 
13,704

Depreciation and amortization
5,185

 
5,198

Operating (gains), losses and other charges, net
587

 
161

 
 
Total operating costs and expenses, net
102,323

 
103,750

Operating income
14,709

 
13,525

Interest expense, net
2,284

 
2,452

Other nonoperating income, net
(33
)
 
(276
)
Net income before income taxes
12,458

 
11,349

Provision for income taxes
4,115

 
4,318

Net income
$
8,343

 
$
7,031

 
 
 
 
 
 
 
 
 
 
 
 
Basic net income per share
$
0.10

 
$
0.08

Diluted net income per share
$
0.10

 
$
0.08

 
 
 
 
 
 
Basic weighted average shares outstanding
85,061

 
90,035

Diluted weighted average shares outstanding
86,983

 
91,967

 
 
 
 
 
 
Comprehensive income
$
8,643

 
$
6,574

 
 
 
 
 
 
General and Administrative Expenses
Quarter Ended
(In thousands)
9/24/2014
 
9/25/2013
Share-based compensation
$
649

 
$
1,053

Other general and administrative expenses
12,790

 
12,651

 
Total general and administrative expenses
$
13,439

 
$
13,704






DENNY’S CORPORATION
Condensed Consolidated Statements of Comprehensive Income
(Unaudited)
 
 
 
 
 
 
 
 
 
Three Quarters Ended
(In thousands, except per share amounts)
9/24/2014
 
9/25/2013
Revenue:
 
 
 
 
Company restaurant sales
$
243,269

 
$
247,242

 
Franchise and license revenue
100,297

 
101,094

 
 
Total operating revenue
343,566

 
348,336

Costs of company restaurant sales
211,625

 
213,659

Costs of franchise and license revenue
32,639

 
34,586

General and administrative expenses
41,623

 
42,948

Depreciation and amortization
15,704

 
15,774

Operating (gains), losses and other charges, net
1,049

 
1,779

 
 
Total operating costs and expenses, net
302,640

 
308,746

Operating income
40,926

 
39,590

Interest expense, net
6,880

 
7,800

Other nonoperating (income) expense, net
(465
)
 
1,056

Net income before income taxes
34,511

 
30,734

Provision for income taxes
11,464

 
10,424

Net income
$
23,047

 
$
20,310

 
 
 
 
 
 
 
 
 
 
 
 
Basic net income per share
$
0.27

 
$
0.22

Diluted net income per share
$
0.26

 
$
0.22

 
 
 
 
 
 
Basic weighted average shares outstanding
86,882

 
91,348

Diluted weighted average shares outstanding
88,844

 
93,377

 
 
 
 
 
 
Comprehensive income
$
22,751

 
$
22,702

 
 
 
 
General and Administrative Expenses
Three Quarters Ended
(In thousands)
9/24/2014
 
9/25/2013
Share-based compensation
$
2,993

 
$
3,434

Other general and administrative expenses
38,630

 
39,514

 
Total general and administrative expenses
$
41,623

 
$
42,948






DENNY’S CORPORATION
Income, EBITDA, Free Cash Flow, and Net Income Reconciliations
(Unaudited)
 
 
 
 
 
 
 
 
 
 
Income, EBITDA and Free Cash Flow Reconciliation
Quarter Ended
 
Three Quarters Ended
(In thousands)
9/24/2014
 
9/25/2013
 
9/24/2014
 
9/25/2013
Net income
$
8,343

 
$
7,031

 
$
23,047

 
$
20,310

Provision for income taxes
4,115

 
4,318

 
11,464

 
10,424

Operating (gains), losses and other charges, net
587

 
161

 
1,049

 
1,779

Other nonoperating (income) expense, net
(33
)
 
(276
)
 
(465
)
 
1,056

Share-based compensation
649

 
1,053

 
2,993

 
3,434

Adjusted Income Before Taxes (1)
$
13,661

 
$
12,287

 
$
38,088

 
$
37,003

 
 
 
 
 
 
 
 
Interest expense, net
2,284

 
2,452

 
6,880

 
7,800

Depreciation and amortization
5,185

 
5,198

 
15,704

 
15,774

Cash payments for restructuring charges and exit costs
(541
)
 
(771
)
 
(1,557
)
 
(2,168
)
Cash payments for share-based compensation

 

 
(1,083
)
 
(900
)
Adjusted EBITDA (1)
$
20,589

 
$
19,166

 
$
58,032

 
$
57,509

 
 
 
 
 
 
 
 
Cash interest expense, net
(2,028
)
 
(2,156
)
 
(6,090
)
 
(6,890
)
Cash paid for income taxes, net
(1,430
)
 
(496
)
 
(3,070
)
 
(1,831
)
Cash paid for capital expenditures
(4,354
)
 
(4,897
)
 
(17,880
)
 
(13,441
)
Free Cash Flow (1)
$
12,777

 
$
11,617

 
$
30,992

 
$
35,347

 
 
 
 
 
 
 
 
Net Income Reconciliation
Quarter Ended
 
Quarter Ended
(In thousands)
9/24/2014
 
9/25/2013
 
9/24/2014
 
9/25/2013
Net income
$
8,343

 
$
7,031

 
$
23,047

 
$
20,310

(Gains) losses on sales of assets and other, net
(33
)
 
(68
)
 
(74
)
 
(83
)
Impairment charges
320

 

 
348

 
857

Loss on debt refinancing

 

 

 
1,187

Tax effect (2)
(95
)
 
23

 
(91
)
 
(665
)
Adjusted Net Income (1)
$
8,535

 
$
6,986

 
$
23,230

 
$
21,606

 
 
 
 
 
 
 
 
Diluted weighted-average shares outstanding
86,983

 
91,967

 
88,844

 
93,377

 
 
 
 
 
 
 
 
Adjusted Net Income Per Share (1)
$
0.10

 
$
0.08

 
$
0.26

 
$
0.23


(1)
The Company believes that, in addition to other financial measures, Adjusted Income Before Taxes, Adjusted EBITDA, Free Cash Flow, Adjusted Net Income and Adjusted Net Income Per Share are appropriate indicators to assist in the evaluation of its operating performance on a period-to-period basis. The Company also uses Adjusted Income, Adjusted EBITDA and Free Cash Flow 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 its ability to service debt because the excluded charges do not have an impact on its prospective debt servicing capability and these adjustments are contemplated in its credit facility for the computation of its debt covenant ratios. Free Cash Flow, defined as Adjusted EBITDA less cash portion of interest expense net of interest income, capital expenditures, and cash taxes, is used to evaluate operating effectiveness and decisions regarding the allocation of resources. However, Adjusted Income, Adjusted EBITDA, Free Cash Flow, Adjusted Net Income and Adjusted Net Income Per Share should be considered as a supplement to, not a substitute for, operating income, net income or other financial performance measures prepared in accordance with U.S. generally accepted accounting principles.
(2)
Tax adjustments for the three and nine months ended September 24, 2014 are calculated using the Company's year-to-date effective tax rate of 33.2%. Tax adjustments for the three and nine months ended September 25, 2013 are calculated using the Company's year-to-date effective tax rate of 33.9%.






DENNY’S CORPORATION
Operating Margins
(Unaudited)
 
 
 
 
 
 
 
 
 
 
 
Quarter Ended
(In thousands)
9/24/2014
 
9/25/2013
Company restaurant operations: (1)
 
 
 
 
 
 
Company restaurant sales
$
82,827

100.0
%
 
$
83,371

100.0
%
 
Costs of company restaurant sales:
 
 
 
 
 
 
 
Product costs
21,364

25.8
%
 
21,722

26.1
%
 
 
Payroll and benefits
32,507

39.2
%
 
33,746

40.5
%
 
 
Occupancy
5,418

6.5
%
 
5,598

6.7
%
 
 
Other operating costs:
 
 
 
 
 
 
 
 
Utilities
3,728

4.5
%
 
3,592

4.3
%
 
 
 
Repairs and maintenance
1,496

1.8
%
 
1,550

1.9
%
 
 
 
Marketing
3,141

3.8
%
 
3,116

3.7
%
 
 
 
Legal settlements
454

0.5
%
 
157

0.2
%
 
 
 
Other
3,695

4.5
%
 
3,607

4.3
%
 
Total costs of company restaurant sales
$
71,803

86.7
%
 
$
73,088

87.7
%
 
Company restaurant operating margin (2)
$
11,024

13.3
%
 
$
10,283

12.3
%
 
 
 
 
 
 
 
 
 
Franchise operations: (3)
 
 
 
 
 
 
Franchise and license revenue:
 
 
 
 
 
 
Royalties
$
22,705

66.4
%
 
$
21,777

64.2
%
 
Initial fees
391

1.1
%
 
434

1.3
%
 
Occupancy revenue
11,109

32.5
%
 
11,693

34.5
%
 
Total franchise and license revenue
$
34,205

100.0
%
 
$
33,904

100.0
%
 
 
 
 
 
 
 
 
 
 
Costs of franchise and license revenue:
 
 
 
 
 
 
Occupancy costs
$
8,292

24.3
%
 
$
8,616

25.4
%
 
Other direct costs
3,017

8.8
%
 
2,983

8.8
%
 
Total costs of franchise and license revenue
$
11,309

33.1
%
 
$
11,599

34.2
%
 
Franchise operating margin (2)
$
22,896

66.9
%
 
$
22,305

65.8
%
 
 
 
 
 
 
 
 
 
Total operating revenue (4)
$
117,032

100.0
%
 
$
117,275

100.0
%
Total costs of operating revenue (4)
83,112

71.0
%
 
84,687

72.2
%
Total operating margin (4)(2)
$
33,920

29.0
%
 
$
32,588

27.8
%
 
 
 
 
 
 
 
 
 
Other operating expenses: (4)(2)
 
 
 
 
 
 
General and administrative expenses
$
13,439

11.5
%
 
$
13,704

11.7
%
 
Depreciation and amortization
5,185

4.4
%
 
5,198

4.4
%
 
Operating gains, losses and other charges, net
587

0.5
%
 
161

0.1
%
 
Total other operating expenses
$
19,211

16.4
%
 
$
19,063

16.3
%
 
 
 
 
 
 
 
 
 
Operating income (4)
$
14,709

12.6
%
 
$
13,525

11.5
%
 
 
 
 
 
 
 
 
 
(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, net income 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)
9/24/2014
 
9/25/2013
Company restaurant operations: (1)
 
 
 
 
 
 
Company restaurant sales
$
243,269

100.0
%
 
$
247,242

100.0
%
 
Costs of company restaurant sales:
 
 
 
 
 
 
 
Product costs
63,274

26.0
%
 
64,270

26.0
%
 
 
Payroll and benefits
97,584

40.1
%
 
98,512

39.8
%
 
 
Occupancy
15,445

6.3
%
 
16,339

6.6
%
 
 
Other operating costs:
 
 
 
 
 
 
 
 
Utilities
10,385

4.3
%
 
9,897

4.0
%
 
 
 
Repairs and maintenance
4,428

1.8
%
 
4,423

1.8
%
 
 
 
Marketing
9,003

3.7
%
 
9,245

3.7
%
 
 
 
Legal settlements
708

0.3
%
 
671

0.3
%
 
 
 
Other
10,798

4.4
%
 
10,302

4.2
%
 
Total costs of company restaurant sales
$
211,625

87.0
%
 
$
213,659

86.4
%
 
Company restaurant operating margin (2)
$
31,644

13.0
%
 
$
33,583

13.6
%
 
 
 
 
 
 
 
 
 
Franchise operations: (3)
 
 
 
 
 
 
Franchise and license revenue:
 
 
 
 
 
 
Royalties
$
66,311

66.1
%
 
$
64,205

63.5
%
 
Initial fees
840

0.9
%
 
1,164

1.2
%
 
Occupancy revenue
33,146

33.0
%
 
35,725

35.3
%
 
Total franchise and license revenue
$
100,297

100.0
%
 
$
101,094

100.0
%
 
 
 
 
 
 
 
 
 
 
Costs of franchise and license revenue:
 
 
 
 
 
 
Occupancy costs
$
24,773

24.7
%
 
$
26,235

25.9
%
 
Other direct costs
7,866

7.8
%
 
8,351

8.3
%
 
Total costs of franchise and license revenue
$
32,639

32.5
%
 
$
34,586

34.2
%
 
Franchise operating margin (2)
$
67,658

67.5
%
 
$
66,508

65.8
%
 
 
 
 
 
 
 
 
 
Total operating revenue (4)
$
343,566

100.0
%
 
$
348,336

100.0
%
Total costs of operating revenue (4)
244,264

71.1
%
 
248,245

71.3
%
Total operating margin (4)(2)
$
99,302

28.9
%
 
$
100,091

28.7
%
 
 
 
 
 
 
 
 
 
Other operating expenses: (4)(2)
 
 
 
 
 
 
General and administrative expenses
$
41,623

12.1
%
 
$
42,948

12.3
%
 
Depreciation and amortization
15,704

4.6
%
 
15,774

4.5
%
 
Operating gains, losses and other charges, net
1,049

0.3
%
 
1,779

0.5
%
 
Total other operating expenses
$
58,376

17.0
%
 
$
60,501

17.4
%
 
 
 
 
 
 
 
 
 
Operating income (4)
$
40,926

11.9
%
 
$
39,590

11.4
%
 
 
 
 
 
 
 
 
 
(1)
As a percentage of company restaurant sales
(2)
Other operating expenses such as general and administrative expenses and depreciation and amortization relate to both company and franchise operations and are not allocated to costs of company restaurant sales and costs of franchise and license revenue. As such, operating margin is considered a non-GAAP financial measure. Operating margins should be considered as a supplement to, not as a substitute for, operating income, net income 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)
 
 
 
 
 
 
 
 
 
 
Same-Store Sales
Quarter Ended
 
Three Quarters Ended
(increase / (decrease) vs. prior year)
9/24/2014
 
9/25/2013
 
9/24/2014
 
9/25/2013
 
Company Restaurants
4.1
%
 
0.7
%
 
3.7
%
 
(0.4
)%
 
Domestic Franchised Restaurants
2.1
%
 
1.3
%
 
1.8
%
 
0.5
 %
 
Domestic System-wide Restaurants
2.4
%
 
1.2
%
 
2.0
%
 
0.4
 %
 
System-wide Restaurants
2.4
%
 
1.0
%
 
1.8
%
 
0.3
 %
 
 
 
 
 
 
 
 
 
 
Average Unit Sales
Quarter Ended
 
Three Quarters Ended
(In thousands)
9/24/2014
 
9/25/2013
 
9/24/2014
 
9/25/2013
 
Company Restaurants
$
519

 
$
510

 
$
1,528

 
$
1,509

 
Franchised Restaurants
$
375

 
$
365

 
$
1,097

 
$
1,073

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Franchised
 
 
 
 
Restaurant Unit Activity
Company
 
 & Licensed
 
Total
 
 
Ending Units 6/25/14
160

 
1,533

 
1,693

 
 
 
Units Opened

 
9

 
9

 
 
 
Units Closed

 
(13
)
 
(13
)
 
 
 
 
Net Change

 
(4
)
 
(4
)
 
 
Ending Units 9/24/14
160

 
1,529

 
1,689

 
 
 
 
 
 
 
 
 
 
 
 
Equivalent Units
 
 
 
 
 
 
 
 
Third Quarter 2014
159

 
1,532

 
1,691

 
 
 
Third Quarter 2013
163

 
1,520

 
1,683

 
 
 
 
 
(4
)
 
12

 
8

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Franchised
 
 
 
 
Restaurant Unit Activity
Company
 
 & Licensed
 
Total
 
 
Ending Units 12/25/13
163

 
1,537

 
1,700

 
 
 
Units Opened

 
16

 
16

 
 
 
Units Closed
(3
)
 
(24
)
 
(27
)
 
 
 
 
Net Change
(3
)
 
(8
)
 
(11
)
 
 
Ending Units 9/24/14
160

 
1,529

 
1,689

 
 
 
 
 
 
 
 
 
 
 
 
Equivalent Units
 
 
 
 
 
 
 
 
Year-to-Date 2014
159

 
1,534

 
1,693

 
 
 
Year-to-Date 2013
164

 
1,524

 
1,688

 
 
 
 
 
(5
)
 
10

 
5