Denny's Corporation Reports Results for the Second Quarter 2010

Denny's Corporation Reports Results for the Second Quarter 2010

SPARTANBURG, S.C.--(BUSINESS WIRE)--Denny's Corporation (NASDAQ: DENN) today reported results for its second quarter ended June 30, 2010.

Second Quarter Summary

  • Same-store guest counts decreased 3.7% and were sequentially stronger each month in the quarter. This reflects an improvement of 1.9 percentage points from the first quarter and represents Denny's strongest guest count performance since the first quarter of 2009.
  • Same-store sales decreased 6.2% at company units and 5.9% at franchised units
  • Opened seven new franchise restaurants, highlighted by the first of an expected seventy franchise conversions in 2010 from Flying J Travel Center sites
  • Sold nine company restaurants under Denny's Franchise Growth Initiative (FGI)
  • Net income of $5.5 million, including proxy contest related costs and lower gains on the sale of assets driven by 13 fewer units sold through the FGI program
  • Adjusted income before taxes* of $6.2 million, a decrease of $1.1 million driven by one-time proxy contest related costs of $1.5 million. Excluding these costs adjusted income before taxes increased $0.4 million, or 6%.
  • Generated $3.3 million in cash proceeds from the sale of assets and reduced outstanding debt by $10.0 million

Debra Smithart-Oglesby, Interim Chief Executive Officer and Board Chair, stated, "Our second quarter showed encouraging signs of progress towards our key areas of focus. First, we have seen a positive and sequential change in trend in same-store guest counts within the quarter due primarily to guest acceptance of the Company's everyday affordability strategy, led by the $2/$4/$6/$8 Value Menu. This momentum carried into July as same-store sales for company units of -1.7% was driven by this improving guest count trend. Second, excluding cost related to the proxy contest, we continued to deliver growth in adjusted income before taxes. Third, our franchisees continued to build new units and began the process of converting an initial 70 Flying J sites to Denny's. Last, we continue to refranchise targeted company units and to further reduce our debt."

"Denny's leadership is committed to effectively executing towards our strategic priorities of driving sales, growing profitability, and growing unit development in traditional and non-traditional venues which will result in the optimization of our balance sheet and free cash-flow. To execute these priorities we are committed to bringing aboard high-caliber talent at the Board and Senior Executive levels. Recently we made progress in this area with the appointment of Gregg Dedrick to the Board and the hiring of Frances Allen as Chief Marketing Officer. We have also recently reinitiated a full review of our cost structure."

Second Quarter Results

For the second quarter of 2010, Denny's reported total operating revenue, including company restaurant sales and franchise revenue, of $135.1 million compared with $155.8 million in the prior year quarter. Company restaurant sales decreased $20.2 million primarily due to 37 fewer equivalent company restaurants compared with the prior year quarter. The decrease in restaurants resulted from the sale of company restaurants to franchisees under FGI.

Company restaurant operating margin (as a percentage of company restaurant sales) was 13.8%, a decrease of 0.5 percentage points compared with the same period last year driven by the factors discussed below.

Product costs decreased 0.1 percentage points to 23.3% of sales primarily due to the impact of lower non ingredient costs and lower commodity costs, partially offset by a higher mix of value priced items.

Payroll and benefit costs decreased 0.4 percentage points to 41.2% of sales primarily due to lower restaurant management incentive compensation as well as efficiency improvements in team labor, partially offset by the deleveraging effect of lower sales and unfavorable worker's compensation claims development.

Occupancy costs increased 0.2 percentage points to 6.6% of sales primarily due to the deleveraging effect of lower sales.

Other operating costs increased 0.9 percentage points to 15.2% of sales. Utility costs decreased 0.2 percentage points to 4.2% due to the recognition of $0.4 million in losses on natural gas contracts during the prior year quarter. Marketing expenses increased 0.5 percentage points to 4.3% of sales due to additional spending related to the Super Bowl and the testing of the $2/$4/$6/$8 value menu program. Other direct costs increased 0.8 percentage points primarily due to write-off of excess promotional materials and higher recruiting costs associated with new Flying J units.

Franchise and license revenue decreased by $0.5 million to $29.8 million compared with $30.3 million in the prior year quarter. The decrease in franchise revenue included a $0.6 million decrease in franchise fees and $0.2 million decrease in royalties, partially offset by $0.2 million increase in franchise occupancy revenue. The franchise fee decrease resulted from the sale of 13 fewer units to franchisees in the second quarter of this year. The royalty revenue decrease was due to negative same-store sales, partially offset by an additional 49 equivalent franchise restaurants. During the second quarter, Denny's franchisees opened seven new restaurants, including the first franchise Flying J Travel Center location, closed ten restaurants and purchased nine company units.

Franchise operating margin decreased $1.0 million to $18.7 million, primarily due to the $0.6 million decrease in franchise fee revenue and lower same-store sales, partially offset by the additional 49 equivalent franchise restaurants. Franchise operating margin (as a percentage of franchise and license revenue) was 62.6%, a decrease of 2.1 percentage points compared with the same quarter last year. The decrease in margin was primarily driven by temporary overhead costs associated with converting the Flying J sites and by a decrease in franchise fees due to fewer refranchisings, this was partially offset by the higher contribution of higher-margin royalty revenue generated through FGI.

General and administrative expenses decreased $2.8 million, or 17.6%, from the same period last year. This reduction was driven by a $1.9 million decrease in stock-based compensation, and a $2.6 million decrease in incentive and deferred compensation, partially offset by $1.5 million in costs related to our recent proxy contest. The $1.9 million decrease in share-based compensation resulted primarily from the change in our stock price during the quarter.

Depreciation and amortization expense declined by $0.7 million compared with the prior year quarter primarily as a result of the sale of restaurants and real estate over the past year. Operating gains, losses and other charges, net, which reflect restructuring charges, exit costs, impairment charges and gains or losses on the sale of assets, decreased $3.6 million in the quarter. The decrease primarily resulted from fewer sales of company restaurants to franchisees and higher severance and other restructuring charges.

Operating income for the quarter decreased $4.5 million from the prior year period to $12.9 million, primarily due to a $20.2 million decrease in total operating revenue attributable to the sale of company restaurants and negative same-store sales.

Interest expense decreased $1.7 million, or 20.9%, to $6.5 million as a result of the termination of our interest rate swap and a $51.4 million reduction in debt from the prior year period. Other nonoperating expense increased $1.3 million in the quarter primarily due to the recognition of $0.7 million in losses on the assets in our deferred compensation plan.

Denny's reported net income of $5.5 million for the second quarter, or $0.05 per diluted common share, compared with prior year period net income of $9.3 million, or $0.09 per diluted common share. Adjusted income before taxes*, Denny's metric for earnings guidance, decreased $1.1 million in the second quarter to $6.2 million. Excluding the $1.5 million of proxy contest related costs, adjusted income before taxes increased $0.4 million, or 6%. This measure, which is used as an internal profitability metric, excludes restructuring charges, exit costs, impairment charges, asset sale gains and losses, share-based compensation, other nonoperating expenses and income taxes.

Business Outlook

Based on year-to-date results and management's expectations at this time, Denny's is reaffirming the majority of its financial guidance for full-year 2010 as announced in its fourth quarter 2009 earnings release on February 17, 2010.

The notable exceptions are: restaurant unit development which is being increased to reflect anticipated Flying J conversions and university campus openings; and, cash capital which is being updated to reflect the conversion of certain Flying J units to company operated sites.

Component - Full Year 2010                   Original Guidance                                   Updated Guidance
----------------------------------    -----------------------------    -------------------------------------------------------------------
Company Same-Store Sales                     (4.0%) to (2.0%)                             Lower end of original guidance
----------------------------------    -----------------------------    -------------------------------------------------------------------
Franchise Same-Store Sales                   (5.0%) to (3.0%)                             Lower end of original guidance
----------------------------------    -----------------------------    -------------------------------------------------------------------
New Company Units                      6 (includes 4 Flying J sites)                      11 (includes 10 Flying J sites)
----------------------------------    -----------------------------    -------------------------------------------------------------------
New Franchise Units                                 35                        100 (includes 70 Flying J sites and 4 university sites)
----------------------------------    -----------------------------    -------------------------------------------------------------------
Adjusted EBITDA* ($M)                           $71 to $75              Lower end of original guidance (excluding restructure costs related
                                                                                                  to former CEO)
----------------------------------    -----------------------------    -------------------------------------------------------------------
Adjusted Income Before Taxes* ($M)              $23 to $28                                Lower end of original guidance
----------------------------------    -----------------------------    -------------------------------------------------------------------
Cash Interest Expense ($M)                          $24                                                 $24
----------------------------------    -----------------------------    -------------------------------------------------------------------
Cash Capital ($M)                                   $17                         $21 (includes $5.7 million for the Flying J sites)
----------------------------------    -----------------------------    ---------------------------------------------------------

* Please refer to the historical reconciliation of net income to adjusted income before taxes and adjusted EBITDA included in the tables below.

Further Information

Denny's will provide further commentary on the results for the second quarter of 2010 on its quarterly investor conference call today, Tuesday, August 3, 2010 at 5:00 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 ir.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.

Denny's is one of America's largest full-service family restaurant chains, consisting of 1,328 franchised and licensed units and 228 company-owned units, with operations in the United States, Canada, Costa Rica, Guam, Mexico, New Zealand and Puerto Rico. 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.

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 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 30, 2009 (and in the Company's subsequent quarterly reports on Form 10-Q).

DENNY'S CORPORATION
                                Condensed Consolidated Statements of Operations
                                                  (Unaudited)
                                                                                Quarter            Quarter
                                                                                 Ended              Ended
(In thousands, except per share amounts)                                        6/30/10            7/1/09
                                                                               -------            -------
Revenue:
                 Company restaurant sales                                 $    105,301       $    125,500
                 Franchise and license revenue                                  29,776             30,313
                                                                               -------            -------
                                      Total operating revenue                  135,077            155,813
                                                                               -------            -------
Costs of company restaurant sales                                               90,765            107,507
Costs of franchise and license revenue                                          11,123             10,689
General and administrative expenses                                             13,111             15,907
Depreciation and amortization                                                    7,291              8,015
Operating (gains), losses and other charges, net                                  (117 )           (3,751 )
                                                                               ------- ----       ------- ----
                                      Total operating costs and expenses       122,173            138,367
                                                                               -------            -------
Operating income                                                                12,904             17,446
                                                                               -------            -------
Other expenses:
                 Interest expense, net                                           6,514              8,239
                 Other nonoperating expense (income), net                          570               (745 )
                                                                               -------            ------- ----
                                      Total other expenses, net                  7,084              7,494
                                                                               -------            -------
Income before income taxes                                                       5,820              9,952
Provision for income taxes                                                         362                616
                                                                               -------            -------
Net income                                                                $      5,458       $      9,336
                                                                          ==== =======       ==== =======
Net income per share:
                 Basic                                                    $       0.05       $       0.10
                                                                          ==== =======       ==== =======
                 Diluted                                                  $       0.05       $       0.09
                                                                          ==== =======       ==== =======
Weighted average shares outstanding:
                 Basic                                                          99,263             96,113
                                                                               =======            =======
                 Diluted                                                       101,983             98,457
                                                                               =======            =======
                                             DENNY'S CORPORATION
                               Condensed Consolidated Statements of Operations
                                                 (Unaudited)
                                                                           Two Quarters      Two Quarters
                                                                               Ended             Ended
(In thousands, except per share amounts)                                      6/30/10           7/1/09
                                                                          ---------------      -------
Revenue:
                 Company restaurant sales                                 $      213,084  $    261,076
                 Franchise and license revenue                                    59,565        60,497
                                                                                 -------       -------
                                      Total operating revenue                    272,649       321,573
                                                                                 -------       -------
Costs of company restaurant sales                                                183,898       227,192
Costs of franchise and license revenue                                            23,489        21,987
General and administrative expenses                                               26,185        29,754
Depreciation and amortization                                                     14,664        16,727
Operating (gains), losses and other charges, net                                     306        (3,453 )
                                                                                 -------       ------- ----
                                      Total operating costs and expenses         248,542       292,207
                                                                                 -------       -------
Operating income                                                                  24,107        29,366
                                                                                 -------       -------
Other expenses:
                 Interest expense, net                                            12,912        16,730
                 Other nonoperating expense (income), net                            558        (1,231 )
                                                                                 -------       ------- ----
                                      Total other expenses, net                   13,470        15,499
                                                                                 -------       -------
Income before income taxes                                                        10,637        13,867
Provision for income taxes                                                           591           224
                                                                                 -------       -------
Net income                                                                $       10,046  $     13,643
                                                                          ====== =======  ==== =======
Net income per share:
                 Basic                                                    $         0.10  $       0.14
                                                                          ====== =======  ==== =======
                 Diluted                                                  $         0.10  $       0.14
                                                                          ====== =======  ==== =======
Weighted average shares outstanding:
                 Basic                                                            98,179        96,079
                                                                                 =======       =======
                 Diluted                                                         101,068        97,893
                                                                                 =======       =======
                                                DENNY'S CORPORATION
                                       Condensed Consolidated Balance Sheets
                                                    (Unaudited)
(In thousands)                                                                       6/30/10          12/30/09
                                                                                    --------          --------
ASSETS
              Current Assets
                            Cash and cash equivalents                           $     21,677      $     26,525
                            Receivables, net                                          13,352            18,106
                            Assets held for sale                                       2,941                 -
                            Other                                                     16,324            13,714
                                                                                    --------          --------
                                                                                      54,294            58,345
                                                                                    --------          --------
              Property, net                                                          122,987           131,484
              Goodwill                                                                32,283            32,440
              Intangible assets, net                                                  53,587            55,110
              Other assets                                                            33,514            35,248
                                                                                    --------          --------
                            Total Assets                                        $    296,665      $    312,627
                                                                                === ========      === ========
LIABILITIES AND SHAREHOLDERS' DEFICIT
              Current Liabilities
                            Current maturities of notes and debentures          $        753      $        900
                            Current maturities of capital lease obligations            3,785             3,725
                            Accounts payable                                          17,676            22,842
                            Other current liabilities                                 55,251            64,641
                                                                                    --------          --------
                                                                                      77,465            92,108
                                                                                    --------          --------
              Long-Term Liabilities
                            Notes and debentures, less current maturities            239,467           254,357
                            Capital lease obligations, less current maturities        19,934            19,684
                            Other                                                     72,710            73,976
                                                                                    --------          --------
                                                                                     332,111           348,017
                                                                                    --------          --------
                            Total Liabilities                                        409,576           440,125
                            Total Shareholders' Deficit                             (112,911 )        (127,498 )
                                                                                    -------- ---      -------- ---
                            Total Liabilities and Shareholders' Deficit         $    296,665      $    312,627
                                                                                === ========      === ========
                                 Debt Balances
(In thousands)                                                                       6/30/10          12/30/09
                                                                                    --------          --------
Credit facility revolver loans due 2011                                         $          -      $          -
Credit facility term loans due 2012                                                   65,000            80,000
Capital leases and other debt                                                         23,939            23,666
Senior notes due 2012                                                                175,000           175,000
                                                                                    --------          --------
              Total Debt                                                        $    263,939      $    278,666
                                                                                === ========      === ========
                                                        DENNY'S CORPORATION
                                              Income, EBITDA and G&A Reconciliations
                                                            (Unaudited)
                                                                   Quarter         Quarter        Two Quarters      Two Quarters
Income and EBITDA Reconciliation                                    Ended           Ended             Ended             Ended
(In millions)                                                      6/30/10         7/1/09            6/30/10           7/1/09
                                                                  -------          ------           -------            ------
Net income                                                    $       5.5      $      9.3      $       10.0       $      13.6
Provision for income taxes                                            0.4             0.6               0.6               0.2
Operating (gains), losses and other charges, net                     (0.1 )          (3.8 )             0.3              (3.5 )
Other nonoperating expense (income), net                              0.6            (0.7 )             0.6              (1.2 )
Share-based compensation                                             (0.1 )           1.8               1.2               2.7
Adjusted income before taxes (1)                              $       6.2      $      7.3      $       12.8       $      11.9
                                                              --- -------      --- ------      ---- -------       ---- ------
Interest expense, net                                                 6.5             8.2              12.9              16.7
Depreciation and amortization                                         7.3             8.0              14.7              16.7
Cash payments for restructuring charges and exit costs               (0.9 )          (1.8 )            (2.3 )            (3.6 )
Cash payments for share-based compensation                              -               -              (1.0 )            (1.8 )
Adjusted EBITDA (1)                                           $      19.1      $     21.7      $       37.1       $      40.0
                                                              === ======= ===  === ====== ===  ==== ======= ====  ==== ====== ====
                                                                   Quarter         Quarter        Two Quarters      Two Quarters
General and Administrative Expenses Reconciliation                  Ended           Ended             Ended             Ended
(In millions)                                                      6/30/10         7/1/09            6/30/10           7/1/09
                                                                  -------          ------           -------            ------
                   Share-based compensation                   $      (0.1 )    $      1.8      $        1.2       $       2.7
                   Other general and administrative expenses         13.2            14.1              25.0              27.1
                                                                  -------          ------           -------            ------
                   Total general and administrative expenses  $      13.1      $     15.9      $       26.2       $      29.8
                                                              === =======      === ======      ==== =======       ==== ======
(1) We believe that, in addition to other financial measures,
Adjusted Income Before Taxes and Adjusted EBITDA are appropriate
indicators to assist in the evaluation of our operating
performance on a period-to-period basis.We also use Adjusted
Income and Adjusted EBITDA 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 our
ability to service debt because the excluded charges do not have
an impact on our prospective debt servicing capability and these
adjustments are contemplated in our senior credit facility for the
computation of our debt covenant ratios.However, Adjusted Income
and Adjusted EBITDA 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.
                                                     DENNY'S CORPORATION
                                                      Operating Margins
                                                         (Unaudited)
                                                                              Quarter                      Quarter
                                                                               Ended                        Ended
(In millions)                                                                 6/30/10                      7/1/09
                                                                   ---------------------------- ----------------------------
Company restaurant operations: (2)
          Company restaurant sales                                 $    105.3       100.0 %     $    125.5       100.0 %
          Costs of company restaurant sales:
                          Product costs                                  24.5        23.3 %           29.3        23.4 %
                          Payroll and benefits                           43.4        41.2 %           52.2        41.6 %
                          Occupancy                                       6.9         6.6 %            8.1         6.4 %
                          Other operating costs:
                                          Utilities                       4.4         4.2 %            5.6         4.4 %
                                          Repairs and maintenance         2.0         1.9 %            2.5         2.0 %
                                          Marketing                       4.5         4.3 %            4.8         3.8 %
                                          Legal settlements               0.1         0.1 %              -         0.0 %
                                          Other                           5.0         4.8 %            5.1         4.0 %
                                                                        -----       ----- ----       -----       ----- ----
          Total costs of company restaurant sales                  $     90.8        86.2 %     $    107.5        85.7 %
                                                                   ---- -----       ----- ----  ---- -----       ----- ----
          Company restaurant operating margin (3)                  $     14.5        13.8 %     $     18.0        14.3 %
                                                                   ---- -----       ----- ----  ---- -----       ----- ----
Franchise operations: (4)
          Franchise and license revenue
             Royalty and license revenue                           $     17.8        59.9 %     $     18.0        59.4 %
             Initial and other fee revenue                                0.7         2.3 %            1.3         4.2 %
             Occupancy revenue                                           11.3        37.8 %           11.0        36.4 %
                                                                        -----       ----- ----       -----       ----- ----
          Total franchise and license revenue                      $     29.8       100.0 %     $     30.3       100.0 %
                                                                   ---- -----       ----- ----  ---- -----       ----- ----
          Costs of franchise and license revenue
             Direct franchise costs                                $      2.5         8.4 %     $      2.1         7.0 %
             Occupancy costs                                              8.6        29.0 %            8.6        28.3 %
                                                                        -----       ----- ----       -----       ----- ----
          Total costs of franchise and license revenue             $     11.1        37.4 %     $     10.7        35.3 %
                                                                   ---- -----       ----- ----  ---- -----       ----- ----
          Franchise operating margin (3)                           $     18.7        62.6 %     $     19.6        64.7 %
                                                                   ---- -----       ----- ----  ---- -----       ----- ----
Total operating revenue (1)                                        $    135.1       100.0 %     $    155.8       100.0 %
Total costs of operating revenue (1)                                    101.9        75.4 %          118.2        75.9 %
                                                                        -----       ----- ----       -----       ----- ----
Total operating margin (1)(3)                                      $     33.2        24.6 %     $     37.6        24.1 %
                                                                   ---- -----       ----- ----  ---- -----       ----- ----
Other operating expenses: (1)(3)
          General and administrative expenses                      $     13.1         9.7 %     $     15.9        10.2 %
          Depreciation and amortization                                   7.3         5.4 %            8.0         5.1 %
          Operating gains, losses and other charges, net                 (0.1 )      (0.1 %)          (3.8 )      (2.4 %)
                                                                        ----- ----  ----- ----       ----- ----  ----- ----
          Total other operating expenses                           $     20.3        15.0 %     $     20.2        12.9 %
                                                                   ---- -----       ----- ----  ---- -----       ----- ----
Operating income (1)                                               $     12.9         9.6 %     $     17.4        11.2 %
                                                                   ==== =====       ===== ====  ==== =====       ===== ====
          (1)                             As a percentage of total operating revenue
          (2)                             As a percentage of company restaurant sales
          (3)                             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.
          (4)                             As a percentage of franchise and license revenue
                                                  DENNY'S CORPORATION
                                                   Operating Margins
                                                      (Unaudited)
                                                                        Two Quarters               Two Quarters
                                                                            Ended                      Ended
(In millions)                                                              6/30/10                    7/1/09
                                                                   ----------------------- ----------------------------
Company restaurant operations: (2)
          Company restaurant sales                                 $    213.1  100.0 %     $    261.1       100.0 %
          Costs of company restaurant sales:
                          Product costs                                  50.2   23.6 %           61.6        23.6 %
                          Payroll and benefits                           87.5   41.1 %          109.9        42.1 %
                          Occupancy                                      14.3    6.7 %           17.1         6.5 %
                          Other operating costs:
                                          Utilities                       9.0    4.2 %           12.4         4.8 %
                                          Repairs and maintenance         3.9    1.9 %            5.1         2.0 %
                                          Marketing                       8.8    4.1 %            9.6         3.7 %
                                          Legal settlements               0.2    0.1 %            0.4         0.1 %
                                          Other                           9.8    4.6 %           11.1         4.3 %
                                                                        -----  ----- ----       -----       ----- ----
          Total costs of company restaurant sales                  $    183.9   86.3 %     $    227.2        87.0 %
                                                                   ---- -----  ----- ----  ---- -----       ----- ----
          Company restaurant operating margin (3)                  $     29.2   13.7 %     $     33.9        13.0 %
                                                                   ---- -----  ----- ----  ---- -----       ----- ----
Franchise operations: (4)
          Franchise and license revenue
             Royalty and license revenue                           $     35.8   60.1 %     $     35.9        59.3 %
             Initial and other fee revenue                                1.1    1.9 %            2.9         4.8 %
             Occupancy revenue                                           22.6   38.0 %           21.7        35.9 %
                                                                        -----  ----- ----       -----       ----- ----
          Total franchise and license revenue                      $     59.6  100.0 %     $     60.5       100.0 %
                                                                   ---- -----  ----- ----  ---- -----       ----- ----
          Costs of franchise and license revenue
             Direct franchise costs                                $      6.2   10.3 %     $      5.4         8.9 %
             Occupancy costs                                             17.3   29.1 %           16.6        27.4 %
                                                                        -----  ----- ----       -----       ----- ----
          Total costs of franchise and license revenue             $     23.5   39.4 %     $     22.0        36.3 %
                                                                   ---- -----  ----- ----  ---- -----       ----- ----
          Franchise operating margin (3)                           $     36.1   60.6 %     $     38.5        63.7 %
                                                                   ---- -----  ----- ----  ---- -----       ----- ----
Total operating revenue (1)                                        $    272.6  100.0 %     $    321.6       100.0 %
Total costs of operating revenue (1)                                    207.4   76.1 %          249.2        77.5 %
                                                                        -----  ----- ----       -----       ----- ----
Total operating margin (1)(3)                                      $     65.3   23.9 %     $     72.4        22.5 %
                                                                   ---- -----  ----- ----  ---- -----       ----- ----
Other operating expenses: (1)(3)
          General and administrative expenses                      $     26.2    9.6 %     $     29.8         9.3 %
          Depreciation and amortization                                  14.7    5.4 %           16.7         5.2 %
          Operating gains, losses and other charges, net                  0.3    0.1 %           (3.5 )      (1.1 %)
                                                                        -----  ----- ----       ----- ----  ----- ----
          Total other operating expenses                           $     41.2   15.1 %     $     43.0        13.4 %
                                                                   ---- -----  ----- ----  ---- -----       ----- ----
Operating income (1)                                               $     24.1    8.8 %     $     29.4         9.1 %
                                                                   ==== =====  ===== ====  ==== =====       ===== ====
          (1)                             As a percentage of total operating revenue
          (2)                             As a percentage of company restaurant sales
          (3)                             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.
          (4)                             As a percentage of franchise and license revenue
                                            DENNY'S CORPORATION
                                             Statistical Data
                                                (Unaudited)
                                            Quarter        Quarter        Two Quarters      Two Quarters
Same-Store Sales                             Ended          Ended             Ended             Ended
(increase/(decrease) vs. prior year)        6/30/10        7/1/09            6/30/10           7/1/09
                                           -------         ------           -------            ------
Same-Store Sales
             Company Restaurants              (6.2 %)        (2.7 %)           (5.8 %)           (1.1 %)
             Franchised Restaurants           (5.9 %)        (4.7 %)           (6.1 %)           (3.1 %)
             System-wide Restaurants          (5.9 %)        (4.2 %)           (6.0 %)           (2.6 %)
Company Restaurant Sales Detail
             Guest Check Average              (2.7 %)         2.3 %            (1.3 %)            1.3 %
             Guest Counts                     (3.7 %)        (4.9 %)           (4.6 %)           (2.5 %)
                                            Quarter        Quarter        Two Quarters      Two Quarters
Average Unit Sales                           Ended          Ended             Ended             Ended
($ in thousands)                           6/30/10         7/1/09           6/30/10            7/1/09
                                           -------         ------           -------            ------
             Company Restaurants         $     448       $    460         $     906          $    915
             Franchised Restaurants      $     339       $    357         $     681          $    719
                                                         Franchised
Restaurant Unit Activity                    Company      & Licensed           Total
                                        -------------- --------------- ------------------
Ending Units 3/31/10                           237          1,322             1,559
Units Opened                                     0              7                 7
Units Refranchised                              (9 )            9                 0
Units Closed                                     0            (10 )             (10 )
                                           -------         ------ ---       ------- ----
Net Change                                      (9 )            6                (3 )
Ending Units 6/30/10                           228          1,328             1,556
                                           =======         ======           =======
Equivalent Units
Second Quarter 2010                            235          1,322             1,557
Second Quarter 2009                            272          1,273             1,545
                                           -------         ------           -------
                                               (37 )           49                12
                                           ======= ==      ======           =======
                                                         Franchised
Restaurant Unit Activity                    Company      & Licensed           Total
                                        -------------- --------------- ------------------
Ending Units 12/30/09                          233          1,318             1,551
             Units Opened                        4             13                17
             Units Refranchised                 (9 )            9                 0
             Units Closed                        0            (12 )             (12 )
                                           -------         ------ ---       ------- ----
                          Net Change            (5 )           10                 5
Ending Units 6/30/10                           228          1,328             1,556
                                           =======         ======           =======
Equivalent Units
             Year-to-Date 2010                 235          1,321             1,556
             Year-to-Date 2009                 285          1,257             1,542
                                           -------         ------           -------
                                               (50 )           64                14
                                           ======= ==      ======           =======

SOURCE: Denny's Corporation

###

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