Denny's Corporation Reports Results for Second Quarter 2012

- Adjusted Income Before Taxes* Grows 35% -
- Quarterly System-wide Same Store Sales Increases 0.8% and 2.8% Over Two Years -

SPARTANBURG, S.C.--(BUSINESS WIRE)--Jul. 31, 2012-- Denny's Corporation (NASDAQ: DENN), franchisor and operator of one of America's largest full-service restaurant chains, today reported results for its second quarter ended June 27, 2012.

Second Quarter Summary

  • System-wide same-store sales grew 0.8%, which marks the fifth consecutive quarter that system-wide same-store sales have been positive, achieving two-year same-store sales of positive 2.8%.
  • Opened nine franchised units, including two international units in the Dominican Republic and Canada.
  • Signed largest international development agreement to date for 50 units in southern China.
  • Franchise operating margin increased 0.8 percentage points to 66.0% compared with the prior year.
  • Company restaurant operating margin increased 1.5 percentage points to 14.8% compared with the prior year.
  • Adjusted EBITDA* margin increased 1.7 percentage points to 17.0% compared with the prior year.
  • Net income of $4.6 million, or $0.05 per diluted share, was impacted by a charge to other nonoperating expense of $7.9 million as a result of the refinancing of our credit facility in April 2012.
  • Adjusted Income Before Taxes* grew 34.6% to $12.9 million compared with the prior year.
  • Free Cash Flow* increased 14.5% to $15.0 million compared with the prior year.
  • Reduced outstanding term loan debt by $7 million to $183 million bringing Total Debt to Adjusted EBITDA Ratio below 2.5x.
  • Repurchased 1.4 million shares in the second quarter bringing total shares repurchased since November 2010 to 8.1 million.

John Miller, President and Chief Executive Officer, stated, "During the second quarter, we achieved our fifth consecutive quarter of positive system-wide same-store sales along with the highest quarterly two-year same-store sales we have generated in almost five years. Despite the persistently challenging economic environment, we continue to deliver solid financial results and make progress in our efforts to differentiate Denny's in the market place. By executing on our strategies to further reinforce our position as America's Diner and globally as your local diner, we will build on our efforts to increase shareholder value. As Denny's approaches its 60th anniversary and 1,700th location, we believe that Denny's will become one of the largest American full service brands in the world. Our recent partnership to open units in southern China is the first significant step toward that goal."

Second Quarter Results

For the second quarter of 2012, franchise and license revenue increased 5.2% to $33.5 million compared with $31.8 million in the prior year quarter. The $1.7 million increase in franchise revenue was primarily driven by a $0.9 million increase in royalties due to 51 additional equivalent franchise restaurants and the effects of higher same-store sales in addition to higher occupancy revenue. Company restaurant sales of $91.2 million decreased $12.8 million due to 36 fewer equivalent company restaurants compared with the prior year quarter. Denny's total operating revenue, including both company restaurant sales and franchise revenue, was $124.7 million compared with $135.9 million in the prior year quarter.

Denny's opened nine new franchised units in the second quarter of this year, including two international units in the Dominican Republic and Canada. During the quarter, Denny's closed five franchised and company restaurants and franchisees purchased 17 company-owned restaurants.

Total operating margin increased $1.0 million, or 2.9%, to $35.6 million. Franchise operating margin increased $1.4 million to $22.1 million primarily due to the increases in franchise royalties and occupancy margin. Company restaurant operating margin decreased $0.4 million primarily due to the impact of selling company-owned units to franchisees.

As a percentage of total operating revenue, total operating margin increased 3.0 percentage points to 28.5%. Franchise operating margin, as a percentage of franchise and license revenue, was 66.0%, an increase of 0.8 percentage points compared with the prior year quarter. Company restaurant operating margin (as a percentage of company restaurant sales) was 14.8%, an increase of 1.5 percentage points compared with the prior year quarter. The increase in company restaurant operating margin was primarily driven by lower other operating costs and lower payroll and benefit costs compared to the prior year quarter.

Total general and administrative expenses increased $0.7 million compared with the prior year quarter primarily due to higher performance-based compensation accruals.

Depreciation and amortization expense decreased by $1.4 million compared with the prior year quarter, primarily as a result of the sale of restaurants over the past two years. Net operating gains, losses and other charges, which reflect restructuring charges, exit costs, impairment charges and gains or losses on the sale of assets, increased $3.6 million in the quarter. The increase was primarily the result of the sale of more company-owned units to franchisees.

Interest expense decreased $1.9 million to $3.0 million as a result of a $39.2 million reduction in total gross debt over the last 12 months and lower interest rates under the refinanced credit facility.

In the second quarter, the provision for income taxes increased $2.8 million, primarily due to a higher effective tax rate of 41.1% compared to 4.8% effective tax rate in the prior year quarter. The change in the effective tax rate compared to the prior year resulted from the release of a substantial portion of the valuation allowance on certain deferred tax assets based on our improved historical and projected pre-tax income. Due to the use of net operating loss and tax credit carryforwards, the Company only paid $1.2 million in cash taxes in the second quarter.

Denny's net income was $4.6 million for the second quarter 2012, or $0.05 per diluted share, compared with prior year period net income of $8.1 million, or $0.08 per diluted share. Net income was impacted by the refinancing of our credit facility which resulted in a charge to other nonoperating expense of $7.9 million for the unamortized portion of deferred financing costs and original issue discount related to the prior facility, and portion of the fees related to the new facility. Adjusted Income Before Taxes*, Denny's metric for earnings guidance, increased 34.6% to $12.9 million compared with the prior year quarter Adjusted Income Before Taxes* of $9.6 million.

Business Outlook

Mark Wolfinger, Executive Vice President, Chief Administrative Officer and Chief Financial Officer, stated, "Our franchised-focused business model has enabled us to deliver another solid quarter of financial performance as demonstrated by our year-over-year increases in same-store sales, profitability, and cash flow. Our total debt ratio is now below 2.5x which lowers the interest rate on our term loan by 25 bps. to around 3.0%, based on current rates. Our business model provides financial stability and flexibility while enabling us to continue to return value to shareholders through debt repayment and share repurchases."

Based on year-to-date results and management's expectations at this time, Denny's is reiterating the Company's financial guidance for full year 2012.

Component           Full Year 2012 Guidance
            Previous**               Current      
                                   
Franchise Same-Store Sales           1.0% to 3.0%               No Change      
                                   
Company Same-Store Sales           0.0% to 2.0%               No Change      
                                   
New System Units           45 - 50               No Change      
            (includes 1 company-owned unit)                      
                                   
Adjusted EBITDA* ($M)           $80 to $84               No Change      
                                   
Adjusted Income Before Taxes* ($M)           $45 to $49               No Change      
                                   
            $12.5 to $13.5                      
Interest Expense, net ($M)           (includes $10.5 to $11.5 of net               No Change      
            cash interest expense)                      
                                   
Cash Capital Expenditure ($M)           $15 to $16               No Change      
                                   
Cash Taxes ($M)           $3 to $4               No Change      
                                   
Free Cash Flow* ($M)           $51 to $55               No Change      
                                   

*

 

Please refer to the historical reconciliation of net income to Adjusted Income Before Taxes, Adjusted EBITDA, and Free Cash Flow included in the tables below.

**   As announced in First Quarter 2012 Earnings Release on April 30, 2012.
     

Further Information

Denny's will provide further commentary on the results for the second quarter of 2012 on its quarterly investor conference call today, Tuesday, July 31, 2012 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 the franchisor and operator of one of America's largest full-service restaurant chains, based on number of units. As of June 27, 2012, Denny's had 1,684 franchised, licensed, and company-owned restaurants across the United States, Canada, Costa Rica, Mexico, Honduras, Guam, Curaçao, Puerto Rico, Dominican Republic and New Zealand. 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, which reflect our 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 28, 2011 (and in the Company's subsequent quarterly reports on Form 10-Q).

DENNY'S CORPORATION
Condensed Consolidated Statements of Comprehensive Income
(Unaudited)
                     
            Quarter       Quarter
            Ended       Ended
(In thousands, except per share amounts)       6/27/12       6/29/11
Revenue:                
  Company restaurant sales       $ 91,239         $ 104,021  
  Franchise and license revenue         33,492           31,832  
    Total operating revenue         124,731           135,853  
Costs of company restaurant sales         77,743           90,154  
Costs of franchise and license revenue         11,386           11,085  
General and administrative expenses         14,785           14,092  
Depreciation and amortization         5,827           7,234  
Operating (gains), losses and other charges, net         (4,009 )         (419 )
    Total operating costs and expenses         105,732           122,146  
Operating income         18,999           13,707  
Other expenses:                
  Interest expense, net         2,993           4,901  
  Other nonoperating expense, net         8,198           268  
    Total other expenses, net         11,191           5,169  
Net income before income taxes         7,808           8,538  
Provision for income taxes         3,207           408  
Net income       $ 4,601         $ 8,130  
                     
                     
Net income per share:                
  Basic       $ 0.05         $ 0.08  
  Diluted       $ 0.05         $ 0.08  
                     
Weighted average shares outstanding:                
  Basic         95,637           98,421  
  Diluted         97,408           100,602  
                     
Comprehensive income       $ 4,869         $ 8,130  
                         
DENNY'S CORPORATION
Condensed Consolidated Statements of Comprehensive Income
(Unaudited)
                     
            Two Quarters       Two Quarters
            Ended       Ended
(In thousands, except per share amounts)       6/27/12       6/29/11
Revenue:                
  Company restaurant sales       $ 185,402         $ 208,576  
  Franchise and license revenue         66,067           63,082  
    Total operating revenue         251,469           271,658  
Costs of company restaurant sales         157,698           182,102  
Costs of franchise and license revenue         22,698           22,650  
General and administrative expenses         30,448           28,231  
Depreciation and amortization         11,887           14,422  
Operating (gains), losses and other charges, net         (4,174 )         (948 )
    Total operating costs and expenses         218,557           246,457  
Operating income         32,912           25,201  
Other expenses:                
  Interest expense, net         7,449           10,594  
  Other nonoperating expense, net         7,903           1,746  
    Total other expenses, net         15,352           12,340  
Net income before income taxes         17,560           12,861  
Provision for income taxes         7,094           607  
Net income       $ 10,466         $ 12,254  
                     
                     
Net income per share:                
  Basic       $ 0.11         $ 0.12  
  Diluted       $ 0.11         $ 0.12  
                     
Weighted average shares outstanding:                
  Basic         95,856           98,700  
  Diluted         97,651           100,976  
                     
Comprehensive income       $ 11,002         $ 12,254  
                         
DENNY'S CORPORATION
Condensed Consolidated Balance Sheets
(Unaudited)
                     
(In thousands)     6/27/12       12/28/11
ASSETS                
  Current Assets              
    Cash and cash equivalents     $ 20,997         $ 13,740  
    Receivables, net       13,781           14,971  
    Assets held for sale       486           2,351  
    Current deferred tax asset       20,324           15,519  
    Other       8,491           14,712  
              64,079           61,293  
  Property, net       102,626           112,772  
  Goodwill       30,476           30,764  
  Intangible assets, net       49,804           50,921  
  Noncurrent deferred tax asset       49,137           60,636  
  Other assets       32,758           34,115  
      Total Assets     $ 328,880         $ 350,501  
                     
LIABILITIES AND SHAREHOLDERS' DEFICIT              
  Current Liabilities              
    Current maturities of long-term debt     $ 12,054         $ 2,591  
    Current maturities of capital lease obligations       4,368           4,380  
    Accounts payable       17,035           25,935  
    Other current liabilities       50,971           54,289  
              84,428           87,195  
  Long-Term Liabilities              
    Long-term debt, less current maturities       171,000           193,257  
    Capital lease obligations, less current maturities       16,996           18,077  
    Other       59,228           61,648  
              247,224           272,982  
      Total Liabilities       331,652           360,177  
                     
  Shareholders' Deficit              
    Common stock       1,030           1,027  
    Paid-in capital       559,160           557,396  
    Deficit       (507,361 )         (517,827 )
    Accumulated other comprehensive loss, net of tax       (24,277 )         (24,813 )
    Treasury stock       (31,324 )         (25,459 )
      Total Shareholders' Deficit       (2,772 )         (9,676 )
      Total Liabilities and Shareholders' Deficit     $ 328,880         $ 350,501  
                     
                     
Debt Balances              
(In thousands)     6/27/12       12/28/11
Credit facility term loan due 2017, net of discount of $0 and $2,251, respectively     $ 183,054         $ 195,749  
Capital leases and other debt       21,364           22,556  
  Total Debt     $ 204,418         $ 218,305  
                         
DENNY'S CORPORATION
Income, EBITDA, Free Cash Flow and G&A Reconciliations
(Unaudited)
                             
          Quarter     Quarter     Two Quarters     Two Quarters
Income and EBITDA Reconciliation     Ended     Ended     Ended     Ended
(In thousands)     6/27/12     6/29/11     6/27/12     6/29/11
Net income     $ 4,601       $ 8,130       $ 10,466       $ 12,254  
                             
Provision for (benefit from) income taxes       3,207         408         7,094         607  
Operating (gains), losses and other charges, net       (4,009 )       (419 )       (4,174 )       (948 )
Other nonoperating expense, net       8,198         268         7,903         1,746  
Share-based compensation       876         1,176         1,666         2,149  
                             
Adjusted Income Before Taxes (1)     $ 12,873       $ 9,563       $ 22,955       $ 15,808  
                             
Interest expense, net       2,993         4,901         7,449         10,594  
Depreciation and amortization       5,827         7,234         11,887         14,422  
Cash payments for restructuring charges and exit costs       (543 )       (747 )       (1,324 )       (1,453 )
Cash payments for share-based compensation       -         (99 )       (355 )       (99 )
                             
Adjusted EBITDA (1)     $ 21,150       $ 20,852       $ 40,612       $ 39,272  
                             
Cash interest expense, net       (2,579 )       (4,111 )       (6,329 )       (9,085 )
Cash paid for income taxes, net       (1,152 )       (574 )       (1,365 )       (737 )
Cash paid for capital expenditures       (2,443 )       (3,084 )       (4,279 )       (8,854 )
                             
Free Cash Flow (1)     $ 14,976       $ 13,083       $ 28,639       $ 20,596  
                             
          Quarter     Quarter     Two Quarters     Two Quarters
General and Administrative Expenses Reconciliation     Ended     Ended     Ended     Ended
(In thousands)       6/27/12         6/29/11         6/27/12         6/29/11  
  Share-based compensation     $ 876       $ 1,176       $ 1,666       $ 2,149  
  Other general and administrative expenses       13,909         12,916         28,782         26,082  
  Total general and administrative expenses     $ 14,785       $ 14,092       $ 30,448       $ 28,231  
                                           
(1)   We believe that, in addition to other financial measures, Adjusted Income Before Taxes, Adjusted EBITDA and Free Cash Flow are appropriate indicators to assist in the evaluation of our operating performance on a period-to-period basis. We also use 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 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 credit facility for the computation of our 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 and Free Cash Flow 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 thousands)     6/27/12     6/29/11
Company restaurant operations: (2)                        
  Company restaurant sales     $ 91,239       100.0 %     $ 104,021       100.0 %
  Costs of company restaurant sales:                        
    Product costs       22,702       24.9 %       25,613       24.6 %
    Payroll and benefits       36,617       40.1 %       42,419       40.8 %
    Occupancy       6,222       6.8 %       6,793       6.5 %
    Other operating costs:                        
      Utilities       3,592       3.9 %       4,590       4.4 %
      Repairs and maintenance       1,634       1.8 %       1,890       1.8 %
      Marketing       3,389       3.7 %       3,971       3.8 %
      Legal settlements       71       0.1 %       (14 )     (0.0 %)
      Other       3,516       3.9 %       4,892       4.7 %
  Total costs of company restaurant sales     $ 77,743       85.2 %     $ 90,154       86.7 %
  Company restaurant operating margin (3)     $ 13,496       14.8 %     $ 13,867       13.3 %
                               
Franchise operations: (4)                        
  Franchise and license revenue                        
  Royalty and license revenue     $ 20,874       62.3 %     $ 19,926       62.6 %
  Initial and other fee revenue       1,003       3.0 %       708       2.2 %
  Occupancy revenue       11,615       34.7 %       11,198       35.2 %
  Total franchise and license revenue     $ 33,492       100.0 %     $ 31,832       100.0 %
                               
  Costs of franchise and license revenue                        
  Direct franchise costs     $ 2,681       8.0 %     $ 2,427       7.6 %
  Occupancy costs       8,705       26.0 %       8,658       27.2 %
  Total costs of franchise and license revenue     $ 11,386       34.0 %     $ 11,085       34.8 %
  Franchise operating margin (3)     $ 22,106       66.0 %     $ 20,747       65.2 %
                               
Total operating revenue (1)     $ 124,731       100.0 %     $ 135,853       100.0 %
Total costs of operating revenue (1)       89,129       71.5 %       101,239       74.5 %
Total operating margin (1)(3)     $ 35,602       28.5 %     $ 34,614       25.5 %
                               
Other operating expenses: (1)(3)                        
  General and administrative expenses     $ 14,785       11.9 %     $ 14,092       10.4 %
  Depreciation and amortization       5,827       4.7 %       7,234       5.3 %
  Operating gains, losses and other charges, net       (4,009 )     (3.2 %)       (419 )     (0.3 %)
  Total other operating expenses     $ 16,603       13.3 %     $ 20,907       15.4 %
                               
Operating income (1)     $ 18,999       15.2 %     $ 13,707       10.1 %
                                     
(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
Operating Margins
(Unaudited)
                               
            Two Quarters     Two Quarters
            Ended     Ended
(In thousands)     6/27/12     6/29/11
Company restaurant operations: (2)                        
  Company restaurant sales     $ 185,402       100.0 %     $ 208,576       100.0 %
  Costs of company restaurant sales:                        
    Product costs       46,235       24.9 %       51,248       24.6 %
    Payroll and benefits       74,370       40.1 %       86,615       41.5 %
    Occupancy       11,996       6.5 %       13,653       6.5 %
    Other operating costs:                        
      Utilities       7,306       3.9 %       8,979       4.3 %
      Repairs and maintenance       3,322       1.8 %       3,732       1.8 %
      Marketing       6,924       3.7 %       7,812       3.7 %
      Legal settlements       169       0.1 %       63       0.0 %
      Other       7,376       4.0 %       10,000       4.8 %
  Total costs of company restaurant sales     $ 157,698       85.1 %     $ 182,102       87.3 %
  Company restaurant operating margin (3)     $ 27,704       14.9 %     $ 26,474       12.7 %
                               
Franchise operations: (4)                        
  Franchise and license revenue                        
  Royalty and license revenue     $ 41,401       62.7 %     $ 39,220       62.2 %
  Initial and other fee revenue       1,439       2.2 %       1,613       2.6 %
  Occupancy revenue       23,227       35.1 %       22,249       35.2 %
  Total franchise and license revenue     $ 66,067       100.0 %     $ 63,082       100.0 %
                               
  Costs of franchise and license revenue                        
  Direct franchise costs     $ 5,270       8.0 %     $ 5,432       8.6 %
  Occupancy costs       17,428       26.4 %       17,218       27.3 %
  Total costs of franchise and license revenue     $ 22,698       34.4 %     $ 22,650       35.9 %
  Franchise operating margin (3)     $ 43,369       65.6 %     $ 40,432       64.1 %
                               
Total operating revenue (1)     $ 251,469       100.0 %     $ 271,658       100.0 %
Total costs of operating revenue (1)       180,396       71.7 %       204,752       75.4 %
Total operating margin (1)(3)     $ 71,073       28.3 %     $ 66,906       24.6 %
                               
Other operating expenses: (1)(3)                        
  General and administrative expenses     $ 30,448       12.1 %     $ 28,231       10.4 %
  Depreciation and amortization       11,887       4.7 %       14,422       5.3 %
  Operating gains, losses and other charges, net       (4,174 )     (1.7 %)       (948 )     (0.3 %)
  Total other operating expenses     $ 38,161       15.2 %     $ 41,705       15.4 %
                               
Operating income (1)     $ 32,912       13.1 %     $ 25,201       9.3 %
                                     
(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)     6/27/12       6/29/11       6/27/12       6/29/11
  Company Restaurants       0.0 %         2.6 %         0.4 %         0.6 %
  Franchised Restaurants       0.9 %         1.8 %         1.8 %         0.0 %
  System-wide Restaurants       0.8 %         2.0 %         1.6 %         0.2 %
                                   
Company Restaurant Sales Detail                              
  Guest Check Average       1.7 %         1.2 %         2.0 %         0.5 %
  Guest Counts       (1.6 %)         1.4 %         (1.6 %)         0.1 %
                                   
                                   
          Quarter       Quarter       Two Quarters       Two Quarters
Average Unit Sales     Ended       Ended       Ended       Ended
(In thousands)     6/27/12       6/29/11       6/27/12       6/29/11
  Company Restaurants     $ 484         $ 463         $ 954         $ 915  
  Franchised Restaurants     $ 354         $ 349         $ 703         $ 688  
                                   
                  Franchised                
Restaurant Unit Activity     Company       & Licensed       Total        
Ending Units 3/28/12       197           1,483           1,680          
  Units Opened       0           9           9          
  Units Refranchised       (17 )         17           0          
  Units Closed (Including Units Relocated)       (3 )         (2 )         (5 )        
    Net Change       (20 )         24           4          
Ending Units 6/27/12       177           1,507           1,684          
                                   
Equivalent Units                              
  Second Quarter 2012       188           1,493           1,681          
  Second Quarter 2011       224           1,442           1,666          
            (36 )         51           15          
                                   
                                   
                  Franchised                
Restaurant Unit Activity     Company       & Licensed       Total        
Ending Units 12/28/11       206           1,479           1,685          
  Units Opened       0           15           15          
  Units Refranchised       (23 )         23           0          
  Units Closed (Including Units Relocated)       (6 )         (10 )         (16 )        
    Net Change       (29 )         28           (1 )        
Ending Units 6/27/12       177           1,507           1,684          
                                   
Equivalent Units                              
  Year-to-Date 2012       194           1,487           1,681          
  Year-to-Date 2011       228           1,436           1,664          
            (34 )         51           17          
                                               

Source: Denny's Corporation

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