Denny’s Corporation Reports Results For Second Quarter 2017

SPARTANBURG, S.C. - Aug. 01, 2017 // GLOBE NEWSWIRE // - Denny’s Corporation (NASDAQ:DENN), franchisor and operator of one of America's largest franchised full-service restaurant chains, today reported results for its second quarter ended June 28, 2017.

Second Quarter 2017 Highlights

  • Domestic system-wide same-store sales increased 2.6%, including growth of 2.7% at company restaurants and an improvement of 2.6% at domestic franchised restaurants.
  • Opened eight system restaurants, including seven franchised restaurants and one company restaurant.
  • Completed 52 remodels at franchised restaurants.
  • Operating Income was $17.0 million.
  • Company restaurant operating margin* grew 1.7% to $16.7 million while franchise operating margin* grew 1.8% to $24.8 million.
  • Net Income was $8.7 million, or $0.12 per diluted share.
  • Adjusted Net Income* was $9.9 million, while Adjusted Net Income per Share* was $0.14.
  • Adjusted EBITDA* improved 2.5% to $26.7 million.
  • Generated $12.7 million of Adjusted Free Cash Flow*, after cash capital expenditures of $8.3 million.
  • Allocated $24.4 million towards share repurchases.

John Miller, President and Chief Executive Officer, stated, “Despite challenges within the full-service dining environment, we achieved positive system same-store sales and continued to outperform key industry benchmarks during the second quarter. Our highly franchised business model, coupled with our efforts to further differentiate Denny’s as a relevant and compelling brand, continues to generate strong cash flows which support ongoing investments in Denny’s brand revitalization and company restaurants, and the return of capital to our shareholders. As we continue to successfully execute our brand revitalization strategy, we remain committed to further elevating the guest experience, consistently growing same-store sales, and expanding our global reach, leading to value creation for all franchisees and shareholders.”

Second Quarter Results

Denny’s total operating revenue grew 7.3% to $133.4 million primarily due to an increase in company restaurant sales. Company restaurant sales grew 10.3% to $98.4 million due to a greater number of company restaurants compared to the prior year quarter and same-store sales growth. Franchise and licensing revenue was $35.0 million compared to $35.1 million in the prior year quarter as an increase in royalty revenue was offset by a decrease in occupancy revenue due to scheduled lease terminations and a decrease in initial fees.

Company restaurant operating margin* was $16.7 million, or 16.9% of company restaurant sales, compared to $16.4 million, or 18.4%, in the prior year quarter, driven by increases in product costs, workers' compensation expense, and minimum wages, partially offset by higher sales. Franchise operating margin* was $24.8 million, or 70.7% of franchise and licensing revenue, compared to $24.3 million, or 69.4%, in the prior year quarter, driven by higher royalty revenue and an improved occupancy margin.

Total general and administrative expenses were $16.6 million compared to $16.2 million in the prior year quarter. Interest expense was $3.7 million versus $3.0 million in the prior year quarter. Denny’s ended the quarter with $264.7 million of total debt outstanding, including $235.0 million of borrowings under its revolving credit facility. The provision for income taxes was $4.9 million, reflecting an effective tax rate of 36.0%. Due to the use of net operating loss and tax credit carryforwards, the Company paid $2.3 million in cash taxes during the quarter.

Net Income was $8.7 million, or $0.12 per diluted share, compared to a net loss of $11.6 million, or $(0.15) per diluted share, including the impact of the Company's pension plan liquidation in the prior year quarter. Adjusted Net Income per Share* grew 2.3% to $0.14 compared to the prior year quarter which excluded the net settlement loss associated with the pension plan liquidation.

Adjusted Free Cash Flow* and Capital Allocation

Denny’s generated $12.7 million of Adjusted Free Cash Flow* in the quarter after investing $8.3 million in cash capital expenditures, including the acquisition of three franchised restaurants and costs associated with opening a new company restaurant and relocating a high-performing company restaurant due to loss of property control.

During the quarter, the Company allocated $24.4 million to share repurchases. Between the end of the second quarter and July 31, 2017, the Company allocated an additional $11.7 million to share repurchases. As of July 31, 2017, the Company had approximately $31 million remaining in authorized share repurchases.

Business Outlook

The following full year 2017 estimates are based on management's expectations at this time. Differences from previously provided guidance are noted in parenthesis below.

  • Same-store sales growth at company and domestic franchised restaurants between 0% and 2%.
  • 45 to 50 new restaurant openings, with net restaurant growth of 5 to 15 restaurants (vs. 10 to 20 restaurants).
  • Total operating revenue between $523 and $532 million including franchise and licensing revenue between $140 and $142 million.
  • Company restaurant operating margin* between 17.0% and 17.5% (vs. 17.5% and 18%) and franchise operating margin* between 71% and 71.5%.
  • Total general and administrative expenses between $67 and $70 million (vs. $68 and $71 million).
  • Adjusted EBITDA* between $101 and $103 million.
  • Depreciation and amortization expense between $23 and $24 million.
  • Net interest expense between $14.5 and $15 million (vs. $12.5 and $13 million).
  • Effective income tax rate between 35% and 37% with cash taxes between $6 and $8 million (vs. $7 and $9 million).
  • Cash capital expenditures between $25 and $27 million (vs. $22 and $24 million).
  • Adjusted Free Cash Flow* between $55 and $57 million (vs. $58 and $60 million).

* Please refer to the historical reconciliation of Net Income to Adjusted Income Before Taxes, Adjusted EBITDA,

Adjusted Free Cash Flow, Adjusted Net Income, and Adjusted Net Income per Share, as well as the reconciliation of Operating Income to non-GAAP financial measures included in the following tables. The Company is not able to reconcile the forward-looking non-GAAP estimates set forth above to their most directly comparable GAAP estimates without unreasonable efforts because it is unable to predict, forecast or determine the probable significance of the items impacting these estimates, including gains, losses and other charges, with a reasonable degree of accuracy. Accordingly, the most directly comparable forward-looking GAAP estimates are not provided.

Conference Call and Webcast Information

Denny’s will provide further commentary on the results for the second quarter ended June 28, 2017 on its quarterly investor conference call today, Tuesday, August 1, 2017 at 4:30 p.m. Eastern Time. Interested parties are invited to listen to a live broadcast of the conference call accessible through the investor relations section of Denny’s website at investor.dennys.com. 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 Corporation is the franchisor and operator of one of America's largest franchised full-service restaurant chains, based on the number of restaurants. As of June 28, 2017, Denny’s had 1,724 franchised, licensed, and company restaurants around the world including 125 restaurants in Canada, Puerto Rico, Mexico, New Zealand, Honduras, Costa Rica, Dominican Republic, the United Arab Emirates, the Philippines, Guam, Curaçao, and El Salvador. 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 “expect”, “anticipate”, “believe”, “intend”, “plan”, “hope”, 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: competitive pressures from within the restaurant industry; the level of success of our operating initiatives and advertising and promotional efforts; adverse publicity; health concerns arising from food-related pandemics, outbreaks of flu viruses, such as avian flu, or other diseases; changes in business strategy or development plans; terms and availability of capital; regional weather conditions; overall changes in the general economy (including with regard to energy costs), particularly at the retail level; political environment (including acts of war and terrorism); and other factors from time to time set forth in the Company’s SEC reports and other filings, including but not limited to the discussion in Management’s Discussion and Analysis and the risks identified in Item 1A. Risk Factors contained in the Company’s Annual Report on Form 10-K for the year ended December 28, 2016 (and in the Company’s subsequent quarterly reports on Form 10-Q).

 
DENNY’S CORPORATION
Condensed Consolidated Balance Sheets
(Unaudited)
             
(In thousands) 6/28/17   12/28/16
Assets      
  Current assets      
    Cash and cash equivalents $ 1,668     $ 2,592  
    Receivables 16,742     19,841  
    Assets held for sale 732     1,020  
    Other current assets 8,868     12,454  
      Total current assets 28,010     35,907  
  Property, net 135,653     133,102  
  Goodwill 36,308     35,233  
  Intangible assets, net 56,391     54,493  
  Deferred income taxes 21,754     17,683  
  Other noncurrent assets 28,788     29,733  
      Total assets $ 306,904     $ 306,151  
             
Liabilities      
  Current liabilities      
    Current maturities of capital lease obligations $ 3,324     $ 3,285  
    Accounts payable 21,428     25,289  
    Other current liabilities 56,521     64,796  
      Total current liabilities 81,273     93,370  
  Long-term liabilities      
    Long-term debt, less current maturities 235,000     218,500  
    Capital lease obligations, less current maturities 26,362     23,806  
    Other 44,168     41,587  
      Total long-term liabilities 305,530     283,893  
      Total liabilities 386,803     377,263  
             
Shareholders' deficit      
    Common stock 1,075     1,071  
    Paid-in capital 589,351     577,951  
    Deficit (357,301 )   (382,843 )
    Accumulated other comprehensive loss, net of tax (3,546 )   (1,407 )
    Treasury stock (309,478 )   (265,884 )
      Total shareholders' deficit (79,899 )   (71,112 )
      Total liabilities and shareholders' deficit $ 306,904     $ 306,151  
             
Debt Balances
(In thousands) 6/28/17   12/28/16
Credit facility revolver due 2020 $ 235,000     $ 218,500  
Capital leases 29,686     27,091  
  Total debt $ 264,686     $ 245,591  
                 

 

DENNY’S CORPORATION
Condensed Consolidated Statements of Comprehensive Income
(Unaudited)
           
      Quarter Ended
(In thousands, except per share amounts) 6/28/17   6/29/16
Revenue:      
  Company restaurant sales $ 98,355     $ 89,210  
  Franchise and license revenue 35,021     35,105  
    Total operating revenue 133,376     124,315  
Costs of company restaurant sales 81,697     72,837  
Costs of franchise and license revenue 10,244     10,759  
General and administrative expenses 16,581     16,206  
Depreciation and amortization 5,799     5,105  
Operating (gains), losses and other charges, net 2,046     24,241  
    Total operating costs and expenses, net 116,367     129,148  
Operating income (loss) 17,009     (4,833 )
Interest expense, net 3,740     3,014  
Other nonoperating income, net (410 )   (119 )
Net income (loss) before income taxes 13,679     (7,728 )
Provision for income taxes 4,930     3,824  
Net income (loss) $ 8,749     $ (11,552 )
           
           
Basic net income (loss) per share $ 0.13     $ (0.15 )
Diluted net income (loss) per share $ 0.12     $ (0.15 )
           
Basic weighted average shares outstanding 69,407     76,730  
Diluted weighted average shares outstanding 71,661     76,730  
           
Comprehensive income $ 7,219     $ 7,052  
       
General and Administrative Expenses Quarter Ended
(In thousands) 6/28/17   6/29/16
Share-based compensation $ 2,080     $ 1,902  
Other general and administrative expenses 14,501     14,304  
  Total general and administrative expenses $ 16,581     $ 16,206  
                 

 

DENNY’S CORPORATION
Condensed Consolidated Statements of Comprehensive Income
(Unaudited)
           
      Two Quarters Ended
(In thousands, except per share amounts) 6/28/17   6/29/16
Revenue:      
  Company restaurant sales $ 192,134     $ 179,596  
  Franchise and license revenue 69,152     69,361  
    Total operating revenue 261,286     248,957  
Costs of company restaurant sales 159,532     146,948  
Costs of franchise and license revenue 19,990     20,762  
General and administrative expenses 34,090     33,133  
Depreciation and amortization 11,535     10,598  
Operating (gains), losses and other charges, net 2,829     24,116  
    Total operating costs and expenses, net 227,976     235,557  
Operating income 33,310     13,400  
Interest expense, net 7,281     5,788  
Other nonoperating income, net (767 )   (92 )
Net income before income taxes 26,796     7,704  
Provision for income taxes 9,674     9,302  
Net income (loss) $ 17,122     $ (1,598 )
           
           
Basic net income (loss) per share $ 0.24     $ (0.02 )
Diluted net income (loss) per share $ 0.24     $ (0.02 )
           
Basic weighted average shares outstanding 70,205     76,895  
Diluted weighted average shares outstanding 72,459     76,895  
           
Comprehensive income $ 14,983     $ 12,326  
       
General and Administrative Expenses Two Quarters Ended
(In thousands) 6/28/17   6/29/16
Share-based compensation $ 4,053     $ 3,850  
Other general and administrative expenses 30,037     29,283  
  Total general and administrative expenses $ 34,090     $ 33,133  
                 

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

The Company believes that, in addition to GAAP measures, certain other non-GAAP financial measures are appropriate indicators to assist in the evaluation of operating performance on a period-to-period basis.  The Company uses Adjusted Income Before Taxes, Adjusted EBITDA, Adjusted Free Cash Flow and Adjusted Net Income internally as performance measures for planning purposes, including the preparation of annual operating budgets, and for compensation purposes, including bonuses for certain employees.  Adjusted EBITDA is also used to evaluate the ability to service debt because the excluded charges do not have an impact on prospective debt servicing capability and these adjustments are contemplated in our credit facility for the computation of our debt covenant ratios.  We define Adjusted Free Cash Flow for a given period as Adjusted EBITDA less the cash portion of interest expense net of interest income, capital expenditures, and cash taxes.  Management believes that the presentation of Adjusted Free Cash Flow provides useful information to investors because it represents a liquidity measure used to evaluate, among other things, operating effectiveness and is used in decisions regarding the allocation of resources.  However, each of these non-GAAP financial measures should be considered as a supplement to, not a substitute for, operating income, net income or other financial performance measures prepared in accordance with U.S. generally accepted accounting principles.

  Quarter Ended   Two Quarters Ended
(In thousands, except per share amounts) 6/28/17   6/29/16   6/28/17   6/29/16
Net income (loss) $ 8,749     $ (11,552 )   $ 17,122     $ (1,598 )
Provision for income taxes 4,930     3,824     9,674     9,302  
Operating (gains), losses and other charges, net 2,046     24,241     2,829     24,116  
Other nonoperating (income) expense, net (410 )   (119 )   (767 )   (92 )
Share-based compensation 2,080     1,902     4,053     3,850  
Adjusted Income Before Taxes $ 17,395     $ 18,296     $ 32,911     $ 35,578  
               
Interest expense, net 3,740     3,014     7,281     5,788  
Depreciation and amortization 5,799     5,105     11,535     10,598  
Cash payments for restructuring charges and exit costs (180 )   (339 )   (1,209 )   (833 )
Cash payments for share-based compensation (14 )       (3,946 )   (2,529 )
Adjusted EBITDA $ 26,740     $ 26,076     $ 46,572     $ 48,602  
               
Cash interest expense, net (3,472 )   (2,763 )   (6,736 )   (5,281 )
Cash paid for income taxes, net (2,273 )   (627 )   (2,668 )   (938 )
Cash paid for capital expenditures (8,262 )   (4,142 )   (15,079 )   (9,449 )
Adjusted Free Cash Flow $ 12,733     $ 18,544     $ 22,089     $ 32,934  
               
  Quarter Ended   Two Quarters Ended
(In thousands, except per share amounts) 6/28/17   6/29/16   6/28/17   6/29/16
Net income (loss) $ 8,749     $ (11,552 )   $ 17,122     $ (1,598 )
Pension settlement loss     24,297         24,297  
Losses (gains) on sales of assets and other, net 1,749     (43 )   2,433     (687 )
Tax effect (1) (631 )   (2,128 )   (878 )   (1,897 )
Adjusted Net Income $ 9,867     $ 10,574     $ 18,677     $ 20,115  
               
Diluted weighted average shares outstanding (2) 71,661     78,583     72,459     78,701  
               
Diluted Net Income Per Share $ 0.12     $ (0.15 )   $ 0.24     $ (0.02 )
Adjustments Per Share $ 0.02     $ 0.28     $ 0.02     $ 0.28  
Adjusted Net Income Per Share $ 0.14     $ 0.13     $ 0.26     $ 0.26  

 

(1 ) Tax adjustments for the three and six months ended June 28, 2017 are calculated using the Company's year-to-date effective tax rate of 36.1%. Tax adjustments for the loss on pension termination for the three and six months ended June 29, 2016 are calculated using an effective tax rate of 8.8%. The remaining tax adjustments for the three and six months ended June 29, 2016 are calculated using the Company's year-to-date effective tax rate of 35.8%, which excludes the impact of the pension termination.
(2 ) Due to the net loss for the three and six months ended June 29, 2016, in accordance with GAAP, awards related to share-based compensation are antidilutive and are excluded from diluted weighted average share outstanding. Basic and diluted shares were 76,730 for the quarter and 76,895 year-to date. Since the net loss position is adjusted to an income position in our calculation of Adjusted Net Income, GAAP diluted weighted average shares outstanding have been adjusted for the effect of dilutive share-based compensation awards to calculate Adjust Net Income Per Share.
     

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

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

We define Total Operating Margin as operating income excluding the following three items: general and administrative expenses, depreciation and amortization, and operating (gains), losses and other charges, net.  We present Total Operating Margin as a percent of total operating revenue.  We exclude general and administrative expenses, which includes primarily non-restaurant-level costs associated with support of company and franchise restaurants and other activities at our corporate office. We exclude depreciation and amortization expense, substantially all of which is related to company restaurant-level assets, because such expenses represent historical sunk costs which do not reflect current cash outlays for the restaurants. We exclude special items, included within operating (gains), losses and other charges, net, to provide investors with a clearer perspective of the Company’s ongoing operating performance and a more relevant comparison to prior period results.

Total Operating Margin is the total of Company Restaurant Operating Margin and Franchise Operating Margin. We define Company Restaurant Operating Margin as company restaurant sales less costs of company restaurant sales (which include product costs, company restaurant level payroll and benefits, occupancy costs, and other operating costs including utilities, repairs and maintenance, marketing and other expenses) and present it as a percent of company restaurant sales. We define Franchise Operating Margin as franchise and license revenue (which includes franchise royalties and other non-food and beverage revenue streams such as initial franchise fees and occupancy revenue) less costs of franchise and license revenue and present it as a percent of franchise and license revenue.

These non-GAAP financial measures provide a meaningful comparison between periods and enable investors to focus on the performance of restaurant-level operations by excluding revenues and costs unrelated to food and beverage sales in addition to corporate general and administrative expense, depreciation and amortization, and other gains and charges. However, each of these non-GAAP financial measures 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. Total Operating Margin, Company Restaurant Operating Margin and Franchise Operating Margin do not accrue directly to the benefit of shareholders because of the aforementioned excluded costs, and are not indicative of the overall results for the Company.

  Quarter Ended   Two Quarters Ended
(In thousands) 6/28/17   6/29/16   6/28/17   6/29/16
Operating income (loss) $ 17,009     $ (4,833 )   $ 33,310     $ 13,400  
General and administrative expenses 16,581     16,206     34,090     33,133  
Depreciation and amortization 5,799     5,105     11,535     10,598  
Operating (gains), losses and other charges, net 2,046     24,241     2,829     24,116  
Total Operating Margin $ 41,435     $ 40,719     $ 81,764     $ 81,247  
               
Total Operating Margin consists of:              
Company Restaurant Operating Margin (1) $ 16,658     $ 16,373     $ 32,602     $ 32,648  
Franchise Operating Margin (2) 24,777     24,346     49,162     48,599  
Total Operating Margin $ 41,435     $ 40,719     $ 81,764     $ 81,247  

 

(1 ) Company Restaurant Operating Margin is calculated as operating income plus general and administrative expenses; depreciation and amortization; operating (gains), losses and other charges; and costs of franchise and license revenue; less franchise and license revenue.
(2 ) Franchise Operating Margin is calculated as operating income plus general and administrative expenses; depreciation and amortization; operating (gains), losses and other charges; and costs of company restaurant sales; less company restaurant sales.
     

 

DENNY’S CORPORATION
Operating Margins
(Unaudited)
             
        Quarter Ended
(In thousands) 6/28/17   6/29/16
Company restaurant operations: (1)          
  Company restaurant sales $ 98,355   100.0 %   $ 89,210   100.0 %
  Costs of company restaurant sales:          
    Product costs 24,769   25.2 %   21,781   24.4 %
    Payroll and benefits 38,492   39.1 %   34,088   38.2 %
    Occupancy 5,503   5.6 %   4,993   5.6 %
    Other operating costs:          
      Utilities 3,053   3.1 %   2,852   3.2 %
      Repairs and maintenance 1,667   1.7 %   1,732   1.9 %
      Marketing 3,621   3.7 %   3,381   3.8 %
      Other 4,592   4.7 %   4,010   4.5 %
  Total costs of company restaurant sales $ 81,697   83.1 %   $ 72,837   81.6 %
  Company restaurant operating margin (non-GAAP) (2) $ 16,658   16.9 %   $ 16,373   18.4 %
                 
Franchise operations: (3)          
  Franchise and license revenue:          
  Royalties $ 25,338   72.4 %   $ 24,511   69.8 %
  Initial fees 588   1.7 %   798   2.3 %
  Occupancy revenue 9,095   26.0 %   9,796   27.9 %
  Total franchise and license revenue $ 35,021   100.0 %   $ 35,105   100.0 %
                 
  Costs of franchise and license revenue:          
  Occupancy costs $ 6,571   18.8 %   $ 7,287   20.8 %
  Other direct costs 3,673   10.5 %   3,472   9.9 %
  Total costs of franchise and license revenue $ 10,244   29.3 %   $ 10,759   30.6 %
  Franchise operating margin (non-GAAP) (2) $ 24,777   70.7 %   $ 24,346   69.4 %
                 
Total operating revenue (4) $ 133,376   100.0 %   $ 124,315   100.0 %
Total costs of operating revenue (4) 91,941   68.9 %   83,596   67.2 %
Total operating margin (non-GAAP)  (4)(2) $ 41,435   31.1 %   $ 40,719   32.8 %
                 
Other operating expenses: (4)(2)          
  General and administrative expenses $ 16,581   12.4 %   $ 16,206   13.0 %
  Depreciation and amortization 5,799   4.3 %   5,105   4.1 %
  Operating (gains), losses and other charges, net 2,046   1.5 %   24,241   19.5 %
  Total other operating expenses $ 24,426   18.3 %   $ 45,552   36.6 %
                 
Operating income (loss) (4) $ 17,009   12.8 %   $ (4,833 ) (3.9 )%
                 
                 
(1 ) As a percentage of company restaurant sales.
(2 ) Other operating expenses such as general and administrative expenses and depreciation and amortization relate to both company and franchise operations and are not allocated to costs of company restaurant sales and costs of franchise and license revenue.  As such, operating margin is considered a non-GAAP financial measure.  Operating margins should be considered as a supplement to, not as a substitute for, operating income, net income 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)
             
        Two Quarters Ended
(In thousands) 6/28/17   6/29/16
Company restaurant operations: (1)          
  Company restaurant sales $ 192,134   100.0 %   $ 179,596   100.0 %
  Costs of company restaurant sales:          
    Product costs 47,902   24.9 %   44,434   24.7 %
    Payroll and benefits 75,889   39.5 %   68,549   38.2 %
    Occupancy 10,237   5.3 %   9,793   5.5 %
    Other operating costs:          
      Utilities 6,106   3.2 %   5,803   3.2 %
      Repairs and maintenance 3,330   1.7 %   3,334   1.9 %
      Marketing 7,242   3.8 %   6,623   3.7 %
      Other 8,826   4.6 %   8,412   4.7 %
  Total costs of company restaurant sales $ 159,532   83.0 %   $ 146,948   81.8 %
  Company restaurant operating margin (non-GAAP) (2) $ 32,602   17.0 %   $ 32,648   18.2 %
                 
Franchise operations: (3)          
  Franchise and license revenue:          
  Royalties $ 49,882   72.1 %   $ 48,655   70.1 %
  Initial fees 1,072   1.6 %   1,324   1.9 %
  Occupancy revenue 18,198   26.3 %   19,382   28.0 %
  Total franchise and license revenue $ 69,152   100.0 %   $ 69,361   100.0 %
                 
  Costs of franchise and license revenue:          
  Occupancy costs $ 13,077   18.9 %   $ 14,350   20.7 %
  Other direct costs 6,913   10.0 %   6,412   9.2 %
  Total costs of franchise and license revenue $ 19,990   28.9 %   $ 20,762   29.9 %
  Franchise operating margin (non-GAAP) (2) $ 49,162   71.1 %   $ 48,599   70.1 %
                 
Total operating revenue (4) $ 261,286   100.0 %   $ 248,957   100.0 %
Total costs of operating revenue (4) 179,522   68.7 %   167,710   67.4 %
Total operating margin (non-GAAP) (4)(2) $ 81,764   31.3 %   $ 81,247   32.6 %
                 
Other operating expenses: (4)(2)          
  General and administrative expenses $ 34,090   13.0 %   $ 33,133   13.3 %
  Depreciation and amortization 11,535   4.4 %   10,598   4.3 %
  Operating gains, losses and other charges, net 2,829   1.1 %   24,116   9.7 %
  Total other operating expenses $ 48,454   18.5 %   $ 67,847   27.3 %
                 
Operating income (4) $ 33,310   12.7 %   $ 13,400   5.4 %
                 
                 
(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   Two Quarters Ended
(increase (decrease) vs. prior year) 6/28/17   6/29/16   6/28/17   6/29/16
  Company Restaurants 2.7 %   (0.1 )%   0.6 %   1.7 %
  Domestic Franchised Restaurants 2.6 %   (0.5 )%   0.8 %   0.9 %
  Domestic System-wide Restaurants 2.6 %   (0.5 )%   0.8 %   1.0 %
  System-wide Restaurants 2.6 %   (0.7 )%   0.8 %   0.7 %
                   
Average Unit Sales Quarter Ended   Two Quarters Ended
(In thousands) 6/28/17   6/29/16   6/28/17   6/29/16
  Company Restaurants $ 576     $ 562     $ 1,129     $ 1,116  
  Franchised Restaurants $ 400     $ 390     $ 785     $ 778  
                   
          Franchised        
Restaurant Unit Activity Company   & Licensed   Total    
Ending Units March 29, 2017 172     1,559     1,731      
  Units Opened 1     7     8      
  Units Reacquired 3     (3 )        
  Units Refranchised (4 )   4          
  Units Closed     (15 )   (15 )    
    Net Change     (7 )   (7 )    
Ending Units June 28, 2017 172     1,552     1,724      
                   
Equivalent Units              
  Second Quarter 2017 171     1,559     1,730      
  Second Quarter 2016 159     1,555     1,714      
    Net Change 12     4     16      
                   
          Franchised        
Restaurant Unit Activity Company   & Licensed   Total    
Ending Units December 28, 2016 169     1,564     1,733      
  Units Opened 1     15     16      
  Units Reacquired 6     (6 )        
  Units Refranchised (4 )   4          
  Units Closed     (25 )   (25 )    
    Net Change 3     (12 )   (9 )    
Ending Units June 28, 2017 172     1,552     1,724      
                   
Equivalent Units              
  Year-to-Date 2017 170     1,560     1,730      
  Year-to-Date 2016 161     1,551     1,712      
    Net Change 9     9     18      
                               

Contacts:

Curt Nichols
Investor Relations
877-784-7167

Jessica Liddell
ICR
Media Relations
203-682-8208

Source: Denny's Corporation

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