Denny’s Corporation Reports Results For Third Quarter 2017

SPARTANBURG, S.C. - Nov. 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 third quarter ended September 27, 2017.

Third Quarter 2017 Highlights

  • Domestic system-wide same-store sales increased 0.6%, including growth of 0.6% at company restaurants and 0.6% at domestic franchised restaurants.
  • Opened nine system restaurants, including eight franchised restaurants and one company restaurant.
  • Completed 58 remodels, including 57 at franchised restaurants.
  • Operating Income increased 5.5% to $18.5 million.
  • Company Restaurant Operating Margin* grew 3.7% to $16.6 million and Franchise Operating Margin* was $25.0 million in both periods.
  • Net Income was $9.3 million, or $0.13 per diluted share.
  • Adjusted Net Income* was $9.7 million, while Adjusted Net Income per Share* was $0.14.
  • Adjusted EBITDA* improved 9.6% to $27.3 million.
  • Generated $12.6 million of Adjusted Free Cash Flow*, after cash capital expenditures of $8.5 million.
  • Allocated $29.7 million towards share repurchases.
  • John Miller, President and Chief Executive Officer, stated, “We once again achieved positive system same-store sales and continued to perform well against key industry benchmarks during the third quarter despite persistent challenges within the full-service dining environment. The disciplined execution of our brand revitalization strategy, which delivers an enhanced guest experience across food, service and atmosphere, coupled with our highly franchised business model, continues to generate growth in revenue and cash flows. We remain committed to effectively reinvesting capital in the business along with returning capital to our shareholders. While the industry outlook remains uncertain, we are focused on further elevating the guest experience, growing sales, and expanding Denny’s global reach to ensure long-term success.”

Third Quarter Results

Denny’s total operating revenue grew 3.1% to $132.4 million primarily due to an increase in company restaurant sales. Company restaurant sales were up 5.1% to $97.9 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 $34.5 million compared to $35.3 million in the prior year quarter as an increase in royalty revenue was offset by lower occupancy revenue due to scheduled lease terminations and a reduction in initial fees from fewer restaurant openings.

Company Restaurant Operating Margin* was $16.6 million, or 16.9% of company restaurant sales, compared to $16.0 million, or 17.2%, in the prior year quarter, driven by expected increases in product costs and minimum wages, partially offset by higher sales and favorable workers' compensation experience. Franchise Operating Margin* was $25.0 million, or 72.5% of franchise and licensing revenue, compared to $25.0 million, or 70.9%, in the prior year quarter, driven by higher royalty revenue and an improved occupancy margin.

Total general and administrative expenses improved to $16.4 million compared to $17.6 million in the prior year quarter. Interest expense was $4.1 million versus $3.1 million in the prior year quarter. Denny’s ended the quarter with $291.4 million of total debt outstanding, including $261.8 million of borrowings under its revolving credit facility. The provision for income taxes was $5.4 million, reflecting an effective tax rate of 36.8%. Due to the use of net operating loss and tax credit carryforwards, the Company paid $2.4 million in cash taxes during the quarter.

Net Income was $9.3 million, or $0.13 per diluted share, compared to $9.7 million, or $0.13 per diluted share, in the prior year quarter. Adjusted Net Income per Share* grew 11.2% to $0.14 compared to the prior year quarter.

Adjusted Free Cash Flow* and Capital Allocation

Denny’s generated $12.6 million of Adjusted Free Cash Flow* in the quarter after investing $8.5 million in cash capital expenditures, including the acquisition of one franchised restaurant and costs associated with opening a new company restaurant and relocating a high-performing company restaurant due to the loss of property control.

During the quarter, the Company allocated $29.7 million to share repurchases. As of September 27, 2017, the Company had approximately $13 million remaining in authorized share repurchases under its existing $100 million share repurchase authorization. On October 31, 2017, the Company announced a new multi-year share repurchase program authorizing the repurchase of an additional $200 million of common stock.

On October 31, 2017, the Company also announced the refinance of its existing $325 million credit facility with a new five-year $400 million senior secured revolving credit facility. Borrowings under the new credit facility bear a tiered interest rate, which is based on the Company's consolidated leverage ratio and was initially set at LIBOR plus 200 basis points. The maturity date for the new credit facility is October 26, 2022.

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%.
    40 to 45 new restaurant openings (vs 45 to 50 restaurant openings), with net restaurant growth of 5 to 10 restaurants (vs. 5 to 15 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% and Franchise Operating Margin* between 71.0% and 71.5%.
  • Total general and administrative expenses between $67 and $70 million.
  • Adjusted EBITDA* between $101 and $103 million.
  • Depreciation and amortization expense between $23 and $24 million.
  • Net interest expense between $14.5 and $15.0 million.
  • Effective income tax rate between 35% and 37% with cash taxes between $6 and $8 million.
  • Cash capital expenditures between $32 and $34 million (vs. $25 and $27 million).
  • Adjusted Free Cash Flow* between $48 and $50 million (vs. $55 and $57 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 third quarter ended September 27, 2017 on its quarterly investor conference call today, Wednesday, November 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 September 27, 2017, Denny’s had 1,725 franchised, licensed, and company restaurants around the world including 125 restaurants in Canada, Puerto Rico, Mexico, New Zealand, Honduras, the Philippines, Costa Rica, Dominican Republic, the United Arab Emirates, 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).

Contacts:

Curt Nichols
Investor Relations
877-784-7167

Christine Beggan
ICR
Media Relations
203-682-8329

DENNY’S CORPORATION
Condensed Consolidated Balance Sheets
(Unaudited)
             
(In thousands) 9/27/17   12/28/16
Assets      
  Current assets      
    Cash and cash equivalents $ 1,663     $ 2,592  
    Receivables 17,423     19,841  
    Assets held for sale     1,020  
    Other current assets 11,571     12,454  
      Total current assets 30,657     35,907  
  Property, net 138,049     133,102  
  Goodwill 37,821     35,233  
  Intangible assets, net 56,075     54,493  
  Deferred income taxes 17,966     17,683  
  Other noncurrent assets 28,658     29,733  
      Total assets $ 309,226     $ 306,151  
             
Liabilities      
  Current liabilities      
    Current maturities of capital lease obligations $ 3,289     $ 3,285  
    Accounts payable 19,002     25,289  
    Other current liabilities 53,748     64,796  
      Total current liabilities 76,039     93,370  
  Long-term liabilities      
    Long-term debt, less current maturities 261,800     218,500  
    Capital lease obligations, less current maturities 26,296     23,806  
    Other 42,688     41,587  
      Total long-term liabilities 330,784     283,893  
      Total liabilities 406,823     377,263  
             
Shareholders' deficit      
    Common stock 1,076     1,071  
    Paid-in capital 591,773     577,951  
    Deficit (347,976 )   (382,843 )
    Accumulated other comprehensive loss, net of tax (3,323 )   (1,407 )
    Treasury stock (339,147 )   (265,884 )
      Total shareholders' deficit (97,597 )   (71,112 )
      Total liabilities and shareholders' deficit $ 309,226     $ 306,151  
             
Debt Balances
(In thousands) 9/27/17   12/28/16
Credit facility revolver due 2020 $ 261,800     $ 218,500  
Capital leases 29,585     27,091  
  Total debt $ 291,385     $ 245,591  
                 

 

DENNY’S CORPORATION
Condensed Consolidated Statements of Comprehensive Income
(Unaudited)
           
      Quarter Ended
(In thousands, except per share amounts) 9/27/17   9/28/16
Revenue:      
  Company restaurant sales $ 97,915     $ 93,122  
  Franchise and license revenue 34,469     35,264  
    Total operating revenue 132,384     128,386  
Costs of company restaurant sales 81,322     77,118  
Costs of franchise and license revenue 9,493     10,275  
General and administrative expenses 16,446     17,558  
Depreciation and amortization 5,958     5,609  
Operating (gains), losses and other charges, net 630     249  
    Total operating costs and expenses, net 113,849     110,809  
Operating income 18,535     17,577  
Interest expense, net 4,067     3,117  
Other nonoperating income, net (286 )   (543 )
Net income before income taxes 14,754     15,003  
Provision for income taxes 5,429     5,277  
Net income $ 9,325     $ 9,726  
           
           
Basic net income per share $ 0.14     $ 0.13  
Diluted net income per share $ 0.13     $ 0.13  
           
Basic weighted average shares outstanding 66,873     74,851  
Diluted weighted average shares outstanding 69,210     76,791  
           
Comprehensive income $ 9,548     $ 9,771  
       
General and Administrative Expenses Quarter Ended
(In thousands) 9/27/17   9/28/16
Share-based compensation $ 2,493     $ 1,775  
Other general and administrative expenses 13,953     15,783  
  Total general and administrative expenses $ 16,446     $ 17,558  
                 

 

DENNY’S CORPORATION
Condensed Consolidated Statements of Comprehensive Income
(Unaudited)
           
      Three Quarters Ended
(In thousands, except per share amounts) 9/27/17   9/28/16
Revenue:      
  Company restaurant sales $ 290,049     $ 272,718  
  Franchise and license revenue 103,621     104,625  
    Total operating revenue 393,670     377,343  
Costs of company restaurant sales 240,854     224,066  
Costs of franchise and license revenue 29,483     31,037  
General and administrative expenses 50,536     50,691  
Depreciation and amortization 17,493     16,207  
Operating (gains), losses and other charges, net 3,459     24,365  
    Total operating costs and expenses, net 341,825     346,366  
Operating income 51,845     30,977  
Interest expense, net 11,348     8,905  
Other nonoperating income, net (1,053 )   (635 )
Net income before income taxes 41,550     22,707  
Provision for income taxes 15,103     14,579  
Net income $ 26,447     $ 8,128  
           
           
Basic net income per share $ 0.38     $ 0.11  
Diluted net income per share $ 0.37     $ 0.10  
           
Basic weighted average shares outstanding 69,095     76,214  
Diluted weighted average shares outstanding 71,377     78,052  
           
Comprehensive income $ 24,531     $ 22,097  
       
General and Administrative Expenses Three Quarters Ended
(In thousands) 9/27/17   9/28/16
Share-based compensation $ 6,546     $ 5,625  
Other general and administrative expenses 43,990     45,066  
  Total general and administrative expenses $ 50,536     $ 50,691  
                 

 

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   Three Quarters Ended
(In thousands, except per share amounts) 9/27/17   9/28/16   9/27/17   9/28/16
Net income $ 9,325     $ 9,726     $ 26,447     $ 8,128  
Provision for income taxes 5,429     5,277     15,103     14,579  
Operating (gains), losses and other charges, net 630     249     3,459     24,365  
Other nonoperating income, net (286 )   (543 )   (1,053 )   (635 )
Share-based compensation 2,493     1,775     6,546     5,625  
Adjusted Income Before Taxes $ 17,591     $ 16,484     $ 50,502     $ 52,062  
               
Interest expense, net 4,067     3,117     11,348     8,905  
Depreciation and amortization 5,958     5,609     17,493     16,207  
Cash payments for restructuring charges and exit costs (274 )   (271 )   (1,483 )   (1,104 )
Cash payments for share-based compensation         (3,946 )   (2,529 )
Adjusted EBITDA $ 27,342     $ 24,939     $ 73,914     $ 73,541  
               
Cash interest expense, net (3,800 )   (2,869 )   (10,536 )   (8,150 )
Cash paid for income taxes, net (2,371 )   (202 )   (5,039 )   (1,140 )
Cash paid for capital expenditures (8,522 )   (18,122 )   (23,601 )   (27,571 )
Adjusted Free Cash Flow $ 12,649     $ 3,746     $ 34,738     $ 36,680  
               
  Quarter Ended   Three Quarters Ended
(In thousands, except per share amounts) 9/27/17   9/28/16   9/27/17   9/28/16
Net income $ 9,325     $ 9,726     $ 26,447     $ 8,128  
Pension settlement loss             24,297  
Losses (gains) on sales of assets and other, net 590     (77 )   3,023     (764 )
Tax effect (1) (214 )   27     (1,097 )   (1,871 )
Adjusted Net Income $ 9,701     $ 9,676     $ 28,373     $ 29,790  
               
Diluted weighted average shares outstanding 69,210     76,791     71,377     78,052  
               
Diluted Net Income Per Share $ 0.13     $ 0.13     $ 0.37     $ 0.10  
Adjustments Per Share $ 0.01     $     $ 0.03     $ 0.28  
Adjusted Net Income Per Share $ 0.14     $ 0.13     $ 0.40     $ 0.38  
                               

 

(1)  Tax adjustments for the three and nine months ended September 27, 2017 are calculated using the Company's year-to-date effective tax rate of 36.3%. Tax adjustments for the loss on pension termination for the nine months ended September 28, 2016 are calculated using an effective tax rate of 8.8%. The remaining tax adjustments for the three and nine months ended September 28, 2016 are calculated using the Company's year-to-date effective tax rate of 35.6%, which excludes the impact of the pension termination.

 

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   Three Quarters Ended
(In thousands) 9/27/17   9/28/16   9/27/17   9/28/16
Operating income $ 18,535     $ 17,577     $ 51,845     $ 30,977  
General and administrative expenses 16,446     17,558     50,536     50,691  
Depreciation and amortization 5,958     5,609     17,493     16,207  
Operating (gains), losses and other charges, net 630     249     3,459     24,365  
  Total Operating Margin $ 41,569     $ 40,993     $ 123,333     $ 122,240  
               
Total Operating Margin consists of:              
  Company Restaurant Operating Margin (1) $ 16,593     $ 16,004     $ 49,195     $ 48,652  
  Franchise Operating Margin (2) 24,976     24,989     74,138     73,588  
  Total Operating Margin $ 41,569     $ 40,993     $ 123,333     $ 122,240  
                               

 

(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) 9/27/17   9/28/16
Company restaurant operations: (1)          
  Company restaurant sales $ 97,915   100.0 %   $ 93,122   100.0 %
  Costs of company restaurant sales:          
    Product costs 24,896   25.4 %   22,819   24.5 %
    Payroll and benefits 37,332   38.1 %   35,999   38.7 %
    Occupancy 5,054   5.2 %   4,928   5.3 %
    Other operating costs:          
      Utilities 3,767   3.8 %   3,429   3.7 %
      Repairs and maintenance 1,642   1.7 %   1,559   1.7 %
      Marketing 3,740   3.8 %   3,500   3.8 %
      Other 4,891   5.0 %   4,884   5.2 %
  Total costs of company restaurant sales $ 81,322   83.1 %   $ 77,118   82.8 %
  Company restaurant operating margin (non-GAAP) (2) $ 16,593   16.9 %   $ 16,004   17.2 %
                 
Franchise operations: (3)          
  Franchise and license revenue:          
  Royalties $ 25,174   73.0 %   $ 25,039   71.0 %
  Initial fees 507   1.5 %   757   2.1 %
  Occupancy revenue 8,788   25.5 %   9,468   26.8 %
  Total franchise and license revenue $ 34,469   100.0 %   $ 35,264   100.0 %
                 
  Costs of franchise and license revenue:          
  Occupancy costs $ 6,343   18.4 %   $ 7,023   19.9 %
  Other direct costs 3,150   9.1 %   3,252   9.2 %
  Total costs of franchise and license revenue $ 9,493   27.5 %   $ 10,275   29.1 %
  Franchise operating margin (non-GAAP) (2) $ 24,976   72.5 %   $ 24,989   70.9 %
                 
Total operating revenue (4) $ 132,384   100.0 %   $ 128,386   100.0 %
Total costs of operating revenue (4) 90,815   68.6 %   87,393   68.1 %
Total operating margin (non-GAAP)  (4)(2) $ 41,569   31.4 %   $ 40,993   31.9 %
                 
Other operating expenses: (4)(2)          
  General and administrative expenses $ 16,446   12.4 %   $ 17,558   13.7 %
  Depreciation and amortization 5,958   4.5 %   5,609   4.4 %
  Operating (gains), losses and other charges, net 630   0.5 %   249   0.2 %
  Total other operating expenses $ 23,034   17.4 %   $ 23,416   18.2 %
                 
Operating income (4) $ 18,535   14.0 %   $ 17,577   13.7 %
                 
(1 As a percentage of company restaurant sales.
(2 ) Other operating expenses such as general and administrative expenses and depreciation and amortization relate to both company and franchise operations and are not allocated to costs of company restaurant sales and costs of franchise and license revenue.  As such, operating margin is considered a non-GAAP financial measure.  Operating margins should be considered as a supplement to, not as a substitute for, operating income, net income or other financial measures prepared in accordance with U.S. generally accepted accounting principles.
(3 ) As a percentage of franchise and license revenue.
(4 ) As a percentage of total operating revenue.
     

 

DENNY’S CORPORATION
Operating Margins
(Unaudited)
             
        Three Quarters Ended
(In thousands) 9/27/17   9/28/16
Company restaurant operations: (1)          
  Company restaurant sales $ 290,049   100.0 %   $ 272,718   100.0 %
  Costs of company restaurant sales:          
    Product costs 72,798   25.1 %   67,253   24.7 %
    Payroll and benefits 113,221   39.0 %   104,548   38.3 %
    Occupancy 15,291   5.3 %   14,721   5.4 %
    Other operating costs:          
      Utilities 9,873   3.4 %   9,232   3.4 %
      Repairs and maintenance 4,972   1.7 %   4,893   1.8 %
      Marketing 10,982   3.8 %   10,123   3.7 %
      Other 13,717   4.7 %   13,296   4.9 %
  Total costs of company restaurant sales $ 240,854   83.0 %   $ 224,066   82.2 %
  Company restaurant operating margin (non-GAAP) (2) $ 49,195   17.0 %   $ 48,652   17.8 %
                 
Franchise operations: (3)          
  Franchise and license revenue:          
  Royalties $ 75,056   72.4 %   $ 73,694   70.4 %
  Initial fees 1,579   1.5 %   2,081   2.0 %
  Occupancy revenue 26,986   26.0 %   28,850   27.6 %
  Total franchise and license revenue $ 103,621   100.0 %   $ 104,625   100.0 %
                 
  Costs of franchise and license revenue:          
  Occupancy costs $ 19,420   18.7 %   $ 21,373   20.4 %
  Other direct costs 10,063   9.7 %   9,664   9.2 %
  Total costs of franchise and license revenue $ 29,483   28.5 %   $ 31,037   29.7 %
  Franchise operating margin (non-GAAP) (2) $ 74,138   71.5 %   $ 73,588   70.3 %
                 
Total operating revenue (4) $ 393,670   100.0 %   $ 377,343   100.0 %
Total costs of operating revenue (4) 270,337   68.7 %   255,103   67.6 %
Total operating margin (non-GAAP) (4)(2) $ 123,333   31.3 %   $ 122,240   32.4 %
                 
Other operating expenses: (4)(2)          
  General and administrative expenses $ 50,536   12.8 %   $ 50,691   13.4 %
  Depreciation and amortization 17,493   4.4 %   16,207   4.3 %
  Operating gains, losses and other charges, net 3,459   0.9 %   24,365   6.5 %
  Total other operating expenses $ 71,488   18.2 %   $ 91,263   24.2 %
                 
Operating income (4) $ 51,845   13.2 %   $ 30,977   8.2 %
                 
(1 As a percentage of company restaurant sales.
(2 ) Other operating expenses such as general and administrative expenses and depreciation and amortization relate to both company and franchise operations and are not allocated to costs of company restaurant sales and costs of franchise and license revenue.  As such, operating margin is considered a non-GAAP financial measure.  Operating margins should be considered as a supplement to, not as a substitute for, operating income, net income or other financial measures prepared in accordance with U.S. generally accepted accounting principles.
(3 ) As a percentage of franchise and license revenue.
(4 ) As a percentage of total operating revenue.
     

 

DENNY’S CORPORATION
Statistical Data
(Unaudited)
                   
Same-Store Sales Quarter Ended   Three Quarters Ended
(increase vs. prior year) 9/27/17   9/28/16   9/27/17   9/28/16
  Company Restaurants 0.6 %   1.0 %   0.6 %   1.5 %
  Domestic Franchised Restaurants 0.6 %   1.0 %   0.7 %   0.9 %
  Domestic System-wide Restaurants 0.6 %   1.0 %   0.7 %   1.0 %
  System-wide Restaurants 0.9 %   0.9 %   0.8 %   0.8 %
                   
Average Unit Sales Quarter Ended   Three Quarters Ended
(In thousands) 9/27/17   9/28/16   9/27/17   9/28/16
  Company Restaurants $ 577     $ 573     $ 1,706     $ 1,689  
  Franchised Restaurants $ 403     $ 396     $ 1,188     $ 1,174  
                   
          Franchised        
Restaurant Unit Activity Company    & Licensed   Total    
Ending Units June 28, 2017 172     1,552     1,724      
  Units Opened 1     8     9      
  Units Reacquired 1     (1 )        
  Units Refranchised              
  Units Closed     (8 )   (8 )    
    Net Change 2     (1 )   1      
Ending Units September 27, 2017 174     1,551     1,725      
                   
Equivalent Units              
  Third Quarter 2017 170     1,550     1,720      
  Third Quarter 2016 163     1,560     1,723      
    Net Change 7     (10 )   (3 )    
                   
          Franchised        
Restaurant Unit Activity Company    & Licensed   Total    
Ending Units December 28, 2016 169     1,564     1,733      
  Units Opened 2     23     25      
  Units Reacquired 7     (7 )        
  Units Refranchised (4 )   4          
  Units Closed     (33 )   (33 )    
    Net Change 5     (13 )   (8 )    
Ending Units September 27, 2017 174     1,551     1,725      
                   
Equivalent Units              
  Year-to-Date 2017 170     1,557     1,727      
  Year-to-Date 2016 161     1,554     1,715      
    Net Change 9     3     12      
                         

SOURCE Denny’s Corporation

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