Denny’s Corporation Reports Results For Second Quarter 2021
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Denny’s Corporation Reports Results For Second Quarter 2021

SPARTANBURG, S.C., Aug. 03, 2021 // GLOBE NEWSWIRE // - Denny’s Corporation (NASDAQ: DENN) today reported results for its second quarter ended June 30, 2021 and provided a business update on the Company’s operations.

John Miller, Chief Executive Officer, stated, “We are simply delighted to welcome guests back now that all of our operating domestic dining rooms are open while still providing them with the convenience of our off-premise options. With the easing of restrictions, the rollout of our two new virtual brands, The Burger Den and The Meltdown, along with the perseverance of our entire organization, both June and July domestic system-wide same-store sales** surpassed 2019 pre-pandemic levels. We are encouraged by the potential for additional sales growth as we overcome staffing challenges and return to 24/7 operations across our system."

Second Quarter 2021 Highlights

  • Total operating revenue increased 164.3% to $106.2 million, primarily due to the COVID-19 recovery.
  • Domestic system-wide same-store sales** decreased 1.2% compared to the equivalent fiscal period in 2019, including a 1.5% decrease at domestic franchised restaurants and a 1.9% increase at company restaurants.
  • Domestic system-wide same-store sales** increased 117.0% compared to the equivalent fiscal period in 2020.
  • Opened three franchised restaurants, including one international location.
  • Operating income (loss) was $18.3 million compared to ($13.5) million in the prior year quarter.
  • Franchise Operating Margin* was $29.9 million, or 51.0% of franchise and license revenue, and Company Restaurant Operating Margin* was $9.8 million, or 20.5% of company restaurant sales.
  • Net loss was $0.8 million, or $0.01 per diluted share.
  • Adjusted Net Income* was $11.6 million, or $0.18 per share.
  • Adjusted EBITDA* was $25.3 million compared to ($5.1) million in the prior year quarter.
  • Cash provided by (used in) operating, investing, and financing activities was $33.1 million, ($1.2) million, and ($35.6) million, respectively.
  • Adjusted Free Cash Flow* was $17.8 million compared to ($11.5) million in the prior year quarter.
  • Provided guidance for the fiscal third quarter 2021.

Current Trends

Domestic system-wide same-store sales** for the second quarter ended June 30, 2021, continued to trend toward pre-pandemic levels. Fiscal periods June and July surpassed 2019 sales levels at both company and domestic franchise restaurants. With all operating dining rooms open, off-premise sales, inclusive of virtual brands, have remained strong at approximately 24% of total sales compared to 12% pre-pandemic.

Additionally, during the second quarter the Company substantially completed the rollout of its first virtual brand, The Burger Den, to over 1,100 domestic locations and began a phased rollout of its second virtual brand, The Meltdown, to approximately half of the domestic system. Transactions for these two virtual brands are highly incremental and leverage labor during underutilized dayparts.

In an effort to provide greater transparency due to the COVID-19 pandemic, Denny's is providing the following tables that present monthly results for 2021 compared to the equivalent fiscal periods in 2019:

Domestic System-Wide Same-Store Sales ** Compared to 2019 Fiscal Periods and Domestic Average Units for 2021 Fiscal Periods

  Domestic System-Wide Same-Store Sales**
  Fiscal Year 2021
  Jan Feb Mar Apr May Jun Jul 1
System (31%) (25%) (9%) (2%) (3%) 1% 3%
               
24/7 Units (20%) (16%) 2% 11% 11% 14% 15%
Limited Hour Units (38%) (32%) (16%) (11%) (12%) (8%) (7%)
 
  1. July results are preliminary.
     

 

  Domestic Average Units
  Fiscal Year 2021
  Jan Feb Mar Apr May Jun Jul 1
System 1,504 1,501 1,501 1,499 1,498 1,497 1,495
               
24/7 Units 519 532 569 566 561 566 576
Limited Hour Units 939 928 912 920 926 920 909
               
Temporary Closures 46 41 20 13 11 11 10
 
  1. July results are preliminary.

Second Quarter Results

Denny’s total operating revenue increased 164.3% to $106.2 million compared to $40.2 million in the prior year quarter. Franchise and license revenue was $58.6 million compared to $25.0 million in the prior year quarter. Company restaurant sales were $47.6 million compared to $15.1 million in the prior year quarter. These changes were primarily due to reduced dine-in restrictions and fewer temporary closures related to the COVID-19 pandemic in the current period as compared to the prior year period.

Franchise Operating Margin* was $29.9 million, or 51.0% of franchise and license revenue, compared to $9.8 million, or 39.1%, in the prior year quarter. This margin increase was primarily due to the improvement in sales performance at franchised restaurants, partially offset by fewer equivalent units.

Company Restaurant Operating Margin* was $9.8 million, or 20.5% of company restaurant sales, compared to ($4.5) million, or (29.6%), in the prior year quarter. This change in margin was primarily due to the improvement in sales performance at company restaurants in addition to lower payroll and benefits costs due to staffing challenges. Additionally, the Company recorded approximately $0.6M in favorable reserve adjustments and tax credits related to the CARES Act.

Total general and administrative expenses were $17.5 million, compared to $13.2 million in the prior year quarter. This change was primarily due to increases in both performance-based incentive compensation and share-based compensation expense in addition to temporary cost reductions during the prior year quarter. These increases were partially offset by market valuation changes in the Company's deferred compensation plan liabilities compared to the prior year quarter as well as approximately $0.5 million in tax credits related to the CARES Act.

Denny’s ended the quarter with $194.9 million of total debt outstanding, including $180.0 million of borrowings under its credit facility. Subsequent to the end of the second quarter, the Company paid down an additional $5 million on its revolving credit facility, bringing the current outstanding balance to $175.0 million.

The benefit from income taxes was $1.2 million, compared to $5.1 million in the prior year quarter, reflecting an effective tax rate of 59.3%. Approximately $1.5 million in cash taxes were paid during the quarter.

Net loss was $0.8 million, or $0.01 per diluted share, compared to net loss of $23.0 million, or $0.41 per diluted share, in the prior year quarter. Adjusted Net Income* per share was $0.18 compared to Adjusted Net Loss* per share of $0.25 in the prior year quarter.

Adjusted Free Cash Flow* and Capital Allocation

Denny’s generated $17.8 million of Adjusted Free Cash Flow* after investing $1.5 million in cash capital expenditures, including maintenance capital.

Business Outlook

The following expectations for the fiscal third quarter ending September 29, 2021 reflect management's expectations that the current economic environment will not change materially:

Domestic system-wide same-store sales** growth between 2% and 4% compared to the equivalent fiscal period in 2019.

Total general and administrative expenses between $17 million and $18 million, including approximately $3.5 million related to share-based compensation.
Adjusted EBITDA* between $22 million and $24 million.

* Please refer to the Reconciliation of Net Income (Loss) and Net Cash Provided by (Used In) Operating Activities to Non-GAAP Financial Measures, as well as the Reconciliation of Operating Income (Loss) 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.

** Same-store sales include sales at company restaurants and non-consolidated franchised and licensed restaurants that were open during the comparable periods noted. Total operating revenue is limited to company restaurant sales and royalties, advertising revenue, fees and occupancy revenue from non-consolidated franchised and licensed restaurants. Accordingly, domestic franchise same-store sales and domestic system-wide same-store sales should be considered as a supplement to, not a substitute for, the Company's results as reported under GAAP.

Conference Call and Webcast Information

Denny’s will provide further commentary on the results for the second quarter ended June 30, 2021 on its quarterly investor conference call today, Tuesday, August 3, 2021 at 4:30 p.m. Eastern Time.

DENNY’S CORPORATION
Condensed Consolidated Balance Sheets
(Unaudited)
             
(In thousands) 6/30/21   12/30/20
Assets      
  Current assets      
    Cash and cash equivalents $ 10,882     $ 3,892  
    Investments 2,069     2,272  
    Receivables, net 20,407     21,349  
    Inventories 1,280     1,181  
    Assets held for sale 1,621     1,125  
    Prepaid and other current assets 12,168     18,847  
      Total current assets 48,427     48,666  
  Property, net 82,490     86,154  
  Financing lease right-of-use assets, net 9,437     9,830  
  Operating lease right-of-use assets, net 135,229     139,534  
  Goodwill 36,884     36,884  
  Intangible assets, net 50,892     51,559  
  Deferred financing costs, net 1,727     2,414  
  Deferred income taxes, net 19,854     23,210  
  Other noncurrent assets 33,407     32,698  
      Total assets $ 418,347     $ 430,949  
             
Liabilities      
  Current liabilities      
    Current finance lease liabilities $ 1,637     $ 1,839  
    Current operating lease liabilities 16,348     16,856  
    Accounts payable 14,376     12,021  
    Other current liabilities 55,251     46,462  
      Total current liabilities 87,612     77,178  
  Long-term liabilities      
    Long-term debt 180,000     210,000  
    Noncurrent finance lease liabilities 13,265     13,530  
    Noncurrent operating lease liabilities 132,959     137,534  
    Liability for insurance claims, less current portion 9,602     10,309  
    Other noncurrent liabilities 94,332     112,844  
      Total long-term liabilities 430,158     484,217  
      Total liabilities 517,770     561,395  
             
Shareholders' deficit      
    Common stock 642     640  
    Paid-in capital 129,176     123,833  
    Deficit (172,161 )   (194,514 )
    Accumulated other comprehensive loss, net (57,080 )   (60,405 )
      Total shareholders' deficit (99,423 )   (130,446 )
      Total liabilities and shareholders' deficit $ 418,347     $ 430,949  
             
Debt Balances
(In thousands) 6/30/21   12/30/20
Credit facility revolver due 2022 $ 180,000     $ 210,000  
Finance lease liabilities 14,902     15,369  
  Total debt $ 194,902     $ 225,369  

 

DENNY’S CORPORATION
Condensed Consolidated Statements of Operations
(Unaudited)
           
      Quarter Ended
(In thousands, except per share amounts) 6/30/21   6/24/20
Revenue:      
  Company restaurant sales $ 47,572     $ 15,128  
  Franchise and license revenue 58,593     25,033  
    Total operating revenue 106,165     40,161  
Costs of company restaurant sales, excluding depreciation and amortization 37,813     19,606  
Costs of franchise and license revenue, excluding depreciation and amortization 28,735     15,244  
General and administrative expenses 17,548     13,153  
Depreciation and amortization 3,897     4,058  
Operating (gains), losses and other charges, net (113 )   1,627  
    Total operating costs and expenses, net 87,880     53,688  
Operating income (loss) 18,285     (13,527 )
Interest expense, net 4,066     4,947  
Other nonoperating expense, net 16,251     9,565  
Loss before income taxes (2,032 )   (28,039 )
Benefit from income taxes (1,204 )   (5,074 )
Net loss $ (828 )   $ (22,965 )
           
           
Basic net loss per share $ (0.01 )   $ (0.41 )
Diluted net loss per share $ (0.01 )   $ (0.41 )
           
Basic weighted average shares outstanding 65,294     55,686  
Diluted weighted average shares outstanding 65,294     55,686  
           
Comprehensive loss $ (578 )   $ (18,550 )
       
General and Administrative Expenses Quarter Ended
(In thousands) 6/30/21   6/24/20
Corporate administrative expenses $ 10,345     $ 9,701  
Share-based compensation 3,388     1,511  
Incentive compensation 3,032     1  
Deferred compensation valuation adjustments 783     1,940  
  Total general and administrative expenses $ 17,548     $ 13,153  

 

DENNY’S CORPORATION
Condensed Consolidated Statements of Operations
(Unaudited)
           
      Two Quarters Ended
(In thousands, except per share amounts) 6/30/21   6/24/20
Revenue:      
  Company restaurant sales $ 81,141     $ 57,419  
  Franchise and license revenue 105,600     79,437  
    Total operating revenue 186,741     136,856  
Costs of company restaurant sales, excluding depreciation and amortization 67,977     55,724  
Costs of franchise and license revenue, excluding depreciation and amortization 52,493     44,414  
General and administrative expenses 34,495     20,895  
Depreciation and amortization 7,558     8,204  
Operating (gains), losses and other charges, net 419     3,100  
    Total operating costs and expenses, net 162,942     132,337  
Operating income 23,799     4,519  
Interest expense, net 8,343     8,898  
Other nonoperating expense (income), net (13,797 )   12,328  
Income (loss) before income taxes 29,253     (16,707 )
Provision for (benefit from) income taxes 6,900     (2,755 )
Net income (loss) $ 22,353     $ (13,952 )
           
           
Basic net income (loss) per share $ 0.34     $ (0.25 )
Diluted net income (loss) per share $ 0.34     $ (0.25 )
           
Basic weighted average shares outstanding 65,273     55,993  
Diluted weighted average shares outstanding 65,789     55,993  
           
Comprehensive income (loss) $ 25,678     $ (42,209 )
       
General and Administrative Expenses Two Quarters Ended
(In thousands) 6/30/21   6/24/20
Corporate administrative expenses $ 21,217     $ 21,482  
Share-based compensation 6,860     (26 )
Incentive compensation 5,118     15  
Deferred compensation valuation adjustments 1,300     (576 )
  Total general and administrative expenses $ 34,495     $ 20,895  

 

DENNY’S CORPORATION
Reconciliation of Net Income (Loss) and Net Cash Provided by (Used in) Operating Activities to Non-GAAP Financial Measures
(Unaudited)

The Company believes that, in addition to GAAP measures, certain non-GAAP financial measures are appropriate indicators to assist in the evaluation of operating performance and liquidity on a period-to-period basis. The Company uses Adjusted EBITDA, Adjusted Free Cash Flow, Adjusted Net Income (Loss) and Adjusted Net Income (Loss) Per Share internally as performance measures for planning purposes, including the preparation of annual operating budgets, and for compensation purposes, including incentive compensation for certain employees. Adjusted EBITDA is also used in the calculation of financial covenant ratios in accordance with the Company’s credit facility. Adjusted Free Cash Flow is also used as a non-GAAP liquidity measure by Management to assess the Company’s ability to generate cash and plan for future operating and capital actions. Management believes that the presentation of Adjusted EBITDA, Adjusted Net Income (Loss), Adjusted Net Income (Loss) Per Share and Adjusted Free Cash Flow provide useful information to investors and analysts about the Company’s operating results, financial condition or cash flows. However, each of these non-GAAP financial measures should be considered as a supplement to, not a substitute for, operating income (loss), net income (loss), net cash provided by (used in) operating activities, or other financial performance and liquidity measures prepared in accordance with U.S. generally accepted accounting principles.

  Quarter Ended   Two Quarters Ended
(In thousands) 6/30/21   6/24/20   6/30/21   6/24/20
Net income (loss) $ (828 )   $ (22,965 )   $ 22,353     $ (13,952 )
Provision for (benefit from) income taxes (1,204 )   (5,074 )   6,900     (2,755 )
Operating (gains), losses and other charges, net (113 )   1,627     419     3,100  
Other nonoperating expense (income), net 16,251     9,565     (13,797 )   12,328  
Share-based compensation expense (benefit) 3,388     1,511     6,860     (26 )
Deferred compensation plan valuation adjustments 783     1,940     1,300     (576 )
Interest expense, net 4,066     4,947     8,343     8,898  
Depreciation and amortization 3,897     4,058     7,558     8,204  
Cash payments for restructuring charges and exit costs (869 )   (690 )   (1,274 )   (1,374 )
Cash payments for share-based compensation (69 )       (1,565 )   (3,211 )
Adjusted EBITDA $ 25,302     $ (5,081 )   $ 37,097     $ 10,636  
               

 

DENNY’S CORPORATION
Reconciliation of Net Income (Loss) and Net Cash Provided by (Used in) Operating Activities to Non-GAAP Financial Measures
(Unaudited)
      Quarter Ended   Two Quarters Ended
(In thousands) 6/30/21   6/24/20   6/30/21   6/24/20
Net cash provided by (used in) operating activities $ 33,136     $ (9,859 )   $ 43,371     $ (7,958 )
Capital expenditures (1,525 )   (1,658 )   (3,108 )   (4,476 )
Cash payments for restructuring charges and exit costs (869 )   (690 )   (1,274 )   (1,374 )
Cash payments for share-based compensation (69 )       (1,565 )   (3,211 )
Deferred compensation plan valuation adjustments 783     1,940     1,300     (576 )
Other nonoperating expense (income), net 16,251     9,565     (13,797 )   12,328  
Gains (losses) on investments 5     (25 )   (3 )   91  
Gains (losses) on termination of leases 106     (25 )   72     (53 )
Amortization of deferred financing costs (344 )   (188 )   (688 )   (340 )
Gains (losses) on interest rate swap derivatives, net (17,227 )   (11,466 )   12,506     (11,466 )
Interest expense, net 4,066     4,947     8,343     8,898  
Cash interest expense, net (1) (4,455 )   (4,717 )   (9,041 )   (8,437 )
Deferred income tax (expense) benefit 1,888     1,128     (2,211 )   3,705  
Provision for (benefit from) income taxes (1,204 )   (5,074 )   6,900     (2,755 )
Income taxes paid, net (1,521 )   (53 )   (1,942 )   (277 )
Changes in operating assets and liabilities              
Receivables (404 )   6,473     (757 )   (9,342 )
Inventories 111     (179 )   98     (175 )
Other current assets (1,383 )   6,704     (6,677 )   2,593  
Other noncurrent assets 1,116     1,472     1,317     (106 )
Operating lease assets and liabilities 217     (1,787 )   821     (1,769 )
Accounts payable (3,800 )   (6,928 )   (5,620 )   537  
Accrued payroll (3,696 )   (1,264 )   (1,992 )   11,519  
Accrued taxes (814 )   (259 )   (434 )   712  
Other accrued liabilities (3,454 )   214     (4,649 )   6,551  
Other noncurrent liabilities 887     220     2,036     2,827  
Adjusted Free Cash Flow $ 17,801     $ (11,509 )   $ 23,006     $ (2,554 )
                   

 

(1 ) Includes cash interest expense, net and cash payments of approximately $0.8 million and $1.6 million for dedesignated interest rate swap derivatives for the quarter and year-to-date periods ended June 30, 2021, respectively.

 

DENNY’S CORPORATION
Reconciliation of Net Income (Loss) and Net Cash Provided by (Used in) Operating Activities to Non-GAAP Financial Measures
(Unaudited)
      Quarter Ended   Two Quarters Ended
(In thousands) 6/30/21   6/24/20   6/30/21   6/24/20
Adjusted EBITDA $ 25,302     $ (5,081 )   $ 37,097     $ 10,636  
Cash interest expense, net (1) (4,455 )   (4,717 )   (9,041 )   (8,437 )
Cash paid for income taxes, net (1,521 )   (53 )   (1,942 )   (277 )
Cash paid for capital expenditures (1,525 )   (1,658 )   (3,108 )   (4,476 )
Adjusted Free Cash Flow $ 17,801     $ (11,509 )   $ 23,006     $ (2,554 )
               
  Quarter Ended   Two Quarters Ended
(In thousands, except per share amounts) 6/30/21   6/24/20   6/30/21   6/24/20
Net income (loss) $ (828 )   $ (22,965 )   $ 22,353     $ (13,952 )
(Gains) losses on interest rate swap derivatives, net 17,227     11,466     (12,506 )   11,466  
(Gains) losses on sales of assets and other, net (65 )   12     (1,007 )   (1,058 )
Impairment charges             2,181  
Tax effect (2) (4,756 )   (2,168 )   3,189     (2,396 )
Adjusted Net Income (Loss) $ 11,578     $ (13,655 )   $ 12,029     $ (3,759 )
               
Adjusted diluted weighted average shares outstanding 65,829     55,686     65,789     55,993  
               
Diluted Net Income (Loss) Per Share $ (0.01 )   $ (0.41 )   $ 0.34     $ (0.25 )
Adjustments Per Share $ 0.19     $ 0.16     $ (0.16 )   $ 0.18  
Adjusted Net Income (Loss) Per Share $ 0.18     $ (0.25 )   $ 0.18     $ (0.07 )
                   

 

(1 ) Includes cash interest expense, net and cash payments of approximately $0.8 million and $1.6 million for dedesignated interest rate swap derivatives for the quarter and year-to-date periods ended June 30, 2021, respectively.
(2 ) Tax adjustments for the quarter and year-to-date periods ended June 30, 2021 reflect an effective tax rate of 27.7% and 23.6%, respectively. Tax adjustments for the reclassification of losses related to derivatives are calculated using an effective tax rate of 25.7% for the quarter and year-to-date periods ended June 24, 2020. Tax adjustments for all other items for the quarter and year-to-date periods ended June 24, 2020 are calculated using an effective rate of 5.4% and 8.8%, respectively.

 

DENNY’S CORPORATION
Reconciliation of Operating Income (Loss) 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 Restaurant-level 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.

The Company defines Restaurant-level Operating Margin as operating income (loss) excluding the following three items: general and administrative expenses, depreciation and amortization, and operating (gains), losses and other charges, net. Restaurant-level Operating Margin is presented as a percent of total operating revenue. The Company excludes general and administrative expenses, which include primarily non-restaurant-level costs associated with support of company and franchised restaurants and other activities at their corporate office. The Company excludes 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. The Company excludes special items, included within operating (gains), losses and other charges, net, to provide investors with a clearer perspective of its ongoing operating performance and a more relevant comparison to prior period results.

Restaurant-level Operating Margin is the total of Company Restaurant Operating Margin and Franchise Operating Margin. The Company defines 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 presents it as a percent of company restaurant sales. The Company defines 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, advertising revenue and occupancy revenue) less costs of franchise and license revenue and presents 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 operating (gains), losses and other charges, net. However, each of these non-GAAP financial measures should be considered as a supplement to, not a substitute for, operating income (loss), net income (loss) or other financial performance measures prepared in accordance with U.S. generally accepted accounting principles. Restaurant-level Operating Margin, Company Restaurant Operating Margin and Franchise Operating Margin do not accrue directly to the benefit of shareholders because of the aforementioned excluded items, and are not indicative of the overall results for the Company.

  Quarter Ended   Two Quarters Ended
(In thousands) 6/30/21   6/24/20   6/30/21   6/24/20
Operating income (loss) $ 18,285     $ (13,527 )   $ 23,799     $ 4,519  
General and administrative expenses 17,548     13,153     34,495     20,895  
Depreciation and amortization 3,897     4,058     7,558     8,204  
Operating (gains), losses and other charges, net (113 )   1,627     419     3,100  
Restaurant-level Operating Margin $ 39,617     $ 5,311     $ 66,271     $ 36,718  
               
Restaurant-level Operating Margin consists of:              
Company Restaurant Operating Margin (1) $ 9,759     $ (4,478 )   $ 13,164     $ 1,695  
Franchise Operating Margin (2) 29,858     9,789     53,107     35,023  
Restaurant-level Operating Margin $ 39,617     $ 5,311     $ 66,271     $ 36,718  

 

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

 

DENNY’S CORPORATION
Operating Margins
(Unaudited)
             
        Quarter Ended
(In thousands) 6/30/21   6/24/20
Company restaurant operations: (1)          
  Company restaurant sales $ 47,572   100.0 %   $ 15,128   100.0 %
  Costs of company restaurant sales:          
    Product costs 11,447   24.1 %   4,305   28.5 %
    Payroll and benefits 16,970   35.7 %   8,039   53.1 %
    Occupancy 2,844   6.0 %   2,728   18.0 %
    Other operating costs:          
      Utilities 1,390   2.9 %   1,098   7.3 %
      Repairs and maintenance 635   1.3 %   428   2.8 %
      Marketing 1,365   2.9 %   607   4.0 %
      Other direct costs 3,162   6.6 %   2,401   15.9 %
  Total costs of company restaurant sales $ 37,813   79.5 %   $ 19,606   129.6 %
  Company restaurant operating margin (non-GAAP) (2) $ 9,759   20.5 %   $ (4,478 ) (29.6 )%
                 
Franchise operations: (3)          
  Franchise and license revenue:          
  Royalties $ 27,117   46.3 %   $ 6,719   26.8 %
  Advertising revenue 18,600   31.7 %   7,232   28.9 %
  Initial and other fees 2,066   3.5 %   1,346   5.4 %
  Occupancy revenue 10,810   18.4 %   9,736   38.9 %
  Total franchise and license revenue $ 58,593   100.0 %   $ 25,033   100.0 %
                 
  Costs of franchise and license revenue:          
  Advertising costs $ 18,600   31.7 %   $ 7,232   28.9 %
  Occupancy costs 6,879   11.7 %   5,829   23.3 %
  Other direct costs 3,256   5.6 %   2,183   8.7 %
  Total costs of franchise and license revenue $ 28,735   49.0 %   $ 15,244   60.9 %
  Franchise operating margin (non-GAAP) (2) $ 29,858   51.0 %   $ 9,789   39.1 %
                 
Total operating revenue (4) $ 106,165   100.0 %   $ 40,161   100.0 %
Total costs of operating revenue (4) 66,548   62.7 %   34,850   86.8 %
Restaurant-level operating margin (non-GAAP) (4)(2) $ 39,617   37.3 %   $ 5,311   13.2 %
                 
Other operating expenses: (4)(2)          
  General and administrative expenses $ 17,548   16.5 %   $ 13,153   32.8 %
  Depreciation and amortization 3,897   3.7 %   4,058   10.1 %
  Operating (gains), losses and other charges, net (113 ) (0.1 )%   1,627   4.1 %
  Total other operating expenses $ 21,332   20.1 %   $ 18,838   46.9 %
                 
Operating income (loss) (4) $ 18,285   17.2 %   $ (13,527 ) (33.7 )%
                 
(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 (loss), net income (loss) 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) 6/30/21   6/24/20
Company restaurant operations: (1)          
  Company restaurant sales $ 81,141   100.0 %   $ 57,419   100.0 %
  Costs of company restaurant sales:          
    Product costs 19,719   24.3 %   14,435   25.1 %
    Payroll and benefits 29,935   36.9 %   25,145   43.8 %
    Occupancy 5,694   7.0 %   5,891   10.3 %
    Other operating costs:          
      Utilities 2,615   3.2 %   2,534   4.4 %
      Repairs and maintenance 1,168   1.4 %   1,217   2.1 %
      Marketing 2,332   2.9 %   1,726   3.0 %
      Other direct costs 6,514   8.0 %   4,776   8.3 %
  Total costs of company restaurant sales $ 67,977   83.8 %   $ 55,724   97.0 %
  Company restaurant operating margin (non-GAAP) (2) $ 13,164   16.2 %   $ 1,695   3.0 %
                 
Franchise operations: (3)          
  Franchise and license revenue:          
  Royalties $ 47,961   45.4 %   $ 30,566   38.5 %
  Advertising revenue 32,711   31.0 %   24,758   31.2 %
  Initial and other fees 3,904   3.7 %   3,043   3.8 %
  Occupancy revenue 21,024   19.9 %   21,070   26.5 %
  Total franchise and license revenue $ 105,600   100.0 %   $ 79,437   100.0 %
                 
  Costs of franchise and license revenue:          
  Advertising costs $ 32,711   31.0 %   $ 24,758   31.2 %
  Occupancy costs 13,418   12.7 %   13,238   16.7 %
  Other direct costs 6,364   6.0 %   6,418   8.1 %
  Total costs of franchise and license revenue $ 52,493   49.7 %   $ 44,414   55.9 %
  Franchise operating margin (non-GAAP) (2) $ 53,107   50.3 %   $ 35,023   44.1 %
                 
Total operating revenue (4) $ 186,741   100.0 %   $ 136,856   100.0 %
Total costs of operating revenue (4) 120,470   64.5 %   100,138   73.2 %
Restaurant-level operating margin (non-GAAP) (4)(2) $ 66,271   35.5 %   $ 36,718   26.8 %
                 
Other operating expenses: (4)(2)          
  General and administrative expenses $ 34,495   18.5 %   $ 20,895   15.3 %
  Depreciation and amortization 7,558   4.0 %   8,204   6.0 %
  Operating (gains), losses and other charges, net 419   0.2 %   3,100   2.3 %
  Total other operating expenses $ 42,472   22.7 %   $ 32,199   23.5 %
                 
Operating income (4) $ 23,799   12.7 %   $ 4,519   3.3 %
                 
(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 margin should be considered as a supplement to, not as a substitute for, operating income (loss), net income (loss) 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)
                   
Changes in Same-Store Sales (1) Quarter Ended   Two Quarters Ended
(Increase (decrease) vs. 2019) 6/30/21       6/30/21    
  Company Restaurants 1.9 %       (10.6 )%    
  Domestic Franchised Restaurants (1.5 )%       (10.2 )%    
  Domestic System-wide Restaurants (1.2 )%       (10.2 )%    
                   
Changes in Same-Store Sales (1) Quarter Ended   Two Quarters Ended
(Increase (decrease) vs. prior year) 6/30/21   6/24/20   6/30/21   6/24/20
  Company Restaurants 172.1 %   (64.9 )%   46.8 %   (35.9 )%
  Domestic Franchised Restaurants 113.2 %   (56.1 )%   30.8 %   (28.4 )%
  Domestic System-wide Restaurants 117.0 %   (56.9 )%   31.9 %   (29.1 )%
                   
Average Unit Sales Quarter Ended   Two Quarters Ended
(In thousands) 6/30/21   6/24/20   6/30/21   6/24/20
  Company Restaurants $ 732     $ 246     $ 1,257     $ 890  
  Franchised Restaurants $ 416     $ 183     $ 742     $ 589  
                   
          Franchised        
Restaurant Unit Activity Company   & Licensed   Total    
Ending Units March 31, 2021 65     1,584     1,649      
  Units Opened     3     3      
  Units Closed     (7 )   (7 )    
    Net Change     (4 )   (4 )    
Ending Units June 30, 2021 65     1,580     1,645      
                   
Equivalent Units              
  Second Quarter 2021 65     1,582     1,647      
  Second Quarter 2020 62     1,622     1,684      
    Net Change 3     (40 )   (37 )    
                   
          Franchised        
Restaurant Unit Activity Company   & Licensed   Total    
Ending Units December 30, 2020 65     1,585     1,650      
  Units Opened     6     6      
  Units Closed     (11 )   (11 )    
    Net Change     (5 )   (5 )    
Ending Units June 30, 2021 65     1,580     1,645      
                   
Equivalent Units              
  Year-to-Date 2021 65     1,583     1,648      
  Year-to-Date 2020 64     1,627     1,691      
    Net Change 1     (44 )   (43 )    
                   
(1 ) Same-store sales include sales at company restaurants and non-consolidated franchised and licensed restaurants that were open during the comparable periods noted. Total operating revenue is limited to company restaurant sales and royalties, advertising revenue, fees and occupancy revenue from non-consolidated franchised and licensed restaurants. Accordingly, domestic franchise same-store sales and domestic system-wide same-store sales should be considered as a supplement to, not a substitute for, the Company's results as reported under GAAP.

SOURCE Denny’s

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