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
CORPORATIONReconciliation 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
CORPORATIONReconciliation 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 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Investor Contact:
Curt Nichols
877-784-7167
Media Contact:
Jessica Liddell, ICR
203-682-8208
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