Denny’s Corporation (NASDAQ: DENN), franchisor and operator of one
of America's largest franchised full-service restaurant chains,
today reported results for its first quarter ended March 27,
2019.
First Quarter 2019 Highlights
- Sold three company restaurants to franchisees.
- Total operating revenue was $151.4 million.
- Domestic system-wide same-store sales** grew 1.3%, including
increases of 1.5% at company restaurants and 1.2% at domestic
franchised restaurants.
- Completed 45 remodels, including 44 at franchised
restaurants.
- Operating Income was $24.1 million.
- Company Restaurant Operating Margin* was $14.4 million, or
14.6% of company restaurant sales, and Franchise Operating Margin*
was $25.8 million, or 48.8% of franchise and license revenue.
- Net Income was $15.5 million, or $0.24 per diluted share.
- Adjusted Net Income* was $8.5 million, or $0.13 per diluted
share.
- Adjusted EBITDA* was $20.6 million.
- Adjusted Free Cash Flow* increased 44.7% to $7.2 million.
- Repurchased $8.9 million of common stock.
John Miller, President and Chief Executive Officer, stated, “Our
2019 started strong with growth in system-wide same-store sales**,
operating margins*, and Adjusted Free Cash Flow*. Based on these
results and expectations for the remainder of the year, we are
reaffirming our annual business outlook. We are pleased with the
initial progress of our refranchising and development strategy
which we believe will enable us to further evolve into a franchisor
of choice in the industry, providing more focused support services.
Upon completion, this approach is expected to result in a higher
quality, more asset-light business model and the creation of
additional stakeholder value."
First Quarter Results
Denny’s total operating revenue was $151.4 million compared to
$155.3 million in the prior year quarter. Company restaurant sales
were $98.5 million compared to $101.2 million in the prior year
quarter primarily due to a reduction in the number of equivalent
company restaurants resulting from the Company's refranchising and
development strategy. Franchise and license revenue was $52.9
million compared to $54.1 million in the prior year quarter. This
change was primarily due to lower occupancy revenue due to
scheduled lease terminations and lower advertising revenue due to
changes in certain international restaurants' contribution
arrangements.
Company Restaurant Operating Margin* was $14.4 million, or 14.6%
of company restaurant sales, compared to $14.3 million, or 14.2%,
in the prior year quarter. This margin rate increase was primarily
due to pricing and an enhanced restaurant portfolio related to our
refranchising and development strategy, partially offset by
increases in minimum wages and third-party delivery costs.
Franchise Operating Margin* was $25.8 million, or 48.8% of
franchise and license revenue, compared to $25.5 million, or 47.2%,
in the prior year quarter. This margin rate increase was primarily
due to a reduction in other direct costs and an improved occupancy
margin.
Total general and administrative expenses were $18.8 million,
compared to $16.6 million in the prior year quarter. This change
was primarily due to market valuation changes in our deferred
compensation plan liabilities and share based compensation expense.
A corresponding valuation adjustment to deferred compensation plan
assets is reflected in other nonoperating income, and therefore
does not have an impact on either Net Income or Adjusted EBITDA*.
Interest expense, net was $5.4 million versus $4.6 million in the
prior year quarter primarily due to rising interest rates and a
higher average credit facility balance. Denny’s ended the quarter
with $312.4 million of total debt outstanding, including $283.5
million of borrowings under its revolving credit facility.
The provision for income taxes was $4.7 million, reflecting an
effective tax rate of 23.1%. Given the Company's utilization of tax
credit carryforwards, approximately $0.4 million in cash taxes was
paid during the quarter.
Net Income was $15.5 million, or $0.24 per diluted share,
compared to $9.8 million, or $0.15 per diluted share, in the prior
year quarter. Adjusted Net Income Per Share* was $0.13 compared to
$0.15 in the prior year quarter.
Adjusted Free Cash Flow* and Capital
Allocation
Denny’s generated $7.2 million of Adjusted Free Cash Flow* in
the quarter after investing $7.8 million in cash capital
expenditures, including real estate acquisitions, new construction,
and facilities maintenance.
During the quarter, the Company allocated $8.9 million to share
repurchases. Additionally in the quarter, the remaining shares from
the $25 million accelerated share repurchase agreement initiated
during the fourth quarter of 2018 were received. Between the end of
the first quarter and April 29, 2019, the Company allocated an
additional $12.9 million to share repurchases resulting in $21.8
million allocated towards share repurchases year to date. As of
April 29, 2019, the Company had approximately $107 million
remaining in authorized share repurchases under its existing $200
million share repurchase authorization.
Adoption of Topic 842 and Lease Accounting
Impact
Effective December 27, 2018, the first day of fiscal 2019, the
Company adopted Accounting Standards Update (“ASU”) 2016-02,
“Leases (Topic 842)” and all subsequent ASUs that modified Topic
842. The new guidance established a right-of-use model (“ROU”) that
requires lessees to recognize a ROU asset and a lease liability for
all leases with terms greater than 12 months. Denny's elected to
apply the modified retrospective transition approach as of the date
of initial application without restating comparative period
financial statements (the “effective date method”).
Upon adoption of Topic 842, operating lease liabilities of
$101.3 million and ROU assets of $94.1 million related to existing
operating leases were recorded. In addition, the Company recorded a
cumulative effect adjustment increasing the opening deficit by $0.4
million and deferred tax assets by $0.1 million. The lease
liabilities were based on the present value of remaining rental
payments under previous leasing standards for existing operating
leases primarily related to real estate leases. Exit cost and
straight-line lease liabilities that existed at the adoption date
were reclassified against the ROU assets upon adoption. The amount
recorded to opening deficit represents the initial impairment of
ROU assets, net of the deferred tax impact.
Refranchising and Development
Strategy
In October 2018, the Company announced a plan to migrate from a
90% franchised business model to one that is between 95% and 97%
franchised over a period of 18 months by selling between 90 and 125
total company restaurants with attached development commitments.
This strategy creates an opportunity for development-focused
franchisees to expand their businesses, while also attracting and
welcoming new, well-capitalized franchisees. In addition to
refranchising, the Company plans to upgrade the quality of its real
estate portfolio through a series of like-kind exchanges. The use
of refranchising proceeds and a moderate increase in leverage are
expected to generate more compelling returns for stakeholders,
including the return of capital.
During the quarter ended March 27, 2019, three company
restaurants were sold to franchisees. Additionally, the first
like-kind exchange real estate transaction was completed during the
quarter for approximately $4.7 million. The following table
summarizes the activity related to the Company's current
refranchising and development strategy.
|
Quarter
Ended |
|
|
|
|
|
March 27,
2019 |
|
March 28,
2018 |
|
|
|
|
|
(Dollars in
thousands) |
Restaurants sold to
franchisees |
3 |
|
|
— |
|
Gains on sales of
company restaurants: |
|
|
|
Cash proceeds |
$ |
2,833 |
|
|
$ |
— |
|
Less:
Property sold |
(550 |
) |
|
— |
|
Less:
Goodwill related to the sales of company restaurants |
(79 |
) |
|
— |
|
Total
gains of sales of company restaurants |
$ |
2,204 |
|
|
$ |
— |
|
|
|
|
|
Real estate sold |
1 |
|
|
— |
|
Gains on sales of real
estate: |
|
|
|
Cash
proceeds |
$ |
4,688 |
|
|
— |
|
Noncash
consideration |
3,000 |
|
|
— |
|
Less:
Property sold |
(190 |
) |
|
— |
|
Total
gains on sale of real estate |
$ |
7,498 |
|
|
$ |
— |
|
Gains on the sale of company restaurants and real estate are
included as a component of operating (gains), losses and other
charges, net. In addition to the proceeds noted in the table above,
the Company also received front end fees and other transaction fees
of approximately $0.1 million related to company restaurants sold
to franchisees.
As of March 27, 2019, Denny's recorded assets held for sale
at their carrying amount of $15.0 million related to 48 company
restaurants. Included in this total were three company restaurants
sold in April, resulting in a total of 14 company restaurants sold
to franchisees under this strategy.
Business Outlook
The Company is reiterating its previously announced full year
2019 estimates based on first quarter results and management's
expectations at this time:
- Same-store sales** growth at company and domestic franchised
restaurants between 0% and 2%.
- 35 to 45 new restaurant openings, with approximately flat net
restaurant growth.
- Company Restaurant Operating Margin* between 15.0% and 16.5%
and Franchise Operating Margin* between 46.5% and 48.0%.
- Total general and administrative expenses between $66 and $69
million.
- Adjusted EBITDA* between $95 and $100 million.
- Net interest expense between $21 and $23 million.
- Effective income tax rate between 20% and 23% with cash taxes
between $13 and $16 million, including between $9 and $12 million
related to anticipated gains from refranchising transactions.
- Cash capital expenditures between $35 and $40 million,
including between $20 and $25 million of anticipated real
estate acquisitions through like-kind exchanges.
- Adjusted Free Cash Flow* between $23 and $26 million.
* Please refer to the Reconciliation of Net Income to
Non-GAAP Financial Measures, 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.
** Same-store sales include sales at company restaurants
and non-consolidated franchised and licensed restaurants that were
open the same period in the prior year. Total operating revenue is
limited to company restaurant sales and royalties, fees and
occupancy revenue from 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, our results as reported under GAAP.
Conference Call and Webcast Information
Denny’s will provide further commentary on the results for the
first quarter ended March 27, 2019 on its quarterly investor
conference call today, Tuesday, April 30, 2019 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 March 27, 2019, Denny’s
had 1,705 franchised, licensed, and company restaurants around the
world including 132 restaurants in Canada, Puerto Rico, Mexico, New
Zealand, the Philippines, Honduras, Costa Rica, the United Arab
Emirates, Guam, the United Kingdom, El Salvador, Guatemala, and
Aruba. 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 26,
2018 (and in the Company’s subsequent quarterly reports on Form
10-Q).
DENNY’S
CORPORATION |
Condensed
Consolidated Balance Sheets |
(Unaudited) |
|
|
|
|
|
|
|
(In
thousands) |
3/27/19 |
|
12/26/18 |
Assets |
|
|
|
|
Current assets |
|
|
|
|
|
Cash and cash
equivalents |
$ |
1,897 |
|
|
$ |
5,026 |
|
|
|
Investments |
3,048 |
|
|
1,709 |
|
|
|
Receivables, net |
18,304 |
|
|
26,283 |
|
|
|
Assets held for
sale |
14,956 |
|
|
723 |
|
|
|
Other current
assets |
10,834 |
|
|
13,859 |
|
|
|
|
Total current assets |
49,039 |
|
|
47,600 |
|
|
Property, net |
108,844 |
|
|
117,251 |
|
|
Financing lease
right-of-use assets, net |
20,962 |
|
|
22,753 |
|
|
Operating lease
right-of-use assets |
94,249 |
|
|
— |
|
|
Goodwill |
38,124 |
|
|
39,781 |
|
|
Intangible assets,
net |
56,631 |
|
|
59,067 |
|
|
Deferred income
taxes |
20,617 |
|
|
17,333 |
|
|
Other noncurrent
assets |
33,866 |
|
|
31,564 |
|
|
|
|
Total assets |
$ |
422,332 |
|
|
$ |
335,349 |
|
|
|
|
|
|
|
|
Liabilities |
|
|
|
|
Current liabilities |
|
|
|
|
|
Current finance lease
liabilities |
$ |
3,487 |
|
|
$ |
3,410 |
|
|
|
Current operating lease
liabilities |
17,004 |
|
|
— |
|
|
|
Accounts payable |
28,584 |
|
|
29,527 |
|
|
|
Other current
liabilities |
50,500 |
|
|
61,790 |
|
|
|
|
Total current liabilities |
99,575 |
|
|
94,727 |
|
|
Long-term
liabilities |
|
|
|
|
|
Long-term debt |
283,500 |
|
|
286,500 |
|
|
|
Noncurrent finance lease
liabilities |
25,439 |
|
|
27,181 |
|
|
|
Noncurrent operating lease
liabilities |
84,220 |
|
|
— |
|
|
|
Other |
69,819 |
|
|
60,286 |
|
|
|
|
Total long-term liabilities |
462,978 |
|
|
373,967 |
|
|
|
|
Total liabilities |
562,553 |
|
|
468,694 |
|
|
|
|
|
|
|
|
Shareholders'
deficit |
|
|
|
|
|
Common stock |
1,090 |
|
|
1,086 |
|
|
|
Paid-in capital |
598,825 |
|
|
592,944 |
|
|
|
Deficit |
(291,318 |
) |
|
(306,414 |
) |
|
|
Accumulated other
comprehensive loss, net of tax |
(16,299 |
) |
|
(4,146 |
) |
|
|
Treasury stock |
(432,519 |
) |
|
(416,815 |
) |
|
|
|
Total shareholders' deficit |
(140,221 |
) |
|
(133,345 |
) |
|
|
|
Total liabilities and shareholders'
deficit |
$ |
422,332 |
|
|
$ |
335,349 |
|
|
|
|
|
|
|
|
Debt Balances |
(In
thousands) |
3/27/19 |
|
12/26/18 |
Credit
facility revolver due 2022 |
$ |
283,500 |
|
|
$ |
286,500 |
|
Finance
lease liabilities |
28,926 |
|
|
30,591 |
|
|
Total debt |
$ |
312,426 |
|
|
$ |
317,091 |
|
|
|
|
|
|
|
|
|
|
DENNY’S
CORPORATION |
Condensed
Consolidated Statements of Comprehensive Income |
(Unaudited) |
|
|
|
|
|
|
|
Quarter Ended |
(In thousands, except
per share amounts) |
|
3/27/19 |
|
3/28/18 |
Revenue: |
|
|
|
|
Company restaurant sales |
|
$ |
98,545 |
|
|
$ |
101,193 |
|
Franchise and license revenue |
|
52,866 |
|
|
54,080 |
|
Total operating revenue |
|
151,411 |
|
|
155,273 |
|
Costs of company
restaurant sales, excluding depreciation and amortization |
|
84,113 |
|
|
86,858 |
|
Costs of franchise and
license revenue, excluding depreciation and amortization |
|
27,058 |
|
|
28,556 |
|
General and
administrative expenses |
|
18,811 |
|
|
16,560 |
|
Depreciation and
amortization |
|
6,233 |
|
|
6,514 |
|
Operating (gains),
losses and other charges, net |
|
(8,935 |
) |
|
360 |
|
Total operating costs and expenses,
net |
|
127,280 |
|
|
138,848 |
|
Operating income |
|
24,131 |
|
|
16,425 |
|
Interest expense,
net |
|
5,407 |
|
|
4,625 |
|
Other nonoperating
expense (income), net |
|
(1,423 |
) |
|
212 |
|
Net income before
income taxes |
|
20,147 |
|
|
11,588 |
|
Provision for income
taxes |
|
4,657 |
|
|
1,829 |
|
Net income |
|
$ |
15,490 |
|
|
$ |
9,759 |
|
|
|
|
|
|
|
|
|
|
|
Basic net income per
share |
|
$ |
0.25 |
|
|
$ |
0.15 |
|
Diluted net income per
share |
|
$ |
0.24 |
|
|
$ |
0.15 |
|
|
|
|
|
|
Basic weighted average
shares outstanding |
|
61,651 |
|
|
64,432 |
|
Diluted weighted
average shares outstanding |
|
63,683 |
|
|
66,946 |
|
|
|
|
|
|
Comprehensive
income |
|
$ |
3,337 |
|
|
$ |
6,668 |
|
|
|
|
|
|
General and Administrative Expenses |
|
Quarter Ended |
(In thousands) |
|
3/27/19 |
|
3/28/18 |
Share-based
compensation |
|
$ |
2,253 |
|
|
$ |
1,350 |
|
Other general and
administrative expenses |
|
16,558 |
|
|
15,210 |
|
Total general and administrative
expenses |
|
$ |
18,811 |
|
|
$ |
16,560 |
|
DENNY’S
CORPORATION |
Reconciliation of Net 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 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 |
(In thousands, except
per share amounts) |
3/27/19 |
|
3/28/18 |
Net income |
$ |
15,490 |
|
|
$ |
9,759 |
|
Provision for income
taxes |
4,657 |
|
|
1,829 |
|
Operating (gains),
losses and other charges, net |
(8,935 |
) |
|
360 |
|
Other nonoperating
(income) expense, net |
(1,423 |
) |
|
212 |
|
Share-based
compensation |
2,253 |
|
|
1,350 |
|
Deferred compensation
plan valuation adjustments |
1,151 |
|
|
(220 |
) |
Interest expense,
net |
5,407 |
|
|
4,625 |
|
Depreciation and
amortization |
6,233 |
|
|
6,514 |
|
Cash payments for
restructuring charges and exit costs |
(751 |
) |
|
(190 |
) |
Cash payments for
share-based compensation |
(3,531 |
) |
|
(1,913 |
) |
Adjusted EBITDA |
$ |
20,551 |
|
|
$ |
22,326 |
|
|
|
|
|
Cash interest expense,
net |
(5,148 |
) |
|
(4,345 |
) |
Cash paid for income
taxes, net |
(367 |
) |
|
(423 |
) |
Cash paid for capital
expenditures |
(7,815 |
) |
|
(12,566 |
) |
Adjusted Free Cash
Flow |
$ |
7,221 |
|
|
$ |
4,992 |
|
|
|
|
|
|
Quarter Ended |
(In thousands, except
per share amounts) |
3/27/19 |
|
3/28/18 |
Net income |
$ |
15,490 |
|
|
$ |
9,759 |
|
Gains on sales of
assets and other, net |
(9,475 |
) |
|
(37 |
) |
Impairment charges |
— |
|
|
37 |
|
Tax effect (1) |
2,448 |
|
|
— |
|
Adjusted Net
Income |
$ |
8,463 |
|
|
$ |
9,759 |
|
|
|
|
|
Diluted weighted
average shares outstanding |
63,683 |
|
|
66,946 |
|
|
|
|
|
Diluted Net Income Per
Share |
$ |
0.24 |
|
|
$ |
0.15 |
|
Adjustments Per
Share |
$ |
(0.11 |
) |
|
$ |
— |
|
Adjusted Net Income Per
Share |
$ |
0.13 |
|
|
$ |
0.15 |
|
(1 |
) |
Tax adjustments for the
gains on sales of assets and other, net for the three months ended
March 27, 2019 are calculated using an effective rate of 25.8%. Tax
adjustments for the three months ended March 28, 2018 are
calculated using the Company's year-to-date effective tax rate of
15.8%. |
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 |
(In thousands) |
3/27/19 |
|
3/28/18 |
Operating income |
$ |
24,131 |
|
|
$ |
16,425 |
|
General and
administrative expenses |
18,811 |
|
|
16,560 |
|
Depreciation and
amortization |
6,233 |
|
|
6,514 |
|
Operating (gains),
losses and other charges, net |
(8,935 |
) |
|
360 |
|
Total Operating Margin |
$ |
40,240 |
|
|
$ |
39,859 |
|
|
|
|
|
Total Operating Margin
consists of: |
|
|
|
Company Restaurant
Operating Margin (1) |
$ |
14,432 |
|
|
$ |
14,335 |
|
Franchise Operating
Margin (2) |
25,808 |
|
|
25,524 |
|
Total Operating Margin |
$ |
40,240 |
|
|
$ |
39,859 |
|
(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) |
3/27/19 |
|
3/28/18 |
Company restaurant operations: (1) |
|
|
|
|
|
Company restaurant sales |
$ |
98,545 |
|
100.0 |
% |
|
$ |
101,193 |
|
100.0 |
% |
Costs of company restaurant
sales: |
|
|
|
|
|
Product costs |
23,905 |
|
24.3 |
% |
|
24,935 |
|
24.6 |
% |
Payroll and benefits |
39,832 |
|
40.4 |
% |
|
41,226 |
|
40.7 |
% |
Occupancy |
5,784 |
|
5.9 |
% |
|
5,647 |
|
5.6 |
% |
Other operating costs: |
|
|
|
|
|
Utilities |
3,372 |
|
3.4 |
% |
|
3,405 |
|
3.4 |
% |
Repairs and maintenance |
1,888 |
|
1.9 |
% |
|
1,890 |
|
1.9 |
% |
Marketing |
3,707 |
|
3.8 |
% |
|
3,765 |
|
3.7 |
% |
Other |
5,625 |
|
5.7 |
% |
|
5,990 |
|
5.9 |
% |
Total costs of company restaurant
sales |
$ |
84,113 |
|
85.4 |
% |
|
$ |
86,858 |
|
85.8 |
% |
Company restaurant operating margin
(non-GAAP) (2) |
$ |
14,432 |
|
14.6 |
% |
|
$ |
14,335 |
|
14.2 |
% |
|
|
|
|
|
|
Franchise operations: (3) |
|
|
|
|
|
Franchise and license revenue: |
|
|
|
|
|
Royalties |
$ |
25,240 |
|
47.7 |
% |
|
$ |
25,165 |
|
46.5 |
% |
Advertising revenue |
18,942 |
|
35.8 |
% |
|
19,310 |
|
35.7 |
% |
Initial and other fees |
1,139 |
|
2.2 |
% |
|
1,417 |
|
2.6 |
% |
Occupancy revenue |
7,545 |
|
14.3 |
% |
|
8,188 |
|
15.1 |
% |
Total franchise and license
revenue |
$ |
52,866 |
|
100.0 |
% |
|
$ |
54,080 |
|
100.0 |
% |
|
|
|
|
|
|
Costs of franchise and license
revenue: |
|
|
|
|
|
Advertising costs |
$ |
18,942 |
|
35.8 |
% |
|
$ |
19,310 |
|
35.7 |
% |
Occupancy costs |
5,249 |
|
9.9 |
% |
|
5,829 |
|
10.8 |
% |
Other direct costs |
2,867 |
|
5.4 |
% |
|
3,417 |
|
6.3 |
% |
Total costs of franchise and
license revenue |
$ |
27,058 |
|
51.2 |
% |
|
$ |
28,556 |
|
52.8 |
% |
Franchise operating margin
(non-GAAP) (2) |
$ |
25,808 |
|
48.8 |
% |
|
$ |
25,524 |
|
47.2 |
% |
|
|
|
|
|
|
Total operating revenue (4) |
$ |
151,411 |
|
100.0 |
% |
|
$ |
155,273 |
|
100.0 |
% |
Total costs of operating revenue
(4) |
111,171 |
|
73.4 |
% |
|
115,414 |
|
74.3 |
% |
Total operating margin (non-GAAP)
(4)(2) |
$ |
40,240 |
|
26.6 |
% |
|
$ |
39,859 |
|
25.7 |
% |
|
|
|
|
|
|
Other operating expenses: (4)(2) |
|
|
|
|
|
General and administrative
expenses |
$ |
18,811 |
|
12.4 |
% |
|
$ |
16,560 |
|
10.7 |
% |
Depreciation and amortization |
6,233 |
|
4.1 |
% |
|
6,514 |
|
4.2 |
% |
Operating (gains), losses and other
charges, net |
(8,935 |
) |
(5.9 |
)% |
|
360 |
|
0.2 |
% |
Total other operating expenses |
$ |
16,109 |
|
10.6 |
% |
|
$ |
23,434 |
|
15.1 |
% |
|
|
|
|
|
|
Operating income (4) |
$ |
24,131 |
|
15.9 |
% |
|
$ |
16,425 |
|
10.6 |
% |
|
|
|
|
|
|
(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) |
|
|
|
|
|
|
|
|
Changes in
Same-Store Sales (1) |
Quarter Ended |
|
|
(increase vs. prior
year) |
3/27/19 |
|
3/28/18 |
|
|
|
Company Restaurants |
1.5 |
% |
|
3.2 |
% |
|
|
|
Domestic Franchised
Restaurants |
1.2 |
% |
|
1.2 |
% |
|
|
|
Domestic System-wide
Restaurants |
1.3 |
% |
|
1.5 |
% |
|
|
|
|
|
|
|
|
|
|
Average Unit
Sales |
Quarter Ended |
|
|
(In thousands) |
3/27/19 |
|
3/28/18 |
|
|
|
Company Restaurants |
$ |
582 |
|
|
$ |
565 |
|
|
|
|
Franchised Restaurants |
$ |
402 |
|
|
$ |
396 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Franchised |
|
|
Restaurant Unit
Activity |
Company |
|
& Licensed |
|
Total |
Ending Units December 26,
2018 |
173 |
|
|
1,536 |
|
|
1,709 |
|
|
Units Opened |
— |
|
|
2 |
|
|
2 |
|
|
Units Relocated |
— |
|
|
— |
|
|
— |
|
|
Units Reacquired |
— |
|
|
— |
|
|
— |
|
|
Units Refranchised |
(3 |
) |
|
3 |
|
|
— |
|
|
Units Closed |
— |
|
|
(6 |
) |
|
(6 |
) |
|
|
Net Change |
(3 |
) |
|
(1 |
) |
|
(4 |
) |
Ending Units March 27,
2019 |
170 |
|
|
1,535 |
|
|
1,705 |
|
|
|
|
|
|
|
|
|
Equivalent Units |
|
|
|
|
|
|
Year-to-Date 2019 |
169 |
|
|
1,534 |
|
|
1,703 |
|
|
Year-to-Date 2018 |
179 |
|
|
1,543 |
|
|
1,722 |
|
|
|
Net Change |
(10 |
) |
|
(9 |
) |
|
(19 |
) |
|
|
|
|
|
|
|
|
(1 |
) |
Same-store
sales include sales at company restaurants and non-consolidated
franchised and licensed restaurants that were open the same period
in the prior year. Total operating revenue is limited to company
restaurant sales and royalties, fees and occupancy revenue from
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, our results as reported under GAAP. |
Investor Contact:
Curt Nichols
877-784-7167
Media Contact:
Hadas Streit, Allison+Partners
646-428-0629
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