Denny’s Corporation (NASDAQ: DENN), franchisor and operator of one
of America's largest franchised full-service restaurant chains,
today reported results for its third quarter ended
September 23, 2020 and provided a business update on the
impact of the COVID-19 pandemic on the Company’s operations.
John Miller, Chief Executive Officer, stated, "I am encouraged
by our sequential sales improvement over the course of the third
quarter, despite the continued disproportionate impact of the
COVID-19 pandemic on the full-service restaurant industry. This
progress would not have been possible without the continued
dedication of all Denny's team members who remain focused on health
and safety protocols as they implement innovations, such as
enhancements to our Denny's on Demand platform, curbside ordering,
and outdoor dining. During the third quarter, we also launched a
new streamlined menu consisting of well-known classic dishes and
new seasonal items. I am confident that Denny's is well-positioned
to effectively navigate through the pandemic while preparing for
future growth."
Third Quarter 2020 Highlights
- Total Operating Revenue was $71.6 million.
- Domestic system-wide same-store sales** decreased 33.6%.
- Operating Income was $3.2 million.
- Franchise Operating Margin* was $19.7 million, or 45.0% of
franchise and license revenue, and Company Restaurant Operating
Margin* was $0.5 million, or 1.7% of company restaurant sales.
- Net Income was $6.5 million, or $0.10 per diluted share.
- Adjusted Net Income* was $0.4 million, or $0.01 per diluted
share.
- Adjusted EBITDA* was $8.0 million.
- Adjusted Free Cash Flow* was $2.1 million.
Current Trends
Domestic system-wide same-store sales** sequentially improved on
a monthly basis during the third quarter ended September 23, 2020,
as compared to the equivalent periods during 2019, despite
approximately 25% of the domestic system in California being
limited to off-premise only sales channels.
Average unit volumes of off-premise sales have increased over
95% since the beginning of the COVID-19 pandemic, supported by
temporarily waived delivery fees, curbside service programs, and
shareable family meal packs.
In an effort to provide greater transparency due to the COVID-19
pandemic, Denny's is providing the following tables that present
monthly results compared to the equivalent fiscal months in
2019:
Domestic System-Wide Same-Store Sales**
for 2020 Fiscal Periods:
Q1: (6%) |
Q2: (57%) |
Q3: (34%) |
Q4 |
Jan |
Feb |
Mar |
Apr |
May |
Jun |
Jul |
Aug |
Sep |
Oct1 |
3 |
% |
2 |
% |
(19 |
%) |
(76 |
%) |
(65 |
%) |
(41 |
%) |
(39 |
%) |
(35 |
%) |
(28 |
%) |
(26 |
%) |
1. Preliminary results
Domestic Same-Store Sales** and Domestic
Average Units for 2020 Fiscal Periods(Open Dining
Rooms vs Off-Premise Only):
|
Q2 |
Q3 |
Q4 |
|
Apr |
May |
Jun |
Jul |
Aug |
Sep |
Oct1 |
Open Dining Rooms |
(74%) |
(47%) |
(33%) |
(36%) |
(29%) |
(24%) |
(24%) |
|
2 |
222 |
1,087 |
1,244 |
1,044 |
1,127 |
1,289 |
|
|
|
|
|
|
|
|
Off-Premise Only |
(76%) |
(69%) |
(68%) |
(55%) |
(47%) |
(39%) |
(33%) |
|
1,060 |
938 |
327 |
237 |
444 |
369 |
207 |
|
|
|
|
|
|
|
|
Temporary Closures |
480 |
378 |
120 |
47 |
35 |
22 |
19 |
1. Preliminary results
Average Domestic Capacity Restrictions
for Fiscal October 20201:
|
Number of Units |
% of Domestic System |
25% Capacity |
229 |
84 |
% |
50-75% Capacity |
667 |
Social Distancing |
378 |
Off-Premise Only |
207 |
14 |
% |
No Restrictions |
15 |
1 |
% |
Temporarily Closed |
19 |
1 |
% |
Total |
1,515 |
100 |
% |
1. Preliminary results
Third Quarter Results
Denny’s total operating revenue was $71.6 million compared to
$124.3 million in the prior year quarter. Franchise and license
revenue was $43.8 million compared to $60.7 million in the prior
year quarter. Company restaurant sales were $27.8 million compared
to $63.6 million in the prior year quarter. These changes were
primarily due to the impact of the COVID-19 pandemic on sales and
the Company's refranchising and development strategy which was
substantially complete by the end of 2019.
Franchise Operating Margin* was $19.7 million, or 45.0% of
franchise and license revenue, compared to $29.5 million, or 48.7%,
in the prior year quarter. This margin decrease was primarily
driven by the impact of the COVID-19 pandemic on sales.
Company Restaurant Operating Margin* was $0.5 million, or 1.7%
of company restaurant sales, compared to $9.3 million, or 14.6%, in
the prior year quarter. This margin decrease was primarily due to
the impact of the COVID-19 pandemic on sales, as well as fewer
equivalent units through the Company's refranchising and
development strategy, partially offset by approximately $1.5
million of favorable reserve adjustments and tax credits related to
the CARES Act.
Total general and administrative expenses were $13.7 million,
compared to $16.4 million in the prior year quarter. This change
was primarily due to cost savings initiatives and previous
reductions in personnel due to the COVID-19 pandemic as well as
approximately $0.8 million in tax credits related to the CARES
Act.
Interest expense, net was $4.4 million, compared to $4.2 million
in the prior year quarter, with the increase primarily due to the
amortization of dedesignated interest rate swap losses from
accumulated other comprehensive loss, net. Denny’s ended the
quarter with $245.8 million of total debt outstanding, including
$230.0 million of borrowings under its credit facility.
The provision for income taxes was $0.8 million, compared to
$15.3 million in the prior year quarter, reflecting an effective
tax rate of 11.2%. This decrease was primarily due to the
significant gains in the prior year quarter from the Company's
refranchising and development strategy. Approximately $0.3 million
in cash taxes were paid during the quarter.
Net income was $6.5 million, or $0.10 per diluted share,
compared to net income of $49.1 million, or $0.80 per diluted
share, in the prior year quarter. Adjusted Net Income* per diluted
share was $0.01 compared to Adjusted Net Income* per diluted share
of $0.18 in the prior year quarter.
Adjusted Free Cash Flow* and Capital
Allocation
Denny’s Adjusted Free Cash Flow* in the quarter after investing
$1.0 million in cash capital expenditures, including maintenance
capital, was $2.1 million.
Business Outlook
Based on third quarter results and management's expectation that
the current business conditions will not materially decline, the
Company is providing full year 2020 (53 operating weeks) guidance
for the fiscal year ending December 30, 2020.
- Domestic system-wide same-store sales** between 70% and 75% of
prior year.
- Total general and administrative expenses between $51 and $54
million, including approximately $7 million related to share-based
compensation expense.
- Adjusted EBITDA* of at least $28 million.
- Cash tax refunds between $5 and $7 million.
- Cash capital expenditures between $6 and $8 million.
- Adjusted Free Cash Flow* of at least $10 million.
* Please refer to the Reconciliation of Net Income
(Loss) to Non-GAAP Financial Measures, as well as the
Reconciliation of Operating Income to Non-GAAP Financial Measures
included in the following tables.
** 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, 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
third quarter ended September 23, 2020 on its quarterly
investor conference call today, Tuesday, October 27, 2020 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.
About Denny’s
Denny's Corporation is the franchisor and operator of one of
America's largest franchised full-service restaurant chains, based
on the number of restaurants. As of September 23, 2020,
Denny’s had 1,664 franchised, licensed, and company restaurants
around the world including 145 restaurants in Canada, Puerto Rico,
Mexico, the Philippines, New Zealand, Honduras, the United Arab
Emirates, Costa Rica, Guam, Guatemala, El Salvador, Indonesia, and
the United Kingdom. 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.
Cautionary Language Regarding Forward-Looking
Statements
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 management's 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”, "will", 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: the rapidly evolving COVID-19 pandemic and related
containment measures, including the potential for further
operational disruption from government mandates affecting
restaurants; economic, public health, social and political
conditions that impact consumer confidence and spending with
respect to social unrest and the COVID-19 pandemic; competitive
pressures from within the restaurant industry; the level of success
of the Company’s operating initiatives and advertising and
promotional efforts; adverse publicity; health concerns arising
from food-related pandemics, outbreaks of flu viruses 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 25, 2019 (and in the Company’s subsequent
Quarterly Reports on Form 10-Q and Current Reports on Form
8-K).
DENNY’S CORPORATION |
Condensed Consolidated Balance Sheets |
(Unaudited) |
|
|
|
|
|
|
|
(In
thousands) |
9/23/20 |
|
12/25/19 |
Assets |
|
|
|
|
Current
assets |
|
|
|
|
|
Cash and cash
equivalents |
$ |
11,217 |
|
|
$ |
3,372 |
|
|
|
Investments |
2,266 |
|
|
3,649 |
|
|
|
Receivables,
net |
20,637 |
|
|
27,488 |
|
|
|
Assets held for
sale |
3,206 |
|
|
1,925 |
|
|
|
Other current
assets |
19,855 |
|
|
16,299 |
|
|
|
|
Total current assets |
57,181 |
|
|
52,733 |
|
|
Property, net |
89,466 |
|
|
97,626 |
|
|
Financing lease
right-of-use assets, net |
10,284 |
|
|
11,720 |
|
|
Operating lease
right-of-use assets, net |
145,302 |
|
|
158,550 |
|
|
Goodwill |
36,884 |
|
|
36,832 |
|
|
Intangible assets,
net |
52,100 |
|
|
53,956 |
|
|
Deferred income
taxes, net |
27,047 |
|
|
14,718 |
|
|
Other noncurrent
assets, net |
32,533 |
|
|
34,252 |
|
|
|
|
Total assets |
$ |
450,797 |
|
|
$ |
460,387 |
|
|
|
|
|
|
|
|
Liabilities |
|
|
|
|
Current
liabilities |
|
|
|
|
|
Current finance
lease liabilities |
$ |
1,963 |
|
|
$ |
1,674 |
|
|
|
Current operating
lease liabilities |
18,253 |
|
|
16,344 |
|
|
|
Accounts
payable |
10,898 |
|
|
20,256 |
|
|
|
Other current
liabilities |
41,346 |
|
|
57,307 |
|
|
|
|
Total current liabilities |
72,460 |
|
|
95,581 |
|
|
Long-term
liabilities |
|
|
|
|
|
Long-term
debt |
230,000 |
|
|
240,000 |
|
|
|
Noncurrent finance
lease liabilities |
13,805 |
|
|
14,779 |
|
|
|
Noncurrent
operating lease liabilities |
142,110 |
|
|
152,750 |
|
|
|
Other |
130,793 |
|
|
95,341 |
|
|
|
|
Total long-term
liabilities |
516,708 |
|
|
502,870 |
|
|
|
|
Total liabilities |
589,168 |
|
|
598,451 |
|
|
|
|
|
|
|
|
Shareholders' deficit |
|
|
|
|
|
Common stock |
1,178 |
|
|
1,094 |
|
|
|
Paid-in
capital |
672,502 |
|
|
603,980 |
|
|
|
Deficit |
(196,873 |
) |
|
(189,398 |
) |
|
|
Accumulated other
comprehensive loss, net of tax |
(61,205 |
) |
|
(33,960 |
) |
|
|
Treasury
stock |
(553,973 |
) |
|
(519,780 |
) |
|
|
|
Total shareholders'
deficit |
(138,371 |
) |
|
(138,064 |
) |
|
|
|
Total liabilities and
shareholders' deficit |
$ |
450,797 |
|
|
$ |
460,387 |
|
|
|
|
|
|
|
|
Debt
Balances |
(In
thousands) |
9/23/20 |
|
12/25/19 |
Credit facility
revolver due 2022 |
$ |
230,000 |
|
|
$ |
240,000 |
|
Finance lease
liabilities |
15,768 |
|
|
16,453 |
|
|
Total debt |
$ |
245,768 |
|
|
$ |
256,453 |
|
DENNY’S CORPORATION |
Condensed Consolidated Statements of
Operations |
(Unaudited) |
|
|
|
|
|
|
|
|
|
Quarter Ended |
(In thousands,
except per share amounts) |
9/23/20 |
|
9/25/19 |
Revenue: |
|
|
|
|
Company restaurant sales |
$ |
27,849 |
|
|
$ |
63,582 |
|
|
Franchise and
license revenue |
43,795 |
|
|
60,676 |
|
|
|
Total operating revenue |
71,644 |
|
|
124,258 |
|
Costs of company
restaurant sales, excluding depreciation and amortization |
27,370 |
|
|
54,306 |
|
Costs of franchise
and license revenue, excluding depreciation and amortization |
24,073 |
|
|
31,136 |
|
General and
administrative expenses |
13,694 |
|
|
16,395 |
|
Depreciation and
amortization |
4,048 |
|
|
4,338 |
|
Operating (gains),
losses and other charges, net |
(781 |
) |
|
(50,091 |
) |
|
|
Total operating costs and
expenses, net |
68,404 |
|
|
56,084 |
|
Operating
income |
3,240 |
|
|
68,174 |
|
Interest expense,
net |
4,422 |
|
|
4,188 |
|
Other nonoperating
expense (income), net |
(8,477 |
) |
|
(415 |
) |
Income before
income taxes |
7,295 |
|
|
64,401 |
|
Provision for
income taxes |
818 |
|
|
15,279 |
|
Net income |
$ |
6,477 |
|
|
$ |
49,122 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic net income
per share |
$ |
0.10 |
|
|
$ |
0.83 |
|
Diluted net income
per share |
$ |
0.10 |
|
|
$ |
0.80 |
|
|
|
|
|
|
|
Basic weighted
average shares outstanding |
63,793 |
|
|
59,430 |
|
Diluted weighted
average shares outstanding |
64,027 |
|
|
61,189 |
|
|
|
|
|
|
|
Comprehensive
income |
$ |
7,489 |
|
|
$ |
34,128 |
|
|
|
|
|
General
and Administrative Expenses |
Quarter Ended |
(In
thousands) |
9/23/20 |
|
9/25/19 |
Corporate
administrative expenses |
$ |
9,820 |
|
|
$ |
12,091 |
|
Share-based
compensation |
1,998 |
|
|
2,176 |
|
Incentive
compensation |
1,290 |
|
|
1,872 |
|
Deferred
compensation valuation adjustments |
586 |
|
|
256 |
|
|
Total general and
administrative expenses |
$ |
13,694 |
|
|
$ |
16,395 |
|
DENNY’S CORPORATION |
Condensed Consolidated Statements of
Operations |
(Unaudited) |
|
|
|
|
|
|
|
|
|
Three Quarters Ended |
(In thousands,
except per share amounts) |
9/23/20 |
|
9/25/19 |
Revenue: |
|
|
|
|
Company restaurant sales |
$ |
85,268 |
|
|
$ |
257,574 |
|
|
Franchise and
license revenue |
123,232 |
|
|
169,979 |
|
|
|
Total operating revenue |
208,500 |
|
|
427,553 |
|
Costs of company
restaurant sales, excluding depreciation and amortization |
83,094 |
|
|
218,249 |
|
Costs of franchise
and license revenue, excluding depreciation and amortization |
68,487 |
|
|
87,065 |
|
General and
administrative expenses |
34,589 |
|
|
53,659 |
|
Depreciation and
amortization |
12,252 |
|
|
15,619 |
|
Operating (gains),
losses and other charges, net |
2,319 |
|
|
(85,459 |
) |
|
|
Total operating costs and
expenses, net |
200,741 |
|
|
289,133 |
|
Operating
income |
7,759 |
|
|
138,420 |
|
Interest expense,
net |
13,320 |
|
|
14,977 |
|
Other nonoperating
expense (income), net |
3,851 |
|
|
(2,111 |
) |
Income (loss)
before income taxes |
(9,412 |
) |
|
125,554 |
|
Provision for
(benefit from) income taxes |
(1,937 |
) |
|
26,703 |
|
Net income
(loss) |
$ |
(7,475 |
) |
|
$ |
98,851 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic net income
(loss) per share |
$ |
(0.13 |
) |
|
$ |
1.64 |
|
Diluted net income
(loss) per share |
$ |
(0.13 |
) |
|
$ |
1.58 |
|
|
|
|
|
|
|
Basic weighted
average shares outstanding |
59,350 |
|
|
60,457 |
|
Diluted weighted
average shares outstanding |
59,350 |
|
|
62,370 |
|
|
|
|
|
|
|
Comprehensive
income (loss) |
$ |
(34,720 |
) |
|
$ |
61,090 |
|
|
|
|
|
General
and Administrative Expenses |
Three Quarters Ended |
(In
thousands) |
9/23/20 |
|
9/25/19 |
Corporate
administrative expenses |
$ |
31,302 |
|
|
$ |
37,396 |
|
Share-based
compensation |
1,972 |
|
|
7,142 |
|
Incentive
compensation |
1,305 |
|
|
7,329 |
|
Deferred
compensation valuation adjustments |
10 |
|
|
1,792 |
|
|
Total general and
administrative expenses |
$ |
34,589 |
|
|
$ |
53,659 |
|
DENNY’S CORPORATION |
Reconciliation of Net 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 operating performance 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 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 the Company's credit facility for
the computation of its debt covenant ratios. The Company defines
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 (loss) or other financial
performance and liquidity measures prepared in accordance with U.S.
generally accepted accounting principles.
|
Quarter Ended |
|
Three Quarters Ended |
(In thousands, except per
share amounts) |
9/23/20 |
|
9/25/19 |
|
9/23/20 |
|
9/25/19 |
Net income (loss) |
$ |
6,477 |
|
|
|
$ |
49,122 |
|
|
|
$ |
(7,475 |
) |
|
|
$ |
98,851 |
|
|
Provision for (benefit from)
income taxes |
818 |
|
|
|
15,279 |
|
|
|
(1,937 |
) |
|
|
26,703 |
|
|
Operating (gains), losses and
other charges, net |
(781 |
) |
|
|
(50,091 |
) |
|
|
2,319 |
|
|
|
(85,459 |
) |
|
Other nonoperating expense
(income), net |
(8,477 |
) |
|
|
(415 |
) |
|
|
3,851 |
|
|
|
(2,111 |
) |
|
Share-based compensation |
1,998 |
|
|
|
2,176 |
|
|
|
1,972 |
|
|
|
7,142 |
|
|
Deferred compensation plan
valuation adjustments |
586 |
|
|
|
256 |
|
|
|
10 |
|
|
|
1,792 |
|
|
Interest expense, net |
4,422 |
|
|
|
4,188 |
|
|
|
13,320 |
|
|
|
14,977 |
|
|
Depreciation and
amortization |
4,048 |
|
|
|
4,338 |
|
|
|
12,252 |
|
|
|
15,619 |
|
|
Cash payments for
restructuring charges and exit costs |
(1,032 |
) |
|
|
(672 |
) |
|
|
(2,406 |
) |
|
|
(2,052 |
) |
|
Cash payments for share-based
compensation |
(13 |
) |
|
|
(28 |
) |
|
|
(3,224 |
) |
|
|
(3,559 |
) |
|
Adjusted EBITDA |
$ |
8,046 |
|
|
|
$ |
24,153 |
|
|
|
$ |
18,682 |
|
|
|
$ |
71,903 |
|
|
|
|
|
|
|
|
|
|
Cash interest expense, net
(1) |
(4,698 |
) |
|
|
(3,949 |
) |
|
|
(13,135 |
) |
|
|
(14,219 |
) |
|
Cash paid for income taxes,
net |
(268 |
) |
|
|
(5,861 |
) |
|
|
(545 |
) |
|
|
(17,853 |
) |
|
Cash paid for capital
expenditures |
(1,000 |
) |
|
|
(10,619 |
) |
|
|
(5,476 |
) |
|
|
(22,102 |
) |
|
Adjusted Free Cash Flow |
$ |
2,080 |
|
|
|
$ |
3,724 |
|
|
|
$ |
(474 |
) |
|
|
$ |
17,729 |
|
|
|
|
|
|
|
|
|
|
|
Quarter Ended |
|
Three Quarters Ended |
(In thousands, except per
share amounts) |
9/23/20 |
|
9/25/19 |
|
9/23/20 |
|
9/25/19 |
Net income (loss) |
$ |
6,477 |
|
|
|
$ |
49,122 |
|
|
|
$ |
(7,475 |
) |
|
|
$ |
98,851 |
|
|
(Gains) losses on interest
rate swap derivatives |
(7,281 |
) |
|
|
— |
|
|
|
4,185 |
|
|
|
— |
|
|
(Gains) losses on sales of
assets and other, net |
(1,202 |
) |
|
|
(51,183 |
) |
|
|
(2,260 |
) |
|
|
(87,497 |
) |
|
Impairment charges |
338 |
|
|
|
— |
|
|
|
2,519 |
|
|
|
— |
|
|
Tax effect (2) |
2,093 |
|
|
|
13,226 |
|
|
|
(1,142 |
) |
|
|
22,610 |
|
|
Adjusted Net Income
(Loss) |
$ |
425 |
|
|
|
$ |
11,165 |
|
|
|
$ |
(4,173 |
) |
|
|
$ |
33,964 |
|
|
|
|
|
|
|
|
|
|
Diluted weighted average
shares outstanding |
64,027 |
|
|
|
61,189 |
|
|
|
59,350 |
|
|
|
62,370 |
|
|
|
|
|
|
|
|
|
|
Diluted Net Income (Loss) Per
Share |
$ |
0.10 |
|
|
|
$ |
0.80 |
|
|
|
$ |
(0.13 |
) |
|
|
$ |
1.58 |
|
|
Adjustments Per Share |
$ |
(0.09 |
) |
|
|
$ |
(0.62 |
) |
|
|
$ |
0.06 |
|
|
|
$ |
(1.04 |
) |
|
Adjusted Net Income (Loss) Per
Share |
$ |
0.01 |
|
|
|
$ |
0.18 |
|
|
|
$ |
(0.07 |
) |
|
|
$ |
0.54 |
|
|
(1 |
) |
Includes cash interest expense,
net and cash payments of approximately $0.6 million and $1.1
million for dedesignated interest rate swap derivatives for the
quarter and year-to-date periods ended September 23, 2020. |
(2 |
) |
Tax adjustments are calculated
using an effective tax rate of 25.7% for the quarter and
year-to-date periods ended September 23, 2020. Tax adjustments for
the gains on sales of assets and other, net for the quarter and
year-to-date periods ended September 25, 2019 are calculated using
an effective tax rate of 25.8%. |
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.
The Company defines 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. Total 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.
Total 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, net income (loss) 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
items, and are not indicative of the overall results for the
Company.
|
Quarter Ended |
|
Three Quarters Ended |
(In thousands) |
9/23/20 |
|
9/25/19 |
|
9/23/20 |
|
9/25/19 |
Operating income |
$ |
3,240 |
|
|
|
$ |
68,174 |
|
|
|
$ |
7,759 |
|
|
$ |
138,420 |
|
|
General and administrative
expenses |
13,694 |
|
|
|
16,395 |
|
|
|
34,589 |
|
|
53,659 |
|
|
Depreciation and
amortization |
4,048 |
|
|
|
4,338 |
|
|
|
12,252 |
|
|
15,619 |
|
|
Operating (gains), losses and
other charges, net |
(781 |
) |
|
|
(50,091 |
) |
|
|
2,319 |
|
|
(85,459 |
) |
|
Total Operating
Margin |
$ |
20,201 |
|
|
|
$ |
38,816 |
|
|
|
$ |
56,919 |
|
|
$ |
122,239 |
|
|
|
|
|
|
|
|
|
|
Total Operating Margin
consists of: |
|
|
|
|
|
|
|
Company Restaurant
Operating Margin (1) |
$ |
479 |
|
|
|
$ |
9,276 |
|
|
|
$ |
2,174 |
|
|
$ |
39,325 |
|
|
Franchise Operating
Margin (2) |
19,722 |
|
|
|
29,540 |
|
|
|
54,745 |
|
|
82,914 |
|
|
Total Operating
Margin |
$ |
20,201 |
|
|
|
$ |
38,816 |
|
|
|
$ |
56,919 |
|
|
$ |
122,239 |
|
|
(1 |
) |
Company Restaurant Operating
Margin is calculated as operating income plus general and
administrative expenses; depreciation and amortization; operating
(gains), losses and other charges; and costs of franchise and
license revenue; less franchise and license revenue. |
(2 |
) |
Franchise Operating Margin is
calculated as operating income plus general and administrative
expenses; depreciation and amortization; operating (gains), losses
and other charges; and costs of company restaurant sales; less
company restaurant sales. |
DENNY’S CORPORATION |
Operating Margins |
(Unaudited) |
|
|
|
|
|
|
|
|
|
|
|
Quarter Ended |
(In
thousands) |
9/23/20 |
|
9/25/19 |
Company restaurant
operations: (1) |
|
|
|
|
|
|
Company restaurant sales |
$ |
27,849 |
|
100.0 |
% |
|
$ |
63,582 |
|
100.0 |
% |
|
Costs of company
restaurant sales: |
|
|
|
|
|
|
|
Product costs |
7,106 |
|
25.5 |
% |
|
15,603 |
|
24.5 |
% |
|
|
Payroll and
benefits |
11,925 |
|
42.8 |
% |
|
23,777 |
|
37.4 |
% |
|
|
Occupancy |
2,638 |
|
9.5 |
% |
|
4,301 |
|
6.8 |
% |
|
|
Other operating
costs: |
|
|
|
|
|
|
|
|
Utilities |
1,281 |
|
4.6 |
% |
|
2,438 |
|
3.8 |
% |
|
|
|
Repairs and maintenance |
711 |
|
2.6 |
% |
|
1,774 |
|
2.8 |
% |
|
|
|
Marketing |
1,045 |
|
3.8 |
% |
|
2,411 |
|
3.8 |
% |
|
|
|
Other direct costs |
2,664 |
|
9.6 |
% |
|
4,002 |
|
6.3 |
% |
|
Total costs of
company restaurant sales |
$ |
27,370 |
|
98.3 |
% |
|
$ |
54,306 |
|
85.4 |
% |
|
Company restaurant
operating margin (non-GAAP) (2) |
$ |
479 |
|
1.7 |
% |
|
$ |
9,276 |
|
14.6 |
% |
|
|
|
|
|
|
|
|
|
Franchise
operations: (3) |
|
|
|
|
|
|
Franchise and
license revenue: |
|
|
|
|
|
|
Royalties |
$ |
17,896 |
|
40.9 |
% |
|
$ |
27,830 |
|
45.9 |
% |
|
Advertising revenue |
13,927 |
|
31.8 |
% |
|
20,756 |
|
34.2 |
% |
|
Initial and other fees |
1,890 |
|
4.3 |
% |
|
1,356 |
|
2.2 |
% |
|
Occupancy revenue |
10,082 |
|
23.0 |
% |
|
10,734 |
|
17.7 |
% |
|
Total franchise
and license revenue |
$ |
43,795 |
|
100.0 |
% |
|
$ |
60,676 |
|
100.0 |
% |
|
|
|
|
|
|
|
|
|
|
Costs of franchise
and license revenue: |
|
|
|
|
|
|
Advertising costs |
$ |
13,927 |
|
31.8 |
% |
|
$ |
20,757 |
|
34.2 |
% |
|
Occupancy costs |
6,858 |
|
15.7 |
% |
|
7,257 |
|
12.0 |
% |
|
Other direct costs |
3,288 |
|
7.5 |
% |
|
3,122 |
|
5.1 |
% |
|
Total costs of
franchise and license revenue |
$ |
24,073 |
|
55.0 |
% |
|
$ |
31,136 |
|
51.3 |
% |
|
Franchise
operating margin (non-GAAP) (2) |
$ |
19,722 |
|
45.0 |
% |
|
$ |
29,540 |
|
48.7 |
% |
|
|
|
|
|
|
|
|
|
Total operating
revenue (4) |
$ |
71,644 |
|
100.0 |
% |
|
$ |
124,258 |
|
100.0 |
% |
Total costs of
operating revenue (4) |
51,443 |
|
71.8 |
% |
|
85,442 |
|
68.8 |
% |
Total operating
margin (non-GAAP) (4)(2) |
$ |
20,201 |
|
28.2 |
% |
|
$ |
38,816 |
|
31.2 |
% |
|
|
|
|
|
|
|
|
|
Other operating
expenses: (4)(2) |
|
|
|
|
|
|
General and
administrative expenses |
$ |
13,694 |
|
19.1 |
% |
|
$ |
16,395 |
|
13.2 |
% |
|
Depreciation and
amortization |
4,048 |
|
5.7 |
% |
|
4,338 |
|
3.5 |
% |
|
Operating (gains),
losses and other charges, net |
(781 |
) |
(1.1 |
)% |
|
(50,091 |
) |
(40.3 |
)% |
|
Total other
operating expenses |
$ |
16,961 |
|
23.7 |
% |
|
$ |
(29,358 |
) |
(23.6 |
)% |
|
|
|
|
|
|
|
|
|
Operating income
(4) |
$ |
3,240 |
|
4.5 |
% |
|
$ |
68,174 |
|
54.9 |
% |
|
|
|
|
|
|
|
|
|
(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 (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) |
|
|
|
|
|
|
|
|
|
|
|
Three Quarters Ended |
(In
thousands) |
9/23/20 |
|
9/25/19 |
Company restaurant
operations: (1) |
|
|
|
|
|
|
Company restaurant sales |
$ |
85,268 |
|
100.0 |
% |
|
$ |
257,574 |
|
|
100.0 |
% |
|
Costs of company
restaurant sales: |
|
|
|
|
|
|
|
Product costs |
21,541 |
|
25.3 |
% |
|
62,871 |
|
|
24.4 |
% |
|
|
Payroll and
benefits |
37,070 |
|
43.5 |
% |
|
100,475 |
|
|
39.0 |
% |
|
|
Occupancy |
8,529 |
|
10.0 |
% |
|
15,583 |
|
|
6.0 |
% |
|
|
Other operating
costs: |
|
|
|
|
|
|
|
|
Utilities |
3,815 |
|
4.5 |
% |
|
8,916 |
|
|
3.5 |
% |
|
|
|
Repairs and maintenance |
1,928 |
|
2.3 |
% |
|
5,742 |
|
|
2.2 |
% |
|
|
|
Marketing |
2,771 |
|
3.2 |
% |
|
9,357 |
|
|
3.6 |
% |
|
|
|
Other direct costs |
7,440 |
|
8.7 |
% |
|
15,305 |
|
|
5.9 |
% |
|
Total costs of
company restaurant sales |
$ |
83,094 |
|
97.5 |
% |
|
$ |
218,249 |
|
|
84.7 |
% |
|
Company restaurant
operating margin (non-GAAP) (2) |
$ |
2,174 |
|
2.5 |
% |
|
$ |
39,325 |
|
|
15.3 |
% |
|
|
|
|
|
|
|
|
|
Franchise
operations: (3) |
|
|
|
|
|
|
Franchise and
license revenue: |
|
|
|
|
|
|
Royalties |
$ |
48,462 |
|
39.3 |
% |
|
$ |
79,742 |
|
|
46.9 |
% |
|
Advertising revenue |
38,685 |
|
31.4 |
% |
|
59,582 |
|
|
35.1 |
% |
|
Initial and other fees |
4,933 |
|
4.0 |
% |
|
4,250 |
|
|
2.5 |
% |
|
Occupancy revenue |
31,152 |
|
25.3 |
% |
|
26,405 |
|
|
15.5 |
% |
|
Total franchise
and license revenue |
$ |
123,232 |
|
100.0 |
% |
|
$ |
169,979 |
|
|
100.0 |
% |
|
|
|
|
|
|
|
|
|
|
Costs of franchise
and license revenue: |
|
|
|
|
|
|
Advertising costs |
$ |
38,685 |
|
31.4 |
% |
|
$ |
59,583 |
|
|
35.1 |
% |
|
Occupancy costs |
20,096 |
|
16.3 |
% |
|
18,018 |
|
|
10.6 |
% |
|
Other direct costs |
9,706 |
|
7.9 |
% |
|
9,464 |
|
|
5.6 |
% |
|
Total costs of
franchise and license revenue |
$ |
68,487 |
|
55.6 |
% |
|
$ |
87,065 |
|
|
51.2 |
% |
|
Franchise
operating margin (non-GAAP) (2) |
$ |
54,745 |
|
44.4 |
% |
|
$ |
82,914 |
|
|
48.8 |
% |
|
|
|
|
|
|
|
|
|
Total operating
revenue (4) |
$ |
208,500 |
|
100.0 |
% |
|
$ |
427,553 |
|
|
100.0 |
% |
Total costs of
operating revenue (4) |
151,581 |
|
72.7 |
% |
|
305,314 |
|
|
71.4 |
% |
Total operating
margin (non-GAAP) (4)(2) |
$ |
56,919 |
|
27.3 |
% |
|
$ |
122,239 |
|
|
28.6 |
% |
|
|
|
|
|
|
|
|
|
Other operating
expenses: (4)(2) |
|
|
|
|
|
|
General and
administrative expenses |
$ |
34,589 |
|
16.6 |
% |
|
$ |
53,659 |
|
|
12.6 |
% |
|
Depreciation and
amortization |
12,252 |
|
5.9 |
% |
|
15,619 |
|
|
3.7 |
% |
|
Operating (gains),
losses and other charges, net |
2,319 |
|
1.1 |
% |
|
(85,459 |
) |
|
(20.0 |
)% |
|
Total other
operating expenses |
$ |
49,160 |
|
23.6 |
% |
|
$ |
(16,181 |
) |
|
(3.8 |
)% |
|
|
|
|
|
|
|
|
|
Operating income
(4) |
$ |
7,759 |
|
3.7 |
% |
|
$ |
138,420 |
|
|
32.4 |
% |
|
|
|
|
|
|
|
|
|
(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 margin should be considered as a supplement to, not as a
substitute for, operating income, 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 |
|
Three Quarters Ended |
(increase
(decrease) vs. prior year) |
9/23/20 |
|
9/25/19 |
|
9/23/20 |
|
9/25/19 |
|
Company
Restaurants |
(40.2 |
)% |
|
(0.2 |
)% |
|
(37.4 |
)% |
|
2.1 |
% |
|
Domestic
Franchised Restaurants |
(33.1 |
)% |
|
1.2 |
% |
|
(30.1 |
)% |
|
2.0 |
% |
|
Domestic
System-wide Restaurants |
(33.6 |
)% |
|
1.1 |
% |
|
(30.7 |
)% |
|
2.1 |
% |
|
|
|
|
|
|
|
|
|
|
Average
Unit Sales |
Quarter Ended |
|
Three Quarters Ended |
(In
thousands) |
9/23/20 |
|
9/25/19 |
|
9/23/20 |
|
9/25/19 |
|
Company Restaurants |
$ |
423 |
|
|
$ |
640 |
|
|
$ |
1,313 |
|
|
$ |
1,820 |
|
|
Franchised
Restaurants |
$ |
282 |
|
|
$ |
421 |
|
|
$ |
868 |
|
|
$ |
1,242 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Franchised |
|
|
|
|
Restaurant
Unit Activity |
Company |
|
& Licensed |
|
Total |
|
|
Ending Units June
24, 2020 |
67 |
|
|
1,616 |
|
|
1,683 |
|
|
|
|
Units Opened |
— |
|
|
5 |
|
|
5 |
|
|
|
|
Units Closed |
(1 |
) |
|
(23 |
) |
|
(24 |
) |
|
|
|
|
Net Change |
(1 |
) |
|
(18 |
) |
|
(19 |
) |
|
|
Ending Units
September 23, 2020 |
66 |
|
|
1,598 |
|
|
1,664 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Equivalent
Units |
|
|
|
|
|
|
|
|
Third Quarter
2020 |
66 |
|
|
1,608 |
|
|
1,674 |
|
|
|
|
Third Quarter
2019 |
99 |
|
|
1,603 |
|
|
1,702 |
|
|
|
|
|
Net Change |
(33 |
) |
|
5 |
|
|
(28 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Franchised |
|
|
|
|
Restaurant
Unit Activity |
Company |
|
& Licensed |
|
Total |
|
|
Ending Units
December 25, 2019 |
68 |
|
|
1,635 |
|
|
1,703 |
|
|
|
|
Units Opened |
— |
|
|
16 |
|
|
16 |
|
|
|
|
Units Closed |
(2 |
) |
|
(53 |
) |
|
(55 |
) |
|
|
|
|
Net Change |
(2 |
) |
|
(37 |
) |
|
(39 |
) |
|
|
Ending Units
September 23, 2020 |
66 |
|
|
1,598 |
|
|
1,664 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Equivalent
Units |
|
|
|
|
|
|
|
|
Year-to-Date
2020 |
65 |
|
|
1,620 |
|
|
1,685 |
|
|
|
|
Year-to-Date
2019 |
141 |
|
|
1,560 |
|
|
1,701 |
|
|
|
|
|
Net Change |
(76 |
) |
|
60 |
|
|
(16 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
(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, 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. |
Investor Contact:
Curt Nichols
877-784-7167
Media Contact:
Hadas Streit, Allison+Partners
646-428-0629
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