Denny’s Corporation Reports Results For Second Quarter 2021
Denny's Corporation (NASDAQ: DENN) reported a strong recovery in its Q2 2021 results, with total operating revenue rising 164.3% to $106.2 million compared to the prior year. While domestic system-wide same-store sales fell 1.2% compared to 2019, June and July saw sales surpass pre-pandemic levels. Operating income improved to $18.3 million, and adjusted net income was $11.6 million. The company opened three franchised locations and experienced robust performance from its virtual brands. Current trends suggest continued sales growth, with Q3 guidance indicating an anticipated 2-4% same-store sales increase.
- Total operating revenue surged 164.3% to $106.2 million.
- Operating income rose to $18.3 million compared to a loss of $13.5 million last year.
- Adjusted net income reached $11.6 million, or $0.18 per share.
- June and July saw domestic same-store sales exceed 2019 levels.
- Launched two virtual brands, contributing to off-premise sales.
- Domestic system-wide same-store sales decreased 1.2% compared to 2019.
- Net loss of $0.8 million, albeit improved from a larger loss last year.
- General and administrative expenses increased to $17.5 million, up from $13.2 million.
SPARTANBURG, S.C., Aug. 03, 2021 (GLOBE NEWSWIRE) -- Denny’s Corporation (NASDAQ: DENN), franchisor and operator of one of America's largest franchised full-service restaurant chains, today reported results for its second quarter ended June 30, 2021 and provided a business update on the Company’s operations.
John Miller, Chief Executive Officer, stated, “We are simply delighted to welcome guests back now that all of our operating domestic dining rooms are open while still providing them with the convenience of our off-premise options. With the easing of restrictions, the rollout of our two new virtual brands, The Burger Den and The Meltdown, along with the perseverance of our entire organization, both June and July domestic system-wide same-store sales** surpassed 2019 pre-pandemic levels. We are encouraged by the potential for additional sales growth as we overcome staffing challenges and return to 24/7 operations across our system."
Second Quarter 2021 Highlights
- Total operating revenue increased
164.3% to$106.2 million , primarily due to the COVID-19 recovery. - Domestic system-wide same-store sales** decreased
1.2% compared to the equivalent fiscal period in 2019, including a1.5% decrease at domestic franchised restaurants and a1.9% increase at company restaurants. - Domestic system-wide same-store sales** increased
117.0% compared to the equivalent fiscal period in 2020. - Opened three franchised restaurants, including one international location.
- Operating income (loss) was
$18.3 million compared to ($13.5) million in the prior year quarter. - Franchise Operating Margin* was
$29.9 million , or51.0% of franchise and license revenue, and Company Restaurant Operating Margin* was$9.8 million , or20.5% of company restaurant sales. - Net loss was
$0.8 million , or$0.01 per diluted share. - Adjusted Net Income* was
$11.6 million , or$0.18 per share. - Adjusted EBITDA* was
$25.3 million compared to ($5.1) million in the prior year quarter. - Cash provided by (used in) operating, investing, and financing activities was
$33.1 million , ($1.2) million , and ($35.6) million , respectively. - Adjusted Free Cash Flow* was
$17.8 million compared to ($11.5) million in the prior year quarter. - Provided guidance for the fiscal third quarter 2021.
Current Trends
Domestic system-wide same-store sales** for the second quarter ended June 30, 2021, continued to trend toward pre-pandemic levels. Fiscal periods June and July surpassed 2019 sales levels at both company and domestic franchise restaurants. With all operating dining rooms open, off-premise sales, inclusive of virtual brands, have remained strong at approximately
Additionally, during the second quarter the Company substantially completed the rollout of its first virtual brand, The Burger Den, to over 1,100 domestic locations and began a phased rollout of its second virtual brand, The Meltdown, to approximately half of the domestic system. Transactions for these two virtual brands are highly incremental and leverage labor during underutilized dayparts.
In an effort to provide greater transparency due to the COVID-19 pandemic, Denny's is providing the following tables that present monthly results for 2021 compared to the equivalent fiscal periods in 2019:
Domestic System-Wide Same-Store Sales** Compared to 2019 Fiscal Periods and Domestic Average Units for 2021 Fiscal Periods
| Domestic System-Wide Same-Store Sales** | |||||||
| Fiscal Year 2021 | |||||||
| Jan | Feb | Mar | Apr | May | Jun | Jul 1 | |
| System | ( | ( | ( | ( | ( | ||
| 24/7 Units | ( | ( | |||||
| Limited Hour Units | ( | ( | ( | ( | ( | ( | ( |
| |||||||
| Domestic Average Units | |||||||
| Fiscal Year 2021 | |||||||
| Jan | Feb | Mar | Apr | May | Jun | Jul 1 | |
| System | 1,504 | 1,501 | 1,501 | 1,499 | 1,498 | 1,497 | 1,495 |
| 24/7 Units | 519 | 532 | 569 | 566 | 561 | 566 | 576 |
| Limited Hour Units | 939 | 928 | 912 | 920 | 926 | 920 | 909 |
| Temporary Closures | 46 | 41 | 20 | 13 | 11 | 11 | 10 |
| |||||||
Second Quarter Results
Denny’s total operating revenue increased
Franchise Operating Margin* was
Company Restaurant Operating Margin* was
Total general and administrative expenses were
Denny’s ended the quarter with
The benefit from income taxes was
Net loss was
Adjusted Free Cash Flow* and Capital Allocation
Denny’s generated
Business Outlook
The following expectations for the fiscal third quarter ending September 29, 2021 reflect management's expectations that the current economic environment will not change materially:
- Domestic system-wide same-store sales** growth between
2% and4% compared to the equivalent fiscal period in 2019. - Total general and administrative expenses between
$17 million and$18 million , including approximately$3.5 million related to share-based compensation. - Adjusted EBITDA* between
$22 million and$24 million .
* Please refer to the Reconciliation of Net Income (Loss) and Net Cash Provided by (Used In) Operating Activities to Non-GAAP Financial Measures, as well as the Reconciliation of Operating Income (Loss) to Non-GAAP Financial Measures included in the following tables. The Company is not able to reconcile the forward-looking non-GAAP estimates set forth above to their most directly comparable GAAP estimates without unreasonable efforts because it is unable to predict, forecast or determine the probable significance of the items impacting these estimates, including gains, losses and other charges, with a reasonable degree of accuracy. Accordingly, the most directly comparable forward-looking GAAP estimates are not provided.
** Same-store sales include sales at company restaurants and non-consolidated franchised and licensed restaurants that were open during the comparable periods noted. Total operating revenue is limited to company restaurant sales and royalties, advertising revenue, fees and occupancy revenue from non-consolidated franchised and licensed restaurants. Accordingly, domestic franchise same-store sales and domestic system-wide same-store sales should be considered as a supplement to, not a substitute for, the Company's results as reported under GAAP.
Conference Call and Webcast Information
Denny’s will provide further commentary on the results for the second quarter ended June 30, 2021 on its quarterly investor conference call today, Tuesday, August 3, 2021 at 4:30 p.m. Eastern Time. 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 June 30, 2021, Denny’s had 1,645 franchised, licensed, and company restaurants around the world including 149 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 30, 2020 (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) | 6/30/21 | 12/30/20 | ||||||||
| Assets | ||||||||||
| Current assets | ||||||||||
| Cash and cash equivalents | $ | 10,882 | $ | 3,892 | ||||||
| Investments | 2,069 | 2,272 | ||||||||
| Receivables, net | 20,407 | 21,349 | ||||||||
| Inventories | 1,280 | 1,181 | ||||||||
| Assets held for sale | 1,621 | 1,125 | ||||||||
| Prepaid and other current assets | 12,168 | 18,847 | ||||||||
| Total current assets | 48,427 | 48,666 | ||||||||
| Property, net | 82,490 | 86,154 | ||||||||
| Financing lease right-of-use assets, net | 9,437 | 9,830 | ||||||||
| Operating lease right-of-use assets, net | 135,229 | 139,534 | ||||||||
| Goodwill | 36,884 | 36,884 | ||||||||
| Intangible assets, net | 50,892 | 51,559 | ||||||||
| Deferred financing costs, net | 1,727 | 2,414 | ||||||||
| Deferred income taxes, net | 19,854 | 23,210 | ||||||||
| Other noncurrent assets | 33,407 | 32,698 | ||||||||
| Total assets | $ | 418,347 | $ | 430,949 | ||||||
| Liabilities | ||||||||||
| Current liabilities | ||||||||||
| Current finance lease liabilities | $ | 1,637 | $ | 1,839 | ||||||
| Current operating lease liabilities | 16,348 | 16,856 | ||||||||
| Accounts payable | 14,376 | 12,021 | ||||||||
| Other current liabilities | 55,251 | 46,462 | ||||||||
| Total current liabilities | 87,612 | 77,178 | ||||||||
| Long-term liabilities | ||||||||||
| Long-term debt | 180,000 | 210,000 | ||||||||
| Noncurrent finance lease liabilities | 13,265 | 13,530 | ||||||||
| Noncurrent operating lease liabilities | 132,959 | 137,534 | ||||||||
| Liability for insurance claims, less current portion | 9,602 | 10,309 | ||||||||
| Other noncurrent liabilities | 94,332 | 112,844 | ||||||||
| Total long-term liabilities | 430,158 | 484,217 | ||||||||
| Total liabilities | 517,770 | 561,395 | ||||||||
| Shareholders' deficit | ||||||||||
| Common stock | 642 | 640 | ||||||||
| Paid-in capital | 129,176 | 123,833 | ||||||||
| Deficit | (172,161 | ) | (194,514 | ) | ||||||
| Accumulated other comprehensive loss, net | (57,080 | ) | (60,405 | ) | ||||||
| Total shareholders' deficit | (99,423 | ) | (130,446 | ) | ||||||
| Total liabilities and shareholders' deficit | $ | 418,347 | $ | 430,949 | ||||||
| Debt Balances | ||||||||||
| (In thousands) | 6/30/21 | 12/30/20 | ||||||||
| Credit facility revolver due 2022 | $ | 180,000 | $ | 210,000 | ||||||
| Finance lease liabilities | 14,902 | 15,369 | ||||||||
| Total debt | $ | 194,902 | $ | 225,369 | ||||||
| DENNY’S CORPORATION | |||||||||
| Condensed Consolidated Statements of Operations | |||||||||
| (Unaudited) | |||||||||
| Quarter Ended | |||||||||
| (In thousands, except per share amounts) | 6/30/21 | 6/24/20 | |||||||
| Revenue: | |||||||||
| Company restaurant sales | $ | 47,572 | $ | 15,128 | |||||
| Franchise and license revenue | 58,593 | 25,033 | |||||||
| Total operating revenue | 106,165 | 40,161 | |||||||
| Costs of company restaurant sales, excluding depreciation and amortization | 37,813 | 19,606 | |||||||
| Costs of franchise and license revenue, excluding depreciation and amortization | 28,735 | 15,244 | |||||||
| General and administrative expenses | 17,548 | 13,153 | |||||||
| Depreciation and amortization | 3,897 | 4,058 | |||||||
| Operating (gains), losses and other charges, net | (113 | ) | 1,627 | ||||||
| Total operating costs and expenses, net | 87,880 | 53,688 | |||||||
| Operating income (loss) | 18,285 | (13,527 | ) | ||||||
| Interest expense, net | 4,066 | 4,947 | |||||||
| Other nonoperating expense, net | 16,251 | 9,565 | |||||||
| Loss before income taxes | (2,032 | ) | (28,039 | ) | |||||
| Benefit from income taxes | (1,204 | ) | (5,074 | ) | |||||
| Net loss | $ | (828 | ) | $ | (22,965 | ) | |||
| Basic net loss per share | $ | (0.01 | ) | $ | (0.41 | ) | |||
| Diluted net loss per share | $ | (0.01 | ) | $ | (0.41 | ) | |||
| Basic weighted average shares outstanding | 65,294 | 55,686 | |||||||
| Diluted weighted average shares outstanding | 65,294 | 55,686 | |||||||
| Comprehensive loss | $ | (578 | ) | $ | (18,550 | ) | |||
| General and Administrative Expenses | Quarter Ended | ||||||||
| (In thousands) | 6/30/21 | 6/24/20 | |||||||
| Corporate administrative expenses | $ | 10,345 | $ | 9,701 | |||||
| Share-based compensation | 3,388 | 1,511 | |||||||
| Incentive compensation | 3,032 | 1 | |||||||
| Deferred compensation valuation adjustments | 783 | 1,940 | |||||||
| Total general and administrative expenses | $ | 17,548 | $ | 13,153 | |||||
| DENNY’S CORPORATION | |||||||||
| Condensed Consolidated Statements of Operations | |||||||||
| (Unaudited) | |||||||||
| Two Quarters Ended | |||||||||
| (In thousands, except per share amounts) | 6/30/21 | 6/24/20 | |||||||
| Revenue: | |||||||||
| Company restaurant sales | $ | 81,141 | $ | 57,419 | |||||
| Franchise and license revenue | 105,600 | 79,437 | |||||||
| Total operating revenue | 186,741 | 136,856 | |||||||
| Costs of company restaurant sales, excluding depreciation and amortization | 67,977 | 55,724 | |||||||
| Costs of franchise and license revenue, excluding depreciation and amortization | 52,493 | 44,414 | |||||||
| General and administrative expenses | 34,495 | 20,895 | |||||||
| Depreciation and amortization | 7,558 | 8,204 | |||||||
| Operating (gains), losses and other charges, net | 419 | 3,100 | |||||||
| Total operating costs and expenses, net | 162,942 | 132,337 | |||||||
| Operating income | 23,799 | 4,519 | |||||||
| Interest expense, net | 8,343 | 8,898 | |||||||
| Other nonoperating expense (income), net | (13,797 | ) | 12,328 | ||||||
| Income (loss) before income taxes | 29,253 | (16,707 | ) | ||||||
| Provision for (benefit from) income taxes | 6,900 | (2,755 | ) | ||||||
| Net income (loss) | $ | 22,353 | $ | (13,952 | ) | ||||
| Basic net income (loss) per share | $ | 0.34 | $ | (0.25 | ) | ||||
| Diluted net income (loss) per share | $ | 0.34 | $ | (0.25 | ) | ||||
| Basic weighted average shares outstanding | 65,273 | 55,993 | |||||||
| Diluted weighted average shares outstanding | 65,789 | 55,993 | |||||||
| Comprehensive income (loss) | $ | 25,678 | $ | (42,209 | ) | ||||
| General and Administrative Expenses | Two Quarters Ended | ||||||||
| (In thousands) | 6/30/21 | 6/24/20 | |||||||
| Corporate administrative expenses | $ | 21,217 | $ | 21,482 | |||||
| Share-based compensation | 6,860 | (26 | ) | ||||||
| Incentive compensation | 5,118 | 15 | |||||||
| Deferred compensation valuation adjustments | 1,300 | (576 | ) | ||||||
| Total general and administrative expenses | $ | 34,495 | $ | 20,895 | |||||
| DENNY’S CORPORATION |
| Reconciliation of Net Income (Loss) and Net Cash Provided by (Used in) Operating Activities to Non-GAAP Financial Measures |
| (Unaudited) |
The Company believes that, in addition to GAAP measures, certain non-GAAP financial measures are appropriate indicators to assist in the evaluation of operating performance and liquidity on a period-to-period basis. The Company uses Adjusted EBITDA, Adjusted Free Cash Flow, Adjusted Net Income (Loss) and Adjusted Net Income (Loss) Per Share internally as performance measures for planning purposes, including the preparation of annual operating budgets, and for compensation purposes, including incentive compensation for certain employees. Adjusted EBITDA is also used in the calculation of financial covenant ratios in accordance with the Company’s credit facility. Adjusted Free Cash Flow is also used as a non-GAAP liquidity measure by Management to assess the Company’s ability to generate cash and plan for future operating and capital actions. Management believes that the presentation of Adjusted EBITDA, Adjusted Net Income (Loss), Adjusted Net Income (Loss) Per Share and Adjusted Free Cash Flow provide useful information to investors and analysts about the Company’s operating results, financial condition or cash flows. However, each of these non-GAAP financial measures should be considered as a supplement to, not a substitute for, operating income (loss), net income (loss), net cash provided by (used in) operating activities, or other financial performance and liquidity measures prepared in accordance with U.S. generally accepted accounting principles.
| Quarter Ended | Two Quarters Ended | ||||||||||||||
| (In thousands) | 6/30/21 | 6/24/20 | 6/30/21 | 6/24/20 | |||||||||||
| Net income (loss) | $ | (828 | ) | $ | (22,965 | ) | $ | 22,353 | $ | (13,952 | ) | ||||
| Provision for (benefit from) income taxes | (1,204 | ) | (5,074 | ) | 6,900 | (2,755 | ) | ||||||||
| Operating (gains), losses and other charges, net | (113 | ) | 1,627 | 419 | 3,100 | ||||||||||
| Other nonoperating expense (income), net | 16,251 | 9,565 | (13,797 | ) | 12,328 | ||||||||||
| Share-based compensation expense (benefit) | 3,388 | 1,511 | 6,860 | (26 | ) | ||||||||||
| Deferred compensation plan valuation adjustments | 783 | 1,940 | 1,300 | (576 | ) | ||||||||||
| Interest expense, net | 4,066 | 4,947 | 8,343 | 8,898 | |||||||||||
| Depreciation and amortization | 3,897 | 4,058 | 7,558 | 8,204 | |||||||||||
| Cash payments for restructuring charges and exit costs | (869 | ) | (690 | ) | (1,274 | ) | (1,374 | ) | |||||||
| Cash payments for share-based compensation | (69 | ) | — | (1,565 | ) | (3,211 | ) | ||||||||
| Adjusted EBITDA | $ | 25,302 | $ | (5,081 | ) | $ | 37,097 | $ | 10,636 | ||||||
| DENNY’S CORPORATION | |||||||||||||||||
| Reconciliation of Net Income (Loss) and Net Cash Provided by (Used in) Operating Activities to Non-GAAP Financial Measures | |||||||||||||||||
| (Unaudited) | |||||||||||||||||
| Quarter Ended | Two Quarters Ended | ||||||||||||||||
| (In thousands) | 6/30/21 | 6/24/20 | 6/30/21 | 6/24/20 | |||||||||||||
| Net cash provided by (used in) operating activities | $ | 33,136 | $ | (9,859 | ) | $ | 43,371 | $ | (7,958 | ) | |||||||
| Capital expenditures | (1,525 | ) | (1,658 | ) | (3,108 | ) | (4,476 | ) | |||||||||
| Cash payments for restructuring charges and exit costs | (869 | ) | (690 | ) | (1,274 | ) | (1,374 | ) | |||||||||
| Cash payments for share-based compensation | (69 | ) | — | (1,565 | ) | (3,211 | ) | ||||||||||
| Deferred compensation plan valuation adjustments | 783 | 1,940 | 1,300 | (576 | ) | ||||||||||||
| Other nonoperating expense (income), net | 16,251 | 9,565 | (13,797 | ) | 12,328 | ||||||||||||
| Gains (losses) on investments | 5 | (25 | ) | (3 | ) | 91 | |||||||||||
| Gains (losses) on termination of leases | 106 | (25 | ) | 72 | (53 | ) | |||||||||||
| Amortization of deferred financing costs | (344 | ) | (188 | ) | (688 | ) | (340 | ) | |||||||||
| Gains (losses) on interest rate swap derivatives, net | (17,227 | ) | (11,466 | ) | 12,506 | (11,466 | ) | ||||||||||
| Interest expense, net | 4,066 | 4,947 | 8,343 | 8,898 | |||||||||||||
| Cash interest expense, net (1) | (4,455 | ) | (4,717 | ) | (9,041 | ) | (8,437 | ) | |||||||||
| Deferred income tax (expense) benefit | 1,888 | 1,128 | (2,211 | ) | 3,705 | ||||||||||||
| Provision for (benefit from) income taxes | (1,204 | ) | (5,074 | ) | 6,900 | (2,755 | ) | ||||||||||
| Income taxes paid, net | (1,521 | ) | (53 | ) | (1,942 | ) | (277 | ) | |||||||||
| Changes in operating assets and liabilities | |||||||||||||||||
| Receivables | (404 | ) | 6,473 | (757 | ) | (9,342 | ) | ||||||||||
| Inventories | 111 | (179 | ) | 98 | (175 | ) | |||||||||||
| Other current assets | (1,383 | ) | 6,704 | (6,677 | ) | 2,593 | |||||||||||
| Other noncurrent assets | 1,116 | 1,472 | 1,317 | (106 | ) | ||||||||||||
| Operating lease assets and liabilities | 217 | (1,787 | ) | 821 | (1,769 | ) | |||||||||||
| Accounts payable | (3,800 | ) | (6,928 | ) | (5,620 | ) | 537 | ||||||||||
| Accrued payroll | (3,696 | ) | (1,264 | ) | (1,992 | ) | 11,519 | ||||||||||
| Accrued taxes | (814 | ) | (259 | ) | (434 | ) | 712 | ||||||||||
| Other accrued liabilities | (3,454 | ) | 214 | (4,649 | ) | 6,551 | |||||||||||
| Other noncurrent liabilities | 887 | 220 | 2,036 | 2,827 | |||||||||||||
| Adjusted Free Cash Flow | $ | 17,801 | $ | (11,509 | ) | $ | 23,006 | $ | (2,554 | ) | |||||||
| (1 | ) | Includes cash interest expense, net and cash payments of approximately |
| DENNY’S CORPORATION | |||||||||||||||||
| Reconciliation of Net Income (Loss) and Net Cash Provided by (Used in) Operating Activities to Non-GAAP Financial Measures | |||||||||||||||||
| (Unaudited) | |||||||||||||||||
| Quarter Ended | Two Quarters Ended | ||||||||||||||||
| (In thousands) | 6/30/21 | 6/24/20 | 6/30/21 | 6/24/20 | |||||||||||||
| Adjusted EBITDA | $ | 25,302 | $ | (5,081 | ) | $ | 37,097 | $ | 10,636 | ||||||||
| Cash interest expense, net (1) | (4,455 | ) | (4,717 | ) | (9,041 | ) | (8,437 | ) | |||||||||
| Cash paid for income taxes, net | (1,521 | ) | (53 | ) | (1,942 | ) | (277 | ) | |||||||||
| Cash paid for capital expenditures | (1,525 | ) | (1,658 | ) | (3,108 | ) | (4,476 | ) | |||||||||
| Adjusted Free Cash Flow | $ | 17,801 | $ | (11,509 | ) | $ | 23,006 | $ | (2,554 | ) | |||||||
| Quarter Ended | Two Quarters Ended | ||||||||||||||||
| (In thousands, except per share amounts) | 6/30/21 | 6/24/20 | 6/30/21 | 6/24/20 | |||||||||||||
| Net income (loss) | $ | (828 | ) | $ | (22,965 | ) | $ | 22,353 | $ | (13,952 | ) | ||||||
| (Gains) losses on interest rate swap derivatives, net | 17,227 | 11,466 | (12,506 | ) | 11,466 | ||||||||||||
| (Gains) losses on sales of assets and other, net | (65 | ) | 12 | (1,007 | ) | (1,058 | ) | ||||||||||
| Impairment charges | — | — | — | 2,181 | |||||||||||||
| Tax effect (2) | (4,756 | ) | (2,168 | ) | 3,189 | (2,396 | ) | ||||||||||
| Adjusted Net Income (Loss) | $ | 11,578 | $ | (13,655 | ) | $ | 12,029 | $ | (3,759 | ) | |||||||
| Adjusted diluted weighted average shares outstanding | 65,829 | 55,686 | 65,789 | 55,993 | |||||||||||||
| Diluted Net Income (Loss) Per Share | $ | (0.01 | ) | $ | (0.41 | ) | $ | 0.34 | $ | (0.25 | ) | ||||||
| Adjustments Per Share | $ | 0.19 | $ | 0.16 | $ | (0.16 | ) | $ | 0.18 | ||||||||
| Adjusted Net Income (Loss) Per Share | $ | 0.18 | $ | (0.25 | ) | $ | 0.18 | $ | (0.07 | ) | |||||||
| (1 | ) | Includes cash interest expense, net and cash payments of approximately |
| (2 | ) | Tax adjustments for the quarter and year-to-date periods ended June 30, 2021 reflect an effective tax rate of |
| DENNY’S CORPORATION |
| Reconciliation of Operating Income (Loss) to Non-GAAP Financial Measures |
| (Unaudited) |
The Company believes that, in addition to GAAP measures, certain other non-GAAP financial measures are appropriate indicators to assist in the evaluation of restaurant-level operating efficiency and performance of ongoing restaurant-level operations. The Company uses Restaurant-level Operating Margin, Company Restaurant Operating Margin and Franchise Operating Margin internally as performance measures for planning purposes, including the preparation of annual operating budgets, and these three non-GAAP measures are used to evaluate operating effectiveness.
The Company defines Restaurant-level Operating Margin as operating income (loss) excluding the following three items: general and administrative expenses, depreciation and amortization, and operating (gains), losses and other charges, net. Restaurant-level Operating Margin is presented as a percent of total operating revenue. The Company excludes general and administrative expenses, which include primarily non-restaurant-level costs associated with support of company and franchised restaurants and other activities at their corporate office. The Company excludes depreciation and amortization expense, substantially all of which is related to company restaurant-level assets, because such expenses represent historical sunk costs which do not reflect current cash outlays for the restaurants. The Company excludes special items, included within operating (gains), losses and other charges, net, to provide investors with a clearer perspective of its ongoing operating performance and a more relevant comparison to prior period results.
Restaurant-level Operating Margin is the total of Company Restaurant Operating Margin and Franchise Operating Margin. The Company defines Company Restaurant Operating Margin as company restaurant sales less costs of company restaurant sales (which include product costs, company restaurant level payroll and benefits, occupancy costs, and other operating costs including utilities, repairs and maintenance, marketing and other expenses) and presents it as a percent of company restaurant sales. The Company defines Franchise Operating Margin as franchise and license revenue (which includes franchise royalties and other non-food and beverage revenue streams such as initial franchise fees, advertising revenue and occupancy revenue) less costs of franchise and license revenue and presents it as a percent of franchise and license revenue.
These non-GAAP financial measures provide a meaningful comparison between periods and enable investors to focus on the performance of restaurant-level operations by excluding revenues and costs unrelated to food and beverage sales in addition to corporate general and administrative expense, depreciation and amortization, and operating (gains), losses and other charges, net. However, each of these non-GAAP financial measures should be considered as a supplement to, not a substitute for, operating income (loss), net income (loss) or other financial performance measures prepared in accordance with U.S. generally accepted accounting principles. Restaurant-level Operating Margin, Company Restaurant Operating Margin and Franchise Operating Margin do not accrue directly to the benefit of shareholders because of the aforementioned excluded items, and are not indicative of the overall results for the Company.
| Quarter Ended | Two Quarters Ended | ||||||||||||||
| (In thousands) | 6/30/21 | 6/24/20 | 6/30/21 | 6/24/20 | |||||||||||
| Operating income (loss) | $ | 18,285 | $ | (13,527 | ) | $ | 23,799 | $ | 4,519 | ||||||
| General and administrative expenses | 17,548 | 13,153 | 34,495 | 20,895 | |||||||||||
| Depreciation and amortization | 3,897 | 4,058 | 7,558 | 8,204 | |||||||||||
| Operating (gains), losses and other charges, net | (113 | ) | 1,627 | 419 | 3,100 | ||||||||||
| Restaurant-level Operating Margin | $ | 39,617 | $ | 5,311 | $ | 66,271 | $ | 36,718 | |||||||
| Restaurant-level Operating Margin consists of: | |||||||||||||||
| Company Restaurant Operating Margin (1) | $ | 9,759 | $ | (4,478 | ) | $ | 13,164 | $ | 1,695 | ||||||
| Franchise Operating Margin (2) | 29,858 | 9,789 | 53,107 | 35,023 | |||||||||||
| Restaurant-level Operating Margin | $ | 39,617 | $ | 5,311 | $ | 66,271 | $ | 36,718 | |||||||
| (1 | ) | Company Restaurant Operating Margin is calculated as operating income plus general and administrative expenses; depreciation and amortization; operating (gains), losses and other charges, net; and costs of franchise and license revenue; less franchise and license revenue. |
| (2 | ) | Franchise Operating Margin is calculated as operating income plus general and administrative expenses; depreciation and amortization; operating (gains), losses and other charges, net; and costs of company restaurant sales; less company restaurant sales. |
| DENNY’S CORPORATION | |||||||||||||||
| Operating Margins | |||||||||||||||
| (Unaudited) | |||||||||||||||
| Quarter Ended | |||||||||||||||
| (In thousands) | 6/30/21 | 6/24/20 | |||||||||||||
| Company restaurant operations: (1) | |||||||||||||||
| Company restaurant sales | $ | 47,572 | 100.0 | % | $ | 15,128 | 100.0 | % | |||||||
| Costs of company restaurant sales: | |||||||||||||||
| Product costs | 11,447 | 24.1 | % | 4,305 | 28.5 | % | |||||||||
| Payroll and benefits | 16,970 | 35.7 | % | 8,039 | 53.1 | % | |||||||||
| Occupancy | 2,844 | 6.0 | % | 2,728 | 18.0 | % | |||||||||
| Other operating costs: | |||||||||||||||
| Utilities | 1,390 | 2.9 | % | 1,098 | 7.3 | % | |||||||||
| Repairs and maintenance | 635 | 1.3 | % | 428 | 2.8 | % | |||||||||
| Marketing | 1,365 | 2.9 | % | 607 | 4.0 | % | |||||||||
| Other direct costs | 3,162 | 6.6 | % | 2,401 | 15.9 | % | |||||||||
| Total costs of company restaurant sales | $ | 37,813 | 79.5 | % | $ | 19,606 | 129.6 | % | |||||||
| Company restaurant operating margin (non-GAAP) (2) | $ | 9,759 | 20.5 | % | $ | (4,478 | ) | (29.6 | )% | ||||||
| Franchise operations: (3) | |||||||||||||||
| Franchise and license revenue: | |||||||||||||||
| Royalties | $ | 27,117 | 46.3 | % | $ | 6,719 | 26.8 | % | |||||||
| Advertising revenue | 18,600 | 31.7 | % | 7,232 | 28.9 | % | |||||||||
| Initial and other fees | 2,066 | 3.5 | % | 1,346 | 5.4 | % | |||||||||
| Occupancy revenue | 10,810 | 18.4 | % | 9,736 | 38.9 | % | |||||||||
| Total franchise and license revenue | $ | 58,593 | 100.0 | % | $ | 25,033 | 100.0 | % | |||||||
| Costs of franchise and license revenue: | |||||||||||||||
| Advertising costs | $ | 18,600 | 31.7 | % | $ | 7,232 | 28.9 | % | |||||||
| Occupancy costs | 6,879 | 11.7 | % | 5,829 | 23.3 | % | |||||||||
| Other direct costs | 3,256 | 5.6 | % | 2,183 | 8.7 | % | |||||||||
| Total costs of franchise and license revenue | $ | 28,735 | 49.0 | % | $ | 15,244 | 60.9 | % | |||||||
| Franchise operating margin (non-GAAP) (2) | $ | 29,858 | 51.0 | % | $ | 9,789 | 39.1 | % | |||||||
| Total operating revenue (4) | $ | 106,165 | 100.0 | % | $ | 40,161 | 100.0 | % | |||||||
| Total costs of operating revenue (4) | 66,548 | 62.7 | % | 34,850 | 86.8 | % | |||||||||
| Restaurant-level operating margin (non-GAAP) (4)(2) | $ | 39,617 | 37.3 | % | $ | 5,311 | 13.2 | % | |||||||
| Other operating expenses: (4)(2) | |||||||||||||||
| General and administrative expenses | $ | 17,548 | 16.5 | % | $ | 13,153 | 32.8 | % | |||||||
| Depreciation and amortization | 3,897 | 3.7 | % | 4,058 | 10.1 | % | |||||||||
| Operating (gains), losses and other charges, net | (113 | ) | (0.1 | )% | 1,627 | 4.1 | % | ||||||||
| Total other operating expenses | $ | 21,332 | 20.1 | % | $ | 18,838 | 46.9 | % | |||||||
| Operating income (loss) (4) | $ | 18,285 | 17.2 | % | $ | (13,527 | ) | (33.7 | )% | ||||||
| (1 | ) | As a percentage of company restaurant sales. | |||||||||||||
| (2 | ) | Other operating expenses such as general and administrative expenses and depreciation and amortization relate to both company and franchise operations and are not allocated to costs of company restaurant sales and costs of franchise and license revenue. As such, operating margin is considered a non-GAAP financial measure. Operating margins should be considered as a supplement to, not as a substitute for, operating income (loss), net income (loss) or other financial measures prepared in accordance with U.S. generally accepted accounting principles. | |||||||||||||
| (3 | ) | As a percentage of franchise and license revenue. | |||||||||||||
| (4 | ) | As a percentage of total operating revenue. | |||||||||||||
| DENNY’S CORPORATION | |||||||||||||||
| Operating Margins | |||||||||||||||
| (Unaudited) | |||||||||||||||
| Two Quarters Ended | |||||||||||||||
| (In thousands) | 6/30/21 | 6/24/20 | |||||||||||||
| Company restaurant operations: (1) | |||||||||||||||
| Company restaurant sales | $ | 81,141 | 100.0 | % | $ | 57,419 | 100.0 | % | |||||||
| Costs of company restaurant sales: | |||||||||||||||
| Product costs | 19,719 | 24.3 | % | 14,435 | 25.1 | % | |||||||||
| Payroll and benefits | 29,935 | 36.9 | % | 25,145 | 43.8 | % | |||||||||
| Occupancy | 5,694 | 7.0 | % | 5,891 | 10.3 | % | |||||||||
| Other operating costs: | |||||||||||||||
| Utilities | 2,615 | 3.2 | % | 2,534 | 4.4 | % | |||||||||
| Repairs and maintenance | 1,168 | 1.4 | % | 1,217 | 2.1 | % | |||||||||
| Marketing | 2,332 | 2.9 | % | 1,726 | 3.0 | % | |||||||||
| Other direct costs | 6,514 | 8.0 | % | 4,776 | 8.3 | % | |||||||||
| Total costs of company restaurant sales | $ | 67,977 | 83.8 | % | $ | 55,724 | 97.0 | % | |||||||
| Company restaurant operating margin (non-GAAP) (2) | $ | 13,164 | 16.2 | % | $ | 1,695 | 3.0 | % | |||||||
| Franchise operations: (3) | |||||||||||||||
| Franchise and license revenue: | |||||||||||||||
| Royalties | $ | 47,961 | 45.4 | % | $ | 30,566 | 38.5 | % | |||||||
| Advertising revenue | 32,711 | 31.0 | % | 24,758 | 31.2 | % | |||||||||
| Initial and other fees | 3,904 | 3.7 | % | 3,043 | 3.8 | % | |||||||||
| Occupancy revenue | 21,024 | 19.9 | % | 21,070 | 26.5 | % | |||||||||
| Total franchise and license revenue | $ | 105,600 | 100.0 | % | $ | 79,437 | 100.0 | % | |||||||
| Costs of franchise and license revenue: | |||||||||||||||
| Advertising costs | $ | 32,711 | 31.0 | % | $ | 24,758 | 31.2 | % | |||||||
| Occupancy costs | 13,418 | 12.7 | % | 13,238 | 16.7 | % | |||||||||
| Other direct costs | 6,364 | 6.0 | % | 6,418 | 8.1 | % | |||||||||
| Total costs of franchise and license revenue | $ | 52,493 | 49.7 | % | $ | 44,414 | 55.9 | % | |||||||
| Franchise operating margin (non-GAAP) (2) | $ | 53,107 | 50.3 | % | $ | 35,023 | 44.1 | % | |||||||
| Total operating revenue (4) | $ | 186,741 | 100.0 | % | $ | 136,856 | 100.0 | % | |||||||
| Total costs of operating revenue (4) | 120,470 | 64.5 | % | 100,138 | 73.2 | % | |||||||||
| Restaurant-level operating margin (non-GAAP) (4)(2) | $ | 66,271 | 35.5 | % | $ | 36,718 | 26.8 | % | |||||||
| Other operating expenses: (4)(2) | |||||||||||||||
| General and administrative expenses | $ | 34,495 | 18.5 | % | $ | 20,895 | 15.3 | % | |||||||
| Depreciation and amortization | 7,558 | 4.0 | % | 8,204 | 6.0 | % | |||||||||
| Operating (gains), losses and other charges, net | 419 | 0.2 | % | 3,100 | 2.3 | % | |||||||||
| Total other operating expenses | $ | 42,472 | 22.7 | % | $ | 32,199 | 23.5 | % | |||||||
| Operating income (4) | $ | 23,799 | 12.7 | % | $ | 4,519 | 3.3 | % | |||||||
| (1 | ) | As a percentage of company restaurant sales. | |||||||||||||
| (2 | ) | Other operating expenses such as general and administrative expenses and depreciation and amortization relate to both company and franchise operations and are not allocated to costs of company restaurant sales and costs of franchise and license revenue. As such, operating margin is considered a non-GAAP financial measure. Operating margin should be considered as a supplement to, not as a substitute for, operating income (loss), net income (loss) or other financial measures prepared in accordance with U.S. generally accepted accounting principles. | |||||||||||||
| (3 | ) | As a percentage of franchise and license revenue. | |||||||||||||
| (4 | ) | As a percentage of total operating revenue. | |||||||||||||
| DENNY’S CORPORATION | ||||||||||||||||||
| Statistical Data | ||||||||||||||||||
| (Unaudited) | ||||||||||||||||||
| Changes in Same-Store Sales (1) | Quarter Ended | Two Quarters Ended | ||||||||||||||||
| (Increase (decrease) vs. 2019) | 6/30/21 | 6/30/21 | ||||||||||||||||
| Company Restaurants | 1.9 | % | (10.6 | )% | ||||||||||||||
| Domestic Franchised Restaurants | (1.5 | )% | (10.2 | )% | ||||||||||||||
| Domestic System-wide Restaurants | (1.2 | )% | (10.2 | )% | ||||||||||||||
| Changes in Same-Store Sales (1) | Quarter Ended | Two Quarters Ended | ||||||||||||||||
| (Increase (decrease) vs. prior year) | 6/30/21 | 6/24/20 | 6/30/21 | 6/24/20 | ||||||||||||||
| Company Restaurants | 172.1 | % | (64.9 | )% | 46.8 | % | (35.9 | )% | ||||||||||
| Domestic Franchised Restaurants | 113.2 | % | (56.1 | )% | 30.8 | % | (28.4 | )% | ||||||||||
| Domestic System-wide Restaurants | 117.0 | % | (56.9 | )% | 31.9 | % | (29.1 | )% | ||||||||||
| Average Unit Sales | Quarter Ended | Two Quarters Ended | ||||||||||||||||
| (In thousands) | 6/30/21 | 6/24/20 | 6/30/21 | 6/24/20 | ||||||||||||||
| Company Restaurants | $ | 732 | $ | 246 | $ | 1,257 | $ | 890 | ||||||||||
| Franchised Restaurants | $ | 416 | $ | 183 | $ | 742 | $ | 589 | ||||||||||
| Franchised | ||||||||||||||||||
| Restaurant Unit Activity | Company | & Licensed | Total | |||||||||||||||
| Ending Units March 31, 2021 | 65 | 1,584 | 1,649 | |||||||||||||||
| Units Opened | — | 3 | 3 | |||||||||||||||
| Units Closed | — | (7 | ) | (7 | ) | |||||||||||||
| Net Change | — | (4 | ) | (4 | ) | |||||||||||||
| Ending Units June 30, 2021 | 65 | 1,580 | 1,645 | |||||||||||||||
| Equivalent Units | ||||||||||||||||||
| Second Quarter 2021 | 65 | 1,582 | 1,647 | |||||||||||||||
| Second Quarter 2020 | 62 | 1,622 | 1,684 | |||||||||||||||
| Net Change | 3 | (40 | ) | (37 | ) | |||||||||||||
| Franchised | ||||||||||||||||||
| Restaurant Unit Activity | Company | & Licensed | Total | |||||||||||||||
| Ending Units December 30, 2020 | 65 | 1,585 | 1,650 | |||||||||||||||
| Units Opened | — | 6 | 6 | |||||||||||||||
| Units Closed | — | (11 | ) | (11 | ) | |||||||||||||
| Net Change | — | (5 | ) | (5 | ) | |||||||||||||
| Ending Units June 30, 2021 | 65 | 1,580 | 1,645 | |||||||||||||||
| Equivalent Units | ||||||||||||||||||
| Year-to-Date 2021 | 65 | 1,583 | 1,648 | |||||||||||||||
| Year-to-Date 2020 | 64 | 1,627 | 1,691 | |||||||||||||||
| Net Change | 1 | (44 | ) | (43 | ) | |||||||||||||
| (1 | ) | Same-store sales include sales at company restaurants and non-consolidated franchised and licensed restaurants that were open during the comparable periods noted. Total operating revenue is limited to company restaurant sales and royalties, advertising revenue, fees and occupancy revenue from non-consolidated franchised and licensed restaurants. Accordingly, domestic franchise same-store sales and domestic system-wide same-store sales should be considered as a supplement to, not a substitute for, the Company's results as reported under GAAP. | ||||||||||||||||
FAQ
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