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Denny’s Corporation Reports Results For Third Quarter 2020

SPARTANBURG, S.C., Oct. 27, 2020 (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 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
JanFebMarAprMayJunJulAugSepOct1
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):

 Q2Q3Q4
 AprMayJunJulAugSepOct1
Open Dining Rooms(74%)(47%)(33%)(36%)(29%)(24%)(24%)
 22221,0871,2441,0441,1271,289
        
Off-Premise Only(76%)(69%)(68%)(55%)(47%)(39%)(33%)
 1,060938327237444369207
        
Temporary Closures48037812047352219

1. Preliminary results

Average Domestic Capacity Restrictions for Fiscal October 20201:

 Number of Units% of Domestic System
25% Capacity22984%
50-75% Capacity667
Social Distancing378
Off-Premise Only20714%
No Restrictions151%
Temporarily Closed191%
Total1,515100%

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 
  Investments2,266  3,649 
  Receivables, net20,637  27,488 
  Assets held for sale3,206  1,925 
  Other current assets19,855  16,299 
   Total current assets57,181  52,733 
 Property, net89,466  97,626 
 Financing lease right-of-use assets, net10,284  11,720 
 Operating lease right-of-use assets, net145,302  158,550 
 Goodwill36,884  36,832 
 Intangible assets, net52,100  53,956 
 Deferred income taxes, net27,047  14,718 
 Other noncurrent assets, net32,533  34,252 
   Total assets$450,797  $460,387 
       
Liabilities   
 Current liabilities   
  Current finance lease liabilities$1,963  $1,674 
  Current operating lease liabilities18,253  16,344 
  Accounts payable10,898  20,256 
  Other current liabilities41,346  57,307 
   Total current liabilities72,460  95,581 
 Long-term liabilities   
  Long-term debt230,000  240,000 
  Noncurrent finance lease liabilities13,805  14,779 
  Noncurrent operating lease liabilities142,110  152,750 
  Other130,793  95,341 
   Total long-term liabilities516,708  502,870 
   Total liabilities589,168  598,451 
       
Shareholders' deficit   
  Common stock1,178  1,094 
  Paid-in capital672,502  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 liabilities15,768  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 revenue43,795  60,676 
  Total operating revenue71,644  124,258 
Costs of company restaurant sales, excluding depreciation and amortization27,370  54,306 
Costs of franchise and license revenue, excluding depreciation and amortization24,073  31,136 
General and administrative expenses13,694  16,395 
Depreciation and amortization4,048  4,338 
Operating (gains), losses and other charges, net(781) (50,091)
  Total operating costs and expenses, net68,404  56,084 
Operating income3,240  68,174 
Interest expense, net4,422  4,188 
Other nonoperating expense (income), net(8,477) (415)
Income before income taxes7,295  64,401 
Provision for income taxes818  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 outstanding63,793  59,430 
Diluted weighted average shares outstanding64,027  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 compensation1,998  2,176 
Incentive compensation1,290  1,872 
Deferred compensation valuation adjustments586  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  $257,574 
 Franchise and license revenue123,232  169,979 
  Total operating revenue208,500  427,553 
Costs of company restaurant sales, excluding depreciation and amortization83,094  218,249 
Costs of franchise and license revenue, excluding depreciation and amortization68,487  87,065 
General and administrative expenses34,589  53,659 
Depreciation and amortization12,252  15,619 
Operating (gains), losses and other charges, net2,319  (85,459)
  Total operating costs and expenses, net200,741  289,133 
Operating income7,759  138,420 
Interest expense, net13,320  14,977 
Other nonoperating expense (income), net3,851  (2,111)
Income (loss) before income taxes(9,412) 125,554 
Provision for (benefit from) income taxes(1,937) 26,703 
Net income (loss)$(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 outstanding59,350  60,457 
Diluted weighted average shares outstanding59,350  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 compensation1,972  7,142 
Incentive compensation1,305  7,329 
Deferred compensation valuation adjustments10  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 taxes818   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 compensation1,998   2,176   1,972   7,142  
Deferred compensation plan valuation adjustments586   256   10   1,792  
Interest expense, net4,422   4,188   13,320   14,977  
Depreciation and amortization4,048   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 charges338      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 outstanding64,027   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 expenses13,694    16,395    34,589   53,659   
Depreciation and amortization4,048    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 costs7,106 25.5% 15,603 24.5%
  Payroll and benefits11,925 42.8% 23,777 37.4%
  Occupancy2,638 9.5% 4,301 6.8%
  Other operating costs:     
   Utilities1,281 4.6% 2,438 3.8%
   Repairs and maintenance711 2.6% 1,774 2.8%
   Marketing1,045 3.8% 2,411 3.8%
   Other direct costs2,664 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 revenue13,927 31.8% 20,756 34.2%
 Initial and other fees1,890 4.3% 1,356 2.2%
 Occupancy revenue10,082 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 costs6,858 15.7% 7,257 12.0%
 Other direct costs3,288 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 amortization4,048 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 costs21,541 25.3% 62,871  24.4%
  Payroll and benefits37,070 43.5% 100,475  39.0%
  Occupancy8,529 10.0% 15,583  6.0%
  Other operating costs:     
   Utilities3,815 4.5% 8,916  3.5%
   Repairs and maintenance1,928 2.3% 5,742  2.2%
   Marketing2,771 3.2% 9,357  3.6%
   Other direct costs7,440 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 revenue38,685 31.4% 59,582  35.1%
 Initial and other fees4,933 4.0% 4,250  2.5%
 Occupancy revenue31,152 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 costs20,096 16.3% 18,018  10.6%
 Other direct costs9,706 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 amortization12,252 5.9% 15,619  3.7%
 Operating (gains), losses and other charges, net2,319 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 SalesQuarter 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 ActivityCompany & Licensed Total  
Ending Units June 24, 202067  1,616  1,683   
 Units Opened  5  5   
 Units Closed(1) (23) (24)  
  Net Change(1) (18) (19)  
Ending Units September 23, 202066  1,598  1,664   
          
Equivalent Units       
 Third Quarter 202066  1,608  1,674   
 Third Quarter 201999  1,603  1,702   
  Net Change(33) 5  (28)  
          
     Franchised    
Restaurant Unit ActivityCompany & Licensed Total  
Ending Units December 25, 201968  1,635  1,703   
 Units Opened  16  16   
 Units Closed(2) (53) (55)  
  Net Change(2) (37) (39)  
Ending Units September 23, 202066  1,598  1,664   
          
Equivalent Units       
 Year-to-Date 202065  1,620  1,685   
 Year-to-Date 2019141  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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