DENN
$15.83
Dennys
$.43
2.79%
Earnings Details
2nd Quarter June 2021
Tuesday, August 03, 2021 4:05:00 PM
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Summary

Dennys (DENN) Recent Earnings

Dennys (DENN) reported 2nd Quarter June 2021 earnings of $0.18 per share on revenue of $106.2 million. The consensus earnings estimate was $0.12 per share on revenue of $98.1 million. Revenue grew 164.3% on a year-over-year basis.

Denny' Corp operates as a full-service restaurant chains. Denny’s, through its wholly-owned subsidiary, Denny’s, Inc., owns and operates the Denny’s restaurant brand.

Results
Reported Earnings
$0.18
Earnings Whisper
-
Consensus Estimate
$0.12
Reported Revenue
$106.2 Mil
Revenue Estimate
$98.1 Mil
Growth
Earnings Growth
Revenue Growth
Power Rating
Grade
Earnings Release

Denny’s Corporation Reports Results For Second Quarter 2021

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 a 1.5% decrease at domestic franchised restaurants and a 1.9% 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, or 51.0% of franchise and license revenue, and Company Restaurant Operating Margin* was $9.8 million, or 20.5% 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 24% of total sales compared to 12% pre-pandemic.

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
 JanFebMarAprMayJunJul 1
System(31%)(25%)(9%)(2%)(3%)1%3%
        
24/7 Units(20%)(16%)2%11%11%14%15%
Limited Hour Units(38%)(32%)(16%)(11%)(12%)(8%)(7%)
 
  1. July results are preliminary.
   


 Domestic Average Units
 Fiscal Year 2021
 JanFebMarAprMayJunJul 1
System1,5041,5011,5011,4991,4981,4971,495
        
24/7 Units519532569566561566576
Limited Hour Units939928912920926920909
        
Temporary Closures46412013111110
 
  1. July results are preliminary.
   

Second Quarter Results

Denny’s total operating revenue increased 164.3% to $106.2 million compared to $40.2 million in the prior year quarter. Franchise and license revenue was $58.6 million compared to $25.0 million in the prior year quarter. Company restaurant sales were $47.6 million compared to $15.1 million in the prior year quarter. These changes were primarily due to reduced dine-in restrictions and fewer temporary closures related to the COVID-19 pandemic in the current period as compared to the prior year period.

Franchise Operating Margin* was $29.9 million, or 51.0% of franchise and license revenue, compared to $9.8 million, or 39.1%, in the prior year quarter. This margin increase was primarily due to the improvement in sales performance at franchised restaurants, partially offset by fewer equivalent units.

Company Restaurant Operating Margin* was $9.8 million, or 20.5% of company restaurant sales, compared to ($4.5) million, or (29.6%), in the prior year quarter. This change in margin was primarily due to the improvement in sales performance at company restaurants in addition to lower payroll and benefits costs due to staffing challenges. Additionally, the Company recorded approximately $0.6M in favorable reserve adjustments and tax credits related to the CARES Act.

Total general and administrative expenses were $17.5 million, compared to $13.2 million in the prior year quarter. This change was primarily due to increases in both performance-based incentive compensation and share-based compensation expense in addition to temporary cost reductions during the prior year quarter. These increases were partially offset by market valuation changes in the Company's deferred compensation plan liabilities compared to the prior year quarter as well as approximately $0.5 million in tax credits related to the CARES Act.

Denny’s ended the quarter with $194.9 million of total debt outstanding, including $180.0 million of borrowings under its credit facility. Subsequent to the end of the second quarter, the Company paid down an additional $5 million on its revolving credit facility, bringing the current outstanding balance to $175.0 million.

The benefit from income taxes was $1.2 million, compared to $5.1 million in the prior year quarter, reflecting an effective tax rate of 59.3%. Approximately $1.5 million in cash taxes were paid during the quarter.

Net loss was $0.8 million, or $0.01 per diluted share, compared to net loss of $23.0 million, or $0.41 per diluted share, in the prior year quarter. Adjusted Net Income* per share was $0.18 compared to Adjusted Net Loss* per share of $0.25 in the prior year quarter.

Adjusted Free Cash Flow* and Capital Allocation

Denny’s generated $17.8 million of Adjusted Free Cash Flow* after investing $1.5 million in cash capital expenditures, including maintenance capital.

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% and 4% 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 
  Investments2,069  2,272 
  Receivables, net20,407  21,349 
  Inventories1,280  1,181 
  Assets held for sale1,621  1,125 
  Prepaid and other current assets12,168  18,847 
   Total current assets48,427  48,666 
 Property, net82,490  86,154 
 Financing lease right-of-use assets, net9,437  9,830 
 Operating lease right-of-use assets, net135,229  139,534 
 Goodwill36,884  36,884 
 Intangible assets, net50,892  51,559 
 Deferred financing costs, net1,727  2,414 
 Deferred income taxes, net19,854  23,210 
 Other noncurrent assets33,407  32,698 
   Total assets$418,347  $430,949 
       
Liabilities   
 Current liabilities   
  Current finance lease liabilities$1,637  $1,839 
  Current operating lease liabilities16,348  16,856 
  Accounts payable14,376  12,021 
  Other current liabilities55,251  46,462 
   Total current liabilities87,612  77,178 
 Long-term liabilities   
  Long-term debt180,000  210,000 
  Noncurrent finance lease liabilities13,265  13,530 
  Noncurrent operating lease liabilities132,959  137,534 
  Liability for insurance claims, less current portion9,602  10,309 
  Other noncurrent liabilities94,332  112,844 
   Total long-term liabilities430,158  484,217 
   Total liabilities517,770  561,395 
       
Shareholders' deficit   
  Common stock642  640 
  Paid-in capital129,176  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 liabilities14,902  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  $15,128 
 Franchise and license revenue58,593  25,033 
  Total operating revenue106,165  40,161 
Costs of company restaurant sales, excluding depreciation and amortization37,813  19,606 
Costs of franchise and license revenue, excluding depreciation and amortization28,735  15,244 
General and administrative expenses17,548  13,153 
Depreciation and amortization3,897  4,058 
Operating (gains), losses and other charges, net(113) 1,627 
  Total operating costs and expenses, net87,880  53,688 
Operating income (loss)18,285  (13,527)
Interest expense, net4,066  4,947 
Other nonoperating expense, net16,251  9,565 
Loss before income taxes(2,032) (28,039)
Benefit from income taxes(1,204) (5,074)
Net loss$(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 outstanding65,294  55,686 
Diluted weighted average shares outstanding65,294  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 compensation3,388  1,511 
Incentive compensation3,032  1 
Deferred compensation valuation adjustments783  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 revenue105,600  79,437 
  Total operating revenue186,741  136,856 
Costs of company restaurant sales, excluding depreciation and amortization67,977  55,724 
Costs of franchise and license revenue, excluding depreciation and amortization52,493  44,414 
General and administrative expenses34,495  20,895 
Depreciation and amortization7,558  8,204 
Operating (gains), losses and other charges, net419  3,100 
  Total operating costs and expenses, net162,942  132,337 
Operating income23,799  4,519 
Interest expense, net8,343  8,898 
Other nonoperating expense (income), net(13,797) 12,328 
Income (loss) before income taxes29,253  (16,707)
Provision for (benefit from) income taxes6,900  (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 outstanding65,273  55,993 
Diluted weighted average shares outstanding65,789  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 compensation6,860  (26)
Incentive compensation5,118  15 
Deferred compensation valuation adjustments1,300  (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), net16,251  9,565  (13,797) 12,328 
Share-based compensation expense (benefit)3,388  1,511  6,860  (26)
Deferred compensation plan valuation adjustments783  1,940  1,300  (576)
Interest expense, net4,066  4,947  8,343  8,898 
Depreciation and amortization3,897  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 adjustments783  1,940  1,300  (576)
Other nonoperating expense (income), net16,251  9,565  (13,797) 12,328 
Gains (losses) on investments5  (25) (3) 91 
Gains (losses) on termination of leases106  (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, net4,066  4,947  8,343  8,898 
Cash interest expense, net (1)(4,455) (4,717) (9,041) (8,437)
Deferred income tax (expense) benefit1,888  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)
Inventories111  (179) 98  (175)
Other current assets(1,383) 6,704  (6,677) 2,593 
Other noncurrent assets1,116  1,472  1,317  (106)
Operating lease assets and liabilities217  (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 liabilities887  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 $0.8 million and $1.6 million for dedesignated interest rate swap derivatives for the quarter and year-to-date periods ended June 30, 2021, respectively.


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, net17,227  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 outstanding65,829  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 $0.8 million and $1.6 million for dedesignated interest rate swap derivatives for the quarter and year-to-date periods ended June 30, 2021, respectively.
(2)Tax adjustments for the quarter and year-to-date periods ended June 30, 2021 reflect an effective tax rate of 27.7% and 23.6%, respectively. Tax adjustments for the reclassification of losses related to derivatives are calculated using an effective tax rate of 25.7% for the quarter and year-to-date periods ended June 24, 2020. Tax adjustments for all other items for the quarter and year-to-date periods ended June 24, 2020 are calculated using an effective rate of 5.4% and 8.8%, respectively.


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 expenses17,548  13,153  34,495  20,895 
Depreciation and amortization3,897  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 costs11,447 24.1% 4,305 28.5%
  Payroll and benefits16,970 35.7% 8,039 53.1%
  Occupancy2,844 6.0% 2,728 18.0%
  Other operating costs:     
   Utilities1,390 2.9% 1,098 7.3%
   Repairs and maintenance635 1.3% 428 2.8%
   Marketing1,365 2.9% 607 4.0%
   Other direct costs3,162 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 revenue18,600 31.7% 7,232 28.9%
 Initial and other fees2,066 3.5% 1,346 5.4%
 Occupancy revenue10,810 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 costs6,879 11.7% 5,829 23.3%
 Other direct costs3,256 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 amortization3,897 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 costs19,719 24.3% 14,435 25.1%
  Payroll and benefits29,935 36.9% 25,145 43.8%
  Occupancy5,694 7.0% 5,891 10.3%
  Other operating costs:     
   Utilities2,615 3.2% 2,534 4.4%
   Repairs and maintenance1,168 1.4% 1,217 2.1%
   Marketing2,332 2.9% 1,726 3.0%
   Other direct costs6,514 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 revenue32,711 31.0% 24,758 31.2%
 Initial and other fees3,904 3.7% 3,043 3.8%
 Occupancy revenue21,024 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 costs13,418 12.7% 13,238 16.7%
 Other direct costs6,364 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 amortization7,558 4.0% 8,204 6.0%
 Operating (gains), losses and other charges, net419 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 Restaurants1.9%   (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 Restaurants172.1% (64.9)% 46.8% (35.9)%
 Domestic Franchised Restaurants113.2% (56.1)% 30.8% (28.4)%
 Domestic System-wide Restaurants117.0% (56.9)% 31.9% (29.1)%
          
Average Unit SalesQuarter 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 ActivityCompany & Licensed Total  
Ending Units March 31, 202165  1,584  1,649   
 Units Opened  3  3   
 Units Closed  (7) (7)  
  Net Change  (4) (4)  
Ending Units June 30, 202165  1,580  1,645   
          
Equivalent Units       
 Second Quarter 202165  1,582  1,647   
 Second Quarter 202062  1,622  1,684   
  Net Change3  (40) (37)  
          
     Franchised    
Restaurant Unit ActivityCompany & Licensed Total  
Ending Units December 30, 202065  1,585  1,650   
 Units Opened  6  6   
 Units Closed  (11) (11)  
  Net Change  (5) (5)  
Ending Units June 30, 202165  1,580  1,645   
          
Equivalent Units       
 Year-to-Date 202165  1,583  1,648   
 Year-to-Date 202064  1,627  1,691   
  Net Change1  (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.


Investor Contact:Curt Nichols877-784-7167Media Contact:Hadas Streit, Allison+Partners646-428-0629

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Source: Denny's Corporation