• Denny’s Corporation Reports Results for Fourth Quarter and Full Year 2021

    المصدر: Nasdaq GlobeNewswire / 15 فبراير 2022 15:05:01   America/Chicago

    SPARTANBURG, S.C., Feb. 15, 2022 (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 fourth quarter and full year ended December 29, 2021 and provided a business update on the Company’s operations.

    John Miller, Chief Executive Officer, stated, "We have entered 2022 with a sense of renewed energy and excitement as several of our recently announced transformational brand initiatives are progressing. While the spread of the Omicron variant has caused some near-term volatility, our progress through the recovery curve validates our confidence for the ongoing success of this brand. Our dedicated franchisees and team continue to deliver a great experience to our guests in addition to sharing in our long-term vision to further propel this iconic brand forward."

    Fourth Quarter 2021 Highlights

    • Total operating revenue increased 34.4% to $107.6 million, primarily due to the COVID-19 recovery as compared to the prior year quarter.
    • Domestic system-wide same-store sales** increased 0.7% compared to the equivalent fiscal period in 2019, including a 0.4% increase at domestic franchised restaurants and a 5.1% increase at company restaurants.
    • Domestic system-wide same-store sales** increased 49.0% compared to the equivalent fiscal period in 2020.
    • Opened seven franchised restaurants, including one international location.
    • Completed seven remodels, including four franchised restaurants.
    • Operating income (loss) was $62.6 million compared to ($1.1) million in the prior year quarter.
    • Franchise Operating Margin* was $31.1 million, or 51.6% of franchise and license revenue, and Company Restaurant Operating Margin* was $7.0 million, or 14.8% of company restaurant sales.
    • Net income was $43.5 million, or $0.67 per diluted share.
    • Adjusted Net Income* and Adjusted Net Income Per Share* were $10.5 million and $0.16, respectively.
    • Adjusted EBITDA* was $24.1 million compared to $8.0 million in the prior year quarter.
    • Cash provided by (used in) operating, investing, and financing activities was $12.9 million, $31.9 million, and ($24.4) million, respectively.
    • Adjusted Free Cash Flow* was $3.4 million compared to $2.1 million in the prior year quarter.

    Full Year 2021 Highlights

    • Total operating revenue increased 38.0% to $398.2 million, primarily due to the COVID-19 recovery as compared to the prior year.
    • Domestic system-wide same-store sales** decreased 4.7% compared to 2019, including decreases of 4.8% at domestic franchised restaurants and 3.5% at company restaurants.
    • Domestic system-wide same-store sales** increased 41.1% compared to 2020.
    • Opened 20 franchised restaurants, including eight international locations.
    • Completed nine remodels, including five franchised restaurants.
    • Operating income was $104.1 million compared to $6.7 million in the prior year.
    • Franchise Operating Margin* was $114.0 million, or 51.1% of franchise and license revenue, and Company Restaurant Operating Margin* was $28.1 million, or 16.0% of company restaurant sales.
    • Net income was $78.1 million, or $1.19 per diluted share.
    • Adjusted Net Income* and Adjusted Net Income Per Share* were $33.1 million and $0.50, respectively.
    • Adjusted EBITDA* was $85.6 million compared to $26.6 million in the prior year.
    • Cash provided by (used in) operating, investing, and financing activities was $76.2 million, $29.0 million, and ($78.5) million, respectively.
    • Adjusted Free Cash Flow* was $40.8 million compared to $1.6 million in the prior year.

    2021 Sales and Operating Hours

    During the fourth quarter, October and November domestic system-wide same-store sales** returned to above pre-pandemic levels, with sales softening in December due to both holiday shifts and the increase in Omicron variant cases. The domestic system experienced improvement in restaurants operating 24/7 from the end of the third quarter to the end of the fourth quarter; however, labor availability continues to challenge effective operating hours.

    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:

     Domestic System-Wide Same-Store Sales** Compared to 2019 Fiscal Periods
     Fiscal Year 2021: (5%)
     Q1: (20%)Q2: (1%)Q3: (0%)Q4: 1%
     JanFebMarAprMayJunJulAugSepOctNovDec
    System(31%)(25%)(9%)(2%)(3%)1%3%(2%)(1%)1%4%(2%)
                 
    24/7 Units(20%)(16%)2%11%11%14%15%9%9%10%13%7%
    Limited Hour Units(38%)(32%)(16%)(11%)(12%)(8%)(7%)(10%)(10%)(9%)(6%)(11%)


     Domestic Units Hours of Operations
     JanFebMarAprMayJunJulAugSepOctNovDec
    24/7 Hours35%35%38%38%37%38%39%40%42%45%46%48%
    18 - 23 Hours10%12%14%14%16%16%17%18%20%26%24%24%
    < than 18 Hours55%53%48%48%47%46%44%42%38%29%30%28%

    Fourth Quarter Results

    Denny’s total operating revenue increased 34.4% to $107.6 million compared to $80.1 million in the prior year quarter. Franchise and license revenue was $60.2 million compared to $47.2 million in the prior year quarter. Company restaurant sales were $47.4 million compared to $32.9 million in the prior year quarter. These changes were primarily due to dine-in restrictions related to the COVID-19 pandemic in the prior year quarter.

    Franchise Operating Margin* was $31.1 million, or 51.6% of franchise and license revenue, compared to $21.4 million, or 45.2%, in the prior year quarter. This margin increase was primarily due to the improvement in sales performance at franchised restaurants.

    Company Restaurant Operating Margin* was $7.0 million, or 14.8% of company restaurant sales, compared to $1.4 million, or 4.3%, in the prior year quarter. This margin increase was primarily due to the improvement in sales performance at company restaurants.

    Total general and administrative expenses were $17.7 million, compared to $20.5 million in the prior year quarter. This change was primarily due to decreases in performance-based incentive compensation, share-based compensation expense and market valuation changes in the Company's deferred compensation plan liabilities compared to the prior year quarter. These decreases were partially offset by prior year quarter benefits of approximately $1.0 million in tax credits related to the CARES Act in addition to temporary cost reductions.

    The provision for (benefit from) income taxes was $15.0 million, reflecting an effective tax rate of 25.7%, compared to ($0.1) million in the prior year quarter. Approximately $4.3 million in cash taxes were paid during the quarter.

    Net income was $43.5 million, or $0.67 per diluted share, compared to $2.4 million, or $0.04 per diluted share, in the prior year quarter. This change in net income was primarily related to the sale of two parcels of real estate in the current year quarter. Adjusted Net Income (Loss)* per share was $0.16 compared to ($0.05) in the prior year quarter.

    Denny’s ended the quarter with $182.7 million of total debt outstanding, including $170.0 million of borrowings under its credit facility.

    Adjusted Free Cash Flow* and Capital Allocation

    Denny’s generated $3.4 million of Adjusted Free Cash Flow* after investing $12.4 million in cash capital expenditures. The Company sold two parcels of real estate for approximately $49 million in December 2021 and approximately $10.4 million of those proceeds were used to acquire three parcels of real estate through a like-kind exchange transaction which is included in the Company's cash capital expenditures along with maintenance and remodel capital. The proceeds from these sales are excluded from Adjusted Free Cash Flow*.

    In the fourth quarter, the Company allocated $24.0 million to share repurchases, resulting in $30.6 million allocated to share repurchases for the full year. Between the end of the fourth quarter and February 11, 2022, the Company allocated an additional $10.7 million to share repurchases resulting in approximately $207 million remaining under its existing repurchase authorization.

    Strategic Brand Initiatives

    The Company has recently begun implementing new strategic brand initiatives:

    • The Company is progressing on its rollout of a new cloud-based restaurant technology platform and starting a new kitchen modernization initiative across the domestic system which is expected to enhance the guest experience and drive operational efficiencies.
    • The Company has extended its remodel cycle from seven years to eight years and has rationalized the due dates to more equally distribute franchisee capital investments over this next remodel cycle.
    • The Company has entered into a new development agreement with Reef Technology, the ghost-kitchen operator, that is designed to enable Denny's to penetrate markets in which the brand is currently underrepresented, especially dense metropolitan locations.
    • Finally, the Company is creating additional opportunities for franchisees to capitalize on market rationalization opportunities with a new cash development incentive program.

    Business Outlook

    The following expectations for the fiscal first quarter of 2022 ending March 30, 2022 reflect management's expectations that the current economic environment will not change materially:

    • Domestic system-wide same-store sales** increasing between 26% and 28% compared to 2021.
    • Total general and administrative expenses between $17 million and $18 million, including approximately $4.0 million related to share-based compensation expense.
    • Adjusted EBITDA* between $17 million and $19 million, including approximately $2.5 million related to cash payments for share-based compensation.

    *   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 fourth quarter ended December 29, 2021 on its quarterly investor conference call today, Tuesday, February 15, 2022 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 December 29, 2021, Denny’s had 1,640 franchised, licensed, and company restaurants around the world including 153 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)12/29/21 12/30/20
    Assets   
    Current assets   
    Cash and cash equivalents$30,624  $3,892 
    Investments 2,551   2,272 
    Receivables, net 19,621   21,349 
    Inventories 5,060   1,181 
    Assets held for sale —   1,125 
    Prepaid and other current assets 11,393   18,847 
    Total current assets 69,249   48,666 
    Property, net 91,176   86,154 
    Financing lease right-of-use assets, net 7,709   9,830 
    Operating lease right-of-use assets, net 128,727   139,534 
    Goodwill 36,884   36,884 
    Intangible assets, net 50,226   51,559 
    Deferred financing costs, net 2,971   2,414 
    Deferred income taxes, net 11,502   23,210 
    Other noncurrent assets 37,083   32,698 
    Total assets$435,527  $430,949 
        
    Liabilities   
    Current liabilities   
    Current finance lease liabilities$1,952  $1,839 
    Current operating lease liabilities 15,829   16,856 
    Accounts payable 15,595   12,021 
    Other current liabilities 64,146   46,462 
    Total current liabilities 97,522   77,178 
    Long-term liabilities   
    Long-term debt 170,000   210,000 
    Noncurrent finance lease liabilities 10,744   13,530 
    Noncurrent operating lease liabilities 126,296   137,534 
    Liability for insurance claims, less current portion 8,438   10,309 
    Other noncurrent liabilities 87,792   112,844 
    Total long-term liabilities 403,270   484,217 
    Total liabilities 500,792   561,395 
        
    Shareholders' deficit   
    Common stock 642   640 
    Paid-in capital 135,596   123,833 
    Deficit (116,441)  (194,514)
    Accumulated other comprehensive loss, net (54,470)  (60,405)
    Treasury stock (30,592)  — 
    Total shareholders' deficit (65,265)  (130,446)
    Total liabilities and shareholders' deficit$435,527  $430,949 
        
    Debt Balances
    Credit facility revolver due 2026$170,000  $210,000 
    Finance lease liabilities 12,696   15,369 
    Total debt$182,696  $225,369 
            


    DENNY’S CORPORATION
    Condensed Consolidated Statements of Operations
    (Unaudited)
        
     Quarter Ended
    ($ in thousands, except per share amounts)12/29/21 12/30/20
    Revenue:   
    Company restaurant sales$47,406  $32,892 
    Franchise and license revenue 60,233   47,213 
    Total operating revenue 107,639   80,105 
    Costs of company restaurant sales, excluding depreciation and amortization 40,386   31,475 
    Costs of franchise and license revenue, excluding depreciation and amortization 29,178   25,861 
    General and administrative expenses 17,694   20,451 
    Depreciation and amortization 4,066   3,909 
    Operating (gains), losses and other charges, net (46,309)  (511)
    Total operating costs and expenses, net 45,015   81,185 
    Operating income (loss) 62,624   (1,080)
    Interest expense, net 3,134   4,645 
    Other nonoperating expense (income), net 989   (8,022)
    Income before income taxes 58,501   2,297 
    Provision for (benefit from) income taxes 15,046   (62)
    Net income$43,455  $2,359 
        
    Net income per share - basic$0.67  $0.04 
    Net income per share - diluted$0.67  $0.04 
        
    Basic weighted average shares outstanding 64,449   64,898 
    Diluted weighted average shares outstanding 64,870   65,467 
        
    Comprehensive income$45,241  $3,159 
        
    General and Administrative Expenses  
    Corporate administrative expenses$11,993  $9,833 
    Share-based compensation 3,390   5,976 
    Incentive compensation 1,617   3,046 
    Deferred compensation valuation adjustments 694   1,596 
    Total general and administrative expenses$17,694  $20,451 
            


    DENNY’S CORPORATION
    Condensed Consolidated Statements of Operations
    (Unaudited)
        
     Fiscal Year Ended
    ($ in thousands, except per share amounts)12/29/21 12/30/20
    Revenue:   
    Company restaurant sales$175,017  $118,160 
    Franchise and license revenue 223,157   170,445 
    Total operating revenue 398,174   288,605 
    Costs of company restaurant sales, excluding depreciation and amortization 146,932   114,569 
    Costs of franchise and license revenue, excluding depreciation and amortization 109,140   94,348 
    General and administrative expenses 68,686   55,040 
    Depreciation and amortization 15,446   16,161 
    Operating (gains), losses and other charges, net (46,105)  1,808 
    Total operating costs and expenses, net 294,099   281,926 
    Operating income 104,075   6,679 
    Interest expense, net 15,148   17,965 
    Other nonoperating income, net (15,176)  (4,171)
    Income (loss) before income taxes 104,103   (7,115)
    Provision for (benefit from) income taxes 26,030   (1,999)
    Net income (loss)$78,073  $(5,116)
        
    Net income (loss) per share - basic$1.20  $(0.08)
    Net income (loss) per share - diluted$1.19  $(0.08)
        
    Basic weighted average shares outstanding 65,171   60,812 
    Diluted weighted average shares outstanding 65,573   60,812 
        
    Comprehensive income (loss)$84,008  $(31,561)
        
    General and Administrative Expenses  
    Corporate administrative expenses$44,367  $41,135 
    Share-based compensation 13,602   7,948 
    Incentive compensation 8,628   4,351 
    Deferred compensation valuation adjustments 2,089   1,606 
    Total general and administrative expenses$68,686  $55,040 
            


    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 U.S. generally accepted accounting principles (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 income (loss) per share, net cash provided by (used in) operating activities, or other financial performance and liquidity measures prepared in accordance with GAAP.

     Quarter Ended Fiscal Year Ended
    ($ in thousands)12/29/21 12/30/20 12/29/21 12/30/20
    Net income (loss)$43,455  $2,359  $78,073  $(5,116)
    Provision for (benefit from) income taxes 15,046   (62)  26,030   (1,999)
    Operating (gains), losses and other charges, net (46,309)  (511)  (46,105)  1,808 
    Other nonoperating expense (income), net 989   (8,022)  (15,176)  (4,171)
    Share-based compensation expense 3,390   5,976   13,602   7,948 
    Deferred compensation plan valuation adjustments 694   1,596   2,089   1,606 
    Interest expense, net 3,134   4,645   15,148   17,965 
    Depreciation and amortization 4,066   3,909   15,446   16,161 
    Cash payments for restructuring charges and exit costs (219)  (575)  (1,767)  (2,981)
    Cash payments for share-based compensation (193)  (1,354)  (1,758)  (4,578)
    Adjusted EBITDA$24,053  $7,961  $85,582  $26,643 
            


    DENNY’S CORPORATION
    Reconciliation of Net Income (Loss) and Net Cash Provided by (Used in) Operating Activities
    to Non-GAAP Financial Measures Continued
    (Unaudited)
     Quarter Ended Fiscal Year Ended
    ($ in thousands)12/29/21 12/30/20 12/29/21 12/30/20
    Net cash provided by (used in) operating activities$12,944  $8,473  $76,173  $(3,137)
    Capital expenditures (2,034)  (1,486)  (7,355)  (6,962)
    Acquisitions of real estate (10,369)  —   (10,369)  — 
    Cash payments for restructuring charges and exit costs (219)  (575)  (1,767)  (2,981)
    Cash payments for share-based compensation (193)  (1,354)  (1,758)  (4,578)
    Deferred compensation plan valuation adjustments 694   1,596   2,089   1,606 
    Other nonoperating expense (income), net 989   (8,022)  (15,176)  (4,171)
    Gains (losses) on investments (32)  6   (21)  123 
    Gains (losses) on early termination of debt and leases 471   (181)  523   (224)
    Amortization of deferred financing costs (159)  (285)  (1,105)  (876)
    Gains (losses) and amortization on interest rate swap derivatives, net (2,142)  6,349   12,629   2,164 
    Interest expense, net 3,134   4,645   15,148   17,965 
    Cash interest expense, net (1) (3,916)  (4,912)  (17,152)  (18,047)
    Deferred income tax expense (10,384)  (6,486)  (14,097)  (3,981)
    Decrease in tax valuation allowance 5,031   3,041   5,031   3,041 
    Provision for (benefit from) income taxes 15,046   (62)  26,030   (1,999)
    Income taxes (paid) received, net (4,304)  539   (9,942)  (6)
    Changes in operating assets and liabilities       
    Receivables 2,809   1,087   (1,373)  (6,378)
    Inventories 3,830   164   3,879   (101)
    Other current assets (3,158)  7   (7,454)  3,872 
    Other noncurrent assets 860   2,290   1,881   1,816 
    Operating lease assets and liabilities 371   387   1,521   (844)
    Accounts payable (248)  2,142   (6,608)  10,682 
    Accrued payroll (1,651)  (5,904)  (3,113)  2,835 
    Accrued taxes 1,570   1,745   317   774 
    Other accrued liabilities (6,794)  (987)  (12,684)  5,525 
    Other noncurrent liabilities 1,284   (115)  5,517   5,510 
    Adjusted Free Cash Flow$3,430  $2,102  $40,764  $1,628 
            


    (1)  Includes cash interest expense, net and cash payments of approximately $0.9 million and $3.3 million for dedesignated interest rate swap derivatives for the quarter and year ended December 29, 2021, respectively. Includes cash interest expense, net and cash payments of approximately $0.8 million and $1.9 million for dedesignated interest rate swap derivatives for the quarter and year ended December 30, 2020, respectively.


    DENNY’S CORPORATION
    Reconciliation of Net Income (Loss) and Net Cash Provided by (Used in) Operating Activities
    to Non-GAAP Financial Measures Continued
    (Unaudited)
       Quarter Ended Fiscal Year Ended
    ($ in thousands, except per share amounts)12/29/21 12/30/20 12/29/21 12/30/20
    Adjusted EBITDA$24,053  $7,961  $85,582  $26,643 
    Cash interest expense, net (1) (3,916)  (4,912)  (17,152)  (18,047)
    Cash (paid) received for income taxes, net (4,304)  539   (9,942)  (6)
    Cash paid for capital expenditures and real estate acquisitions (12,403)  (1,486)  (17,724)  (6,962)
    Adjusted Free Cash Flow$3,430  $2,102  $40,764  $1,628 
            
    Net income (loss)$43,455  $2,359  $78,073  $(5,116)
    (Gains) losses and amortization on interest rate swap derivatives, net 2,142   (6,349)  (12,629)  (2,164)
    Gains on sales of assets and other, net (46,722)  (2,418)  (47,822)  (4,678)
    Impairment charges 442   1,564   442   4,083 
    Tax effect (2) 11,177   1,848   15,002   706 
    Adjusted Net Income (Loss)$10,494  $(2,996) $33,066  $(7,169)
            
    Diluted weighted average shares outstanding 64,870   64,898   65,573   60,812 
            
    Net Income (Loss) Per Share - Diluted$0.67  $0.04  $1.19  $(0.08)
    Adjustments Per Share$(0.51) $(0.09) $(0.69) $(0.04)
    Adjusted Net Income (Loss) Per Share$0.16  $(0.05) $0.50  $(0.12)
              


    (1)  Includes cash interest expense, net and cash payments of approximately $0.9 million and $3.3 million for dedesignated interest rate swap derivatives for the quarter and year ended December 29, 2021, respectively. Includes cash interest expense, net and cash payments of approximately $0.8 million and $1.9 million for dedesignated interest rate swap derivatives for the quarter and year ended December 30, 2020, respectively.
    (2)Tax adjustments for the quarter and year ended December 29, 2021 reflect an effective tax rate of 25.3% and 25.0%, respectively. Tax adjustments for the quarter and year ended December 30, 2020 reflect an effective tax rate of 25.7% and 25.6%, respectively.


    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 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 Fiscal Year Ended
    ($ in thousands)12/29/21 12/30/20 12/29/21 12/30/20
    Operating income (loss)$62,624  $(1,080) $104,075  $6,679 
    General and administrative expenses 17,694   20,451   68,686   55,040 
    Depreciation and amortization 4,066   3,909   15,446   16,161 
    Operating (gains), losses and other charges, net (46,309)  (511)  (46,105)  1,808 
    Restaurant-level Operating Margin$38,075  $22,769  $142,102  $79,688 
            
    Restaurant-level Operating Margin consists of:       
    Company Restaurant Operating Margin (1)$7,020  $1,417  $28,085  $3,591 
    Franchise Operating Margin (2) 31,055   21,352   114,017   76,097 
    Restaurant-level Operating Margin$38,075  $22,769  $142,102  $79,688 
                    


    (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)12/29/21 12/30/20
    Company restaurant operations: (1)     
     Company restaurant sales$47,406 100.0% $32,892 100.0%
     Costs of company restaurant sales:     
      Product costs 11,833 25.0%  8,275 25.2%
      Payroll and benefits 17,998 38.0%  14,614 44.4%
      Occupancy 2,955 6.2%  2,712 8.2%
      Other operating costs:     
       Utilities 1,539 3.2%  1,333 4.1%
       Repairs and maintenance 853 1.8%  680 2.1%
       Marketing 1,023 2.2%  1,133 3.4%
       Other direct costs 4,185 8.8%  2,728 8.3%
     Total costs of company restaurant sales$40,386 85.2% $31,475 95.7%
     Company restaurant operating margin (non-GAAP) (2)$7,020 14.8% $1,417 4.3%
             
    Franchise operations: (3)     
     Franchise and license revenue:     
     Royalties$28,128 46.7% $19,039 40.3%
     Advertising revenue 19,031 31.6%  15,060 31.9%
     Initial and other fees 2,663 4.4%  2,399 5.1%
     Occupancy revenue 10,411 17.3%  10,715 22.7%
     Total franchise and license revenue$60,233 100.0% $47,213 100.0%
             
     Costs of franchise and license revenue:     
     Advertising costs$19,030 31.6% $15,060 31.9%
     Occupancy costs 6,374 10.6%  6,636 14.1%
     Other direct costs 3,774 6.3%  4,165 8.8%
     Total costs of franchise and license revenue$29,178 48.4% $25,861 54.8%
     Franchise operating margin (non-GAAP) (2)$31,055 51.6% $21,352 45.2%
             
    Total operating revenue (4)$107,639 100.0% $80,105 100.0%
    Total costs of operating revenue (4) 69,564 64.6%  57,336 71.6%
    Restaurant-level operating margin (non-GAAP) (4)(2)$38,075 35.4% $22,769 28.4%
             
    Other operating expenses: (4)(2)     
     General and administrative expenses$17,694 16.4% $20,451 25.5%
     Depreciation and amortization 4,066 3.8%  3,909 4.9%
     Operating (gains), losses and other charges, net (46,309)(43.0)%  (511)(0.6)%
     Total other operating expenses (income)$(24,549)(22.8)% $23,849 29.8%
              
    Operating income (loss) (4)$62,624 58.2% $(1,080)(1.3)%
             
    (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 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)
           
        Fiscal Year Ended
    ($ in thousands)12/29/21 12/30/20
    Company restaurant operations: (1)     
     Company restaurant sales$175,017 100.0% $118,160100.0%
     Costs of company restaurant sales:     
      Product costs 42,982 24.6%  29,81625.2%
      Payroll and benefits 65,337 37.3%  51,68443.7%
      Occupancy 11,662 6.7%  11,2419.5%
      Other operating costs:     
       Utilities 5,814 3.3%  5,1484.4%
       Repairs and maintenance 2,743 1.6%  2,6082.2%
       Marketing 4,594 2.6%  3,9043.3%
       Other direct costs 13,800 7.9%  10,1688.6%
     Total costs of company restaurant sales$146,932 84.0% $114,56997.0%
     Company restaurant operating margin (non-GAAP) (2)$28,085 16.0% $3,5913.0%
             
    Franchise operations: (3)     
     Franchise and license revenue:     
     Royalties$103,425 46.4% $67,50139.6%
     Advertising revenue 69,957 31.3%  53,74531.5%
     Initial and other fees 8,009 3.6%  7,3324.3%
     Occupancy revenue 41,766 18.7%  41,86724.6%
     Total franchise and license revenue$223,157 100.0% $170,445100.0%
             
     Costs of franchise and license revenue:     
     Advertising costs$69,957 31.3% $53,74531.5%
     Occupancy costs 26,237 11.8%  26,73215.7%
     Other direct costs 12,946 5.8%  13,8718.1%
     Total costs of franchise and license revenue$109,140 48.9% $94,34855.4%
     Franchise operating margin (non-GAAP) (2)$114,017 51.1% $76,09744.6%
             
    Total operating revenue (4)$398,174 100.0% $288,605100.0%
    Total costs of operating revenue (4) 256,072 64.3%  208,91772.4%
    Restaurant-level operating margin (non-GAAP) (4)(2)$142,102 35.7% $79,68827.6%
             
    Other operating expenses: (4)(2)     
     General and administrative expenses$68,686 17.3% $55,04019.1%
     Depreciation and amortization 15,446 3.9%  16,1615.6%
     Operating (gains), losses and other charges, net (46,105)(11.6)%  1,8080.6%
     Total other operating expenses$38,027 9.6% $73,00925.3%
             
    Operating income (4)$104,075 26.1% $6,6792.3%
             
    (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) vs. 2019Quarter Ended Fiscal Year Ended
    (Increase (decrease))12/29/21   12/29/21  
    Company Restaurants 5.1%    (3.5)%  
    Domestic Franchised Restaurants 0.4%    (4.8)%  
    Domestic System-wide Restaurants 0.7%    (4.7)%  
            
    Changes in Same-Store Sales (1) vs. Prior YearQuarter Ended Fiscal Year Ended
    (Increase (decrease))12/29/21 12/30/20 12/29/21 12/30/20
    Company Restaurants 58.6%  (34.9)%  55.3%  (36.7)%
    Domestic Franchised Restaurants 48.3%  (32.8)%  40.1%  (30.9)%
    Domestic System-wide Restaurants 49.0%  (32.9)%  41.1%  (31.4)%
            
    Average Unit SalesQuarter Ended Fiscal Year Ended
    ($ in thousands)12/29/21 12/30/20 12/29/21 12/30/20
    Company Restaurants$735  $499  $2,709  $1,812 
    Franchised Restaurants$431  $314  $1,597  $1,181 
            
       Franchised    
    Restaurant Unit ActivityCompany & Licensed Total  
    Ending Units September 29, 2021 65   1,582   1,647   
    Units Opened —   7   7   
    Units Closed —   (14)  (14)  
    Net Change —   (7)  (7)  
    Ending Units December 29, 2021 65   1,575   1,640   
            
    Equivalent Units       
    Fourth Quarter 2021 64   1,580   1,644   
    Fourth Quarter 2020 66   1,594   1,660   
    Net Change (2)  (14)  (16)  
            
       Franchised    
    Restaurant Unit ActivityCompany & Licensed Total  
    Ending Units December 30, 2020 65   1,585   1,650   
    Units Opened —   20   20   
    Units Closed —   (30)  (30)  
    Net Change —   (10)  (10)  
    Ending Units December 29, 2021 65   1,575   1,640   
            
    Equivalent Units       
    Year-to-Date 2021 65   1,581   1,646   
    Year-to-Date 2020 65   1,614   1,679   
    Net Change —   (33)  (33)  
            


    (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 Nichols
877-784-7167

Media Contact:
Hadas Streit, Allison+Partners
646-428-0629

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