DENNY’S CORPORATION
Condensed Consolidated Statements of Comprehensive Income
(Unaudited)
		Quarter				Quarter
		Ended				Ended
(In thousands, except per share amounts)		3/28/12				3/30/11
Revenue:
Company restaurant sales		$	94,163			$	104,555
Franchise and license revenue			32,575				31,250
Total operating revenue			126,738				135,805
Costs of company restaurant sales			79,955				91,948
Costs of franchise and license revenue			11,312				11,565
General and administrative expenses			15,663				14,139
Depreciation and amortization			6,060				7,188
Operating (gains), losses and other charges, net			(165	)			(529	)
Total operating costs and expenses			112,825				124,311
Operating income			13,913				11,494
Other expenses:
Interest expense, net			4,456				5,693
Other nonoperating (income) expense, net			(295	)			1,478
Total other expenses, net			4,161				7,171
Net income before income taxes			9,752				4,323
Provision for income taxes			3,887				199
Net income		$	5,865			$	4,124
Net income per share:
Basic		$	0.06			$	0.04
Diluted		$	0.06			$	0.04
Weighted average shares outstanding:
Basic			96,075				98,980
Diluted			97,878				101,362
Comprehensive income		$	6,133			$	4,124

 

DENNY’S CORPORATION
Condensed Consolidated Balance Sheets
(Unaudited)
(In thousands)		3/28/12				12/28/11
ASSETS
Current Assets
Cash and cash equivalents		$	13,540			$	13,740
Receivables, net			12,377				14,971
Assets held for sale			3,782				2,351
Current deferred tax asset			17,557				15,519
Other			11,576				14,712
			58,832				61,293
Property, net			106,833				112,772
Goodwill			30,573				30,764
Intangible assets, net			50,364				50,921
Noncurrent deferred tax asset			55,370				60,636
Other assets			34,270				34,115
Total Assets		$	336,242			$	350,501
LIABILITIES AND SHAREHOLDERS’ DEFICIT
Current Liabilities
Current maturities of long-term debt		$	2,577			$	2,591
Current maturities of capital lease obligations			4,444				4,380
Accounts payable			17,903				25,935
Other current liabilities			50,177				54,289
			75,101				87,195
Long-Term Liabilities
Long-term debt, less current maturities			185,450				193,257
Capital lease obligations, less current maturities			17,908				18,077
Other			60,428				61,648
			263,786				272,982
Total Liabilities			338,887				360,177
Shareholders' Deficit
Common stock			1,028				1,027
Paid-in capital			558,293				557,396
Deficit			(511,962	)			(517,827	)
Accumulated other comprehensive loss, net of tax			(24,545	)			(24,813	)
Treasury stock			(25,459	)			(25,459	)
Total Shareholders' Deficit			(2,645	)			(9,676	)
Total Liabilities and Shareholders' Deficit		$	336,242			$	350,501
Debt Balances
(In thousands)		3/28/12				12/28/11
Credit facility term loan due 2016, net of discount of $2,050 and $2,251, respectively		$	187,950			$	195,749
Capital leases and other debt			22,429				22,556
Total Debt		$	210,379			$	218,305

 

 

DENNY’S CORPORATION
Income, EBITDA, Free Cash Flow and G&A Reconciliations
(Unaudited)
		Quarter				Quarter
Income and EBITDA Reconciliation		Ended				Ended
(In thousands)		3/28/12				3/30/11
Net income		$	5,865			$	4,124
Provision for (benefit from) income taxes			3,887				199
Operating (gains), losses and other charges, net			(165	)			(529	)
Other nonoperating (income) expense, net			(295	)			1,478
Share-based compensation			790				973
Adjusted Income Before Taxes (1)		$	10,082			$	6,245
Interest expense, net			4,456				5,693
Depreciation and amortization			6,060				7,188
Cash payments for restructuring charges and exit costs			(781	)			(706	)
Cash payments for share-based compensation			(355	)			-
Adjusted EBITDA (1)		$	19,462			$	18,420
Cash interest expense, net			(3,750	)			(4,974	)
Cash paid for income taxes, net			(213	)			(163	)
Cash paid for capital expenditures			(1,836	)			(5,770	)
Free Cash Flow (1)		$	13,663			$	7,513
		Quarter				Quarter
General and Administrative Expenses Reconciliation		Ended				Ended
(In thousands)		3/28/12				3/30/11
Share-based compensation		$	790			$	973
Other general and administrative expenses			14,873				13,166
Total general and administrative expenses		$	15,663			$	14,139

 

 

(1)

We believe that, in addition to other financial measures, Adjusted Income Before Taxes, Adjusted EBITDA and Free Cash Flow are appropriate indicators to assist in the evaluation of our operating performance on a period-to-period basis.  We also use Adjusted Income, Adjusted EBITDA and Free Cash Flow 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 our ability to service debt because the excluded charges do not have an impact on our prospective debt servicing capability and these adjustments are contemplated in our credit facility for the computation of our debt covenant ratios.  Free Cash Flow, defined as Adjusted EBITDA less cash portion of interest expense net of interest income, capital expenditures, and cash taxes, is used to evaluate operating effectiveness and decisions regarding the allocation of resources. However, Adjusted Income, Adjusted EBITDA and Free Cash Flow should be considered as a supplement to, not a substitute for, operating income, net income or other financial performance measures prepared in accordance with U.S. generally accepted accounting principles.

 

 

 

DENNY’S CORPORATION
Operating Margins
(Unaudited)
		Quarter								Quarter
		Ended								Ended
(In thousands)		3/28/12								3/30/11
Company restaurant operations: (2)
Company restaurant sales		$	94,163				100.0	%		$	104,555				100.0	%
Costs of company restaurant sales:
Product costs			23,533				25.0	%			25,635				24.5	%
Payroll and benefits			37,753				40.1	%			44,196				42.3	%
Occupancy			5,774				6.1	%			6,860				6.6	%
Other operating costs:
Utilities			3,714				3.9	%			4,389				4.2	%
Repairs and maintenance			1,688				1.8	%			1,842				1.8	%
Marketing			3,535				3.8	%			3,841				3.7	%
Legal settlements			98				0.1	%			77				0.1	%
Other			3,860				4.1	%			5,108				4.9	%
Total costs of company restaurant sales		$	79,955				84.9	%		$	91,948				87.9	%
Company restaurant operating margin (3)		$	14,208				15.1	%		$	12,607				12.1	%
Franchise operations: (4)
Franchise and license revenue
Royalty and license revenue		$	20,527				63.0	%		$	19,294				61.7	%
Initial and other fee revenue			436				1.3	%			905				2.9	%
Occupancy revenue			11,612				35.7	%			11,051				35.4	%
Total franchise and license revenue		$	32,575				100.0	%		$	31,250				100.0	%
Costs of franchise and license revenue
Direct franchise costs		$	2,589				7.9	%		$	3,005				9.6	%
Occupancy costs			8,723				26.8	%			8,560				27.4	%
Total costs of franchise and license revenue		$	11,312				34.7	%		$	11,565				37.0	%
Franchise operating margin (3)		$	21,263				65.3	%		$	19,685				63.0	%
Total operating revenue (1)		$	126,738				100.0	%		$	135,805				100.0	%
Total costs of operating revenue (1)			91,267				72.0	%			103,513				76.2	%
Total operating margin (1)(3)		$	35,471				28.0	%		$	32,292				23.8	%
Other operating expenses: (1)(3)
General and administrative expenses		$	15,663				12.4	%		$	14,139				10.4	%
Depreciation and amortization			6,060				4.8	%			7,188				5.3	%
Operating gains, losses and other charges, net			(165	)			(0.1	%)			(529	)			(0.4	%)
Total other operating expenses		$	21,558				17.0	%		$	20,798				15.3	%
Operating income (1)		$	13,913				11.0	%		$	11,494				8.5	%

 

 

(1)	As a percentage of total operating revenue
(2)	As a percentage of company restaurant sales
(3)	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 or other financial measures prepared in accordance with U.S. generally accepted accounting principles.
(4)	As a percentage of franchise and license revenue