Breaking News

Tweet TWEET

Denny's Corporation Reports Results for First Quarter 2013

Denny's Corporation Reports Results for First Quarter 2013

         - Adjusted Net Income Per Share* Increased 48.4% to $0.08 -

 - Refinances Credit Facility and Increases Share Repurchase Authorization by
                             10 Million Shares -

SPARTANBURG, S.C., April 30, 2013 (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 first quarter
ended March 27, 2013.

First Quarter Summary

  *System-wide same-store sales decreased 0.7%, comprised of a 0.5% decrease
    at domestic franchised restaurants and a 1.5% decrease at company
    restaurants, with a 1.7% increase in system-wide same-store sales on a
    two-year basis.
  *Opened seven new franchised restaurants and closed six franchised
    restaurants bringing total restaurant count to 1,689.
  *Net Income of $7.1 million, or $0.07 per diluted share, grew 20.7%
    compared with the prior year quarter Net Income of $5.9 million, or $0.06
    per diluted share.
  *Adjusted Net Income per Share* of $0.08 grew 48.4% compared with the prior
    year quarter Adjusted Net Income per Share* of $0.05.
  *Generated $12.6 million of Free Cash Flow* used to reduce outstanding term
    loan debt by $4.0 million and repurchase 341,100 shares for $1.9 million.

Subsequent to the First Quarter

  *Refinanced credit facility providing lower interest costs and increased
    flexibility for the Company to continue to return cash to shareholders.
  *Authorized additional 10 million shares for ongoing share repurchase
    program bringing the total number of shares remaining in the outstanding
    programs to 12.4 million.

John Miller, President and Chief Executive Officer, stated, "Denny's delivered
another quarter of solid results, as we continued to successfully execute
against our key objectives implemented to strengthen and grow our position as
one of the largest franchised American full-service restaurant brands. We
remain focused on revitalizing Denny's image with our 'America's Diner'
positioning, increasing the growth of the Denny's brand, and growing
profitability and free cash flow. As we move forward, we will continue to work
closely with our franchisees to increase restaurant level performance and new
restaurant growth, while also balancing our capital allocation between
reinvestments in the brand and returning value to shareholders."

First Quarter Results

For the first quarter of 2013, franchise and license revenue increased 2.7% to
$33.5 million compared with $32.6 million in the prior year quarter. The $0.9
million increase in franchise revenue was primarily driven by a $0.5 million
increase in royalties and higher occupancy revenue from 45 additional
equivalent franchise restaurants. Company restaurant sales of $81.0 million
decreased $13.1 million due to 36 fewer equivalent company restaurants. This
decrease reflects the continuing impact of selling company restaurants to
franchisees as part of the Company's FGI refranchising strategy that was
completed at the end of 2012.

Denny's opened seven new franchised restaurants in the first quarter of this
year and closed six franchised restaurants bringing the total restaurant count
to 1,689. Franchise operating margin increased $0.8 million to $22.1 million
primarily due to the increases in franchise royalties and occupancy margin.
Franchise operating margin (as a percentage of franchise and license revenue)
was 65.9%, an increase of 0.6 percentage points. The increase was primarily
due to the increase in royalties and occupancy margin and was partially offset
by lower initial fee revenue from refranchising six restaurants in the prior
year quarter.

Company restaurant operating margin decreased $2.3 million primarily due to
the impact of selling company restaurants to franchisees. Company restaurant
operating margin (as a percentage of company restaurant sales) was 14.7%, a
decrease of 0.4 percentage points. The decrease was primarily driven by higher
product costs and higher occupancy costs, due to favorable general liability
claims development in the prior year. These increases were partially offset by
lower payroll and benefits costs primarily driven by lower incentive
compensation and medical costs.

Total general and administrative expenses decreased $0.5 million to $15.2
million in the quarter. Depreciation and amortization expense decreased by
$0.8 million primarily as a result of the sale of restaurants in 2012.
Interest expense decreased by $1.7 million as a result of a $26.3 million
reduction in total gross debt over the last 12 months and lower interest rates
under the Company's refinanced credit facility. In the first quarter, the
provision for income taxes was $3.6 million, reflecting an effective tax rate
of 33.5%. Due to the use of net operating loss and tax credit carryforwards,
the Company paid only $0.3 million in cash taxes in the first quarter.

Denny's first quarter net income of $7.1 million, or $0.07 per diluted share,
grew 20.7% compared to prior year quarter net income of $5.9 million, or $0.06
per diluted share.Adjusted Net Income* of $7.1 million, or $0.08 per diluted
share, grew 43.2% compared to Adjusted Net Income* of $5.0 million, or $0.05
per diluted share, in the prior year quarter.

Denny's generated $12.6 million of Free Cash Flow* in the first quarter, a
portion of which the Company used to reduce its outstanding term loan by $4.0
million and to repurchase 341,100 shares for $1.9 million.Since initiating
its share repurchase strategy in November 2010, the Company has used $53.3
million to repurchase 12.6 million shares through April 24, 2013.The Company
recently announced that the Board of Directors approved a new share repurchase
program authorizing the repurchase of an additional 10 million shares of its
common stock, in addition to repurchases previously authorized.As of April
24, 2013, the Company has 12.4 million shares remaining in its current
authorized share repurchase initiative.

Denny's recently entered into a new five-year $250 million senior secured bank
credit facility, comprised of a $60 million term loan and a $190 million
revolving line of credit.At the time of closing there were $105 million of
borrowings under the new revolving line of credit.The refinanced facility has
a reduced interest rate starting at LIBOR plus 200 basis points for the term
loan and revolver, and lower amortization, as the term loan will be amortized
5% per year in the first two years, 7.5% in the subsequent two years, and 10%
in the fifth year, with the balance due at maturity.

Mark Wolfinger, Executive Vice President, Chief Administrative Officer and
Chief Financial Officer, concluded, "Our new credit facility and share
repurchase authorization are testaments to the tremendous progress Denny's has
made over the past several years with its franchise-focused business model,
which enables us to continue to reinvest in the growth of the brand and return
cash to shareholders through our increased share repurchase program."

Business Outlook

The Company continues to successfully execute against its key objectives
implemented to strengthen and grow its position as one of the largest American
full-service restaurant brands. These include:

  *Revitalize Denny's image with its "America's Diner" positioning.
  *Increase the growth of the Denny's brand both domestically and
    internationally.
  *Grow profitability and Free Cash Flow* through a primarily
    franchise-focused business model that balances reinvesting in the brand
    with debt repayment and returning cash to shareholders.

The following full year 2013 estimates are based on management's expectations
at this time.

  *System-wide same-store sales growth between 0% and 1.5%.
  *New restaurant openings (all franchised) between 40 and 45 restaurants
    with net restaurant growth between 5 and 10 restaurants.
  *Total G&A, including share-based compensation, between $59 million and $61
    million.
  *Adjusted EBITDA* between $76 million and $80 million.
  *Cash capital expenditures between $19 million and $21 million, including
    approximately 20 to 25 remodels at company restaurants and the acquisition
    of two parcels of real estate for approximately $2.4 million in the second
    quarter of this year.
  *Depreciation and amortization between $20.5 million and $21.5 million.
  *Net interest expense between $9.5 million and $10.5 million with net cash
    interest expense between $8.0 million and $9.0 million.The closing of the
    Company's new bank facility will result in a non-cash one-time charge to
    other nonoperating expense of approximately $1.2 million in the second
    quarter of 2013
  *Cash taxes between $2.5 million and $3.5 million with income tax rate
    between 35% and 40%.
  *Free Cash Flow* between $45 million and $48 million.

  *Please refer to the historical reconciliation of net income to Adjusted
  Net Income, Adjusted Net Income Per Share, Adjusted EBITDA, and Free Cash
  Flow included in the tables below.

Conference Call and Webcast Information

Denny's will provide further commentary on the results for the first quarter
2013 on its quarterly investor conference call today, Tuesday, April 30, 2013
at 5:00 p.m. ET.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. A replay of the call may be accessed
at the same location later in the day and will remain available for 30 days.

About Denny's

Denny's is the franchisor and operator of one of America's largest franchised
full-service restaurant chains, based on number of restaurants. Denny's
currently has 1,689 franchised, licensed, and company restaurants around the
world with combined sales of $2.5 billion including 1,591 restaurants in the
United States and 98 restaurants in Canada, Costa Rica, Mexico, Honduras,
Guam, Curaçao, Puerto Rico, Dominican Republic and New Zealand. As of March
27, 2013, 1,525 of Denny's restaurants were franchised and 164 restaurants
were company operated. 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.

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 its 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 "expects", "anticipates",
"believes", "intends", "plans", "hopes", 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 competitive pressures from within the restaurant
industry; the level of success of the Company's strategic and operating
initiatives, advertising and promotional efforts; adverse publicity; changes
in business strategy or development plans; terms and availability of capital;
regional weather conditions; overall changes in the general economy,
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 26, 2012 (and in the Company's subsequent quarterly reports on
Form 10-Q).

                                      

DENNY'S CORPORATION
Condensed Consolidated Balance Sheets
(Unaudited)
                                                           
(In thousands)                                     3/27/2013 12/26/2012
Assets                                                      
Current assets                                              
Cash and cash equivalents                          $10,263   $13,565
Receivables, net                                   16,762    19,947
Current deferred tax asset                         20,238    19,807
Other current assets                               9,109     11,291
Total current assets                               56,372    64,610
Property, net                                      105,426   107,004
Goodwill                                           31,430    31,430
Intangible assets, net                             48,369    48,920
Noncurrent deferred tax asset                      42,305    45,776
Other noncurrent assets                            27,391    27,145
Total assets                                       $311,293  $324,885
                                                           
Liabilities                                                 
Current liabilities                                         
Current maturities of long-term debt               $9,250    $8,500
Current maturities of capital lease obligations    4,135     4,181
Accounts payable                                   19,336    24,461
Other current liabilities                          46,529    54,682
Total current liabilities                          79,250    91,824
Long-term liabilities                                       
Long-term debt, less current maturities            156,750   161,500
Capital lease obligations, less current maturities 16,012    15,953
Other                                              57,462    60,068
Total long-term liabilities                        230,224   237,521
Total liabilities                                  309,474   329,345
                                                           
Shareholders' equity                                        
Common stock                                       1,044     1,038
Paid-in capital                                    563,483   562,657
Deficit                                            (488,437) (495,518)
Accumulated other comprehensive loss, net of tax   (24,745)  (24,999)
Treasury stock                                     (49,526)  (47,638)
Total shareholders' equity (deficit)               1,819     (4,460)
Total liabilities and shareholders' equity         $311,293  $324,885
                                                           
Debt Balances
(In thousands)                                     3/27/2013 12/26/2012
Credit facility term loan due 2017                 $166,000  $170,000
Capital leases                                     20,147    20,134
Total debt                                         $186,147  $190,134



DENNY'S CORPORATION
Condensed Consolidated Statements of Comprehensive Income
(Unaudited)
                                                
                                                Quarter Ended
(In thousands, except per share amounts)         3/27/2013 3/28/2012
Revenue:                                                  
Company restaurant sales                         $81,030   $94,163
Franchise and license revenue                    33,460    32,575
Total operating revenue                          114,490   126,738
Costs of company restaurant sales                69,120    79,955
Costs of franchise and license revenue           11,402    11,312
General and administrative expenses              15,159    15,663
Depreciation and amortization                    5,224     6,060
Operating (gains), losses and other charges, net 134       (165)
Total operating costs and expenses, net          101,039   112,825
Operating income                                 13,451    13,913
Interest expense, net                            2,800     4,456
Other nonoperating expense (income), net         1         (295)
Net income before income taxes                   10,650    9,752
Provision for income taxes                       3,569     3,887
Net income                                       $7,081    $5,865
                                                         
Basic net income per share                       $0.08     $0.06
Diluted net income per share                     $0.07     $0.06
                                                         
Basic weighted average shares outstanding        92,350    96,075
Diluted weighted average shares outstanding      94,461    97,878
                                                         
Comprehensive income                             $7,335    $6,133
                                                         
General and Administrative Expenses              Quarter Ended
(In thousands)                                   3/27/2013 3/28/2012
Share-based compensation                         $1,175    $790
Other general and administrative expenses        13,984    14,873
Total general and administrative expenses        $15,159   $15,663



DENNY'S CORPORATION
Income, EBITDA, Free Cash Flow, and Net Income Reconciliations
(Unaudited)
                                                      
Income, EBITDA and Free Cash Flow Reconciliation       Quarter Ended
(In thousands)                                         3/27/2013 3/28/2012
Net income                                             $7,081    $5,865
Provision for income taxes                             3,569     3,887
Operating (gains), losses and other charges, net       134       (165)
Other nonoperating expense (income), net               1         (295)
Share-based compensation                               1,175     790
Adjusted Income Before Taxes ^(1)                      $11,960   $10,082
                                                               
Interest expense, net                                  2,800     4,456
Depreciation and amortization                          5,224     6,060
Cash payments for restructuring charges and exit costs (672)     (781)
Cash payments for share-based compensation             (890)     (355)
Adjusted EBITDA ^(1)                                   $18,422   $19,462
                                                               
Cash interest expense, net                             (2,485)   (3,750)
Cash paid for income taxes, net                        (343)     (213)
Cash paid for capital expenditures                     (3,006)   (1,836)
Free Cash Flow ^(1)                                    $12,588   $13,663
                                                               
Net Income Reconciliation                              Quarter Ended
(In thousands)                                         3/27/2013 3/28/2012
Net income                                             $7,081    $5,865
Gains on sales of assets and other, net                18        (1,955)
Impairment charges                                     —         523
Tax effect ^(2)                                        (6)       521
Adjusted Net Income ^(1)                               $7,093    $4,954
                                                               
Diluted weighted-average shares outstanding            94,461    97,878
                                                               
Adjusted Net Income Per Share ^(1)                     $0.08     $0.05


(1) The Company believes that, in addition to other financial measures,
Adjusted Income Before Taxes, Adjusted EBITDA, Free Cash Flow, Adjusted Net
Income and Adjusted Net Income Per Share are appropriate indicators to assist
in the evaluation of its operating performance on a period-to-period
basis.The Company also uses 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 its ability to service debt because the excluded charges do not have
an impact on its prospective debt servicing capability and these adjustments
are contemplated in its credit facility for the computation of its 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, Free Cash
Flow, Adjusted Net Income and Adjusted Net Income Per Share 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.
(2) Tax adjustments for the three months ended March 27, 2013 are calculated
using the Company's year-to-date effective tax rate of 33.5%.Tax adjustments
for the three months ended March 28, 2012 are calculated using the Company's
full year 2012 effective tax rate of 36.4%.



DENNY'S CORPORATION
Operating Margins
(Unaudited)
                                              
                                              Quarter Ended
(In thousands)                                 3/27/2013       3/28/2012
Company restaurant operations: ^(1)                                  
Company restaurant sales                       $81,030  100.0% $94,163  100.0%
Costs of company restaurant sales:                                   
Product costs                                  21,146   26.1%  23,533   25.0%
Payroll and benefits                           31,546   38.9%  37,753   40.1%
Occupancy                                      5,228    6.5%   5,774    6.1%
Other operating costs:                                               
Utilities                                      3,127    3.9%   3,714    3.9%
Repairs and maintenance                        1,349    1.7%   1,688    1.8%
Marketing                                      3,016    3.7%   3,535    3.8%
Legal settlements                              276      0.3%   98       0.1%
Other                                          3,432    4.2%   3,860    4.1%
Total costs of company restaurant sales        $69,120  85.3%  $79,955  84.9%
Company restaurant operating margin ^(2)       $11,910  14.7%  $14,208  15.1%
                                                                    
Franchise operations: ^(3)                                           
Franchise and license revenue                                        
Royalty and license revenue                    $21,027  62.9%  $20,527  63.0%
Initial and other fee revenue                  280      0.8%   436      1.3%
Occupancy revenue                              12,153   36.3%  11,612   35.7%
Total franchise and license revenue            $33,460  100.0% $32,575  100.0%
                                                                    
Costs of franchise and license revenue                               
Occupancy costs                                $8,853   26.5%  $8,723   26.8%
Direct franchise costs                         2,549    7.6%   2,589    7.9%
Total costs of franchise and license revenue   $11,402  34.1%  $11,312  34.7%
Franchise operating margin ^(2)                $22,058  65.9%  $21,263  65.3%
                                                                    
Total operating revenue ^(4)                   $114,490 100.0% $126,738 100.0%
Total costs of operating revenue ^(4)          80,522   70.3%  91,267   72.0%
Total operating margin ^(4)(2)                 $33,968  29.7%  $35,471  28.0%
                                                                    
Other operating expenses: ^(4)(2)                                    
General and administrative expenses            $15,159  13.2%  $15,663  12.4%
Depreciation and amortization                  5,224    4.6%   6,060    4.8%
Operating gains, losses and other charges, net 134      0.1%   (165)    (0.1)%
Total other operating expenses                 $20,517  17.9%  $21,558  17.0%
                                                                    
Operating income ^(4)                          $13,451  11.7%  $13,913  11.0%


(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 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)
                                                       
Same-Store Sales                     Quarter Ended        
(increase/(decrease) vs. prior year) 3/27/2013 3/28/2012  
Company Restaurants                  (1.5)%    0.8%       
Domestic Franchised Restaurants      (0.5)%    2.8%       
Domestic System-wide Restaurants     (0.7)%    2.5%       
System-wide Restaurants              (0.7)%    2.4%       
                                                       
Average Unit Sales                   Quarter Ended        
(In thousands)                       3/27/2013 3/28/2012  
Company Restaurants                  $494      $470       
Franchised Restaurants               $349      $349       
                                                       
                                             Franchised 
Restaurant Unit Activity             Company   & Licensed Total
Ending Units 12/26/12                164       1,524      1,688
Units Opened                         0         7          7
Units Closed                         0         (6)        (6)
Net Change                           0         1          1
Ending Units 3/27/13                 164       1,525      1,689
                                                       
Equivalent Units                                        
Year-to-Date 2013                    164       1,526      1,690
Year-to-Date 2012                    200       1,481      1,681
                                    (36)      45         9

CONTACT: Investor Contact:
         Whit Kincaid
         877-784-7167
        
         Media Contact:
         Liz DiTrapano, ICR
         646-277-1226

Denny's Corporation Logo
 
Press spacebar to pause and continue. Press esc to stop.