UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June ~~30, 2021~~29, 2022

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from _______________ to ________________

Commission File Number 0-18051

DENNY’S CORPORATION

(Exact name of registrant as specified in its charter)


Delaware		13-3487402
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)

203 East Main Street
Spartanburg,	South Carolina	29319-0001
(Address of principal executive offices)		(Zip Code)

(864) 597-8000

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class

Trading Symbol(s)

Name of each exchange on which registered

$.01 Par Value, Common Stock

DENN

The Nasdaq Stock Market LLC

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ý No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ý No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large Accelerated Filer

☐ý

Accelerated Filer

ý☐

Non-Accelerated Filer

☐

Smaller Reporting Company

☐

Emerging Growth Company

☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ¨

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yes ☐ No ý

As of July ~~29, 2021, 64,199,998~~28, 2022, 57,929,626 shares of the registrant’s common stock, par value $0.01 per share, were outstanding.

TABLE OF CONTENTS

PART I - FINANCIAL INFORMATION

Item 1. Financial Statements

Denny’s Corporation and Subsidiaries

~~Condensed~~ Consolidated Balance Sheets

(Unaudited)

June 30, 2021 December 30, 2020
(In thousands)
Assets
Current assets:
Cash and cash equivalents $ 10,882 $ 3,892
Investments 2,069 2,272
Receivables, net 20,407 21,349
Inventories 1,280 1,181
Assets held for sale 1,621 1,125
Prepaid and other current assets 12,168 18,847
Total current assets 48,427 48,666
Property, net of accumulated depreciation of $149,516 and $146,583, respectively 82,490 86,154
Financing lease right-of-use assets, net of accumulated amortization of $10,684 and $9,907, respectively 9,437 9,830
Operating lease right-of-use assets, net 135,229 139,534
Goodwill 36,884 36,884
Intangible assets, net 50,892 51,559
Deferred financing costs, net 1,727 2,414
Deferred income taxes, net 19,854 23,210
Other noncurrent assets 33,407 32,698
Total assets $ 418,347 $ 430,949
Liabilities
Current liabilities:
Current finance lease liabilities $ 1,637 $ 1,839
Current operating lease liabilities 16,348 16,856
Accounts payable 14,376 12,021
Other current liabilities 55,251 46,462
Total current liabilities 87,612 77,178
Long-term liabilities:
Long-term debt 180,000 210,000
Noncurrent finance lease liabilities 13,265 13,530
Noncurrent operating lease liabilities 132,959 137,534
Liability for insurance claims, less current portion 9,602 10,309
Other noncurrent liabilities 94,332 112,844
Total long-term liabilities 430,158 484,217
Total liabilities 517,770 561,395
Shareholders' deficit
Common stock $0.01 par value; 135,000 shares authorized; June 30, 2021: 64,200 shares issued and outstanding; December 30, 2020: 63,962 shares issued and outstanding $ 642 $ 640
Paid-in capital 129,176 123,833
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


	June 29, 2022		December 29, 2021
	(In thousands, except per share amounts)
Assets
Current assets:
Cash and cash equivalents	$	1,360	$	30,624
Investments	3,529		2,551
Receivables, net	23,193		19,621
Inventories	12,208		5,060
Assets held for sale	1,319		—
Prepaid and other current assets	7,829		11,393
Total current assets	49,438		69,249
Property, net of accumulated depreciation of $152,311 and $151,836, respectively	92,934		91,176
Financing lease right-of-use assets, net of accumulated amortization of $10,071 and $11,210, respectively	7,103		7,709
Operating lease right-of-use assets, net	124,176		128,727
Goodwill	36,884		36,884
Intangible assets, net	49,581		50,226
Deferred financing costs, net	2,654		2,971
Deferred income taxes, net	—		11,502
Other noncurrent assets	30,048		37,083
Total assets	$	392,818	$	435,527
Liabilities
Current liabilities:
Current finance lease liabilities	$	1,896	$	1,952
Current operating lease liabilities	15,051		15,829
Accounts payable	16,675		15,595
Other current liabilities	56,680		64,146
Total current liabilities	90,302		97,522
Long-term liabilities:
Long-term debt	187,000		170,000
Noncurrent finance lease liabilities	10,117		10,744
Noncurrent operating lease liabilities	121,807		126,296
Liability for insurance claims, less current portion	7,386		8,438
Deferred income taxes, net	1,994		—
Other noncurrent liabilities	32,920		87,792
Total long-term liabilities	361,224		403,270
Total liabilities	451,526		500,792
Shareholders' deficit
Common stock $0.01 par value; 135,000 shares authorized; June 29, 2022: 64,998 shares issued and 58,344 outstanding; December 29, 2021: 64,200 shares issued and 62,210 shares outstanding	$	650	$	642
Paid-in capital	138,347		135,596
Deficit	(71,583)		(116,441)
Accumulated other comprehensive loss, net	(46,281)		(54,470)
Treasury stock, at cost, 6,654 and 1,990 shares, respectively	(79,841)		(30,592)
Total shareholders' deficit	(58,708)		(65,265)
Total liabilities and shareholders' deficit	$	392,818	$	435,527

See accompanying notes

Denny’s Corporation and Subsidiaries

~~Condensed~~ Consolidated Statements of Operations

(Unaudited)


		Quarter Ended				Two Quarters Ended					Quarter Ended				Two Quarters Ended
		June 30, 2021		June 24, 2020		June 30, 2021		June 24, 2020			June 29, 2022		June 30, 2021		June 29, 2022		June 30, 2021
		(In thousands, except per share amounts)									(In thousands, except per share amounts)
Revenue:	Revenue:									Revenue:
Company restaurant sales	Company restaurant sales	$	47,572	$	15,128	$	81,141	$	57,419	Company restaurant sales	$	49,167	$	47,572	$	93,143	$	81,141
Franchise and license revenue	Franchise and license revenue	58,593		25,033		105,600		79,437		Franchise and license revenue	65,850		58,593		124,981		105,600
Total operating revenue	Total operating revenue	106,165		40,161		186,741		136,856		Total operating revenue	115,017		106,165		218,124		186,741
Costs of company restaurant sales, excluding depreciation and amortization:	Costs of company restaurant sales, excluding depreciation and amortization:									Costs of company restaurant sales, excluding depreciation and amortization:
Product costs	Product costs	11,447		4,305		19,719		14,435		Product costs	13,168		11,447		24,412		19,719
Payroll and benefits	Payroll and benefits	16,970		8,039		29,935		25,145		Payroll and benefits	18,336		16,970		35,422		29,935
Occupancy	Occupancy	2,844		2,728		5,694		5,891		Occupancy	3,782		2,844		7,022		5,694
Other operating expenses	Other operating expenses	6,552		4,534		12,629		10,253		Other operating expenses	9,542		6,552		16,597		12,629
Total costs of company restaurant sales		37,813		19,606		67,977		55,724
Total costs of company restaurant sales, excluding depreciation and amortization										Total costs of company restaurant sales, excluding depreciation and amortization	44,828		37,813		83,453		67,977
Costs of franchise and license revenue, excluding depreciation and amortization	Costs of franchise and license revenue, excluding depreciation and amortization	28,735		15,244		52,493		44,414		Costs of franchise and license revenue, excluding depreciation and amortization	35,265		28,735		65,934		52,493
General and administrative expenses	General and administrative expenses	17,548		13,153		34,495		20,895		General and administrative expenses	16,623		17,548		33,581		34,495
Depreciation and amortization	Depreciation and amortization	3,897		4,058		7,558		8,204		Depreciation and amortization	3,590		3,897		7,138		7,558
Operating (gains), losses and other charges, net	Operating (gains), losses and other charges, net	(113)		1,627		419		3,100		Operating (gains), losses and other charges, net	846		(113)		846		419
Total operating costs and expenses, net	Total operating costs and expenses, net	87,880		53,688		162,942		132,337		Total operating costs and expenses, net	101,152		87,880		190,952		162,942
Operating income (loss)		18,285		(13,527)		23,799		4,519
Operating income										Operating income	13,865		18,285		27,172		23,799
Interest expense, net	Interest expense, net	4,066		4,947		8,343		8,898		Interest expense, net	2,878		4,066		5,838		8,343
Other nonoperating expense (income), net	Other nonoperating expense (income), net	16,251		9,565		(13,797)		12,328		Other nonoperating expense (income), net	(19,795)		16,251		(39,410)		(13,797)
Income (loss) before income taxes	Income (loss) before income taxes	(2,032)		(28,039)		29,253		(16,707)		Income (loss) before income taxes	30,782		(2,032)		60,744		29,253
Provision for (benefit from) income taxes	Provision for (benefit from) income taxes	(1,204)		(5,074)		6,900		(2,755)		Provision for (benefit from) income taxes	7,779		(1,204)		15,886		6,900
Net income (loss)	Net income (loss)	$	(828)	$	(22,965)	$	22,353	$	(13,952)	Net income (loss)	$	23,003	$	(828)	$	44,858	$	22,353

Basic net income (loss) per share		$	(0.01)	$	(0.41)	$	0.34	$	(0.25)
Diluted net income (loss) per share		$	(0.01)	$	(0.41)	$	0.34	$	(0.25)
Net income (loss) per share - basic										Net income (loss) per share - basic	$	0.37	$	(0.01)	$	0.71	$	0.34
Net income (loss) per share - diluted										Net income (loss) per share - diluted	$	0.37	$	(0.01)	$	0.71	$	0.34

Basic weighted average shares outstanding	Basic weighted average shares outstanding	65,294		55,686		65,273		55,993		Basic weighted average shares outstanding	62,306		65,294		62,822		65,273
Diluted weighted average shares outstanding	Diluted weighted average shares outstanding	65,294		55,686		65,789		55,993		Diluted weighted average shares outstanding	62,430		65,294		63,003		65,789

See accompanying notes

Denny’s Corporation and Subsidiaries

~~Condensed~~ Consolidated Statements of Comprehensive Income (Loss)

(Unaudited)

Quarter Ended Two Quarters Ended
June 30, 2021 June 24, 2020 June 30, 2021 June 24, 2020
(In thousands)
Net income (loss) $ (828) $ (22,965) $ 22,353 $ (13,952)
Other comprehensive income (loss), net of tax:
Minimum pension liability adjustment, net of tax of $11, $6, $21 and $12, respectively 29 16 59 33
Changes in the fair value of cash flow derivatives, net of tax of $(192), $(772), $571 and $(12,567), respectively (561) (2,230) 1,654 (35,158)
Reclassification of cash flow derivatives to interest expense, net of tax of $257, $334, $512 and $420, respectively 748 967 1,488 1,206
Reclassification of loss related to dedesignation of derivatives to other nonoperating expense (income), net of tax of $0, $1,892, $0 and $1,892, respectively 0 5,462 0 5,462
Amortization of unrealized losses related to dedesignated derivatives to interest expense, net of tax of $11, $69, $42 and $69, respectively 34 200 124 200
Other comprehensive income (loss) 250 4,415 3,325 (28,257)
Total comprehensive income (loss) $ (578) $ (18,550) $ 25,678 $ (42,209)


	Quarter Ended				Two Quarters Ended
	June 29, 2022		June 30, 2021		June 29, 2022		June 30, 2021
	(In thousands)
Net income (loss)	$	23,003	$	(828)	$	44,858	$	22,353
Other comprehensive income, net of tax:
Minimum pension liability adjustment, net of tax of $7, $11, $15 and $21, respectively	22		29		46		59
Changes in the fair value of cash flow hedges, net of tax of $613, $(192), $2,286 and $571, respectively	1,840		(561)		6,855		1,654
Reclassification of cash flow hedges to interest expense, net of tax of $180, $257, $428 and $512, respectively	541		748		1,283		1,488

Amortization of unrealized losses related to dedesignated swaps to interest expense, net of tax of $1, $11, $1 and $42, respectively	5		34		5		124
Other comprehensive income	2,408		250		8,189		3,325
Total comprehensive income (loss)	$	25,411	$	(578)	$	53,047	$	25,678

See accompanying notes

Denny’s Corporation and Subsidiaries

~~Condensed~~ Consolidated Statements of Shareholders’ Deficit

For the Quarter Ended June ~~30, 2021~~29, 2022 and June ~~24, 2020~~30, 2021

(Unaudited)


		Common Stock			Treasury Stock			Paid-in Capital				Deficit			Accumulated Other Comprehensive Loss, Net				Total Shareholders’ Deficit				Common Stock						Treasury Stock			Paid-in Capital			Deficit			Accumulated Other Comprehensive Loss, Net			Total Shareholders’ Deficit
		Shares	Amount		Shares	Amount								Shares								Amount			Shares			Amount
		(In thousands)																					(In thousands)
Balance, March 31, 2021		64,145	$	641	0	$	0			$	125,950						$	(171,333)			$	(57,330)		(102,072)
Balance, March 30, 2022																						Balance, March 30, 2022	64,457			$	645		(2,744)	$	(42,457)		$	137,332		$	(94,586)		$	(48,689)		(47,755)

Net loss		—	—		—	—		—				(828)			—				(828)
Net income																						Net income	—			—			—	—		—			23,003			—			23,003
Other comprehensive income	Other comprehensive income	—	—		—	—		—				—			250				250			Other comprehensive income	—			—			—	—		—			—			2,408			2,408

Share-based compensation on equity classified awards, net of withholding tax	Share-based compensation on equity classified awards, net of withholding tax	—	—		—	—		3,227				—			—				3,227			Share-based compensation on equity classified awards, net of withholding tax	—			—			—	—		1,020			—			—			1,020
Purchase of treasury stock																						Purchase of treasury stock	—			—			(3,910)	(37,384)		—			—			—			(37,384)

Issuance of common stock for share-based compensation	Issuance of common stock for share-based compensation	55	1		—	—		(1)				—			—				0			Issuance of common stock for share-based compensation	541			5			—	—		(5)			—			—			—

Balance, June 30, 2021		64,200	$	642	0	$	0	$	129,176			$	(172,161)		$	(57,080)			$	(99,423)
Balance, June 29, 2022																						Balance, June 29, 2022	64,998			$	650		(6,654)	$	(79,841)	$	138,347		$	(71,583)		$	(46,281)		$	(58,708)

Common Stock Treasury Stock Paid-in Capital Deficit Accumulated
Other
Comprehensive Loss, Net Total
Shareholders’
Deficit
Shares Amount Shares Amount
(In thousands)
Balance, March 25, 2020 109,677 $ 1,097 (54,010) $ (553,973) $ 599,401 $ (180,385) $ (66,632) $ (200,492)
Net loss — — — — — (22,965) — (22,965)
Other comprehensive income — — — — — — 4,415 4,415
Share-based compensation on equity classified awards, net of withholding tax — — — — 1,469 — — 1,469
Issuance of common stock for share-based compensation 25 — — — — — — —
Exercise of common stock options 17 — — — 66 — — 66
Balance, June 24, 2020 109,719 $ 1,097 (54,010) $ (553,973) $ 600,936 $ (203,350) $ (62,217) $ (217,507)


	Common Stock			Treasury Stock			Paid-in Capital		Deficit		Accumulated Other Comprehensive Loss, Net		Total Shareholders’ Deficit
	Shares	Amount		Shares	Amount
	(In thousands)
Balance, March 31, 2021	64,145	$	641	—	$	—	$	125,950	$	(171,333)	$	(57,330)	$	(102,072)

Net loss	—	—		—	—		—		(828)		—		(828)
Other comprehensive income	—	—		—	—		—		—		250		250

Share-based compensation on equity classified awards, net of withholding tax	—	—		—	—		3,227		—		—		3,227




Issuance of common stock for share-based compensation	55	1		—	—		(1)		—		—		—

Balance, June 30, 2021	64,200	$	642	—	$	—	$	129,176	$	(172,161)	$	(57,080)	$	(99,423)

See accompanying notes

Denny’s Corporation and Subsidiaries

~~Condensed~~ Consolidated Statements of Shareholders’ Deficit

For the Two Quarters Ended June ~~30, 2021~~29, 2022 and June ~~24, 2020~~30, 2021

(Unaudited)


		Common Stock			Treasury Stock			Paid-in Capital				Deficit			Accumulated Other Comprehensive Loss, Net				Total Shareholders’ Deficit				Common Stock						Treasury Stock			Paid-in Capital			Deficit			Accumulated Other Comprehensive Loss, Net			Total Shareholders’ Deficit
		Shares	Amount		Shares	Amount								Shares								Amount			Shares			Amount
		(In thousands)																					(In thousands)
Balance, December 30, 2020		63,962	$	640	0	$	0			$	123,833						$	(194,514)			$	(60,405)		$	(130,446)
Balance, December 29, 2021																						Balance, December 29, 2021	64,200			$	642		(1,990)	$	(30,592)		$	135,596		$	(116,441)		$	(54,470)		$	(65,265)

Net income	Net income	—	—		—	—		—				22,353			—				22,353			Net income	—			—			—	—		—			44,858			—			44,858
Other comprehensive income	Other comprehensive income	—	—		—	—		—				—			3,325				3,325			Other comprehensive income	—			—			—	—		—			—			8,189			8,189

Share-based compensation on equity classified awards, net of withholding tax	Share-based compensation on equity classified awards, net of withholding tax	—	—		—	—		5,229				—			—				5,229			Share-based compensation on equity classified awards, net of withholding tax	—			—			—	—		2,759			—			—			2,759

Purchase of treasury stock																						Purchase of treasury stock	—			—			(4,664)	(49,249)		—			—			—			(49,249)

Issuance of common stock for share-based compensation	Issuance of common stock for share-based compensation	208	2		—	—		(2)				—			—				0			Issuance of common stock for share-based compensation	798			8			—	—		(8)			—			—			—
Exercise of common stock options		30	—		—	—		116				—			—				116
Balance, June 30, 2021		64,200	$	642	0	$	0	$	129,176			$	(172,161)		$	(57,080)			$	(99,423)

Balance, June 29, 2022																						Balance, June 29, 2022	64,998			$	650		(6,654)	$	(79,841)	$	138,347		$	(71,583)		$	(46,281)		$	(58,708)

Common Stock Treasury Stock Paid-in Capital Deficit Accumulated
Other
Comprehensive Loss, Net Total
Shareholders’
Deficit
Shares Amount Shares Amount
(In thousands)
Balance, December 25, 2019 109,415 $ 1,094 (52,320) $ (519,780) $ 603,980 $ (189,398) $ (33,960) $ (138,064)
Net loss — — — — — (13,952) — (13,952)
Other comprehensive loss — — — — — — (28,257) (28,257)
Share-based compensation on equity classified awards, net of withholding tax — — — — (3,107) — — (3,107)
Purchase of treasury stock — — (1,690) (34,193) — — — (34,193)
Issuance of common stock for share-based compensation 287 3 — — (3) — — 0
Exercise of common stock options 17 — — — 66 — — 66
Balance, June 24, 2020 109,719 $ 1,097 (54,010) $ (553,973) $ 600,936 $ (203,350) $ (62,217) $ (217,507)


	Common Stock			Treasury Stock			Paid-in Capital		Deficit		Accumulated Other Comprehensive Loss, Net		Total Shareholders’ Deficit
	Shares	Amount		Shares	Amount
	(In thousands)
Balance, December 30, 2020	63,962	$	640	—	$	—	$	123,833	$	(194,514)	$	(60,405)	$	(130,446)

Net income	—	—		—	—		—		22,353		—		22,353
Other comprehensive income	—	—		—	—		—		—		3,325		3,325

Share-based compensation on equity classified awards, net of withholding tax	—	—		—	—		5,229		—		—		5,229



Issuance of common stock for share-based compensation	208	2		—	—		(2)		—		—		—
Exercise of common stock options	30	—		—	—		116		—		—		116
Balance, June 30, 2021	64,200	$	642	—	$	—	$	129,176	$	(172,161)	$	(57,080)	$	(99,423)

See accompanying notes

Denny’s Corporation and Subsidiaries

~~Condensed~~ Consolidated Statements of Cash Flows

(Unaudited)


		Two Quarters Ended					Two Quarters Ended
		June 30, 2021		June 24, 2020			June 29, 2022		June 30, 2021
		(In thousands)					(In thousands)
Cash flows from operating activities:	Cash flows from operating activities:					Cash flows from operating activities:
Net income (loss)		$	22,353	$	(13,952)
Adjustments to reconcile net income (loss) to cash flows provided by (used in) operating activities:
Net income						Net income	$	44,858	$	22,353
Adjustments to reconcile net income to cash flows provided by operating activities:						Adjustments to reconcile net income to cash flows provided by operating activities:
Depreciation and amortization	Depreciation and amortization	7,558		8,204		Depreciation and amortization	7,138		7,558
Operating (gains), losses and other charges, net	Operating (gains), losses and other charges, net	419		3,100		Operating (gains), losses and other charges, net	846		419
(Gains) losses and amortization on interest rate swap derivatives, net		(12,506)		11,466
Gains and amortization on dedesignated interest rate swaps, net						Gains and amortization on dedesignated interest rate swaps, net	(41,924)		(12,506)
Amortization of deferred financing costs	Amortization of deferred financing costs	688		340		Amortization of deferred financing costs	317		688
Losses (gains) on investments		3		(91)
(Gains) losses on termination of leases		(72)		53
Deferred income tax expense (benefit)		2,211		(3,705)
Share-based compensation expense (benefit)		6,860		(26)
Losses on investments						Losses on investments	223		3
Losses (gains) on early termination of debt and leases						Losses (gains) on early termination of debt and leases	24		(72)
Deferred income tax expense						Deferred income tax expense	10,766		2,211
Share-based compensation expense						Share-based compensation expense	7,520		6,860
Changes in assets and liabilities:	Changes in assets and liabilities:					Changes in assets and liabilities:
Receivables	Receivables	757		9,342		Receivables	(3,419)		757
Inventories	Inventories	(98)		175		Inventories	(7,148)		(98)
Prepaids and other current assets	Prepaids and other current assets	6,677		(2,593)		Prepaids and other current assets	3,563		6,677
Other noncurrent assets	Other noncurrent assets	(1,317)		106		Other noncurrent assets	6,125		(1,317)
Operating lease assets and liabilities	Operating lease assets and liabilities	(821)		1,769		Operating lease assets and liabilities	(466)		(821)
Accounts payable	Accounts payable	5,620		(537)		Accounts payable	(1,541)		5,620
Accrued payroll	Accrued payroll	1,992		(11,519)		Accrued payroll	(5,721)		1,992
Accrued taxes	Accrued taxes	434		(712)		Accrued taxes	(338)		434
Other accrued liabilities	Other accrued liabilities	4,649		(6,551)		Other accrued liabilities	(5,003)		4,649
Other noncurrent liabilities	Other noncurrent liabilities	(2,036)		(2,827)		Other noncurrent liabilities	(6,211)		(2,036)
Net cash flows provided by (used in) operating activities		43,371		(7,958)
Net cash flows provided by operating activities						Net cash flows provided by operating activities	9,609		43,371
Cash flows from investing activities:	Cash flows from investing activities:					Cash flows from investing activities:
Capital expenditures	Capital expenditures	(3,108)		(4,476)		Capital expenditures	(5,771)		(3,108)

Proceeds from sales of restaurants, real estate and other assets	Proceeds from sales of restaurants, real estate and other assets	1,612		2,208		Proceeds from sales of restaurants, real estate and other assets	170		1,612
Investment purchases	Investment purchases	0		(1,400)		Investment purchases	(1,200)		—
Proceeds from sale of investments	Proceeds from sale of investments	200		2,900		Proceeds from sale of investments	—		200
Collections on notes receivable	Collections on notes receivable	383		918		Collections on notes receivable	126		383
Issuance of notes receivable	Issuance of notes receivable	(94)		(484)		Issuance of notes receivable	—		(94)
Net cash flows used in investing activities	Net cash flows used in investing activities	(1,007)		(334)		Net cash flows used in investing activities	(6,675)		(1,007)
Cash flows from financing activities:	Cash flows from financing activities:					Cash flows from financing activities:
Revolver borrowings	Revolver borrowings	9,500		130,000		Revolver borrowings	45,325		9,500
Revolver payments	Revolver payments	(39,500)		(63,000)		Revolver payments	(28,325)		(39,500)
Long-term debt payments		(980)		(594)
Repayments of finance leases						Repayments of finance leases	(1,018)		(980)
Proceeds from exercise of stock options	Proceeds from exercise of stock options	116		66		Proceeds from exercise of stock options	—		116
Tax withholding on share-based payments	Tax withholding on share-based payments	(1,377)		(3,036)		Tax withholding on share-based payments	(4,782)		(1,377)
Deferred financing costs	Deferred financing costs	(8)		(982)		Deferred financing costs	—		(8)
Purchase of treasury stock	Purchase of treasury stock	0		(36,008)		Purchase of treasury stock	(46,249)		—

Net bank overdrafts	Net bank overdrafts	(3,125)		(449)		Net bank overdrafts	2,851		(3,125)
Net cash flows provided by (used in) financing activities		(35,374)		25,997
Increase in cash and cash equivalents		6,990		17,705
Net cash flows used in financing activities						Net cash flows used in financing activities	(32,198)		(35,374)
Increase (decrease) in cash and cash equivalents						Increase (decrease) in cash and cash equivalents	(29,264)		6,990
Cash and cash equivalents at beginning of period	Cash and cash equivalents at beginning of period	3,892		3,372		Cash and cash equivalents at beginning of period	30,624		3,892
Cash and cash equivalents at end of period	Cash and cash equivalents at end of period	$	10,882	$	21,077	Cash and cash equivalents at end of period	$	1,360	$	10,882

See accompanying notes

Denny’s Corporation and Subsidiaries

Notes to ~~Condensed~~ Consolidated Financial Statements

(Unaudited)

Note 1. Introduction and Basis of Presentation

Denny’s Corporation, or Denny’s or the Company, is one of America’s largest full-service restaurant chains based on number of restaurants. At June ~~30, 2021,~~29, 2022, the Denny's brand consisted of ~~1,645~~1,631 restaurants, ~~1,580~~1,566 of which were franchised/licensed restaurants and 65 of which were company operated.

The global crisis resulting from the spread of coronavirus ("COVID-19") has had a substantial impact on our restaurant operations starting in the quarter ended March 25, 2020 with continuing impacts into the current quarter ended June ~~30, 2021.~~29, 2022. While we have seen improvements compared to earlier periods during the COVID-19 pandemic, we cannot currently estimate the duration or future financial impact of the COVID-19 pandemic on our business. ~~However, we expect that~~Ongoing material adverse effects of the COVID-19 pandemic ~~will continue to impact~~for an extended period could negatively affect our business, results of operations, ~~for the balance~~liquidity and financial condition and could impact our impairment assessments of ~~2021.~~accounts receivable, property, right-of-use assets, goodwill and intangible assets.

Our unaudited ~~condensed~~ consolidated financial statements have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission. Therefore, certain information and notes normally included in financial statements prepared in accordance with U.S. generally accepted accounting principles (“GAAP”) have been condensed or omitted. In our opinion, all adjustments considered necessary for a fair presentation of the interim periods presented have been included. Such adjustments are of a normal and recurring nature. The preparation of these financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosure of contingent assets and liabilities. Actual results may differ from these estimates under different assumptions or conditions; however, we believe that our estimates are reasonable.

These interim ~~condensed~~ consolidated financial statements should be read in conjunction with our consolidated financial statements and notes thereto as of and for the fiscal year ended December ~~30, 2020~~29, 2021 which are contained in our audited Annual Report on Form 10-K for the fiscal year ended December ~~30, 2020.~~29, 2021. The results of operations for the interim periods presented are not necessarily indicative of the results for the entire fiscal year ending December ~~29, 2021.~~28, 2022. Our significant interim accounting policies include the recognition of advertising and marketing costs, generally in proportion to revenue, and the recognition of income taxes using an estimated annual effective rate.

Note 2. Summary of Significant Accounting Policies

Newly Adopted Accounting Standards

In ~~December 2019,~~March 2020, the FASB issued ~~ASU 2019-12, "Income Taxes~~(Topic 740): Simplifying the Accounting for Income Taxes", which modifies Topic 740 to simplify the accounting for income taxes. ASU 2019-12 is effective for financial statements issued for annual periods beginning after December 15, 2020, and for the interim periods therein. The adoption of ASU 2019-12 did not have a significant impact on the Company’s consolidated financial position or results of operations.

~~Accounting Standards to be Adopted~~

~~In January 2021, the FASB issued ASU 2021-01, “Reference Rate Reform (Topic 848): Scope” which clarified the guidance issued in March 2020,~~ ASU 2020-04, “Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting” which was later clarified in January 2021 by ASU 2021-01, “Reference Rate Reform (Topic 848): Scope”. The guidance provides optional guidance, for a limited time, to ease the potential burden in accounting for or recognizing the effects of reference rate reform on financial reporting. The Company adopted ASU 2020-04 on March 12, 2020. The adoption of and future elections under this new guidance did not and are not expected to have a material impact on the Company’s consolidated financial position or results of operations. The guidance is effective through December 31, 2022. The Company is currently evaluating the impact that the adoption of this new guidance will have on our consolidated financial position or results of operations and has not adopted any of the transition relief available under the new guidance as of June 30, 2021.

Accounting Standards to be Adopted

We reviewed all other newly issued accounting pronouncements and concluded that they are either not applicable to our business or are not expected to have a material effect on our consolidated financial statements as a result of future adoption.

Note 3. Receivables

Receivables consisted of the following:


		June 30, 2021		December 30, 2020			June 29, 2022		December 29, 2021
		(In thousands)					(In thousands)
Receivables, net:	Receivables, net:					Receivables, net:
Trade accounts receivable from franchisees	Trade accounts receivable from franchisees	$	15,580	$	15,535	Trade accounts receivable from franchisees	$	13,435	$	13,430
Financing receivables from franchisees	Financing receivables from franchisees	1,082		2,104		Financing receivables from franchisees	6,310		1,027

Vendor receivables	Vendor receivables	2,023		2,199		Vendor receivables	2,107		4,041
Credit card receivables	Credit card receivables	684		542		Credit card receivables	623		747
Other	Other	2,062		2,668		Other	1,267		950
Allowance for doubtful accounts	Allowance for doubtful accounts	(1,024)		(1,699)		Allowance for doubtful accounts	(549)		(574)
Total receivables, net	Total receivables, net	$	20,407	$	21,349	Total receivables, net	$	23,193	$	19,621

Other noncurrent assets:	Other noncurrent assets:					Other noncurrent assets:
Financing receivables from franchisees	Financing receivables from franchisees	$	398	$	502	Financing receivables from franchisees	$	14	$	293

Note 4. Intangible Assets

Intangible assets consisted of the following:


		June 30, 2021				December 30, 2020					June 29, 2022				December 29, 2021
		Gross Carrying Amount		Accumulated Amortization		Gross Carrying Amount		Accumulated Amortization			Gross Carrying Amount		Accumulated Amortization		Gross Carrying Amount		Accumulated Amortization
		(In thousands)									(In thousands)
Intangible assets with indefinite lives:	Intangible assets with indefinite lives:									Intangible assets with indefinite lives:
Trade names	Trade names	$	44,087	$	—	$	44,087	$	—	Trade names	$	44,087	$	—	$	44,087	$	—
Liquor licenses	Liquor licenses	120		—		120		—		Liquor licenses	120		—		120		—
Intangible assets with definite lives:	Intangible assets with definite lives:									Intangible assets with definite lives:
Reacquired franchise rights	Reacquired franchise rights	12,218		5,533		12,218		4,866		Reacquired franchise rights	11,801		6,427		12,218		6,199
Intangible assets, net	Intangible assets, net	$	56,425	$	5,533	$	56,425	$	4,866	Intangible assets, net	$	56,008	$	6,427	$	56,425	$	6,199

Note 5. Other Current Liabilities

Other current liabilities consisted of the following:


		June 30, 2021		December 30, 2020			June 29, 2022		December 29, 2021
		(In thousands)					(In thousands)
Accrued payroll	Accrued payroll	$	19,452	$	17,076	Accrued payroll	$	14,949	$	20,676
Current portion of liability for insurance claims	Current portion of liability for insurance claims	4,424		4,667		Current portion of liability for insurance claims	3,652		4,285
Accrued taxes	Accrued taxes	5,283		4,850		Accrued taxes	4,195		4,533
Accrued advertising	Accrued advertising	11,570		4,318		Accrued advertising	10,476		15,355
Gift cards	Gift cards	5,573		6,127		Gift cards	5,805		7,170
Other	Other	8,949		9,424		Other	17,603		12,127
Other current liabilities	Other current liabilities	$	55,251	$	46,462	Other current liabilities	$	56,680	$	64,146

Note 6. Fair Value of Financial Instruments

Financial assets and liabilities measured at fair value on a recurring basis are summarized below:


		Total		Quoted Prices in Active Markets for Identical Assets/Liabilities (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)			Total		Quoted Prices in Active Markets for Identical Assets/Liabilities (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
		(In thousands)									(In thousands)
Fair value measurements as of June 30, 2021:
Fair value measurements as of June 29, 2022:										Fair value measurements as of June 29, 2022:
Deferred compensation plan investments (1)										Deferred compensation plan investments (1)	$	10,930	$	10,930	$	—	$	—
Interest rate swaps, net (2)										Interest rate swaps, net (2)	2,419		—		2,419		—
Investments (3)										Investments (3)	3,529		—		3,529		—
Total										Total	$	16,878	$	10,930	$	5,948	$	—

Fair value measurements as of December 29, 2021:										Fair value measurements as of December 29, 2021:
Deferred compensation plan investments (1)	Deferred compensation plan investments (1)	$	14,049	$	14,049	$	0	$	0	Deferred compensation plan investments (1)	$	13,726	$	13,726	$	—	$	—
Interest rate swaps (2)	Interest rate swaps (2)	(57,738)		0		(57,738)		0		Interest rate swaps (2)	(52,121)		—		(52,121)		—
Investments (3)	Investments (3)	2,069		0		2,069		0		Investments (3)	2,551		—		2,551		—
Total	Total	$	(41,620)	$	14,049	$	(55,669)	$	0	Total	$	(35,844)	$	13,726	$	(49,570)	$	—

Fair value measurements as of December 30, 2020:
Deferred compensation plan investments (1)		$	13,627	$	13,627	$	0	$	0
Interest rate swaps (2)		(76,445)		0		(76,445)		0
Investments (3)		2,272		0		2,272		0
Total		$	(60,546)	$	13,627	$	(74,173)	$	0

(1) The fair values of our deferred compensation plan investments are based on the closing market prices of the elected ~~investments.~~investments and are included in other noncurrent assets in our Consolidated Balance Sheets.

(2) The fair values of our interest rate swaps are based upon Level 2 inputs, which include valuation models. The key inputs for the valuation models are quoted market prices, interest rates and forward yield curves. See Note 7 for details on the interest rate swaps.

(3) The fair values of our investments are valued using a readily determinable net asset value per share based on the fair value of the underlying securities. There are no significant redemption restrictions associated with these investments.

Those assets and liabilities measured at fair value on a non-recurring basis are summarized below:


	Significant Unobservable Inputs (Level 3)		Impairment Charges

Fair value measurements for the year-to-date period ended June 29, 2022:
Assets held and used (1)	$	—	$	266

(1)As of June 29, 2022, impaired assets were written down to their fair value. To determine fair value, we used the income approach, which assumes that the future cash flows reflect current market expectations. These fair value measurements require significant judgment using Level 3 inputs, such as discounted cash flows from operations, which are not observable from the market, directly or indirectly. There is uncertainty in the projected future cash flows used in the Company's impairment analysis, which requires the use of estimates and assumptions. If actual performance does not achieve the projections, or if the assumptions used change in the future, the Company may be required to recognize impairment charges in future periods.

Assets that are measured at fair value on a non-recurring basis include property, operating right-of-use assets, finance right-of-use assets and reacquired franchise rights. During the year-to-date period ended June 29, 2022, we recognized impairment charges of $0.3 million related to certain of these assets. See Note 9.

The carrying amounts of cash and cash equivalents, receivables, accounts payable and accrued expenses are deemed to approximate fair value due to the immediate or short-term maturity of these instruments. The fair value of notes receivable approximates the carrying value after consideration of recorded allowances and related risk-based interest rates. The outstanding senior secured revolver is carried at historical cost, which approximates fair value. The fair value of our senior secured revolver approximates its carrying value since it is a variable rate facility (Level 2).

Note 7. Long-Term Debt

Denny's and certain of its subsidiaries have a credit facility ~~as amended,~~ consisting of a five-year ~~$375~~$400 million senior secured revolver (with a ~~$30~~$25 million letter of credit sublimit). The credit facility includes an accordion feature that would allow us to increase the size of the facility to $450 million. Borrowings bear a tiered interest rate, which ~~was reduced to $350 million~~is based on ~~July 1, 2021. As of June 30, 2021, we had outstanding revolver loans of $180.0 million and outstanding letters of credit under~~the Company's consolidated leverage ratio. The maturity date for the credit facility of $15.7 million. These balances resulted in availability of $179.3 million as of June 30, 2021 under the credit facility prior to considering the liquidity covenant in our credit facility. Factoring in the liquidity covenant, our availability was $120.2 million as of June 30, 2021. is August 26, 2026.

The credit facility is available for working capital, capital expenditures and other general corporate purposes. The credit facility is guaranteed by Denny's and its material subsidiaries and is secured by assets of Denny's and its subsidiaries, including the stock of its subsidiaries (other than ~~our~~its insurance captive subsidiary). It includes negative covenants that are usual for facilities and transactions of this type. The credit facility also includes certain financial covenants with respect to a maximum consolidated leverage ratio and a minimum consolidated fixed charge coverage ratio. We were in compliance with all financial covenants as of June 29, 2022.

As of June 29, 2022, we had outstanding revolver loans of $187.0 million and outstanding letters of credit under the credit facility of $14.2 million. These balances resulted in unused commitments of $198.8 million as of June 29, 2022 under the credit facility.

As of June ~~30, 2021,~~29, 2022, borrowings under the credit facility bore interest at a rate of LIBOR plus ~~3.00%~~1.75% and the commitment fee, paid on the unused portion of the credit facility, was set to ~~0.40%~~0.25%. ~~The maturity date for the credit facility is October 26, 2022.~~

The Company is prohibited from paying dividends and making stock repurchases and other general investments through the delivery of its fiscal third quarter 2021 results. Limitations on capital expenditures of $12 million are in effect for the period of May 13, 2020 through September 29, 2021. As of June 30, 2021, approximately $6.4 million of the $12 million has been utilized.

The consolidated fixed charge coverage ratio covenant was a minimum of 1.00x for the quarter ended June 30, 2021, adjusting to 1.25x for the quarter ending September 29, 2021, and 1.50x for the quarter ending December 29, 2021 and thereafter. The consolidated leverage ratio covenant was a maximum of 5.25x as of June 30, 2021, stepping down to 4.75x as of September 29, 2021, and 4.00x as of December 29, 2021 and thereafter. In addition, the Company is subject to a monthly minimum liquidity covenant, defined as the sum of unrestricted cash and revolver availability, of $70 million, until the date of delivery of the

~~financial statements for the fiscal quarter ending September 29, 2021. We were in compliance with all financial covenants as of June 30, 2021.~~

Prior to considering the impact of our interest rate swaps, described below, the weighted-average interest rate on outstanding revolver loans was ~~3.11%~~2.91% and ~~3.15%~~2.09% as of June ~~30, 2021~~29, 2022 and December ~~30, 2020,~~29, 2021, respectively. Taking into consideration our interest rate swaps that are designated as cash flow hedges, the weighted-average interest rate of outstanding revolver loans was ~~5.31%~~4.17% and ~~5.01%~~4.44% as of June ~~30, 2021~~29, 2022 and December ~~30, 2020,~~29, 2021, respectively.

Interest Rate Hedges

We have receive-variable, pay-fixed interest rate swaps to hedge the forecasted cash flows of our floating rate debt. We initially designated the interest rate swaps as cash flow hedges of our exposure to variability in future cash flows attributable to variable interest payments due on forecasted notional amounts. A summary of our interest rate swaps as of June ~~30, 2021~~29, 2022 is as follows:


Trade Date	Trade Date	Effective Date	Maturity Date	Notional Amount			Fair Value		Fixed Rate		Trade Date	Effective Date	Maturity Date	Notional Amount			Fair Value		Fixed Rate
				(In thousands)										(In thousands)
Swaps designated as cash flow hedges	Swaps designated as cash flow hedges										Swaps designated as cash flow hedges
March 20, 2015	March 20, 2015	March 29, 2018	March 31, 2025	$	120,000		$	7,921	2.44	%	March 20, 2015	March 29, 2018	March 31, 2025	$	120,000		$	2,165	2.44	%
October 1, 2015	October 1, 2015	March 29, 2018	March 31, 2026	$	50,000		$	3,783	2.46	%	October 1, 2015	March 29, 2018	March 31, 2026	$	50,000		$	1,055	2.46	%
Dedesignated swaps	Dedesignated swaps										Dedesignated swaps
February 15, 2018	February 15, 2018	March 31, 2020	December 31, 2033	$	100,000	(1)	$	46,034	3.19	%	February 15, 2018	March 31, 2020	December 31, 2033	$	120,000	(1)	$	(801)	3.19	%
Total	Total			$	270,000		$	57,738			Total			$	290,000		$	2,419

(1) The notional amounts of the swaps entered into on February 15, 2018 increase ~~annually~~periodically until they reach the maximum notional amount of $425.0 million on September 28, 2029.

Swaps Designated as Cash Flow Hedges

To the extent the swaps are highly effective in offsetting the variability of the hedged cash flows, changes in the fair value of the swaps are not included in the Consolidated Statements of Operations but are reported as a component of other comprehensive ~~income (loss).~~income. The interest rate swaps entered into in 2015 are designated as cash flow hedges with unrealized ~~gain~~gains and losses recorded as a component of accumulated other comprehensive loss, net.

As of June ~~30, 2021,~~29, 2022, the fair value of the swaps designated as cash flow hedges was ~~a liability~~an asset of ~~$11.7~~$3.2 million, ~~and was~~ recorded as a component of other noncurrent ~~liabilities with~~assets. The designated swaps have an offsetting amount (before taxes) recorded as a component of accumulated other comprehensive loss, net in our ~~Condensed~~ Consolidated Balance Sheets. See Note 13 for amounts recorded in accumulated other comprehensive loss related to interest rate swaps. We expect to reclassify approximately ~~$4.0~~$1.3 million from accumulated other comprehensive loss, net to interest expense, net in our Consolidated Statements of Operations related to swaps designated as cash flow hedges during the next 12 months.

Dedesignated Interest Rate ~~Hedges~~Swaps

During the year ended December 30, 2020, we determined that a portion of the underlying cash flows related to our hedging relationship entered into in 2018 (“2018 Swaps”) were no longer probable of occurring over the term of the interest rate swaps. Accordingly, we dedesignated the cash flow relationship and discontinued hedge accounting treatment for the 2018 Swaps. As a result, we reclassified a portion of losses from accumulated other comprehensive loss, net to other nonoperating ~~expense (income),~~income, net in our Consolidated Statements of Operations and began amortizing the remaining amounts of unrealized losses related to the 2018 Swaps from accumulated other comprehensive loss, net into our Consolidated Statements of Operations as a component of interest expense, net over the remaining term of the 2018 Swaps. For the quarter and two quarters ended June 29, 2022, unrealized losses of less than $0.1 million were reclassified to interest expense, net related to the 2018 Swaps. For the quarter and two quarters ended June 30, 2021, we reclassified unrealized losses of ~~approximately~~ less than $0.1 million and $0.2 million, respectively, to interest expense, net related to the 2018 Swaps. At June ~~30, 2021, approximately~~29, 2022, $64.2 million (before taxes) of unrealized losses remained in accumulated other comprehensive loss, net. We expect to amortize ~~less than~~approximately $0.1 million from accumulated other comprehensive loss, net to interest expense, net in our Consolidated Statements of Operations related to dedesignated interest rate swaps during the next 12 months.

As a result of the dedesignated cash flow relationship related to the 2018 Swaps, changes in the fair value of the 2018 Swaps are recorded as a component of other nonoperating ~~expense (income),~~income, net in our Consolidated Statements of Operations. For the quarter and two quarters ended June 29, 2022, we recorded income of approximately $21.7 million and $41.9 million, respectively, as a component of other nonoperating income, net related to the 2018 Swaps resulting from changes in fair value. For the quarter and two quarters ended June 30, 2021, we recorded approximately $17.2 million of expense and $12.7 million of income, respectively, as a component of other nonoperating ~~expense (income)~~income, net related to the 2018 Swaps resulting from changes in fair value. As of June ~~30, 2021,~~29, 2022, the fair value of the dedesignated interest rate swaps was a liability of ~~$46.0~~$0.8 million, $0.2 million of which was recorded as a component of other current liabilities and $0.6 million of which was recorded as a component of other noncurrent liabilities in our ~~Condensed~~ Consolidated Balance Sheets.

Note 8. Revenues

Our revenues are derived primarily from 2 sales channels, which we operate as 1 segment: company restaurants and franchised and licensed restaurants. The following table disaggregates our revenue by sales channel and type of good or service:


		Quarter Ended				Two Quarters Ended					Quarter Ended				Two Quarters Ended
		June 30, 2021		June 24, 2020		June 30, 2021		June 24, 2020			June 29, 2022		June 30, 2021		June 29, 2022		June 30, 2021
		(In thousands)									(In thousands)
Company restaurant sales	Company restaurant sales	$	47,572	$	15,128	$	81,141	$	57,419	Company restaurant sales	$	49,167	$	47,572	$	93,143	$	81,141
Franchise and license revenue:	Franchise and license revenue:									Franchise and license revenue:
Royalties	Royalties	27,117		6,719		47,961		30,566		Royalties	28,759		27,117		55,284		47,961
Advertising revenue	Advertising revenue	18,600		7,232		32,711		24,758		Advertising revenue	19,486		18,600		37,692		32,711
Initial and other fees	Initial and other fees	2,066		1,346		3,904		3,043		Initial and other fees	7,779		2,066		12,286		3,904
Occupancy revenue	Occupancy revenue	10,810		9,736		21,024		21,070		Occupancy revenue	9,826		10,810		19,719		21,024
Franchise and license revenue	Franchise and license revenue	58,593		25,033		105,600		79,437		Franchise and license revenue	65,850		58,593		124,981		105,600
Total operating revenue	Total operating revenue	$	106,165	$	40,161	$	186,741	$	136,856	Total operating revenue	$	115,017	$	106,165	$	218,124	$	186,741

Franchise occupancy revenue consisted of the following:


		Quarter Ended				Two Quarters Ended					Quarter Ended				Two Quarters Ended
		June 30, 2021		June 24, 2020		June 30, 2021		June 24, 2020			June 29, 2022		June 30, 2021		June 29, 2022		June 30, 2021
		(In thousands)									(In thousands)
Operating lease revenue	Operating lease revenue	$	7,668	$	8,060	$	15,581	$	16,682	Operating lease revenue	$	7,253	$	7,668	$	14,671	$	15,581
Variable lease revenue	Variable lease revenue	3,142		1,676		5,443		4,388		Variable lease revenue	2,573		3,142		5,048		5,443
Total occupancy revenue	Total occupancy revenue	$	10,810	$	9,736	$	21,024	$	21,070	Total occupancy revenue	$	9,826	$	10,810	$	19,719	$	21,024

Balances related to contracts with customers consist of receivables, deferred franchise revenue and deferred gift card revenue. See Note 3 for details on our receivables.

The components of the change in deferred franchise revenue are as follows:


	(In thousands)
Balance, December 29, 2021	$	19,896
Fees received from franchisees	2,224
Franchisee deferred costs (1)	(1,722)
Revenue recognized, net (2)	(1,302)
Balance, June 29, 2022	19,096
Less current portion included in other current liabilities	1,804
Deferred franchise revenue included in other noncurrent liabilities	$	17,292

(1) Deferred costs are contract assets consisting of incentives given to franchisees related to the rollout of kitchen equipment to all franchise locations.

(2) Of this amount $1.2 million was included in the deferred franchise revenue balance as of December 29, 2021.

Deferred franchise revenue consists primarily of the unamortized portion of initial franchise fees that are currently being amortized into revenue and amounts related to development agreements and unopened restaurants that we will begin amortizing into revenue when the related restaurants are ~~opened.~~opened net of certain deferred costs. Deferred franchise revenue represents our remaining performance obligations to our franchisees, excluding amounts of variable consideration related to sales-based royalties and advertising.

The ~~components~~Company has entered into equipment purchase contracts of approximately $19.3 million related to the rollout of kitchen equipment for franchise restaurants, which will be billed to the franchisee and recognized as revenue as the equipment is installed, less approximately $5.7 million in commitments from the Company. Amounts committed from the Company are contract assets that have been netted against deferred revenue and will be recognized as a component of franchise and license revenue over the remaining term of the ~~change in deferred~~related franchise ~~revenue are as follows:~~


	~~(In thousands)~~
~~Balance, December 30, 2020~~	$	~~20,806~~
~~Fees received from franchisees~~	~~303~~
~~Revenue recognized~~ ~~(1)~~	~~(1,175)~~
~~Balance, June 30, 2021~~	~~19,934~~
~~Less current portion included in other current liabilities~~	~~1,946~~
~~Deferred franchise revenue included in other noncurrent liabilities~~	$	~~17,988~~

~~(1) Of this amount $1.2~~agreements. As of June 29, 2022, our remaining obligation under these contracts was approximately $2.5 million, ~~was~~$0.7 million of which is included in accounts payable. As of June 29, 2022, we had approximately $10.7 million in inventory and $1.6 million in contract assets related to the ~~deferred franchise revenue balance as of December 30, 2020.~~

kitchen equipment rollout.

Deferred gift card liabilities consist of the unredeemed portion of gift cards sold in company restaurants and at third party locations. The balance of deferred gift card liabilities represents our remaining performance obligations to our customers. The balance of deferred gift card liabilities as of June ~~30, 2021~~29, 2022 and December ~~30, 2020~~29, 2021 was ~~$5.6~~$5.8 million and ~~$6.1~~$7.2 million, respectively. During the ~~two quarters~~year-to-date period ended June ~~30, 2021,~~29, 2022, we recognized revenue of ~~$0.2~~$0.3 million from gift card redemptions at company restaurants.

Note 9. Operating (Gains), Losses and Other Charges, Net

Operating (gains), losses and other charges, net consisted of the following:

Quarter Ended Two Quarters Ended
June 30, 2021 June 24, 2020 June 30, 2021 June 24, 2020
(In thousands)
(Gains) losses on sales of assets and other, net $ (65) $ 12 $ (1,007) $ (1,058)
Restructuring charges and exit costs (48) 1,615 1,426 1,977
Impairment charges 0 0 0 2,181
Operating (gains), losses and other charges, net $ (113) $ 1,627 $ 419 $ 3,100

During the two quarters ended June 30, 2021, gains on sales of assets and other, net were primarily related to the sale of 1 parcel of real estate. During the two quarters ended June 24, 2020, (gains) losses on sales of assets and other, net were primarily related to the sale of 2 real estate parcels.


	Quarter Ended				Two Quarters Ended
	June 29, 2022		June 30, 2021		June 29, 2022		June 30, 2021
	(In thousands)
Gains on sales of assets and other, net	$	(99)	$	(65)	$	(245)	$	(1,007)
Restructuring charges and exit costs	679		(48)		825		1,426
Impairment charges	266		—		266		—
Operating (gains), losses and other charges, net	$	846	$	(113)	$	846	$	419

As of June ~~30, 2021, we had recorded assets held for sale consisting of property at their carrying amount of $1.6 million related to 2 parcels of real estate. As of December 30, 2020,~~29, 2022, we had recorded assets held for sale at their carrying amount of ~~$1.1~~$1.3 million (consisting of property of $1.0 million and other assets of ~~$0.1~~$0.3 million) related to 23 parcels of real estate. There were no assets held for sale as of December 29, 2021.

Restructuring charges and exit costs consisted of the following:


		Quarter Ended				Two Quarters Ended					Quarter Ended				Two Quarters Ended
		June 30, 2021		June 24, 2020		June 30, 2021		June 24, 2020			June 29, 2022		June 30, 2021		June 29, 2022		June 30, 2021
		(In thousands)									(In thousands)
Exit costs	Exit costs	$	141	$	50	$	223	$	94	Exit costs	$	38	$	141	$	50	$	223
Severance and other restructuring charges	Severance and other restructuring charges	(189)		1,565		1,203		1,883		Severance and other restructuring charges	641		(189)		775		1,203
Total restructuring charges and exit costs	Total restructuring charges and exit costs	$	(48)	$	1,615	$	1,426	$	1,977	Total restructuring charges and exit costs	$	679	$	(48)	$	825	$	1,426

Exit costs primarily consist of costs related to closed restaurants. ~~Exit cost liabilities were $0.1 million as of both June 30, 2021 and December 30, 2020.~~ Exit cost liabilities related to lease costs are included as a component of operating lease liabilities in our ~~Condensed~~ Consolidated Balance Sheets.

As of June ~~30, 2021~~29, 2022 and December ~~30, 2020,~~29, 2021, we had accrued severance and other restructuring charges of $0.7 million and ~~$0.6~~$0.1 million, respectively. The balance as of June ~~30, 2021~~29, 2022 is expected to be paid during the next 12 months.

We recorded impairment charges of $0.3 million (consisting of property and right-of-use assets) during the quarter and year-to-date period ended June 29, 2022 resulting from our assessment of underperforming restaurants.

Note 10. Share-Based Compensation

Total share-based compensation included as a component of general and administrative expenses was as follows:

Quarter Ended Two Quarters Ended
June 30, 2021 June 24, 2020 June 30, 2021 June 24, 2020
(In thousands)
Employee share awards $ 3,164 $ 1,326 $ 6,417 $ (420)
Restricted stock units for board members 224 185 443 394
Total share-based compensation $ 3,388 $ 1,511 $ 6,860 $ (26)


	Quarter Ended				Two Quarters Ended
	June 29, 2022		June 30, 2021		June 29, 2022		June 30, 2021
	(In thousands)
Employee share awards	$	3,284	$	3,164	$	7,078	$	6,417
Restricted stock units for board members	221		224		442		443
Total share-based compensation	$	3,505	$	3,388	$	7,520	$	6,860

1415

Employee Share Awards

During the ~~two quarters~~quarter ended ~~June~~March 30, ~~2021,~~2022, we granted certain employees approximately ~~0.5 million~~233,000 performance share units ("PSUs") with a grant date fair value of ~~$24.74~~$24.51 per share that vest based on the total shareholder return (“TSR”) of our common stock compared to the TSRs of a group of peer companies ~~(from 0% to 200%~~and approximately 233,000 PSUs with a grant date fair value of $15.59 per share that vest based on our Adjusted EPS growth rate versus plan, as defined under the terms of the ~~target award).~~award. As the TSR based ~~performance shares~~PSUs contain a market condition, a Monte Carlo valuation was used to determine the grant date fair value. The performance period for these PSUs is the three year fiscal period beginning December ~~31, 2020~~30, 2021 and ending December ~~27, 2023.~~25, 2024. The PSUs will completely vest and be earned at the end of the performance period at which point the relative TSR and Adjusted EPS growth rate achievement percentages will be ~~determined.~~applied to the vested units (from 0% to 200% of the target award). We recognize compensation cost associated with approximately 312,000 of these PSU awards over the entire performance period on a straight-line basis, with compensation cost for the remaining 154,000 PSU awards recognized on a graded-vesting basis due to the accelerated vesting terms for certain retirement eligible individuals.

WeDuring the quarter ended March 30, 2022, we also granted certain employees approximately ~~0.2 million~~310,000 restricted stock units ("RSUs") with a grant date fair value of ~~$15.91~~$15.59 per share. The RSUs vest evenly over the three year fiscal period beginning December 30, 2021 and ending December ~~27, 2023.~~25, 2024. We recognize compensation cost associated with these RSU awards on a straight-line basis over the entire performance period of the award.

During the quarter ended June 29, 2022, we granted PSUs and RSUs to our newly appointed Chief Executive Officer and President, Kelli A. Valade. The grants included approximately 69,000 PSUs with a grant date fair value of $12.18 per share that vest based on the TSR of our common stock compared to the TSRs of a group of peer companies and approximately 69,000 PSUs with a grant date fair value of $9.89 per share that vest based on our Adjusted EPS growth rate versus plan, as defined under the terms of the award. As the TSR based PSUs contain a market condition, a Monte Carlo valuation was used to determine the grant date fair value. The performance period and application of achievement percentages for these PSUs are the same as mentioned above. We recognize compensation cost associated with these PSU awards on a straight-line basis. In addition, the grants included approximately 93,000 RSUs with a grant date fair value of $9.89 per share.

During the two quarters ended June ~~30, 2021,~~29, 2022, we issued ~~0.2 million~~approximately 768,000 shares of common stock related to vested ~~performance share units.~~PSUs and RSUs. In addition, ~~0.1 million~~approximately 24,000 shares of common stock were deferred and approximately 407,000 shares of common stock were withheld in lieu of taxes related to vested ~~performance share units.~~PSUs and RSUs.

~~We recognize compensation cost associated with our PSU and RSU awards on a straight-line basis over the entire performance period of the awards.~~ As of June ~~30, 2021,~~29, 2022, we had approximately ~~$19.1~~$19.3 million of unrecognized compensation cost related to unvested ~~performance share~~PSU awards and ~~restricted share~~RSU awards outstanding, which have a weighted average remaining contractual term of ~~2.0~~2.1 years.

Restricted Stock Units for Board Members

During the quarter and two quarters ended June ~~30, 2021,~~29, 2022, we granted less than 0.1 million ~~restricted stock units~~RSUs (which are equity classified) with a weighted average grant date fair value of ~~$17.35~~$9.95 per unit to non-employee members of our Board of Directors. The ~~restricted stock units~~RSUs vest after a one year service period. A director may elect to convert these awards into shares of common stock either on a specific date in the future (while still serving as a member of our Board of Directors), upon termination as a member of our Board of Directors, or in 3 equal annual installments commencing after termination of service as a member of our ~~Board.~~Board of Directors.

During the quarter and two quarters ended June ~~30, 2021,~~29, 2022, less than 0.1 million ~~restricted stock units~~RSUs were converted into shares of common stock.

As of June ~~30, 2021,~~29, 2022, we had approximately $0.8 million of unrecognized compensation cost related to these unvested ~~restricted stock unit~~RSU awards outstanding, which have a weighted average remaining contractual term of 0.9 years.

Note 11. Income Taxes

The effective income tax rate was ~~59.3%~~25.3% for the quarter and ~~23.6%~~26.2% for the ~~two quarters~~year-to-date period ended June ~~30, 2021,~~29, 2022, compared to ~~18.1%~~59.3% and ~~16.5%~~23.6% for the prior year periods, respectively. The 2021 quarterly and year-to-date rates included the impact of excess tax benefits relating to share-based compensation of 13.4% and (1.2)%, respectively. ~~The 2020 quarterly and year-to-date rates included a benefit from the reclassification of cash flow derivatives from accumulated other comprehensive loss, net of 7.0% and 11.7%, respectively.~~

1516

Note 12. Net Income (Loss) Per Share

The amounts used for the basic and diluted net income (loss) per share calculations are summarized below:

Quarter Ended Two Quarters Ended
June 30, 2021 June 24, 2020 June 30, 2021 June 24, 2020
(In thousands, except per share amounts)
Net income (loss) $ (828) $ (22,965) $ 22,353 $ (13,952)
Weighted average shares outstanding - basic 65,294 55,686 65,273 55,993
Effect of dilutive share-based compensation awards(1)
0 0 516 0
Weighted average shares outstanding - diluted 65,294 55,686 65,789 55,993
Basic net income (loss) per share $ (0.01) $ (0.41) $ 0.34 $ (0.25)
Diluted net income (loss) per share $ (0.01) $ (0.41) $ 0.34 $ (0.25)
Anti-dilutive share-based compensation awards(1)
998 3,493 483 3,493

~~(1)~~ For the quarter ended June 30, 2021 and for the quarter and two quarters ended June 24, 2020, share-based compensation awards have been omitted from the calculations because they have an anti-dilutive effect.


	Quarter Ended				Two Quarters Ended
	June 29, 2022		June 30, 2021		June 29, 2022		June 30, 2021
	(In thousands, except per share amounts)
Net income (loss)	$	23,003	$	(828)	$	44,858	$	22,353

Weighted average shares outstanding - basic	62,306		65,294		62,822		65,273
Effect of dilutive share-based compensation awards	124		—		181		516
Weighted average shares outstanding - diluted	62,430		65,294		63,003		65,789

Net income (loss) per share - basic	$	0.37	$	(0.01)	$	0.71	$	0.34
Net income (loss) per share - diluted	$	0.37	$	(0.01)	$	0.71	$	0.34

Anti-dilutive share-based compensation awards	740		998		785		483

Note 13. Shareholders' Deficit

Share Repurchases

~~We suspended~~Our credit facility permits the repurchase of Denny’s stock and the payment of cash dividends subject to certain limitations. Our Board of Directors approves share repurchases as of ~~February 27, 2020 and terminated~~ our ~~previously approved~~common stock. Under these authorizations, we may, from time to time, purchase shares in the open market (including pre-arranged stock trading plans in accordance with the guidelines specified in Rule 10b5-1 ~~Repurchase Plan effective March 16, 2020~~under the Securities Exchange Act of 1934, as amended (the "Exchange Act")) or in ~~light of uncertain~~privately negotiated transactions, subject to market ~~conditions arising from the COVID-19 pandemic. Under our amended credit agreement,~~and business conditions. Currently, we are ~~prohibited, until~~operating under a $250 million share repurchase authorization approved by the ~~date~~Board of ~~delivery of our financial statements for the fiscal quarter ending September 29, 2021, from making any stock repurchases.~~Directors in December 2019.

~~Prior to suspending share repurchases, during~~During the ~~quarter~~two quarters ended ~~March 25, 2020,~~June 29, 2022, we repurchased a total of ~~1.7~~4.7 million shares of our common stock for approximately ~~$34.2~~$49.2 million. ~~During~~This brings the ~~quarter ended March 25, 2020, we completed~~total amount repurchased under the ~~$200~~current authorization to approximately $81.8 million, share repurchase program that was approved by the Board of Directors in October 2017. In December 2019, our Board of Directors approved a share repurchase program authorizing us to repurchase up to $250leaving approximately $168.2 million ~~of our common stock (in addition to the October 2017 authorization). At June 30, 2021, there was approximately $248.0 million remaining~~ that can be used to repurchase our common stock under ~~the current program.~~this authorization as of June 29, 2022. Repurchased shares ~~were~~are included as treasury stock in our ~~Condensed~~ Consolidated Balance Sheets and our ~~Condensed~~ Consolidated ~~Statement~~Statements of Shareholders' Deficit. ~~In the fourth quarter of fiscal 2020, the Board approved the retirement of 54.0 million shares of treasury stock at a weighted average share price of $10.26.~~

As of June ~~30, 2021, 0~~29, 2022, 6.7 million shares ~~remained~~were held in treasury stock.

1617

Accumulated Other Comprehensive Loss, Net

The components of the change in accumulated other comprehensive loss, net were as follows:

Defined Benefit Plans Derivatives Accumulated Other Comprehensive Loss, Net
(In thousands)
Balance as of December 30, 2020 $ (978) $ (59,427) $ (60,405)
Amortization of net loss (1)
80 — 80
Changes in the fair value of cash flow derivatives — 2,225 2,225
Reclassification of cash flow derivatives to interest expense, net (2)
— 2,000 2,000
Amortization of unrealized losses related to dedesignated derivatives to interest expense, net (3)
— 166 166
Income tax expense related to items of other comprehensive income (21) (1,125) (1,146)
Balance as of June 30, 2021 $ (919) $ (56,161) $ (57,080)


	Defined Benefit Plans		Derivatives		Accumulated Other Comprehensive Loss, Net
	(In thousands)
Balance as of December 29, 2021	$	(900)	$	(53,570)	$	(54,470)

Amortization of net loss (1)	61		—		61

Changes in the fair value of cash flow hedges	—		9,141		9,141
Reclassification of cash flow hedges to interest expense, net (2)	—		1,711		1,711

Amortization of unrealized losses related to dedesignated swaps to interest expense, net	—		6		6
Income tax expense related to items of other comprehensive income	(15)		(2,715)		(2,730)
Balance as of June 29, 2022	$	(854)	$	(45,427)	$	(46,281)

(1) ~~Amount~~Before-tax amount related to our defined benefit plans that was reclassified from accumulated other comprehensive loss, net and included as a component of pension expense within general and administrative expenses in our ~~Condensed~~ Consolidated Statements of Operations during the two quarters ended June ~~30, 2021.~~29, 2022.

(2) Amounts reclassified from accumulated other comprehensive loss, net into interest expense, net in our ~~Condensed~~ Consolidated Statements of Operations represent payments either received from or made to the counterparty for the interest rate ~~swaps. See Note 7 for additional details.~~

(3) The losses related to the 2018 Swaps will continue to be included in accumulated other comprehensive loss, net and will be amortized as a component of interest expense, net in our Consolidated Statements of Operations over the remaining term of the 2018 Swaps. For the two quarters ended June 30, 2021, we amortized approximately $0.2 million of losses to interest expense, net related to the 2018 Swaps. We expect to amortize less than $0.1 million from accumulated other comprehensive loss related to our interest rate swaps during the next 12 months.hedges. See Note 7 for additional details.

Note 14. Commitments and Contingencies

Legal Proceedings

There are various claims and pending legal actions against or indirectly involving us, incidental to and arising out of the ordinary course of the business. In the opinion of management, based upon information currently available, the ultimate liability with respect to these proceedings and claims will not materially affect our consolidated results of operations or financial position.

Note 15. Supplemental Cash Flow Information


		Two Quarters Ended					Two Quarters Ended
		June 30, 2021		June 24, 2020			June 29, 2022		June 30, 2021
		(In thousands)					(In thousands)
Income taxes paid, net	Income taxes paid, net	$	1,942	$	277	Income taxes paid, net	$	4,644	$	1,942
Interest paid	Interest paid	$	8,478	$	8,057	Interest paid	$	5,617	$	8,478

Noncash investing and financing activities:	Noncash investing and financing activities:					Noncash investing and financing activities:

Issuance of common stock, pursuant to share-based compensation plans	Issuance of common stock, pursuant to share-based compensation plans	$	3,087	$	5,808	Issuance of common stock, pursuant to share-based compensation plans	$	9,547	$	3,087

Receipt of real estate receivable						Receipt of real estate receivable	$	3,000	$	—
Execution of finance leases	Execution of finance leases	$	464	$	11	Execution of finance leases	$	311	$	464
Treasury stock payable						Treasury stock payable	$	3,633	$	—

Note 16. Subsequent Events

On July 20, 2022, the Company completed its previously announced acquisition of Keke's Breakfast Cafe ("Keke's") pursuant to the Asset Purchase Agreement (the "Purchase Agreement"), dated May 3, 2022, which was subsequently amended by the First Amendment to Asset Purchase Agreement (the "First Amendment"), dated July 11, 2022, by and between the Company, as purchaser, and K2 Restaurants, Inc. together with the other sellers and principals party thereto for the acquisition of certain assets and assumption of certain liabilities of the franchise business, Keke's, and 8 Keke’s restaurants owned and operated by the sellers.

1718

Keke’s is the franchisor and operator of a full-service A.M. eatery concept, currently consisting of 52 domestic restaurants in Florida, including 44 franchised locations. We believe Keke’s is a brand with attractive unit economics and strong potential. This acquisition provides an opportunity to participate in the fast-growing A.M. eatery segment through a complementary concept we believe our experienced team can develop across multiple states with the goal of becoming the A.M. eatery franchisor of choice. We believe this acquisition will also enhance value for our shareholders.

Pursuant to the Purchase Agreement, we agreed to purchase Keke's for an aggregate purchase price of $82.5 million. Of the aggregate purchase price, $81.5 million was funded by utilizing cash on hand as well as funds from the Company's revolving credit facility, with the remaining $1.0 million to be paid as part of the post closing adjustments.

We estimate that approximately $2.0 million of the purchase price will be allocated to fixed assets and leasehold improvements, $0.7 million to deferred franchise revenue, with the balance allocated to intangible assets as follows: $34.9 million to trade names, $9.3 million to franchise rights and $37.0 million to goodwill. In addition, we recorded approximately $8.6 million of operating lease right-of-use assets and liabilities. These amounts are subject to subsequent adjustment as we continue to gather information during the measurement period.

The Company’s Consolidated Balance Sheet as of June 29, 2022 and the Consolidated Statements of Operations and Consolidated Statements of Cash Flows for the periods ended June 29, 2022 do not reflect the impacts of Keke’s as the acquisition was completed after the balance sheet date.

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

Forward-Looking Statements

This report includes forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, as codified in Section 27A of the Securities Act and Section 21E of the ~~Securities~~ Exchange ~~Act of 1934, as amended.~~Act. The Company urges caution in considering its current trends and any outlook on its operations and financial results disclosed in this report. In addition, certain matters discussed in this report 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 report 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 and political conditions that impact consumer confidence and spending, including COVID-19; commodity and labor inflation; the ability to effectively staff restaurants; our ability to maintain adequate levels of liquidity for our cash needs, including debt obligations, payment of dividends, planned share repurchases and capital expenditures as well as the ability of our customers, suppliers, franchisees and lenders to access sources of liquidity to provide for their own cash needs; competitive pressures from within the restaurant industry; our ability to integrate and derive the expected benefits from our acquisition of Keke's; the level of success of our 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 and geopolitical events (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, the Company's Quarterly Report on Form 10-Q for the quarter ended March 31,~~29, 2021, this report on Form 10-Q and in the ~~Company’s~~Company's subsequent quarterly reports on Form 10-Q.

~~Current Trends~~

~~Domestic system-wide same-store sales~~1 for the quarter ended June 30, 2021 decreased 1.2% compared to the equivalent fiscal period in 2019 and increased 117.0% compared to the equivalent fiscal period in 2020. Over 99% of Denny’s restaurants were operating with open dining rooms as of the end of the current quarter with an effective capacity of approximately 98%.

Total off-premise sales at domestic and franchised restaurants, inclusive of virtual brands, have remained strong at approximately 24% of average weekly sales in July 2021 compared to pre-pandemic levels in February 2020 of approximately 12%.

Sales at domestic and franchised restaurants in the quarter benefited from over 1,100 active locations with the Company’s first virtual brand, The Burger Den. The Company began a phased rollout of its second virtual brand, The Meltdown, in April 2021 and is expected to be substantially complete with the rollout during the third quarter at approximately half of its domestic locations. Transactions from these two virtual brands are highly incremental and leverage labor during underutilized dayparts with nearly 70% of transactions occurring during dinner and late night.

Nearly 40% of domestic company and franchised restaurants were operating 24/7 at the end of the second quarter with staffing challenges being the primary headwind preventing restaurants from opening at the late night daypart. To address the industry-wide staffing challenges, the Company conducted a hiring tour and engaged a third-party vendor to enhance its online recruiting allowing franchisees to post open positions on its career website with greater visibility to potential applicants.

~~In an effort to provide greater transparency due to the COVID-19 pandemic, Denny's is providing the following table that presents monthly same-store sales~~1 ~~results compared to the equivalent fiscal periods during 2019:~~

~~Domestic System-Wide Same-Store Sales~~1 ~~Compared to 2019 Fiscal Periods~~

Domestic System-Wide Same-Store Sales1
Fiscal Year 2021*
Jan Feb Mar Apr May Jun Jul*
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%)
*July results are preliminary.

Domestic Average Units
Fiscal Year 2021
Jan Feb Mar Apr May Jun
Jul *
System 1,504 1,501 1,501 1,499 1,498 1,497 1,495
24/7 Units 519 532 569 566 561 566 576
Limited Hour Units 939 928 912 920 926 920 909
*July results are preliminary.

~~______________~~

~~(1)~~ Domestic system-wide 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 system-wide same-store sales should be considered as a supplement to, not a substitute for, the Company's results as reported under GAAP.

1920

Statements of Operations

The following table contains information derived from our ~~Condensed~~ Consolidated Statements of Operations expressed as a percentage of total operating revenue, except as noted below. Percentages may not add due to rounding.

Quarter Ended Two Quarters Ended
June 30, 2021 June 24, 2020 June 30, 2021 June 24, 2020
(Dollars in thousands)
Revenue:
Company restaurant sales $ 47,572 44.8 % $ 15,128 37.7 % $ 81,141 43.5 % $ 57,419 42.0 %
Franchise and license revenue 58,593 55.2 % 25,033 62.3 % 105,600 56.5 % 79,437 58.0 %
Total operating revenue 106,165 100.0 % 40,161 100.0 % 186,741 100.0 % 136,856 100.0 %
Costs of company restaurant sales, excluding depreciation and amortization (a):
Product costs 11,447 24.1 % 4,305 28.5 % 19,719 24.3 % 14,435 25.1 %
Payroll and benefits 16,970 35.7 % 8,039 53.1 % 29,935 36.9 % 25,145 43.8 %
Occupancy 2,844 6.0 % 2,728 18.0 % 5,694 7.0 % 5,891 10.3 %
Other operating expenses 6,552 13.8 % 4,534 30.0 % 12,629 15.6 % 10,253 17.9 %
Total costs of company restaurant sales 37,813 79.5 % 19,606 129.6 % 67,977 83.8 % 55,724 97.0 %
Costs of franchise and license revenue, excluding depreciation and amortization (a) 28,735 49.0 % 15,244 60.9 % 52,493 49.7 % 44,414 55.9 %
General and administrative expenses 17,548 16.5 % 13,153 32.8 % 34,495 18.5 % 20,895 15.3 %
Depreciation and amortization 3,897 3.7 % 4,058 10.1 % 7,558 4.0 % 8,204 6.0 %
Operating (gains), losses and other charges, net (113) (0.1) % 1,627 4.1 % 419 0.2 % 3,100 2.3 %
Total operating costs and expenses, net 87,880 82.8 % 53,688 133.7 % 162,942 87.3 % 132,337 96.7 %
Operating income (loss) 18,285 17.2 % (13,527) (33.7) % 23,799 12.7 % 4,519 3.3 %
Interest expense, net 4,066 3.8 % 4,947 12.3 % 8,343 4.5 % 8,898 6.5 %
Other nonoperating expense (income), net 16,251 15.3 % 9,565 23.8 % (13,797) (7.4) % 12,328 9.0 %
Income (loss) before income taxes (2,032) (1.9) % (28,039) (69.8) % 29,253 15.7 % (16,707) (12.2) %
Provision for (benefit from) income taxes (1,204) (1.1) % (5,074) (12.6) % 6,900 3.7 % (2,755) (2.0) %
Net income (loss) $ (828) (0.8) % $ (22,965) (57.2) % $ 22,353 12.0 % $ (13,952) (10.2) %
Other Data:
Company average unit sales $ 732 $ 246 $ 1,257 $ 890
Franchise average unit sales $ 416 $ 183 $ 742 $ 589
Company equivalent units (b) 65 62 65 64
Franchise equivalent units (b) 1,582 1,622 1,583 1,627
Company same-store sales increase (decrease) vs. prior year (c)(e) 172.1 % (64.9) % 46.8 % (35.9) %
Domestic franchise same-store sales increase (decrease) vs. prior year (c)(e) 113.2 % (56.1) % 30.8 % (28.4) %
Company same-store sales increase (decrease) vs. 2019 (c)(d)(e) 1.9 % N/A (10.6) % N/A
Domestic franchise same-store sales decrease vs. 2019 (c)(d)(e) (1.5) % N/A (10.2) % N/A


	Quarter Ended										Two Quarters Ended
	June 29, 2022					June 30, 2021					June 29, 2022					June 30, 2021
	(In thousands)
Revenue:
Company restaurant sales	$	49,167		42.7	%	$	47,572		44.8	%	$	93,143		42.7	%	$	81,141		43.5	%
Franchise and license revenue	65,850			57.3	%	58,593			55.2	%	124,981			57.3	%	105,600			56.5	%
Total operating revenue	115,017			100.0	%	106,165			100.0	%	218,124			100.0	%	186,741			100.0	%
Costs of company restaurant sales, excluding depreciation and amortization (a):
Product costs	13,168			26.8	%	11,447			24.1	%	24,412			26.2	%	19,719			24.3	%
Payroll and benefits	18,336			37.3	%	16,970			35.7	%	35,422			38.0	%	29,935			36.9	%
Occupancy	3,782			7.7	%	2,844			6.0	%	7,022			7.5	%	5,694			7.0	%
Other operating expenses	9,542			19.4	%	6,552			13.8	%	16,597			17.8	%	12,629			15.6	%
Total costs of company restaurant sales, excluding depreciation and amortization	44,828			91.2	%	37,813			79.5	%	83,453			89.6	%	67,977			83.8	%
Costs of franchise and license revenue, excluding depreciation and amortization (a)	35,265			53.6	%	28,735			49.0	%	65,934			52.8	%	52,493			49.7	%
General and administrative expenses	16,623			14.5	%	17,548			16.5	%	33,581			15.4	%	34,495			18.5	%
Depreciation and amortization	3,590			3.1	%	3,897			3.7	%	7,138			3.3	%	7,558			4.0	%
Operating (gains), losses and other charges, net	846			0.7	%	(113)			(0.1)	%	846			0.4	%	419			0.2	%
Total operating costs and expenses, net	101,152			87.9	%	87,880			82.8	%	190,952			87.5	%	162,942			87.3	%
Operating income	13,865			12.1	%	18,285			17.2	%	27,172			12.5	%	23,799			12.7	%
Interest expense, net	2,878			2.5	%	4,066			3.8	%	5,838			2.7	%	8,343			4.5	%
Other nonoperating expense (income), net	(19,795)			(17.2)	%	16,251			15.3	%	(39,410)			(18.1)	%	(13,797)			(7.4)	%
Income (loss) before income taxes	30,782			26.8	%	(2,032)			(1.9)	%	60,744			27.8	%	29,253			15.7	%
Provision for (benefit from) income taxes	7,779			6.8	%	(1,204)			(1.1)	%	15,886			7.3	%	6,900			3.7	%
Net income (loss)	$	23,003		20.0	%	$	(828)		(0.8)	%	$	44,858		20.6	%	$	22,353		12.0	%

Other Data:
Company average unit sales	$	761				$	732				$	1,443				$	1,257
Franchise average unit sales	$	442				$	416				$	846				$	742
Company equivalent units (b)	64					65					64					65
Franchise equivalent units (b)	1,567					1,582					1,570					1,583
Company same-store sales increase vs. prior year (c)(d)	3.8		%			172.1		%			14.9		%			46.8		%
Domestic franchise same-store sales increase vs. prior year (c)(d)	2.4		%			113.2		%			11.2		%			30.8		%

(a)Costs of company restaurant sales percentages are as a percentage of company restaurant sales. Costs of franchise and license revenue percentages are as a percentage of franchise and license revenue. All other percentages are as a percentage of total operating revenue.

(b)Equivalent units are calculated as the weighted average number of units outstanding during a defined time period.

(c)Same-store sales include sales from company restaurants or non-consolidated franchised and licensed restaurants that were open during the comparable periods noted.

(d)In an effort to provide greater transparency due to the COVID-19 pandemic, we are providing additional same-store sales information for 2021 that includes sales from company restaurants or non-consolidated franchised and licensed restaurants that were open the same period in fiscal 2019.

~~(e)~~Prior year amounts have not been restated for ~~2021~~2022 comparable units.

Unit Activity


		Quarter Ended		Two Quarters Ended			Quarter Ended		Two Quarters Ended
		June 30, 2021	June 24, 2020	June 30, 2021	June 24, 2020		June 29, 2022	June 30, 2021	June 29, 2022	June 30, 2021
Company restaurants, beginning of period	Company restaurants, beginning of period	65	67	65	68	Company restaurants, beginning of period	65	65	65	65
Units opened	Units opened	—	—	—	—	Units opened	—	—	—	—

Units closed	Units closed	—	—	—	(1)	Units closed	—	—	—	—
End of period	End of period	65	67	65	67	End of period	65	65	65	65

Franchised and licensed restaurants, beginning of period	Franchised and licensed restaurants, beginning of period	1,584	1,628	1,585	1,635	Franchised and licensed restaurants, beginning of period	1,569	1,584	1,575	1,585
Units opened	Units opened	3	3	6	11	Units opened	4	3	9	6

Units closed	Units closed	(7)	(15)	(11)	(30)	Units closed	(7)	(7)	(18)	(11)
End of period	End of period	1,580	1,616	1,580	1,616	End of period	1,566	1,580	1,566	1,580
Total restaurants, end of period	Total restaurants, end of period	1,645	1,683	1,645	1,683	Total restaurants, end of period	1,631	1,645	1,631	1,645

Company Restaurant Operations

Company restaurant sales increased ~~$32.4~~$1.6 million, or ~~214.5%~~3.4%, for the quarter ended June ~~30, 2021~~29, 2022 and ~~$23.7~~$12.0 million, or ~~41.3%~~14.8%, year-to-date compared to the prior year ~~periods, respectively.~~periods. The increases in ~~company restaurant~~ sales were primarily due to ~~reduced dine-in restrictions and fewer temporary closures related~~increases in guest check average resulting from price increases to ~~the COVID-19 pandemic~~offset inflationary costs. Sales also benefited from changes in ~~the current periods as compared to the prior year periods.~~product mix. Company same-store sales increased ~~172.1%~~3.8% for the current year quarter and ~~46.8%~~14.9% year-to-date as compared to the prior year periods.

Total costs of company restaurant sales as a percentage of company restaurant sales ~~was 79.5%~~were 91.2% for the quarter ended June ~~30, 2021~~29, 2022 and ~~83.8%~~89.6% year-to-date compared to ~~129.6%~~79.5% and ~~97.0%~~83.8%, respectively, for the prior year periods.

Product costs as a percentage of company restaurant sales were ~~24.1%~~26.8% for the quarter ended June ~~30, 2021~~29, 2022 and ~~24.3%~~26.2% year-to-date compared to ~~28.5%~~24.1% and ~~25.1%~~24.3%, respectively, for the prior year ~~periods. The prior year included increases in paper product costs~~periods, primarily due to ~~higher delivery and to-go orders as a percentage of sales related to the COVID-19 pandemic.~~increased commodity costs.

Payroll and benefits as a percentage of company restaurant sales were ~~35.7%~~37.3% for the quarter ended June ~~30, 2021~~29, 2022 and ~~36.9%~~38.0% year-to-date compared to ~~53.1%~~35.7% and ~~43.8%~~36.9%, respectively, in the prior year periods. ~~For the~~The current ~~year~~ quarter ~~and year-to-date periods,~~increase was primarily due to a 2.4 percentage point increase in management and staff payroll, including payroll taxes, ~~decreased 19.4~~partially offset by a 0.6 percentage ~~points and 6.6 percentage points, respectively, as a percentage of sales. The primary driver of these decreases was the leveraging effect of the increase~~point decrease in sales caused by higher sales as guests return to our restaurants due to the easing of COVID-19 restrictions. Also contributing to the decreases were lower staffing and deployment levels in the current year due to challenges in the labor market as compared to the prior year's retention of a significant portion of our management staff during a time that restaurants were closed or operating under government restrictions. Increases in unit level incentive compensation costs and workers' compensation costs related to claims development. The year-to-date increase was primarily due to a 1.8 percentage point increase in staff payroll, partially offset ~~the leveraging benefit of higher sales. For the current year quarter and year-to-date periods, incentive compensation costs increased 0.8~~by a 0.5 percentage ~~points and 0.7 percentage points, respectively,~~point decrease in management labor as a result of the ~~improvement~~leveraging effect of higher sales in ~~operating performance. For~~ the current ~~year quarter, workers' compensation costs increased 2.2 percentage points resulting from positive claims development in the prior year.~~year-to-date period.

Occupancy costs as a percentage of company restaurant sales were ~~6.0%~~7.7% for the quarter ended June ~~30, 2021~~29, 2022 and ~~7.0%~~7.5% year-to-date compared to ~~18.0%~~6.0% and ~~10.3%~~7.0%, respectively, in the prior year periods. The ~~decreases~~quarter and year-to-date increases as a percentage of sales were primarily due to increases in general liability insurance costs from negative claims development in the ~~leveraging effect of improved sales.~~current periods and positive developments in the prior year periods.

Other operating expenses consist of the following amounts and percentages of company restaurant sales:


		Quarter Ended								Two Quarters Ended									Quarter Ended								Two Quarters Ended
		June 30, 2021				June 24, 2020				June 30, 2021				June 24, 2020					June 29, 2022				June 30, 2021				June 29, 2022				June 30, 2021
		(Dollars in thousands)																	(In thousands)
Utilities	Utilities	$	1,390	2.9	%	$	1,098	7.3	%	$	2,615	3.2	%	$	2,534	4.4	%	Utilities	$	1,650	3.4	%	$	1,390	2.9	%	$	3,227	3.5	%	$	2,615	3.2	%
Repairs and maintenance	Repairs and maintenance	635		1.3	%	428		2.8	%	1,168		1.4	%	1,217		2.1	%	Repairs and maintenance	889		1.8	%	635		1.3	%	1,714		1.8	%	1,168		1.4	%
Marketing	Marketing	1,365		2.9	%	607		4.0	%	2,332		2.9	%	1,726		3.0	%	Marketing	1,330		2.7	%	1,365		2.9	%	2,537		2.7	%	2,332		2.9	%

Other direct costs	Other direct costs	3,162		6.6	%	2,401		15.9	%	6,514		8.0	%	4,776		8.3	%	Other direct costs	5,673		11.5	%	3,162		6.6	%	9,119		9.8	%	6,514		8.0	%
Other operating expenses	Other operating expenses	$	6,552	13.8	%	$	4,534	30.0	%	$	12,629	15.6	%	$	10,253	17.9	%	Other operating expenses	$	9,542	19.4	%	$	6,552	13.8	%	$	16,597	17.8	%	$	12,629	15.6	%

Other direct costs were ~~lower~~higher as a percentage of sales as compared to the prior year primarily due to unfavorable developments in certain legal claims of 4.5 percentage points for the ~~leveraging effect of higher sales.~~quarter and 1.7 percentage points for the year-to-date period.

Franchise Operations

Franchise and license revenue and costs of franchise and license revenue consisted of the following amounts and percentages of franchise and license revenue for the periods indicated:


		Quarter Ended								Two Quarters Ended									Quarter Ended								Two Quarters Ended
		June 30, 2021				June 24, 2020				June 30, 2021				June 24, 2020					June 29, 2022				June 30, 2021				June 29, 2022				June 30, 2021
		(Dollars in thousands)																	(In thousands)
Royalties	Royalties	$	27,117	46.3	%	$	6,719	26.8	%	$	47,961	45.4	%	$	30,566	38.5	%	Royalties	$	28,759	43.7	%	$	27,117	46.3	%	$	55,284	44.2	%	$	47,961	45.4	%
Advertising revenue	Advertising revenue	18,600		31.7	%	7,232		28.9	%	32,711		31.0	%	24,758		31.2	%	Advertising revenue	19,486		29.6	%	18,600		31.7	%	37,692		30.2	%	32,711		31.0	%
Initial and other fees	Initial and other fees	2,066		3.5	%	1,346		5.4	%	3,904		3.7	%	3,043		3.8	%	Initial and other fees	7,779		11.8	%	2,066		3.5	%	12,286		9.8	%	3,904		3.7	%
Occupancy revenue	Occupancy revenue	10,810		18.4	%	9,736		38.9	%	21,024		19.9	%	21,070		26.5	%	Occupancy revenue	9,826		14.9	%	10,810		18.4	%	19,719		15.8	%	21,024		19.9	%
Franchise and license revenue	Franchise and license revenue	$	58,593	100.0	%	$	25,033	100.0	%	$	105,600	100.0	%	$	79,437	100.0	%	Franchise and license revenue	$	65,850	100.0	%	$	58,593	100.0	%	$	124,981	100.0	%	$	105,600	100.0	%

Advertising costs	Advertising costs	$	18,600	31.7	%	$	7,232	28.9	%	$	32,711	31.0	%	$	24,758	31.2	%	Advertising costs	$	19,486	29.6	%	$	18,600	31.7	%	$	37,692	30.2	%	$	32,711	31.0	%
Occupancy costs	Occupancy costs	6,879		11.7	%	5,829		23.3	%	13,418		12.7	%	13,238		16.7	%	Occupancy costs	6,064		9.2	%	6,879		11.7	%	12,441		10.0	%	13,418		12.7	%
Other direct costs	Other direct costs	3,256		5.6	%	2,183		8.7	%	6,364		6.0	%	6,418		8.1	%	Other direct costs	9,715		14.8	%	3,256		5.6	%	15,801		12.6	%	6,364		6.0	%
Costs of franchise and license revenue	Costs of franchise and license revenue	$	28,735	49.0	%	$	15,244	60.9	%	$	52,493	49.7	%	$	44,414	55.9	%	Costs of franchise and license revenue	$	35,265	53.6	%	$	28,735	49.0	%	$	65,934	52.8	%	$	52,493	49.7	%

Franchise and license revenue increased ~~$33.6~~$7.3 million, or ~~134.1%~~12.4%, for the quarter ended June ~~30, 2021~~29, 2022 and ~~$26.2~~$19.4 million, or ~~32.9%~~18.4%, year-to-date compared to the prior year periods. Royalties increased ~~$20.4~~$1.6 million, or ~~303.6%~~6.1%, and ~~$17.4~~$7.3 million, or ~~56.9%~~15.3%, for the current quarter and year-to-date ~~periods,~~period, respectively, compared to the prior year periods. Advertising revenue increased ~~$11.4~~$0.9 million, or ~~157.2%~~4.8%, for the current quarter and ~~$8.0~~$5.0 million, or ~~32.1%~~15.2%, year-to-date compared to the prior year periods. The increases in royalty and advertising revenue primarily resulted from ~~113.2%~~2.4% and ~~30.8%~~11.2% increases in domestic same-store sales for the respective periods. ~~Additionally,~~These increases were partially offset by the ~~prior year periods included abatements~~impacts of $3.0 million and $4.9 million of royalties in the quarter-to-date and year-to-date periods, respectively, and $1.2 million of advertising fees in the year-to-date period to help our franchisees weather the impact of the COVID-19 pandemic. Partially offsetting these increases for both periods were decreases of 40 and 44fewer equivalent units for the ~~quarterly~~quarter and year-to-date ~~periods, respectively.~~period.

Initial and other fees increased ~~$0.7~~$5.7 million, or ~~53.5%~~276.5%, for the quarter ended June ~~30, 2021~~29, 2022 and ~~$0.9~~$8.4 million, or ~~28.3%, year-to-date compared to the prior year periods. Occupancy revenue increased $1.1 million, or 11.0%, for the current quarter and decreased less than $0.1 million, or 0.2%~~214.7%, year-to-date compared to the prior year periods. The increase in ~~occupancy~~initial and other fees primarily resulted from the recognition of $5.7 million and $7.9 million of revenue for the quarter and year-to-date period, respectively, from the sale and installation of kitchen equipment purchased by franchisees. The revenue recorded related to the sale of equipment has an equal and offsetting expense recorded in other direct costs as described below. Occupancy revenue decreased $1.0 million, or 9.1%, for the current quarter and decreased $1.3 million, or 6.2%, year-to-date compared to the prior year periods. The decreases in occupancy revenue primarily resulted from ~~higher percentage rents as a result of sales increases due to reduced dine-in restrictions and temporary closures related to the COVID-19 pandemic.~~lease terminations.

Costs of franchise and license revenue increased ~~$13.5~~$6.5 million, or ~~88.5%~~22.7%, for the quarter ended June ~~30, 2021~~29, 2022 and ~~$8.1~~$13.4 million, or ~~18.2%~~25.6%, year-to-date compared to the prior year periods. Advertising costs increased $0.9 million, or 4.8%, for the current quarter and $5.0 million, or 15.2%, year-to-date, which corresponds to the related advertising revenue increases noted above. Occupancy costs decreased $0.8 million, or 11.8%, for the current quarter and $1.0 million, or 7.3%, year-to-date compared to the prior year periods. The decreases in occupancy costs for the current quarter and year-to-date period primarily resulted from lease terminations, which corresponds to the related occupancy revenue decreases noted above. Other direct franchise costs increased $6.5 million, or 198.4%, for the current quarter and $9.4 million, or 148.3%, year-to-date compared to the prior year periods. The increases ~~were primarily related to the increases~~ in advertising costs year-over-year, which corresponded to the related advertising revenue increases noted above. Occupancy costs increased $1.1 million, or 18.0%, for the current quarter and $0.2 million, or 1.4%, year-to-date compared to prior year periods. The increase in occupancy costs for the current quarter primarily resulted from higher percentage rent expense as a result of sales

~~increases. Other~~other direct franchise costs ~~increased $1.1~~were primarily due to $5.7 million ~~or 49.1%,~~of expense for the ~~current~~ quarter and ~~decreased $0.1~~$7.9 million ~~or 0.8%,~~of expense year-to-date ~~compared to~~as part of the ~~prior year periods. Other direct franchise costs for the current quarter~~sale and ~~year-to-date periods included increases in franchise administrative costs, partially offset~~installation of kitchen equipment purchased by ~~bad debt allowance reversals of $0.4 million and $0.7 million for the quarterly and year-to-date periods, respectively. Due to the increase in revenue,~~franchisees as mentioned above. As a result, costs of franchise and license revenue ~~decreased~~increased to 53.6% and 52.8% for the respective quarter and year-to-date period ended June 29, 2022 from 49.0% and 49.7% for the ~~quarter and two quarters ended June 30, 2021 from 60.9% and 55.9% for the~~ respective prior year ~~periods.~~periods.

Other Operating Costs and Expenses

Other operating costs and expenses such as general and administrative expenses and depreciation and amortization expense relate to both company and franchise operations.

General and administrative expenses consisted of the following:


		Quarter Ended				Two Quarters Ended					Quarter Ended				Two Quarters Ended
		June 30, 2021		June 24, 2020		June 30, 2021		June 24, 2020			June 29, 2022		June 30, 2021		June 29, 2022		June 30, 2021
		(In thousands)									(In thousands)
Corporate administrative expenses	Corporate administrative expenses	$	10,345	$	9,701	$	21,217	$	21,482	Corporate administrative expenses	$	13,162	$	10,345	$	24,545	$	21,217
Share-based compensation	Share-based compensation	3,388		1,511		6,860		(26)		Share-based compensation	3,505		3,388		7,520		6,860
Incentive compensation	Incentive compensation	3,032		1		5,118		15		Incentive compensation	1,639		3,032		3,758		5,118
Deferred compensation valuation adjustments	Deferred compensation valuation adjustments	783		1,940		1,300		(576)		Deferred compensation valuation adjustments	(1,683)		783		(2,242)		1,300
Total general and administrative expenses	Total general and administrative expenses	$	17,548	$	13,153	$	34,495	$	20,895	Total general and administrative expenses	$	16,623	$	17,548	$	33,581	$	34,495

Corporate administrative expenses increased ~~$0.6~~$2.8 million for the quarter ended June ~~30, 2021~~29, 2022 and ~~decreased $0.3~~increased $3.3 million year-to-date. The ~~increase for the current quarter was~~increases are primarily due to ~~prior~~compensation increases in the current year and temporary cost reductions in the prior year related to the COVID-19 ~~pandemic, partially offset by retention credits of $0.5 million in the current year quarter.~~pandemic. Share-based compensation increased ~~$1.9~~$0.1 million for the current quarter and ~~$6.9~~$0.7 million year-to-date. Incentive compensation ~~increased $3.0~~decreased $1.4 million for the current quarter and ~~$5.1 million year-to-date. The increases in share-based compensation and incentive compensation~~year-to-date period primarily ~~resulted~~resulting from ~~adjustments recorded in the prior year as a result of not meeting~~our performance ~~measures for the respective compensation plans due to the impacts of the COVID-19 pandemic.~~against plan metrics. Changes in deferred compensation valuation adjustments have offsetting gains or losses on the underlying nonqualified deferred plan investments included as a component of other non-operating expense (income), net, for the corresponding periods.

Depreciation and amortization consisted of the following:


		Quarter Ended				Two Quarters Ended					Quarter Ended				Two Quarters Ended
		June 30, 2021		June 24, 2020		June 30, 2021		June 24, 2020			June 29, 2022		June 30, 2021		June 29, 2022		June 30, 2021
		(In thousands)									(In thousands)
Depreciation of property and equipment	Depreciation of property and equipment	$	2,938	$	2,810	$	5,653	$	5,691	Depreciation of property and equipment	$	2,702	$	2,938	$	5,349	$	5,653
Amortization of financing lease right-of-use assets	Amortization of financing lease right-of-use assets	428		467		856		967		Amortization of financing lease right-of-use assets	437		428		879		856
Amortization of intangible and other assets	Amortization of intangible and other assets	531		781		1,049		1,546		Amortization of intangible and other assets	451		531		910		1,049
Total depreciation and amortization expense	Total depreciation and amortization expense	$	3,897	$	4,058	$	7,558	$	8,204	Total depreciation and amortization expense	$	3,590	$	3,897	$	7,138	$	7,558

The decreases in depreciation and amortization expense during the quarter and year-to-date period ended June ~~30, 2021 and year-to-date periods were~~29, 2022 are primarily due to certain ~~intangible~~ assets becoming fully ~~amortized in the prior year.~~depreciated.

Operating (gains), losses and other charges, net consisted of the following:


		Quarter Ended				Two Quarters Ended					Quarter Ended				Two Quarters Ended
		June 30, 2021		June 24, 2020		June 30, 2021		June 24, 2020			June 29, 2022		June 30, 2021		June 29, 2022		June 30, 2021
		(In thousands)									(In thousands)
(Gains) losses on sales of assets and other, net		$	(65)	$	12	$	(1,007)	$	(1,058)
Gains on sales of assets and other, net										Gains on sales of assets and other, net	$	(99)	$	(65)	$	(245)	$	(1,007)
Restructuring charges and exit costs	Restructuring charges and exit costs	(48)		1,615		1,426		1,977		Restructuring charges and exit costs	679		(48)		825		1,426
Impairment charges	Impairment charges	—		—		—		2,181		Impairment charges	266		—		266		—
Operating (gains), losses and other charges, net	Operating (gains), losses and other charges, net	$	(113)	$	1,627	$	419	$	3,100	Operating (gains), losses and other charges, net	$	846	$	(113)	$	846	$	419

Gains on sales of assets and other, net for the two quarters ended June 30, 2021 were primarily related to the sale of one parcel of real estate. Gains on sales of assets and other, net during the two quarters ended June

24 ~~2020 were primarily related to the sale of two parcels of real estate.~~

Restructuring charges and exit costs consisted of the following:


		Quarter Ended				Two Quarters Ended					Quarter Ended				Two Quarters Ended
		June 30, 2021		June 24, 2020		June 30, 2021		June 24, 2020			June 29, 2022		June 30, 2021		June 29, 2022		June 30, 2021
		(In thousands)									(In thousands)
Exit costs	Exit costs	$	141	$	50	$	223	$	94	Exit costs	$	38	$	141	$	50	$	223
Severance and other restructuring charges	Severance and other restructuring charges	(189)		1,565		1,203		1,883		Severance and other restructuring charges	641		(189)		775		1,203
Total restructuring and exit costs	Total restructuring and exit costs	$	(48)	$	1,615	$	1,426	$	1,977	Total restructuring and exit costs	$	679	$	(48)	$	825	$	1,426

Restructuring and exit costs ~~decreased by $1.7~~increased $0.7 million for the current quarter and decreased $0.6 million year-to-date compared to the prior year periods. The current quarter increase was primarily due to severance costs and the year-to-date decrease ~~for~~was primarily due to prior period relocation costs.

We recorded impairment charges of $0.3 million (consisting of property and right-of-use assets) during the ~~current~~ quarter and year-to-date period ~~was primarily due to the Company permanently separating with approximately 50 support center staff in the prior year period. Restructuring and exit costs for the two quarters~~ ended June ~~30, 2021 include relocation costs associated with moving certain employees to~~29, 2022 resulting from our ~~support center in the Dallas, Texas area.~~

~~Impairment charges of $2.2 million during the two quarters ended June 24, 2020 were the result of an~~ assessment of ~~the recoverability of assets resulting from the impact of the COVID-19 pandemic.~~underperforming restaurants.

Operating income was ~~$18.3~~$13.9 million for the current quarter and ~~$23.8~~$27.2 million year-to-date compared to ~~a loss of $13.5~~$18.3 million and ~~income of $4.5~~$23.8 million, respectively, for the prior year periods.

Interest expense, net consisted of the following:


		Quarter Ended				Two Quarters Ended					Quarter Ended				Two Quarters Ended
		June 30, 2021		June 24, 2020		June 30, 2021		June 24, 2020			June 29, 2022		June 30, 2021		June 29, 2022		June 30, 2021
		(In thousands)									(In thousands)
Interest on credit facility	Interest on credit facility	$	1,554	$	2,160	$	3,255	$	4,539	Interest on credit facility	$	1,130	$	1,554	$	2,029	$	3,255
Interest on interest rate swaps	Interest on interest rate swaps	1,006		1,570		2,001		1,895		Interest on interest rate swaps	721		1,006		1,711		2,001
Interest on financing lease liabilities	Interest on financing lease liabilities	746		774		1,514		1,559		Interest on financing lease liabilities	595		746		1,202		1,514
Letters of credit and other fees	Letters of credit and other fees	377		250		732		511		Letters of credit and other fees	279		377		588		732
Interest income	Interest income	(7)		(37)		(15)		(67)		Interest income	(12)		(7)		(16)		(15)
Total cash interest, net	Total cash interest, net	3,676		4,717		7,487		8,437		Total cash interest, net	2,713		3,676		5,514		7,487
Amortization of deferred financing costs	Amortization of deferred financing costs	344		188		688		340		Amortization of deferred financing costs	159		344		317		688
Amortization of interest rate swap losses	Amortization of interest rate swap losses	46		—		167		—		Amortization of interest rate swap losses	6		46		6		167
Interest accretion on other liabilities	Interest accretion on other liabilities	—		42		1		121		Interest accretion on other liabilities	—		—		1		1
Total interest expense, net	Total interest expense, net	$	4,066	$	4,947	$	8,343	$	8,898	Total interest expense, net	$	2,878	$	4,066	$	5,838	$	8,343

Total cash interest expense, net decreased by $1.0 million for ~~both~~ the current quarter ~~ended June 30, 2021~~ and $2.0 million year-to-date ~~periods as~~ compared to the ~~respective~~ prior year periods. ~~Combined interest~~Interest on credit facility borrowings ~~and interest rate swaps~~ decreased by ~~$1.2~~$0.4 million for ~~both~~ the current quarter and $1.2 million year-to-date compared to the prior year periods. These decreases primarily resulted from decreased average borrowings ~~in the current quarter and year-to-date periods~~ and lower average interest rates in the current quarter compared to the respective prior year period. Interest rates on ~~the~~our borrowings primarily decreased as a result of our credit facility ~~for the year-to-date period.~~Partially offsetting these decreases to total interest expense net, for both the quarter and year-to-date periods were $0.2 million and $0.3 million increases in the amortization of deferred financing costs resulting from prior year credit facility amendments.refinancing on August 26, 2021.

Other nonoperating expense (income), net was ~~expense~~income of ~~$16.3~~$19.8 million for the current quarter and ~~income of $13.8~~$39.4 million year-to-date, compared to expense of ~~$9.6~~$16.3 million and ~~$12.3~~income of $13.8 million, respectively, for the prior year periods. Other nonoperating ~~expense (income)~~income, net for the current quarter primarily consisted of $21.7 million of gains related to valuation adjustments for dedesignated interest rate hedges, partly offset by losses of $1.7 million on deferred compensation plan investments. The year-to-date period primarily consisted of $41.9 million of gains on interest rate swap valuation adjustments, partially offset by $2.3 million of losses on deferred compensation plan investments. Prior year other nonoperating expense, net for the quarter primarily consisted of $17.2 million of losses related to interest rate swap valuation adjustments, partially offset by $0.8 million of gains on deferred compensation plan investments. The prior year-to-date period primarily consisted of $12.7 million of gains on interest rate swap valuation adjustments in addition to $1.4 million of gains on deferred compensation plan investments. Prior year other nonoperating expense for the quarter and year-to-date periods primarily consisted of recognized losses on interest rate swaps of $11.5 million resulting from the discontinuance of hedge accounting treatment on a portion of our interest rate swaps.

Provision for (benefit from) income taxes was a ~~benefit~~provision of ~~$1.2~~$7.8 million for the quarter ended June ~~30, 2021~~29, 2022 and provision of $15.9 million year-to-date, compared to a benefit of $1.2 million and a provision of $6.9 million ~~year-to-date, compared to benefits of $5.1 million and $2.8 million~~ for the prior year ~~periods.~~periods, respectively. The effective tax rate was ~~59.3%~~25.3% for the current quarter and ~~23.6%~~26.2% year-to-date, compared to ~~18.1%~~59.3% and ~~16.5%~~23.6%, respectively, for the prior year periods. The 2021 quarterly and year-to-date rates included the impact of excess tax benefits relating to share-based compensation of 13.4% and (1.2%), respectively. ~~The 2020 quarterly and year-to-date rates included a benefit from the reclassification of cash flow derivatives from accumulated other comprehensive loss, net of 7.0% and 11.7%, respectively.~~

Net income (loss) was net income of $23.0 million for the quarter ended June 29, 2022 and net income of $44.9 million year-to-date compared to a net loss of $0.8 million ~~for the quarter ended June 30, 2021~~ and net income of $22.4 ~~million year-to-date compared to net loss of $23.0 million and $14.0~~ million, respectively, for the prior year periods.

Liquidity and Capital Resources

Our primary sources of liquidity and capital resources are cash generated from operations and borrowings under our credit facility (as described below). Principal uses of cash are operating expenses, capital expenditures and ~~prior to the second quarter of 2020,~~ the repurchase of shares of our common stock.

The following table presents a summary of our sources and uses of cash and cash equivalents for the periods indicated:

Two Quarters Ended
June 30, 2021 June 24, 2020
(In thousands)
Net cash provided by (used in) operating activities $ 43,371 $ (7,958)
Net cash used in investing activities (1,007) (334)
Net cash provided by (used in) financing activities (35,374) 25,997
Increase in cash and cash equivalents $ 6,990 $ 17,705


	Two Quarters Ended
	June 29, 2022		June 30, 2021
	(In thousands)
Net cash provided by operating activities	$	9,609	$	43,371
Net cash used in investing activities	(6,675)		(1,007)
Net cash used in financing activities	(32,198)		(35,374)
Increase (decrease) in cash and cash equivalents	$	(29,264)	$	6,990

Net cash flows provided by operating activities were $9.6 million for the two quarters ended June 29, 2022 compared to $43.4 million for the two quarters ended June 30, ~~2021 compared to net cash flows used in operating activities of $8.0 million for the two quarters ended June 24, 2020.~~2021. The ~~increase~~decrease in cash flows provided by operating activities was primarily due to the ~~improvement of operating results in 2021 and the~~ timing of prior year accrual ~~payments.~~payments, collections of receivables and purchases of inventory for our kitchen equipment project. We believe that our estimated cash flows from operations for ~~2021,~~2022, combined with our capacity for additional borrowings under our credit facility and cash on hand, will enable us to meet our anticipated cash requirements and fund capital expenditures over the next 12 months.

Net cash flows used in investing activities were $6.7 million for the two quarters ended June 29, 2022. These cash flows primarily consisted of capital expenditures of $5.8 million and investments purchases of $1.2 million.Net cash flows used in investing activities were $1.0 million for the two quarters ended June 30, 2021. These cash flows primarily consisted of capital expenditures of $3.1 million, partially offset by proceeds from sales of restaurants, real estate and other assets of $1.6 million, collections on notes receivable of $0.4 million, and proceeds from sales of investments of $0.2 million. Net cash flows used in investing activities were $0.3 million for the two quarters ended June 24, 2020. These cash flows primarily consisted of capital expenditures of $4.5 million and investment purchases of $1.4 million, which were mostly offset by proceeds from sales of restaurants and real estate of $2.2 million and proceeds from the sale of investments of $2.9 million.

Our principal capital requirements have been largely associated with the following:


		Two Quarters Ended					Two Quarters Ended
		June 30, 2021		June 24, 2020			June 29, 2022		June 30, 2021
		(In thousands)					(In thousands)
Facilities	Facilities	$	1,626	$	1,966	Facilities	$	2,004	$	1,626
New construction		—		114

Remodeling	Remodeling	356		965		Remodeling	2,524		356
Information technology	Information technology	842		1,138		Information technology	824		842
Other	Other	284		293		Other	419		284
Capital expenditures	Capital expenditures	$	3,108	$	4,476	Capital expenditures	$	5,771	$	3,108

~~Cash~~Net cash flows used in financing activities were $32.2 million for the two quarters ended June 29, 2022, which included cash payments for stock repurchases of $46.2 million and payments of tax withholding on share-based compensation of $4.8 million, partially offset by net long-term debt borrowings of $16.0 million and net bank overdrafts payments of $2.9 million. Net cash flows used in financing activities were $35.4 million for the two quarters ended June 30, 2021, which included net long-term debt repayments of $31.0 million, in addition to net bank overdraft payments of $3.1 million and payments of tax withholdings on share-based compensation of $1.4 million. Cash flows provided by financing activities were $26.0 million for the two quarters ended June 24, 2020, which included net long-term debt borrowings of $66.4 million, partially offset by cash payments for stock repurchases of $36.0 million.

Our working capital deficit was ~~$39.2~~$40.9 million at June ~~30, 2021~~29, 2022 compared to ~~$28.5~~$28.3 million at December ~~30, 2020. The increase in working capital deficit was primarily related to the increase in current liabilities as of June 30,~~29, 2021. We are able to operate with a substantial working capital deficit because (1) restaurant operations and most food service operations are conducted primarily on a cash (and cash equivalent) basis with a low level of accounts receivable, (2) rapid turnover allows for a limited investment in inventories, and (3) accounts payable for food, beverages and supplies usually becomes due after the receipt of cash from the related sales.

Credit Facility

The Company is prohibited from paying dividends and making stock repurchases and other general investments. Limitations on capital expenditures of $12 million are in effect for the period of May 13, 2020 through September 29, 2021.

Kitchen Modernization and Technology Transformation Initiatives

The Company is currently in the process of upgrading and improving its kitchen equipment throughout the domestic system. The rollout began during the first quarter of 2022 and is expected to be substantially complete by the end of 2022. This investment is expected to yield long-term benefits through menu enhancements across all dayparts, but especially the dinner daypart, with new and improved food offerings. The new equipment is also expected to provide immediate benefits through increased kitchen efficiency and productivity while also reducing food waste.

The Company has entered into equipment purchase contracts of approximately $19.3 million related to the rollout of kitchen equipment for franchise restaurants, which will be billed to the franchisee and recognized as revenue as the equipment is installed, less approximately $5.7 million in commitments from the Company. Amounts committed from the Company are contract assets that have been netted against deferred revenue and will be recognized as a component of franchise and license revenue over the remaining term of the related franchise agreements. As of June 29, 2022, our remaining obligation under these contracts was approximately $2.5 million, $0.7 million of which is included in accounts payable. As of June 29, 2022, we had approximately $10.7 million in inventory and $1.6 million in contract assets related to the kitchen equipment rollout.

The Company intends to initiate the rollout of a new cloud-based restaurant technology platform throughout the domestic system which will lay the foundation for future technology initiatives to further enhance the guest experience. The rollout is expected to begin during the second half of 2022 and continue throughout 2023.

The Company has committed to investing approximately $10 million towards the cost and installation of the kitchen equipment package (approximately $5.7 million) and the new cloud-based restaurant technology platform (approximately $4.3 million) in domestic franchise restaurants. Additionally, the Company has negotiated favorable financing terms on behalf of its franchisees for the remaining cost.

Critical Accounting Policies and Estimates

For information regarding our Critical Accounting Policies and Estimates, see the "Critical Accounting Policies and Estimates" section in Part II, Item 7, "Management’s Discussion and Analysis of Financial Condition and Results of Operations" in our Annual Report on Form 10-K for the fiscal year ended December 29, 2021.

Implementation of New Accounting Standards

Information regarding the implementation of new accounting standards is incorporated by reference from Note 2 to our unaudited ~~Condensed~~ Consolidated Financial Statements set forth in Part I, Item 1 of this report.

Item 3. Quantitative and Qualitative Disclosures About Market Risk

Interest Rate Risk

We have exposure to interest rate risk related to certain instruments entered into for other than trading purposes. Specifically, as of June ~~30, 2021,~~29, 2022, borrowings under our credit facility bore interest at variable rates based on LIBOR plus ~~3.00%~~1.75% per annum.

We have receive-variable, pay-fixed interest rate swaps to hedge the forecasted cash flows of our floating rate debt.

A summary of our interest rate swaps as of June ~~30, 2021~~29, 2022 is as follows:

Trade Date Effective Date Maturity Date Notional Amount Fair Value Fixed Rate
(In thousands)
Swaps designated as cash flow hedges
March 20, 2015 March 29, 2018 March 31, 2025 $ 120,000 $ 7,921 2.44 %
October 1, 2015 March 29, 2018 March 31, 2026 $ 50,000 $ 3,783 2.46 %
Dedesignated swaps
February 15, 2018 March 31, 2020 December 31, 2033 $ 100,000 (1) $ 46,034 3.19 %
Total $ 270,000 $ 57,738


Trade Date	Effective Date	Maturity Date	Notional Amount			Fair Value		Fixed Rate
			(In thousands)
Swaps designated as cash flow hedges
March 20, 2015	March 29, 2018	March 31, 2025	$	120,000		$	2,165	2.44	%
October 1, 2015	March 29, 2018	March 31, 2026	$	50,000		$	1,055	2.46	%
Dedesignated swaps
February 15, 2018	March 31, 2020	December 31, 2033	$	120,000	(1)	$	(801)	3.19	%
Total			$	290,000		$	2,419

(1) The notional amounts of the swaps entered into on February 15, 2018 increase ~~annually~~periodically until they reach the maximum notional amount of $425.0 million on September 28, 2029.

As of June ~~30, 2021,~~29, 2022, the total notional amount of our interest rate swaps was in excess of 100% of our floating rate debt. Based on the ~~levels~~portion of ~~borrowings under~~ the ~~credit facility at~~swaps in excess of our floating rate debt as of June ~~30, 2021, if interest rates changed by~~29, 2022, a hypothetical change of 100 basis points in LIBOR would change our annual cash flow ~~and income before taxes would not change. However, depending~~by approximately $1.0 million. Depending on market considerations, fluctuations in the fair values of our interest rate swaps could be significant. With the exception of these changes in the fair value of our interest rate swaps and in the levels of borrowings under our credit facility, there have been no material changes in our quantitative and qualitative market risks since the prior reporting period. For additional information related to our interest rate swaps, including changes in the fair value, refer to Notes 6, 7 and 13 to our unaudited ~~Condensed~~ Consolidated Financial Statements in Part I, Item 1 of this report.

Item 4. Controls and Procedures

As required by Rule 13a-15(b) under the ~~Securities~~ Exchange Act, ~~of 1934, as amended (the “Exchange Act”),~~ our management conducted an evaluation (under the supervision and with the participation of our Chief Executive Officer ~~John C. Miller,~~and President, Kelli A. Valade, and our Executive Vice President and Chief Financial Officer, Robert P. Verostek) as of the end of the period covered by this Quarterly Report on Form 10-Q, of the effectiveness of our disclosure controls and procedures as defined in Rule 13a-15(e) under the Exchange Act. Based on that evaluation, ~~Messrs. Miller~~Ms. Valade and Mr. Verostek each concluded that our disclosure controls and procedures are effective to provide reasonable assurance that information required to be disclosed in the reports that we file or submit under the Exchange Act (i) is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission's rules and forms and (ii) is accumulated and communicated to our management, including ~~Messrs. Miller~~Ms. Valade and Mr. Verostek, as appropriate to allow timely decisions regarding required disclosure.

There were no changes in our internal control over financial reporting identified in connection with the evaluation required by Rule 13a-15(d) of the Exchange Act that occurred during our fiscal quarter ended June ~~30, 2021~~29, 2022 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

PART II - OTHER INFORMATION

Item 1. Legal Proceedings

Information regarding legal proceedings is incorporated by reference from Note 14 to our unaudited ~~Condensed~~ Consolidated Financial Statements set forth in Part I, Item 1 of this report.

Item 1A. Risk Factors

~~There have been no material changes~~The Company is supplementing the Risk Factors previously disclosed in ~~the risk factors set forth in Part I,~~ Item 1A ~~“Risk Factors” in our~~of the Annual Report on Form 10-K for the fiscal year ended December 29, 2021, (the “Annual Report”) and the Quarterly Report on Form 10-Q for the fiscal quarter ended March 30, ~~2020.~~2022. The following risk factors should be read in conjunction with the Risk Factors disclosed in the Annual Report.

The failure to successfully integrate the business and operations of Keke's Breakfast Cafe in the expected time frame may adversely affect our future results.

We believe that the acquisition of Keke's Breakfast Café, or Keke’s, will result in certain benefits, including expansion opportunities through a complementary concept, the opportunity to participate in the fast-growing A.M. eatery segment, and enhance value for our shareholders.

The success of the acquisition will depend on our ability to realize these anticipated benefits. We may fail to realize the anticipated benefits of the acquisition of Keke’s for a variety of reasons, including the following:

•failure to grow the brand in a timely manner through current and new franchisees;

•failure of customers to accept any changes that we may implement at Keke’s or to continue as customers of Keke’s following the acquisition; and

•failure to leverage the increased scale of our company quickly and effectively.

If we are not able to successfully integrate Keke’s business and operations, or if there are delays in combining the businesses, the anticipated benefits of the acquisition may not be realized fully or at all or may take longer to realize than expected.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

Purchases of Equity Securities by the Issuer

The table below provides information concerning repurchases of shares of our common stock during the quarter ended June 29, 2022.


Period	Total Number of Shares Purchased	Average Price Paid Per Share (1)		Total Number of Shares Purchased as Part of Publicly Announced Programs (2)	Approximate Dollar Value of Shares that May Yet be Purchased Under the Programs (2)
	(In thousands, except per share amounts)
March 31, 2022 - April 27, 2022	—	$	—	—	$	205,547
April 28, 2022 - May 25, 2022	1,414	9.88		1,414	$	191,549
May 26, 2022 - June 29, 2022	2,496	9.35		2,496	$	168,162
Total	3,910	$	9.54	3,910

(1)Average price paid per share excludes commissions.

(2)On December 2, 2019, we announced that our Board of Directors approved a share repurchase program, authorizing us to repurchase up to an additional $250 million of our common stock (in addition to prior authorizations). Such repurchases may take place from time to time in the open market (including pre-arranged stock trading plans in accordance with the guidelines specified in Rule 10b5-1 under the Exchange Act) or in privately negotiated transactions, subject to market and business conditions. During the quarter ended June 29, 2022, we purchased 3.9 million shares of our common stock for an aggregate consideration of approximately $37.4 million pursuant to the share repurchase program.

Item 6. Exhibits

The following are included as exhibits to this report:


Exhibit No.						Description
~~10.1~~2.1*						~~Summary of Non-Employee Director Compensation~~Asset Purchase Agreement, dated as of May ~~19, 2021.~~

~~10.2~~						3, 2022, by and between the Denny's Corporation, ~~2021 Omnibus Incentive Plan~~as purchaser, and the sellers and principals party thereto (incorporated by reference to Exhibit ~~99.1~~2.1 to the ~~Denny's Corporation Registration Statement~~Current Report on Form ~~S-8~~8-K of Denny's Corporation filed with the Securities and Exchange Commission on May ~~19, 2021)~~3, 2022).

2.2						First Amendment to Asset Purchase Agreement, dated as of July 11, 2022, by and between the Denny's Corporation, as purchaser, and the sellers and principals party thereto (incorporated by reference to Exhibit 2.1 to the Current Report on Form 8-K of Denny's Corporation filed with the Securities and Exchange Commission on July 14, 2022).

10.1						Employment Letter Agreement, dated as of April 28, 2022, by and between Denny's Corporation and Kelli A. Valade (incorporated by reference to Exhibit 10.1 to the Current Report on Form 8-K of Denny's Corporation filed with the Securities and Exchange Commission on May 3, 2022).

31.1						Certification of ~~John C. Miller,~~Kelli A. Valade, Chief Executive Officer and President of Denny's Corporation, pursuant to Rule 13a-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

31.2						Certification of Robert P. Verostek, Executive Vice President and Chief Financial Officer of Denny's Corporation, pursuant to Rule 13a-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

32.1						Certification of ~~John C. Miller,~~Kelli A. Valade, Chief Executive Officer and President of Denny's Corporation, and Robert P. Verostek, Executive Vice President and Chief Financial Officer of Denny's Corporation, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

101.INS						Inline XBRL Instance Document (the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document)

101.SCH						Inline XBRL Taxonomy Extension Schema Document

101.CAL						Inline XBRL Taxonomy Extension Calculation Linkbase Document

101.LAB						Inline XBRL Taxonomy Extension Label Linkbase Document

101.PRE						Inline XBRL Taxonomy Extension Presentation Linkbase Document

101.DEF						Inline XBRL Taxonomy Extension Definition Linkbase Document

104						Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101)

*Schedules and exhibits have been omitted pursuant to Item 601(a)(5) of Regulation S-K. The omitted schedules and exhibits will be furnished to the Securities and Exchange Commission upon request.

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

DENNY'S CORPORATION

Date:

August ~~3, 2021~~2, 2022

By:

/s/ Robert P. Verostek

Robert P. Verostek

Executive Vice President and
Chief Financial Officer

Date:

August ~~3, 2021~~2, 2022

By:

/s/ Jay C. Gilmore

Jay C. Gilmore

Senior Vice President,
Chief Accounting Officer and
Corporate Controller


			Page
PART I - FINANCIAL INFORMATION

Item 1. Financial Statements (Unaudited)
~~Condensed~~ Consolidated Balance Sheets			3
~~Condensed~~ Consolidated Statements of Operations			4
~~Condensed~~ Consolidated Statements of Comprehensive Income (Loss)			5
~~Condensed~~ Consolidated Statements of Shareholders' Deficit			6
~~Condensed~~ Consolidated Statements of Cash Flows			8
Notes to ~~Condensed~~ Consolidated Financial Statements			9
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations			1820
Item 3. Quantitative and Qualitative Disclosures About Market Risk			28
Item 4. Controls and Procedures			28

PART II - OTHER INFORMATION

Item 1. Legal Proceedings			29
Item 1A. Risk Factors			29
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds			29
Item 6. Exhibits			30
Signatures			31


	Domestic System-Wide Same-Store Sales1
	Fiscal Year 2021*
	Jan	Feb	Mar	Apr	May	Jun	Jul*
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%)
	*July results are preliminary.


	Domestic Average Units
	Fiscal Year 2021
	Jan	Feb	Mar	Apr	May	Jun	Jul *
System	1,504	1,501	1,501	1,499	1,498	1,497	1,495

24/7 Units	519	532	569	566	561	566	576
Limited Hour Units	939	928	912	920	926	920	909
	*July results are preliminary.