Document and Entity Information
Document and Entity Information - shares | 3 Months Ended | |
Mar. 28, 2018 | May 01, 2018 | |
Document and Entity Information [Abstract] | ||
Entity Registrant Name | DENNYS CORP | |
Entity Central Index Key | 852,772 | |
Current Fiscal Year End Date | --12-26 | |
Entity Well-known Seasoned Issuer | No | |
Entity Voluntary Filers | No | |
Entity Current Reporting Status | Yes | |
Entity Filer Category | Large Accelerated Filer | |
Entity Common Stock, Shares Outstanding | 63,576,618 | |
Document Fiscal Year Focus | 2,018 | |
Document Fiscal Period Focus | Q1 | |
Document Type | 10-Q | |
Amendment Flag | false | |
Document Period End Date | Mar. 28, 2018 |
Condensed Consolidated Balance
Condensed Consolidated Balance Sheets (Unaudited) - USD ($) $ in Thousands | Mar. 28, 2018 | Dec. 27, 2017 |
Current assets: | ||
Cash and cash equivalents | $ 3,919 | $ 4,983 |
Receivables, net | 19,512 | 21,384 |
Inventories | 3,101 | 3,134 |
Prepaid and other current assets | 9,048 | 11,788 |
Total current assets | 35,580 | 41,289 |
Property, net of accumulated depreciation of $245,365 and $243,325, respectively | 141,357 | 139,856 |
Goodwill | 39,843 | 38,269 |
Intangible assets, net | 61,628 | 57,109 |
Deferred financing costs, net | 2,790 | 2,942 |
Deferred income taxes | 22,294 | 16,945 |
Other noncurrent assets | 30,097 | 27,372 |
Total assets | 333,589 | 323,782 |
Current liabilities: | ||
Current maturities of capital lease obligations | 3,126 | 3,168 |
Accounts payable | 25,411 | 32,487 |
Other current liabilities | 51,707 | 59,246 |
Total current liabilities | 80,244 | 94,901 |
Long-term liabilities: | ||
Long-term debt, less current maturities | 282,000 | 259,000 |
Capital lease obligations, less current maturities | 28,734 | 27,054 |
Liability for insurance claims, less current portion | 12,465 | 12,236 |
Other noncurrent liabilities | 51,561 | 27,951 |
Total long-term liabilities | 374,760 | 326,241 |
Total liabilities | 455,004 | 421,142 |
Commitments and contingencies | ||
Shareholders' equity (deficit) | ||
Common stock $0.01 par value; shares authorized - 135,000; March 28, 2018:108,259 shares issued and 64,037 shares outstanding; December 27, 2017: 107,740 shares issued and 64,589 shares outstanding | 1,083 | 1,077 |
Paid-in capital | 595,069 | 594,166 |
Deficit | (340,348) | (334,661) |
Accumulated other comprehensive loss, net of tax | (5,407) | (2,316) |
Shareholders’ equity before treasury stock | 250,397 | 258,266 |
Treasury stock, at cost, 44,222 and 43,151 shares, respectively | (371,812) | (355,626) |
Total shareholders' deficit | (121,415) | (97,360) |
Total liabilities and shareholders' deficit | $ 333,589 | $ 323,782 |
Condensed Consolidated Balance3
Condensed Consolidated Balance Sheets (Unaudited) (Parenthetical) - USD ($) shares in Thousands, $ in Thousands | Mar. 28, 2018 | Dec. 27, 2017 |
Assets [Abstract] | ||
Accumulated depreciation | $ 245,365 | $ 243,325 |
Shareholders' equity (deficit) | ||
Common stock, par value (in dollars per share) | $ 0.01 | $ 0.01 |
Common stock, shares authorized | 135,000 | 135,000 |
Common stock, shares issued | 108,259 | 107,740 |
Common stock, shares outstanding | 64,037 | 64,589 |
Treasury stock, at cost, shares | 44,222 | 43,151 |
Condensed Consolidated Statemen
Condensed Consolidated Statements of Income (Unaudited) - USD ($) shares in Thousands, $ in Thousands | 3 Months Ended | ||
Mar. 28, 2018 | Mar. 29, 2017 | ||
Revenue: | |||
Company restaurant sales | $ 101,193 | $ 93,779 | |
Franchise and license revenue | 54,080 | 34,131 | |
Total operating revenue | 155,273 | 127,910 | [1] |
Costs of company restaurant sales: | |||
Product costs | 24,935 | 23,133 | |
Payroll and benefits | 41,226 | 37,397 | |
Occupancy | 5,647 | 4,734 | |
Other operating expenses | 15,050 | 12,571 | |
Total costs of company restaurant sales | 86,858 | 77,835 | |
Costs of franchise and license revenue | 28,556 | 9,746 | |
General and administrative expenses | 16,560 | 17,509 | |
Depreciation and amortization | 6,514 | 5,736 | |
Operating (gains), losses and other charges, net | 360 | 783 | |
Total operating costs and expenses, net | 138,848 | 111,609 | |
Operating income | 16,425 | 16,301 | |
Interest expense, net | 4,625 | 3,541 | |
Other nonoperating expense (income), net | 212 | (357) | |
Net income before income taxes | 11,588 | 13,117 | |
Provision for income taxes | 1,829 | 4,744 | |
Net income | $ 9,759 | $ 8,373 | |
Basic net income per share | $ 0.15 | $ 0.12 | |
Diluted net income per share | $ 0.15 | $ 0.11 | |
Basic weighted average shares outstanding | 64,432 | 71,004 | |
Diluted weighted average shares outstanding | 66,946 | 73,241 | |
[1] | As disclosed in Note 2, prior period amounts have not been adjusted under the modified retrospective method of adoption of Topic 606. |
Condensed Consolidated Stateme5
Condensed Consolidated Statements of Comprehensive Income (Unaudited) - USD ($) $ in Thousands | 3 Months Ended | |
Mar. 28, 2018 | Mar. 29, 2017 | |
Statement of Comprehensive Income [Abstract] | ||
Net income | $ 9,759 | $ 8,373 |
Other comprehensive income, net of tax: | ||
Minimum pension liability adjustment, net of tax of $6 and $9, respectively | 22 | 14 |
Recognition of unrealized loss on hedge transactions, net of tax of $(1,085) and $(397), respectively | (3,113) | (623) |
Other comprehensive loss | (3,091) | (609) |
Total comprehensive income | $ 6,668 | $ 7,764 |
Condensed Consolidated Stateme6
Condensed Consolidated Statements of Comprehensive Income (Unaudited) (Parenthetical) - USD ($) $ in Thousands | 3 Months Ended | |
Mar. 28, 2018 | Mar. 29, 2017 | |
Statement of Comprehensive Income [Abstract] | ||
Minimum pension liability adjustment, tax | $ 6 | $ 9 |
Unrealized gain (loss) on hedge transactions, tax | $ (1,085) | $ (397) |
Condensed Consolidated Stateme7
Condensed Consolidated Statement of Shareholders' Deficit (Unaudited) - USD ($) shares in Thousands, $ in Thousands | Total | Common Stock [Member] | Treasury Stock [Member] | Paid-in Capital [Member] | (Deficit) [Member] | Accumulated Other Comprehensive Loss, Net [Member] |
Increase (Decrease) in Stockholders' Equity [Roll Forward] | ||||||
Cumulative effect adjustment | $ (15,446) | $ 0 | $ (15,446) | |||
Balance at Dec. 27, 2017 | $ (97,360) | $ 1,077 | $ (355,626) | 594,166 | (334,661) | $ (2,316) |
Balance, common stock, shares issued at Dec. 27, 2017 | 107,740 | 107,740 | ||||
Balance, treasury stock, at cost, shares at Dec. 27, 2017 | (43,151) | (43,151) | ||||
Increase (Decrease) in Stockholders' Equity [Roll Forward] | ||||||
Net income | $ 9,759 | 9,759 | ||||
Other comprehensive loss | (3,091) | (3,091) | ||||
Share-based compensation on equity classified awards | (104) | (104) | ||||
Purchase of treasury stock | (16,186) | $ (16,186) | ||||
Purchase of treasury stock (in shares) | (1,071) | |||||
Issuance of common stock for share-based compensation | 0 | $ 3 | (3) | |||
Issuance of common stock for share-based compensation (in shares) | 233 | |||||
Exercise of common stock options | 1,013 | $ 3 | 1,010 | |||
Exercise of common stock options (in shares) | 286 | |||||
Balance at Mar. 28, 2018 | $ (121,415) | $ 1,083 | $ (371,812) | $ 595,069 | $ (340,348) | $ (5,407) |
Balance, common stock, shares issued at Mar. 28, 2018 | 108,259 | 108,259 | ||||
Balance, treasury stock, at cost, shares at Mar. 28, 2018 | (44,222) | (44,222) |
Condensed Consolidated Stateme8
Condensed Consolidated Statements of Cash Flows (Unaudited) - USD ($) $ in Thousands | 3 Months Ended | |
Mar. 28, 2018 | Mar. 29, 2017 | |
Cash flows from operating activities: | ||
Net income | $ 9,759 | $ 8,373 |
Adjustments to reconcile net income to cash flows provided by operating activities: | ||
Depreciation and amortization | 6,514 | 5,736 |
Operating (gains), losses and other charges, net | 360 | 783 |
Amortization of deferred financing costs | 152 | 148 |
Loss on early extinguishments of debt and leases | 0 | 73 |
Deferred income tax expense | 1,118 | 3,225 |
Share-based compensation | 1,350 | 1,973 |
Decrease (increase) in assets: | ||
Receivables | 1,821 | 3,345 |
Inventories | 33 | (41) |
Other current assets | 2,739 | 3,131 |
Other assets | (160) | (2,312) |
Increase (decrease) in liabilities: | ||
Accounts payable | (9,865) | (2,277) |
Accrued salaries and vacations | (4,048) | (11,584) |
Accrued taxes | 38 | (215) |
Other accrued liabilities | (5,948) | (1,204) |
Other noncurrent liabilities | (413) | (1,133) |
Net cash flows provided by operating activities | 3,450 | 8,021 |
Cash flows from investing activities: | ||
Capital expenditures | (4,148) | (3,017) |
Acquisition of restaurants and real estate | (8,418) | (3,800) |
Proceeds from disposition of property | 4 | 252 |
Collections on notes receivable | 859 | 612 |
Issuance of notes receivable | (1,934) | (1,010) |
Net cash flows used in investing activities | (13,637) | (6,963) |
Cash flows from financing activities: | ||
Revolver borrowings | 39,500 | 31,000 |
Revolver payments | (16,500) | (19,500) |
Long-term debt payments | (823) | (826) |
Proceeds from exercise of stock options | 1,013 | 130 |
Tax withholding on share-based payments | (1,696) | 0 |
Purchase of treasury stock | (15,691) | (11,742) |
Net bank overdrafts | 3,320 | (972) |
Net cash flows provided by (used in) financing activities | 9,123 | (1,910) |
Decrease in cash and cash equivalents | (1,064) | (852) |
Cash and cash equivalents at beginning of period | 4,983 | 2,592 |
Cash and cash equivalents at end of period | $ 3,919 | $ 1,740 |
Introduction and Basis of Prese
Introduction and Basis of Presentation | 3 Months Ended |
Mar. 28, 2018 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
Introduction and Basis of Presentation | 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 March 28, 2018 , the Denny's brand consisted of 1,724 restaurants, 1,542 of which were franchised/licensed restaurants and 182 of which were company operated. 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, including those for the above-described items, are reasonable. These interim condensed consolidated financial statements should be read in conjunction with our consolidated financial statements and notes thereto for the year ended December 27, 2017 and the related Management’s Discussion and Analysis of Financial Condition and Results of Operations, both of which are contained in our Annual Report on Form 10-K for the fiscal year ended December 27, 2017 . The results of operations for the interim periods presented are not necessarily indicative of the results for the entire fiscal year ending December 26, 2018 . |
Summary of Significant Accounti
Summary of Significant Accounting Policies | 3 Months Ended |
Mar. 28, 2018 | |
Accounting Policies [Abstract] | |
Summary of Significant Accounting Policies | Summary of Significant Accounting Policies Newly Adopted Accounting Standards Effective December 28, 2017, the first day of fiscal 2018, we adopted Accounting Standards Update 2014-09, “Revenue from Contracts with Customers (Topic 606)” and all subsequent ASUs that modified Topic 606. The new guidance clarifies the principles used to recognize revenue for all entities and requires companies to recognize revenue when it transfers goods or services to a customer in an amount that reflects the consideration to which a company expects to be entitled. We elected to apply the modified retrospective method of adoption to those contracts which were not completed as of December 28, 2017. In doing so, we applied the practical expedient to aggregate all contract modifications that occurred before December 28, 2017 in determining the satisfied and unsatisfied performance obligations, the transaction price and the allocation of the transaction price to the satisfied and unsatisfied performance obligations. Results for reporting periods beginning after December 28, 2017 are presented under Topic 606. Prior period amounts are not adjusted and continue to be reported in accordance with our historical accounting under Topic 605 “Revenue Recognition.” Our transition to Topic 606 represents a change in accounting principle. See Note 3 for further information about our transition to Topic 606 and the newly required disclosures. Effective December 28, 2017, we adopted ASU 2016-01, “Financial Instruments—Overall (Subtopic 825-10): Recognition and Measurement of Financial Assets and Financial Liabilities”. The new guidance requires equity investments (except those accounted for under the equity method of accounting, or those that result in consolidation of the investee) to be measured at fair value with changes in fair value recognized in net income, requires public business entities to use the exit price notion when measuring the fair value of financial instruments for disclosure purposes, requires separate presentation of financial assets and financial liabilities by measurement category and form of financial asset, and eliminates the requirement for public business entities to disclose the method(s) and significant assumptions used to estimate the fair value that is required to be disclosed for financial instruments measured at amortized cost. The adoption of this guidance did not have any impact on our Consolidated Financial Statements. Effective December 28, 2017, we adopted ASU 2016-15, “Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments (a consensus of the Emerging Issues Task Force)”. The new guidance addresses eight specific cash flow issues with the objective of reducing the existing diversity in practice. The adoption of this guidance did not have any impact on our Consolidated Financial Statements. Effective December 28, 2017, we adopted ASU 2017-01, “Business Combinations (Topic 805): Clarifying the Definition of a Business”. The new guidance clarifies the definition of a business. The adoption of this guidance did not have any impact on our Consolidated Financial Statements. Effective December 28, 2017, we adopted ASU 2017-07, “Compensation—Retirement Benefits (Topic 715): Improving the Presentation of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Cost”. The new guidance requires an entity to report the service cost component in the same line on the income statement as other compensation costs arising from services rendered by the pertinent employees during the period. The other components of net benefit cost are required to be presented in the income statement separately from the service cost component and outside the subtotal of income from operations, if one is presented. If a separate line item is not used, the line item used in the income statement must be disclosed. The adoption of this guidance did not have any impact on our Consolidated Financial Statements. Effective December 28, 2017, we adopted ASU 2017-09, “Compensation—Stock Compensation (Topic 718): Scope of Modification Accounting”. The new update provides guidance about which changes to the terms or conditions of a share-based payment award require an entity to apply modification accounting. The adoption of this guidance did not have any impact on our Consolidated Financial Statements. Effective December 28, 2017, we early adopted ASU 2018-02, “Income Statement—Reporting Comprehensive Income (Topic 220): Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income”. The new guidance allows a reclassification from accumulated other comprehensive income to retained earnings for stranded tax effects resulting from the Tax Cuts and Jobs Act of 2017 (the “Tax Act”) and requires certain disclosures about stranded tax effects. Due to the immateriality of the stranded tax effects resulting from the implementation Tax Act, we have elected not to reclassify these amounts from accumulated other comprehensive income to retained earnings. Therefore the adoption of this guidance did not have any impact on our Consolidated Financial Statements. Effective December 28, 2017, we early adopted ASU 2018-03, “Technical Corrections and Improvements to Financial Instruments—Overall (Subtopic 825-10): Recognition and Measurement of Financial Assets and Financial Liabilities”. The new update clarifies certain aspects of the guidance issued in ASU 2016-01. The adoption of this guidance did not have any impact on our Consolidated Financial Statements. Effective December 28, 2017, we early adopted ASU 2017-12, “Derivatives and Hedging (Topic 815): Targeted Improvements to Accounting for Hedging Activities”. The new update better aligns an entity’s risk management activities and financial reporting for hedging relationships, simplifies the hedge accounting requirements, and improves the disclosures of hedging arrangements. The amended presentation and disclosure guidance has been applied on a prospective basis. The adoption of this guidance did not have any impact on our Consolidated Financial Statements. Accounting Standards to be Adopted In February 2016, the Financial Accounting Standards Board (“FASB”) issued ASU 2016-02, “Leases (Topic 842)”, which provides guidance for accounting for leases. The new guidance requires companies to recognize the assets and liabilities for the rights and obligations created by leased assets. The accounting guidance for lessors is largely unchanged. ASU 2016-02 is effective for annual and interim periods beginning after December 15, 2018 (our fiscal 2019) with early adoption permitted. The guidance will be adopted using a modified retrospective approach. Based on a preliminary assessment, we expect the adoption will result in a significant increase in the assets and liabilities on our Consolidated Balance Sheets, as most of our operating lease commitments will be recognized as operating lease liabilities and right-of-use assets. We are continuing our evaluation, which may identify additional impacts this standard will have on our Consolidated Financial Statements and related disclosures. In June 2016, the FASB issued ASU 2016-13, “Financial Instruments—Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments”. The new guidance replaces the incurred loss impairment methodology in current GAAP with a methodology that reflects expected credit losses and requires consideration of a broader range of reasonable and supportable information to inform financial statement users of credit loss estimates. ASU 2016-13 is effective for annual and interim periods beginning after December 15, 2019 (our fiscal 2020) with early adoption permitted for annual and interim periods beginning after December 15, 2018 (our fiscal 2019). We do not expect the adoption of this guidance to have a material impact on our Consolidated Financial Statements. 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. |
Revenues
Revenues | 3 Months Ended |
Mar. 28, 2018 | |
Revenues [Abstract] | |
Revenues | Revenues Our revenues are derived primarily from two sales channels, which we operate as one segment: company restaurants and franchised and licensed restaurants. The following table disaggregates our revenue by sales channels and types of goods or services. Quarter Ended March 28, 2018 March 29, 2017 (1) (Dollars in thousands) Company restaurant sales $ 101,193 $ 93,779 Franchise and license revenue: Royalties 25,165 24,544 Advertising revenue 19,310 — Initial and other fees 1,417 484 Occupancy revenue 8,188 9,103 Franchise and license revenue 54,080 34,131 Total operating revenue $ 155,273 $ 127,910 (1) As disclosed in Note 2, prior period amounts have not been adjusted under the modified retrospective method of adoption of Topic 606. Company Restaurant Revenue Company restaurant revenue is recognized at the point in time when food and beverage products are sold at company restaurants. We present company restaurant sales net of sales-related taxes collected from customers and remitted to governmental taxing authorities. The adoption of Topic 606 did not impact the recognition of company restaurant sales. Franchise Revenue Franchise and license revenues consist primarily of royalties, advertising revenue, initial and other fees and occupancy revenue. Our performance obligations under franchise agreements consist of a license of our brand’s symbolic intellectual property, administration of advertising programs (including local co-operatives), and other ongoing support services. These performance obligations are highly interrelated so we do not consider them to be individually distinct, and therefore account for them under Topic 606 as a single performance obligation. Revenue from franchise agreements is recognized evenly over the term of the agreement with the exception of sales-based royalties and revenue allocated to goods and services distinct from the franchise right. Royalty and advertising revenues represent sales-based royalties that are recognized in the period in which the sales occur. Sales-based royalties are variable consideration related to our performance obligations to our franchisees to maintain the intellectual property being licensed. Under our franchise agreements, franchisee advertising contributions must be spent on marketing and related activities. The adoption of Topic 606 did not impact the recognition of royalties. Upon adoption of Topic 606, advertising revenues and expenditures are recorded on a gross basis within the Consolidated Statements of Income. Under the previous guidance of Topic 605, we recorded franchise advertising expense net of contributions from franchisees to our advertising programs, including local co-operatives. While this change materially impacts the gross amount of reported franchise and license revenue and costs of franchise and license revenue, the impact is generally an offsetting increase to both revenue and expense with little, if any, impact on operating income and net income. Initial and other fees consist of initial, successor and assignment franchise fees (“initial franchise fees”), training fees and other franchise services fees. Initial franchise fees are billed and received upon the signing of the franchise agreement. Under Topic 606, recognition of these fees is deferred until the commencement date of the agreement and occurs over time based on the term of the underlying franchise agreement. In the event a franchise agreement is terminated, any remaining deferred fees are recognized in the period of termination. Under the previous guidance, initial franchise fees were recognized upon the opening of a franchise restaurant. Training and other franchise services fees are billed and recognized at a point in time as services are rendered. Similar to advertising revenue, upon adoption of Topic 606, other franchise services fees are recorded on a gross basis within the Consolidated Statements of Income, whereas, under previous guidance, they were netted against the related expenses. Occupancy revenue results from leasing or subleasing restaurants to franchisees and is recognized over the term of the lease agreement. With the exception of initial and other franchise fees, revenues are typically billed and collected on a weekly basis. Gift Card Breakage Under previous guidance, we recorded gift card breakage when the likelihood of redemption was remote. Breakage was recorded as a benefit to our advertising fund or reduction to other operating expenses, depending on where the gift cards were sold. Upon adoption of Topic 606, gift card breakage is recognized proportionally as redemptions occur. Our gift card breakage primarily relates to cards sold by third parties. Breakage revenue related to third party sales is recorded as advertising revenue (included as a component of franchise and license revenue) with an offsetting amount recorded as advertising expense (included as a component of costs of franchise and license revenue). Financial Statement Impact of Adoption The following tables summarize the impact of adopting Topic 606 on our financial statement line items as of March 28, 2018 and for the quarter ended March 28, 2018. March 28, 2018 Consolidated Balance Sheet As Reported Adjustments Balances without adoption of Topic 606 (In thousands) Prepaid and other current assets $ 9,048 $ 509 $ 9,557 Deferred income taxes 22,294 (5,282 ) 17,012 Other current liabilities 51,707 (1,158 ) 50,549 Other noncurrent liabilities 51,561 (18,624 ) 32,937 Deficit (340,348 ) 15,009 (325,339 ) Quarter ended March 28, 2018 Consolidated Statement of Income As Reported Adjustments Balances without adoption of Topic 606 (In thousands, except per share amounts) Franchise and license revenue $ 54,080 $ (20,307 ) $ 33,773 Costs of franchise and license revenue 28,556 (19,764 ) 8,792 Provision for income taxes 1,829 (140 ) 1,689 Net income 9,759 (403 ) 9,356 Basic net income per share $ 0.15 $ (0.01 ) $ 0.14 Diluted net income per share $ 0.15 $ (0.01 ) $ 0.14 Quarter ended March 28, 2018 Consolidated Statement of Comprehensive Income As Reported Adjustments Balances without adoption of Topic 606 (In thousands) Net income $ 9,759 $ (403 ) $ 9,356 Total comprehensive income 6,668 (403 ) 6,265 Quarter ended March 28, 2018 Consolidated Statement of Cash Flow As Reported Adjustments Balances without adoption of Topic 606 (In thousands) Net income $ 9,759 $ (403 ) $ 9,356 Deferred income tax expense 1,118 (140 ) 978 Changes in assets and liabilities: Other current assets 2,739 (509 ) 2,230 Other accrued liabilities (5,948 ) 923 (5,025 ) Other noncurrent liabilities (413 ) 129 (284 ) Net cash flows provided by operating activities 3,450 — 3,450 The following significant changes impacted our financial statement line items as of March 28, 2018 and for the quarter ended March 28, 2018: • Upon adoption of Topic 606, we recorded a cumulative effect adjustment related to previously recognized initial franchise fees resulting in a $21.0 million increase to deferred franchise revenue, a $15.6 million increase to opening deficit and a $5.4 million increase to deferred tax assets. The deferred franchise revenue resulting from the cumulative effect adjustment will be amortized over the remaining lives of the individual franchise agreements. Also upon adoption, we recorded a cumulative effect adjustment to recognize breakage in proportion to redemptions that occurred prior to December 28, 2017 resulting in a decrease of $0.6 million to gift card liability (a component of other current liabilities), a $0.5 million increase to accrued advertising (a component of other current liabilities) and a $0.1 million decrease to opening deficit. • We recognized $19.2 million of franchise and license revenue and $19.2 million of costs of franchise and license revenue resulting from the recording of advertising revenues and expenditures on a gross basis under Topic 606 versus recording these amounts on a net basis under Topic 605. • We recognized an additional $0.5 million of franchise and license revenue under Topic 606 than we would have recognized under Topic 605, resulting from the timing of recognition of initial franchise fees. • We recognized $0.5 million of franchise and license revenue and $0.5 million of costs of franchise and license revenue resulting from the recording of other franchise services fees on a gross basis under Topic 606 versus recording these amount on a net basis under Topic 605. Contract Balances Contract balances related to contracts with customers consists of receivables, deferred franchise revenue and deferred gift card revenue. See note 4 for details on our receivables. 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 will begin amortizing into revenue when the related restaurants are opened. Deferred franchise revenue represents our remaining performance obligations to our franchisees, excluding amounts of variable consideration related to sale-based royalties and advertising. The components of the change in deferred franchise revenue are as follows: (In thousands) Balance, December 27, 2017 $ 1,643 Cumulative effect adjustment recognized upon adoption of Topic 606 20,976 Fees received from franchisees 239 Revenue recognized (1) (930 ) Balance, March 28, 2018 21,928 Less current portion included in other current liabilities 3,303 Deferred franchise revenue included in other noncurrent liabilities $ 18,625 (1) Of this amount $0.9 million was included in either the deferred franchise revenue balance as of December 27, 2017 or the cumulative effect adjustment. As of March 28, 2018 , the deferred franchise revenue expected to be recognized for each of the next five years and in the aggregate is as follows: (In thousands) Remainder of 2018 $ 1,646 2019 2,105 2020 1,981 2021 1,769 2022 1,661 Thereafter 11,270 Development agreements and unopened restaurants 1,496 Deferred franchise revenue $ 21,928 Deferred gift card liabilities consist of the unredeemed portion of gift cards sold in company restaurants and at third party locations. We recognize gift card revenue when a gift card is redeemed in one of our company restaurants. Gift card breakage is recognized proportionally as redemptions occur. The balance of deferred gift card liabilities represents our remaining performance obligations to our customers. The balance of deferred gift card liabilities as of March 28, 2018 and December 27, 2017 was $4.4 million and $6.5 million , respectively. During the quarter ended March 28, 2018 , we recognized revenue of $0.7 million from gift card redemptions. |
Receivables
Receivables | 3 Months Ended |
Mar. 28, 2018 | |
Receivables [Abstract] | |
Receivables | Receivables Receivables were comprised of the following: March 28, 2018 December 27, 2017 (In thousands) Receivables, net: Trade accounts receivable from franchisees $ 10,379 $ 10,688 Financing receivables from franchisees 4,675 5,084 Vendor receivables 1,791 3,256 Credit card receivables 1,549 1,870 Other 1,545 762 Allowance for doubtful accounts (427 ) (276 ) Total receivables, net $ 19,512 $ 21,384 Other noncurrent assets: Financing receivables from franchisees $ 1,573 $ 427 During the quarter ended March 28, 2018 , we recorded an allowance for doubtful accounts of $0.2 million of financing receivables from a franchisee. |
Goodwill and Other Intangible A
Goodwill and Other Intangible Assets | 3 Months Ended |
Mar. 28, 2018 | |
Goodwill and Intangible Assets Disclosure [Abstract] | |
Goodwill and Other Intangible Assets | Goodwill and Other Intangible Assets The following table reflects the changes in carrying amounts of goodwill. (In thousands) Balance, December 27, 2017 $ 38,269 Additions related to acquisition 1,574 Balance, March 28, 2018 $ 39,843 Other intangible assets were comprised of the following: March 28, 2018 December 27, 2017 Gross Carrying Amount Accumulated Amortization Gross Carrying Amount Accumulated Amortization (In thousands) Intangible assets with indefinite lives: Trade names $ 44,081 $ — $ 44,080 $ — Liquor licenses 166 — 166 — Intangible assets with definite lives: Reacquired franchise rights 20,553 3,172 15,252 2,389 Intangible assets $ 64,800 $ 3,172 $ 59,498 $ 2,389 During the quarter ended March 28, 2018 , we acquired five franchised restaurants for $7.9 million , of which $5.3 million was allocated to reacquired franchise rights, $1.0 million to property and $1.6 million to goodwill. In addition, we recorded $2.4 million of capital leases in connection with the acquired franchised restaurants. We account for the acquisition of franchised restaurants using the acquisition method of accounting for business combinations. The purchase price allocations were based on Level 3 fair value estimates. |
Other Current Liabilities
Other Current Liabilities | 3 Months Ended |
Mar. 28, 2018 | |
Other Liabilities, Current [Abstract] | |
Other Liabilities Disclosure [Text Block] | Other Current Liabilities Other current liabilities consisted of the following: March 28, 2018 December 27, 2017 (In thousands) Accrued payroll $ 16,989 $ 20,998 Accrued insurance, primarily current portion of liability for insurance claims 6,863 6,922 Accrued taxes 7,422 7,384 Accrued advertising 5,499 8,417 Gift cards 4,419 6,480 Other 10,515 9,045 Other current liabilities $ 51,707 $ 59,246 |
Operating (Gains), Losses and O
Operating (Gains), Losses and Other Charges, Net | 3 Months Ended |
Mar. 28, 2018 | |
Other Income and Expenses [Abstract] | |
Operating (Gains), Losses and Other Charges, Net | Operating (Gains), Losses and Other Charges, Net Operating (gains), losses and other charges, net are comprised of the following: Quarter Ended March 28, 2018 March 29, 2017 (In thousands) Software implementation costs $ — $ 2,124 Gains on sales of assets and other, net (37 ) (1,440 ) Restructuring charges and exit costs 360 99 Impairment charges 37 — Operating (gains), losses and other charges, net $ 360 $ 783 Software implementation costs of $2.1 million for the quarter ended March 29, 2017 were the result of our investment in a new cloud-based Enterprise Resource Planning system. Gains on sales of assets and other, net of $1.4 million for the quarter ended March 29, 2017 primarily related to real estate sold to a franchisee. Restructuring charges and exit costs were comprised of the following: Quarter Ended March 28, 2018 March 29, 2017 (In thousands) Exit costs $ 24 $ 31 Severance and other restructuring charges 336 68 Total restructuring charges and exit costs $ 360 $ 99 The components of the change in accrued exit cost liabilities are as follows: (In thousands) Balance, December 27, 2017 $ 1,180 Exit costs (1) 24 Payments, net of sublease receipts (128 ) Interest accretion 21 Balance, March 28, 2018 1,097 Less current portion included in other current liabilities 333 Long-term portion included in other noncurrent liabilities $ 764 (1) Included as a component of operating (gains), losses and other charges, net. As of March 28, 2018 and December 27, 2017 , we had accrued severance and other restructuring charges of $0.3 million and less than $0.1 million , respectively. The balance as of March 28, 2018 is expected to be paid during the next 12 months. |
Fair Value of Financial Instrum
Fair Value of Financial Instruments | 3 Months Ended |
Mar. 28, 2018 | |
Fair Value Disclosures [Abstract] | |
Fair Value Disclosures | 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) Valuation Technique (In thousands ) Fair value measurements as of March 28, 2018: Deferred compensation plan investments (1) $ 12,424 $ 12,424 $ — $ — market approach Interest rate swaps, net (2) (6,385 ) — (6,385 ) — income approach Total $ 6,039 $ 12,424 $ (6,385 ) $ — Fair value measurements as of December 27, 2017: Deferred compensation plan investments (1) $ 12,663 $ 12,663 $ — $ — market approach Interest rate swaps, net (2) (2,187 ) — (2,187 ) — income approach Total $ 10,476 $ 12,663 $ (2,187 ) $ — (1) The fair values of our deferred compensation plan investments are based on the closing market prices of the elected investments. (2) The fair values of our interest rate swaps are based upon Level 2 inputs, which include valuation models as reported by our counterparties. The key inputs for the valuation models are quoted market prices, interest rates and forward yield curves. See Note 9 for details on the interest rate swaps. |
Long-Term Debt
Long-Term Debt | 3 Months Ended |
Mar. 28, 2018 | |
Debt Disclosure [Abstract] | |
Long-Term Debt | Long-Term Debt Denny's Corporation and certain of its subsidiaries have a credit facility consisting of a five-year $400 million senior secured revolver (with a $30 million letter of credit sublimit). The credit facility includes an accordion feature that would allow us to increase the size of the revolver to $450 million . As of March 28, 2018 , we had outstanding revolver loans of $282.0 million and outstanding letters of credit under the senior secured revolver of $21.2 million . These balances resulted in availability of $96.8 million under the credit facility. Prior to considering the impact of our interest rate swaps, described below, the weighted-average interest rate on outstanding revolver loans was 3.76% and 3.42% as of March 28, 2018 and December 27, 2017 , respectively. Taking into consideration our interest rate swaps, the weighted-average interest rate of outstanding revolver loans was 3.53% and 3.32% as of March 28, 2018 and December 27, 2017 , respectively. A commitment fee is paid on the unused portion of the credit facility and was 0.30% as of March 28, 2018 . Borrowings under the credit facility bear a tiered interest rate, which is based on the Company’s consolidated leverage ratio and was set at LIBOR plus 200 basis points as of March 28, 2018 . The maturity date for the credit facility is October 26, 2022 . The credit facility is available for working capital, capital expenditures and other general corporate purposes. The credit facility is guaranteed by the Company and its material subsidiaries and is secured by assets of the Company and its subsidiaries, including the stock of the Company's subsidiaries. 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 March 28, 2018 . Interest Rate Hedges We have interest rate swaps to hedge a portion of the forecasted cash flows of our floating rate debt. We designated the interest rate swaps as cash flow hedges of our exposure to variability in future cash flows attributable to payments of LIBOR due on specific notional amounts. Under the interest rate swaps, we pay a fixed rate on the notional amount in addition to the current interest rate as determined by our consolidated leverage ratio in effect at the time. A summary of our interest rate swaps as of March 28, 2018 is as follows: Trade Date Effective Date Maturity Date Notional Amount Fixed Rate (In thousands) April 30, 2013 March 31, 2015 March 29, 2018 $ 120,000 1.13 % March 20, 2015 March 29, 2018 March 31, 2025 120,000 2.44 % October 1, 2015 March 29, 2018 March 31, 2026 50,000 2.46 % February 15, 2018 March 31, 2020 December 31, 2033 80,000 (1) 3.19 % (1) The notional amount of the swaps entered into on February 15, 2018 increases annually beginning September 30, 2020 until they reach the maximum notional amount of $425.0 million on September 28, 2029. As of March 28, 2018 , the fair value of the interest rate swaps was a net liability of $6.4 million , which is comprised of assets of $1.7 million recorded as a component of other noncurrent assets and liabilities of $8.1 million recorded as a component of other noncurrent liabilities in our Condensed Consolidated Balance Sheets. See Note 15 for the amounts recorded in accumulated other comprehensive loss related to the interest rate swaps. |
Defined Benefit Plans
Defined Benefit Plans | 3 Months Ended |
Mar. 28, 2018 | |
Retirement Benefits [Abstract] | |
Defined Benefit Plans | Defined Benefit Plans The components of net periodic benefit cost for our defined benefit plans, included as a component of general and administrative costs, were as follows: Quarter Ended March 28, 2018 March 29, 2017 (In thousands) Interest cost $ 19 $ 21 Amortization of net loss 28 23 Net periodic benefit cost $ 47 $ 44 We made contributions of less than $0.1 million to our defined benefit plans during both the quarter ended March 28, 2018 and the quarter ended March 29, 2017 . We expect to contribute $0.1 million to our defined benefit plans over the remainder of fiscal 2018 . Additional minimum pension liability, net of tax, of $1.0 million related to our defined benefit plans is reported as a component of accumulated other comprehensive loss in our Condensed Consolidated Statement of Shareholders’ Equity as of both March 28, 2018 and December 27, 2017 , respectively. |
Share-Based Compensation
Share-Based Compensation | 3 Months Ended |
Mar. 28, 2018 | |
Disclosure of Compensation Related Costs, Share-based Payments [Abstract] | |
Share-Based Compensation | Share-Based Compensation Total share-based compensation cost included as a component of net income was as follows: Quarter Ended March 28, 2018 March 29, 2017 (In thousands) Performance share awards $ 1,078 $ 1,940 Restricted stock units for board members 272 33 Total share-based compensation $ 1,350 $ 1,973 Performance Share Units During the quarter ended March 28, 2018 , we granted certain employees approximately 0.2 million performance share units that vest based on the total shareholder return (“TSR”) of our common stock compared to the TSRs of a group of peer companies and 0.3 million performance share units that vest based on our Adjusted EPS growth rate versus plan, as defined under the terms of the award. As the TSR based performance share units contain a market condition, a Monte Carlo valuation was used to determine the grant date fair value of $18.17 per share. The performance share units based on the Adjusted EPS growth rate have a grant date fair value of $15.93 per share, the market value of our common stock on the date of grant. The awards granted to our named executive officers also contain a performance condition based on the attainment of an operating measure for the fiscal year ended December 26, 2018 . The performance period for these performance share units is the three year fiscal period beginning December 28, 2017 and ending December 30, 2020. They will vest and be earned (from 0% to 150% of the target award for each such increment) at the end of the performance period. During the quarter ended March 28, 2018 , we issued 0.2 million shares of common stock related to vested performance share units. In addition 0.3 million shares of common stock were deferred and 0.1 million shares of common stock were withheld in lieu of taxes related to vested performance share units. As of March 28, 2018 , we had approximately $13.3 million of unrecognized compensation cost related to all unvested performance share awards outstanding, which is expected to be recognized over a weighted average of 2.2 years . Restricted Stock Units for Board Members As of March 28, 2018 , we had approximately $0.2 million of unrecognized compensation cost related to all unvested restricted stock unit awards outstanding, which is expected to be recognized over a weighted average of 0.8 years . |
Income Taxes
Income Taxes | 3 Months Ended |
Mar. 28, 2018 | |
Income Tax Disclosure [Abstract] | |
Income Taxes | Income Taxes The effective income tax rate was 15.8% for the quarter ended March 28, 2018 compared to 36.2% for the prior year period. The 2018 period was impacted by the Tax Act. In addition, the 2018 period benefited from a 4.7% discrete item relating to share-based compensation. The Tax Act reduces the U.S. statutory tax rate from 35% to 21% for years after 2017. We revalued our deferred taxes during fiscal 2017 to reflect the reduced rate that will apply in future periods when these deferred taxes are realized. The implementation of the Tax Act resulted in certain stranded tax effects in accumulated other comprehensive income. Due to the immateriality of the stranded tax effects, we have elected not to reclassify these amounts from accumulated other comprehensive income to retained earnings. |
Net Income Per Share
Net Income Per Share | 3 Months Ended |
Mar. 28, 2018 | |
Earnings Per Share [Abstract] | |
Net Income Per Share | Net Income Per Share The amounts used for the basic and diluted net income per share calculations are summarized below: Quarter Ended March 28, 2018 March 29, 2017 (In thousands, except for per share amounts) Net income $ 9,759 $ 8,373 Weighted average shares outstanding - basic 64,432 71,004 Effect of dilutive share-based compensation awards 2,514 2,237 Weighted average shares outstanding - diluted 66,946 73,241 Basic net income per share $ 0.15 $ 0.12 Diluted net income per share $ 0.15 $ 0.11 Anti-dilutive share-based compensation awards 471 580 |
Supplemental Cash Flow Informat
Supplemental Cash Flow Information | 3 Months Ended |
Mar. 28, 2018 | |
Supplemental Cash Flow Information [Abstract] | |
Supplemental Cash Flow Information | Supplemental Cash Flow Information Quarter Ended March 28, 2018 March 29, 2017 (In thousands) Income taxes paid, net $ 423 $ 395 Interest paid $ 4,272 $ 3,261 Noncash investing and financing activities: Issuance of common stock, pursuant to share-based compensation plans $ 3,513 $ 4,946 Execution of capital leases $ 2,478 $ 1,523 Treasury stock payable $ 615 $ 862 Notes received in connection with disposition of property $ — $ 1,750 |
Shareholders' Equity
Shareholders' Equity | 3 Months Ended |
Mar. 28, 2018 | |
Stockholders' Equity Attributable to Parent [Abstract] | |
Shareholders' equity | Shareholders' Equity Share Repurchase Our credit facility permits the purchase of Denny’s stock and the payment of cash dividends subject to certain limitations. In October 2017, our Board of Directors approved a share repurchase program authorizing us to repurchase up to $200 million of our common stock (in addition to prior authorizations). Under this program, 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 under the Securities Exchange Act of 1934, as amended) or in privately negotiated transactions, subject to market and business conditions. During the quarter ended March 28, 2018 , we repurchased 1.1 million shares of our common stock for approximately $16.2 million . This brings the total amount repurchased under the current repurchase program to 1.3 million shares of our common stock for approximately $19.9 million , leaving approximately $180.1 million that can be used to repurchase our common stock under this program as of March 28, 2018 . Repurchased shares are included as treasury stock in our Condensed Consolidated Balance Sheets and our Condensed Consolidated Statement of Shareholders' Equity. Accumulated Other Comprehensive Loss The components of the change in accumulated other comprehensive loss were as follows: Pensions Derivatives Accumulated Other Comprehensive Loss (In thousands) Balance as of December 27, 2017 $ (982 ) $ (1,334 ) $ (2,316 ) Amortization of net loss (1) 28 — 28 Net change in fair value of derivatives — (4,058 ) (4,058 ) Reclassification of derivatives to interest expense, net (2) — (140 ) (140 ) Income tax (expense) benefit related to items of other comprehensive loss (6 ) 1,085 1,079 Balance as of March 28, 2018 $ (960 ) $ (4,447 ) $ (5,407 ) (1) Before-tax amount related to our Other Defined Benefit Plans that was reclassified from accumulated other comprehensive loss and included as a component of pension expense within general and administrative expenses in our Condensed Consolidated Statements of Income during the quarter ended March 28, 2018 . See Note 10 for additional details. (2) Amounts reclassified from accumulated other comprehensive loss into income represent payments either received from or made to the counterparty for the effective portions of the interest rate swaps. These amounts are included as a component of interest expense, net in our Condensed Consolidated Statements of Income. We expect to make payments to the counterparty and reclassify approximately $1.0 million from accumulated other comprehensive loss related to our interest rate swaps during the next twelve months. See Note 9 for additional details. |
Commitments and Contingencies
Commitments and Contingencies | 3 Months Ended |
Mar. 28, 2018 | |
Commitments and Contingencies Disclosure [Abstract] | |
Commitments and Contingencies | Commitments and Contingencies We have guarantees related to certain franchisee loans. Payments under these guarantees would result from the inability of a franchisee to fund required payments when due. Through March 28, 2018 , no events had occurred that caused us to make payments under these guarantees. There were $4.7 million and $5.1 million of loans outstanding under these programs as of March 28, 2018 and December 27, 2017 , respectively. As of March 28, 2018 , the maximum amount payable under the loan guarantees was $1.1 million . As a result of these guarantees, we have recorded liabilities of less than $0.1 million as of both March 28, 2018 and December 27, 2017 , which are included as a component of other noncurrent liabilities in our Condensed Consolidated Balance Sheets and other nonoperating expense in our Condensed Consolidated Statements of Income. 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 the Company's consolidated results of operations or financial position. |
Subsequent Events
Subsequent Events | 3 Months Ended |
Mar. 28, 2018 | |
Subsequent Events [Abstract] | |
Subsequent Events | Subsequent Events We performed an evaluation of subsequent events and determined that no events required disclosure. |
Summary of Significant Accoun26
Summary of Significant Accounting Policies (Policies) | 3 Months Ended |
Mar. 28, 2018 | |
Accounting Policies [Abstract] | |
Newly adopted accounting standards and accounting standards to be adopted | Newly Adopted Accounting Standards Effective December 28, 2017, the first day of fiscal 2018, we adopted Accounting Standards Update 2014-09, “Revenue from Contracts with Customers (Topic 606)” and all subsequent ASUs that modified Topic 606. The new guidance clarifies the principles used to recognize revenue for all entities and requires companies to recognize revenue when it transfers goods or services to a customer in an amount that reflects the consideration to which a company expects to be entitled. We elected to apply the modified retrospective method of adoption to those contracts which were not completed as of December 28, 2017. In doing so, we applied the practical expedient to aggregate all contract modifications that occurred before December 28, 2017 in determining the satisfied and unsatisfied performance obligations, the transaction price and the allocation of the transaction price to the satisfied and unsatisfied performance obligations. Results for reporting periods beginning after December 28, 2017 are presented under Topic 606. Prior period amounts are not adjusted and continue to be reported in accordance with our historical accounting under Topic 605 “Revenue Recognition.” Our transition to Topic 606 represents a change in accounting principle. See Note 3 for further information about our transition to Topic 606 and the newly required disclosures. Effective December 28, 2017, we adopted ASU 2016-01, “Financial Instruments—Overall (Subtopic 825-10): Recognition and Measurement of Financial Assets and Financial Liabilities”. The new guidance requires equity investments (except those accounted for under the equity method of accounting, or those that result in consolidation of the investee) to be measured at fair value with changes in fair value recognized in net income, requires public business entities to use the exit price notion when measuring the fair value of financial instruments for disclosure purposes, requires separate presentation of financial assets and financial liabilities by measurement category and form of financial asset, and eliminates the requirement for public business entities to disclose the method(s) and significant assumptions used to estimate the fair value that is required to be disclosed for financial instruments measured at amortized cost. The adoption of this guidance did not have any impact on our Consolidated Financial Statements. Effective December 28, 2017, we adopted ASU 2016-15, “Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments (a consensus of the Emerging Issues Task Force)”. The new guidance addresses eight specific cash flow issues with the objective of reducing the existing diversity in practice. The adoption of this guidance did not have any impact on our Consolidated Financial Statements. Effective December 28, 2017, we adopted ASU 2017-01, “Business Combinations (Topic 805): Clarifying the Definition of a Business”. The new guidance clarifies the definition of a business. The adoption of this guidance did not have any impact on our Consolidated Financial Statements. Effective December 28, 2017, we adopted ASU 2017-07, “Compensation—Retirement Benefits (Topic 715): Improving the Presentation of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Cost”. The new guidance requires an entity to report the service cost component in the same line on the income statement as other compensation costs arising from services rendered by the pertinent employees during the period. The other components of net benefit cost are required to be presented in the income statement separately from the service cost component and outside the subtotal of income from operations, if one is presented. If a separate line item is not used, the line item used in the income statement must be disclosed. The adoption of this guidance did not have any impact on our Consolidated Financial Statements. Effective December 28, 2017, we adopted ASU 2017-09, “Compensation—Stock Compensation (Topic 718): Scope of Modification Accounting”. The new update provides guidance about which changes to the terms or conditions of a share-based payment award require an entity to apply modification accounting. The adoption of this guidance did not have any impact on our Consolidated Financial Statements. Effective December 28, 2017, we early adopted ASU 2018-02, “Income Statement—Reporting Comprehensive Income (Topic 220): Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income”. The new guidance allows a reclassification from accumulated other comprehensive income to retained earnings for stranded tax effects resulting from the Tax Cuts and Jobs Act of 2017 (the “Tax Act”) and requires certain disclosures about stranded tax effects. Due to the immateriality of the stranded tax effects resulting from the implementation Tax Act, we have elected not to reclassify these amounts from accumulated other comprehensive income to retained earnings. Therefore the adoption of this guidance did not have any impact on our Consolidated Financial Statements. Effective December 28, 2017, we early adopted ASU 2018-03, “Technical Corrections and Improvements to Financial Instruments—Overall (Subtopic 825-10): Recognition and Measurement of Financial Assets and Financial Liabilities”. The new update clarifies certain aspects of the guidance issued in ASU 2016-01. The adoption of this guidance did not have any impact on our Consolidated Financial Statements. Effective December 28, 2017, we early adopted ASU 2017-12, “Derivatives and Hedging (Topic 815): Targeted Improvements to Accounting for Hedging Activities”. The new update better aligns an entity’s risk management activities and financial reporting for hedging relationships, simplifies the hedge accounting requirements, and improves the disclosures of hedging arrangements. The amended presentation and disclosure guidance has been applied on a prospective basis. The adoption of this guidance did not have any impact on our Consolidated Financial Statements. Accounting Standards to be Adopted In February 2016, the Financial Accounting Standards Board (“FASB”) issued ASU 2016-02, “Leases (Topic 842)”, which provides guidance for accounting for leases. The new guidance requires companies to recognize the assets and liabilities for the rights and obligations created by leased assets. The accounting guidance for lessors is largely unchanged. ASU 2016-02 is effective for annual and interim periods beginning after December 15, 2018 (our fiscal 2019) with early adoption permitted. The guidance will be adopted using a modified retrospective approach. Based on a preliminary assessment, we expect the adoption will result in a significant increase in the assets and liabilities on our Consolidated Balance Sheets, as most of our operating lease commitments will be recognized as operating lease liabilities and right-of-use assets. We are continuing our evaluation, which may identify additional impacts this standard will have on our Consolidated Financial Statements and related disclosures. In June 2016, the FASB issued ASU 2016-13, “Financial Instruments—Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments”. The new guidance replaces the incurred loss impairment methodology in current GAAP with a methodology that reflects expected credit losses and requires consideration of a broader range of reasonable and supportable information to inform financial statement users of credit loss estimates. ASU 2016-13 is effective for annual and interim periods beginning after December 15, 2019 (our fiscal 2020) with early adoption permitted for annual and interim periods beginning after December 15, 2018 (our fiscal 2019). We do not expect the adoption of this guidance to have a material impact on our Consolidated Financial Statements. 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. |
Revenues Revenue (Tables)
Revenues Revenue (Tables) | 3 Months Ended |
Mar. 28, 2018 | |
Revenues [Abstract] | |
Disaggregation of revenue | The following table disaggregates our revenue by sales channels and types of goods or services. Quarter Ended March 28, 2018 March 29, 2017 (1) (Dollars in thousands) Company restaurant sales $ 101,193 $ 93,779 Franchise and license revenue: Royalties 25,165 24,544 Advertising revenue 19,310 — Initial and other fees 1,417 484 Occupancy revenue 8,188 9,103 Franchise and license revenue 54,080 34,131 Total operating revenue $ 155,273 $ 127,910 (1) As disclosed in Note 2, prior period amounts have not been adjusted under the modified retrospective method of adoption of Topic 606. |
Financial statement impact of adoption | The following tables summarize the impact of adopting Topic 606 on our financial statement line items as of March 28, 2018 and for the quarter ended March 28, 2018. March 28, 2018 Consolidated Balance Sheet As Reported Adjustments Balances without adoption of Topic 606 (In thousands) Prepaid and other current assets $ 9,048 $ 509 $ 9,557 Deferred income taxes 22,294 (5,282 ) 17,012 Other current liabilities 51,707 (1,158 ) 50,549 Other noncurrent liabilities 51,561 (18,624 ) 32,937 Deficit (340,348 ) 15,009 (325,339 ) Quarter ended March 28, 2018 Consolidated Statement of Income As Reported Adjustments Balances without adoption of Topic 606 (In thousands, except per share amounts) Franchise and license revenue $ 54,080 $ (20,307 ) $ 33,773 Costs of franchise and license revenue 28,556 (19,764 ) 8,792 Provision for income taxes 1,829 (140 ) 1,689 Net income 9,759 (403 ) 9,356 Basic net income per share $ 0.15 $ (0.01 ) $ 0.14 Diluted net income per share $ 0.15 $ (0.01 ) $ 0.14 Quarter ended March 28, 2018 Consolidated Statement of Comprehensive Income As Reported Adjustments Balances without adoption of Topic 606 (In thousands) Net income $ 9,759 $ (403 ) $ 9,356 Total comprehensive income 6,668 (403 ) 6,265 Quarter ended March 28, 2018 Consolidated Statement of Cash Flow As Reported Adjustments Balances without adoption of Topic 606 (In thousands) Net income $ 9,759 $ (403 ) $ 9,356 Deferred income tax expense 1,118 (140 ) 978 Changes in assets and liabilities: Other current assets 2,739 (509 ) 2,230 Other accrued liabilities (5,948 ) 923 (5,025 ) Other noncurrent liabilities (413 ) 129 (284 ) Net cash flows provided by operating activities 3,450 — 3,450 |
Components of the change in deferred franchise revenue | The components of the change in deferred franchise revenue are as follows: (In thousands) Balance, December 27, 2017 $ 1,643 Cumulative effect adjustment recognized upon adoption of Topic 606 20,976 Fees received from franchisees 239 Revenue recognized (1) (930 ) Balance, March 28, 2018 21,928 Less current portion included in other current liabilities 3,303 Deferred franchise revenue included in other noncurrent liabilities $ 18,625 (1) Of this amount $0.9 million was included in either the deferred franchise revenue balance as of December 27, 2017 or the cumulative effect adjustment. |
Schedule of deferred franchise revenue recognition | As of March 28, 2018 , the deferred franchise revenue expected to be recognized for each of the next five years and in the aggregate is as follows: (In thousands) Remainder of 2018 $ 1,646 2019 2,105 2020 1,981 2021 1,769 2022 1,661 Thereafter 11,270 Development agreements and unopened restaurants 1,496 Deferred franchise revenue $ 21,928 |
Receivables (Tables)
Receivables (Tables) | 3 Months Ended |
Mar. 28, 2018 | |
Receivables [Abstract] | |
Receivables, net | Receivables were comprised of the following: March 28, 2018 December 27, 2017 (In thousands) Receivables, net: Trade accounts receivable from franchisees $ 10,379 $ 10,688 Financing receivables from franchisees 4,675 5,084 Vendor receivables 1,791 3,256 Credit card receivables 1,549 1,870 Other 1,545 762 Allowance for doubtful accounts (427 ) (276 ) Total receivables, net $ 19,512 $ 21,384 Other noncurrent assets: Financing receivables from franchisees $ 1,573 $ 427 |
Goodwill and Other Intangible29
Goodwill and Other Intangible Assets (Tables) | 3 Months Ended |
Mar. 28, 2018 | |
Goodwill and Intangible Assets Disclosure [Abstract] | |
Goodwill | The following table reflects the changes in carrying amounts of goodwill. (In thousands) Balance, December 27, 2017 $ 38,269 Additions related to acquisition 1,574 Balance, March 28, 2018 $ 39,843 |
Indefinite-Lived Intangible Assets | Other intangible assets were comprised of the following: March 28, 2018 December 27, 2017 Gross Carrying Amount Accumulated Amortization Gross Carrying Amount Accumulated Amortization (In thousands) Intangible assets with indefinite lives: Trade names $ 44,081 $ — $ 44,080 $ — Liquor licenses 166 — 166 — Intangible assets with definite lives: Reacquired franchise rights 20,553 3,172 15,252 2,389 Intangible assets $ 64,800 $ 3,172 $ 59,498 $ 2,389 |
Finite-Lived Intangible Assets | Other intangible assets were comprised of the following: March 28, 2018 December 27, 2017 Gross Carrying Amount Accumulated Amortization Gross Carrying Amount Accumulated Amortization (In thousands) Intangible assets with indefinite lives: Trade names $ 44,081 $ — $ 44,080 $ — Liquor licenses 166 — 166 — Intangible assets with definite lives: Reacquired franchise rights 20,553 3,172 15,252 2,389 Intangible assets $ 64,800 $ 3,172 $ 59,498 $ 2,389 |
Other Current Liabilities (Tabl
Other Current Liabilities (Tables) | 3 Months Ended |
Mar. 28, 2018 | |
Other Liabilities, Current [Abstract] | |
Schedule of Other Current Liabilities | Other current liabilities consisted of the following: March 28, 2018 December 27, 2017 (In thousands) Accrued payroll $ 16,989 $ 20,998 Accrued insurance, primarily current portion of liability for insurance claims 6,863 6,922 Accrued taxes 7,422 7,384 Accrued advertising 5,499 8,417 Gift cards 4,419 6,480 Other 10,515 9,045 Other current liabilities $ 51,707 $ 59,246 |
Operating (Gains), Losses and31
Operating (Gains), Losses and Other Charges, Net (Tables) | 3 Months Ended |
Mar. 28, 2018 | |
Other Income and Expenses [Abstract] | |
Operating gains losses and other charges net | Operating (gains), losses and other charges, net are comprised of the following: Quarter Ended March 28, 2018 March 29, 2017 (In thousands) Software implementation costs $ — $ 2,124 Gains on sales of assets and other, net (37 ) (1,440 ) Restructuring charges and exit costs 360 99 Impairment charges 37 — Operating (gains), losses and other charges, net $ 360 $ 783 |
Restructuring charges and exit costs | Restructuring charges and exit costs were comprised of the following: Quarter Ended March 28, 2018 March 29, 2017 (In thousands) Exit costs $ 24 $ 31 Severance and other restructuring charges 336 68 Total restructuring charges and exit costs $ 360 $ 99 |
Components of change in accrued exit cost liabilities | The components of the change in accrued exit cost liabilities are as follows: (In thousands) Balance, December 27, 2017 $ 1,180 Exit costs (1) 24 Payments, net of sublease receipts (128 ) Interest accretion 21 Balance, March 28, 2018 1,097 Less current portion included in other current liabilities 333 Long-term portion included in other noncurrent liabilities $ 764 (1) Included as a component of operating (gains), losses and other charges, net. |
Fair Value of Financial Instr32
Fair Value of Financial Instruments (Tables) | 3 Months Ended |
Mar. 28, 2018 | |
Fair Value Disclosures [Abstract] | |
Financial assets and liabilities measured at fair value on a recurring basis | 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) Valuation Technique (In thousands ) Fair value measurements as of March 28, 2018: Deferred compensation plan investments (1) $ 12,424 $ 12,424 $ — $ — market approach Interest rate swaps, net (2) (6,385 ) — (6,385 ) — income approach Total $ 6,039 $ 12,424 $ (6,385 ) $ — Fair value measurements as of December 27, 2017: Deferred compensation plan investments (1) $ 12,663 $ 12,663 $ — $ — market approach Interest rate swaps, net (2) (2,187 ) — (2,187 ) — income approach Total $ 10,476 $ 12,663 $ (2,187 ) $ — (1) The fair values of our deferred compensation plan investments are based on the closing market prices of the elected investments. (2) The fair values of our interest rate swaps are based upon Level 2 inputs, which include valuation models as reported by our counterparties. The key inputs for the valuation models are quoted market prices, interest rates and forward yield curves. See Note 9 for details on the interest rate swaps. |
Long-Term Debt Derivative Instr
Long-Term Debt Derivative Instruments (Tables) | 3 Months Ended |
Mar. 28, 2018 | |
Derivative Instruments and Hedging Activities Disclosure [Abstract] | |
Interest rate swaps | A summary of our interest rate swaps as of March 28, 2018 is as follows: Trade Date Effective Date Maturity Date Notional Amount Fixed Rate (In thousands) April 30, 2013 March 31, 2015 March 29, 2018 $ 120,000 1.13 % March 20, 2015 March 29, 2018 March 31, 2025 120,000 2.44 % October 1, 2015 March 29, 2018 March 31, 2026 50,000 2.46 % February 15, 2018 March 31, 2020 December 31, 2033 80,000 (1) 3.19 % (1) The notional amount of the swaps entered into on February 15, 2018 increases annually beginning September 30, 2020 until they reach the maximum notional amount of $425.0 million on September 28, 2029. |
Defined Benefit Plans (Tables)
Defined Benefit Plans (Tables) | 3 Months Ended |
Mar. 28, 2018 | |
Retirement Benefits [Abstract] | |
Components of net periodic benefit cost | Quarter Ended March 28, 2018 March 29, 2017 (In thousands) Interest cost $ 19 $ 21 Amortization of net loss 28 23 Net periodic benefit cost $ 47 $ 44 |
Share-Based Compensation (Table
Share-Based Compensation (Tables) | 3 Months Ended |
Mar. 28, 2018 | |
Disclosure of Compensation Related Costs, Share-based Payments [Abstract] | |
Total share-based compensation | Total share-based compensation cost included as a component of net income was as follows: Quarter Ended March 28, 2018 March 29, 2017 (In thousands) Performance share awards $ 1,078 $ 1,940 Restricted stock units for board members 272 33 Total share-based compensation $ 1,350 $ 1,973 |
Net Income Per Share (Tables)
Net Income Per Share (Tables) | 3 Months Ended |
Mar. 28, 2018 | |
Earnings Per Share [Abstract] | |
Net Income Per Share | The amounts used for the basic and diluted net income per share calculations are summarized below: Quarter Ended March 28, 2018 March 29, 2017 (In thousands, except for per share amounts) Net income $ 9,759 $ 8,373 Weighted average shares outstanding - basic 64,432 71,004 Effect of dilutive share-based compensation awards 2,514 2,237 Weighted average shares outstanding - diluted 66,946 73,241 Basic net income per share $ 0.15 $ 0.12 Diluted net income per share $ 0.15 $ 0.11 Anti-dilutive share-based compensation awards 471 580 |
Supplemental Cash Flow Inform37
Supplemental Cash Flow Information (Tables) | 3 Months Ended |
Mar. 28, 2018 | |
Supplemental Cash Flow Information [Abstract] | |
Supplemental Cash Flow Information | Quarter Ended March 28, 2018 March 29, 2017 (In thousands) Income taxes paid, net $ 423 $ 395 Interest paid $ 4,272 $ 3,261 Noncash investing and financing activities: Issuance of common stock, pursuant to share-based compensation plans $ 3,513 $ 4,946 Execution of capital leases $ 2,478 $ 1,523 Treasury stock payable $ 615 $ 862 Notes received in connection with disposition of property $ — $ 1,750 |
Shareholders' Equity (Tables)
Shareholders' Equity (Tables) | 3 Months Ended |
Mar. 28, 2018 | |
Statement of Comprehensive Income [Abstract] | |
Components of accumulated other comprehensive loss | The components of the change in accumulated other comprehensive loss were as follows: Pensions Derivatives Accumulated Other Comprehensive Loss (In thousands) Balance as of December 27, 2017 $ (982 ) $ (1,334 ) $ (2,316 ) Amortization of net loss (1) 28 — 28 Net change in fair value of derivatives — (4,058 ) (4,058 ) Reclassification of derivatives to interest expense, net (2) — (140 ) (140 ) Income tax (expense) benefit related to items of other comprehensive loss (6 ) 1,085 1,079 Balance as of March 28, 2018 $ (960 ) $ (4,447 ) $ (5,407 ) (1) Before-tax amount related to our Other Defined Benefit Plans that was reclassified from accumulated other comprehensive loss and included as a component of pension expense within general and administrative expenses in our Condensed Consolidated Statements of Income during the quarter ended March 28, 2018 . See Note 10 for additional details. (2) Amounts reclassified from accumulated other comprehensive loss into income represent payments either received from or made to the counterparty for the effective portions of the interest rate swaps. These amounts are included as a component of interest expense, net in our Condensed Consolidated Statements of Income. We expect to make payments to the counterparty and reclassify approximately $1.0 million from accumulated other comprehensive loss related to our interest rate swaps during the next twelve months. See Note 9 for additional details. |
Introduction and Basis of Pre39
Introduction and Basis of Presentation (Details) | Mar. 28, 2018restaurant |
Franchisor Disclosure [Line Items] | |
Number of restaurants | 1,724 |
Franchised/licensed restaurants [Member] | |
Franchisor Disclosure [Line Items] | |
Number of restaurants | 1,542 |
Company restaurants [Member] | |
Franchisor Disclosure [Line Items] | |
Number of restaurants | 182 |
Revenues Disaggregation of Reve
Revenues Disaggregation of Revenues (Details) - USD ($) $ in Thousands | 3 Months Ended | ||
Mar. 28, 2018 | Mar. 29, 2017 | ||
Disaggregation of Revenue [Line Items] | |||
Company restaurant sales | $ 101,193 | $ 93,779 | |
Franchise and license revenue | 54,080 | 34,131 | |
Total operating revenue | 155,273 | 127,910 | [1] |
Sales Channel, Directly to Consumer [Member] | |||
Disaggregation of Revenue [Line Items] | |||
Company restaurant sales | 101,193 | 93,779 | [1] |
Sales Channel, Through Intermediary [Member] | |||
Disaggregation of Revenue [Line Items] | |||
Franchise and license revenue | 54,080 | 34,131 | [1] |
Royalties [Member] | Sales Channel, Through Intermediary [Member] | |||
Disaggregation of Revenue [Line Items] | |||
Franchise and license revenue | 25,165 | 24,544 | [1] |
Advertising [Member] | Sales Channel, Through Intermediary [Member] | |||
Disaggregation of Revenue [Line Items] | |||
Franchise and license revenue | 19,310 | 0 | [1] |
Initial and other fees [Member] | Sales Channel, Through Intermediary [Member] | |||
Disaggregation of Revenue [Line Items] | |||
Franchise and license revenue | 1,417 | 484 | [1] |
Occupancy [Member] | Sales Channel, Through Intermediary [Member] | |||
Disaggregation of Revenue [Line Items] | |||
Franchise and license revenue | $ 8,188 | $ 9,103 | [1] |
[1] | As disclosed in Note 2, prior period amounts have not been adjusted under the modified retrospective method of adoption of Topic 606. |
Revenues Financial Statement Im
Revenues Financial Statement Impact of Adoption (Details) - USD ($) $ / shares in Units, $ in Thousands | 3 Months Ended | |||
Mar. 28, 2018 | Mar. 29, 2017 | Dec. 28, 2017 | Dec. 27, 2017 | |
New Accounting Pronouncements or Change in Accounting Principle [Line Items] | ||||
Prepaid and other current assets | $ 9,048 | $ 11,788 | ||
Deferred income taxes | 22,294 | 16,945 | ||
Other current liabilities | 51,707 | 59,246 | ||
Other noncurrent liabilities | 51,561 | 27,951 | ||
Deficit | (340,348) | (334,661) | ||
Franchise and license revenue | 54,080 | $ 34,131 | ||
Costs of franchise and license revenue | 28,556 | 9,746 | ||
Provision for income taxes | 1,829 | 4,744 | ||
Net income | $ 9,759 | $ 8,373 | ||
Basic net income per share | $ 0.15 | $ 0.12 | ||
Diluted net income per share | $ 0.15 | $ 0.11 | ||
Total comprehensive income | $ 6,668 | $ 7,764 | ||
Deferred income tax expense | 1,118 | 3,225 | ||
Other current assets | 2,739 | 3,131 | ||
Other accrued liabilities | (5,948) | (1,204) | ||
Other noncurrent liabilities | (413) | (1,133) | ||
Net cash flows provided by operating activities | 3,450 | $ 8,021 | ||
Cumulative effect adjustment | $ (20,976) | $ (15,446) | ||
Difference between Revenue Guidance in Effect before and after Topic 606 [Member] | ||||
New Accounting Pronouncements or Change in Accounting Principle [Line Items] | ||||
Prepaid and other current assets | 509 | |||
Deferred income taxes | (5,282) | |||
Other current liabilities | (1,158) | |||
Other noncurrent liabilities | (18,624) | |||
Deficit | 15,009 | |||
Franchise and license revenue | (20,307) | |||
Costs of franchise and license revenue | (19,764) | |||
Provision for income taxes | (140) | |||
Net income | $ (403) | |||
Basic net income per share | $ (0.01) | |||
Diluted net income per share | $ (0.01) | |||
Total comprehensive income | $ (403) | |||
Deferred income tax expense | (140) | |||
Other current assets | (509) | |||
Other accrued liabilities | 923 | |||
Other noncurrent liabilities | 129 | |||
Net cash flows provided by operating activities | 0 | |||
Calculated under Revenue Guidance in Effect before Topic 606 [Member] | ||||
New Accounting Pronouncements or Change in Accounting Principle [Line Items] | ||||
Prepaid and other current assets | 9,557 | |||
Deferred income taxes | 17,012 | |||
Other current liabilities | 50,549 | |||
Other noncurrent liabilities | 32,937 | |||
Deficit | (325,339) | |||
Franchise and license revenue | 33,773 | |||
Costs of franchise and license revenue | 8,792 | |||
Provision for income taxes | 1,689 | |||
Net income | $ 9,356 | |||
Basic net income per share | $ 0.14 | |||
Diluted net income per share | $ 0.14 | |||
Total comprehensive income | $ 6,265 | |||
Deferred income tax expense | 978 | |||
Other current assets | 2,230 | |||
Other accrued liabilities | (5,025) | |||
Other noncurrent liabilities | (284) | |||
Net cash flows provided by operating activities | 3,450 | |||
Initial and other fees [Member] | ||||
New Accounting Pronouncements or Change in Accounting Principle [Line Items] | ||||
Cumulative effect adjustment | 21,000 | |||
(Deficit) [Member] | ||||
New Accounting Pronouncements or Change in Accounting Principle [Line Items] | ||||
Cumulative effect adjustment | 100 | |||
Deferred Tax Asset [Member] | ||||
New Accounting Pronouncements or Change in Accounting Principle [Line Items] | ||||
Cumulative effect adjustment | (5,400) | |||
Other Liabilities [Member] | ||||
New Accounting Pronouncements or Change in Accounting Principle [Line Items] | ||||
Cumulative effect adjustment | (600) | |||
Other Current Liabilities [Member] | ||||
New Accounting Pronouncements or Change in Accounting Principle [Line Items] | ||||
Cumulative effect adjustment | 500 | |||
Adjustments for New Accounting Pronouncement [Member] | (Deficit) [Member] | ||||
New Accounting Pronouncements or Change in Accounting Principle [Line Items] | ||||
Cumulative effect adjustment | $ (15,600) | |||
Initial and other fees [Member] | Difference between Revenue Guidance in Effect before and after Topic 606 [Member] | ||||
New Accounting Pronouncements or Change in Accounting Principle [Line Items] | ||||
Franchise and license revenue | 500 | |||
Advertising [Member] | Difference between Revenue Guidance in Effect before and after Topic 606 [Member] | ||||
New Accounting Pronouncements or Change in Accounting Principle [Line Items] | ||||
Franchise and license revenue | 19,188 | |||
Costs of franchise and license revenue | 19,188 | |||
Other Franchise Services [Member] | Difference between Revenue Guidance in Effect before and after Topic 606 [Member] | ||||
New Accounting Pronouncements or Change in Accounting Principle [Line Items] | ||||
Franchise and license revenue | 454 | |||
Costs of franchise and license revenue | $ 454 |
Revenues Contract Balances (Det
Revenues Contract Balances (Details) - USD ($) $ in Thousands | 3 Months Ended | |||
Mar. 28, 2018 | Dec. 28, 2017 | Dec. 27, 2017 | ||
Revenues [Abstract] | ||||
Balance, December 27, 2017 | $ 1,643 | |||
Cumulative effect adjustment recognized upon adoption of Topic 606 | $ 20,976 | $ 15,446 | ||
Fees received from franchisees | 239 | |||
Revenue recognized | [1] | (930) | ||
Balance, March 28, 2018 | 21,928 | |||
Less current portion included in other current liabilities | 3,303 | |||
Deferred franchise revenue included in other noncurrent liabilities | 18,625 | |||
Revenue recognized that was included in either the deferred franchise revenue balance as of December 27, 2017 or the cumulative effect adjustment | 900 | |||
Gift card liabilities | 4,419 | $ 6,480 | ||
Revenue recognized from gift card redemptions | $ 700 | |||
[1] | Of this amount $0.9 million was included in either the deferred franchise revenue balance as of December 27, 2017 or the cumulative effect adjustment. |
Revenues Estimated revenue reco
Revenues Estimated revenue recognition (Details) $ in Thousands | Mar. 28, 2018USD ($) |
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction [Line Items] | |
Deferred franchise revenue expected to be recognized | $ 21,928 |
2018 [Member] | |
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction [Line Items] | |
Deferred franchise revenue expected to be recognized | 1,646 |
2019 [Member] | |
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction [Line Items] | |
Deferred franchise revenue expected to be recognized | 2,105 |
2020 [Member] | |
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction [Line Items] | |
Deferred franchise revenue expected to be recognized | 1,981 |
2021 [Member] | |
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction [Line Items] | |
Deferred franchise revenue expected to be recognized | 1,769 |
2022 [Member] | |
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction [Line Items] | |
Deferred franchise revenue expected to be recognized | 1,661 |
Thereafter [Member] | |
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction [Line Items] | |
Deferred franchise revenue expected to be recognized | 11,270 |
Development agreements and unopened restaurants [Member] | |
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction [Line Items] | |
Deferred franchise revenue expected to be recognized | $ 1,496 |
Receivables (Details)
Receivables (Details) - USD ($) $ in Thousands | 3 Months Ended | |
Mar. 28, 2018 | Dec. 27, 2017 | |
Receivables [Abstract] | ||
Trade accounts receivable from franchisees, gross, current | $ 10,379 | $ 10,688 |
Financing receivables from franchisees, gross, current | 4,675 | 5,084 |
Allowance for doubtful accounts | (427) | (276) |
Total current receivables, net | 19,512 | 21,384 |
Noncurrent assets (included as a component of other noncurrent assets): | ||
Financing receivables from franchisees, noncurrent | 1,573 | 427 |
Write-off of financing receivables from a franchisee | 200 | |
Vendor receivables [Member] | ||
Receivables [Abstract] | ||
Other receivables, gross, current | 1,791 | 3,256 |
Credit card receivables [Member] | ||
Receivables [Abstract] | ||
Other receivables, gross, current | 1,549 | 1,870 |
Other [Member] | ||
Receivables [Abstract] | ||
Other receivables, gross, current | $ 1,545 | $ 762 |
Goodwill and Other Intangible45
Goodwill and Other Intangible Assets (Details) $ in Thousands | 3 Months Ended | |
Mar. 28, 2018USD ($)restaurants | Dec. 27, 2017USD ($) | |
Goodwill [Roll Forward] | ||
Balance, December 27, 2017 | $ 38,269 | |
Additions related to acquisition | 1,574 | |
Balance, March 28, 2018 | 39,843 | |
Gross carrying amount - Trade names | 44,081 | $ 44,080 |
Gross carrying amount - Liquor licenses | 166 | 166 |
Gross carrying amount - Intangible assets with definite lives | 20,553 | 15,252 |
Accumulated amortization - Intangible assets with definite lives | 3,172 | 2,389 |
Intangible assets | $ 64,800 | $ 59,498 |
Restaurants reacquired from franchisees | restaurants | 5 | |
Purchase price to reacquire franchised restaurants | $ 7,900 | |
Purchase price allocation of reacquired franchise rights | 5,300 | |
Purchase price allocation of property | 1,000 | |
Purchase price allocation of goodwill | 1,574 | |
Capital leases recorded related to acquired franchise restaurants | $ 2,400 |
Other Current Liabilities (Deta
Other Current Liabilities (Details) - USD ($) $ in Thousands | Mar. 28, 2018 | Dec. 27, 2017 |
Other Liabilities, Current [Abstract] | ||
Accrued payroll | $ 16,989 | $ 20,998 |
Accrued insurance, primarily current portion of liability for insurance claims | 6,863 | 6,922 |
Accrued taxes | 7,422 | 7,384 |
Accrued advertising | 5,499 | 8,417 |
Gift cards | 4,419 | 6,480 |
Other | 10,515 | 9,045 |
Other current liabilities | $ 51,707 | $ 59,246 |
Operating (Gains), Losses and47
Operating (Gains), Losses and Other Charges, Net (Details) - USD ($) $ in Thousands | 3 Months Ended | |||
Mar. 28, 2018 | Mar. 29, 2017 | Dec. 27, 2017 | ||
Other Income and Expenses [Abstract] | ||||
Software implementation costs | $ 0 | $ 2,124 | ||
Gains on sales of assets and other, net | (37) | (1,440) | ||
Restructuring charges and exit costs | 360 | 99 | ||
Impairment charges | 37 | 0 | ||
Operating (gains), losses and other charges, net | 360 | 783 | ||
Restructuring Charges [Abstract] | ||||
Exit costs | 24 | [1] | 31 | |
Severance and other restructuring charges | 336 | 68 | ||
Total restructuring charges and exit costs | 360 | 99 | ||
Restructuring Reserve [Roll Forward] | ||||
Balance, December 27, 2017 | 1,180 | |||
Exit costs | 24 | [1] | $ 31 | |
Payments, net of sublease receipts | (128) | |||
Interest accretion | 21 | |||
Balance, March 28, 2018 | 1,097 | |||
Less current portion included in other current liabilities | 333 | |||
Long-term portion included in other noncurrent liabilities | 764 | |||
Accrued severance and other restructuring charges | $ 300 | $ 100 | ||
[1] | Included as a component of operating (gains), losses and other charges, net. |
Fair Value of Financial Instr48
Fair Value of Financial Instruments (Details) - USD ($) $ in Thousands | 3 Months Ended | 12 Months Ended | |
Mar. 28, 2018 | Dec. 27, 2017 | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | |||
Interest rate swaps, net | $ (6,400) | ||
Recurring [Member] | |||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | |||
Total, assets | 6,039 | $ 10,476 | |
Recurring [Member] | Quoted Prices in Active Markets for Identical Assets/Liabilities (Level 1) [Member] | |||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | |||
Total, assets | 12,424 | 12,663 | |
Recurring [Member] | Significant Other Observable Inputs (Level 2) [Member] | |||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | |||
Total, liabilities | (6,385) | (2,187) | |
Recurring [Member] | Significant Unobservable Inputs (Level 3) [Member] | |||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | |||
Total, assets | 0 | 0 | |
Recurring [Member] | Deferred Compensation Plan Investments [Member] | |||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | |||
Deferred compensation plan investments | [1] | $ 12,424 | $ 12,663 |
Valuation technique | market approach | market approach | |
Recurring [Member] | Deferred Compensation Plan Investments [Member] | Quoted Prices in Active Markets for Identical Assets/Liabilities (Level 1) [Member] | |||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | |||
Deferred compensation plan investments | [1] | $ 12,424 | $ 12,663 |
Recurring [Member] | Deferred Compensation Plan Investments [Member] | Significant Other Observable Inputs (Level 2) [Member] | |||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | |||
Deferred compensation plan investments | [1] | 0 | 0 |
Recurring [Member] | Deferred Compensation Plan Investments [Member] | Significant Unobservable Inputs (Level 3) [Member] | |||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | |||
Deferred compensation plan investments | [1] | 0 | 0 |
Recurring [Member] | Interest Rate Swap [Member] | |||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | |||
Interest rate swaps, net | [2] | $ (6,385) | $ (2,187) |
Valuation technique | income approach | income approach | |
Recurring [Member] | Interest Rate Swap [Member] | Quoted Prices in Active Markets for Identical Assets/Liabilities (Level 1) [Member] | |||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | |||
Interest rate swaps, net | [2] | $ 0 | $ 0 |
Recurring [Member] | Interest Rate Swap [Member] | Significant Other Observable Inputs (Level 2) [Member] | |||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | |||
Interest rate swaps, net | [2] | (6,385) | (2,187) |
Recurring [Member] | Interest Rate Swap [Member] | Significant Unobservable Inputs (Level 3) [Member] | |||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | |||
Interest rate swaps, net | [2] | $ 0 | $ 0 |
[1] | The fair values of our deferred compensation plan investments are based on the closing market prices of the elected investments. | ||
[2] | The fair values of our interest rate swaps are based upon Level 2 inputs, which include valuation models as reported by our counterparties. The key inputs for the valuation models are quoted market prices, interest rates and forward yield curves. See Note 9 for details on the interest rate swaps. |
Long-Term Debt (Narrative) (Det
Long-Term Debt (Narrative) (Details) - USD ($) $ in Millions | 3 Months Ended | |
Mar. 28, 2018 | Dec. 27, 2017 | |
Senior secured revolver [Member] | ||
Line of Credit Facility [Line Items] | ||
Line of credit facility, current borrowing capacity | $ 400 | |
Accordion feature that allows increase in size of facility | 450 | |
Outstanding amount under credit facility | 282 | |
Availability under the revolving facility | $ 96.8 | |
Weighted-average interest rate (in hundredths) | 3.76% | 3.42% |
Commitment fee for unused portion of revolving credit facility (in hundredths) | 0.30% | |
Basis spread on variable rate debt | 2.00% | |
Maturity date | Oct. 26, 2022 | |
Letter of Credit [Member] | ||
Line of Credit Facility [Line Items] | ||
Line of credit facility, current borrowing capacity | $ 30 | |
Outstanding amount of letters of credit | $ 21.2 | |
Interest Rate Swap [Member] | Senior secured revolver [Member] | ||
Line of Credit Facility [Line Items] | ||
Weighted-average interest rate (in hundredths) | 3.53% | 3.32% |
Long-Term Debt Interest Rate Sw
Long-Term Debt Interest Rate Swaps (Details) $ in Thousands | 3 Months Ended | |
Mar. 28, 2018USD ($) | ||
Derivative [Line Items] | ||
Interest rate swaps, net liability | $ 6,400 | |
Interest rate swaps, asset | 1,700 | |
Interest rate swaps, liability | $ 8,100 | |
Interest Rate Swap 2015-2018 [Member] | ||
Derivative [Line Items] | ||
Trade date | Apr. 30, 2013 | |
Effective date | Mar. 31, 2015 | |
Maturity date | Mar. 29, 2018 | |
Notional amount | $ 120,000 | |
Fixed rate | 1.13% | |
Interest Rate Swap 2018-2025 [Member] | ||
Derivative [Line Items] | ||
Trade date | Mar. 20, 2015 | |
Effective date | Mar. 29, 2018 | |
Maturity date | Mar. 31, 2025 | |
Notional amount | $ 120,000 | |
Fixed rate | 2.44% | |
Interest Rate Swap 2018-2026 [Member] | ||
Derivative [Line Items] | ||
Trade date | Oct. 1, 2015 | |
Effective date | Mar. 29, 2018 | |
Maturity date | Mar. 31, 2026 | |
Notional amount | $ 50,000 | |
Fixed rate | 2.46% | |
Interest Rate Swap 2020-2033 [Member] | ||
Derivative [Line Items] | ||
Trade date | Feb. 15, 2018 | |
Effective date | Mar. 31, 2020 | |
Maturity date | Dec. 31, 2033 | |
Notional amount | $ 80,000 | [1] |
Fixed rate | 3.19% | |
Interest Rate Swap 2020-2033 [Member] | Maximum [Member] | ||
Derivative [Line Items] | ||
Notional amount | $ 425,000 | |
[1] | The notional amount of the swaps entered into on February 15, 2018 increases annually beginning September 30, 2020 until they reach the maximum notional amount of $425.0 million on September 28, 2029. |
Defined Benefit Plans (Details)
Defined Benefit Plans (Details) - USD ($) $ in Thousands | 3 Months Ended | ||
Mar. 28, 2018 | Mar. 29, 2017 | Dec. 27, 2017 | |
Components of net periodic benefit cost [Abstract] | |||
Interest cost | $ 19 | $ 21 | |
Amortization of net loss | 28 | 23 | |
Net periodic benefit cost | 47 | 44 | |
Employer contributions | 100 | $ 100 | |
Estimated employer contributions remainder of current fiscal year | 100 | ||
Additional minimum pension liability | $ 1,000 | $ 982 |
Share-Based Compensation (Detai
Share-Based Compensation (Details) - USD ($) $ / shares in Units, $ in Thousands, shares in Millions | 3 Months Ended | |
Mar. 28, 2018 | Mar. 29, 2017 | |
Total share-based compensation [Abstract] | ||
Total share-based compensation | $ 1,350 | $ 1,973 |
Performance share units [Member] | ||
Total share-based compensation [Abstract] | ||
Total share-based compensation | $ 1,078 | 1,940 |
Restricted Stock Units [Abstract] | ||
Performance period, equity award | 3 years | |
Common stock shares issued (in shares) | 0.2 | |
Common stock shares deferred (in shares) | 0.3 | |
Shares paid for tax withholding (in shares) | 0.1 | |
Unrecognized compensation cost [Abstract] | ||
Unrecognized compensation cost related to unvested share awards outstanding | $ 13,300 | |
Unrecognized compensation cost, expected weighted average period | 2 years 2 months 1 day | |
Performance share units [Member] | Minimum [Member] | ||
Restricted Stock Units [Abstract] | ||
Percentage of target awards to be earned (in hundredths) | 0.00% | |
Performance share units [Member] | Maximum [Member] | ||
Restricted Stock Units [Abstract] | ||
Percentage of target awards to be earned (in hundredths) | 150.00% | |
Performance share units [Member] | Performance share units that vest based on TSR [Member] | ||
Restricted Stock Units [Abstract] | ||
Equity awards granted (in shares) | 0.2 | |
Equity awards, grant date fair value (in dollars per share) | $ 18.17 | |
Performance share units [Member] | Performance share units that vest based on EBITDA growth [Member] | ||
Restricted Stock Units [Abstract] | ||
Equity awards granted (in shares) | 0.3 | |
Equity awards, grant date fair value (in dollars per share) | $ 15.93 | |
Restricted stock units for board members [Member] | ||
Total share-based compensation [Abstract] | ||
Total share-based compensation | $ 272 | $ 33 |
Unrecognized compensation cost [Abstract] | ||
Unrecognized compensation cost related to unvested share awards outstanding | $ 200 | |
Unrecognized compensation cost, expected weighted average period | 9 months 1 day |
Income Taxes (Details)
Income Taxes (Details) | 3 Months Ended | |
Mar. 28, 2018 | Mar. 29, 2017 | |
Effective tax rate reconciliation [Line Items] | ||
Effective tax rate, percent | 15.80% | 36.20% |
Effective income tax rate reconciliation, discrete item relating to share-based compensation, percent | 4.70% | |
Tax Year 2017 [Member] | ||
Effective tax rate reconciliation [Line Items] | ||
U.S. statutory tax rate | 35.00% | |
Tax Year 2018 [Member] | ||
Effective tax rate reconciliation [Line Items] | ||
U.S. statutory tax rate | 21.00% |
Net Income Per Share (Details)
Net Income Per Share (Details) - USD ($) $ / shares in Units, shares in Thousands, $ in Thousands | 3 Months Ended | |
Mar. 28, 2018 | Mar. 29, 2017 | |
Earnings Per Share [Abstract] | ||
Net income | $ 9,759 | $ 8,373 |
Weighted average shares outstanding - basic (in shares) | 64,432 | 71,004 |
Effect of dilutive share-based compensation awards | 2,514 | 2,237 |
Weighted average shares outstanding - diluted (in shares) | 66,946 | 73,241 |
Basic net income per share | $ 0.15 | $ 0.12 |
Diluted net income per share | $ 0.15 | $ 0.11 |
Antidilutive share-based compensation awards (in shares) | 471 | 580 |
Supplemental Cash Flow Inform55
Supplemental Cash Flow Information (Details) - USD ($) $ in Thousands | 3 Months Ended | |
Mar. 28, 2018 | Mar. 29, 2017 | |
Supplemental Cash Flow Information [Abstract] | ||
Income taxes paid, net | $ 423 | $ 395 |
Interest paid | 4,272 | 3,261 |
Noncash investing and financing activities: | ||
Issuance of common stock, pursuant to share-based compensation plans | 3,513 | 4,946 |
Execution of capital leases | 2,478 | 1,523 |
Treasury stock payable | 615 | 862 |
Notes received in connection with disposition of property | $ 0 | $ 1,750 |
Shareholders' Equity (Share Rep
Shareholders' Equity (Share Repurchase) (Details) - USD ($) shares in Thousands, $ in Thousands | 3 Months Ended | |
Mar. 28, 2018 | Dec. 27, 2017 | |
Equity, Class of Treasury Stock [Line Items] | ||
Purchase of treasury stock | $ 16,186 | |
Number of accumulated shares repurchased (in shares) | 44,222 | 43,151 |
Share Repurchase Program 2017 [Member] | ||
Equity, Class of Treasury Stock [Line Items] | ||
Share repurchase, authorized amount (in dollars) | $ 200,000 | |
Purchase of treasury stock (in shares) | 1,100 | |
Purchase of treasury stock | $ 16,200 | |
Number of accumulated shares repurchased (in shares) | 1,300 | |
Value of shares repurchased | $ 19,900 | |
Remaining shares to be repurchased (in dollars) | $ 180,100 |
Shareholders' Equity (Component
Shareholders' Equity (Components of Accumulated Other Comprehensive Loss) (Details) $ in Thousands | 3 Months Ended | |
Mar. 28, 2018USD ($) | ||
AOCI Attributable to Parent, Net of Tax [Roll Forward] | ||
Balance as of December 27, 2017 | $ (2,316) | |
Amortization of net loss | 28 | [1] |
Net change in fair value of derivatives | (4,058) | |
Reclassification of derivatives to interest expense, net | (140) | [2] |
Income tax (expense) benefit related to items of other comprehensive loss | 1,079 | |
Balance as of March 28, 2018 | (5,407) | |
Estimated reclassification from accumulated other comprehensive income to interest expense related to the interest rate swaps over the next 12 months | 1,000 | |
Pensions [Member] | ||
AOCI Attributable to Parent, Net of Tax [Roll Forward] | ||
Balance as of December 27, 2017 | (982) | |
Amortization of net loss | 28 | [1] |
Income tax (expense) benefit related to items of other comprehensive loss | (6) | |
Balance as of March 28, 2018 | (960) | |
Derivatives [Member] | ||
AOCI Attributable to Parent, Net of Tax [Roll Forward] | ||
Balance as of December 27, 2017 | (1,334) | |
Net change in fair value of derivatives | (4,058) | |
Reclassification of derivatives to interest expense, net | (140) | [2] |
Income tax (expense) benefit related to items of other comprehensive loss | 1,085 | |
Balance as of March 28, 2018 | $ (4,447) | |
[1] | Before-tax amount related to our Other Defined Benefit Plans that was reclassified from accumulated other comprehensive loss and included as a component of pension expense within general and administrative expenses in our Condensed Consolidated Statements of Income during the quarter ended March 28, 2018. See Note 10 for additional details. | |
[2] | Amounts reclassified from accumulated other comprehensive loss into income represent payments either received from or made to the counterparty for the effective portions of the interest rate swaps. These amounts are included as a component of interest expense, net in our Condensed Consolidated Statements of Income. We expect to make payments to the counterparty and reclassify approximately $1.0 million from accumulated other comprehensive loss related to our interest rate swaps during the next twelve months. See Note 9 for additional details. |
Commitments and Contingencies (
Commitments and Contingencies (Details) - USD ($) $ in Millions | Mar. 28, 2018 | Dec. 27, 2017 |
Commitments and Contingencies Disclosure [Abstract] | ||
Loan amounts outstanding under the loan pools | $ 4.7 | $ 5.1 |
Maximum payments guaranteed | 1.1 | |
Guarantee liabilities included as a component of other noncurrent liabilities | $ 0.1 | $ 0.1 |