Exhibit 99.1
Investor Contact: Ken Jones
864-597-8658
NEWS RELEASE
Media Contact: Debbie Atkins
864-597-8361
DENNY'S CORPORATION REPORTS SECOND QUARTER 2004 RESULTS
SPARTANBURG, S.C., July 29, 2004 -- Denny's Corporation (OTCBB: DNYY)
today reported results for its second quarter ended June 30, 2004. Highlights
included:
o Same-store sales for the second quarter increased 4.6% at company units and
4.8% at franchised units.
o Denny's ended the quarter with 556 company units, down 7 from the same time
last year, and 1,063 franchised and licensed units, down 37 from last year.
o Total operating revenue increased $9.7 million, or 4.2%, to $239.7 million for
the quarter.
o Operating income increased $3.0 million to $16.8 million for the quarter.
o Net loss for the quarter was $2.9 million compared with last year's net loss
of $5.4 million.
o At quarter end, Denny's $155 million credit facility had net availability of
$78 million.
o Subsequent to quarter end, Denny's closed a private placement of approximately
48.4 million shares of common stock at a price of $1.90 per share yielding
gross proceeds of approximately $92.0 million.
Commenting on Denny's results for the second quarter, Nelson J.
Marchioli, president and chief executive officer, said, "We are pleased to
report solid sales growth and significant margin improvement during the second
quarter. June marked our tenth consecutive month of positive same-store sales
which benefited from growth in both guest counts and guest check average. In
addition, our operating margins continued to improve despite a challenging cost
environment for restaurants. The substantial investments we have made over the
last few years in food, labor and facilities are beginning to have a meaningful
impact on our financial results.
"Without question our recent equity placement was a significant
milestone in the Denny's turnaround. We appreciate the support provided by these
investors and believe it is further confirmation of the strength of the Denny's
brand and the steps we have taken to build upon that strong foundation,"
Marchioli concluded.
Second Quarter Results
Denny's reported total operating revenue for the second quarter of
$239.7 million, up $9.7 million from the prior year quarter. Company restaurant
sales increased $9.4 million to $217.9 million as a same-store sales increase of
4.6% more than offset a seven unit decline in company-owned restaurants.
Franchise revenue increased slightly to $21.8 million as a 4.8% same-store sales
increase offset a 37-unit decline in franchised restaurants.
Company restaurant operating margin for the second quarter increased by
2.7 percentage points to 13.9% of company sales compared with 11.2% of sales
last year. A 2.9 percentage point decrease in payroll and benefit costs
accounted for most of the margin improvement. Lower health benefit costs, as
well as more efficient labor scheduling, offset an increase in restaurant-level
incentive compensation. Product costs increased 0.5 percentage points due
primarily to $1.0 million in deferred gain amortization in last year's quarter
with no related benefit in this year's quarter. The Company, like most of the
industry, has experienced commodity cost increases; however, higher food costs
have been mitigated by managing menu mix and pricing.
General and administrative expenses for the second quarter increased
$1.2 million due primarily to higher incentive compensation expense
(approximately $2.8 million) as well as the incurrence of costs related to
exploring possible recapitalization alternatives (approximately $0.6 million).
These expense increases were partially offset by reductions in other corporate
overhead costs.
Operating income for the quarter increased $3.0 million to $16.8
million, reflecting higher sales and improved margins. Operating income in last
year's second quarter benefited from $2.6 million in gains on disposition of
assets.
Net loss for the second quarter was $2.9 million, or $0.07 per diluted
common share, compared with last year's second quarter net loss of $5.4 million,
or $0.13 per diluted common share.
Capital Structure
As previously announced, on July 7, 2004 (subsequent to quarter end),
the Company closed a private placement of approximately 48.4 million shares of
its common stock sold at a price of $1.90 per share generating gross proceeds of
approximately $92.0 million. The proceeds from the equity placement have been
applied to reduce indebtedness and for general corporate purposes. As of today,
the Company has repurchased approximately $35 million principal amount of its
11.25% Senior Notes, leaving a balance outstanding of $343.9 million. The
Company has also repurchased approximately $9 million principal amount of its
12.75% Senior Notes, leaving a balance outstanding of $111.7 million. In
addition, the Company has paid off the $40 million balance outstanding under the
term loan portion of its credit facility. The Company is now evaluating further
recapitalization alternatives which may include refinancing its credit facility
as well as refinancing some or all of its remaining senior notes.
Revolving Credit Facility
Effective June 30, 2004, commitments under the Denny's credit facility
were reduced to $155 million as scheduled in the credit agreement. At the end of
the second quarter, the credit facility consisted of outstanding term loans of
$40 million, revolver advances of $2 million, and letters of credit of $35
million, leaving net availability of $78 million.
As of today, with the prepayment of the term loan described above,
commitments under the credit facility have been reduced to $115 million. The
credit facility now consists of revolver advances of $5 million and letters of
credit of $35 million, leaving net availability of $75 million.
Further Information
Denny's will host its quarterly conference call for investors and
analysts today, Thursday, July 29, 2004 at 1:00 p.m. EST. Interested parties are
invited to join a live, listen only broadcast of the conference call. The call
may be accessed through our website at www.dennys.com. On the front page of the
website, follow the link to "About Us;" then follow the link to "Investor Info;"
and then select the "Live Webcast" icon. A replay of the call may be accessed at
the same location later in the day and will remain available for at least 30
days.
Denny's is America's largest full-service family restaurant chain,
consisting of 556 company-owned units and 1,063 franchised and licensed units,
with operations in the United States, Canada, Costa Rica, Guam, Mexico, New
Zealand and Puerto Rico. For further information on Denny's, including news
releases, links to SEC filings and other financial information, please visit our
website referenced above.
Certain matters discussed in this release may constitute forward
looking statements involving risks, uncertainties, and other factors that may
cause the actual performance of Denny's Corporation, its subsidiaries and
underlying restaurants to be materially different from the performance indicated
or implied by such statements. Factors that could cause actual performance to
differ materially from the performance indicated by such statements include,
among others: the competitive pressures from within the restaurant industry; the
level of success of the Company's operating initiatives and advertising and
promotional efforts; adverse publicity; changes in business strategy or
development plans; the ability to refinance our credit facility on favorable
terms; terms and availability of capital; regional weather conditions; overall
changes in the general economy, particularly at the retail level; political
environment (including acts of war and terrorism); and other factors from time
to time set forth in the Company's SEC reports, including but not limited to the
discussion in Management's Discussion and Analysis and the risks identified in
Exhibit 99 contained in the Company's Annual Report on Form 10-K for the year
ended December 31, 2003 (and in the Company's subsequent quarterly reports on
Form 10-Q).
DENNY'S CORPORATION
Condensed Consolidated Statements of Operations
(Unaudited)
Quarter Quarter
Ended Ended
6/30/04 6/25/03
--------------- --------------
(In thousands, except per share amounts)
Revenue:
Company restaurant sales $ 217,906 $ 208,457
Franchise and license revenue 21,835 21,603
--------------- --------------
Total operating revenue 239,741 230,060
--------------- --------------
Costs of company restaurant sales 187,687 185,192
Costs of franchise and license revenue 7,049 6,778
General and administrative expenses 14,228 13,044
Depreciation and amortization 14,194 14,420
Restructuring charges and exit costs (519) (982)
Impairment charges 497 410
Gains on disposition of assets and other, net (158) (2,552)
--------------- --------------
Total operating costs and expenses 222,978 216,310
--------------- --------------
Operating income 16,763 13,750
--------------- --------------
Other expenses:
Interest expense, net 19,457 18,989
Other nonoperating expense (income), net 1 (127)
--------------- --------------
Total other expenses, net 19,458 18,862
--------------- --------------
Loss before income taxes (2,695) (5,112)
Provision for income taxes 203 265
--------------- --------------
Net loss $ (2,898) $ (5,377)
=============== ==============
Basic and diluted net loss per share $ (0.07) $ (0.13)
=============== ==============
Basic and diluted weighted average shares outstanding 41,258 40,743
=============== ==============
DENNY'S CORPORATION
Condensed Consolidated Statements of Operations
(Unaudited)
Two Quarters Two Quarters
Ended Ended
6/30/04 6/25/03
--------------- --------------
(In thousands, except per share amounts)
Revenue:
Company restaurant sales $ 425,668 $ 407,901
Franchise and license revenue 43,468 43,000
--------------- --------------
Total operating revenue 469,136 450,901
--------------- --------------
Costs of company restaurant sales 369,607 363,656
Costs of franchise and license revenue 14,217 13,270
General and administrative expenses 29,409 26,247
Depreciation and amortization 28,412 28,677
Restructuring charges and exit costs (414) (936)
Impairment charges 497 699
Gains on disposition of assets and other, net (232) (4,869)
--------------- --------------
Total operating costs and expenses 441,496 426,744
--------------- --------------
Operating income 27,640 24,157
--------------- --------------
Other expenses:
Interest expense, net 38,925 38,206
Other nonoperating income, net (64) (120)
--------------- --------------
Total other expenses, net 38,861 38,086
--------------- --------------
Loss before income taxes (11,221) (13,929)
Provision for income taxes 407 530
--------------- --------------
Net loss $ (11,628) $ (14,459)
=============== ==============
Basic and diluted net loss per share $ (0.28) $ (0.36)
=============== ==============
Basic and diluted weighted average shares outstanding 41,161 40,628
=============== ==============
DENNY'S CORPORATION
Condensed Consolidated Balance Sheets
(Unaudited)
6/30/04 12/31/03
----------------- -----------------
(In thousands)
ASSETS
Current Assets
Cash and cash equivalents $ 4,038 $ 7,363
Other 23,544 24,894
----------------- -----------------
27,582 32,257
----------------- -----------------
Property, net 287,665 296,995
Goodwill 50,404 50,404
Intangible assets, net 80,456 83,879
Other assets 39,317 43,117
----------------- -----------------
Total Assets $ 485,424 $ 506,652
================= =================
LIABILITIES AND SHAREHOLDERS' DEFICIT
Current Liabilities
Current maturities of notes and debentures $ 42,274 $ 51,714
Current maturities of capital lease obligations 3,331 3,462
Accounts payable and other accrued liabilities 139,661 137,549
----------------- -----------------
185,266 192,725
----------------- -----------------
Long-Term Liabilities
Notes and debentures, less current maturities 508,466 509,593
Capital lease obligations, less current maturities 28,411 28,728
Other 87,575 88,538
----------------- -----------------
624,452 626,859
----------------- -----------------
Total Liabilities 809,718 819,584
Total Shareholders' Deficit (324,294) (312,932)
----------------- -----------------
Total Liabilities and Shareholders' Deficit $ 485,424 $ 506,652
================= =================
DENNY'S CORPORATION
Quarterly Operating Margins
(Unaudited)
Quarter Quarter
Ended Ended
(In millions) 6/30/04 6/25/03
--------------------- ---------------------
Total operating revenue (1) $ 239.7 100.0% $ 230.1 100.0%
Company restaurant operations: (2)
Company restaurant sales 217.9 100.0% 208.5 100.0%
Costs of company restaurant sales:
Product costs 56.4 25.9% 53.0 25.4%
Payroll and benefits 90.0 41.3% 92.2 44.2%
Occupancy 12.1 5.6% 11.9 5.7%
Other operating costs:
Utilities 9.4 4.3% 9.1 4.3%
Repairs and maintenance 4.2 1.9% 4.3 2.1%
Marketing 7.8 3.6% 6.8 3.3%
Other 7.8 3.6% 7.9 3.8%
--------------------- ---------------------
Total costs of company restaurant sales 187.7 86.1% 185.2 88.8%
--------------------- ---------------------
Company restaurant operating margin (4) $ 30.2 13.9% $ 23.3 11.2%
--------------------- ---------------------
Franchise operations: (3)
Franchise and license revenue 21.8 100.0% 21.6 100.0%
Costs of franchise and license revenue 7.0 32.3% 6.8 31.4%
--------------------- ---------------------
Franchise operating margin (4) $ 14.8 67.7% $ 14.8 68.6%
--------------------- ---------------------
Total operating margin (1)(4) $ 45.0 18.8% $ 38.1 16.6%
Other operating expenses: (1)(4)
General and administrative expenses 14.2 5.9% 13.0 5.7%
Depreciation and amortization 14.2 5.9% 14.4 6.3%
Restructuring, exit costs and impairment (0.0) (0.0%) (0.6) (0.2%)
Gains on disposition of assets and other net (0.2) (0.1%) (2.6) (1.1%)
--------------------- ---------------------
Total other operating expenses $ 28.2 11.8% $ 24.3 10.6%
--------------------- ---------------------
Operating income (1) $ 16.8 7.0% $ 13.8 6.0%
===================== =====================
(1) As a percentage of total operating revenue
(2) As a percentage of company restaurant sales
(3) As a percentage of franchise and license revenue
(4) Other operating expenses such as general and administrative expenses and
depreciation and amortization relate to both company and franchise operations
and are not allocated to costs of company restaurant sales and costs of
franchise and license revenue. As such, operating margins may be considered a
non-GAAP financial measure. Operating margins should be considered as a
supplement to, not as a substitute for, operating income, net income or other
financial measures prepared in accordance with accounting principles generally
accepted in the United States of America.
DENNY'S CORPORATION
EBITDA Reconciliation
(Unaudited)
Quarter Quarter Two Quarters Two Quarters
Ended Ended Ended Ended
(In millions) 6/30/04 6/25/03 6/30/04 6/25/03
--------------- ---------------- ---------------- ----------------
Net loss $ (2.9) $ (5.4) $ (11.6) $ (14.5)
Provision for income taxes 0.2 0.3 0.4 0.5
Interest expense, net 19.5 19.0 38.9 38.2
Depreciation and amortization 14.2 14.4 28.4 28.7
--------------- ---------------- ---------------- ----------------
EBITDA (1) $ 31.0 $ 28.3 $ 56.1 $ 53.0
=============== ================ ================ ================
(1) We believe that, in addition to other financial measures, EBITDA is an
appropriate indicator to assist in the evaluation of our operating
performance because it provides additional information with respect to
our ability to meet our future debt service, capital expenditures and
working capital needs. However, EBITDA should be considered as a
supplement to, not a substitute for, operating income, net income or
other financial performance measures prepared in accordance with
accounting principles generally accepted in the United States of
America.
Quarter Quarter Two Quarters Two Quarters
Ended Ended Ended Ended
(In millions) 6/30/04 6/25/03 6/30/04 6/25/03
--------------- ---------------- ---------------- ----------------
Other financial data: (2)
Restructuring charges and exit costs $ (0.5) $ (1.0) (0.4) $ (0.9)
Impairment charges 0.5 0.4 0.5 0.7
Gains on disposition of assets and other, net (0.2) (2.6) (0.2) (4.9)
Other nonoperating expense (income), net 0.0 (0.1) (0.1) (0.1)
(2) The line items in this section are components of both net income and EBITDA as shown above.
DENNY'S CORPORATION
Statistical Data
(Unaudited)
Quarter Two Quarters
Same-Store Sales Ended Ended
(increase/(decrease) vs. prior year) 6/30/04 6/30/04
--------------- ---------------
Company-Owned Same-Store Sales 4.6% 5.5%
Guest Check Average 3.4% 3.2%
Guest Counts 1.1% 2.2%
Franchised Same-Store Sales 4.8% 5.7%
Quarter Quarter Two Quarters Two QuarterS
Aggregate Unit Sales Ended Ended Ended Ended
($ in millions) 6/30/04 6/25/03 6/30/04 6/25/03
--------------- --------------- ---------------- ----------------
Company-Owned Units $ 217.9 $ 208.5 $ 425.7 $ 407.9
Quarter Quarter Two Quarters Two Quarters
Average Unit Sales Ended Ended Ended Ended
($ in thousands) 6/30/04 6/25/03 6/30/04 6/25/03
--------------- --------------- ---------------- ----------------
Company-Owned Units $ 393.0 $ 372.2 $ 766.1 $ 727.0
Franchised
Restaurant Units Company & Licensed Total
----------------- ----------------- ----------------
Ending Units 6/25/03 563 1,100 1,663
Units Opened 0 14 14
Units Acquired/Reacquired 0 0 0
Units Refranchised (1) 1 0
Units Closed (6) (52) (58)
----------------- ----------------- ----------------
Net Change (7) (37) (44)
Ending Units 6/30/04 556 1,063 1,619