Exhibit 99.1
Investor Contact: Alex Lewis
877-784-7167
Media Contact: Debbie Atkins NEWS RELEASE
864-597-8361
DENNY'S CORPORATION REPORTS THIRD QUARTER 2005 RESULTS
SPARTANBURG, S.C., October 27, 2005 - Denny's Corporation
(Nasdaq: DENN) today reported results for its third quarter ended September 28,
2005.
Highlights for the third quarter included:
o Same-store sales increased 1.5% at company units and 3.8% at franchised
units
o Total operating revenue increased $1.6 million
o Net loss improved $8.4 million to $3.4 million, or $0.04 per share,
including charges totaling $7.0 million for legal settlements and severance
Commenting on third quarter results, Nelson J. Marchioli, President and
Chief Executive Officer, said, "We are pleased to have maintained our positive
sales momentum in the third quarter in a challenging economic environment. While
we are certainly disappointed with softened guest counts during the quarter, we
are encouraged that the trend was relatively stable, which we believe is
attributable to the consumer's recognition of Denny's strong value proposition."
Mr. Marchioli continued, "We are confident that our team will continue
to successfully execute the Company's strategy of improving operations through
investments in food, people and facilities. We believe these investments will
lead to improved financial performance and enhanced shareholder value over
time."
Third Quarter Results
For the third quarter of 2005, Denny's reported total operating revenue
of $248.7 million, an increase of 0.6%, or $1.6 million over the prior year
quarter. Company restaurant sales increased 0.7%, or $1.5 million, to $225.8
million, as a 1.5% increase in same-store sales offset a seven-unit decline in
company-owned restaurants. Franchise revenue increased 0.4%, or $0.1 million, to
$22.9 million, as a 3.8% increase in same-store sales offset a 20-unit decline
in franchised restaurants.
Company restaurant operating margin (as a percentage of company
restaurant sales) was 10.7% for the third quarter compared with 13.5% for the
same period last year. This margin decrease is due primarily to legal settlement
charges recorded in the third quarter as a result of a previously announced
litigation settlement with the State of California's Division of Labor
Standard's Enforcement ("DLSE").
Product costs for the third quarter decreased 0.9 percentage points
compared with last year, due primarily to easing of commodity cost pressures and
a 4.1% increase in average guest check. Payroll and benefit costs increased 0.8
percentage points over last year, due primarily to wage rate pressures and
higher worker's compensation costs. Occupancy costs decreased 0.3 percentage
points, due primarily to a reduction in general liability insurance accruals.
This reduction benefited occupancy expense by $1.1 million, or 0.5 percentage
points. Other operating costs increased 3.2 percentage points, due primarily to
legal settlement charges of $5.8 million, or 2.5 percentage points. Of this
amount, $4.8 million resulted from the DSLE settlement with an additional $1.0
million accrued for other ongoing cases. In addition to the legal charges, other
operating costs were burdened by increasing utility costs as well as training
expenses associated with the rollout of a new point-of-sale system. Utility
costs are expected to compare unfavorably for the next two quarters by 0.5 to
1.0 percentage points as a result of considerably higher natural gas prices.
General and administrative expenses for the third quarter decreased
$2.1 million over the same period last year. The primary contributor to the
decrease was a $2.1 million reduction in incentive compensation expense. In
addition, Denny's incurred $1.4 million of recapitalization related transaction
costs in the third quarter of last year with no similar expense in this year's
quarter. Partially offsetting these cost decreases was an increase of $0.8
million in stock-based compensation costs which totaled $1.4 million for the
quarter.
Operating income for the third quarter decreased $6.5 million from the
same period last year. In addition to the charges for legal settlements noted
above, restructuring charges and exit costs increased $1.0 million over last
year, attributable primarily to $1.2 million in severance related costs. Also,
gains on asset sales decreased $1.0 million, as no surplus properties were sold
in this year's third quarter.
Interest expense for the third quarter decreased $3.6 million to $13.9
million due to the financial recapitalization completed during 2004, which
significantly lowered borrowing costs.
Net loss for the third quarter was $3.4 million, or $0.04 per common
share, an improvement of $8.4 million compared with a net loss in the prior year
of $11.8 million, or $0.14 per common share. The net loss this quarter included
charges totaling $7.0 million for legal settlements and severance related costs.
Business Outlook
Commenting on expectations for the fourth quarter and full year 2005,
Marchioli said, "In spite of the macroeconomic pressures this year, we intend to
meet our operational guidance as provided at the beginning of the year,
excluding the legal settlement. The holiday season is a high volume period for
Denny's and provides an opportunity for a strong finish to the year."
The following financial guidance is based on year-to-date results and
management expectations at this time.
9/05 YTD 4Q05 2005
($ in millions) Actual Estimate Estimate
-------- ----------- -----------
Company Unit Same-Store Sales 3.9% 0.0 to 1.5% 3.0 to 3.4%
Franchise Unit Same-Store Sales 5.6% 2.0 to 3.5% 4.7 to 5.1%
Company Unit Openings 1 2 3
Franchise Unit Openings 15 2 to 4 17 to 19
Total Operating Revenue $735 $242 to 245 $977 to 980
Reported EBITDA * $78 $31 to 34 $109 to 112
Adjusted EBITDA * $85 $31 to 34 $116 to 119
Capital Spending $29 $21 to 26 $50 to 55
* Please refer to the EBITDA Reconciliation table included below.
Further Information
Denny's will host its quarterly conference call for investors and
analysts today, Thursday, October 27, 2005 at 5:00 p.m. EST. Interested parties
are invited to listen to a live broadcast of the conference call accessible
through our website at www.dennys.com. On the front page of the website, follow
the link to "Investor Relations." In the new window, 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 30 days.
Denny's is America's largest full-service family restaurant chain,
consisting of 546 company-owned units and 1,036 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 constitute forward looking
statements. These forward-looking statements involve risks, uncertainties, and
other factors that may cause the actual performance of Denny's Corporation, its
subsidiaries and underlying restaurants to be materially different from the
performance indicated or implied by such statements. Words such as "expects",
"anticipates", "believes", "intends", "plans", and "hopes", variations of such
words and similar expressions are intended to identify such forward-looking
statements. Except as may be required by law, the Company expressly disclaims
any obligation to update these forward-looking statements to reflect events or
circumstances after the date of this release or to reflect the occurrence of
unanticipated events. Factors that could cause actual performance to differ
materially from the performance indicated by these forward-looking statements
include, among others: the competitive pressures from within the restaurant
industry; the level of success of the Company's operating initiatives and
advertising and promotional efforts; adverse publicity; changes in business
strategy or development plans; terms and availability of capital; regional
weather conditions; overall changes in the general economy, particularly at the
retail level; political environment (including acts of war and terrorism); and
other factors from time to time set forth in the Company's SEC reports,
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 29, 2004 (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
(In thousands, except per share amounts) 9/28/05 9/29/04
-------------- --------------
Revenue:
Company restaurant sales $ 225,824 $ 224,330
Franchise and license revenue 22,898 22,815
-------------- --------------
Total operating revenue 248,722 247,145
-------------- --------------
Costs of company restaurant sales 201,695 194,020
Costs of franchise and license revenue 7,069 6,948
General and administrative expenses 14,654 16,727
Depreciation and amortization 13,818 13,529
Restructuring charges and exit costs, net 2,056 1,080
Impairment charges 320 195
Gains on disposition of assets and other, net (40) (998)
-------------- --------------
Total operating costs and expenses 239,572 231,501
-------------- --------------
Operating income 9,150 15,644
-------------- --------------
Other expenses:
Interest expense, net 13,934 17,556
Other nonoperating (income) expense, net (86) 9,699
-------------- --------------
Total other expenses, net 13,848 27,255
-------------- --------------
Loss before income taxes (4,698) (11,611)
Provision for (benefit from) income taxes (1,264) 202
-------------- --------------
Net loss $ (3,434) $ (11,813)
============== ==============
Net loss per share
Basic $ (0.04) $ (0.14)
============== ==============
Diluted $ (0.04) $ (0.14)
============== ==============
Weighted average shares outstanding
Basic 91,363 86,614
============== ==============
Diluted 91,363 86,614
============== ==============
DENNY'S CORPORATION
Condensed Consolidated Statements of Operations
(Unaudited)
Three Quarters Three Quarters
Ended Ended
(In thousands, except per share amounts) 9/28/05 9/29/04
-------------- --------------
Revenue:
Company restaurant sales $ 667,833 $ 649,998
Franchise and license revenue 67,513 66,283
-------------- --------------
Total operating revenue 735,346 716,281
-------------- --------------
Costs of company restaurant sales 586,613 563,627
Costs of franchise and license revenue 21,530 21,165
General and administrative expenses 46,873 46,136
Depreciation and amortization 40,857 41,941
Restructuring charges and exit costs, net 4,416 666
Impairment charges 585 692
Gains on disposition of assets and other, net (1,790) (1,230)
-------------- --------------
Total operating costs and expenses 699,084 672,997
-------------- --------------
Operating income 36,262 43,284
-------------- --------------
Other expenses:
Interest expense, net 40,810 56,481
Other nonoperating (income) expense, net (545) 9,635
-------------- --------------
Total other expenses, net 40,265 66,116
-------------- --------------
Loss before income taxes (4,003) (22,832)
Provision for (benefit from) income taxes (1,178) 609
-------------- --------------
Net loss $ (2,825) $ (23,441)
============== ==============
Net loss per share
Basic $ (0.03) $ (0.42)
============== ==============
Diluted $ (0.03) $ (0.42)
============== ==============
Weighted average shares outstanding
Basic 90,785 56,312
============== ==============
Diluted 90,785 56,312
============== ==============
DENNY'S CORPORATION
Condensed Consolidated Balance Sheets
(Unaudited)
(In thousands) 9/28/05 12/29/04
-------------- --------------
ASSETS
Current Assets
Cash and cash equivalents $ 27,828 $ 15,561
Other 32,850 27,994
-------------- --------------
60,678 43,555
-------------- --------------
Property, net 274,423 285,401
Goodwill 50,186 50,186
Intangible assets, net 73,126 77,484
Other assets 39,736 43,867
-------------- --------------
Total Assets $ 498,149 $ 500,493
============== ==============
LIABILITIES AND SHAREHOLDERS' DEFICIT
Current Liabilities
Current maturities of notes and debentures $ 2,429 $ 1,975
Current maturities of capital lease obligations 3,841 3,396
Accounts payable and other accrued liabilities 126,267 130,873
-------------- --------------
132,537 136,244
-------------- --------------
Long-Term Liabilities
Notes and debentures, less current maturities 516,851 519,236
Capital lease obligations, less current maturities 27,008 28,149
Other 82,532 82,294
-------------- --------------
626,391 629,679
-------------- --------------
Total Liabilities 758,928 765,923
Total Shareholders' Deficit (260,779) (265,430)
-------------- --------------
Total Liabilities and Shareholders' Deficit $ 498,149 $ 500,493
============== ==============
Debt Balances
(In thousands) 9/28/05 12/29/04
-------------- --------------
First lien revolver loans $ - $ -
First lien term loans 223,314 225,000
Second lien term loans 120,000 120,000
Capital leases and other debt 31,815 32,756
Senior notes due 2012 175,000 175,000
-------------- --------------
Total Debt $ 550,129 $ 552,756
============== ==============
DENNY'S CORPORATION
EBITDA and G&A Reconciliation
(Unaudited)
Quarter Quarter Three Quarters Three Quarters
EBITDA Reconciliation Ended Ended Ended Ended
(In millions) 9/28/05 9/29/04 9/28/05 9/29/04
-------------- -------------- -------------- --------------
Net loss $ (3.4) $ (11.8) $ (2.8) $ (23.4)
Provision for (benefit from) income taxes $ (1.3) $ 0.2 $ (1.2) $ 0.6
Interest expense, net $ 13.9 $ 17.6 $ 40.8 $ 56.5
Depreciation and amortization $ 13.8 $ 13.5 $ 40.9 $ 41.9
-------------- -------------- -------------- --------------
EBITDA (1) $ 23.1 $ 19.5 $ 77.7 $ 75.6
-------------- -------------- -------------- --------------
Restructuring charges and exit costs, net $ 2.1 $ 1.1 $ 4.4 $ 0.7
Impairment charges $ 0.3 $ 0.2 $ 0.6 $ 0.7
Gains on disposition of assets and other, net $ (0.0) $ (1.0) $ (1.8) $ (1.2)
Other nonoperating (income) expense, net (2) $ (0.1) $ 9.7 $ (0.5) $ 9.6
Other noncash charges $ (0.2) $ (0.2) $ (0.5) $ (0.6)
Transaction costs (3) $ - $ 1.4 $ - $ 3.9
Stock-based incentive compensation (4) $ 1.4 $ 0.6 $ 6.1 $ 1.3
-------------- -------------- -------------- --------------
Adjusted EBITDA (1) $ 26.6 $ 31.2 $ 86.0 $ 89.9
============== ============== ============== ==============
Quarter Quarter Three Quarters Three Quarters
General and Administrative Reconciliation Ended Ended Ended Ended
(In millions) 9/28/05 9/29/04 9/28/05 9/29/04
-------------- -------------- -------------- --------------
Transaction costs (3) $ - $ 1.4 $ - $ 3.9
Stock-based incentive compensation (4) $ 1.4 $ 0.6 $ 6.1 $ 1.3
Other general and administrative expenses $ 13.3 $ 14.7 $ 40.8 $ 40.9
-------------- -------------- -------------- --------------
Total general and administrative expenses $ 14.7 $ 16.7 $ 46.9 $ 46.1
============== ============== ============== ==============
(1) We believe that, in addition to other financial measures, EBITDA and
Adjusted EBITDA are appropriate indicators to assist in the evaluation
of our operating performance because they provide additional
information with respect to our ability to meet our future debt
service, capital expenditures and working capital needs. We also use
EBITDA and Adjusted EBITDA for planning purposes, including the
preparation of annual operating budgets, and for compensation purposes,
including bonuses for certain employees. EBITDA and Adjusted EBITDA are
also used to evaluate our ability to service debt because the excluded
charges do not have an impact on our prospective debt servicing
capability and these adjustments are contemplated in our senior credit
facility for the computation of our debt covenant ratios. However,
EBITDA and Adjusted 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
(2) 2004 amounts include debt repurchase premiums and related costs
attributable to the financial recapitalization completed during the
third and fourth quarters.
(3) These transactions costs are attributable to the financial
recapitalization completed in 2004.
(4) This compensation expense is attributable to options and restricted
stock units granted under Denny's 2002 and 2004 Omnibus Incentive
Plans.
DENNY'S CORPORATION
Quarterly Operating Margins
(Unaudited)
Quarter Quarter
Ended Ended
(In millions) 9/28/05 9/29/04
------------------------ -------------------------
Total operating revenue (1) $ 248.7 100.0% $ 247.1 100.0%
Company restaurant operations: (2)
Company restaurant sales 225.8 100.0% 224.3 100.0%
Costs of company restaurant sales:
Product costs 56.7 25.1% 58.3 26.0%
Payroll and benefits 94.3 41.8% 91.9 41.0%
Occupancy 12.2 5.4% 12.8 5.7%
Other operating costs:
Utilities 11.2 5.0% 10.5 4.7%
Repairs and maintenance 4.7 2.1% 4.9 2.2%
Marketing 7.4 3.3% 7.2 3.2%
Legal settlements 6.4 2.8% 0.8 0.3%
Other 8.6 3.8% 7.6 3.4%
------------------------ -------------------------
Total costs of company restaurant sales 201.7 89.3% 194.0 86.5%
------------------------ -------------------------
Company restaurant operating margin (3) $ 24.1 10.7% $ 30.3 13.5%
------------------------ -------------------------
Franchise operations: (4)
Franchise and license revenue 22.9 100.0% 22.8 100.0%
Costs of franchise and license revenue 7.1 30.9% 6.9 30.5%
------------------------ -------------------------
Franchise operating margin (3) $ 15.8 69.1% $ 15.9 69.5%
------------------------ -------------------------
Total operating margin (1)(3) $ 40.0 16.1% $ 46.2 18.7%
Other operating expenses: (1)(3)
General and administrative expenses 14.7 5.9% 16.7 6.8%
Depreciation and amortization 13.8 5.6% 13.5 5.5%
Restructuring, exit costs and impairment 2.4 1.0% 1.3 0.5%
Gains on disposition of assets and other, net (0.0) (0.0%) (1.0) (0.4%)
------------------------ -------------------------
Total other operating expenses $ 30.8 12.4% $ 30.5 12.4%
------------------------ -------------------------
------------------------ -------------------------
Operating income (1) $ 9.2 3.7% $ 15.6 6.3%
======================== =========================
(1) As a percentage of total operating revenue
(2) As a percentage of company restaurant sales
(3) Other operating expenses such as general and administrative expenses
and depreciation and amortization relate to both company and franchise
operations and are not allocated to costs of company restaurant sales
and costs of franchise and license revenue. As such, operating margin
is considered a non-GAAP financial measure. Operating margins should
be considered as a supplement to, not as a substitute for, operating
income, net income or other financial measures prepared in accordance
with accounting principles generally accepted in the United States of
America.
(4) As a percentage of franchise and license revenue
DENNY'S CORPORATION
Statistical Data
(Unaudited)
Quarter Quarter Three Quarters Three Quarters
Same-Store Sales Ended Ended Ended Ended
(increase/(decrease) vs. prior year) 9/28/05 9/29/04 9/28/05 9/29/04
--------------- -------------- -------------- --------------
Company-Owned Same-Store Sales 1.5% 6.8% 3.9% 5.9%
Guest Check Average 4.1% 3.8% 4.1% 3.4%
Guest Counts (2.5%) 2.9% (0.2%) 2.4%
Franchised Same-Store Sales 3.8% 6.6% 5.6% 6.0%
Quarter Quarter Three Quarters Three Quarters
Average Unit Sales Ended Ended Ended Ended
($ in thousands) 9/28/05 9/29/04 9/28/05 9/29/04
--------------- -------------- -------------- --------------
Company-Owned Units $ 418.2 $ 408.2 $ 1,227.6 $ 1,174.1
Franchised Units $ 364.4 $ 346.3 $ 1,056.4 $ 989.2
Franchised
Restaurant Units Company & Licensed Total
--------------- -------------- --------------
Ending Units 9/29/04 553 1,056 1,609
Units Opened 2 16 18
Units Refranchised - - -
Units Closed (9) (36) (45)
--------------- -------------- --------------
Net Change (7) (20) (27)
--------------- -------------- --------------
Ending Units 9/28/05 546 1,036 1,582
=============== ============== ==============