Exhibit 99.1
Investor Contact: Alex Lewis
877-784-7167
Media Contact: Debbie Atkins NEWS RELEASE
864-597-8361
DENNY'S CORPORATION REPORTS FIRST QUARTER 2006 RESULTS
SPARTANBURG, S.C., April 26, 2006 - Denny's Corporation (Nasdaq: DENN)
today reported results for its first quarter ended March 29, 2006.
Highlights for the quarter include:
o Same-store sales increased 4.6% at company units and 6.2% at
franchised units
o Total operating revenue increased $7.9 million, or 3.3% to $248.0
million.
o Operating income increased $3.8 million, or 33.5% to $15.0 million
o Net income, excluding the cumulative effect of change in accounting
principle, improved $1.9 million to $0.5 million compared with a net
loss of $1.5 million last year.
Nelson Marchioli, President and Chief Executive Officer, stated,
"Denny's positive sales momentum continued in the first quarter of 2006 which
marked our 10th consecutive quarter of same-store sales growth. Despite
difficult prior year comparisons both company and franchise restaurants achieved
strong sales increases during the quarter. This revenue growth, combined with
diligent cost management, resulted in improved operating margins for the
quarter."
First Quarter Results
For the first quarter of 2006, Denny's reported total operating revenue
of $248.0 million, compared with $240.0 million in the prior year quarter.
Company restaurant sales increased 3.2%, or $7.0 million, to $225.0 million, as
a 4.6% increase in same-store sales offset a four-unit decline in company-owned
restaurants. Franchise revenue increased 4.2%, or $0.9 million, to $23.0
million, as a 6.2% increase in same-store sales offset an 8-unit decline in
franchised restaurants.
Company restaurant operating margin (as a percentage of company
restaurant sales) for the first quarter was 13.2% compared with 12.4% for the
same period last year. The primary driver of this margin improvement was
operating leverage attributable to strong sales growth. Product costs for the
first quarter decreased 1.0 percentage point compared with last year, due
primarily to the easing of commodity cost pressures and an 8.0% increase in
average guest check. Higher sales also benefited payroll and benefit costs which
decreased 0.2 percentage points compared with the prior year. Other operating
costs increased 0.6 percentage points due primarily to a $1.4 million increase
in utility expense attributable to higher natural gas prices.
General and administrative expenses for the first quarter increased
$1.2 million over the same period last year as a result of increased staffing
necessary to execute Denny's sales growth and restaurant development plans.
Operating income for the first quarter increased 33.5%, or $3.8
million, compared with the prior year, due primarily to higher revenues and
improved operating margins.
Interest expense for the first quarter increased $1.4 million to $14.6
million due to higher interest rates on variable-rate debt compared with the
prior year period.
Net income for the first quarter, excluding the cumulative effect of
change in accounting principle, was $0.5 million, or $0.01 per common share, an
improvement of $1.9 million compared with a net loss in the prior year of $1.5
million, or $0.02 per common share. The cumulative effect of change in
accounting principle resulted from the adoption of FASB Statement No. 123(R),
"Share-Based Payment".
Mr. Marchioli continued, "While our revenue increase and margin
improvement are encouraging, we remain concerned about guest traffic trends. We
are conducting considerable customer research to better understand and respond
to the factors contributing to our soft guest traffic. We believe our marketing
message, which is focused on abundant value and driven by flavorful new product
introductions, remains particularly relevant in a tightened consumer
environment."
Denny's reiterated its earnings per share guidance range for the full
year 2006 of $0.02 to $0.06 per share.
Further Information
Denny's will host its quarterly conference call for investors and
analysts today, Wednesday, April 26, 2006 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." Then select the "Webcast" icon under "Upcoming
Events." 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 545 company-owned units and 1,030 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.
The Company urges caution in considering its current trends and any
outlook on earnings disclosed in this press release. In addition, certain
matters discussed in this release may constitute forward-looking statements.
These forward-looking statements 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, 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 28, 2005.
DENNY'S CORPORATION
Condensed Consolidated Statements of Operations
(Unaudited)
Quarter Quarter
Ended Ended
(In thousands, except per share amounts) 3/29/06 3/30/05
------------- -------------
Revenue:
Company restaurant sales $ 225,022 $ 218,015
Franchise and license revenue 22,963 22,034
------------- -------------
Total operating revenue 247,985 240,049
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Costs of company restaurant sales 195,318 191,073
Costs of franchise and license revenue 7,213 7,009
General and administrative expenses 17,229 16,068
Depreciation and amortization 14,065 13,270
Restructuring charges and exit costs, net 721 2,274
Impairment charges - -
Gains on disposition of assets and other, net (1,571) (885)
------------- -------------
Total operating costs and expenses 232,975 228,809
------------- -------------
Operating income 15,010 11,240
------------- -------------
Other expenses:
Interest expense, net 14,643 13,212
Other nonoperating income, net (162) (371)
------------- -------------
Total other expenses, net 14,481 12,841
------------- -------------
Income (loss) before income taxes and cumulative effect of change in accounting
principle 529 (1,601)
Provision for (benefit from) income taxes 49 (141)
------------- -------------
Net income (loss) before cumulative effect of change in accounting principle 480 (1,460)
Cumulative effect of change in accounting principle, net of tax 232 -
------------- -------------
Net income (loss) $ 712 $ (1,460)
============= =============
Basic and diluted earnings per share:
Earnings before cumulative effect of change in accounting principle $ 0.01 $ (0.02)
Cumulative effect of change in accounting principle 0.00 -
------------- -------------
Net income (loss) $ 0.01 $ (0.02)
============= =============
Weighted average shares outstanding:
Basic 91,785 90,219
============= =============
Diluted 96,907 90,219
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DENNY'S CORPORATION
Condensed Consolidated Balance Sheets
(Unaudited)
(In thousands) 3/29/06 12/28/05
------------- -------------
ASSETS
Current Assets
Cash and cash equivalents $ 29,909 $ 28,236
Other 33,021 35,013
------------- -------------
62,930 63,249
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Property, net 280,322 288,140
Goodwill 50,765 50,186
Intangible assets, net 70,628 71,664
Other assets 40,336 39,642
------------- -------------
Total Assets $ 504,981 $ 512,881
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LIABILITIES AND SHAREHOLDERS' DEFICIT
Current Liabilities
Current maturities of notes and debentures $ 1,876 $ 1,871
Current maturities of capital lease obligations 6,590 6,226
Accounts payable and other accrued liabilities 129,390 140,777
------------- -------------
137,856 148,874
------------- -------------
Long-Term Liabilities
Notes and debentures, less current maturities 516,192 516,803
Capital lease obligations, less current maturities 28,461 28,862
Other 83,149 83,744
------------- -------------
627,802 629,409
------------- -------------
Total Liabilities 765,658 778,283
Total Shareholders' Deficit (260,677) (265,402)
------------- -------------
Total Liabilities and Shareholders' Deficit $ 504,981 $ 512,881
============= =============
Debt Balances
(In thousands) 3/29/06 12/28/05
------------- -------------
First lien revolver loans $ - $ -
First lien term loans 222,190 222,752
Second lien term loans 120,000 120,000
Capital leases and other debt 35,929 36,010
Senior notes due 2012 175,000 175,000
------------- -------------
Total Debt $ 553,119 $ 553,762
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DENNY'S CORPORATION
EBITDA and G&A Reconciliation
(Unaudited)
Quarter Quarter
EBITDA Reconciliation Ended Ended
(In millions) 3/29/06 3/30/05
-------------- --------------
Net income (loss) before cumulative effect of change
in accounting principle $ 0.5 $ (1.5)
Provision for (benefit from) income taxes $ 0.0 $ (0.1)
Interest expense, net $ 14.6 $ 13.2
Depreciation and amortization $ 14.1 $ 13.3
-------------- --------------
EBITDA (1) $ 29.2 $ 24.9
-------------- --------------
Restructuring charges and exit costs, net $ 0.7 $ 2.3
Impairment charges $ - $ -
Gains on disposition of assets and other, net $ (1.6) $ (0.9)
Other nonoperating (income) expense, net $ (0.2) $ (0.4)
Other noncash charges $ (0.1) $ (0.2)
Stock-based incentive compensation (2) $ 2.4 $ 2.6
-------------- --------------
Adjusted EBITDA (1) $ 30.5 $ 28.3
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Quarter Quarter
General and Administrative Reconciliation Ended Ended
(In millions) 3/29/06 3/30/05
-------------- --------------
Stock-based incentive compensation (2) $ 2.4 $ 2.6
Other general and administrative expenses $ 14.8 $ 13.5
-------------- --------------
Total general and administrative expenses $ 17.2 $ 16.1
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(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 becuase 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) 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) 3/29/06 3/30/05
----------------------- ------------------------
Total operating revenue (1) $ 248.0 100.0% $ 240.0 100.0%
Company restaurant operations: (2)
Company restaurant sales 225.0 100.0% 218.0 100.0%
Costs of company restaurant sales:
Product costs 55.7 24.8% 56.2 25.8%
Payroll and benefits 94.0 41.8% 91.7 42.0%
Occupancy 13.1 5.8% 13.1 6.0%
Other operating costs:
Utilities 11.6 5.2% 10.3 4.7%
Repairs and maintenance 4.3 1.9% 4.5 2.1%
Marketing 7.5 3.3% 7.3 3.3%
Other 9.0 4.0% 8.0 3.7%
----------------------- ------------------------
Total costs of company restaurant sales 195.3 86.8% 191.1 87.6%
----------------------- ------------------------
Company restaurant operating margin (3) $ 29.7 13.2% $ 26.9 12.4%
----------------------- ------------------------
Franchise operations: (4)
Franchise and license revenue 23.0 100.0% 22.0 100.0%
Costs of franchise and license revenue 7.2 31.4% 7.0 31.8%
----------------------- ------------------------
Franchise operating margin (3) $ 15.8 68.6% $ 15.0 68.2%
----------------------- ------------------------
Total operating margin (1)(3) $ 45.5 18.3% $ 42.0 17.5%
Other operating expenses: (1)(3)
General and administrative expenses 17.2 6.9% 16.1 6.7%
Depreciation and amortization 14.1 5.7% 13.3 5.5%
Restructuring, exit costs and impairment 0.7 0.3% 2.3 0.9%
Gains on disposition of assets and other, net (1.6) (0.6%) (0.9) (0.4%)
----------------------- ------------------------
Total other operating expenses $ 30.4 12.3% $ 30.7 12.8%
----------------------- ------------------------
----------------------- ------------------------
Operating income (1) $ 15.0 6.1% $ 11.2 4.7%
======================= ========================
(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
Same-Store Sales Ended Ended
(increase/(decrease) vs. prior year) 3/29/06 3/30/05
-------------- --------------
Company-Owned Same-Store Sales 4.6% 6.3%
Guest Check Average 8.0% 3.2%
Guest Counts (3.1%) 3.0%
Franchised Same-Store Sales 6.2% 7.1%
Quarter Quarter
Average Unit Sales Ended Ended
($ in thousands) 3/29/06 3/30/05
-------------- --------------
Company-Owned Units $ 419.6 $ 398.1
Franchised Units $ 365.7 $ 339.0
Franchised
Restaurant Units Company & Licensed Total
-------------- -------------- --------------
Ending Units 3/30/05 549 1,038 1,587
Units Opened 3 22 25
Units Acquired 1 (1) -
Units Refranchised - - -
Units Closed (8) (29) (37)
-------------- -------------- --------------
Net Change (4) (8) (12)
-------------- -------------- --------------
Ending Units 3/29/06 545 1,030 1,575
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