denn-20220330

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

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

For the quarterly period ended March 30, 2022

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

For the transition period from _______________ to ________________

Commission File Number 0-18051

DENNY’S CORPORATION

(Exact name of registrant as specified in its charter)


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

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

(864) 597-8000

(Registrant’s telephone number, including area code)

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

Title of each class

Trading Symbol(s)

Name of each exchange on which registered

$.01 Par Value, Common Stock

DENN

The Nasdaq Stock Market LLC

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

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

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

Large Accelerated Filer

Accelerated Filer

☐

Non-Accelerated Filer

☐

Smaller Reporting Company

☐

Emerging Growth Company

☐

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

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

Yes ☐ No ý

As of April 28, 2022, 61,712,452 shares of the registrant’s common stock, par value $0.01 per share, were outstanding.

TABLE OF CONTENTS


			Page
PART I - FINANCIAL INFORMATION

Item 1. Financial Statements (Unaudited)
Consolidated Balance Sheets			3
Consolidated Statements of Operations			4
Consolidated Statements of Comprehensive Income			5
Consolidated Statements of Shareholders' Deficit			6
Consolidated Statements of Cash Flows			7
Notes to Consolidated Financial Statements			8
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations			17
Item 3. Quantitative and Qualitative Disclosures About Market Risk			24
Item 4. Controls and Procedures			25

PART II - OTHER INFORMATION

Item 1. Legal Proceedings			26
Item 1A. Risk Factors			26
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds			26
Item 6. Exhibits			27
Signatures			28

PART I - FINANCIAL INFORMATION

Item 1. Financial Statements

Denny’s Corporation and Subsidiaries

Consolidated Balance Sheets

(Unaudited)


	March 30, 2022		December 29, 2021
	(In thousands)
Assets
Current assets:
Cash and cash equivalents	$	6,091	$	30,624
Investments	3,687		2,551
Receivables, net	23,161		19,621
Inventories	9,829		5,060
Assets held for sale	1,322		—
Prepaid and other current assets	7,941		11,393
Total current assets	52,031		69,249
Property, net of accumulated depreciation of $150,914 and $151,836, respectively	89,878		91,176
Financing lease right-of-use assets, net of accumulated amortization of $9,772 and $11,210, respectively	7,399		7,709
Operating lease right-of-use assets, net	125,012		128,727
Goodwill	36,884		36,884
Intangible assets, net	49,892		50,226
Deferred financing costs, net	2,813		2,971
Deferred income taxes, net	5,139		11,502
Other noncurrent assets	32,346		37,083
Total assets	$	401,394	$	435,527
Liabilities
Current liabilities:
Current finance lease liabilities	$	1,962	$	1,952
Current operating lease liabilities	15,406		15,829
Accounts payable	12,998		15,595
Other current liabilities	48,524		64,146
Total current liabilities	78,890		97,522
Long-term liabilities:
Long-term debt	171,500		170,000
Noncurrent finance lease liabilities	10,374		10,744
Noncurrent operating lease liabilities	122,470		126,296
Liability for insurance claims, less current portion	7,860		8,438
Other noncurrent liabilities	58,055		87,792
Total long-term liabilities	370,259		403,270
Total liabilities	449,149		500,792
Shareholders' deficit
Common stock $0.01 par value; 135,000 shares authorized; March 30, 2022: 64,457 shares issued and 61,713 outstanding; December 29, 2021: 64,200 shares issued and 62,210 shares outstanding	$	645	$	642
Paid-in capital	137,332		135,596
Deficit	(94,586)		(116,441)
Accumulated other comprehensive loss, net	(48,689)		(54,470)
Treasury stock, at cost, 2,744 and 1,990 shares, respectively	(42,457)		(30,592)
Total shareholders' deficit	(47,755)		(65,265)
Total liabilities and shareholders' deficit	$	401,394	$	435,527

See accompanying notes

Denny’s Corporation and Subsidiaries

Consolidated Statements of Operations

(Unaudited)


	Quarter Ended
		March 30, 2022		March 31, 2021
		(In thousands, except per share amounts)
Revenue:
Company restaurant sales		$	43,976	$	33,569
Franchise and license revenue		59,131		47,007
Total operating revenue		103,107		80,576
Costs of company restaurant sales, excluding depreciation and amortization:
Product costs		11,244		8,272
Payroll and benefits		17,086		12,965
Occupancy		3,240		2,850
Other operating expenses		7,055		6,077
Total costs of company restaurant sales		38,625		30,164
Costs of franchise and license revenue, excluding depreciation and amortization		30,669		23,758
General and administrative expenses		16,958		16,947
Depreciation and amortization		3,548		3,661
Operating (gains), losses and other charges, net		—		532
Total operating costs and expenses, net		89,800		75,062
Operating income		13,307		5,514
Interest expense, net		2,960		4,277
Other nonoperating income, net		(19,615)		(30,048)
Income before income taxes		29,962		31,285
Provision for income taxes		8,107		8,104
Net income		$	21,855	$	23,181

Net income per share - basic		$	0.35	$	0.36
Net income per share - diluted		$	0.34	$	0.35

Basic weighted average shares outstanding		63,343		65,251
Diluted weighted average shares outstanding		63,580		65,749

See accompanying notes

Denny’s Corporation and Subsidiaries

Consolidated Statements of Comprehensive Income

(Unaudited)


	Quarter Ended
		March 30, 2022		March 31, 2021
		(In thousands)
Net income		$	21,855	$	23,181
Other comprehensive income, net of tax:
Minimum pension liability adjustment, net of tax of $8 and $10, respectively		24		30
Changes in the fair value of cash flow derivatives, net of tax of $1,673 and $763, respectively		5,015		2,215
Reclassification of cash flow derivatives to interest expense, net of tax of $248 and $255, respectively		742		740

Amortization of unrealized losses related to dedesignated derivatives to interest expense, net of tax of $0 and $31, respectively		—		90
Other comprehensive income		5,781		3,075
Total comprehensive income		$	27,636	$	26,256

See accompanying notes

Denny’s Corporation and Subsidiaries

Consolidated Statements of Shareholders’ Deficit

For the Quarter Ended March 30, 2022 and March 31, 2021

(Unaudited)


	Common Stock			Treasury Stock			Paid-in Capital		Deficit		Accumulated Other Comprehensive Loss, Net		Total Shareholders’ Deficit
	Shares	Amount		Shares	Amount
	(In thousands)
Balance, December 29, 2021	64,200	$	642	(1,990)	$	(30,592)	$	135,596	$	(116,441)	$	(54,470)	(65,265)

Net income	—	—		—	—		—		21,855		—		21,855
Other comprehensive income	—	—		—	—		—		—		5,781		5,781

Share-based compensation on equity classified awards, net of withholding tax	—	—		—	—		1,739		—		—		1,739
Purchase of treasury stock	—	—		(754)	(11,865)		—		—		—		(11,865)



Issuance of common stock for share-based compensation	257	3		—	—		(3)		—		—		—

Balance, March 30, 2022	64,457	$	645	(2,744)	$	(42,457)	$	137,332	$	(94,586)	$	(48,689)	$	(47,755)


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

SEC Form 10-Q filed by Denny's Corporation