denn-20210331

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 31, 2021

☐ 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 29, 2021, 64,144,845 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)
Condensed Consolidated Balance Sheets			3
Condensed Consolidated Statements of Operations			4
Condensed Consolidated Statements of Comprehensive Income (Loss)			5
Condensed Consolidated Statements of Shareholders' Deficit			6
Condensed Consolidated Statements of Cash Flows			7
Notes to Condensed 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			26
Item 4. Controls and Procedures			27

PART II - OTHER INFORMATION

Item 1. Legal Proceedings			27
Item 1A. Risk Factors			27
Item 6. Exhibits			28
Signatures			29

PART I - FINANCIAL INFORMATION

Item 1. Financial Statements

Denny’s Corporation and Subsidiaries

Condensed Consolidated Balance Sheets

(Unaudited)


	March 31, 2021		December 30, 2020
	(In thousands)
Assets
Current assets:
Cash and cash equivalents	$	14,508	$	3,892
Investments	2,064		2,272
Receivables, net	20,821		21,349
Inventories	1,169		1,181
Assets held for sale	1,620		1,125
Prepaid and other current assets	13,552		18,847
Total current assets	53,734		48,666
Property, net of accumulated depreciation of $146,825 and $146,583, respectively	83,963		86,154
Financing lease right-of-use assets, net of accumulated amortization of $10,333 and $9,907, respectively	9,401		9,830
Operating lease right-of-use assets, net	135,004		139,534
Goodwill	36,884		36,884
Intangible assets, net	51,226		51,559
Deferred financing costs, net	2,071		2,414
Deferred income taxes, net	18,052		23,210
Other noncurrent assets	32,590		32,698
Total assets	$	422,925	$	430,949
Liabilities
Current liabilities:
Current finance lease liabilities	$	1,808	$	1,839
Current operating lease liabilities	16,210		16,856
Accounts payable	10,632		12,021
Other current liabilities	47,169		46,462
Total current liabilities	75,819		77,178
Long-term liabilities:
Long-term debt	215,000		210,000
Noncurrent finance lease liabilities	13,116		13,530
Noncurrent operating lease liabilities	133,051		137,534
Liability for insurance claims, less current portion	9,930		10,309
Other noncurrent liabilities	78,081		112,844
Total long-term liabilities	449,178		484,217
Total liabilities	524,997		561,395
Shareholders' deficit
Common stock $0.01 par value; 135,000 shares authorized; March 31, 2021: 64,145 shares issued and outstanding; December 30, 2020: 63,962 shares issued and outstanding	$	641	$	640
Paid-in capital	125,950		123,833
Deficit	(171,333)		(194,514)
Accumulated other comprehensive loss, net	(57,330)		(60,405)
Total shareholders' deficit	(102,072)		(130,446)
Total liabilities and shareholders' deficit	$	422,925	$	430,949

See accompanying notes

Denny’s Corporation and Subsidiaries

Condensed Consolidated Statements of Operations

(Unaudited)


	Quarter Ended
		March 31, 2021		March 25, 2020
		(In thousands, except per share amounts)
Revenue:
Company restaurant sales		$	33,569	$	42,291
Franchise and license revenue		47,007		54,404
Total operating revenue		80,576		96,695
Costs of company restaurant sales, excluding depreciation and amortization:
Product costs		8,272		10,130
Payroll and benefits		12,965		17,106
Occupancy		2,850		3,163
Other operating expenses		6,077		5,719
Total costs of company restaurant sales		30,164		36,118
Costs of franchise and license revenue, excluding depreciation and amortization		23,758		29,170
General and administrative expenses		16,947		7,742
Depreciation and amortization		3,661		4,146
Operating (gains), losses and other charges, net		532		1,473
Total operating costs and expenses, net		75,062		78,649
Operating income		5,514		18,046
Interest expense, net		4,277		3,951
Other nonoperating expense (income), net		(30,048)		2,763
Income before income taxes		31,285		11,332
Provision for income taxes		8,104		2,319
Net income		$	23,181	$	9,013

Basic net income per share		$	0.36	$	0.16
Diluted net income per share		$	0.35	$	0.16

Basic weighted average shares outstanding		65,251		56,300
Diluted weighted average shares outstanding		65,749		58,106

See accompanying notes

Denny’s Corporation and Subsidiaries

Condensed Consolidated Statements of Comprehensive Income (Loss)

(Unaudited)


	Quarter Ended
		March 31, 2021		March 25, 2020
		(In thousands)
Net income		$	23,181	$	9,013
Other comprehensive income (loss), net of tax:
Minimum pension liability adjustment, net of tax of $10 and $6, respectively		30		17
Changes in the fair value of cash flow derivatives, net of tax of $763 and $(11,795), respectively		2,215		(32,928)
Reclassification of cash flow derivatives to interest expense, net of tax of $255 and $86, respectively		740		239

Amortization of unrealized losses related to dedesignated derivatives to interest expense, net of tax of $31 and $0, respectively		90		—
Other comprehensive income (loss)		3,075		(32,672)
Total comprehensive income (loss)		$	26,256	$	(23,659)

See accompanying notes

Denny’s Corporation and Subsidiaries

Condensed Consolidated Statements of Shareholders’ Deficit

For the Quarter Ended March 31, 2021 and March 25, 2020

(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 30, 2020	63,962	$	640	—	$	—	$	123,833	$	(194,514)	$	(60,405)	$	(130,446)

Net income	—	—		—	—		—		23,181		—		23,181
Other comprehensive income	—	—		—	—		—		—		3,075		3,075

Share-based compensation on equity classified awards, net of withholding tax	—	—		—	—		2,002		—		—		2,002



Issuance of common stock for share-based compensation	153	1		—	—		(1)		—		—		—
Exercise of common stock options	30	—		—	—		116		—		—		116
Balance, March 31, 2021	64,145	$	641	—	$	—	$	125,950	$	(171,333)	$	(57,330)	$	(102,072)

Common Stock

Treasury Stock

Paid-in Capital

Deficit

Accumulated
Other
Comprehensive Loss, Net

Total
Shareholders’
Deficit

Amount

(In thousands)

Balance, December 25, 2019

109,415

SEC Form 10-Q filed by Denny&#39;s Corporation

SEC Form 10-Q filed by Denny's Corporation