GlobeNewswire Inc | Oct 27, 2020 04:05PM EDT

October 27, 2020

SPARTANBURG, S.C., Oct. 27, 2020 (GLOBE NEWSWIRE) -- Dennys Corporation (NASDAQ: DENN), franchisor and operator of one of America's largest franchised full-service restaurant chains, today reported results for its third quarter ended September23, 2020 and provided a business update on the impact of the COVID-19 pandemic on the Companys operations.

John Miller, Chief Executive Officer, stated, "I am encouraged by our sequential sales improvement over the course of the third quarter, despite the continued disproportionate impact of the COVID-19 pandemic on the full-service restaurant industry. This progress would not have been possible without the continued dedication of all Denny's team members who remain focused on health and safety protocols as they implement innovations, such as enhancements to our Denny's on Demand platform, curbside ordering, and outdoor dining. During the third quarter, we also launched a new streamlined menu consisting of well-known classic dishes and new seasonal items. I am confident that Denny's is well-positioned to effectively navigate through the pandemic while preparing for future growth."

Third Quarter 2020 Highlights

-- Total Operating Revenue was $71.6 million. -- Domestic system-wide same-store sales** decreased 33.6%. -- Operating Income was $3.2 million. -- Franchise Operating Margin* was $19.7 million, or 45.0% of franchise and license revenue, and Company Restaurant Operating Margin* was $0.5 million, or 1.7% of company restaurant sales. -- Net Income was $6.5 million, or $0.10 per diluted share. -- Adjusted Net Income* was $0.4 million, or $0.01 per diluted share. -- Adjusted EBITDA* was $8.0 million. -- Adjusted Free Cash Flow* was $2.1 million.

Current Trends

Domestic system-wide same-store sales** sequentially improved on a monthly basis during the third quarter ended September 23, 2020, as compared to the equivalent periods during 2019, despite approximately 25% of the domestic system in California being limited to off-premise only sales channels.

Average unit volumes of off-premise sales have increased over 95% since the beginning of the COVID-19 pandemic, supported by temporarily waived delivery fees, curbside service programs, and shareable family meal packs.

In an effort to provide greater transparency due to the COVID-19 pandemic, Denny's is providing the following tables that present monthly results compared to the equivalent fiscal months in 2019:

Domestic System-Wide Same-Store Sales** for 2020 Fiscal Periods:

Q1: (6%) Q2: (57%) Q3: (34%) Q4Jan Feb Mar Apr May Jun Jul Aug Sep Oct^13 % 2 % (19 %) (76 %) (65 %) (41 %) (39 %) (35 %) (28 %) (26 %)

1. Preliminary results

Domestic Same-Store Sales** and Domestic Average Units for 2020 Fiscal Periods(Open Dining Rooms vs Off-Premise Only):

Q2 Q3 Q4 Apr May Jun Jul Aug Sep Oct^1Open Dining Rooms (74%) (47%) (33%) (36%) (29%) (24%) (24%) 2 222 1,087 1,244 1,044 1,127 1,289 Off-Premise Only (76%) (69%) (68%) (55%) (47%) (39%) (33%) 1,060 938 327 237 444 369 207 Temporary Closures 480 378 120 47 35 22 19

1. Preliminary results

Average Domestic Capacity Restrictions for Fiscal October 20201:

Number of Units % of Domestic System25% Capacity 22950-75% Capacity 667 84 %Social Distancing 378Off-Premise Only 207 14 %No Restrictions 15 1 %Temporarily Closed 19 1 %Total 1,515 100 %

1. Preliminary results

Third Quarter Results

Dennys total operating revenue was $71.6 million compared to $124.3 million in the prior year quarter. Franchise and license revenue was $43.8 million compared to $60.7 million in the prior year quarter. Company restaurant sales were $27.8 million compared to $63.6 million in the prior year quarter. These changes were primarily due to the impact of the COVID-19 pandemic on sales and the Company's refranchising and development strategy which was substantially complete by the end of 2019.

Franchise Operating Margin* was $19.7 million, or 45.0% of franchise and license revenue, compared to $29.5 million, or 48.7%, in the prior year quarter. This margin decrease was primarily driven by the impact of the COVID-19 pandemic on sales.

Company Restaurant Operating Margin* was $0.5 million, or 1.7% of company restaurant sales, compared to $9.3 million, or 14.6%, in the prior year quarter. This margin decrease was primarily due to the impact of the COVID-19 pandemic on sales, as well as fewer equivalent units through the Company's refranchising and development strategy, partially offset by approximately $1.5 million of favorable reserve adjustments and tax credits related to the CARES Act.

Total general and administrative expenses were $13.7 million, compared to $16.4 million in the prior year quarter. This change was primarily due to cost savings initiatives and previous reductions in personnel due to the COVID-19 pandemic as well as approximately $0.8 million in tax credits related to the CARES Act.

Interest expense, net was $4.4 million, compared to $4.2 million in the prior year quarter, with the increase primarily due to the amortization of dedesignated interest rate swap losses from accumulated other comprehensive loss, net. Dennys ended the quarter with $245.8 million of total debt outstanding, including $230.0 million of borrowings under its credit facility.

The provision for income taxes was $0.8 million, compared to $15.3 million in the prior year quarter, reflecting an effective tax rate of 11.2%. This decrease was primarily due to the significant gains in the prior year quarter from the Company's refranchising and development strategy. Approximately $0.3 million in cash taxes were paid during the quarter.

Net income was $6.5 million, or $0.10 per diluted share, compared to net income of $49.1 million, or $0.80 per diluted share, in the prior year quarter. Adjusted Net Income* per diluted share was $0.01 compared to Adjusted Net Income* per diluted share of $0.18 in the prior year quarter.

Adjusted Free Cash Flow* and Capital Allocation

Dennys Adjusted Free Cash Flow* in the quarter after investing $1.0 million in cash capital expenditures, including maintenance capital, was $2.1 million.

Business Outlook

Based on third quarter results and management's expectation that the current business conditions will not materially decline, the Company is providing full year 2020 (53 operating weeks) guidance for the fiscal year ending December 30, 2020.

-- Domestic system-wide same-store sales** between 70% and 75% of prior year. -- Total general and administrative expenses between $51 and $54 million, including approximately $7 million related to share-based compensation expense. -- Adjusted EBITDA* of at least $28 million. -- Cash tax refunds between $5 and $7 million. -- Cash capital expenditures between $6 and $8 million. -- Adjusted Free Cash Flow* of at least $10 million.

* Please refer to the Reconciliation of Net Income (Loss) to Non-GAAP Financial Measures, as well as the Reconciliation of Operating Income to Non-GAAP Financial Measures included in the following tables.

** Same-store sales include sales at company restaurants and non-consolidated franchised and licensed restaurants that were open the same period in the prior year. Total operating revenue is limited to company restaurant sales and royalties, advertising revenue, fees and occupancy revenue from non-consolidated franchised and licensed restaurants. Accordingly, domestic franchise same-store sales and domestic system-wide same-store sales should be considered as a supplement to, not a substitute for, the Company's results as reported under GAAP.

Conference Call and Webcast Information

Dennys will provide further commentary on the results for the third quarter ended September23, 2020 on its quarterly investor conference call today, Tuesday, October27, 2020 at 4:30 p.m. Eastern Time. Interested parties are invited to listen to a live broadcast of the conference call accessible through the investor relations section of Dennys website at investor.dennys.com.

About Dennys

Denny's Corporation is the franchisor and operator of one of America's largest franchised full-service restaurant chains, based on the number of restaurants. As of September23, 2020, Dennys had 1,664 franchised, licensed, and company restaurants around the world including 145 restaurants in Canada, Puerto Rico, Mexico, the Philippines, New Zealand, Honduras, the United Arab Emirates, Costa Rica, Guam, Guatemala, El Salvador, Indonesia, and the United Kingdom. For further information on Denny's, including news releases, links to SEC filings, and other financial information, please visit the Denny's investor relations website at investor.dennys.com.

Cautionary Language Regarding Forward-Looking Statements

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, which reflect management's best judgment based on factors currently known, are intended to speak only as of the date such statements are made and involve risks, uncertainties, and other factors that may cause the actual performance of Dennys Corporation, its subsidiaries, and underlying restaurants to be materially different from the performance indicated or implied by such statements. Words such as expect, anticipate, believe, intend, plan, hope, "will", and 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 rapidly evolving COVID-19 pandemic and related containment measures, including the potential for further operational disruption from government mandates affecting restaurants; economic, public health, social and political conditions that impact consumer confidence and spending with respect to social unrest and the COVID-19 pandemic; competitive pressures from within the restaurant industry; the level of success of the Companys operating initiatives and advertising and promotional efforts; adverse publicity; health concerns arising from food-related pandemics, outbreaks of flu viruses or other diseases; changes in business strategy or development plans; terms and availability of capital; regional weather conditions; overall changes in the general economy (including with regard to energy costs), particularly at the retail level; political environment (including acts of war and terrorism); and other factors from time to time set forth in the Companys SEC reports and other filings, including but not limited to the discussion in Managements Discussion and Analysis and the risks identified in Item 1A. Risk Factors contained in the Companys Annual Report on Form 10-K for the year ended December 25, 2019 (and in the Companys subsequent Quarterly Reports on Form 10-Q and Current Reports on Form 8-K).

DENNY?S CORPORATIONCondensed Consolidated Balance Sheets(Unaudited) (In thousands) 9/23/20 12/25/19Assets Current assets Cash and cash equivalents $ 11,217 $ 3,372 Investments 2,266 3,649 Receivables, net 20,637 27,488 Assets held for sale 3,206 1,925 Other current assets 19,855 16,299 Total current assets 57,181 52,733 Property, net 89,466 97,626 Financing lease right-of-use assets, net 10,284 11,720 Operating lease right-of-use assets, net 145,302 158,550 Goodwill 36,884 36,832 Intangible assets, net 52,100 53,956 Deferred income taxes, net 27,047 14,718 Other noncurrent assets, net 32,533 34,252 Total assets $ 450,797 $ 460,387 Liabilities Current liabilities Current finance lease liabilities $ 1,963 $ 1,674 Current operating lease liabilities 18,253 16,344 Accounts payable 10,898 20,256 Other current liabilities 41,346 57,307 Total current liabilities 72,460 95,581 Long-term liabilities Long-term debt 230,000 240,000 Noncurrent finance lease liabilities 13,805 14,779 Noncurrent operating lease liabilities 142,110 152,750 Other 130,793 95,341 Total long-term liabilities 516,708 502,870 Total liabilities 589,168 598,451 Shareholders' deficit Common stock 1,178 1,094 Paid-in capital 672,502 603,980 Deficit (196,873 ) (189,398 ) Accumulated other comprehensive loss, net of tax (61,205 ) (33,960 ) Treasury stock (553,973 ) (519,780 ) Total shareholders' deficit (138,371 ) (138,064 ) Total liabilities and shareholders' deficit $ 450,797 $ 460,387 Debt Balances(In thousands) 9/23/20 12/25/19Credit facility revolver due 2022 $ 230,000 $ 240,000 Finance lease liabilities 15,768 16,453 Total debt $ 245,768 $ 256,453

DENNY?S CORPORATIONCondensed Consolidated Statements of Operations(Unaudited) Quarter Ended(In thousands, except per share amounts) 9/23/20 9/25/19Revenue: Company restaurant sales $ 27,849 $ 63,582 Franchise and license revenue 43,795 60,676 Total operating revenue 71,644 124,258 Costs of company restaurant sales, excluding 27,370 54,306 depreciation and amortizationCosts of franchise and license revenue, excluding 24,073 31,136 depreciation and amortizationGeneral and administrative expenses 13,694 16,395 Depreciation and amortization 4,048 4,338 Operating (gains), losses and other charges, net (781 ) (50,091 ) Total operating costs and expenses, net 68,404 56,084 Operating income 3,240 68,174 Interest expense, net 4,422 4,188 Other nonoperating expense (income), net (8,477 ) (415 )Income before income taxes 7,295 64,401 Provision for income taxes 818 15,279 Net income $ 6,477 $ 49,122 Basic net income per share $ 0.10 $ 0.83 Diluted net income per share $ 0.10 $ 0.80 Basic weighted average shares outstanding 63,793 59,430 Diluted weighted average shares outstanding 64,027 61,189 Comprehensive income $ 7,489 $ 34,128 General and Administrative Expenses Quarter Ended(In thousands) 9/23/20 9/25/19Corporate administrative expenses $ 9,820 $ 12,091 Share-based compensation 1,998 2,176 Incentive compensation 1,290 1,872 Deferred compensation valuation adjustments 586 256 Total general and administrative expenses $ 13,694 $ 16,395

DENNY?S CORPORATIONCondensed Consolidated Statements of Operations(Unaudited) Three Quarters Ended(In thousands, except per share amounts) 9/23/20 9/25/19Revenue: Company restaurant sales $ 85,268 $ 257,574 Franchise and license revenue 123,232 169,979 Total operating revenue 208,500 427,553 Costs of company restaurant sales, excluding 83,094 218,249 depreciation and amortizationCosts of franchise and license revenue, excluding 68,487 87,065 depreciation and amortizationGeneral and administrative expenses 34,589 53,659 Depreciation and amortization 12,252 15,619 Operating (gains), losses and other charges, net 2,319 (85,459 ) Total operating costs and expenses, net 200,741 289,133 Operating income 7,759 138,420 Interest expense, net 13,320 14,977 Other nonoperating expense (income), net 3,851 (2,111 )Income (loss) before income taxes (9,412 ) 125,554 Provision for (benefit from) income taxes (1,937 ) 26,703 Net income (loss) $ (7,475 ) $ 98,851 Basic net income (loss) per share $ (0.13 ) $ 1.64 Diluted net income (loss) per share $ (0.13 ) $ 1.58 Basic weighted average shares outstanding 59,350 60,457 Diluted weighted average shares outstanding 59,350 62,370 Comprehensive income (loss) $ (34,720 ) $ 61,090 General and Administrative Expenses Three Quarters Ended(In thousands) 9/23/20 9/25/19Corporate administrative expenses $ 31,302 $ 37,396 Share-based compensation 1,972 7,142 Incentive compensation 1,305 7,329 Deferred compensation valuation adjustments 10 1,792 Total general and administrative expenses $ 34,589 $ 53,659

DENNY?S CORPORATIONReconciliation of Net Income (Loss) to Non-GAAP Financial Measures(Unaudited)

The Company believes that, in addition to GAAP measures, certain other non-GAAP financial measures are appropriate indicators to assist in the evaluation of operating performance on a period-to-period basis.The Company uses Adjusted EBITDA, Adjusted Free Cash Flow, Adjusted Net Income (Loss) and Adjusted Net Income (Loss) Per Share internally as performance measures for planning purposes, including the preparation of annual operating budgets, and for compensation purposes, including bonuses for certain employees.Adjusted EBITDA is also used to evaluate the ability to service debt because the excluded charges do not have an impact on prospective debt servicing capability and these adjustments are contemplated in the Company's credit facility for the computation of its debt covenant ratios. The Company defines Adjusted Free Cash Flow for a given period as Adjusted EBITDA less the cash portion of interest expense net of interest income, capital expenditures, and cash taxes. Management believes that the presentation of Adjusted Free Cash Flow provides useful information to investors because it represents a liquidity measure used to evaluate, among other things, operating effectiveness and is used in decisions regarding the allocation of resources.However,each of these non-GAAP financial measures should be considered as a supplement to, not a substitute for, operating income, net income (loss) or other financial performance and liquidity measures prepared in accordance with U.S. generally accepted accounting principles.

Quarter Ended Three Quarters Ended(In thousands, except 9/23/20 9/25/19 9/23/20 9/25/19per share amounts)Net income (loss) $ 6,477 $ 49,122 $ (7,475 ) $ 98,851 Provision for (benefit 818 15,279 (1,937 ) 26,703 from) income taxesOperating (gains),losses and other (781 ) (50,091 ) 2,319 (85,459 ) charges, netOther nonoperating (8,477 ) (415 ) 3,851 (2,111 ) expense (income), netShare-based 1,998 2,176 1,972 7,142 compensationDeferred compensationplan valuation 586 256 10 1,792 adjustmentsInterest expense, net 4,422 4,188 13,320 14,977 Depreciation and 4,048 4,338 12,252 15,619 amortizationCash payments forrestructuring charges (1,032 ) (672 ) (2,406 ) (2,052 ) and exit costsCash payments forshare-based (13 ) (28 ) (3,224 ) (3,559 ) compensationAdjusted EBITDA $ 8,046 $ 24,153 $ 18,682 $ 71,903 Cash interest expense, (4,698 ) (3,949 ) (13,135 ) (14,219 ) net ^(1)Cash paid for income (268 ) (5,861 ) (545 ) (17,853 ) taxes, netCash paid for capital (1,000 ) (10,619 ) (5,476 ) (22,102 ) expendituresAdjusted Free Cash $ 2,080 $ 3,724 $ (474 ) $ 17,729 Flow Quarter Ended Three Quarters Ended(In thousands, except 9/23/20 9/25/19 9/23/20 9/25/19per share amounts)Net income (loss) $ 6,477 $ 49,122 $ (7,475 ) $ 98,851 (Gains) losses oninterest rate swap (7,281 ) ? 4,185 ? derivatives(Gains) losses onsales of assets and (1,202 ) (51,183 ) (2,260 ) (87,497 ) other, netImpairment charges 338 ? 2,519 ? Tax effect ^(2) 2,093 13,226 (1,142 ) 22,610 Adjusted Net Income $ 425 $ 11,165 $ (4,173 ) $ 33,964 (Loss) Diluted weightedaverage shares 64,027 61,189 59,350 62,370 outstanding Diluted Net Income $ 0.10 $ 0.80 $ (0.13 ) $ 1.58 (Loss) Per ShareAdjustments Per Share $ (0.09 ) $ (0.62 ) $ 0.06 $ (1.04 ) Adjusted Net Income $ 0.01 $ 0.18 $ (0.07 ) $ 0.54 (Loss) Per Share

Includes cash interest expense, net and cash payments of approximately(1 ) $0.6 million and $1.1 million for dedesignated interest rate swap derivatives for the quarter and year-to-date periods ended September 23, 2020. Tax adjustments are calculated using an effective tax rate of 25.7% for the quarter and year-to-date periods ended September 23, 2020. Tax(2 ) adjustments for the gains on sales of assets and other, net for the quarter and year-to-date periods ended September 25, 2019 are calculated using an effective tax rate of 25.8%.

DENNY?S CORPORATIONReconciliation of Operating Income to Non-GAAP Financial Measures(Unaudited)

The Company believes that, in addition to GAAP measures, certain other non-GAAP financial measures are appropriate indicators to assist in the evaluation of restaurant-level operating efficiency and performance of ongoing restaurant-level operations. The Company uses Total Operating Margin, Company Restaurant Operating Margin and Franchise Operating Margin internally as performance measures for planning purposes, including the preparation of annual operating budgets, and these three non-GAAP measures are used to evaluate operating effectiveness.

The Company defines Total Operating Margin as operating income excluding the following three items: general and administrative expenses, depreciation and amortization, and operating (gains), losses and other charges, net. Total Operating Margin is presented as a percent of total operating revenue. The Company excludes general and administrative expenses, which include primarily non-restaurant-level costs associated with support of company and franchised restaurants and other activities at their corporate office. The Company excludes depreciation and amortization expense, substantially all of which is related to company restaurant-level assets, because such expenses represent historical sunk costs which do not reflect current cash outlays for the restaurants. The Company excludes special items, included within operating (gains), losses and other charges, net, to provide investors with a clearer perspective of its ongoing operating performance and a more relevant comparison to prior period results.

Total Operating Margin is the total of Company Restaurant Operating Margin and Franchise Operating Margin. The Company defines Company Restaurant Operating Margin as company restaurant sales less costs of company restaurant sales (which include product costs, company restaurant level payroll and benefits, occupancy costs, and other operating costs including utilities, repairs and maintenance, marketing and other expenses) and presents it as a percent of company restaurant sales. The Company defines Franchise Operating Margin as franchise and license revenue (which includes franchise royalties and other non-food and beverage revenue streams such as initial franchise fees, advertising revenue and occupancy revenue) less costs of franchise and license revenue and presents it as a percent of franchise and license revenue.

These non-GAAP financial measures provide a meaningful comparison between periods and enable investors to focus on the performance of restaurant-level operations by excluding revenues and costs unrelated to food and beverage sales in addition to corporate general and administrative expense, depreciation and amortization, and operating (gains), losses and other charges, net. However, each of these non-GAAP financial measures should be considered as a supplement to, not a substitute for, operating income, net income (loss) or other financial performance measures prepared in accordance with U.S. generally accepted accounting principles. Total Operating Margin, Company Restaurant Operating Margin and Franchise Operating Margin do not accrue directly to the benefit of shareholders because of the aforementioned excluded items, and are not indicative of the overall results for the Company.

Quarter Ended Three Quarters Ended(In thousands) 9/23/20 9/25/19 9/23/20 9/25/19Operating $ 3,240 $ 68,174 $ 7,759 $ 138,420 incomeGeneral andadministrative 13,694 16,395 34,589 53,659 expensesDepreciationand 4,048 4,338 12,252 15,619 amortizationOperating(gains),losses and (781 ) (50,091 ) 2,319 (85,459 ) other charges,net TotalOperating $ 20,201 $ 38,816 $ 56,919 $ 122,239 Margin TotalOperating Marginconsists of:CompanyRestaurant $ 479 $ 9,276 $ 2,174 $ 39,325 OperatingMargin ^(1)FranchiseOperating 19,722 29,540 54,745 82,914 Margin ^(2) TotalOperating $ 20,201 $ 38,816 $ 56,919 $ 122,239 Margin

Company Restaurant Operating Margin is calculated as operating income plus(1 ) general and administrative expenses; depreciation and amortization; operating (gains), losses and other charges; and costs of franchise and license revenue; less franchise and license revenue. Franchise Operating Margin is calculated as operating income plus general(2 ) and administrative expenses; depreciation and amortization; operating (gains), losses and other charges; and costs of company restaurant sales; less company restaurant sales.

DENNY?S CORPORATIONOperating Margins(Unaudited) Quarter Ended(In thousands) 9/23/20 9/25/19Company restaurant operations: ^(1) Company restaurant sales $ 27,849 100.0 % $ 63,582 100.0 % Costs of company restaurant sales: Product costs 7,106 25.5 % 15,603 24.5 % Payroll and benefits 11,925 42.8 % 23,777 37.4 % Occupancy 2,638 9.5 % 4,301 6.8 % Other operating costs: Utilities 1,281 4.6 % 2,438 3.8 % Repairs and maintenance 711 2.6 % 1,774 2.8 % Marketing 1,045 3.8 % 2,411 3.8 % Other direct costs 2,664 9.6 % 4,002 6.3 % Total costs of company $ 27,370 98.3 % $ 54,306 85.4 % restaurant sales Company restaurant operating $ 479 1.7 % $ 9,276 14.6 % margin (non-GAAP) ^(2) Franchise operations: ^(3) Franchise and license revenue: Royalties $ 17,896 40.9 % $ 27,830 45.9 % Advertising revenue 13,927 31.8 % 20,756 34.2 % Initial and other fees 1,890 4.3 % 1,356 2.2 % Occupancy revenue 10,082 23.0 % 10,734 17.7 % Total franchise and license $ 43,795 100.0 % $ 60,676 100.0 % revenue Costs of franchise and license revenue: Advertising costs $ 13,927 31.8 % $ 20,757 34.2 % Occupancy costs 6,858 15.7 % 7,257 12.0 % Other direct costs 3,288 7.5 % 3,122 5.1 % Total costs of franchise and $ 24,073 55.0 % $ 31,136 51.3 % license revenue Franchise operating margin $ 19,722 45.0 % $ 29,540 48.7 % (non-GAAP) ^(2) Total operating revenue ^(4) $ 71,644 100.0 % $ 124,258 100.0 %Total costs of operating 51,443 71.8 % 85,442 68.8 %revenue ^(4)Total operating margin $ 20,201 28.2 % $ 38,816 31.2 %(non-GAAP) ^(4)(2) Other operating expenses: ^(4) (2) General and administrative $ 13,694 19.1 % $ 16,395 13.2 % expenses Depreciation and amortization 4,048 5.7 % 4,338 3.5 % Operating (gains), losses and (781 ) (1.1 )% (50,091 ) (40.3 )% other charges, net Total other operating $ 16,961 23.7 % $ (29,358 ) (23.6 )% expenses Operating income ^(4) $ 3,240 4.5 % $ 68,174 54.9 % (1 ) As a percentage of company restaurant sales. 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(2 ) 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 (loss) or other financial measures prepared in accordance with U.S. generally accepted accounting principles.(3 ) As a percentage of franchise and license revenue.(4 ) As a percentage of total operating revenue.

DENNY?S CORPORATIONOperating Margins(Unaudited) Three Quarters Ended(In thousands) 9/23/20 9/25/19Company restaurant operations: ^(1) Company restaurant sales $ 85,268 100.0 % $ 257,574 100.0 % Costs of company restaurant sales: Product costs 21,541 25.3 % 62,871 24.4 % Payroll and benefits 37,070 43.5 % 100,475 39.0 % Occupancy 8,529 10.0 % 15,583 6.0 % Other operating costs: Utilities 3,815 4.5 % 8,916 3.5 % Repairs and maintenance 1,928 2.3 % 5,742 2.2 % Marketing 2,771 3.2 % 9,357 3.6 % Other direct costs 7,440 8.7 % 15,305 5.9 % Total costs of company $ 83,094 97.5 % $ 218,249 84.7 % restaurant sales Company restaurant operating $ 2,174 2.5 % $ 39,325 15.3 % margin (non-GAAP) ^(2) Franchise operations: ^(3) Franchise and license revenue: Royalties $ 48,462 39.3 % $ 79,742 46.9 % Advertising revenue 38,685 31.4 % 59,582 35.1 % Initial and other fees 4,933 4.0 % 4,250 2.5 % Occupancy revenue 31,152 25.3 % 26,405 15.5 % Total franchise and license $ 123,232 100.0 % $ 169,979 100.0 % revenue Costs of franchise and license revenue: Advertising costs $ 38,685 31.4 % $ 59,583 35.1 % Occupancy costs 20,096 16.3 % 18,018 10.6 % Other direct costs 9,706 7.9 % 9,464 5.6 % Total costs of franchise and $ 68,487 55.6 % $ 87,065 51.2 % license revenue Franchise operating margin $ 54,745 44.4 % $ 82,914 48.8 % (non-GAAP) ^(2) Total operating revenue ^(4) $ 208,500 100.0 % $ 427,553 100.0 %Total costs of operating 151,581 72.7 % 305,314 71.4 %revenue ^(4)Total operating margin $ 56,919 27.3 % $ 122,239 28.6 %(non-GAAP) ^(4)(2) Other operating expenses: ^(4) (2) General and administrative $ 34,589 16.6 % $ 53,659 12.6 % expenses Depreciation and amortization 12,252 5.9 % 15,619 3.7 % Operating (gains), losses and 2,319 1.1 % (85,459 ) (20.0 )% other charges, net Total other operating $ 49,160 23.6 % $ (16,181 ) (3.8 )% expenses Operating income ^(4) $ 7,759 3.7 % $ 138,420 32.4 % (1 ) As a percentage of company restaurant sales. 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(2 ) costs of franchise and license revenue. As such, operating margin is considered a non-GAAP financial measure. Operating margin should be considered as a supplement to, not as a substitute for, operating income, net income (loss) or other financial measures prepared in accordance with U.S. generally accepted accounting principles.(3 ) As a percentage of franchise and license revenue.(4 ) As a percentage of total operating revenue.

DENNY?S CORPORATIONStatistical Data(Unaudited) Changes in Same-Store Quarter Ended Three Quarters EndedSales ^(1)(increase (decrease) vs. 9/23/20 9/25/19 9/23/20 9/25/19prior year) Company Restaurants (40.2 )% (0.2 )% (37.4 )% 2.1 % Domestic Franchised (33.1 )% 1.2 % (30.1 )% 2.0 % Restaurants Domestic System-wide (33.6 )% 1.1 % (30.7 )% 2.1 % Restaurants Average Unit Sales Quarter Ended Three Quarters Ended(In thousands) 9/23/20 9/25/19 9/23/20 9/25/19 Company Restaurants $ 423 $ 640 $ 1,313 $ 1,820 Franchised Restaurants $ 282 $ 421 $ 868 $ 1,242 Franchised Restaurant Unit Activity Company & Licensed Total Ending Units June 24, 2020 67 1,616 1,683 Units Opened ? 5 5 Units Closed (1 ) (23 ) (24 ) Net Change (1 ) (18 ) (19 ) Ending Units September 23, 66 1,598 1,664 2020 Equivalent Units Third Quarter 2020 66 1,608 1,674 Third Quarter 2019 99 1,603 1,702 Net Change (33 ) 5 (28 ) Franchised Restaurant Unit Activity Company & Licensed Total Ending Units December 25, 68 1,635 1,703 2019 Units Opened ? 16 16 Units Closed (2 ) (53 ) (55 ) Net Change (2 ) (37 ) (39 ) Ending Units September 23, 66 1,598 1,664 2020 Equivalent Units Year-to-Date 2020 65 1,620 1,685 Year-to-Date 2019 141 1,560 1,701 Net Change (76 ) 60 (16 ) Same-store sales include sales at company restaurants and non-consolidated franchised and licensed restaurants that were open the same period in the prior year. Total operating revenue is limited to company restaurant sales(1 ) and royalties, advertising revenue, fees and occupancy revenue from non-consolidated franchised and licensed restaurants. Accordingly, domestic franchise same-store sales and domestic system-wide same-store sales should be considered as a supplement to, not a substitute for, the Company's results as reported under GAAP.



Investor Contact:Curt Nichols877-784-7167

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