q1-2008_10q.htm
UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
Washington,
D.C. 20549
FORM
10-Q
QUARTERLY
REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES
EXCHANGE ACT OF 1934
For
the Quarterly Period Ended March 26,
2008
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
|
|
(I.R.S.
Employer
|
incorporation
or organization
|
|
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)
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 þ No ¨
Indicate
by check mark whether the registrant is a large accelerated filer, an
accelerated filer, a non-accelerated filer, or a smaller
reporting company. See the definitions of “large accelerated filer,”
“accelerated filer” and “smaller reporting company” in Rule 12b-2 of the
Exchange Act.
Large accelerated
filer ¨ Accelerated
filer þ
Non-accelerated
filer ¨ (Do not check if a smaller
reporting
company) Smaller
reporting company ¨
Indicate
by check mark whether the registrant is a shell company (as defined in Rule
12b-2 of the Exchange Act).
Yes ¨ No þ
As of May
1, 2008, 94,981,991 shares of the registrant’s common stock, par value $.01 per
share, were outstanding.
TABLE
OF CONTENTS
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Page
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3
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4
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5
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6
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7
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14
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18
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19
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19
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19
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20
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Denny’s
Corporation and Subsidiaries
(Unaudited)
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|
Quarter
Ended
|
|
|
|
March
26, 2008
|
|
|
March
28, 2007
|
|
|
|
(In thousands,
except per share amounts)
|
|
|
|
|
|
|
|
|
|
|
$ |
169,593 |
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|
$ |
215,801 |
|
Franchise
and license revenue
|
|
|
26,403 |
|
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|
20,950 |
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|
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|
195,996 |
|
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|
236,751 |
|
Costs
of company restaurant sales:
|
|
|
|
|
|
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|
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|
41,947 |
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|
55,126 |
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73,728 |
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|
92,868 |
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|
|
|
10,552 |
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|
13,128 |
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25,208 |
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|
30,313 |
|
Total
costs of company restaurant sales
|
|
|
151,435 |
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|
191,435 |
|
Costs
of franchise and license revenue
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|
|
8,171 |
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|
|
6,475 |
|
General
and administrative expenses
|
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|
15,615 |
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|
15,926 |
|
Depreciation
and amortization
|
|
|
10,241 |
|
|
|
12,878 |
|
Operating
gains, losses and other charges, net
|
|
|
(8,713
|
) |
|
|
(2,549
|
) |
Total
operating costs and expenses
|
|
|
176,749 |
|
|
|
224,165 |
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|
19,247 |
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|
12,586 |
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|
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9,201 |
|
|
|
11,341 |
|
Other
nonoperating expense (income), net
|
|
|
5,376 |
|
|
|
(197
|
) |
Total
other expenses, net
|
|
|
14,577 |
|
|
|
11,144 |
|
Net
income before income taxes
|
|
|
4,670 |
|
|
|
1,442 |
|
Provision
for income taxes
|
|
|
546 |
|
|
|
355 |
|
|
|
$ |
4,124 |
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|
$ |
1,087 |
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|
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|
|
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Basic
and diluted net income per share:
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|
$ |
0.04 |
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|
$ |
0.01 |
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Weighted
average shares outstanding:
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|
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94,826 |
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|
93,416 |
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|
98,388 |
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|
98,976 |
|
See
accompanying notes
Denny’s
Corporation and Subsidiaries
(Unaudited)
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|
March
26, 2008
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|
December
26, 2007
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|
(In
thousands)
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|
Current
Assets:
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|
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Cash
and cash equivalents
|
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|
|
|
|
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Receivables,
net
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|
13,633
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|
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|
13,585
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Receivable
from sale of restaurants
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|
12,722
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|
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|
—
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Assets
held for sale
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|
3,734
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|
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|
6,712
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Total
Current Assets
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|
63,291
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|
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|
57,873
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|
|
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|
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Property,
net of accumulated depreciation of $304,100
and $307,047, respectively
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180,838
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184,610
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Other
Assets:
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|
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Intangible
assets, net
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61,606
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62,657
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Deferred
financing costs, net
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|
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Other
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28,196
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24,699
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Current
Liabilities:
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Current
maturities of notes and debentures
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Current
maturities of capital lease obligations
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|
3,865
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|
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|
4,051
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|
|
|
|
|
|
|
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|
Other
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|
83,023
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|
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|
82,069
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|
Total
Current Liabilities
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|
|
|
|
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Notes
and debentures, less current maturities
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325,936
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325,971
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Capital
lease obligations, less current maturities
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Liability
for insurance claims, less current portion
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26,894
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27,148
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Other
noncurrent liabilities and deferred credits
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|
43,591
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|
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42,578
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Total
Long-Term Liabilities
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|
|
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|
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Total
Liabilities
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|
556,547
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559,588
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Commitments
and contingencies
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Total
Shareholders' Deficit
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Total
Liabilities and Shareholders' Deficit
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$
|
380,136
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|
$
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377,356
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|
See
accompanying notes
Denny’s
Corporation and Subsidiaries
(Unaudited)
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|
Common
Stock
|
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Accumulated
Other Comprehensive
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Total
Shareholders'
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Shares
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Amount
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Paid-in
Capital
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Deficit
|
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Loss,
Net
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Deficit
|
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(In
thousands)
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|
Balance,
December 26, 2007
|
|
|
94,626
|
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|
$
|
946
|
|
|
$
|
533,612
|
|
|
$
|
(700,284
|
)
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|
$
|
(13,144
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)
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|
$
|
(178,870
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)
|
Goodwill
adjustment (Note 3) |
|
|
— |
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|
|
— |
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|
— |
|
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|
(3,362 |
) |
|
|
— |
|
|
|
(3,362 |
) |
Balance,
December 26, 2007 |
|
|
94,626 |
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|
$ |
946 |
|
|
$ |
533,612 |
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|
$ |
(703,646 |
) |
|
$ |
(13,144 |
) |
|
$ |
(182,232 |
) |
Comprehensive
income:
|
|
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Recognition
of unrealized loss on hedged
transactions,
net of tax
|
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|
—
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|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
262
|
|
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|
262
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|
|
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Share-based
compensation on equity classified
awards
|
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|
—
|
|
|
|
—
|
|
|
|
759
|
|
|
|
—
|
|
|
|
—
|
|
|
|
759
|
|
Issuance
of common stock for share-based
compensation
|
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|
|
|
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|
Exercise
of common stock options
|
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|
176
|
|
|
|
2
|
|
|
|
383
|
|
|
|
—
|
|
|
|
—
|
|
|
|
385
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
See
accompanying notes
Denny’s
Corporation and Subsidiaries
(Unaudited)
|
|
Quarter
Ended
|
|
|
|
March
26, 2008
|
|
|
March
28, 2007
|
|
|
|
(In
thousands)
|
|
Cash
Flows from Operating Activities:
|
|
|
|
|
|
|
Net
income
|
|
$
|
4,124
|
|
|
$
|
1,087
|
|
Adjustments
to reconcile net income to cash flows provided by operating
activities:
|
|
|
|
|
|
|
|
|
Depreciation
and amortization
|
|
|
|
|
|
|
|
|
Operating
gains, losses and other charges, net
|
|
|
|
|
|
|
|
|
Amortization
of deferred financing costs
|
|
|
|
|
|
|
|
|
Loss
on early extinguishment of debt
|
|
|
|
|
|
|
|
|
Loss
on change in the fair value of interest rate swap
|
|
|
4,632
|
|
|
|
—
|
|
Deferred
income tax expense
|
|
|
|
|
|
|
|
|
Share-based
compensation
|
|
|
|
|
|
|
|
|
Changes
in assets and liabilities, net of effects of acquisitions and
dispositions:
|
|
|
|
|
|
|
|
|
Decrease
(increase) in assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Inventories
|
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Other
assets
|
|
|
|
|
|
|
|
|
Increase
(decrease) in liabilities:
|
|
|
|
|
|
|
|
|
Accounts
payable
|
|
|
|
|
|
|
|
|
Accrued
salaries and vacations
|
|
|
|
|
|
|
|
|
Accrued
taxes
|
|
|
|
|
|
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|
|
Other
accrued liabilities
|
|
|
|
|
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Other
noncurrent liabilities and deferred credits
|
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|
)
|
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|
Net
cash flows provided by operating activities
|
|
|
|
|
|
|
|
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|
|
|
|
|
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Cash
Flows from Investing Activities:
|
|
|
|
|
|
|
|
|
Purchase
of property
|
|
|
|
|
|
|
|
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Proceeds
from disposition of property
|
|
|
|
|
|
|
|
|
Acquisition
of restaurant units
|
|
|
|
|
|
|
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|
Net
cash flows used in investing activities
|
|
|
|
|
|
|
|
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|
|
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|
|
|
|
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|
Cash
Flows from Financing Activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deferred
financing costs paid
|
|
|
|
|
|
|
|
|
Proceeds
from exercise of stock options
|
|
|
|
|
|
|
|
|
Net
bank overdrafts
|
|
|
|
|
|
|
|
|
Net
cash flows provided by (used in) financing
activities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Increase
(decrease) in cash and cash equivalents
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash
and Cash Equivalents at:
|
|
|
|
|
|
|
|
|
Beginning
of period
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
See
accompanying notes
Denny’s
Corporation and Subsidiaries
(Unaudited)
Note
1. Introduction and Basis of Presentation
Denny’s
Corporation, through its wholly owned subsidiaries, Denny’s Holdings, Inc. and
Denny’s, Inc., owns and operates the Denny’s restaurant brand, or
Denny’s.
Our
unaudited condensed consolidated financial statements have been prepared
pursuant to the rules and regulations of the Securities and Exchange Commission.
Therefore, certain information and notes normally included in financial
statements prepared in accordance with U.S. generally accepted accounting
principles have been condensed or omitted. In our opinion, all adjustments
considered necessary for a fair presentation of the interim periods presented
have been included. Such adjustments are of a normal and recurring nature. The
preparation of these financial statements requires us to make estimates and
judgments that affect the reported amounts of assets, liabilities, revenues and
expenses, and related disclosure of contingent assets and liabilities. Actual
results may differ from these estimates under different assumptions or
conditions; however, we believe that our estimates, including those for the
above-described items, are reasonable. These interim condensed consolidated
financial statements should be read in conjunction with our consolidated
financial statements and notes thereto for the year ended December 26, 2007 and
the related Management’s Discussion and Analysis of Financial Condition and
Results of Operations, both of which are contained in our Annual Report on Form
10-K for the fiscal year ended December 26, 2007. The results of operations for
the interim periods presented are not necessarily indicative of the results for
the entire fiscal year ending December 31, 2008.
Note
2. Summary of Significant Accounting Policies
Effective
December 27, 2007, the first day of fiscal 2008, we adopted Statement of
Financial Accounting Standards No. 159 ("SFAS 159"), “The Fair Value Option for
Financial Assets and Financial Liabilities.” SFAS 159 permits entities to choose
to measure many financial instruments and certain other items at fair value. We
did not elect the fair value reporting option for any assets and liabilities not
previously recorded at fair value.
Effective
December 27, 2007, the first day of fiscal 2008, we adopted the provisions of
Statement of Financial Accounting Standards No. 157 ("SFAS 157"), “Fair Value
Measurements” for financial assets and liabilities, as well as any other assets
and liabilities that are carried at fair value on a recurring basis in financial
statements. SFAS 157 defines fair value, establishes a framework for measuring
fair value and expands disclosures about fair value measurements. SFAS 157
applies under other accounting pronouncements that require or permit fair value
measurements, the Financial Accounting Standards Board
("FASB") having previously concluded in those accounting pronouncements
that fair value is the relevant measurement attribute. Accordingly, SFAS 157
does not require any new fair value measurements. We applied the provisions of FSP FAS 157-2,
"Effective Date of FASB Statement 157," which defers the provisions of
SFAS 157 for nonfinancial assets and
liabilities to the first fiscal
period beginning after November 15, 2008. The deferred nonfinancial assets and liabilities
include items such as goodwill and other nonamortizable intangibles. We
are required to adopt SFAS 157 for nonfinancial assets and liabilities in the
first quarter of fiscal 2009 and are still evaluating the impact on our
Condensed Consolidated Financial Statements.
Assets and liabilities measured at
fair value on a recurring basis are summarized below:
|
|
Fair
Value Measurements as of March 26, 2008
|
|
|
|
March
26, 2008 |
|
|
Quoted
Prices in Active Markets for Identical Assets/Liabilities
(Level
1)
|
|
|
Significant
Other Observable Inputs
(Level
2)
|
|
|
Significant
Unobservable Inputs
(Level
3)
|
|
Valuation
Technique
|
|
|
|
(In thousands)
|
|
|
|
Deferred
compensation plan investments |
|
$ |
6,560 |
|
|
$ |
6,560 |
|
|
$ |
— |
|
|
$ |
— |
|
market
approach
|
|
Interest rate swap
liability |
|
|
(4,723 |
) |
|
|
— |
|
|
|
(4,723 |
) |
|
|
— |
|
income
approach
|
|
Total |
|
$ |
1,837 |
|
|
$ |
6,560 |
|
|
$ |
(4,723 |
) |
|
$ |
— |
|
|
|
There
have been no other material changes to our significant accounting policies and
estimates from the information provided in Note 2 of our Consolidated Financial
Statements included in our Form 10-K for the fiscal year ended December 26,
2007, except as noted in Note 3.
Note 3. Adjustments
Related to Goodwill
In March 2008, we recorded adjustments to correct an error in
accounting for goodwill in relation to the sale of restaurant operations during
the quarters ending March 28, 2007, June 27 2007, September 26, 2007 and
December 26, 2007. Historically, we did not write-off goodwill when we sold
restaurant units to franchisees. Statement of Financial Accounting Standards No.
142, "Goodwill and Other Intangible Assets" requires that a portion of the
entity level goodwill should be written off based on the relative fair values of
the restaurant unit being sold and the remaining value of the entity, in our
case, Denny's.
The following line items on the Consolidated Statements of Operations
for the quarter and year ended March 28, 2007 and December 26, 2007,
respectively, were impacted by the adjustments:
|
|
Quarter
Ended March 28, 2007 |
|
|
Fiscal
Year Ended December 26, 2007 |
|
|
|
Unadjusted |
|
|
Adjustment |
|
|
Adjusted
|
|
|
Unadjusted |
|
|
Adjustment |
|
|
Adjusted
|
|
|
|
(In
thousands, except per share amounts) |
|
Operating
gains, losses and
other charges,
net
|
|
$ |
(2,633 |
) |
|
$ |
84 |
|
|
$ |
(2,549 |
) |
|
$ |
(34,828 |
) |
|
$ |
3,746 |
|
|
$ |
(31,082 |
) |
Total
operating costs and
expenses
|
|
|
224,081 |
|
|
|
84 |
|
|
|
224,165 |
|
|
|
855,838 |
|
|
|
3,746 |
|
|
|
859,584 |
|
Operating
income |
|
|
12,670 |
|
|
|
(84 |
) |
|
|
12,586 |
|
|
|
83,530 |
|
|
|
(3,746 |
) |
|
|
79,784 |
|
Net income before
taxes |
|
|
1,526 |
|
|
|
(84 |
) |
|
|
1,442 |
|
|
|
39,905 |
|
|
|
(3,746 |
) |
|
|
36,159 |
|
Provision for income
taxes |
|
|
363 |
|
|
|
(8 |
) |
|
|
355 |
|
|
|
5,192 |
|
|
|
(384 |
) |
|
|
4,808 |
|
Net income |
|
|
1,163 |
|
|
|
(76 |
) |
|
|
1,087 |
|
|
|
34,713 |
|
|
|
(3,362 |
) |
|
|
31,351 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic net income per
share |
|
$ |
0.01 |
|
|
$ |
0.00 |
|
|
$ |
0.01 |
|
|
$ |
0.37 |
|
|
$ |
(0.04 |
) |
|
$ |
0.33 |
|
Diluted net income
per share |
|
$ |
0.01 |
|
|
$ |
0.00 |
|
|
$ |
0.01 |
|
|
$ |
0.35 |
|
|
$ |
(0.03 |
) |
|
$ |
0.32 |
|
The following line items on the Consolidated Balance Sheet as of
December 26, 2007 were impacted by the adjustments:
|
|
December
26, 2007 |
|
|
Adjustment |
|
|
Adjusted
December 26,
2007
|
|
|
|
(In
thousands) |
|
Goodwill |
|
$ |
46,185 |
|
|
$ |
(3,746 |
) |
|
$ |
42,439 |
|
Total
assets |
|
|
381,102 |
|
|
|
(3,746 |
) |
|
|
377,356 |
|
Deferred income
taxes |
|
|
11,963 |
|
|
|
(384 |
) |
|
|
11,579 |
|
Total long-term
liabilities |
|
|
428,505 |
|
|
|
(384 |
) |
|
|
428,121 |
|
Total
liabilities |
|
|
559,972 |
|
|
|
(384 |
) |
|
|
559,588 |
|
Total shareholders'
deficit |
|
|
(178,870 |
) |
|
|
(3,362 |
) |
|
|
(182,232 |
) |
Total liabilities
and shareholders' deficit |
|
|
381,102 |
|
|
|
(3,746 |
) |
|
|
377,356 |
|
The following reflects the adjusted quarterly data for the fiscal
2007:
|
|
Fiscal Year
Ended December 26, 2007 |
|
|
|
First
Quarter |
|
|
Second
Quarter |
|
|
Third
Quarter |
|
|
Fourth
Quarter |
|
|
|
(In
thousands, except per share data) |
|
Company restaurant
sales |
|
$ |
215,801 |
|
|
$ |
218,316 |
|
|
$ |
216,792 |
|
|
$ |
193,712 |
|
Franchise and
licensing revenue |
|
|
20,950 |
|
|
|
22,626 |
|
|
|
24,617 |
|
|
|
26,554 |
|
Total operating
revenue |
|
|
236,751 |
|
|
|
240,942 |
|
|
|
241,409 |
|
|
|
220,266 |
|
Total operating
costs and expenses |
|
|
224,165 |
|
|
|
217,616 |
|
|
|
225,529 |
|
|
|
192,274 |
|
Operating
income |
|
$ |
12,586 |
|
|
$ |
23,326 |
|
|
$ |
15,880 |
|
|
$ |
27,992 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income |
|
$ |
1,087 |
|
|
$ |
10,583 |
|
|
$ |
4,950 |
|
|
$ |
14,731 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic net income per
share (a) |
|
$ |
0.01 |
|
|
$ |
0.11 |
|
|
$ |
0.05 |
|
|
$ |
0.16 |
|
Diluted net income
per share (a) |
|
$ |
0.01 |
|
|
$ |
0.11 |
|
|
$ |
0.05 |
|
|
$ |
0.15 |
|
(a) |
Per share amounts do
not necessarily sum to the total year amounts due to changes in shares
outstanding and rounding. |
Note
4. Assets Held for Sale
Assets
held for sale of $3.7 million and $6.7 million as of March 26, 2008 and December
26, 2007, respectively, include restaurants to be sold to franchisees and
certain real estate properties. We expect to sell each of these assets within 12
months. Our Credit Facility (defined in Note 7) requires us to make mandatory
prepayments to reduce outstanding indebtedness with the net cash proceeds from
the sale of specified real estate properties. As a result, we
classified a corresponding $0.4 million of our long-term debt as a current
liability in our Consolidated Balance Sheet as of December 26, 2007. This
amount represents the net book value of the specified properties as of the
balance sheet date. As of March 26, 2008, there were no properties included in
assets held for sale for which mandatory prepayment was required.
Note
5. Goodwill and Other Intangible Assets
The
changes in carrying amounts of goodwill for the quarter ended March 26, 2008 are
as follows:
|
|
(In
thousands)
|
|
Balance
at December 26, 2007
|
|
$
|
42,439
|
|
Write-offs
associated with sale of restaurants |
|
|
(935 |
) |
Reversal
of valuation allowance related to deferred tax assets (Note
11)
|
|
|
(100
|
)
|
Balance
at March 26, 2008
|
|
$
|
41,404
|
|
The
following table reflects goodwill and intangible assets as of March 26, 2008 and
December 26, 2007:
|
|
March
26, 2008
|
|
|
December
26, 2007
|
|
|
|
Gross
Carrying Amount
|
|
|
Accumulated
Amortization
|
|
|
Gross
Carrying Amount
|
|
|
Accumulated
Amortization
|
|
|
|
(In
thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Intangible
assets with indefinite lives:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Trade
names
|
|
$
|
|
|
|
|
|
|
|
$
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Intangible
assets with definite lives:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Franchise
and license agreements
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Foreign
license agreements
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Intangible
assets
|
|
$
|
|
|
|
|
|
|
|
$
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other
assets with definite lives:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Software
development costs
|
|
$
|
|
|
|
|
|
|
|
$
|
|
|
|
|
|
|
Note
6. Operating Gains, Losses and Other Charges, Net
Operating
gains, losses and other charges, net are comprised of the
following:
|
|
|
|
|
|
|
|
|
|
|
Gains
on sales of assets and other, net
|
|
$ |
(9,748 |
) |
|
$ |
(3,187 |
) |
Restructuring
charges and exit costs
|
|
|
1,035 |
|
|
|
638 |
|
Operating
gains, losses and other charges, net
|
|
$ |
(8,713 |
) |
|
$ |
(2,549 |
) |
Gains
on Sales of Assets
Proceeds
and gains on sales of assets were comprised of the following:
|
|
Quarter
Ended
March
26, 2008
|
|
|
Quarter
Ended
March
28, 2007
|
|
|
|
Net
Proceeds
|
|
|
Gains
|
|
|
Net
Proceeds
|
|
|
Gains
|
|
|
|
(In
thousands)
|
|
Sales
of restaurant operations and related real estate to
franchisees
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sales
of other real estate assets
|
|
|
—
|
|
|
|
—
|
|
|
|
4,125
|
|
|
|
2,837
|
|
Recognition
of deferred gains
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
16,455
|
|
|
$
|
9,748
|
|
|
$
|
5,736
|
|
|
$
|
3,187
|
|
During
the quarter ended March 26, 2008, we sold 21 restaurant operations as part of
our Franchise Growth Initiative. Proceeds of $16.5 million include a note
receivable of $2.1 million $0.2
million of which is included as a component of receivables, net and $1.9
million of which is included as a component of other assets on the
Condensed Consolidated Balance Sheet). Additionally, as a result of the timing
of the transactions, $12.7 million in proceeds was received subsequent to period end and,
therefore, is included as receivables from sale of restaurants on
the Condensed Consolidated Balance Sheet at
March 26, 2008.
Restructuring
Charges and Exit Costs
Restructuring
charges and exit costs were comprised of the following:
|
Quarter
Ended
|
|
|
March
26, 2008
|
|
March
28, 2007
|
|
|
(In
thousands)
|
|
|
|
$ |
840 |
|
|
$ |
147 |
|
Severance
and other restructuring charges
|
|
|
195 |
|
|
|
491 |
|
Total
restructuring and exit costs
|
|
$ |
1,035 |
|
|
$ |
638 |
|
The
components of the change in accrued exit cost liabilities are as
follows:
|
|
(In
thousands)
|
|
Balance,
beginning of fiscal year
|
|
|
|
|
Provisions
for units closed during the year (1)
|
|
|
19
|
|
Changes
in estimates of accrued exit costs, net (1)
|
|
|
821
|
|
Payments,
net of sublease receipts
|
|
|
(817
|
)
|
|
|
|
|
|
Balance,
end of fiscal year
|
|
|
8,561
|
|
Less
current portion included in other current
liabilities
|
|
|
|
|
Long-term
portion included in other noncurrent liabilities
|
|
$
|
6,433
|
|
(1) Included
as a component of operating gains, losses
and other charges, net.
Estimated
net cash payments related to exit cost liabilities in the next five years are as
follows:
|
|
(In
thousands)
|
|
|
|
|
|
|
2009
|
|
|
1,720
|
|
|
|
|
|
|
2011
|
|
|
1,242
|
|
|
|
|
|
|
Thereafter
|
|
|
2,989
|
|
|
|
|
|
|
Less
imputed interest
|
|
|
2,006
|
|
Present
value of exit cost liabilities
|
|
|
|
|
As of
March 26, 2008 and December 26, 2007, we had accrued severance and other
restructuring charges of $0.8 million and $1.3 million, respectively. The
balance as of March 26, 2008 is expected to be paid during the next 12
months.
Note
7. Long-Term Debt
Credit
Facility
Our
subsidiaries, Denny's, Inc. and Denny's Realty, LLC (the "Borrowers"), have a
senior secured credit agreement consisting of a $50 million revolving credit
facility (including up to $10 million for a revolving letter of credit
facility), a $152.1 million term loan and an additional $37 million letter of
credit facility (together, the "Credit Facility"). At March 26, 2008, we
had outstanding letters of credit of $35.0 million (comprised of $35.0
million under our letter of credit facility and less than $0.1 million under our
revolving facility). There were no revolving loans outstanding at March 26,
2008. These balances result in availability of $2.0 million under our letter of
credit facility and approximately $50.0 million under the revolving
facility.
The
revolving facility matures on December 15, 2011. The term loan and the $37
million letter of credit facility mature on March 31, 2012. The term loan
amortizes in equal quarterly installments at a rate equal to approximately 1%
per annum with all remaining amounts due on the maturity date. The Credit
Facility is available for working capital, capital expenditures and other
general corporate purposes. We will be required to make mandatory prepayments
under certain circumstances (such as required payments related to asset sales)
typical for this type of credit facility and may make certain optional
prepayments under the Credit Facility.
The
Credit Facility is guaranteed by Denny's Corporation and its other subsidiaries and
is secured by substantially all of the assets of Denny's and its subsidiaries.
In addition, the Credit Facility is secured by first-priority mortgages
on 120 company-owned real estate assets. The Credit Facility contains
certain financial covenants (i.e., maximum total debt to EBITDA (as defined
under the Credit Facility) ratio requirements, maximum senior secured debt to
EBITDA ratio requirements, minimum fixed charge coverage ratio requirements and
limitations on capital expenditures), negative covenants, conditions precedent,
material adverse change provisions, events of default and other terms,
conditions and provisions customarily found in credit agreements for facilities
and transactions of this type. We were in compliance with the terms of the
Credit Facility as of March 26, 2008.
A
commitment fee of 0.5% is paid on the unused portion of the revolving credit
facility. Interest on loans under the revolving facility is payable at per annum
rates equal to LIBOR plus 250 basis points and will adjust over time based on
our leverage ratio. Interest on the term loan and letter of credit facility
is payable at per annum rates equal to LIBOR plus 200 basis points. Prior
to considering the impact of the interest rate swap described below, the
weighted-average interest rate under the term loan was 6.8% and 7.4% as of March 26, 2008 and
March 28, 2007, respectively.
Interest
Rate Swap
During
the second quarter of fiscal 2007, we entered into an interest rate swap with a
notional amount of $150 million to hedge a portion of the cash flows of our
variable rate debt. We designated the interest rate swap as a cash flow hedge of
our exposure to variability in future cash flows attributable to interest
payments on the first $150 million of floating rate debt. Under the terms of the
swap, we pay a fixed rate of 4.8925% on the $150 million notional amount
and receive payments from the counterparties based on the 3-month LIBOR
rate for a term ending on March 30, 2010, effectively resulting in a fixed rate
of 6.8925% on the $150 million notional amount at the inception of the swap. Interest rate
differentials paid or received under the swap agreement are recognized as adjustments to interest
expense.
Prior to
December 26, 2007, to the extent the swap was effective in offsetting the
variability of the hedged cash flows, changes in the fair value of the swap were
not included in current earnings, but were reported as adjustments to other comprehensive income.
At December 26, 2007, we determined that a portion of the underlying cash flows
related to the swap (i.e., interest payments on $150 million of floating rate
debt) were no longer probable of occurring over the term of the interest rate
swap as a result of the probability of paying the debt down below $150 million
through scheduled repayments and prepayments with cash from the sale of
company-owned restaurant operations to franchisees. As a result, we discontinued
hedge accounting treatment. The losses related to the fair value of
the swap included in accumulated other comprehensive income as of December 26,
2007 will be amortized to other nonoperating expense over the remaining
term of the interest rate swap. Additionally, future changes in the fair value
of the swap will be recorded in other nonoperating expense.
The
changes in accumulated other comprehensive income related to the swap for the
quarter ended March 26, 2008 are as follows:
|
|
March
26, 2008 |
|
|
|
(In
thousands) |
|
Accumulated Other
Comprehensive Income, beginning of period |
|
$ |
2,353 |
|
Amortization of
unrealized losses related to the interest rate swap (recorded in other
nonoperating expense) |
|
|
(262 |
) |
Accumulated Other
Comprehensive Income, end of period |
|
$ |
2,091 |
|
The
changes in fair value of the interest rate swap for the quarter ended March 26,
2008 are as follows:
|
|
March
26, 2008 |
|
|
|
(In
thousands) |
|
Fair value of the
interest rate swap, beginning of period |
|
$ |
(2,753 |
) |
Change in the fair
value of the interest rate swap (recorded in other nonoperating
expense) |
|
|
(4,370 |
) |
Reclassification to
other current liabilities related to termination of swap |
|
|
2,400 |
|
Fair value of the
interest rate swap, end of period |
|
$ |
(4,723 |
) |
On March 26, 2008, we terminated $50
million notional amount of the interest rate swap. The termination resulted in a
$2.4 million cash payment, which was made subsequent to quarter
end. As a result, as of March 26, 2008, we reclassified $2.4 million
from other long-term liabilities to other current liabilities on the Condensed
Consolidated Balance Sheet.
By using a derivative instrument to
hedge exposures to changes in interest rates, we expose ourselves to credit
risk. Credit risk is the failure of the counterparty to perform under the terms
of the derivative contract. We minimize the credit risk by entering into
transactions with high-quality counterparties whose credit rating is evaluated
on a quarterly basis.
Note
8. Defined Benefit Plans
The
components of net pension cost of our pension plan and other defined benefit
plans as determined under Statement of Financial Accounting Standards No. 87,
“Employers’ Accounting for Pensions,” as amended by Statement of Financial
Accounting Standards No. 158, "Employer's Accounting for Defined Benefit
Pension and Other Postretirement Plans," are as follows:
|
Pension
Plan
|
|
Other
Defined Benefit Plans
|
|
|
Quarter
Ended
|
|
Quarter
Ended
|
|
|
March
26 2008
|
|
March
28, 2007
|
|
March
26, 2008
|
|
March
28, 2007
|
|
|
(In
thousands)
|
|
|
|
$ |
88 |
|
|
$ |
87 |
|
|
$ |
— |
|
|
$ |
— |
|
|
|
|
843 |
|
|
|
783 |
|
|
|
49 |
|
|
|
47 |
|
Expected
return on plan assets
|
|
|
(973
|
) |
|
|
(885
|
) |
|
|
— |
|
|
|
— |
|
|
|
|
150 |
|
|
|
217 |
|
|
|
5 |
|
|
|
6 |
|
Net
periodic benefit cost
|
|
$ |
108 |
|
|
$ |
202 |
|
|
$ |
54 |
|
|
$ |
53 |
|
We made
contributions of $0.1 million and $0.8 million to our qualified pension plan in
the quarters ended March 26, 2008 and March 28, 2007, respectively. We made
contributions of $0.1 million and $0.1 million to our other defined benefit
plans during the quarters ended March 26, 2008 and March 28, 2007, respectively.
We expect to contribute $2.2 million to our qualified pension plan and an
additional $0.2 million to our other defined benefit plans during the remainder
of fiscal 2008.
Additional
minimum pension liability of $10.8 million is reported as a component of
accumulated other comprehensive loss in the Condensed Consolidated
Statement of Shareholders’ Deficit and Comprehensive Loss as of March 26, 2008
and December 26, 2007.
Note
9. Share-Based Compensation
Total
share-based compensation included as a component of net income was as
follows:
|
|
Quarter
Ended
|
|
|
|
March
26, 2008
|
|
|
March
28, 2007
|
|
|
|
|
|
Share-based
compensation related to liability classified restricted stock
units
|
|
$ |
(129 |
) |
|
$ |
473 |
|
Share-based
compensation related to equity classified awards:
|
|
|
|
|
|
|
|
|
|
|
$ |
239 |
|
|
$ |
198 |
|
|
|
|
464 |
|
|
|
432 |
|
Board
deferred stock units
|
|
|
56 |
|
|
|
81 |
|
Total
share-based compensation related to equity classified
awards
|
|
|
759 |
|
|
|
711 |
|
Total
share-based compensation
|
|
$ |
630 |
|
|
$ |
1,184 |
|
Additionally,
during the quarter ended March 26, 2008, we issued approximately 97,000 shares
of common stock in lieu of cash to pay approximately $0.3 million of incentive
compensation.
Stock
Options
During
the quarter ended March 26, 2008, we granted approximately 1.5 million stock
options to certain employees and approximately 0.2 million stock options to the
non-employee members of our Board of Directors. These stock options vest evenly over 3
years and have a 10-year contractual life.
The
weighted average fair value per option for options granted during the quarter
ended March 26, 2008 was $2.65. The fair
value of the stock options granted in the period ended March 26, 2008 was
estimated at the date of grant using the Black-Scholes option pricing model. Use
of this option pricing model requires the input of subjective assumptions. These
assumptions include estimating the length of time employees will retain their
vested stock options before exercising them (“expected term”), the estimated
volatility of our common stock price over the expected term and the number of
options that will ultimately not complete their vesting requirements
(“forfeitures”). Changes in the subjective assumptions can materially affect the
estimate of the fair value of share-based compensation and, consequently, the
related amount recognized in the Condensed Consolidated Statements of
Operations.
We used
the following weighted average assumptions for the stock option grants for the
quarter ended March 26, 2008:
|
|
|
|
|
Expected
volatility
|
|
|
50.1
|
%
|
|
|
|
|
|
Weighted-average
expected term
|
|
4.6
years
|
|
The
dividend yield assumption was based on our dividend payment history and
expectations of future dividend payments. The expected volatility was based on
the historical volatility of our stock for a period approximating the expected
life. The risk-free interest rate was based on published U.S. Treasury spot
rates in effect at the time of grant with terms approximating the expected life
of the option. The weighted average expected term of the options represents the
period of time the options are expected to be outstanding based on historical
trends.
As of
March 26, 2008, we had approximately $3.4 million of unrecognized
compensation cost related to unvested stock option awards outstanding, which is expected to be
recognized over a weighted average of 2.5 years.
Restricted
Stock Units
During
the quarter ended March 26, 2008, we made payments of $0.4 million (before
taxes) in cash and issued 0.1 million
shares of common stock related to the restricted stock unit awards that vested
as of December 26, 2007.
Accrued
compensation expense included as a component of the Condensed Consolidated
Balance Sheet was as follows:
|
|
|
|
|
|
|
|
|
|
|
Liability
classified restricted stock units:
|
|
|
|
|
|
|
|
|
Other
current liabilities
|
|
$
|
1,397
|
|
|
$
|
1,170
|
|
Other
noncurrent liabilities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity
classified restricted stock units:
|
|
|
|
|
|
|
|
|
Additional
paid-in capital
|
|
$
|
4,056
|
|
|
$
|
3,925
|
|
As of
March 26, 2008, we had approximately $3.9 million of unrecognized compensation
cost (approximately $1.3 million for liability classified units and
approximately $2.6 million for equity classified units) related to all unvested
restricted stock unit awards outstanding, which is expected to be
recognized over a weighted average of 1.8 years.
Board
Deferred Stock Units
During the
quarter ended March 26, 2008, we granted approximately 0.1 million deferred
stock units (which are equity classified) with a weighted-average grant date
fair value of $3.30 per unit to non-employee members of our Board of Directors.
These awards are restricted in that they may not be converted to shares until the
recipient has ceased serving as a member of the Board of Directors for Denny's,
Corporation at which time the awards automatically convert to
shares.
Note
10. Comprehensive Income (Loss) and Accumulated Other Comprehensive
Income (Loss)
Total
comprehensive income was $4.4 million and $1.1 million for the quarters ended
March 26, 2008 and March 28, 2007, respectively.
The
components of Accumulated Other Comprehensive Loss, Net in the Condensed
Consolidated Statement of Shareholder’s Deficit and Comprehensive Loss are as
follows:
|
|
March
26, 2008
|
|
|
December
26, 2007
|
|
|
|
(In
thousands)
|
|
Additional
minimum pension liability
|
|
|
|
|
|
|
|
|
Unrealized
loss on interest rate swap
|
|
|
(2,091
|
)
|
|
|
(2,353
|
) |
Accumulated
other comprehensive income (loss)
|
|
|
|
|
|
|
|
|
Note
11. Income Taxes
The
provision for income taxes was $0.5 million and $0.4 million for the
quarters ended March 26, 2008 and March 28, 2007, respectively. The provision
for income taxes for the first quarters of 2008 and 2007 was determined using
our effective rate estimated for the entire fiscal year.
We have
provided valuation allowances related to any benefits from income taxes
resulting from the application of a statutory tax rate to our net operating
losses (“NOL”) generated in previous periods. In addition, during 2008 and 2007,
we utilized certain federal and state NOL carryforwards whose
valuation allowance was established in connection with fresh start
reporting on January 7, 1998. Accordingly, for the quarters ended March 26, 2008
and March 28, 2007, we recognized approximately $0.1 million and $0.1 million,
respectively, of federal and state deferred tax expense with a
corresponding reduction to the goodwill that was recorded in connection with
fresh start reporting on January 7, 1998.
The reduction in our effective tax rate for the quarter ended March
26, 2008 was due primarily to the utilization of federal net operating loss
carryforwards from periods prior to fresh start reporting on January 7,
1998. These federal net operating loss carryforwards were fully utilized during
fiscal 2007. We still have certain state net operating loss carryforwards from
periods prior to fresh start reporting that have been utilized in both fiscal
2007 and 2008.
Note
12. Net Income (Loss) Per Share
|
|
Quarter
Ended
|
|
|
|
March
26, 2008
|
|
|
March
28, 2007
|
|
|
|
(In
thousands, except per share amounts)
|
|
|
|
|
|
|
|
|
Numerator
for basic and diluted net income per share - net
income
|
|
$ |
4,124 |
|
|
$ |
1,087 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Denominator
for basic net income per share - weighted average
shares
|
|
|
94,826 |
|
|
|
93,416 |
|
Effect
of dilutive securities:
|
|
|
|
|
|
|
|
|
|
|
|
2,640 |
|
|
|
4,417 |
|
Restricted
stock units and awards
|
|
|
922 |
|
|
|
1,143 |
|
Denominator
for diluted net income per share - adjusted weighted average shares and
assumed
conversions
of dilutive securities
|
|
|
98,388 |
|
|
|
98,976 |
|
|
|
|
|
|
|
|
|
|
Basic
and diluted net income per share
|
|
$ |
0.04 |
|
|
$ |
0.01 |
|
|
|
|
|
|
|
|
|
|
Stock
options excluded (1)
|
|
|
2,552 |
|
|
|
1,423 |
|
(1) Excluded from
diluted weighted-average shares outstanding as the impact would have been
antidilutive.
Note
13. Supplemental Cash Flow Information
|
|
Quarter
Ended
|
|
|
|
March
26, 2008
|
|
|
March
28, 2007
|
|
|
|
(In
thousands)
|
|
|
|
$ |
52 |
|
|
$ |
603 |
|
|
|
$ |
4,118 |
|
|
$ |
5,232 |
|
|
|
|
|
|
|
|
|
|
Noncash
investing activities:
|
|
|
|
|
|
|
|
|
Net
proceeds receivable from disposition of property
|
|
$ |
12,722 |
|
|
$ |
— |
|
Notes
received in connection with disposition of property
|
|
$ |
2,100 |
|
|
$ |
— |
|
|
|
|
|
|
|
|
|
|
Noncash
financing activities:
|
|
|
|
|
|
|
|
|
Issuance
of common stock, pursuant to share-based compensation
plans
|
|
$ |
624 |
|
|
$ |
222 |
|
Execution
of capital leases
|
|
$ |
1,670 |
|
|
$ |
465 |
|
Note
14. Related Party Transactions
During
the quarter ended March 26, 2008, we sold company-owned restaurants to
franchisees that are former employees. We received cash proceeds of
$1.2 million from the sale of restaurant operations to these related
parties.
Note
15. Implementation of New Accounting Standards
In
March 2008, the FASB issued Statement of Financial Accounting Standards No. 161
(“SFAS 161”), “Disclosures about Derivative Instruments and Hedging Activities,”
which amends and expands Statement of Financial Accounting Standards No.
133, "Accounting for Derivative Instruments and Hedging
Activities." SFAS 161 requires tabular disclosure of the fair
value of derivative instruments and their gains and losses. This
statement also requires disclosure regarding the credit-risk related contingent
features in derivative agreements, counterparty credit risk, and strategies and
objectives for using derivative instruments. We are required to adopt SFAS 161
in the first quarter of 2009. We are currently evaluating the impact
of adopting SFAS 161 on our Condensed Consolidated Financial
Statements.
In
December 2007, the FASB issued Statement of Financial Accounting Standards No.
141 (revised 2007) ("SFAS 141R"), "Business Combinations." SFAS 141R establishes
principles and requirements for how an acquirer recognizes and measures in its
financial statements the identifiable assets acquired, the liabilities assumed,
any noncontrolling interest in an acquiree and the goodwill acquired. SFAS
141R applies to business combinations for which the acquisition date is on or
after the first fiscal period beginning on or after December 15,
2008. SFAS 141R will also require that any additional reversal of deferred
tax asset valuation allowance established in connection with fresh start
reporting on January 7, 1998 be recorded as a component of income tax
expense rather than as currently reflected as a reduction to the goodwill
established in connection with the fresh start reporting. We are
required to adopt SFAS 141R in the first quarter of 2009. We are currently
evaluating the impact of adopting SFAS 141R on our Condensed Consolidated
Financial Statements.
In
December 2007, the FASB issued Statement of Financial Accounting Standards No.
160 ("SFAS 160"), "Noncontrolling Interests in Consolidated Financial Statements
— an amendment of ARB No. 51." SFAS 160 amends Accounting Research Bulletin No. 51, "Consolidated
Financial Statements" to establish accounting and reporting standards for
the noncontrolling interest in a subsidiary and for the deconsolidation of a
subsidiary. It clarifies that a noncontrolling interest in a subsidiary, which
is sometimes referred to as minority interest, is an ownership interest in the
consolidated entity that should be reported as equity in our Consolidated
Financial Statements. Among other requirements, this statement requires that the
consolidated net income attributable to the parent and the noncontrolling
interest be clearly identified and presented on the face of the consolidated
income statement. SFAS 160 is effective for the first fiscal period beginning on
or after December 15, 2008. We are required to adopt SFAS 160 in the first
quarter of 2009. We are currently evaluating the impact of adopting SFAS 160 on
our Condensed Consolidated Financial Statements.
In
September 2006, the FASB issued Statement of Financial Accounting Standards No.
157, “Fair Value Measurements.” SFAS 157 defines fair value, establishes
a framework for measuring fair value and expands disclosures about fair
value measurements. SFAS 157 applies under other accounting pronouncements that
require or permit fair value measurements, the FASB having previously
concluded in those accounting pronouncements that fair value is the relevant
measurement attribute. Accordingly, SFAS 157 does not require any new fair
value measurements. Effective December 27, 2007, the first day of fiscal 2008,
we adopted the provisions of SFAS 157 for financial assets and liabilities, as
well as any other assets and liabilities that are carried at fair value on
a recurring basis in financial statements. We applied the provisions of FSP FAS 157-2,
"Effective Date of FASB Statement 157," which defers the provisions of
SFAS 157 for nonfinancial assets and
liabilities to the first fiscal
period beginning after November 15, 2008. The deferred nonfinancial assets and liabilities
include items such as goodwill and other nonamortizable intangibles. We
are required to adopt SFAS 157 for nonfinancial assets and liabilities in the
first quarter of fiscal 2009 and are still evaluating the impact on our
Condensed Consolidated Financial Statements.
Other
accounting standards that have been issued or proposed by the FASB or other
standards-setting bodies that do not require adoption until a future date are
not expected to have a material impact on the Condensed Consolidated Financial
Statements upon adoption.
Note
16. Commitments and Contingencies
There are
various claims and pending legal actions against or indirectly involving us,
including actions concerned with civil rights of employees and guests, other
employment related matters, taxes, sales of franchise rights and businesses and
other matters. Based on our examination of these matters and our experience to
date, we have recorded reserves reflecting our best estimate of liability, if
any, with respect to these matters. However, the ultimate disposition of these
matters cannot be determined with certainty. We record legal expenses and
other litigation costs as those costs are incurred.
Forward-Looking
Statements
The
following discussion is intended to highlight significant changes in our
financial position as of March 26, 2008 and results of operations for the
quarter ended March 26, 2008 compared to the quarter ended March 28, 2007.
The forward-looking statements included in Management’s Discussion and Analysis
of Financial Condition and Results of Operations, which reflect our best
judgment based on factors currently known, involve risks, uncertainties, and
other factors which may cause our actual performance to be materially different
from the performance indicated or implied by such statements. Such factors
include, among others: competitive pressures from within the restaurant
industry; the level of success of our 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 (including with regard to
energy costs), particularly at the retail level; political environment
(including acts of war and terrorism); and other factors included in the
discussion below, or in Part II. Item 7. Management’s Discussion and Analysis of
Financial Condition and Results of Operations and Part I. Item 1A. Risk Factors,
contained in our Annual Report on Form 10-K for the year ended December 26,
2007.
Statements of
Operations
The
following table contains information derived from our Condensed Consolidated
Statements of Operations expressed as a percentage of total operating revenues,
except as noted below. Percentages may not add due to
rounding.
|
|
Quarter
Ended
|
|
|
|
March
26, 2008
|
|
|
March
28, 2007
|
|
|
|
(Dollars
in thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Franchise
and license revenue
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Costs
of company restaurant sales (a):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
costs of company restaurant sales
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Costs
of franchise and license revenue (a)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
General
and administrative expenses
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation
and amortization
|
|
|
|
|
|
|
|
|
|
|
|
Operating
gains, losses and other charges, net
|
|
|
|
|
|
|
|
|
|
|
|
Total
operating costs and expenses
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other
nonoperating expense (income), net
|
|
|
|
|
|
|
|
|
|
|
|
Total
other expenses, net
|
|
|
|
|
|
|
|
|
|
|
|
Net
income before income taxes
|
|
|
|
|
|
|
|
|
|
|
|
Provision
for income taxes
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Company-owned
average unit sales
|
|
|
|
|
|
|
|
|
|
|
|
Franchise
average unit sales
|
|
$ |
|
|
|
|
$ |
|
|
|
|
Company-owned
equivalent units (b)
|
|
|
|
|
|
|
|
|
|
|
|
Franchise
equivalent units (b)
|
|
|
|
|
|
|
|
|
|
|
|
Same-store
sales increase (decrease) (company-owned)
(c)(d)
|
|
|
|
|
|
|
|
|
|
|
|
Guest
check average increase (d)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Same-store
sales decrease (franchised and licensed units)
(c)(d)
|
|
|
|
|
|
|
|
|
|
|
|
__________________
|
Costs
of company restaurant sales percentages are as a percentage of company
restaurant sales. Costs of franchise and license revenue percentages are
as a percentage of franchise and license revenue. All other percentages
are as a percentage of total operating revenue.
|
|
|
|
Equivalent
units are calculated as the weighted average number of units outstanding
during a defined time period.
|
|
|
|
Same-store
sales include sales from restaurants that were open the same days in both
the current year and prior year.
|
|
|
|
Prior
year amounts have not been restated for 2008 comparable
units.
|
Quarter Ended March 26, 2008 Compared with Quarter Ended
March 28,
2007
|
|
Quarter
Ended
|
|
|
|
March
26, 2008
|
|
|
March
28, 2007
|
|
Company-owned
restaurants, beginning of period
|
|
|
|
|
|
|
|
|
Units
opened
|
|
|
|
|
|
|
|
|
Units
acquired from franchisees
|
|
|
|
|
|
|
|
|
Units
sold to franchisees
|
|
|
|
)
|
|
|
|
)
|
|
|
|
|
|
|
|
|
|
End
of period
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Franchised
and licensed restaurants, beginning of period
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Units
acquired by Company
|
|
|
|
|
|
|
|
)
|
Units
purchased from Company
|
|
|
|
|
|
|
|
|
Units
closed
|
|
|
|
)
|
|
|
|
)
|
|
|
|
|
|
|
|
|
|
Total
company-owned, franchised and licensed restaurants, end of
period
|
|
|
|
|
|
|
|
|
Company
Restaurant Operations
During
the quarter ended March 26, 2008, we realized a 0.7% increase in same-store
sales, comprised of a 5.7% increase in guest check average and a 4.7% decrease
in guest counts. Company restaurant sales decreased $46.2 million or 21.4%
resulting from a 128 equivalent-unit decrease in company-owned restaurants. The
decrease was partially offset by the increase in same-store sales for the
current year. The decrease in company-owned restaurants primarily resulted from
the sale of 130 company-owned restaurants to franchisees as part of our Franchise Growth Initiative
during fiscal 2007.
Total
costs of company restaurant sales as a percentage of company restaurant sales
increased to 89.3% from 88.7%. Product
costs decreased to 24.7% from 25.5% due to favorable shifts in menu
mix. Payroll and benefits increased to 43.5% from 43.0% primarily as a
result of additional management
staffing. Occupancy costs increased slightly to 6.2% from 6.1%.
Other operating expenses were comprised of the following amounts and percentages
of company restaurant sales:
|
|
Quarter
Ended
|
|
|
|
March
26 2008
|
|
|
March
28, 2007
|
|
|
|
(Dollars
in thousands)
|
|
|
|
$ |
8,265 |
|
|
|
4.9
|
% |
|
$ |
10,763 |
|
|
|
5.0
|
% |
|
|
|
3,658 |
|
|
|
2.2
|
% |
|
|
3,947 |
|
|
|
1.8
|
% |
|
|
|
5,637 |
|
|
|
3.3
|
% |
|
|
7,153 |
|
|
|
3.3
|
% |
|
|
|
385 |
|
|
|
0.2
|
% |
|
|
544 |
|
|
|
0.3
|
% |
|
|
|
7,263 |
|
|
|
4.3
|
% |
|
|
7,906 |
|
|
|
3.7
|
% |
|
|
$ |
25,208 |
|
|
|
14.9
|
% |
|
$ |
30,313 |
|
|
|
14.0
|
% |
The
percentage increase in other operating expenses is primarily the result of a
$0.6 million benefit in fiscal 2007 related to insurance proceeds resulting from income lost due to
hurricanes.
Franchise
Operations
Franchise
and license revenue and related costs were comprised of the following amounts
and percentages of franchise and license revenue for the periods
indicated:
|
|
Quarter
Ended
|
|
|
|
March
26, 2008
|
|
|
March
28, 2007
|
|
|
|
(Dollars in
thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Franchise
and license revenue
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Costs
of franchise and license revenue
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Royalties
increased by $2.0 million, or 13.8%, primarily resulting from the sale of 130
company-owned restaurants to franchisees during fiscal 2007, offset by the
effects of a 0.9% decrease in same-store sales for franchised and licensed
units. Initial fees increased $0.7 million primarily resulting from the sale of
21 company-owned restaurants to franchisees during the quarter ended March 26,
2008. The sale of restaurants to franchisees resulted in a 136 equivalent-unit
increase in franchised and licensed units compared to the prior year. The
increase in occupancy revenue of $2.7 million, or 48.4%, is primarily the result
of the sale of company-owned restaurants to franchisees.
Costs of
franchise and license revenue increased by $1.7 million, or 26.2%. The increase
in occupancy costs of $1.9 million, or 41.7%, is primarily the result
of the sale of company-owned restaurants to franchisees during fiscal 2007. As a
percentage of franchise and license revenue, costs of franchise and license
revenue remained constant at 30.9%.
Other
Operating Costs and Expenses
Other
operating costs and expenses such as general and administrative expenses and
depreciation and amortization expense relate to both company and franchise
operations.
General and administrative
expenses are comprised of the following:
|
Quarter
Ended
|
|
|
March
26, 2008
|
|
March
28, 2007
|
|
|
(In
thousands)
|
|
|
|
$ |
630 |
|
|
$ |
1,184 |
|
Other
general and administrative expenses
|
|
|
14,985 |
|
|
|
14,742 |
|
Total
general and administrative expenses
|
|
$ |
15,615 |
|
|
$ |
15,926 |
|
The
decrease in share-based compensation expense is primarily due to the adjustment
of the liability classified restricted stock units to fair value as of
March 26, 2008.
Depreciation and amortization
is comprised of the following:
|
Quarter
Ended
|
|
|
March
26, 2008
|
|
March
28, 2007
|
|
|
(In
thousands)
|
|
Depreciation
of property and equipment
|
|
$ |
7,872 |
|
|
$ |
9,804 |
|
Amortization
of capital lease assets
|
|
|
844 |
|
|
|
1,209 |
|
Amortization
of intangible assets
|
|
|
1,525 |
|
|
|
1,865 |
|
Total
depreciation and amortization expense
|
|
$ |
10,241 |
|
|
$ |
12,878 |
|
The
overall decrease in depreciation and amortization expense is due primarily to
the sale of real estate properties during 2007 and the sale of 130 company-owned
restaurants to franchisees during 2007.
Operating gains, losses and other
charges, net represent gains or losses on the sales of assets,
restructuring charges, exit costs and impairment charges and were comprised of
the following:
|
Quarter
Ended
|
|
|
March
26, 2008
|
|
March
28, 2007
|
|
|
(In
thousands)
|
|
Gains
on sales of assets and other, net
|
|
$ |
(9,748 |
) |
|
$ |
(3,187 |
) |
Restructuring
charges and exit costs
|
|
|
1,035 |
|
|
|
638 |
|
|
|
|
— |
|
|
|
— |
|
Operating
gains, losses and other charges, net
|
|
$ |
(8,713 |
) |
|
$ |
(2,549 |
) |
Gains on
sales of assets and other, net of $9.7 million in the first quarter of 2008
primarily include gains on sales of restaurant operations to franchisees.
During the quarter ended March 26, 2008, we sold 21 restaurant operations to four
franchisees for net proceeds of $16.5 million as part of FGI. The quarter ended March 28, 2007
included a $0.3 million gain on the sale of six restaurant operations to
two franchisees for net proceeds of $1.6 million as part of FGI. The
remaining fiscal 2007 gains resulted from the sale of real estate related to
closed restaurants and restaurants operated by franchisees.
Restructuring charges and exit
costs were comprised of the following:
|
Quarter
Ended
|
|
|
March
26, 2008
|
|
March
28, 2007
|
|
|
(In
thousands)
|
|
|
|
$ |
840 |
|
|
$ |
147 |
|
Severance
and other restructuring charges
|
|
|
195 |
|
|
|
491 |
|
Total
restructuring and exit costs
|
|
$ |
1,035 |
|
|
$ |
638 |
|
Operating income was
$19.2 million for the quarter ended March 26, 2008 compared with $12.6
million for the quarter ended March 28, 2007.
Interest expense, net is
comprised of the following:
|
|
Quarter
Ended
|
|
|
|
|
|
|
March
28, 2007
|
|
|
|
(In
thousands)
|
|
|
|
$ |
4,363 |
|
|
$ |
4,363 |
|
Interest
on credit facilities
|
|
|
2,664 |
|
|
|
4,652 |
|
Interest
on capital lease liabilities
|
|
|
943 |
|
|
|
1,004 |
|
Letters
of credit and other fees
|
|
|
494 |
|
|
|
594 |
|
|
|
|
(273
|
) |
|
|
(351
|
) |
|
|
|
8,191 |
|
|
|
10,262 |
|
Amortization
of deferred financing costs
|
|
|
277 |
|
|
|
288 |
|
Interest
accretion on other liabilities
|
|
|
733 |
|
|
|
791 |
|
Total
interest expense, net
|
|
$ |
9,201 |
|
|
$ |
11,341 |
|
The
decrease in interest expense resulted primarily from the repayment
of $100.3 million of debt during 2007.
Other nonoperating expenses, net were $5.4 million for the quarter ended March 26,
2008 compared with other nonoperating income of $0.2 million for the
quarter ended March 28, 2007. Approximately $4.7 million of the increase in
other nonoperating expense resulted from the discontinuance of hedge accounting
related to the interest rate swap. The $4.7
million increase is comprised of a $4.4 million change in the fair
value of the swap and $0.3 million of
amortization of losses included in accumulated other comprehensive
income.
The provision for income taxes was
$0.5 million and $0.4 million for the quarters ended March 26, 2008 and March
28, 2007, respectively. The provision for income taxes for the first quarters of
2008 and 2007 was determined using our effective rate estimated for the entire
fiscal year. We have provided valuation allowances related to any benefits from
income taxes resulting from the application of a statutory tax rate to our net
operating losses (“NOL”) generated in previous periods. In addition, during 2008
and 2007, we utilized certain federal and state net operating loss carryforwards
whose valuation allowance was established in connection with fresh start
reporting on January 7, 1998. Accordingly, for the quarters ended March 26, 2008
and March 28, 2007, we recognized approximately $0.1 million and $0.1 million,
respectively, of federal and state deferred tax expense with a corresponding
reduction to the goodwill that was recorded in connection with fresh start
reporting on January 7, 1998. The reduction in our effective tax rate for the
quarter ended March 26, 2008 was due primarily to the utilization of federal net
operating loss carryforwards from periods prior to fresh start reporting on
January 7, 1998. These federal net operating loss carryforwards were fully
utilized during fiscal 2007. We still have certain state net operating loss
carryforwards from periods prior to fresh start reporting that have been
utilized in both fiscal 2007 and 2008.
Net income was
$4.1 million for the quarter ended March 26, 2008 compared with net income
of $1.1 million for the quarter ended March 28, 2007 due to the factors noted
above.
Liquidity and Capital
Resources
Our
primary sources of liquidity and capital resources are cash generated
from operations, borrowings under our Credit Facility (as defined in Note
7) and, in recent years, cash proceeds from the sale of surplus properties
and sales of restaurant operations to franchisees. Principal uses of cash
are operating expenses, capital expenditures and debt repayments.
The following
table presents a summary of our sources and uses of cash and cash equivalents
for the quarter ended March 26, 2008 and the quarter ended March 28,
2007:
|
|
Quarter
Ended |
|
|
|
March
26, 2008
|
|
|
March
28, 2007
|
|
|
|
(In
thousands) |
|
Net cash provided by
operating activities |
|
$ |
1,251 |
|
|
$ |
14,513 |
|
Net cash used in
investing activities |
|
|
(5,320 |
) |
|
|
(1,093 |
) |
Net cash provided by
(used in) financing activities |
|
|
1,067 |
|
|
|
(4,481 |
) |
Net increase
(decrease) in cash and cash equivalents |
|
$ |
(3,002 |
) |
|
$ |
8,939 |
|
We
believe that our estimated cash flows from operations for 2008, combined with
our capacity for additional borrowings under our credit facility, will enable us
to meet our anticipated cash requirements and fund capital expenditures through
the end of 2008.
Net cash
flows used in investing activities were $5.3 million for the quarter ended March
26, 2008. These cash flows primarily represent capital expenditures
of $8.6 million for the quarter
ended March 26, 2008, of which $1.7
million was financed through capital leases. Capital
expenditures were partially
offset by net proceeds of $1.6 million on sales of restaurant
operations to franchisees, real estate and other assets. Additional net proceeds of $12.7 million on sales
of restaurant operations to franchisees was received subsequent to quarter
end. Our principal capital requirements have been largely associated
with the maintenance of our existing company-owned restaurants and facilities,
new construction, remodeling and our strategic initiatives, as
follows:
|
|
Quarter
Ended
|
|
|
|
March
26, 2008
|
|
|
March
28, 2007
|
|
|
|
(In
thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Acquisitions |
|
|
—
|
|
|
|
2,208
|
|
Capital
expenditures and acquisitions |
|
$ |
6,953
|
|
|
$ |
6,829
|
|
Cash
flows provided by financing activities were $1.1 million for the quarter
ended March 26, 2008, which primarily resulted from the timing of changes in
bank overdrafts. During the quarter we made $1.6 million in scheduled debt
payments. Subsequent to the quarter ended March 26, 2008, we made $2.1
million of term
loan prepayments through a
combination of asset sale proceeds, as noted above, and cash generated from
operations.
Our
credit facility consists of a $50 million revolving credit facility (including
up to $10 million for a revolving letter of credit facility), a $152.1 million
term loan and an additional $37 million letter of credit facility. At March 26,
2008, we had outstanding letters of credit of $35.0 million (comprised of $35.0
million under our letter of credit facility and less than $0.1 million under our
revolving facility). There were no revolving loans outstanding at March 26,
2008. These balances result in availability of $2.0 million under our letter of
credit facility and approximately $50.0 million under the revolving facility.
The
revolving facility matures on December 15, 2011. The term loan and the
$37 million letter of credit facility mature on March 31, 2012. The term
loan amortizes in equal quarterly installments at a rate equal to approximately
1% per annum with all remaining amounts due on the maturity date. The credit facility is available for working
capital, capital expenditures and other general corporate purposes. We will be
required to make mandatory prepayments under certain circumstances (such as
required payments related to asset
sales) typical for this type of credit facility and may make certain
optional prepayments under the credit facility.
The
credit facility is guaranteed by Denny's Corporation and its other subsidiaries and
is secured by substantially all of the assets of Denny's and its subsidiaries.
In addition, the credit facility is secured by first-priority mortgages on 120
company-owned real estate assets. The credit facility contains certain financial
covenants (i.e., maximum total debt to EBITDA (as defined under the credit
facility) ratio requirements, maximum senior secured debt to EBITDA ratio
requirements, minimum fixed charge coverage ratio requirements and limitations
on capital expenditures), negative covenants, conditions precedent, material
adverse change provisions, events of default and other terms, conditions and
provisions customarily found in credit agreements for facilities and
transactions of this type. We were in compliance with the terms of the credit
facility as of March 26, 2008.
As of
March 26, 2008, interest on loans under the revolving facility is payable at per
annum rates equal to LIBOR plus 250 basis points and will adjust over time
based on our leverage ratio. Interest on the term loan and letter of credit
facility is payable at per annum rates equal to LIBOR plus 200 basis
points. Prior to considering the impact of the interest rate swap, the
weighted-average interest rate under the term loan was 6.8% as of March 26, 2008.
Our
working capital deficit was $63.7
million at March 26, 2008 compared with $73.6 million at December 26, 2007. We
are able to operate with a substantial working capital deficit because (1)
restaurant operations and most food service operations are conducted primarily
on a cash (and cash equivalent) basis with a low level of accounts receivable,
(2) rapid turnover allows a limited investment in inventories, and (3) accounts
payable for food, beverages and supplies usually become due after the receipt of
cash from the related sales.
Implementation of New
Accounting Standards
See Notes
2 and 15 to our Condensed Consolidated Financial
Statements.
Interest Rate Risk
We have
exposure to interest rate risk related to certain instruments entered into for
other than trading purposes. Specifically, borrowings under the term loan and
revolving credit facility bear interest at variable rates based on LIBOR plus a
spread of 200 basis points per annum for the term loan and letter of credit
facility and 250 basis points per annum for the revolving credit
facility.
During
the second quarter of fiscal 2007, we entered into an interest rate swap with a
notional amount of $150 million to hedge a portion of the cash flows of our
variable rate debt. We designated the interest rate swap as a cash flow hedge of
our exposure to variability in future cash flows attributable to interest
payments on the first $150 million of floating rate debt. Under the terms of the
swap, through March 26, 2008, we paid a fixed rate of 4.8925% on the $150
million notional amount and received payments from the counterparties based on
the 3-month LIBOR rate for a term ending on March 30, 2010, effectively
resulting in a fixed rate of 6.8925% on the $150 million notional amount. On
March 26, 2008, we terminated $50 million of the notional amount of the interest
rate swap. As of March 26, 2008, the swap effectively increases our ratio of
fixed rate debt from approximately 54% of total debt to approximately 84% of
total debt.
Based on
the levels of borrowings under the credit facility at March 26, 2008, if
interest rates changed by 100 basis points our annual cash flow and income
before income taxes would change by approximately $0.5 million. This computation
is determined by considering the impact of hypothetical interest rates on the
variable rate portion of the credit facility at March 26, 2008. However, the
nature and amount of our borrowings under the credit facility may vary as a
result of future business requirements, market conditions and other
factors.
Our other
outstanding long-term debt bears fixed rates of interest. The estimated fair
value of our fixed rate long-term debt (excluding capital lease obligations and
revolving credit facility advances) was approximately $160.6 million,
compared with a book value of $175.5 million at March 26, 2008. This
computation is based on market quotations for the same or similar debt issues or
the estimated borrowing rates available to us. Specifically, the difference
between the estimated fair value of long-term debt compared with its historical
cost reported in our consolidated balance sheets at March 26, 2008 relates
primarily to market quotations for our Denny's Holdings, Inc. 10% Senior
Notes due 2012.
We also
have exposure to interest rate risk related to our pension plan, other defined
benefit plans and self-insurance liabilities. A 25 basis point increase or
decrease in discount rate would decrease or increase our projected benefit
obligation related to our pension plan and other defined benefit plans by $1.7
million and $0.1 million, respectively, and impact our net periodic benefit cost
related to our pension plan by $0.1 million. The impact of a 25 basis point
increase or decrease in discount rate on periodic benefit costs related to our
other defined benefit plans would be less than $0.1 million. A 25 basis point
increase or decrease in discount rate related to our self-insurance liabilities
would result in a decrease or increase of $0.2 million,
respectively.
Commodity
Price Risk
We
purchase certain food products such as beef, poultry, pork, eggs and coffee, and
utilities such as gas and electricity, which are affected by commodity pricing
and are, therefore, subject to price volatility caused by weather, production
problems, delivery difficulties and other factors that are outside our control
and which are generally unpredictable. Changes in commodity prices affect us and
our competitors generally and often simultaneously. In general, we purchase food
products and utilities based upon market prices established with vendors.
Although many of the items purchased are subject to changes in commodity prices,
the majority of our purchasing arrangements are structured to contain features
that minimize price volatility by establishing fixed pricing and/or price
ceilings and floors. We use these types of purchase arrangements to control
costs as an alternative to using financial instruments to hedge commodity
prices. We have determined that our purchasing agreements do not qualify as
derivative financial instruments or contain embedded derivative instruments. In
many cases, we believe we will be able to address commodity cost increases which
are significant and appear to be long-term in nature by adjusting our menu
pricing or changing our product delivery strategy. However, competitive
circumstances could limit such actions and, in those circumstances, increases in
commodity prices could lower our margins. Because of the often short-term nature
of commodity pricing aberrations and our ability to change menu pricing or
product delivery strategies in response to commodity price increases, we believe
that the impact of commodity price risk is not significant.
We have
established a policy to identify, control and manage market risks which may
arise from changes in interest rates, commodity prices and other relevant rates
and prices. We do not enter into financial instruments for trading or
speculative purposes.
As
required by Rule 13a-15(b) under the Securities Exchange Act of 1934, as
amended, (the “Exchange Act”) our management conducted an evaluation (under the
supervision and with the participation of our President and Chief Executive
Officer, Nelson J. Marchioli, and our Executive Vice President, Growth
Initiatives, Chief Administrative Officer and Chief Financial Officer, F.
Mark Wolfinger) as of the end of the period covered by this report, of the
effectiveness of our disclosure controls and procedures as defined in Rule
13a-15(e) under the Exchange Act. Based on that evaluation, Messrs. Marchioli
and Wolfinger each concluded that our disclosure controls and procedures are
effective to ensure that information required to be disclosed in the reports
that we file or submit under the
Exchange Act is recorded, processed, summarized and reported within the time
periods specified in the Securities and Exchange Commission’s rules and
forms.
There
have been no changes in our internal control over financial reporting identified
in connection with the evaluation required by Rule 13a-15(d) of the Exchange Act
that occurred during our last fiscal quarter that have materially affected, or
are reasonably likely to materially affect, our internal control over financial
reporting.
There are
various claims and pending legal actions against or indirectly involving us,
including actions concerned with civil rights of employees and guests, other
employment related matters, taxes, sales of franchise rights and businesses and
other matters. Based on our examination of these matters and our experience to
date, we have recorded our best estimate of legal and financial liabilities, if
any, with respect to these matters. However, the ultimate disposition of these
matters cannot be determined with certainty.
The
following are included as exhibits to this report:
Exhibit
No.
|
|
Description
|
|
|
|
10.1 |
|
Denny's
Corporation Executive Severance Pay Plan (incorporated by reference to
Exhibit 99.1 to the Current Report on Form 8-K of Denny's Corporation
filed with the Securities Exchange Commission on February 4,
2008) |
|
|
|
10.2 |
|
Written
description of the 2008 Corporate Incentive Program (incorporated by
reference to the Current Report on Form 8-K of Denny's Corporation filed
with the Securities Exchange Commission on January 11, 2008) |
|
|
|
31.1
|
|
Certification
of Nelson J. Marchioli, President and Chief Executive Officer of Denny’s
Corporation, pursuant to Rule 13a-14(a), as adopted pursuant to Section
302 of the Sarbanes-Oxley Act of 2002.
|
|
|
|
31.2
|
|
Certification
of F. Mark Wolfinger, Executive Vice President, Growth Initiatives, Chief
Administrative Officer and Chief Financial Officer of Denny’s
Corporation, pursuant to Rule 13a-14(a), as adopted pursuant to Section
302 of the Sarbanes-Oxley Act of 2002.
|
|
|
|
32.1
|
|
Certification
of Nelson J. Marchioli, President and Chief Executive Officer of Denny’s
Corporation and F. Mark Wolfinger, Executive Vice President, Growth
Initiatives, Chief Administrative Officer and Chief Financial Officer of
Denny’s Corporation, pursuant to 18 U.S.C. Section 1350, as adopted
pursuant to Section 906 of the Sarbanes-Oxley Act of
2002.
|
Pursuant
to the requirements of the Securities Exchange Act of 1934, the registrant has
duly caused this report to be signed on its behalf by the undersigned thereunto
duly authorized.
|
DENNY'S
CORPORATION
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Executive
Vice President,
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Executive
Vice President,
Chief
Administrative Officer and
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Chief
Accounting Officer and
|
|