UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 OR 15(d) of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): February 18, 2004
Denny's Corporation
-------------------
(Exact name of registrant as specified in its charter)
Delaware 0-18051 13-3487402
-------- ------- ----------
(State or other (Commission File (IRS Employer
jurisdiction of Number) Identification No.)
incorporation)
203 East Main Street, Spartanburg, SC 29319-9966
------------------------------------- ----------
(Address of Principal Executive Offices) (Zip Code)
Registrant's telephone number, including area code (864) 597-8000
----------------------------------------------------------
(Former name or former address, if changed since last report)
Item 7. Financial Statements and Exhibits
(c) Exhibits
Exhibit 99.1 -- Press release issued by Denny's Corporation on
February 18, 2004.
Item 12. Results of Operations and Financial Condition
On February 18, 2004, Denny's Corporation issued a press release announcing
financial results for the fourth quarter and year ended December 31, 2003. A
copy of the press release is attached as Exhibit 99.1 hereto and incorporated
herein by reference.
SIGNATURES
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 hereunto duly authorized.
Denny's Corporation
Date: February 20, 2004 /s/ Andrew F. Green
-------------------
Andrew F. Green
Senior Vice President
and Chief Financial Officer
EXHIBIT 99.1
NEWS RELEASE
Investor Contact: Ken Jones
864-597-8658
Media Contact: Debbie Atkins
864-597-8361
DENNY'S CORPORATION REPORTS FOURTH QUARTER AND YEAR END 2003 RESULTS
SPARTANBURG, S.C., February 18, 2004 -- Denny's Corporation (OTCBB:
DNYY) today reported results for its fourth quarter and year ended December 31,
2003. Highlights included:
Fourth Quarter 2003
o Same-store sales for the fourth quarter increased 3.0% at company units
and 2.8% at franchised units.
o Denny's ended the quarter with 561 company units, down 5 from last year,
and 1,077 franchised and licensed units, down 33 from last year.
o Denny's fourth quarter included an additional week of operations, or 14
weeks total, compared with a standard 13 week quarter as reported for
the prior year.
o Total operating revenue increased $24.7 million, or 10.9%, to $251.7
million for the quarter.
o Operating income increased $8.9 million to $11.3 million for the
quarter, or 4.5% of total revenue compared with 1.1% last year.
o Net loss for the quarter was $10.8 million compared with last year's net
income of $0.5 million.
o Last year's fourth quarter net income included nonoperating income of
$13.7 million attributable to senior note exchange transactions.
o At quarter end, Denny's $161 million credit facility had net
availability of $75 million.
Full Year 2003
o Same-store sales for the year increased 0.2% at company units and
declined 0.6% at franchised units.
o Denny's 2003 results included an additional week of operations, or 53
weeks total, compared with a standard 52 week year as reported for 2002.
o Total operating revenue declined $7.6 million, or 0.8%, to $940.9
million for the year.
o Operating income declined $1.2 million to $48.4 million for the year,
or 5.1% of total revenue compared with 5.2% last year.
o Net loss for the year was $31.5 million compared with last year's net
income of $68.1 million.
o Last year's net income included $32.9 million of nonoperating income
attributable to senior note exchange transactions as well as a $60.6
million gain on discontinued operations.
Commenting on Denny's results for the fourth quarter and fiscal year
2003, Nelson J. Marchioli, president and chief executive officer, said, "Denny's
same-store sales and customer traffic continue to improve as the fourth quarter
built upon the positive sales momentum achieved in the third quarter. We believe
much of this success can be attributed to our renewed focus on breakfast and
value - Denny's is well recognized for both. During the second half of the year,
we were able to leverage our breakfast credibility and began to increase guest
traffic across all dayparts.
"We remain encouraged by our sales performance into 2004 as company
same-store sales in January increased 5.7% and guest counts improved 2.3%. This
marked our fifth consecutive month of positive same-store sales and fourth
consecutive month of positive guest counts. We hope to maintain this sales
momentum with our current media campaign featuring a limited time offer on our
French Toast Slam for only $4.99 nationwide.
"Though 2003 did not live up to our profitability expectations, we are
encouraged by our current sales trends, especially our positive guest counts.
Consistent customer count growth is the measure that will ultimately define the
future success of Denny's," Marchioli concluded.
Fourth Quarter Results
Denny's reported total operating revenue for the fourth quarter of
$251.7 million, up $24.7 million from the prior year quarter. Company restaurant
sales increased $23.0 million to $228.4 million as the result of an additional
week of operations combined with a 3.0% increase in same-store sales. Franchise
revenue increased $1.7 million to $23.3 million as the additional operating
week, combined with a 2.8% increase in franchise unit same-store sales, more
than offset a 33 unit decline in franchised and licensed restaurants.
Company restaurant operating margin for the fourth quarter increased by
2.2 percentage points to 12.1% of company sales compared with 9.9% of sales last
year. A 2.5 percentage point decrease in payroll and benefits costs, resulting
primarily from more efficient labor scheduling, was offset by a 2.7 percentage
point increase in product costs. Higher food costs resulted from increased
commodity prices as well as menu mix shifts. The balance of the product cost
increase resulted from $1.9 million in deferred gain amortization in last year's
fourth quarter with no related amortization in this year's quarter. In addition,
operating margin benefited from lower marketing and repairs and maintenance
expenses.
Operating income for the quarter increased $8.9 million to $11.3
million, reflecting higher sales, improved margins and the additional operating
week. In addition, operating income benefited from a $4.9 million reduction in
depreciation and amortization expense. In January 1998, certain assets were
revalued and assigned a five-year life as a result of the predecessor company's
reorganization. Those assets became fully amortized in January 2003, resulting
in lower depreciation and amortization expense in 2003.
Net loss for the fourth quarter was $10.8 million, or $0.26 per diluted
common share, compared with last year's fourth quarter net income of $0.5
million, or $0.01 per diluted common share. Last year's fourth quarter included
nonoperating income of $13.7 million attributable to senior note exchange
transactions.
Full Year Results
For 2003, total operating revenue decreased $7.6 million to $940.9
million due primarily to a 5 unit decline in company restaurants combined with a
33 unit decline in franchised units during the year.
Company restaurant operating margin for the year decreased by 2.7
percentage points to 11.3% of company sales compared with 14.0% of sales last
year. The largest contributors to the margin decline were higher product costs
as well as increased payroll and benefits costs.
Operating income for the year decreased $1.2 million to $48.4 million
as a result of lower operating margins partially offset by a $23.3 million
reduction in depreciation and amortization expense.
Net loss for the year was $31.5 million, or $0.77 per diluted common
share, compared with last year's net income of $68.1 million, or $1.68 per
diluted common share. Last year's results included nonoperating income of $32.9
million attributable to senior note exchange transactions as well as a $60.6
million gain on discontinued operations.
Revolving Credit Facility
Effective December 31, 2003, commitments under the Denny's credit
facility were reduced to $161 million as scheduled in the credit agreement. At
the end of the fourth quarter, the credit facility consisted of outstanding term
loans of $40 million, revolver advances of $11 million, and letters of credit of
$35 million, leaving a net availability of $75 million. As of today, revolver
advances have increased to $24 million, leaving a net availability of $62
million.
Capital Structure
The Company continues to explore possible alternatives to improve its
long-term liquidity and capital structure and during 2003 retained UBS
Securities LLC as a financial advisor to assist in that regard. The Company has
not made a determination at this time whether it will ultimately seek to
implement any specific alternative, and there can be no assurance that, if it
does so, its efforts will be successful.
Further Information
Denny's will host its quarterly conference call for investors and
analysts today, Wednesday, February 18, 2004 at 1:00 p.m. EST. Interested
parties are invited to join a live, listen only broadcast of the conference
call. The call may be accessed through our website at www.dennys.com. On the
front page of the website, follow the link to "About Us;" then follow the link
to "Investor Info;" and then select the "Live Webcast" icon. A replay of the
call may be accessed at the same location later in the day and will remain
available for at least 30 days.
Denny's is America's largest full-service family restaurant chain,
consisting of 561 company-owned units and 1,077 franchised and licensed units,
with operations in the United States, Canada, Costa Rica, Guam, Mexico, New
Zealand and Puerto Rico. For further information on Denny's, including news
releases, links to SEC filings and other financial information, please visit our
website referenced above.
Certain matters discussed in this release may constitute forward
looking statements involving risks, uncertainties, and other factors that may
cause the actual performance of Denny's Corporation, its subsidiaries and
underlying restaurants to be materially different from the performance indicated
or implied by such statements. Factors that could cause actual performance to
differ materially from the performance indicated by such statements include,
among others: the competitive pressures from within the restaurant industry; the
level of success of the Company's 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, particularly at the retail
level; political environment (including acts of war and terrorism); and other
factors from time to time set forth in the Company's SEC reports, including but
not limited to the discussion in Management's Discussion and Analysis and the
risks identified in Exhibit 99 contained in the Company's Annual Report on Form
10-K for the year ended December 25, 2002 (and in the Company's subsequent
quarterly reports on Form 10-Q).
DENNY'S CORPORATION
Condensed Consolidated Statements of Operations
(Unaudited)
14 Weeks 13 Weeks
(In thousands, except per share amounts) Ended Ended
12/31/03 12/25/02
--------------- --------------
Revenue:
Company restaurant sales $ 228,379 $ 205,384
Franchise and license revenue 23,275 21,545
--------------- --------------
Total operating revenue 251,654 226,929
--------------- --------------
Costs of company restaurant sales 200,829 185,129
Costs of franchise and license revenue 7,054 6,606
General and administrative expenses 13,039 10,986
Depreciation and amortization 16,069 20,959
Restructuring charges and exit costs 1,479 442
Impairment charges 2,097 3,594
Gains on disposition of assets and other, net (197) (3,175)
--------------- --------------
Total operating costs and expenses 240,370 224,541
--------------- --------------
Operating income 11,284 2,388
--------------- --------------
Other expenses:
Interest expense, net 20,994 19,214
Other nonoperating expense (income), net 1,078 (13,672)
--------------- --------------
Total other expenses, net 22,072 5,542
--------------- --------------
Loss before income taxes (10,788) (3,154)
Provision for income taxes (37) 412
--------------- --------------
Loss from continuing operations (10,751) (3,566)
Gain on discontinued operations, net -- 4,040
--------------- --------------
Net income (loss) $ (10,751) $ 474
=============== ==============
Basic net income (loss) per share:
Loss on continuing operations $ (0.26) $ (0.09)
Gain on disposal of discontinued operations -- 0.10
--------------- --------------
Net income (loss) $ (0.26) $ 0.01
=============== ==============
Basic weighted average shares outstanding 40,746 40,290
=============== ==============
Diluted net income (loss) per share:
Loss on continuing operations $ (0.26) $ (0.09)
Gain on disposal of discontinued operations -- 0.10
--------------- --------------
Net income (loss) $ (0.26) $ 0.01
=============== ==============
Diluted weighted average shares outstanding 40,746 40,290
=============== ==============
DENNY'S CORPORATION
Condensed Consolidated Statements of Operations
(Unaudited)
53 Weeks 52 Weeks
(In thousands, except per share amounts) Ended Ended
12/31/03 12/25/02
--------------- --------------
Revenue:
Company restaurant sales $ 851,853 $ 858,569
Franchise and license revenue 89,092 90,015
--------------- --------------
Total operating revenue 940,945 948,584
--------------- --------------
Costs of company restaurant sales 755,430 738,208
Costs of franchise and license revenue 27,125 28,576
General and administrative expenses 51,268 50,001
Depreciation and amortization 60,000 83,251
Restructuring charges and exit costs 613 3,521
Impairment charges 3,986 4,556
Gains on disposition of assets and other, net (5,844) (9,127)
--------------- --------------
Total operating costs and expenses 892,578 898,986
--------------- --------------
Operating income 48,367 49,598
--------------- --------------
Other expenses:
Interest expense, net 78,190 76,401
Other nonoperating expense (income), net 901 (32,915)
--------------- --------------
Total other expenses, net 79,091 43,486
--------------- --------------
Income (loss) before income taxes (30,724) 6,112
Provision for (benefit from) income taxes 759 (1,422)
--------------- --------------
Income (loss) from continuing operations (31,483) 7,534
Gain on discontinued operations, net -- 60,602
--------------- --------------
Net income (loss) $ (31,483) $ 68,136
=============== ==============
Basic income (loss) per share:
Income (loss) from continuing operations $ (0.77) $ 0.19
Gain on discontinued operations, net -- 1.50
--------------- --------------
Net income (loss) $ (0.77) $ 1.69
=============== ==============
Basic weighted average shares outstanding 40,687 40,270
=============== ==============
Diluted income (loss) per share:
Income (loss) from continuing operations $ (0.77) $ 0.19
Gain on discontinued operations, net -- 1.49
--------------- --------------
Net income (loss) $ (0.77) $ 1.68
=============== ==============
Diluted weighted average shares outstanding 40,687 40,583
=============== ==============
DENNY'S CORPORATION
Condensed Consolidated Balance Sheet
(Unaudited)
(In thousands) 12/31/03 12/25/02
----------------- -----------------
ASSETS
Current Assets
Cash and cash equivalents $ 7,363 $ 5,717
Other 24,894 28,024
----------------- -----------------
32,257 33,741
----------------- -----------------
Property, net 296,995 324,725
Goodwill 50,404 50,073
Intangible assets, net 83,879 92,257
Other assets 43,117 50,695
----------------- -----------------
Total Assets $ 506,652 $ 551,491
================= =================
LIABILITIES AND SHAREHOLDERS' DEFICIT
Current Liabilities
Current maturities of notes and debentures $ 51,714 $ 554
Current maturities of capital lease obligations 3,462 3,886
Accounts payable and other accrued liabilities 137,549 148,363
----------------- -----------------
192,725 152,803
----------------- -----------------
Long-Term Liabilities
Notes and debentures, less current maturities 509,593 560,359
Capital lease obligations, less current maturities 28,728 31,177
Other 88,538 86,043
----------------- -----------------
626,859 677,579
----------------- -----------------
Total Liabilities 819,584 830,382
Total Shareholders' Deficit (312,932) (278,891)
----------------- -----------------
Total Liabilities and Shareholders' Deficit $ 506,652 $ 551,491
================= =================
DENNY'S CORPORATION
Quarterly Operating Margins
(Unaudited)
14 Weeks 13 Weeks
Ended Ended
(In millions) 12/31/03 12/25/02
--------------------- ---------------------
Total operating revenue (1) $ 251.7 100.0% $ 226.9 100.0%
Company restaurant operations: (2)
Company restaurant sales 228.4 100.0% 205.4 100.0%
Costs of company restaurant sales:
Product costs 60.9 26.7% 49.2 24.0%
Payroll and benefits 96.9 42.4% 92.1 44.9%
Occupancy 12.7 5.6% 12.2 6.0%
Other operating costs:
Utilities 10.0 4.4% 8.7 4.3%
Repairs and maintenance 4.1 1.8% 5.7 2.8%
Marketing 7.4 3.2% 9.6 4.7%
Other 8.8 3.9% 7.6 3.7%
--------------------- ---------------------
Total costs of company restaurant sales 200.8 87.9% 185.1 90.1%
--------------------- ---------------------
Company restaurant operating margin $ 27.6 12.1% $ 20.3 9.9%
--------------------- ---------------------
Franchise operations: (3)
Franchise and license revenue 23.3 100.0% 21.5 100.0%
Costs of franchise and license revenue 7.1 30.3% 6.6 30.7%
--------------------- ---------------------
Franchise operating margin $ 16.2 69.7% $ 14.9 69.3%
--------------------- ---------------------
Total operating margin (1) $ 43.8 17.4% $ 35.2 15.5%
Other operating expenses: (1) (4)
General and administrative expenses 13.0 5.2% 11.0 4.8%
Depreciation and amortization 16.1 6.4% 21.0 9.2%
Restructuring, exit costs and impairment 3.6 1.4% 4.0 1.8%
Gains on disposition of assets and other, (0.2) (0.1)% (3.2) 1.4%
net
--------------------- ---------------------
Total other operating expenses $ 32.5 12.9% $ 32.8 14.5%
--------------------- ---------------------
Operating income (1) $ 11.3 4.5% $ 2.4 1.1%
(1) As a percentage of total operating revenue
(2) As a percentage of company restaurant sales
(3) As a percentage of franchise and license revenue
(4) Other operating expenses such as general and administrative expenses and
depreciation and amortization relate to both company and franchise operations
and are not allocated to costs of company restaurant sales and costs of
franchise and license revenue. As such, operating margins may be considered a
non-GAAP financial measure. Operating margins should be considered as a
supplement to, not as a substitute for, operating income, net income or other
financial measures prepared in accordance with accounting principles generally
accepted in the United States of America.
DENNY'S CORPORATION
EBITDA Reconciliation
(Unaudited)
14 Weeks 13 Weeks 53 Weeks 52 Weeks
Ended Ended Ended Ended
(in millions) 12/31/03 12/25/02 12/31/03 12/25/02
--------------- ---------------- ---------------- ----------------
Net income (loss) from continuing operations $ (10.8) $ (3.6) $ (31.5) $ 7.5
Provision for (benefit from) income taxes 0.0 0.4 0.8 (1.4)
Interest expense, net 21.0 19.2 78.2 76.4
Depreciation and amortization 16.1 21.0 60.0 83.3
--------------- ---------------- ---------------- ----------------
EBITDA (1) (2) $ 26.3 $ 37.0 $ 107.5 $ 165.8
=============== ================ ================ ================
(1) Following SEC guidance, we changed our definition of EBITDA in the
second quarter of 2003. Amounts previously reported for EBITDA have
been reclassified to conform to the current presentation.
(2) We believe that, in addition to other financial measures, EBITDA is an
appropriate indicator to assist in the evaluation of our operating
performance because it provides additional information with respect to
our ability to meet our future debt service, capital expenditures and
working capital needs. However, EBITDA should be considered as a
supplement to, not a substitute for, operating income, net income or
other financial performance measures prepared in accordance with
accounting principles generally accepted in the United States of
America.
14 Weeks 13 Weeks 53 Weeks 52 Weeks
Ended Ended Ended Ended
12/31/03 12/25/02 12/31/03 12/25/02
--------------- ---------------- ---------------- ----------------
Other financial data: (3)
Restructuring charges and exit costs $ 1.5 $ 0.4 $ 0.6 $ 3.5
Impairment charges 2.1 3.6 4.0 4.6
Gains on disposition of assets and other, net (0.2) (3.2) (5.8) (9.1)
Other nonoperating expense (income), net (4) 1.1 (13.7) 0.9 (32.9)
(3) The line items in this section are components of both net income and
EBITDA as shown above.
(4) The fourth quarter and year-to-date results in 2002 included gains of
$13.7 million and $32.9 million, respectively, which were attributable
to senior note debt exchanges completed in April and December of 2002.
DENNY'S CORPORATION
Statistical Data
(Unaudited)
14 Weeks 53 Weeks
Same-Store Sales Ended Ended
(increase/(decrease) vs. prior year) 12/31/03 12/31/03
--------------- ----------------
Company-Owned Same-Store Sales 3.0% 0.2%
Guest Check Average 2.0% 3.2%
Guest Counts 1.0% (2.9%)
Franchised Same-Store Sales 2.8% (0.6%)
14 Weeks 13 Weeks 53 Weeks 52 Weeks
Aggregate Unit Sales Ended Ended Ended Ended
($ in millions) 12/31/03 12/25/02 12/31/03 12/25/02
--------------- --------------- ---------------- ----------------
Sales at Company-Owned Units $ 228.4 $ 205.4 $ 851.9 $ 858.6
Sales at Franchised Units $ 359.7 $ 325.1 $ 1,377.0 $ 1,363.5
14 Weeks 13 Weeks 53 Weeks 52 Weeks
Average Unit Sales Ended Ended Ended Ended
($ in thousands) 12/31/03 12/25/02 12/31/03 12/25/02
--------------- --------------- ---------------- ----------------
Company-Owned $ 408.5 $ 361.5 $ 1,520.0 $ 1,461.2
Franchised $ 336.0 $ 296.9 $ 1,254.8 $ 1,210.2
Restaurant Units Company Franchised Licensed Total
--------------- --------------- ---------------- ----------------
Ending Units 12/25/02 566 1,095 15 1,676
Units Opened/Acquired 1 17 0 18
Units Reacquired 1 (1) 0 0
Units Refranchised 0 0 0 0
Units Closed (7) (49) 0 (56)
--------------- --------------- ---------------- ----------------
Net Change (5) (33) 0 (38)
Ending Units 12/31/03 561 1,062 15 1,638
###