Denny's Corp (DENN)

[MCArmel1]

Denny's beats by $0.01, beats on revenue

May 4 2015, 16:08 ET | About: Denny's Corporation (DENN) | By: Niloofer Shaikh, SA News Editor

Denny's (NASDAQ:DENN): Q1 EPS of $0.10 beats by $0.01.
Revenue of $120.17M (+7.4% Y/Y) beats by $3.33M.
Press Release

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Denny’s Corporation Reports Results for First Quarter 2015
Mon May 4, 2015 4:05 PM|GlobeNewswire | About: DENN

- 7.2% Growth in Domestic System-Wide Same-Store Sales -

- Raises 2015 Full Year Guidance for Same-Store Sales and Adjusted EBITDA* -

SPARTANBURG, S.C., May 4, 2015 (GLOBE NEWSWIRE) -- Dennys Corporation (Nasdaq:DENN), franchisor and operator of one of America's largest franchised full-service restaurant chains, today reported results for its first quarter ended April 1, 2015.

First Quarter Summary


•Domestic system-wide same-store sales growth of 7.2%, comprised of a 7.6% increase at company restaurants and 7.1% increase at domestic franchised restaurants.
•Opened nine system restaurants including one non-traditional location.
•Completed 31 remodels including seven at company restaurants.
•Adjusted EBITDA* of $18.8 million, or 15.7% of total operating revenue, increased 14.8%.
•Net Income of $8.5 million increased 32.7% with Diluted Net Income per Share of $0.10 growing 37.8%.
•Adjusted Net Income of $8.7 million grew 36.0% with Adjusted Net Income per Share* of $0.10 increasing 41.2%.
•Generated $13.2 million of Free Cash Flow* after remodel investments at company restaurants.
•Allocated $5.1 million to repurchase 450,000 shares during the first quarter.

* Adjusted Net Income excludes debt refinancing charges, impairment charges and gains on sales of assets and other. Please refer to the historical reconciliation of Net Income to Adjusted Net Income, Adjusted Net Income per Share, Adjusted EBITDA and Free Cash Flow included in the following tables.

John Miller, President and Chief Executive Officer, stated, We are very pleased to start the year with the strongest quarter of same-store sales in more than a decade, including growth in guest traffic. We are benefiting from solid execution of our brand revitalization strategy focused on elevating our food, service and atmosphere, which is resonating with our guests. Although we have made remarkable progress to date due to our dedicated franchisees, employees and partners, we believe we are still in the early stages of our strategy with key initiatives like our Heritage remodel program penetrating less than 20% of our system. Going forward, we remain committed to driving long-term shareholder value by consistently growing the profitability of our highly franchised business primarily through consistent, sustainable same-store sales and traffic growth."

First Quarter Results

Dennys total operating revenue grew 7.4% to $120.2 million resulting from an increase in both company restaurant sales along with franchise and license revenue. Franchise and license revenue of $34.2 million increased $1.6 million, or 4.8%, primarily due to higher royalty revenue resulting from an increase in same-store sales. Company restaurant sales of $86.0 million grew $6.7 million, or 8.4%, primarily due to the increase in same-store sales and the reopening of the Las Vegas Casino Royale restaurant in November 2014.

In the first quarter, Dennys opened nine franchised restaurants, including one non-traditional location, and closed seventeen system restaurants, including one company restaurant, bringing the total number of restaurants to 1,694. Domestic system-wide same-store sales grew 7.2%, including a 7.6% increase at company restaurants and 7.1% increase at domestic franchised restaurants. Franchise operating margin was $23.2 million, or 67.9% of franchise and license revenue, an increase of $1.3 million, or 0.7 percentage points. This improvement was primarily due to an increase in royalties offset by an increase in direct costs. Company restaurant operating margin of $14.7 million, or 17.1% of company restaurant sales, increased $5.5 million, or 5.6 percentage points. The improvement in company margin was primarily driven by the leveraging effect from the growth in same-store sales and lower product costs.

Total general and administrative expenses were $16.9 million compared to $14.1 million in the prior year primarily due to higher payroll and benefits, and incentive and share-based compensation expenses. Depreciation and amortization expense of $5.0 million improved $0.2 million. Interest expense of $2.1 million improved $0.2 million primarily due to the expiration of capital leases and a $21.3 million reduction in total debt outstanding over the last 12 months. In the first quarter, the provision for income taxes was $4.7 million, reflecting an effective tax rate of 35.4%. Due to the use of net operating loss and tax credit carryforwards, the Company only paid $0.3 million in cash taxes during the first quarter.

Denny's (DENN) first quarter net income of $8.5 million increased 32.7% compared to prior year quarter net income of $6.4 million, with net income per diluted share of $0.10 growing 37.8% compared to $0.07 per diluted share in the prior year quarter. Net income was impacted by the refinancing of its credit facility which resulted in a charge to other nonoperating expense of $0.3 million in the first quarter of 2015. Adjusted net income* of $8.7 million grew 36.0% compared to prior year quarter adjusted net income* of $6.4 million. Adjusted net income per share* of $0.10 increased 41.2% compared with the prior year quarter Adjusted net Income per share* of $0.07.

Dennys generated $13.2 million of Free Cash Flow* in the first quarter, after investing $3.4 million on capital expenditures. During the quarter, the Company repurchased 450,000 shares for $5.1 million. At the end of the first quarter, the Company had 3.4 million shares authorized to be repurchased in addition to the $100 million multi-year share repurchase program approved by the Company's Board of Directors on March 30, 2015. Dennys ended the first quarter with $153.5 million of total debt outstanding, including $135.5 million of borrowings under its revolving credit facility.

Business Outlook

Mark Wolfinger, Denny's Executive Vice President, Chief Administrative Officer and Chief Financial Officer, commented, Our strong first quarter sales growth led to margin expansion and 41% growth in Adjusted Net Income per Share*. We are excited about continuing to grow our highly franchised business and using our Free Cash Flow* to both reinvest in our company restaurants and return value to our shareholders through our ongoing share repurchase program. Due to our strong first quarter results, we are raising our annual guidance for same-store sales and Adjusted EBITDA*."

The following full year 2015 estimates are based on managements expectations at this time. A key consideration impacting the Company's outlook for 2015 is having 52 operating weeks in the year compared to 53 operating weeks in 2014.

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