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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-Q
(Mark One)
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 24, 2020
or
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from _______________ to ________________

Commission File Number 0-18051

DENNY’S CORPORATION
(Exact name of registrant as specified in its charter)
Delaware 13-3487402
(State or other jurisdiction of incorporation or organization) (I.R.S. Employer Identification No.)
203 East Main Street
Spartanburg, South Carolina29319-0001
(Address of principal executive offices)(Zip Code)
(864) 597-8000
(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:
Title of each classTrading Symbol(s) Name of each exchange on which registered
$.01 Par Value, Common StockDENN The Nasdaq Stock Market LLC
 
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.  Yes  ý No  ☐
 
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes  ý  No  ☐
 
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large Accelerated FilerýAccelerated FilerNon-Accelerated FilerSmaller Reporting CompanyEmerging Growth Company
 
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ¨

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
Yes   No  ý

As of July 28, 2020, 63,708,958 shares of the registrant’s common stock, par value $0.01 per share, were outstanding.





TABLE OF CONTENTS
 
 Page
 
  
 
  
 
  
  
2


PART I - FINANCIAL INFORMATION

Item 1.     Financial Statements
 
Denny’s Corporation and Subsidiaries
Condensed Consolidated Balance Sheets
(Unaudited)
 June 24, 2020December 25, 2019
 (In thousands, except per share amounts)
Assets  
Current assets:  
Cash and cash equivalents$21,077  $3,372  
Investments2,240  3,649  
Receivables, net19,049  27,488  
Inventories1,107  1,325  
Assets held for sale1,973  1,925  
Prepaid and other current assets17,567  14,974  
Total current assets63,013  52,733  
Property, net of accumulated depreciation of $149,156 and $147,445, respectively
93,759  97,626  
Financing lease right-of-use assets, net of accumulated amortization of $9,036 and $8,468, respectively
10,672  11,720  
Operating lease right-of-use assets, net149,169  158,550  
Goodwill36,884  36,832  
Intangible assets, net52,681  53,956  
Deferred financing costs, net2,369  1,727  
Deferred income taxes, net28,597  14,718  
Other noncurrent assets31,559  32,525  
Total assets$468,703  $460,387  
Liabilities  
Current liabilities:  
Current finance lease liabilities$1,987  $1,674  
Current operating lease liabilities18,479  16,344  
Accounts payable18,901  20,256  
Other current liabilities37,390  57,307  
Total current liabilities76,757  95,581  
Long-term liabilities:  
Long-term debt307,000  240,000  
Noncurrent finance lease liabilities14,144  14,779  
Noncurrent operating lease liabilities146,080  152,750  
Liability for insurance claims, less current portion11,371  11,454  
Other noncurrent liabilities130,858  83,887  
Total long-term liabilities609,453  502,870  
Total liabilities686,210  598,451  
Shareholders' deficit  
Common stock $0.01 par value; 135,000 shares authorized; June 24, 2020: 109,719 shares issued and 55,709 shares outstanding; December 25, 2019: 109,415 shares issued and 57,095 shares outstanding
$1,097  $1,094  
Paid-in capital600,936  603,980  
Deficit(203,350) (189,398) 
Accumulated other comprehensive loss, net of tax(62,217) (33,960) 
Treasury stock, at cost, 54,010 and 52,320 shares, respectively
(553,973) (519,780) 
Total shareholders' deficit(217,507) (138,064) 
Total liabilities and shareholders' deficit$468,703  $460,387  

See accompanying notes
3


Denny’s Corporation and Subsidiaries
Condensed Consolidated Statements of Operations
(Unaudited)
 Quarter EndedTwo Quarters Ended
 June 24, 2020June 26, 2019June 24, 2020June 26, 2019
 (In thousands, except per share amounts)
Revenue:    
Company restaurant sales$15,128  $95,447  $57,419  $193,992  
Franchise and license revenue25,033  56,437  79,437  109,303  
Total operating revenue40,161  151,884  136,856  303,295  
Costs of company restaurant sales, excluding depreciation and amortization:
    
Product costs4,305  23,363  14,435  47,268  
Payroll and benefits8,039  36,866  25,145  76,698  
Occupancy2,728  5,498  5,891  11,282  
Other operating expenses4,534  14,103  10,253  28,695  
Total costs of company restaurant sales19,606  79,830  55,724  163,943  
Costs of franchise and license revenue, excluding depreciation and amortization
15,244  28,871  44,414  55,929  
General and administrative expenses13,153  18,453  20,895  37,264  
Depreciation and amortization4,058  5,048  8,204  11,281  
Operating (gains), losses and other charges, net
1,627  (26,433) 3,100  (35,368) 
Total operating costs and expenses, net
53,688  105,769  132,337  233,049  
Operating income (loss)(13,527) 46,115  4,519  70,246  
Interest expense, net4,947  5,382  8,898  10,789  
Other nonoperating expense (income), net9,565  (273) 12,328  (1,696) 
Income (loss) before income taxes(28,039) 41,006  (16,707) 61,153  
Provision for (benefit from) income taxes(5,074) 6,767  (2,755) 11,424  
Net income (loss)$(22,965) $34,239  $(13,952) $49,729  
Basic net income (loss) per share$(0.41) $0.57  $(0.25) $0.82  
Diluted net income (loss) per share$(0.41) $0.55  $(0.25) $0.79  
Basic weighted average shares outstanding
55,686  60,290  55,993  60,970  
Diluted weighted average shares outstanding
55,686  62,082  55,993  62,937  
 
See accompanying notes
4


Denny’s Corporation and Subsidiaries
Condensed Consolidated Statements of Comprehensive Income (Loss)
(Unaudited)
 Quarter EndedTwo Quarters Ended
 June 24, 2020June 26, 2019June 24, 2020June 26, 2019
 (In thousands)
Net income (loss)$(22,965) $34,239  $(13,952) $49,729  
Other comprehensive income (loss), net of tax:
Minimum pension liability adjustment, net of tax of $6, $5, $12 and $11, respectively
16  16  33  32  
Changes in the fair value of cash flow derivatives, net of tax of $(772), $(3,701), $(12,567) and $(8,323), respectively
(2,230) (10,619) (35,158) (22,771) 
Reclassification of cash flow derivatives to interest expense, net of tax of $334, $(3), $420 and $(10), respectively
967  (11) 1,206  (28) 
Reclassification of loss related to dedesignation of derivatives to other nonoperating expense (income), net of tax of $1,892, $0, $1,892 and $0, respectively
5,462    5,462    
Reclassification of unrealized losses related to derivatives to interest expense, net of tax of $69, $0, $69 and $0, respectively
200    200    
Other comprehensive income (loss)4,415  (10,614) (28,257) (22,767) 
Total comprehensive income (loss)$(18,550) $23,625  $(42,209) $26,962  

See accompanying notes
5


Denny’s Corporation and Subsidiaries
Condensed Consolidated Statements of Shareholders’ Deficit
For the Quarter Ended June 24, 2020 and June 26, 2019
(Unaudited)
 Common StockTreasury StockPaid-in CapitalDeficitAccumulated
Other
Comprehensive Loss, Net
Total
Shareholders’
Deficit
 SharesAmountSharesAmount
 (In thousands)
Balance, March 25, 2020109,677  $1,097  (54,010) $(553,973) $599,401  $(180,385) $(66,632) $(200,492) 
Net loss—  —  —  —  —  (22,965) —  (22,965) 
Other comprehensive income—  —  —  —  —  —  4,415  4,415  
Share-based compensation on equity classified awards, net of withholding tax—  —  —  —  1,469  —  —  1,469  
Issuance of common stock for share-based compensation25  —  —  —  —  —  —  —  
Exercise of common stock options17  —  —  —  66  —  —  66  
Balance, June 24, 2020109,719  $1,097  (54,010) $(553,973) $600,936  $(203,350) $(62,217) $(217,507) 

 Common StockTreasury StockPaid-in CapitalDeficitAccumulated
Other
Comprehensive Loss, Net
Total
Shareholders’
Deficit
 SharesAmountSharesAmount
 (In thousands)
Balance, March 27, 2019108,986  $1,090  (47,948) $(432,519) $598,825  $(291,318) $(16,299) $(140,221) 
Net income—  —  —  —  —  34,239  —  34,239  
Other comprehensive loss—  —  —  —  —  —  (10,614) (10,614) 
Share-based compensation on equity classified awards, net of withholding tax—  —  —  —  2,637  —  —  2,637  
Purchase of treasury stock—  —  (1,536) (29,056) —  —  —  (29,056) 
Issuance of common stock for share-based compensation118  2  —  —  (2) —  —  —  
Exercise of common stock options187  1  —  —  442  —  —  443  
Balance, June 26, 2019109,291  $1,093  (49,484) $(461,575) $601,902  $(257,079) $(26,913) $(142,572) 


See accompanying notes


6


Denny’s Corporation and Subsidiaries
Condensed Consolidated Statements of Shareholders’ Deficit
For the Two Quarters Ended June 24, 2020 and June 26, 2019
(Unaudited)
 Common StockTreasury StockPaid-in CapitalDeficitAccumulated
Other
Comprehensive Loss, Net
Total
Shareholders’
Deficit
 SharesAmountSharesAmount
 (In thousands)
Balance, December 25, 2019109,415  $1,094  (52,320) $(519,780) $603,980  $(189,398) $(33,960) $(138,064) 
Net loss—  —  —  —  —  (13,952) —  (13,952) 
Other comprehensive loss—  —  —  —  —  —  (28,257) (28,257) 
Share-based compensation on equity classified awards, net of withholding tax
—  —  —  —  (3,107) —  —  (3,107) 
Purchase of treasury stock—  —  (1,690) (34,193) —  —  —  (34,193) 
Issuance of common stock for share-based compensation287  3  —  —  (3) —  —  —  
Exercise of common stock options17  —  —  —  66  —  —  66  
Balance, June 24, 2020
109,719  $1,097  (54,010) $(553,973) $600,936  $(203,350) $(62,217) $(217,507) 

 Common StockTreasury StockPaid-in CapitalDeficitAccumulated
Other
Comprehensive Loss, Net
Total
Shareholders’
Deficit
 SharesAmountSharesAmount
 (In thousands)
Balance, December 26, 2018108,585  $1,086  (47,052) $(416,815) $592,944  $(306,414) $(4,146) $(133,345) 
Cumulative effect adjustment—  —  —  —  —  (394) —  (394) 
Net income—  —  —  —  —  49,729  —  49,729  
Other comprehensive loss—  —  —  —  —  —  (22,767) (22,767) 
Share-based compensation on equity classified awards, net of withholding tax
—  —  —  —  1,652  —  —  1,652  
Purchase of treasury stock—  —  (2,043) (37,997) —  —  —  (37,997) 
Equity forward contract settlement—  —  (389) (6,763) 6,763  —  —  —  
Issuance of common stock for share-based compensation465  5  —  —  (5) —  —  —  
Exercise of common stock options241  2  —  —  548  —  —  550  
Balance, June 26, 2019
109,291  $1,093  (49,484) $(461,575) $601,902  $(257,079) $(26,913) $(142,572) 
 
See accompanying notes

7


Denny’s Corporation and Subsidiaries
Condensed Consolidated Statements of Cash Flows
(Unaudited)
 Two Quarters Ended
 June 24, 2020June 26, 2019
 (In thousands)
Cash flows from operating activities:  
Net income (loss)$(13,952) $49,729  
Adjustments to reconcile net income (loss) to cash flows provided by (used in) operating activities:  
Depreciation and amortization8,204  11,281  
Operating (gains), losses and other charges, net3,100  (35,368) 
Loss on interest rate swap derivatives11,466    
Amortization of deferred financing costs340  304  
Gains on investments(91) (106) 
Losses (gains) on termination of leases53  (83) 
Deferred income tax expense (benefit)(3,705) 4,944  
Share-based compensation expense (benefit)(26) 4,966  
Changes in assets and liabilities:  
Receivables9,342  7,545  
Inventories175  646  
Other current assets(2,593) (4,748) 
Other assets106  (2,392) 
   Operating lease assets and liabilities1,769  (481) 
Accounts payable(537) (2,190) 
Accrued payroll(11,519) (4,597) 
Accrued taxes(712) (952) 
Other accrued liabilities(6,551) (3,840) 
Other noncurrent liabilities(2,827) 497  
Net cash flows provided by (used in) operating activities(7,958) 25,155  
Cash flows from investing activities:  
Capital expenditures(4,476) (6,777) 
Acquisition of restaurants and real estate  (4,706) 
Deposits on acquisitions of real estate  (4,320) 
Proceeds from sales of restaurants, real estate and other assets2,208  47,938  
Investment purchases(1,400) (1,300) 
Proceeds from sale of investments2,900    
Collections on notes receivable918  858  
Issuance of notes receivable(484) (718) 
Net cash flows provided by (used in) investing activities(334) 30,975  
Cash flows from financing activities:  
Revolver borrowings130,000  66,500  
Revolver payments(63,000) (82,000) 
Long-term debt payments(594) (1,547) 
Proceeds from exercise of stock options66  550  
Tax withholding on share-based payments(3,036) (3,178) 
Deferred financing costs(982)   
Purchase of treasury stock(36,008) (37,266) 
Net bank overdrafts(449) (1,923) 
Net cash flows provided by (used in) financing activities25,997  (58,864) 
Increase (decrease) in cash and cash equivalents17,705  (2,734) 
Cash and cash equivalents at beginning of period3,372  5,026  
Cash and cash equivalents at end of period$21,077  $2,292  
 
See accompanying notes
8


Denny’s Corporation and Subsidiaries
Notes to Condensed Consolidated Financial Statements
(Unaudited)

Note 1.     Introduction and Basis of Presentation

Denny’s Corporation, or Denny’s or the Company, is one of America’s largest full-service restaurant chains based on number of restaurants. At June 24, 2020, the Denny's brand consisted of 1,683 restaurants, 1,616 of which were franchised/licensed restaurants and 67 of which were company operated.

The global crisis resulting from the spread of coronavirus ("COVID-19") has had a substantial impact on our restaurant operations for the two quarters ended June 24, 2020, which is expected to continue with the timing of recovery uncertain. During the two quarters ended June 24, 2020, many of our company and franchised and licensed restaurants were temporarily closed and most of the restaurants that remained open had limited operations. This has continued into the third quarter of 2020. Our operating results substantially depend upon the sales volumes, restaurant profitability, and financial stability of our company and franchised and licensed restaurants.

We cannot currently estimate the duration or future negative financial impact of the COVID-19 pandemic on our business; however, we expect that the COVID-19 pandemic will continue to impact our results of operations for the balance of 2020. Ongoing material adverse effects of the COVID-19 pandemic for an extended period could negatively affect our business, results of operations, liquidity and financial condition and could impact our impairment assessments of accounts receivable, intangible assets, long-lived assets and goodwill.

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 (“GAAP”) 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 are reasonable.

These interim condensed consolidated financial statements should be read in conjunction with our consolidated financial statements and notes thereto for the fiscal year ended December 25, 2019 which are contained in our audited Annual Report on Form 10-K for the fiscal year ended December 25, 2019. Certain reclassifications have been made to the prior year amounts to conform to the current year presentation. The results of operations for the interim periods presented are not necessarily indicative of the results for the entire fiscal year ending December 30, 2020.

Note 2.     Summary of Significant Accounting Policies
 
Newly Adopted Accounting Standards

In June 2016, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") 2016-13, Financial Instruments—Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments. The new guidance replaces the incurred loss impairment methodology in current GAAP with a methodology that reflects expected credit losses and requires consideration of a broader range of reasonable and supportable information to inform financial statement users of credit loss estimates. ASU 2016-13 is effective for annual and interim periods beginning after December 15, 2019 (our fiscal 2020) with early adoption permitted for annual and interim periods beginning after December 15, 2018 (our fiscal 2019). The adoption of this guidance did not have a material impact on our condensed consolidated financial statements.

In March 2020, the FASB issued ASU 2020-04, Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting. The new guidance provides optional guidance, for a limited time, to ease the potential burden in accounting for or recognizing the effects of reference rate reform on financial reporting. ASU 2020-04 is effective for a limited time, from March 12, 2020 through December 31, 2022. The Company adopted this ASU on March 12, 2020. The adoption of ASU 2020-04 did not have a significant impact on the Company’s consolidated financial position or results of operations.

In April 2020, the FASB staff issued interpretive guidance that indicated it would be acceptable for entities to make an election to account for lease concessions related to the effects of the COVID-19 pandemic consistent with how those concessions would
9


be accounted for under ASU 2016-02, Leases (Topic 842): Targeted Improvements, as though enforceable rights and obligations for those concessions existed (regardless of whether those enforceable rights and obligations for the concessions explicitly exist in the contract). Consequently, for concessions related to the effects of the COVID-19 pandemic, an entity will not have to analyze each contract to determine whether enforceable rights and obligations for concessions exist in the contract and can elect to apply or not apply the lease modification guidance in Topic 842 to those contracts. This election is available for concessions related to the effects of the COVID-19 pandemic that do not result in a substantial increase in the rights of the lessor or the obligations of the lessee.

We have elected to apply this interpretive guidance to the rent relief we have secured, and have assumed that enforceable rights and obligations for those concessions exist in the lease contract. As such, starting on the effective dates indicated above, we began recognizing abatements or deferrals in rents received from landlords as reductions in variable lease payments. This election will continue while these abatement or deferrals are in effect.

Accounting Standards to be Adopted

In December 2019, the FASB issued ASU 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes, which modifies Topic 740 to simplify the accounting for income taxes. ASU 2019-12 is effective for financial statements issued for annual periods beginning after December 15, 2020, and for the interim periods therein. The adoption of ASU 2019-12 is not expected to have a significant impact on the Company’s consolidated financial position or results of operations.

Note 3.     Receivables
 
Receivables consisted of the following:
 
 June 24, 2020December 25, 2019
 (In thousands)
Receivables, net:  
Trade accounts receivable from franchisees$15,286  $14,551  
Financing receivables from franchisees1,499  2,230  
Vendor receivables768  3,260  
Credit card receivables497  6,806  
Other2,248  915  
Allowance for doubtful accounts(1,249) (274) 
Total receivables, net$19,049  $27,488  
Other noncurrent assets:
  
Financing receivables from franchisees$181  $364  

We recorded $1.0 million of bad debt expense during the two quarters ended June 24, 2020 based on expected losses on franchise-related receivables, primarily as a result of uncertainties related to the impacts of the COVID-19 pandemic.

Note 4.    Goodwill and Other Intangible Assets
(In thousands)
Balance, December 25, 2019$36,832  
Reclassification from assets held for sale52  
Balance, June 24, 2020$36,884  








10


Other intangible assets consisted of the following:

 June 24, 2020December 25, 2019
 Gross Carrying AmountAccumulated AmortizationGross Carrying AmountAccumulated Amortization
 (In thousands)
Intangible assets with indefinite lives:
    
Trade names$44,087  $—  $44,087  $—  
Liquor licenses120  —  120  —  
Intangible assets with definite lives:
    
Reacquired franchise rights15,076  6,602  15,516  5,767  
Intangible assets, net$59,283  $6,602  $59,723  $5,767  

Due to the recent impact of the COVID-19 pandemic to the global economy, including but not limited to the volatility of the Company's stock price as well as that of its competitors, the negative impact on sales at company and franchised and licensed restaurants and the challenging environment for the restaurant industry generally, the Company determined that there were indicators of potential impairment of its goodwill and indefinite-lived intangible assets during the two quarters ended June 24, 2020. As such, the Company performed an impairment assessment for both goodwill and indefinite-lived intangible assets and concluded that the fair value of these assets substantially exceeded their carrying values. However, we recorded less than $0.1 million of impairment related to reacquired franchise rights during the two quarters ended June 24, 2020. See Note 9.

Note 5.     Other Current Liabilities
 
Other current liabilities consisted of the following:
 June 24, 2020December 25, 2019
 (In thousands)
Accrued payroll$8,323  $19,689  
Current portion of liability for insurance claims
6,012  6,515  
Accrued taxes4,912  5,624  
Accrued advertising1,818  6,753  
Gift cards4,964  6,469  
Other11,361  12,257  
Other current liabilities$37,390  $57,307  

11


Note 6.     Fair Value of Financial Instruments

Financial assets and liabilities measured at fair value on a recurring basis are summarized below:
 
 TotalQuoted Prices in Active Markets for Identical Assets/Liabilities
(Level 1)
Significant Other Observable Inputs
(Level 2)
Significant Unobservable Inputs
(Level 3)
 
(In thousands)
Fair value measurements as of June 24, 2020:
Deferred compensation plan investments (1)
$12,210  $12,210  $  $  
Interest rate swaps (2)
(94,612)   (94,612)   
Investments (3)
2,240    2,240    
Total$(80,162) $12,210  $(92,372) $  
Fair value measurements as of December 25, 2019:
Deferred compensation plan investments (1)
$13,517  $13,517  $  $  
Interest rate swaps (2)
(44,670)   (44,670)   
Investments (3)
3,649    3,649    
Total$(27,504) $13,517  $(41,021) $  

(1) The fair values of our deferred compensation plan investments are based on the closing market prices of the elected investments.
(2) The fair values of our interest rate swaps are based upon Level 2 inputs, which include valuation models as reported by our counterparties. The key inputs for the valuation models are quoted market prices, interest rates and forward yield curves. See Note 7 for details on the interest rate swaps.
(3) The fair values of our investments are valued using a readily determinable net asset value per share based on the fair value of the underlying securities. There are no significant redemption restrictions associated with these investments.

Those assets and liabilities measured at fair value on a nonrecurring basis are summarized below:
 
 Significant Unobservable Inputs
(Level 3)
Impairment Charges
 
Fair value measurements for the two quarters ended June 24, 2020:
Assets held and used (1)
$2,718  $2,181  

(1)During the first quarter of 2020, impaired assets were written down to their fair value. To determine fair value, we used the income approach, which assumes that the future cash flows reflect current market expectations. These fair value measurements require significant judgment using Level 3 inputs, such as discounted cash flows from operations, which are not observable from the market, directly or indirectly. There is uncertainty in the projected future cash flows used in the Company's impairment analysis, which requires the use of estimates and assumptions. If actual performance does not achieve the projections, or if the assumptions used change in the future, the Company may be required to recognize impairment charges in future periods.

Assets that are measured at fair value on a non-recurring basis include property, operating right-of-use assets, finance right-of-use assets and reacquired franchise rights. During the two quarters ended June 24, 2020, we recognized impairment charges of $2.2 million related to certain of these assets. See Note 9.

The carrying amounts of cash and cash equivalents, accounts receivables, accounts payable and accrued expenses are deemed to approximate fair value due to the immediate or short-term maturity of these instruments. The fair value of notes receivable approximates the carrying value after consideration of recorded allowances and related risk-based interest rates. The liabilities under our credit facility are carried at historical cost, which approximates fair value. The fair value of our senior secured revolver approximates its carrying value since it is a variable rate facility (Level 2).

12


Note 7.     Long-Term Debt

Denny's and certain of its subsidiaries have a credit facility consisting of a five-year $400 million senior secured revolver (with a $30 million letter of credit sublimit). The credit facility includes an accordion feature that would allow us to increase the size of the revolver to $450 million, subject to approval. As of June 24, 2020, we had outstanding revolver loans of $307.0 million and outstanding letters of credit under the credit facility of $18.3 million. These balances resulted in availability of $74.7 million under the credit facility. The credit facility is available for working capital, capital expenditures and other general corporate purposes. The credit facility is guaranteed by Denny's and its material subsidiaries and is secured by assets of Denny's and its subsidiaries, including the stock of its subsidiaries (other than our insurance captive subsidiary).

On May 13, 2020, we entered into an amendment (the "Second Amendment") to our credit agreement. As a result of the Second Amendment, beginning May 13, 2020 until the date of delivery of our financial statements for the fiscal quarter ending June 30, 2021, the interest rate of the amended credit agreement was increased to LIBOR plus 3.00% and the commitment fee, which is paid on the unused portion of the credit facility, was increased to 0.40%. During this period, we will also have supplemental monthly reporting obligations to our lenders and will be prohibited from paying dividends and making stock repurchases and other general investments. Additionally, capital expenditures will be restricted to $10 million in the aggregate from May 13, 2020 through the fiscal quarter ending March 31, 2021.

The Second Amendment temporarily waives certain financial covenants. The consolidated fixed charge coverage ratio is waived until the fiscal quarter ending March 31, 2021, at which point the covenant level will revert to a minimum of 1.50x. The consolidated leverage ratio covenant is waived until the fiscal quarter ending March 31, 2021, at which point the covenant level will increase from 4.00x to 4.50x, stepping down to 4.25x in the second quarter of 2021 and 4.00x in the third fiscal quarter of 2021 and thereafter. In addition, the Second Amendment adds a monthly minimum liquidity covenant, defined as the sum of unrestricted cash and revolver availability, ranging from $60 million to $70 million, commencing on May 13, 2020 to May 26, 2021. We were in compliance with all financial covenants as of June 24, 2020.

Prior to considering the impact of our interest rate swaps, described below, the weighted-average interest rate on outstanding revolver loans was 3.18% and 3.47% as of June 24, 2020 and December 25, 2019, respectively. Taking into consideration our interest rate swaps, the weighted-average interest rate of outstanding revolver loans was 5.22% and 3.99% as of June 24, 2020 and December 25, 2019, respectively.

Interest Rate Hedges
We have receive-variable, pay-fixed interest rate swaps to hedge a portion of the forecasted cash flows of our floating rate debt. We initially designated the interest rate swaps as cash flow hedges of our exposure to variability in future cash flows attributable to variable interest payments due on forecasted notional amounts. A summary of our interest rate swaps as of June 24, 2020 is as follows:
Trade DateEffective DateMaturity DateNotional AmountFixed Rate
(In thousands)
March 20, 2015March 29, 2018March 31, 2025$120,000  2.44 %
October 1, 2015March 29, 2018March 31, 202650,000  2.46 %
February 15, 2018March 31, 2020December 31, 203380,000  (1)3.19 %

(1)  The notional amounts of the swaps entered into on February 15, 2018 increase annually beginning September 30, 2020 until they reach the maximum notional amount of $425.0 million on September 28, 2029.

To the extent the swaps are highly effective in offsetting the variability of the hedged cash flows, changes in the fair value of the swaps are not included in the Consolidated Statements of Operations but are reported as a component of accumulated other comprehensive loss, net.
13


For the quarter ended June 24, 2020, we determined that a portion of the underlying cash flows related to our hedging relationship entered into in 2018 (“2018 Swaps”) were no longer probable of occurring over the term of the interest rate swaps as a result of the ongoing impacts of the COVID-19 pandemic and using proceeds from our share offering described in Note 16 to repay a portion of our long-term debt. Accordingly, during the quarter ended June 24, 2020, we dedesignated the cash flow relationship and discontinued hedge accounting treatment for the 2018 Swaps. As a result, we reclassified approximately $7.4 million of losses from accumulated other comprehensive loss, net to other nonoperating expense (income), net in our Consolidated Statements of Operations for the quarter ended June 24, 2020 related to the portion of the forecasted transaction no longer considered probable of occurring. The remaining $65.1 million in unrealized losses related to the 2018 Swaps will continue to be included in accumulated other comprehensive loss, net and will be reclassified into the Consolidated Statements of Operations as a component of interest expense, net over the remaining term of the 2018 Swaps. For the quarter ended June 24, 2020, we reclassified unrealized losses of approximately $0.3 million to interest expense, net related to the 2018 Swaps. Additionally, as a result of the dedesignated cash flow relationship related to the 2018 Swaps, changes in the fair value of the 2018 Swaps will be recorded as a component of other nonoperating expense (income), net in our Consolidated Statements of Operations. For the quarter and two quarters ended June 24, 2020, we recorded approximately $4.1 million of unrealized losses as a component of nonoperating expense (income) related to the 2018 Swaps related to changes in fair value. The interest rate swaps entered into in 2015 continue to be designated as cash flow hedges with unrealized gain and losses recorded as a component of accumulated other comprehensive loss, net.

As of June 24, 2020, the fair value of the interest rate swaps was $94.6 million, and recorded as a component of other noncurrent liabilities in our Condensed Consolidated Balance Sheets. We expect to reclassify approximately $4.5 million from accumulated other comprehensive loss, net to interest expense, net in our Consolidated Statements of Operations related to our interest rate swaps during the next twelve months.

Note 8.     Revenues

Our revenues are derived primarily from two sales channels, which we operate as one segment: company restaurants and franchised and licensed restaurants. The following table disaggregates our revenue by sales channel and type of good or service:
 Quarter EndedTwo Quarters Ended
 June 24, 2020June 26, 2019June 24, 2020June 26, 2019
 (Dollars in thousands)
Company restaurant sales$15,128  $95,447  $57,419  $193,992  
Franchise and license revenue:
Royalties6,719  26,672  30,566  51,912  
Advertising revenue7,232  19,884  24,758  38,826  
Initial and other fees1,346  1,755  3,043  2,894  
Occupancy revenue 9,736  8,126  21,070  15,671  
Franchise and license revenue 
25,033  56,437  79,437  109,303  
Total operating revenue$40,161  $151,884  $136,856  $303,295  



Franchise occupancy revenue consisted of the following:
 Quarter EndedTwo Quarters Ended
 June 24, 2020June 26, 2019June 24, 2020June 26, 2019
 (In thousands)
Operating lease revenue$8,060  $5,846  $16,682  $11,271  
Variable lease revenue
1,676  2,280  4,388  4,400  
Total occupancy revenue
$9,736  $8,126  $21,070  $15,671  

Balances related to contracts with customers consist of receivables, deferred franchise revenue and deferred gift card revenue. See Note 3 for details on our receivables.
Deferred franchise revenue consists primarily of the unamortized portion of initial franchise fees that are currently being amortized into revenue and amounts related to development agreements and unopened restaurants that we will begin amortizing into revenue when the related restaurants are opened. Initial franchise fees are amortized over the term of the related franchise
14


agreement, generally 10-20 years. Deferred franchise revenue represents our remaining performance obligations to our franchisees, excluding amounts of variable consideration related to sales-based royalties and advertising. The components of the change in deferred franchise revenue are as follows:
 (In thousands)
Balance, December 25, 2019$23,256  
Fees received from franchisees389  
Revenue recognized (1)
(1,528) 
Balance, June 24, 202022,117  
Less current portion included in other current liabilities2,112  
Deferred franchise revenue included in other noncurrent liabilities$20,005  

(1) Of this amount $1.5 million was included in the deferred franchise revenue balance as of December 25, 2019.

Gift card liabilities consist of the unredeemed portion of gift cards sold in company restaurants and at third party locations. The balance of gift card liabilities represents our remaining performance obligations to our customers. The balance of gift card liabilities as of June 24, 2020 and December 25, 2019 was $5.0 million and $6.5 million, respectively. During the two quarters ended June 24, 2020, we recognized revenue of $0.5 million from gift card redemptions at company restaurants.

Note 9.     Operating (Gains), Losses and Other Charges, Net

Operating (gains), losses and other charges, net consisted of the following:
 
 Quarter EndedTwo Quarters Ended
 June 24, 2020June 26, 2019June 24, 2020June 26, 2019
 (In thousands)
(Gains) losses on sales of assets and other, net
$12  $(26,839) $(1,058) $(36,314) 
Restructuring charges and exit costs
1,615  406  1,977  946  
Impairment charges    2,181    
Operating (gains), losses and other charges, net
$1,627  $(26,433) $3,100  $(35,368) 
 
During the two quarters ended June 24, 2020, (gains) losses on sales of assets and other, net were primarily related to the sales of two real estate parcels. During the quarter ended June 26, 2019, (gains) losses on sale of assets and other, net included $24.2 million in gains on the sale of 37 company restaurants and $3.1 million in gains on the sales of three parcels of real estate. During the two quarters ended June 26, 2019, (gains) losses on sales of assets and other, net included $26.4 million in gains on the sales of 40 company restaurants and $10.6 million on the sale of four parcels of real estate.

As of June 24, 2020, we had recorded assets held for sale at their carrying amount of $2.0 million (consists of property of $1.7 million and other assets of $0.3 million) related to five parcels of real estate. As of December 25, 2019, we had recorded assets held for sale at their carrying amount of $1.9 million (comprised of property of $1.6 million, other assets of $0.2 million and goodwill of $0.1 million) related to four company restaurants and two pieces of real estate. During the two quarters ended June 24, 2020, two pieces of real estate were sold and the four company restaurants were reclassified out of assets held for sale, as they were no longer expected to be sold in the next 12 months.

Restructuring charges and exit costs consisted of the following:
 
 Quarter EndedTwo Quarters Ended
 June 24, 2020June 26, 2019June 24, 2020June 26, 2019
 (In thousands)
Exit costs$50  $52  $94  $174  
Severance and other restructuring charges
1,565  354  1,883  772  
Total restructuring charges and exit costs
$1,615  $406  $1,977  $946  
15



Exit cost liabilities were $0.2 million as of June 24, 2020 and December 25, 2019. Exit cost liabilities related to lease costs are included as a component of operating lease liabilities in our Condensed Consolidated Balance Sheets.

As of June 24, 2020 and December 25, 2019, we had accrued severance and other restructuring charges of $1.6 million and $0.9 million, respectively. The balance as of June 24, 2020 is expected to be paid during the next 12 months.

We review our property, right-of-use assets ("ROU assets") and definite-lived intangible assets for impairment whenever events or changes in circumstances indicate that the carrying value of certain long-lived and ROU assets may not be recoverable. Based on our review, we recorded impairment charges of $2.2 million for the two quarters ended June 24, 2020 resulting from the impacts of the COVID-19 pandemic. The $2.2 million included $1.1 million related to property, $1.0 million related to operating lease ROU assets and less than $0.1 million related to each of finance lease ROU assets and reacquired franchise rights.

Note 10.     Share-Based Compensation

Total share-based compensation included as a component of general and administrative expenses was as follows:
 Quarter EndedTwo Quarters Ended
 June 24, 2020June 26, 2019June 24, 2020June 26, 2019
 (In thousands)
Employee share awards$1,326  $2,463  $(420) $4,461  
Restricted stock units for board members
185  250  394  505  
Total share-based compensation
$1,511  $2,713  $(26) $4,966  
 
Employee Share Awards

Employee share awards consist of performance share units and restricted stock units (which are equity classified). During the quarter and two quarters ended June 24, 2020, as a component of our annual compensation program, we granted certain employees approximately 0.8 million restricted stock units with a grant date fair value of $10.46 per share that vest over a two-year period, as defined under the terms of the award. The vesting period for these restricted stock units is the two-year period beginning May 20, 2020 through May 20, 2022.

During the two quarters ended June 24, 2020, we issued 0.3 million shares of common stock related to vested performance share units. In addition, 0.1 million shares of common stock were withheld in lieu of taxes related to vested performance share units.
 
As of June 24, 2020, we had approximately $12.3 million of unrecognized compensation cost related to all unvested performance share awards and restricted share awards outstanding, which have a weighted average remaining contractual term of 1.7 years.
 
Restricted Stock Units for Board Members

During the quarter and two quarters ended June 24, 2020, we granted less than 0.1 million restricted stock units (which are equity classified) with a weighted average grant date fair value of $10.46 per unit to non-employee members of our Board of
Directors. The restricted stock units vest after a one year service period. A director may elect to convert these awards into
shares of common stock either on a specific date in the future (while still serving as a member of our Board of Directors), upon
termination as a member of our Board of Directors, or in three equal annual installments commencing after termination of
service as a member of our Board.

During the quarter and two quarters ended June 24, 2020, less than 0.1 million restricted stock units were converted into shares of common stock.

As of June 24, 2020, we had approximately $0.8 million of unrecognized compensation cost related to all unvested restricted stock unit awards outstanding, which have a weighted average remaining contractual term of 0.9 years.

16


Note 11.     Income Taxes

The effective income tax rate was 18.1% for the quarter ended and 16.5% for the two quarters ended June 24, 2020, compared to 16.5% and 18.7% for the prior year periods, respectively. The 2020 quarterly and year-to-date rates included a benefit from the reclassification of cash flow derivatives from accumulated other comprehensive loss, net of 7.0% and 11.7%, respectively. During the quarter ended June 26, 2019, we completed an Internal Revenue Service federal income tax audit of the 2016 tax year. Upon completion of this audit, revaluations of certain tax positions were performed and as a result, we recognized a net benefit of 4.8% and 3.3% for the 2019 quarterly and year-to-date periods, respectively. In addition, the 2019 quarterly and year-to-date rates included the impact of excess tax benefits relating to share-based compensation of 3.6% and 2.8%, respectively.

On March 27, 2020, the Coronavirus Aid, Relief, and Economic Security (CARES) Act was signed into law as a response to the economic impacts of the COVID-19 pandemic. There is no significant impact on the Company for the quarter and year-to-date from the CARES Act.

Note 12.     Net Income (Loss) Per Share
 
The amounts used for the basic and diluted net income (loss) per share calculations are summarized below:
 Quarter EndedTwo Quarters Ended
 June 24, 2020June 26, 2019June 24, 2020June 26, 2019
 (In thousands, except for per share amounts)
Net income (loss)
$(22,965) $34,239  $(13,952) $49,729  
Weighted average shares outstanding - basic
55,686  60,290  55,993  60,970  
Effect of dilutive share-based compensation awards (1)
  1,792    1,967  
Weighted average shares outstanding - diluted
55,686  62,082  55,993  62,937  
Basic net income (loss) per share
$(0.41) $0.57  $(0.25) $0.82  
Diluted net income (loss) per share
$(0.41) $0.55  $(0.25) $0.79  
Anti-dilutive share-based compensation awards(1)
3,493  630  3,493  630  
        
(1) For the quarter and two quarters ended June 24, 2020, share-based compensation awards have been omitted from the calculations because they have an anti-dilutive effect on loss per share.

Note 13.     Shareholders' Deficit

Share Repurchases

We suspended share repurchases as of February 27, 2020 and terminated our previously approved Rule 10b5-1 Repurchase Plan effective March 16, 2020 in light of uncertain market conditions arising from the COVID-19 pandemic. Under our amended credit agreement, we are prohibited, until the date of delivery of our financial statements for the fiscal quarter ending June 30, 2021, from making any stock repurchases.

Prior to entering into our amended credit agreement, during the quarter ended March 25, 2020, we repurchased a total of 1.7 million shares of our common stock for approximately $34.2 million. During the quarter ended March 25, 2020, we completed the $200 million share repurchase program that was approved by the Board of Directors in October 2017. In December 2019, our Board of Directors approved a share repurchase program authorizing us to repurchase up to $250 million of our common stock (in addition to the October 2017 authorization). At June 24, 2020, there was approximately $248.0 million remaining that can be used to repurchase our common stock under the current program. Repurchased shares are included as treasury stock in our Condensed Consolidated Balance Sheets and our Condensed Consolidated Statement of Shareholders' Deficit.

17


In November 2018, as part of our previously authorized share repurchase programs, we entered into a $25 million accelerated share repurchase (the "ASR") agreement with MUFG Securities EMEA plc (“MUFG”). We paid $25 million in cash and received approximately 1.1 million shares of our common stock (which represents the minimum shares to be delivered based on the cap price) and recorded $18.2 million of treasury stock related to these shares. The remaining balance of $6.8 million was recorded as additional paid-in capital in shareholders’ deficit as of December 26, 2018 as an equity forward contract.

During the quarter ended March 27, 2019, we settled the ASR agreement with MUFG. As a result, we received final delivery of an additional 0.4 million shares of our common stock. The total number of shares repurchased was based on a combined discounted volume-weighted average price (“VWAP”) of $17.04 per share, which was determined based on the average of the daily VWAP of our common stock, less a fixed discount, over the term of the ASR agreement. As a result of settling the ASR agreement, we recorded $6.8 million of treasury stock related to the settlement of the equity forward contract related to the ASR agreement.


Accumulated Other Comprehensive Loss, Net

The components of the change in accumulated other comprehensive loss, net were as follows:
Defined Benefit PlansDerivativesAccumulated Other Comprehensive Loss, Net
(In thousands)
Balance as of December 25, 2019$(781) $(33,179) $(33,960) 
Amortization of net loss (1)
45  —  45  
Changes in the fair value of cash flow derivatives—  (47,725) (47,725) 
Reclassification of cash flow derivatives to interest expense, net (2)
—  1,626  1,626  
Reclassification of loss related to dedesignation of derivatives to other nonoperating expense (income)(3)
—  7,354  7,354  
Reclassification of unrealized losses related to derivatives to interest expense, net(3)
—  269  269  
Income tax (expense) benefit related to items of other comprehensive loss
(12) 10,186  10,174  
Balance as of June 24, 2020$(748) $(61,469) $(62,217) 

(1) Amount related to our defined benefit plans that was reclassified from accumulated other comprehensive loss, net and included as a component of pension expense within general and administrative expenses in our Condensed Consolidated Statements of Operations during the two quarters ended June 24, 2020.
(2) Amounts reclassified from accumulated other comprehensive loss, net into interest expense, net in our Condensed Consolidated Statements of Operations represent payments either received from or made to the counterparty for the interest rate swaps. See Note 7 for additional details.
(3) During the quarter ended June 24, 2020, we dedesignated the cash flow relationship and discontinued hedge accounting treatment for the 2018 Swaps. As a result, we reclassified approximately $7.4 million of losses from accumulated other comprehensive loss, net to other nonoperating expense (income), net in our Condensed Consolidated Statements of Operations related to the portion of forecasted transaction no longer considered probable of occurring. The remaining losses related to the 2018 Swaps will continue to be included in accumulated other comprehensive loss, net and will be recognized in as a component of interest expense, net in our Condensed Consolidated Statements of Operations over the remaining term of the 2018 Swaps. For the quarter ended June 24, 2020, we reclassified approximately $0.3 million of losses to interest expense, net related to the 2018 Swaps. See Note 7 for additional details.


Note 14.     Commitments and Contingencies

We have guarantees related to certain franchisee loans. Payments under these guarantees would result from the inability of a franchisee to fund required payments when due. Through June 24, 2020, no events had occurred that caused us to make payments under these guarantees. There were $0.4 million and $0.6 million of loans outstanding under these programs as of June 24, 2020 and December 25, 2019, respectively. As of June 24, 2020, the maximum amount payable under the loan guarantees was $0.4 million. As a result of these guarantees, we have recorded liabilities of less than $0.1 million as of both June 24, 2020 and December 25, 2019, which are included as a component of other noncurrent liabilities in our Condensed Consolidated Balance Sheets and other nonoperating expense (income), net in our Condensed Consolidated Statements of Operations.

18


There are various claims and pending legal actions against or indirectly involving us, incidental to and arising out of the ordinary course of the business. In the opinion of management, based upon information currently available, the ultimate liability with respect to these proceedings and claims will not materially affect our consolidated results of operations or financial position. 

Note 15.     Supplemental Cash Flow Information
 Two Quarters Ended
 June 24, 2020June 26, 2019
 (In thousands)
Income taxes paid, net$277  $11,992  
Interest paid$8,057  $10,230  
Noncash investing and financing activities:  
Issuance of common stock, pursuant to share-based compensation plans$5,808  $7,453  
Noncash consideration received in connection with the sale of real estate$  $3,000  
Execution of finance leases$11  $305  
Treasury stock payable$  $803  
Receivables in connection with disposition of property$  $470  
 

Note 16. Subsequent Events

Issuance and Sale of Common Stock

On July 1, 2020, the Company entered into an underwriting agreement with Wells Fargo Securities, LLC, as representative of the several underwriters named therein, for the issuance and sale by the Company of 8,000,000 shares of its common stock, par value $0.01 per share, in an underwritten public offering at a price to the public of $9.15 per share. On July 6, 2020, the Company received net proceeds of $69.6 million from the sale of shares, after deducting the underwriters' discounts and commissions and offering expenses.

Pursuant to the underwriting agreement, the Company also granted the underwriters a 30-day option to purchase up to an additional 1,200,000 shares of common stock.
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Item 2.     Management’s Discussion and Analysis of Financial Condition and Results of Operations

Forward-Looking Statements

This report includes forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, as codified in Section 27A of the Securities Act and Section 21E of the Securities Exchange Act of 1934, as amended. The Company urges caution in considering its current trends and any outlook on its operations and financial results disclosed in this report. In addition, certain matters discussed in this report may constitute forward-looking statements. These forward-looking statements, which reflect management's best judgment based on factors currently known, are intended to speak only as of the date such statements are made and involve risks, uncertainties, and other factors that may cause the actual performance of Denny’s Corporation, its subsidiaries, and underlying restaurants to be materially different from the performance indicated or implied by such statements. Words such as “expect”, “anticipate”, “believe”, “intend”, “plan”, “hope”, "will" and variations of such words and similar expressions are intended to identify such forward-looking statements. Except as may be required by law, the Company expressly disclaims any obligation to update these forward-looking statements to reflect events or circumstances after the date of this report or to reflect the occurrence of unanticipated events. Factors that could cause actual performance to differ materially from the performance indicated by these forward-looking statements include, among others: the rapidly evolving COVID-19 pandemic and related containment measures, including the potential for further operational disruption from government mandates affecting restaurants; economic, public health and political conditions that impact consumer confidence and spending, including COVID-19; competitive pressures from within the restaurant industry; the level of success of our operating initiatives and advertising and promotional efforts; adverse publicity; health concerns arising from food-related pandemics, outbreaks of flu viruses, or other diseases; changes in business strategy or development plans; terms and availability of capital; regional weather conditions; overall changes in the general economy (including with regard to energy costs), particularly at the retail level; political environment (including acts of war and terrorism); and other factors from time to time set forth in the Company’s SEC reports and other filings, including but not limited to the discussion in Management’s Discussion and Analysis and the risks identified in Item 1A. Risk Factors contained in the Company’s Annual Report on Form 10-K for the year ended December 25, 2019, the Company's Quarterly Report on Form 10-Q for the quarter ended March 25, 2020, this report on Form 10-Q and in the Company’s subsequent quarterly reports on Form 10-Q.
Impact of the COVID-19 Pandemic

On March 11, 2020, the World Health Organization classified the COVID-19 outbreak as a pandemic. Following the pandemic declaration, federal, state and local governments responded by implementing restrictions on travel, "stay at home" directives, "social distancing" guidance, limitations of dine-in food service, and mandated dining room closures, which collectively had a significant adverse impact on the Company’s business performance, results of operations and cash flows for the quarter and two quarters ended June 24, 2020.

Operational Update

In response to various government orders restricting dine-in restaurant food service, the Company implemented a number of initiatives to support Denny’s restaurants including: free delivery when guests place orders through the Company’s website or mobile app, a contactless delivery option, streamlined menus to facilitate greater operational efficiency, a platform of shareable family meal packs, a curb-side ordering and pick up option, selling grocery items where permitted, highlighting value products, and evolving our dining service to include outdoor seating options.

The Company remains focused on the safety and wellbeing of its guests, restaurant teams, franchisees, employees, and suppliers. Retraining materials and communications have been distributed to the entire system of restaurants, reinforcing strict food safety procedures, handwashing and personal hygiene standards, and enhanced daily deep cleaning protocols. Restaurant teams are subject to daily temperature checks, are required to wear face masks and gloves, and must wash their hands with alcohol-based sanitizer at regular intervals throughout their shift. The Company has remained in close contact with public health officials and government agencies to ensure all public health concerns are appropriately addressed. While these enhanced health and safety measures were developed in anticipation of dine-in service restrictions beginning to be lifted and as Denny’s restaurants prepared for new social-distancing standards in their dining rooms, the current restrictions are expected largely to continue and have an adverse impact on our operating costs.

The Company has also worked closely with its suppliers to address contingency plans and has not experienced any significant supply chain issues thus far.


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Current Trends

Domestic system-wide same-store sales1 sequentially improved on a weekly basis during the second quarter ended June 24, 2020, as compared to the equivalent weeks of 2019. During the second quarter, dine-in restrictions continued to ease with most restaurants operating with streamlined menus and reduced operating hours. Due to the recent significant increase in COVID-19 cases, various states reinstated dining room closures and the Company experienced a slight decline in domestic system-wide same-store sales1 in fiscal July.

In an effort to provide greater transparency due to COVID-19, Denny's is providing the following tables that present second and third quarter weekly results compared to the equivalent fiscal weeks in 2019:

Domestic System-Wide Same-Store Sales1 for the Weeks Ended:
Fiscal April: (76%)Fiscal May: (65%)Fiscal June: (41%)
4/014/084/154/224/295/065/135/205/276/036/106/176/24
(79%)(78%)(76%)(72%)(72%)(68%)(63%)(60%)(55%)(47%)(39%)(37%)(29%)

Fiscal July: (39%)*
7/017/087/157/22*
(33%)(42%)(41%)(41%)
*Preliminary results

Number of Domestic Restaurants Operating with Open Dining Rooms for the Weeks Ended:

Fiscal AprilFiscal MayFiscal June
4/014/084/154/224/295/65/135/205/276/036/106/176/24
7222113395216469671,1161,2341,3551,424

Fiscal July
7/17/87/157/22
1,4301,1241,0321,035

Average unit volumes of off-premise sales have almost doubled from February 2020 to July 2020, supported by temporarily waived delivery fees, new “Dine-Thru” curbside service programs, and recently launched shareable family meal packs.

As of July 22, 2020, 97% of domestic Denny's restaurants were operating, most with take-out and delivery options, streamlined menus, and reduced operating hours, which impacted same-store sales1 results. Also as of July 22, 2020, 55 Denny's restaurants remain temporarily closed, including 47 domestic franchise restaurants and 8 international franchise restaurants. Additionally, 1,035 domestic restaurants were operating with open dining rooms with capacity limitations across 28 states.

Franchisee Support

Direct financial relief to Denny’s franchise partners has included: deferral of remodels until March 31, 2021, and most of our domestic development commitments for one year from their original due date, both of which will be reviewed to determine if an additional extension is appropriate; deferral of royalty and advertising fees for week 11 of the 2020 fiscal year; abatement of such fees for weeks 12 and 13 of the 2020 fiscal year; a $3 million royalty abatement in the second fiscal quarter of 2020; and a 12-week lease deferral for franchisees operating in properties owned by the Company. Fiscal weeks 11, 12 and 13 were all within the Company’s first quarter ended March 25, 2020.

Additionally, the Company has secured rent relief in the form of abatements or deferrals for over 77% of the leases in which the Company is a lessee, including those instances in which the Company subleases to franchisees and will be extending the same relief to the franchisees as a pass through.

Furthermore, the Company has worked closely with key vendors and primary third-party franchise lenders to help secure additional relief on behalf of franchisees. Substantially all of Denny’s franchisees pursued available forms of relief under recent
21


federal stimulus programs, and franchisees representing approximately 99% of total domestic franchise restaurants have received funding under the Paycheck Protection Program.

Cost Savings Initiatives and Capital Allocation

In response to the COVID-19 pandemic, the Company began implementing cost savings measures in the first quarter, including suspended travel, canceled in-person field meetings, placed holds on all open corporate and field positions, significantly reduced restaurant level staffing across the Company portfolio, meaningfully reduced compensation for the Company’s board of directors and multiple levels of management, and furloughed over 25% of the employees at its corporate office, approximately half of which were subsequently separated from the Company. The Company has begun to ease certain of these cost savings measures. For example, the Company has resumed recruiting for certain corporate and field positions. In addition, the compensation reductions expired on June 25, 2020.

The Company is also analyzing whether federal tax credits available in connection with the COVID-19 pandemic apply to wages paid to retained employees during the crisis. In addition, the Company suspended share repurchases as of February 27, 2020, and terminated its Rule 10b5-1 Plan effective March 16, 2020, in light of uncertain market conditions arising from the COVID-19 pandemic.

For the quarter ended March 25, 2020, the Company was in compliance with its financial covenants related to its credit facility, but projected that it would not be in compliance with certain financial covenants beginning for the quarter ended June 24, 2020 due to the impact of the COVID-19 pandemic. Subsequent to the quarter ended March 25, 2020, effective May 13, 2020, the Company and certain of its subsidiaries entered into a second amendment to the current credit facility which amends the current credit agreement dated as of October 26, 2017. See Liquidity and Capital Resources - Credit Facility. As of June 24, 2020, the Company was in compliance with its financial covenants related to the amended credit facility.

On July 6, 2020, subsequent to the end of the second quarter 2020, the Company closed on the issuance and sale of 8,000,000 shares of common stock. Net proceeds of $69.6 million were received after deducting the underwriters’ discounts and commissions and offering expenses payable by the Company and partially disbursed to pay down the outstanding balance on the credit facility. Immediately following these two events, the Company had approximately $12 million of cash on hand and $237 million outstanding on the credit facility, yielding approximately $98 million of total available liquidity after considering the current liquidity covenant under the amended credit facility.

______________

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





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Statements of Operations
 
The following table contains information derived from our Condensed Consolidated Statements of Operations expressed as a percentage of total operating revenue, except as noted below. Percentages may not add due to rounding.
 
 Quarter EndedTwo Quarters Ended
 June 24, 2020June 26, 2019June 24, 2020June 26, 2019
 (Dollars in thousands)
Revenue:        
Company restaurant sales$15,128  37.7 %$95,447  62.8 %$57,419  42.0 %$193,992  64.0 %
Franchise and license revenue25,033  62.3 %56,437  37.2 %79,437  58.0 %109,303  36.0 %
Total operating revenue40,161  100.0 %151,884  100.0 %136,856  100.0 %303,295  100.0 %
Costs of company restaurant sales, excluding depreciation and amortization (a):
    
Product costs4,305  28.5 %23,363  24.5 %14,435  25.1 %47,268  24.4 %
Payroll and benefits8,039  53.1 %36,866  38.6 %25,145  43.8 %76,698  39.5 %
Occupancy2,728  18.0 %5,498  5.8 %5,891  10.3 %11,282  5.8 %
Other operating expenses4,534  30.0 %14,103  14.8 %10,253  17.9 %28,695  14.8 %
Total costs of company restaurant sales
19,606  129.6 %79,830  83.6 %55,724  97.0 %163,943  84.5 %
Costs of franchise and license revenue, excluding depreciation and amortization (a)
15,244  60.9 %28,871  51.2 %44,414  55.9 %55,929  51.2 %
General and administrative expenses13,153  32.8 %18,453  12.1 %20,895  15.3 %37,264  12.3 %
Depreciation and amortization4,058  10.1 %5,048  3.3 %8,204  6.0 %11,281  3.7 %
Operating (gains), losses and other charges, net
1,627  4.1 %(26,433) (17.4)%3,100  2.3 %(35,368) (11.7)%
Total operating costs and expenses, net
53,688  133.7 %105,769  69.6 %132,337  96.7 %233,049  76.8 %
Operating income (loss)(13,527) (33.7)%46,115  30.4 %4,519  3.3 %70,246  23.2 %
Interest expense, net4,947  12.3 %5,382  3.5 %8,898  6.5 %10,789  3.6 %
Other nonoperating expense (income), net
9,565  23.8 %(273) (0.2)%12,328  9.0 %(1,696) (0.6)%
Income (loss) before income taxes(28,039) (69.8)%41,006  27.0 %(16,707) (12.2)%61,153  20.2 %
Provision for (benefit from) income taxes(5,074) (12.6)%6,767  4.5 %(2,755) (2.0)%11,424  3.8 %
Net income (loss)$(22,965) (57.2)%$34,239  22.5 %$(13,952) (10.2)%$49,729  16.4 %
Other Data:        
Company average unit sales$246   $612   $890   $1,193   
Franchise average unit sales$183   $419   $589   $821   
Company equivalent units (b)
62   156   64   163   
Franchise equivalent units (b)1,622   1,543   1,627   1,539   
Company same-store sales increase (decrease) (c)(d)
(64.9)% 4.4 % (35.9)% 2.9 % 
Domestic franchise same-store sales increase (decrease) (c)(d)
(56.1)% 3.7 % (28.4)% 2.5 % 
          
(a)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.
(b)Equivalent units are calculated as the weighted average number of units outstanding during a defined time period.
(c)Same-store sales include sales from company restaurants or non-consolidated franchised and licensed restaurants that were open the same period in the prior year.
(d)Prior year amounts have not been restated for 2020 comparable units.
23


Unit Activity
 
 Quarter EndedTwo Quarters Ended
 June 24, 2020June 26, 2019June 24, 2020June 26, 2019
Company restaurants, beginning of period
67  170  68  173  
Units opened—  —  —  —  
Units acquired from franchisees
—  —  —  —  
Units sold to franchisees—  (37) —  (40) 
Units closed—  —  (1) —  
End of period67  133  67  133  
Franchised and licensed restaurants, beginning of period
1,628  1,535  1,635  1,536  
Units opened   11   
Units purchased from Company
—  37  —  40  
Units acquired by Company—  —  —  —  
Units closed(15) (9) (30) (15) 
End of period1,616  1,569  1,616  1,569  
Total restaurants, end of period1,683  1,702  1,683  1,702  

Company Restaurant Operations
 
During the quarter ended June 24, 2020, company restaurant sales decreased $80.3 million, or 84.2%, primarily resulting from 94 fewer equivalent company restaurants as compared to the prior year period and a 64.9% decrease in company same-store sales caused primarily by dine-in restrictions and temporary closures related to the COVID-19 pandemic. During the two quarters ended June 24, 2020, company restaurant sales decreased $136.6 million, or 70.4%, primarily resulting from 98 fewer equivalent company restaurants as compared to the prior year period and a 35.9% decrease in company same-store sales. The decreases in equivalent company restaurants were the result of our refranchising and development strategy during 2019.

Total costs of company restaurant sales as a percentage of company restaurant sales was 129.6% for the quarter and 97.0% year-to-date compared to 83.6% and 84.5%, respectively, for the prior year periods.

Product costs were 28.5% for the quarter and 25.1% year-to-date compared to 24.5% and 24.4%, respectively, for the prior year periods as a result of increases in paper products due to the increase in delivery and to-go orders related to the COVID-19 pandemic.

Payroll and benefits were 53.1% for the quarter and 43.8% year-to-date compared to 38.6% and 39.5%, respectively, in the prior year periods. The increases as a percentage of sales were primarily the result of sales deleveraging caused by lower sales resulting from the COVID-19 pandemic. For the quarter and year-to-date periods, management and staff payroll, including payroll taxes, increased 17.0 percentage points and 4.7 percentage points as a percentage of sales. The primary driver of these increases was an increase in management labor as we retained a significant portion of our management staff during the time that restaurants were closed or operating under government restrictions. To a limited extent, reductions in unit level incentive compensation costs and workers' compensation costs have partially offset the negative impact of lower sales. For the quarter and year-to-date periods, incentive compensation costs decreased 0.8 percentage points and 0.6 percentage points, respectively, as a result of the decrease in unit level profitability caused by the COVID-19 pandemic. For the quarter, worker’s compensation costs decreased 2.2 percentage points as a result of fewer claims and positive claims development.

Occupancy costs were 18.0% for the quarter and 10.3% year-to-date compared to 5.8% for the respective prior year periods. The increases as a percentage of sales were primarily due to the sales deleveraging effect caused by the COVID-19 pandemic. Additionally, the impact of last year's refranchising of restaurants where we own the real estate is contributing to the rate increase.

24


Other operating expenses were comprised of the following amounts and percentages of company restaurant sales: 
 Quarter EndedTwo Quarters Ended
 June 24, 2020June 26, 2019June 24, 2020June 26, 2019
 (Dollars in thousands)
Utilities$1,098  7.3 %$3,106  3.3 %$2,534  4.4 %$6,478  3.3 %
Repairs and maintenance428  2.8 %2,080  2.2 %1,217  2.1 %3,968  2.0 %
Marketing607  4.0 %3,239  3.4 %1,726  3.0 %6,946  3.6 %
Other direct costs2,401  15.9 %5,678  5.9 %4,776  8.3 %11,303  5.8 %
Other operating expenses$4,534  30.0 %$14,103  14.8 %$10,253  17.9 %$28,695  14.8 %

Other operating costs were higher as a percentage of sales due to the deleveraging effect of lower sales as well as higher delivery costs due to the increase in delivery sales during the COVID-19 pandemic.

Franchise Operations
 
Franchise and license revenue and costs of franchise and license revenue consisted of the following amounts and percentages of franchise and license revenue for the periods indicated:
 
 Quarter EndedTwo Quarters Ended
 June 24, 2020June 26, 2019June 24, 2020June 26, 2019
 (Dollars in thousands)
Royalties$6,719  26.8 %$26,672  47.3 %$30,566  38.5 %$51,912  47.5 %
Advertising revenue7,232  28.9 %19,884  35.2 %24,758  31.2 %38,826  35.5 %
Initial and other fees1,346  5.4 %1,755  3.1 %3,043  3.8 %2,894  2.6 %
Occupancy revenue 9,736  38.9 %8,126  14.4 %21,070  26.5 %15,671  14.3 %
Franchise and license revenue 
$25,033  100.0 %$56,437  100.0 %$79,437  100.0 %$109,303  100.0 %
Advertising costs$7,232  28.9 %$19,884  35.2 %$24,758  31.2 %$38,826  35.5 %
Occupancy costs 5,829  23.3 %5,512  9.8 %13,238  16.7 %10,761  9.8 %
Other direct costs 2,183  8.7 %3,475  6.2 %6,418  8.1 %6,342  5.8 %
Costs of franchise and license revenue 
$15,244  60.9 %$28,871  51.2 %$44,414  55.9 %$55,929  51.2 %

Franchise and license revenue decreased $31.4 million, or 55.6%, for the quarter and $29.9 million, or 27.3%, year-to-date compared to the prior year periods. Royalties decreased $20.0 million, or 74.8%, and $21.3 million, or 41.1%, for the quarter and year-to-date periods, respectively, compared to the prior year periods. Advertising revenue decreased $12.7 million, or 63.6%, for the quarter and $14.1 million, or 36.2%, year-to-date compared to the prior year periods. The decreases in royalty and advertising revenue primarily resulted from 56.1% and 28.4% decreases in domestic same-store sales for the respective periods. Additionally, we abated $3.0 million and $4.9 million of royalties in the quarter-to-date and year-to-date periods, respectively, and $1.2 million of advertising fees year-to-date to help our franchisees weather the impact of the COVID-19 pandemic. Partially offsetting these decreases for both periods were increases in equivalent units of 79 and 88 on a quarter-to-date and year-to-date basis, respectively, resulting from our refranchising and development strategy in 2019.

Initial and other fees decreased $0.4 million, or 23.3%, for the quarter and increased $0.1 million, or 5.1%, year-to-date compared to the prior year periods. Occupancy revenue increased $1.6 million, or 19.8%, for the quarter and $5.4 million, or 34.5%, year-to-date compared to the prior year periods. The increases in occupancy revenue resulted from additional leases and subleases to franchisees as a result of our refranchising and development strategy in 2019.

Costs of franchise and license revenue decreased $13.6 million, or 47.2%, for the quarter and $11.5 million, or 20.6%, year-to-date compared to the prior year periods. The decreases were primarily related to the decrease in advertising costs, which corresponded to the related advertising revenue decreases noted above. Occupancy costs increased $0.3 million, or 5.7%, for the quarter and $2.5 million, or 23.0%, year-to-date compared to prior year periods. The increases in occupancy costs were primarily related to the sale of leased company units to franchisees in the prior year. Partially offsetting the occupancy cost increase during the quarter was lower percentage rent expense as a result of the sales decreases. Other direct franchise costs
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decreased $1.3 million, or 37.2%, for the quarter and increased $0.1 million, or 1.2%, year-to-date compared to the prior year periods. The decrease in other direct franchise costs for the quarter was mostly due to a reduction in franchise administrative costs. Year-to-date, the decrease in franchise administrative costs was offset by a $1.0 million bad debt allowance resulting from expected losses on franchise-related receivables due to the COVID-19 pandemic. As a result, costs of franchise and license revenue increased to 60.9% and 55.9% for the quarter and two quarters ended June 24, 2020 from 51.2% for both of the respective prior year periods.

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 consisted of the following:
 Quarter EndedTwo Quarters Ended
 June 24, 2020June 26, 2019June 24, 2020June 26, 2019
 (In thousands)
Corporate administrative expenses
$9,701  $12,436  $21,482  $25,305  
Share-based compensation1,511  2,713  (26) 4,966  
Incentive compensation
 2,919  15  5,457  
Deferred compensation valuation adjustments
1,940  385  (576) 1,536  
Total general and administrative expenses
$13,153  $18,453  $20,895  $37,264  

Corporate administrative expenses decreased $2.7 million for the quarter and $3.8 million year-to-date primarily due to cost savings initiatives related to the COVID-19 pandemic, as well as the rationalization of certain business costs in connection with our refranchising and development strategy. Share-based compensation decreased $1.2 million for the quarter and $5.0 million year-to-date. Incentive compensation decreased $2.9 million for the quarter and $5.4 million year-to-date. The decreases in share-based compensation and incentive compensation primarily resulted from lower expectations of meeting performance measures due to the impacts of the COVID-19 pandemic. Changes in deferred compensation valuation adjustments have offsetting gains or losses on the underlying nonqualified deferred plan investments included as a component of other non-operating expense (income), net, for the corresponding periods.
 
Depreciation and amortization consisted of the following:
 Quarter EndedTwo Quarters Ended
 June 24, 2020June 26, 2019June 24, 2020June 26, 2019
 (In thousands)
Depreciation of property and equipment
$2,810  $3,267  $5,691  $7,550  
Amortization of financing lease right-of-use assets
467  886  967  1,881  
Amortization of intangible and other assets
781  895  1,546  1,850  
Total depreciation and amortization expense
$4,058  $5,048  $8,204  $11,281  

The decreases in depreciation and amortization expense during the current quarter and year-to-date periods were primarily related to refranchising restaurants as part of our refranchising and development strategy during 2019.
 
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Operating (gains), losses and other charges, net consisted of the following:
 Quarter EndedTwo Quarters Ended
 June 24, 2020June 26, 2019June 24, 2020June 26, 2019
 (In thousands)
(Gains) losses on sales of assets and other, net
$12  $(26,839) $(1,058) $(36,314) 
Restructuring charges and exit costs
1,615  406  1,977  946  
Impairment charges
—  —  2,181  —  
Operating (gains), losses and other charges, net
$1,627  $(26,433) $3,100  $(35,368) 

(Gains) losses on sales of assets and other, net during the two quarters ended June 24, 2020, were primarily related to the sale of two parcels of real estate. During the quarter ended June 26, 2019, (gains) losses on sale of assets and other, net included $24.2 million in gains on the sale of 37 company restaurants and $3.1 million in gains on the sales of three parcels of real estate. During the two quarters ended June 26, 2019, (gains) losses on sales of assets and other, net included $26.4 million in gains on the sales of 40 company restaurants and $10.6 million on the sale of four parcels of real estate. These sales were part of our refranchising and development strategy.

Restructuring charges and exit costs consisted of the following:
 
 Quarter EndedTwo Quarters Ended
 June 24, 2020June 26, 2019June 24, 2020June 26, 2019
 (In thousands)
Exit costs$50  $52  $94  $174  
Severance and other restructuring charges
1,565  354  1,883  772  
Total restructuring and exit costs
$1,615  $406  $1,977  $946  

During the quarter ended June 24, 2020, the Company permanently separated with approximately 50 support center staff. As a result, severance and other restructuring charges increased $1.2 million and $1.1 million during the quarter and two quarters ended June 24, 2020, respectively.

Impairment charges of $2.2 million during the two quarters ended June 24, 2020 were the result of an assessment of the recoverability of assets resulting from the impact of the COVID-19 pandemic.

Operating income (loss) was a loss of $13.5 million for the quarter and income of $4.5 million year-to-date compared to income of $46.1 million and $70.2 million, respectively, for the prior year periods.

Interest expense, net consisted of the following:
 
 Quarter EndedTwo Quarters Ended
 June 24, 2020June 26, 2019June 24, 2020June 26, 2019
 (In thousands)
Interest on credit facilities
$2,160  $3,541  $4,539  $6,935  
Interest on interest rate swaps, net
1,570  (14) 1,895  (38) 
Interest on financing lease liabilities
774  1,318  1,559  2,834  
Letters of credit and other fees
250  320  511  624  
Interest income
(37) (43) (67) (85) 
Total cash interest
4,717  5,122  8,437  10,270  
Amortization of deferred financing costs
188  152  340  304  
Interest accretion on other liabilities
42  108  121  215  
Total interest expense, net
$4,947  $5,382  $8,898  $10,789  
        
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Interest expense, net decreased by $0.4 million for the quarter and $1.9 million year-to-date primarily due to a reduction in financing lease interest during the quarter and year-to-date periods resulting from sales of restaurants to franchisees during the prior year and lower net interest rates on borrowings during the year-to-date period.

Other nonoperating expense (income), net was expense of $9.6 million for the quarter and $12.3 million year-to-date, compared to income of $0.3 million and $1.7 million, respectively, for the prior year periods. Other nonoperating expense (income) primarily consisted of recognized losses on interest rate swaps of $11.5 million resulting from the discontinuance of hedge accounting treatment on a portion of our interest rate swaps during the current quarter. For additional details related to the interest rate swaps, see Note 7 to our unaudited Condensed Consolidated Financial Statements in Part I, Item 1 of this report.

Provision for (benefit from) income taxes was a benefit of $5.1 million for the quarter and $2.8 million year-to-date, compared to expense of $6.8 million and $11.4 million for the prior year periods. The effective tax rate was 18.1% for the quarter and 16.5% year-to-date, compared to 16.5% and 18.7%, respectively, for the prior year periods. The 2020 quarterly and year-to-date rates included a benefit from the reclassification of cash flow derivatives from accumulated other comprehensive loss, net of 7.0% and 11.7%, respectively. During the quarter ended June 26, 2019, we completed an Internal Revenue Service federal income tax audit of the 2016 tax year. Upon completion of this audit, revaluations of certain tax positions were performed and as a result, we recognized a net benefit of 4.8% and 3.3% for the 2019 quarterly and year-to-date periods, respectively. In addition, the 2019 quarterly and year-to-date rates included the impact of excess tax benefits relating to share-based compensation of 3.6% and 2.8%, respectively.

Net income (loss) was a net loss of $23.0 million for the quarter and $14.0 million year-to-date compared with net income of $34.2 million and $49.7 million, respectively, for the prior year periods.

Liquidity and Capital Resources

Our primary sources of liquidity and capital resources are cash generated from operations and borrowings under our credit facility (as described below). Principal uses of cash are operating expenses, capital expenditures and, prior to the second quarter of 2020, the repurchase of shares of our common stock.
 
The following table presents a summary of our sources and uses of cash and cash equivalents for the periods indicated:
 
 Two Quarters Ended
 June 24, 2020June 26, 2019
 (In thousands)
Net cash provided by (used in) operating activities$(7,958) $25,155  
Net cash provided by (used in) investing activities(334) 30,975  
Net cash provided by (used in) financing activities25,997  (58,864) 
Increase (decrease) in cash and cash equivalents$17,705  $(2,734) 
  
Net cash flows used in operating activities were $8.0 million for the two quarters ended June 24, 2020 compared to net cash flows provided by operating activities of $25.2 million for the two quarters ended June 26, 2019. The decrease in cash flows provided by operating activities was primarily due to the timing of prior year accrual payments and the impacts of the COVID-19 pandemic during the two quarters ended June 24, 2020. We believe that our estimated cash flows from operations for 2020, combined with our capacity for additional borrowings under our credit facility and cash on hand, will enable us to meet our anticipated cash requirements and fund capital expenditures over the next 12 months.
 
Net cash flows used in investing activities were $0.3 million for the two quarters ended June 24, 2020. These cash flows were primarily comprised of capital expenditures of $4.5 million and investment purchases of $1.4 million which were mostly offset by proceeds from sales of restaurants and real estate of $2.2 million and proceeds from the sale of investments of $2.9 million. Net cash flows provided by investing activities were $31.0 million for the two quarters ended June 26, 2019. These cash flows were primarily comprised of proceeds from sales of restaurants and real estate of $47.9 million, partially offset by capital expenditures of $6.8 million, acquisitions of real estate of $4.7 million, deposits on acquisitions of real estate of $4.3 million, and investment purchases of $1.3 million.

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Our principal capital requirements have been largely associated with the following:
  
 Two Quarters Ended
 June 24, 2020June 26, 2019
 (In thousands)
Facilities$1,966  $3,108  
New construction 114  1,901  
Remodeling965  1,019  
Information technology1,138  641  
Other293  108  
Capital expenditures (excluding acquisitions)$4,476  $6,777  
 
Cash flows provided by financing activities were $26.0 million for the two quarters ended June 24, 2020, which included net long-term debt borrowings of $66.4 million, partially offset by cash payments for stock repurchases of $36.0 million. Long-term debt borrowings during the current year included $19.5 million to provide enhanced financial flexibility in light of uncertain market conditions arising from the COVID-19 pandemic. Cash flows used in financing activities were $58.9 million for the two quarters ended June 26, 2019, which included cash payments for stock repurchases of $37.3 million, and net long-term debt repayments of $17.0 million.

Our working capital deficit was $13.7 million at June 24, 2020 compared to $42.8 million at December 25, 2019, and included $19.5 million of excess cash held as a result of liquidity measures taken in response to the COVID-19 pandemic. The decrease in working capital deficit was primarily related to additional revolver borrowings made during the two quarters ended June 24, 2020 in response to the COVID-19 outbreak. 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 becomes due after the receipt of cash from the related sales.

Credit Facility

Denny's and certain of its subsidiaries have a credit facility consisting of a five-year $400 million senior secured revolver (with a $30 million letter of credit sublimit). The credit facility includes an accordion feature that would allow us to increase the size of the revolver to $450 million, subject to approval. As of June 24, 2020, we had outstanding revolver loans of $307.0 million and outstanding letters of credit under the credit facility of $18.3 million. These balances resulted in availability of $74.7 million under the credit facility. The credit facility is available for working capital, capital expenditures and other general corporate purposes. The credit facility is guaranteed by Denny's and its material subsidiaries and is secured by assets of Denny's and its subsidiaries, including the stock of its subsidiaries (other than our insurance captive subsidiary).

On May 13, 2020, we entered into the Second Amendment to our credit agreement. As a result of the Second Amendment, beginning May 13, 2020 until the date of delivery of our financial statements for the fiscal quarter ending June 30, 2021, the interest rate of the amended credit agreement was increased to LIBOR plus 3.00% and the commitment fee, which is paid on the unused portion of the credit facility, was increased to 0.40%. During this period, we will also have supplemental monthly reporting obligations to our lenders and will be prohibited from paying dividends and making stock repurchases and other general investments. Additionally, capital expenditures will be restricted to $10 million in the aggregate, from May 13, 2020 through the fiscal quarter ending March 31, 2021.

The Second Amendment temporarily waives certain financial covenants. The consolidated fixed charge coverage ratio is waived until the fiscal quarter ending March 31, 2021, at which point the covenant level will revert to a minimum of 1.50x. The consolidated leverage ratio covenant is waived until the fiscal quarter ending March 31, 2021, at which point the covenant level will increase from 4.00x to 4.50x, stepping down to 4.25x in the second quarter of 2021 and 4.00x in the third fiscal quarter of 2021 and thereafter. In addition, the Second Amendment adds a monthly minimum liquidity covenant, defined as the sum of unrestricted cash and revolver availability, ranging from $60 million to $70 million, commencing on May 13, 2020 to May 26, 2021. We were in compliance with all financial covenants as of June 24, 2020.

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Prior to considering the impact of our interest rate swaps, described below, the weighted-average interest rate on outstanding revolver loans was 3.18% and 3.47% as of June 24, 2020 and December 25, 2019, respectively. Taking into consideration our interest rate swaps, the weighted-average interest rate of outstanding revolver loans was 5.22% and 3.99% as of June 24, 2020 and December 25, 2019, respectively.

Issuance and Sale of Common Stock

On July 1, 2020, the Company entered into an underwriting agreement with Wells Fargo Securities, LLC, as representative of the several underwriters named therein, for the issuance and sale by the Company of 8,000,000 shares of its common stock, par value $0.01 per share, in an underwritten public offering at a price to the public of $9.15 per share. On July 6, 2020, the Company received net proceeds of $69.6 million from the sale of shares, after deducting the underwriters' discounts and commissions and offering expenses.

Pursuant to the underwriting agreement, the Company also granted the underwriters a 30-day option to purchase up to an additional 1,200,000 shares of common stock, which we currently expect will expire unexercised.

Implementation of New Accounting Standards

Information regarding the implementation of new accounting standards is incorporated by reference from Note 2 to our unaudited Condensed Consolidated Financial Statements set forth in Part I, Item 1 of this report.

Item 3.     Quantitative and Qualitative Disclosures About Market Risk

Interest Rate Risk

We have exposure to interest rate risk related to certain instruments entered into for other than trading purposes. Specifically, as of June 24, 2020, borrowings under our credit facility bore interest at variable rates based on LIBOR plus 3.00% per annum.

We have receive-variable, pay-fixed interest rate swaps to hedge a portion of the forecasted cash flows of our floating rate debt. We initially designated these interest rate swaps as cash flow hedges of our exposure to variability in future cash flows attributable to variable interest payments due on forecasted notional debt obligations. A summary of our interest rate swaps as of June 24, 2020 is as follows:
Trade DateEffective DateMaturity DateNotional AmountFixed Rate
(In thousands)
March 20, 2015March 29, 2018March 31, 2025$120,000  2.44 %
October 1, 2015March 29, 2018March 31, 202650,000  2.46 %
February 15, 2018March 31, 2020December 31, 203380,000  (1)3.19 %

(1)  The notional amounts of the swaps entered into on February 15, 2018 increase annually beginning September 30, 2020 until they reach the maximum notional amount of $425.0 million on September 28, 2029.

For the quarter ended June 24, 2020, we determined that a portion of the underlying cash flows related to our hedging relationship entered into in 2018 ("2018 Swaps") were no longer probable of occurring over the term of the interest rate swaps. Accordingly, during the quarter ended June 24, 2020, we dedesignated the cash flow relationship and discontinued hedge accounting treatment for the 2018 Swaps. See Note 7 to our unaudited Condensed Consolidated Financial Statements in Part I, Item 1 of this report.

As of June 24, 2020, the fair value of the interest rate swaps was $94.6 million and is recorded as a component of other noncurrent liabilities in our Condensed Consolidated Balance Sheets. The interest rate swaps effectively increased our ratio of fixed rate debt from approximately 5% of total debt to approximately 82% of total debt. We expect to reclassify approximately $4.5 million from accumulated other comprehensive loss, net to interest expense, net in our Consolidated Statements of Operations related to our interest rate swaps during the next twelve months.. Additionally, as a result of the dedesignated cash flow relationship related to the 2018 Swaps, changes in the fair value of the 2018 Swaps will be recorded as a component of other nonoperating expense (income), net in our Consolidated Statements of Operations. Depending on market considerations, fluctuations in these fair values could be significant. See Note 7 to our unaudited Condensed Consolidated Financial Statements included in Part I, Item 1 of this report for additional details.

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Based on the levels of borrowings under the credit facility at June 24, 2020, if interest rates changed by 100 basis points, our annual cash flow and income before taxes would change by approximately $0.6 million. This computation is determined by considering the impact of hypothetical interest rates on the credit facility at June 24, 2020, taking into consideration the interest rate swaps that will be in effect during the annual period. However, the nature and amount of our borrowings may vary as a result of future business requirements, market conditions and other factors.

With the exception of these changes in the fair value of our interest rate swaps and in the levels of borrowings under our credit facility, there have been no material changes in our quantitative and qualitative market risks since the prior reporting period. For additional information related to our interest rate swaps, including changes in the fair value, refer to Notes 6 and 13 to our unaudited Condensed Consolidated Financial Statements in Part I, Item 1 of this report.
  
Item 4.     Controls and Procedures

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 Chief Executive Officer, John C. Miller, and our Senior Vice President and Chief Financial Officer, Robert P. Verostek) as of the end of the period covered by this Quarterly Report on Form 10-Q, 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. Miller and Verostek each concluded that our disclosure controls and procedures are effective to provide reasonable assurance that information required to be disclosed in the reports that we file or submit under the Exchange Act (i) is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission's rules and forms and (ii) is accumulated and communicated to our management, including Messrs. Miller and Verostek, as appropriate to allow timely decisions regarding required disclosure.

There were 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.

PART II - OTHER INFORMATION

Item 1.     Legal Proceedings

Information regarding legal proceedings is incorporated by reference from Note 14 to our unaudited Condensed Consolidated Financial Statements set forth in Part I, Item 1 of this report.

Item 1A.     Risk Factors

The Company is supplementing the Risk Factors previously disclosed in Item 1A of the Annual Report on Form 10-K for the fiscal year ended December 25, 2019, (the “Annual Report”) and the Quarterly Report on Form 10-Q for the fiscal quarter ended March 25, 2020. The following risk factors should be read in conjunction with the Risk Factors disclosed in the Annual Report.

The COVID-19 pandemic has disrupted and is expected to continue to disrupt our business, which could continue to have a material adverse impact on our business, results of operations, liquidity and financial condition for an extended period of time.

The outbreak of COVID-19 has had a material adverse effect on our business, results of operations, liquidity and financial condition. In 2020, the COVID-19 pandemic has significantly impacted the economy in general, and our business specifically, and it could continue to negatively affect our business in a number of ways. These effects could include, but are not limited to:

Disruptions or restrictions on our employees’ ability to work effectively due to travel bans, quarantines, shelter-in-place orders or other limitations.
Temporary restrictions on and closures of our company operated restaurants and our franchised and licensed restaurants or our suppliers.
Failure of third parties on which we rely, including our franchisees and suppliers, to meet their respective obligations to the Company, or significant disruptions in their ability to do so, which may be caused by their own financial or operational difficulties or issues with the regional or national supply chain.
Volatility of commodity costs due to the COVID-19 outbreak.
Disruptions or uncertainties related to the COVID-19 outbreak for a sustained period of time which could hinder our ability to achieve our strategic goals and our ability to meet financial obligations as they come due.
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Customer reluctance to return to in-restaurant dining.

The extent to which the COVID-19 pandemic, or other outbreaks of disease or similar public health threats, materially and adversely impacts our business, results of operations, liquidity and financial condition is highly uncertain and will depend on future developments. Such developments may include the geographic spread and duration of the virus, the severity of the disease and the actions that may be taken by various governmental authorities and other third parties in response to the outbreak.

In addition, how quickly, and to what extent, normal economic and operating conditions can resume cannot be predicted, and the resumption of normal business operations may be delayed or constrained by lingering effects of the COVID-19 pandemic on us or our franchisees, suppliers, third-party service providers, and/or customers. During the quarter ended June 24, 2020, state and local governments started to ease certain restrictions on our Company operated and franchise restaurants and we began to reopen dining rooms with capacity limitations. While we currently intend for all Company owned restaurants to reopen, certain Company operated and franchise restaurants may remain permanently closed or ultimately close as a result of the pandemic. The effects of the pandemic on our business could be long-lasting and could continue to have adverse effects on our business, results of operations, liquidity, cash flows and financial condition, some of which may be significant, and may adversely impact our ability to operate our business on the same terms as we conducted business prior to the pandemic even after our restaurants fully reopen.

As dining room restrictions continue to ease, we expect to incur increased cleaning and supply costs and labor inefficiencies as we adjust to improved sales volumes and enhanced health and safety protocols. We may not be able to attract customers to our reopened restaurants given the risks, or perceived risks, of gathering in public places, dining in restaurants and complying with social distancing and/or depressed consumer sentiment due to adverse economic conditions, including job losses, among other things. We also may be unable to reinstate, retain and incentivize our employees. Previously terminated or furloughed employees may have found other jobs or otherwise be unwilling or unable to return to work. Even as restaurants resume operations, a single case of COVID-19 in a restaurant could result in additional costs and further closures, or a “second wave” or recurrence of COVID-19 cases could cause state and local governments to reinstate restrictions on our restaurants, as we have seen recently, and we may need to temporarily close our restaurants or otherwise limit operations.

Risks Related to our Common Stock and Recent Issuance and Sale of Common Stock

The market price of our common stock has been and may continue to be volatile or may decline regardless of our operating performance.

The market price for our common stock has been and may continue to be volatile. In addition, the market price of our common stock may fluctuate significantly in response to a number of factors, many of which we cannot control, including:

the ongoing implications of the COVID-19 pandemic on our business and operations, which include, among other things, reduced customer traffic at our restaurants, potential increases in commodity costs, closures of or reduced operating hours at our affected restaurants, our ability to implement growth plans, adverse effects on the health of our workforce, our financial results and liquidity, and may also include potential inability to obtain supplies and our ability to comply with covenants under our credit agreement;
delays in the planned openings of new restaurants;
temporary or prolonged restaurant closures;
actual or anticipated quarterly fluctuations in our operating results and financial conditions;
anticipated or pending investigations, proceedings, or litigation that involve or affect us;
stock price performance of our competitors;
future sales of our common stock;
changes in the price and availability of food commodities;
fluctuations in stock market prices and volumes;
actions by competitors;
changes in senior management or key personnel;
changes in financial estimates by securities analysts;
negative earnings or other announcements by us or other restaurant companies;
downgrades in our credit ratings or the credit ratings of our competitors;
incurrence of indebtedness or issuances of capital stock;
global economic, legal and regulatory factors unrelated to our performance; and
32


the other factors set forth in this Quarterly Report on Form 10-Q, our most recent Annual Report on Form 10-K and our other filings with the United States Securities and Exchange Commission.

Volatility in the market price of our common stock may cause investors to suffer a loss on their investment.

In addition, stock markets have experienced extreme price and volume fluctuations that have affected and continue to affect the market prices of equity securities of many companies in our industry. In the past, stockholders have instituted securities class action litigation following periods of market volatility. If we were involved in securities litigation, we could incur substantial costs and our resources and the attention of management could be diverted from our business.

Sales of our common stock by existing stockholders, or the perception that these sales may occur, especially by our directors, executive officers or significant stockholders, may cause our stock price to decline.

If our existing stockholders, in particular our directors, executive officers or other affiliates, sell substantial amounts of our common stock in the public market, or are perceived by the public market as intending to sell, the trading price of our common stock could decline. In addition, sales of these shares of common stock could impair our ability to raise capital, should we wish to do so. We cannot predict the timing or amount of future sales of our common stock by existing stockholders, but such sales, or the perception that such sales could occur, may adversely affect prevailing market prices for our common stock.

Stockholders may experience dilution as a result of future equity offerings.

In order to raise additional capital, we may in the future offer additional shares of our common stock or other securities convertible into or exchangeable for our common stock. We cannot predict the effect, if any, of future sales of our common stock, or the availability of our common stock for future sales, on the value of our common stock, and investors purchasing shares or other securities in the future could have rights superior to existing stockholders.

Because we do not anticipate paying any cash dividends on our common stock in the foreseeable future, capital appreciation, if any, will be the sole source of gain for our stockholders..

We have not historically declared or paid cash dividends on our common stock. We currently intend to retain all of our future earnings, if any, to finance the growth and development of our business. In addition, our credit agreement includes certain limitations on our ability to pay cash dividends and the terms of any future debt agreements may preclude us from paying dividends. As a result, capital appreciation, if any, of our common stock will be the sole source of gain for our stockholders for the foreseeable future.

Some provisions of Delaware law and our certificate of incorporation and by-laws may deter third parties from acquiring us, which could reduce the market price of our common stock.

Our restated certificate of incorporation, as amended, and our amended and restated by-laws provide for, among other things:

the authorization of undesignated preferred stock, the terms of which may be established and shares of which may be issued without stockholder approval;
restrictions on the ability of our stockholders to fill a vacancy on our board of directors;
advance notice requirements for stockholder nominations of directors and other proposals; and
restrictions on the ability of stockholders to call a special meeting of stockholders.

In addition, we are subject to Section 203 of the Delaware General Corporation Law. Subject to certain exceptions, Section 203 prevents a publicly held Delaware corporation from engaging in a "business combination" with any "interested stockholder" for three years following the date that the person became an interested stockholder, unless the interested stockholder attained such status with the approval of our board of directors or unless the business combination is approved in a prescribed manner. The term "business combination" is broadly defined to include mergers, consolidations, and sales and other dispositions of assets having an aggregate market value equal to 10% or more of the consolidated assets of the corporation, and other specified transactions resulting in financial benefits to the interested stockholder. Under Section 203, an "interested stockholder" generally is defined as a person who, together with affiliates and associates, owns (or within the three prior years did own) 15% or more of the corporation’s outstanding voting stock.

These anti-takeover defenses could discourage, delay or prevent a transaction involving a change in control of our company, which, under certain circumstances, could reduce the market price of our common stock. These provisions could also
33


discourage proxy contests and make it more difficult for stockholders to elect directors of their choosing and cause us to take other corporate actions than they desire.

Our board of directors can authorize the issuance of preferred stock, which could diminish the rights of holders of our common stock and make a change of control of the Company more difficult even if it might benefit our stockholders.

Our board of directors is authorized to issue shares of preferred stock in one or more series and to fix the voting powers, preferences and other rights and limitations of the preferred stock. Accordingly, we may issue shares of preferred stock with a preference over our common stock with respect to dividends or distributions on liquidation or dissolution, or that may otherwise adversely affect the voting or other rights of the holders of common stock.

Issuances of preferred stock, depending upon the rights, preferences and designations of the preferred stock, may have the effect of delaying, deterring or preventing a change of control of the Company, even if that change of control might benefit our stockholders.

34


Item 6.     Exhibits
 
The following are included as exhibits to this report: 
Exhibit No.Description 
10.1
10.2
31.1
  
31.2
  
32.1
101.INS
Inline XBRL Instance Document (the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document)
  
101.SCHInline XBRL Taxonomy Extension Schema Document
  
101.CALInline XBRL Taxonomy Extension Calculation Linkbase Document
  
101.LABInline XBRL Taxonomy Extension Label Linkbase Document
  
101.PREInline XBRL Taxonomy Extension Presentation Linkbase Document
  
101.DEFInline XBRL Taxonomy Extension Definition Linkbase Document
104Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101)
35


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 thereunto duly authorized.

 
 
 DENNY'S CORPORATION 
    
Date:July 31, 2020By:    /s/ Robert P. Verostek 
  Robert P. Verostek 
  Senior Vice President and
Chief Financial Officer
 
    
Date:July 31, 2020By:    /s/ Jay C. Gilmore 
  Jay C. Gilmore 
  Vice President,
Chief Accounting Officer and
Corporate Controller
 
36
exhibitno1012020long-ter
2020 Long-Term Incentive Program Denny’s Corporation Restricted Stock Unit 203 East Main Street Award Certificate Spartanburg, SC 29319 (“Grantee”), Denny’s Corporation (the “Company”) has granted to you a restricted stock unit award (the “Award”) denominated in a number of restricted stock units (the “Restricted Stock Units”). The terms and conditions relating to the Restricted Stock Units are set forth in this Award Certificate. The Restricted Stock Units are rights that entitle you to earn shares of the Company’s $0.01 par value common stock (“Shares”), on a one-for-one basis. The Award is granted under the Denny’s Corporation 2017 Omnibus Incentive Plan (the “Plan”). By accepting the Award, you shall be deemed to have agreed to the terms and conditions set forth in this Award Certificate. The Restricted Stock Units will vest (become non-forfeitable) in full on May 20, 2022, subject to your continued employment with the Company through such date, unless vesting is accelerated under Section 2 or Section 3 of the attached Terms and Conditions in the event of certain employment terminations or a change in control. The number of Restricted Stock Units covered by your Award will be determined as follows:  Value of Restricted Stock Units (“Value”):  Number of Restricted Stock Units = Value/$10.701 or RSU’s2 This Award is governed by the terms of the Plan and the Program Description, and subject to the Terms and Conditions on the following page. Capitalized terms used herein and not otherwise defined shall have the meanings assigned to such terms in the Plan. Grant Date: May 20, 2020 Jill Van Pelt Senior Vice President, Human Resources For Denny’s Corporation 1 The average closing market price per Share for the 90 days ending in the Grant Date. 2 Rounded up to nearest whole share


 
TERMS AND CONDITIONS 1. Vesting and Forfeiture of Award. The Award will vest and become non-forfeitable in full on May 20, 2022 (the “Regular Vesting Date”), subject to accelerated vesting under certain circumstances as provided in Section 2 and Section 3 below. Notwithstanding anything contained in the Plan to the contrary, if Grantee’s employment with the Company terminates for any reason other than as set forth in paragraph (a) or (b) of Section 2 below, Grantee shall forfeit all of Grantee’s right, title and interest in and to any unvested Restricted Stock Units as of the date of termination of employment. In addition, if Grantee’s employment is terminated by the Company for Cause, Grantee shall also forfeit any vested Restricted Stock Units that have not yet been converted to Shares. The Restricted Stock Units which vest on the Regular Vesting Date shall convert into Shares and be paid within 30 days following the Regular Vesting Date. 2. Vesting Under Certain Employment Terminations. The Award shall be subject to accelerated vesting in connection with a termination of employment under certain circumstances, as set forth below. (a) Upon Grantee’s termination of employment with the Company due to death or Disability, a pro rata portion of the Restricted Stock Units to the extent then outstanding and not previously vested will vest and become non-forfeitable (the pro rata portion shall be determined by multiplying the number of Restricted Stock Units covered by your Award by a fraction, the numerator of which is the number of days elapsed from the Grant Date to the employment termination date, and the denominator of which is 730 (as so determined, the “Pro Rata Amount”)). The vested Restricted Stock Units shall convert into Shares and be paid out as provided in Section 4. A Grantee’s employment with the Company shall be terminated upon the Grantee being Disabled. (b) In event of Grantee’s termination of employment with the Company by the Grantee due to Retirement (as defined below), the Pro Rata Amount (as defined in Section 2(a) above) of the Restricted Stock Units to the extent then outstanding and not previously vested will vest and become non-forfeitable as of the Regular Vesting Date, provided Grantee has not engaged in any Restricted Activities with a Competitor (each as defined below) prior to the Regular Vesting Date. The vested Restricted Stock Units shall convert into Shares and be paid out as provided in Section 4.2 For purposes of this Award Certificate: “Retirement” means Grantee’s voluntary resignation or termination of employment without Cause on or after attainment of age 55, provided that the sum of Grantee’s age and years of service with the Company is equal to or greater than 70. “Restricted Activities” means with respect to a Competitor, accepting employment, 2 In the event of a termination due to Retirement, the Grantee must comply with the non-competition requirement through the Regular Vesting Date in order to receive the accelerated amount. Also, settlement is delayed to the Regular Vesting Date.


 
serving on a board of directors or otherwise being engaged as a consultant or advisor. “Competitor” means any restaurant chain in the family dining segment, including but not limited to, IHOP, Bob Evans, Friendly’s, Cracker Barrel, Perkins, FRISCH’s Restaurants, Village Inn, Coco’s, Carrows, and Shoney’s. 3. Change in Control. Upon a Change in Control of the Company, the Restricted Stock Units to the extent then outstanding and not previously vested will vest and become non-forfeitable. Any vested Restricted Stock Units shall convert into Shares and be paid out within 30 days following the Change in Control. 4. Settlement of Restricted Stock Units. Except as otherwise provided in this Section 4 or in Section 6, vested Restricted Stock Units shall convert into Shares and be paid out within 30 days following the Regular Vesting Date (including, without limitation, in the event of Retirement). Notwithstanding the preceding sentence, to the extent any Restricted Stock Units are not subject to a “substantial risk of forfeiture (within the meaning of Section 409A of the Code), such Restricted Stock Units shall convert into Shares and be paid out on an accelerated basis within 30 days following any of the following events, to the extent necessary to comply with Section 409A of the Code: (a) Your death; (b) Your Disability; or (c) The occurrence of a Change in Control. Shares paid upon conversion of the Restricted Stock Units will be registered on the books of the Company in Grantee’s name (or in street name to Grantee’s brokerage account) as of the date of payment in uncertificated (book-entry) form. 5. Limitation of Rights. The Award does not confer to Grantee or Grantee’s beneficiary any rights of a stockholder of the Company unless and until Shares are in fact issued to such person in connection with the Award. Nothing in this Award Certificate shall interfere with or limit in any way the right of the Company or any Affiliate to terminate Grantee’s employment at any time, nor confer upon Grantee any right to continue in employment of the Company or any Affiliate. From and after the Grant Date and until the earlier of (a) the time when the Restricted Stock Units become vested and are paid in accordance with this Award Certificate or (b) the time when your right to receive Shares in payment of the Restricted Stock Units is forfeited in accordance with this Award Certificate, on the date the Company pays a cash dividend (if any) to holders of Shares generally, Grantee shall be credited with cash per Restricted Stock Unit equal to the amount of such dividend. Any amounts credited pursuant to the immediately preceding sentence shall be subject to the same applicable terms and conditions (including vesting, payment and forfeitability) as apply to the Restricted Stock Units based on which the Dividend Equivalents were credited, and such amounts shall be paid in cash at the same time as the Restricted Stock Units to which they relate. 6. Payment of Taxes. Grantee will owe federal, state, and local taxes (including FICA required by law to be withheld with respect to any taxable event arising as a result of the vesting or


 
settlement of the Award (the “Taxes”)). The withholding of Taxes shall be mandatorily satisfied by withholding from the settlement of the Restricted Stock Units a number of Shares having a fair market value equal to the amount required to be withheld for the Taxes. To the extent that prior to settlement the Grantee owes FICA, the required withholding then due shall be satisfied by reducing the number of Restricted Stock Units then outstanding by a number of Shares having a fair market value equal to the taxes then due, which shall include (a) the FICA amount then due and (b) the amount of additional income tax then due as a result of the payment of the FICA amount. In no event, however, will the fair market value of the Shares to be withheld pursuant to this Section 6 to satisfy the applicable withholding obligations exceed the minimum amount of taxes required to be withheld. Grantee’s acceptance of the Award constitutes Grantee’s acknowledgement that the Company will withhold on Grantee’s behalf a number of Shares sufficient to satisfy the Taxes (except as provided in the foregoing sentence). The obligations of the Company under this Award Certificate will be conditional on such payment of the Taxes by Grantee. 7. Restrictions on Issuance of Shares. If at any time the Compensation and Incentives Committee of the Board (the “Compensation Committee”) shall determine, in its discretion, that registration, listing or qualification of the Shares underlying the Restricted Stock Units upon any securities exchange or similar self-regulatory organization or under any foreign, federal, or local law or practice, or the consent or approval of any governmental regulatory body, is necessary or desirable as a condition to the settlement of the Restricted Stock Units, the Shares will not be paid unless and until such registration, listing, qualification, consent or approval shall have been effected or obtained free of any conditions not acceptable to the Compensation Committee. 8. Plan Controls. The terms contained in the Plan are incorporated into and made a part of this Award Certificate and this Award Certificate shall be governed by and construed in accordance with the Plan. In the event of any actual or alleged conflict between the provisions of the Plan and the provisions of this Award Certificate, the provisions of the Plan shall be controlling and determinative. 9. Successors. This Award Certificate shall be binding upon any successor of the Company, in accordance with the terms of this Award Certificate and the Plan. 10. Severability. If any one or more of the provisions contained in this Award Certificate is deemed to be invalid, illegal or unenforceable, the other provisions of this Award Certificate will be construed and enforced as if the invalid, illegal or unenforceable provision had never been included. 11. Notice. Notices and communications under this Award Certificate must be in writing and either personally delivered or sent by registered or certified United States mail, return receipt requested, postage prepaid. Notices to the Company must be addressed to Denny’s Corporation, 203 East Main Street, Spartanburg, SC 29319-0001, Attn: Secretary, or any other address designated by the Company in a written notice to Grantee. Notices to Grantee will


 
be directed to the address of Grantee then currently on file with the Company, or at any other address given by Grantee in a written notice to the Company. 12. Clawback or Recoupment Policy. Grantee agrees that Grantee will be subject to any compensation, clawback and recoupment policies in the Plan and that may be applicable to Grantee as an employee of the Company, as in effect from time to time and as approved by the Board of Directors, the Compensation Committee or a duly authorized committee thereof, whether or not approved before or after the Grant Date. 13. Governing Law. This Award Certificate shall be governed by the laws of the State of Delaware, excluding any conflicts or choice of law, rule or principle that might otherwise refer construction or interpretation of this Award Certificate to the substantive law of another jurisdiction. 14. Section 409A Compliance. This Award Certificate is intended to be exempt from or otherwise comply with the provisions of Section 409A of the Code. The Company may change or modify the terms of this Award Certificate without Grantee’s consent or signature if the Company determines, in its sole discretion, provided that such change or modification is necessary for purposes of compliance with or exemption from the requirements of Section 409A of the Code or any regulations or other guidance issued thereunder.


 
Document

Exhibit 31.1
 
 
CERTIFICATION
 
 
I, John C. Miller, certify that:
 
1. I have reviewed this report on Form 10-Q of Denny’s Corporation;
 
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
 
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
 
4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
 
a) designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
 
b) designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
 
c) evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
 
d) disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
 
5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent function):
 
a) all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
 
b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal controls over financial reporting.
  
    
Date:July 31, 2020By:/s/ John C. Miller 
  John C. Miller 
  Chief Executive Officer 
    


Document

Exhibit 31.2
 
 
CERTIFICATION
 
 
I, Robert P. Verostek, certify that:
 
1. I have reviewed this report on Form 10-Q of Denny’s Corporation;
 
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
 
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
 
4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
 
a) designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
 
b) designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
 
c) evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
 
d) disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
 
5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent function):
 
a) all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
 
b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal controls over financial reporting.
 
Date:July 31, 2020By:/s/ Robert P. Verostek 
  Robert P. Verostek 
  Senior Vice President and 
  Chief Financial Officer 


Document

Exhibit 32.1
 
 
CERTIFICATION
 
 
John C. Miller
Chief Executive Officer of Denny’s Corporation
 
and
 
Robert P. Verostek
Senior Vice President and Chief Financial Officer
 
 
Pursuant to 18 U.S.C. Section 1350,
As Adopted Pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002
 
In connection with the Quarterly Report of Denny’s Corporation (the “Company”) on Form 10-Q for the period ended June 24, 2020 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, John C. Miller, Chief Executive Officer of the Company, and I, Robert P. Verostek, Senior Vice President and Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:
 
1) The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
 
2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
 
Date:July 31, 2020By:/s/ John C. Miller 
  John C. Miller 
  Chief Executive Officer 
 
Date:July 31, 2020By:/s/ Robert P. Verostek 
  Robert P. Verostek 
  Senior Vice President and 
  Chief Financial Officer 
 
A signed original of this written statement required by Section 906, or other document authenticating, acknowledging, or otherwise adopting the signature that appears in typed form within the electronic version of this written statement required by Section 906, has been provided to Denny’s Corporation and will be retained by Denny’s Corporation and furnished to the Securities and Exchange Commission or its staff upon request.


v3.20.2
Cover Page - shares
6 Months Ended
Jun. 24, 2020
Jul. 24, 2020
Cover [Abstract]    
Document Type 10-Q  
Document Quarterly Report true  
Document Period End Date Jun. 24, 2020  
Document Transition Report false  
Entity File Number 0-18051  
Entity Registrant Name DENNY’S CORPORATION  
Entity Incorporation, State or Country Code DE  
Entity Tax Identification Number 13-3487402  
Entity Address, Address Line One 203 East Main Street  
Entity Address, City or Town Spartanburg,  
Entity Address, State or Province SC  
Entity Address, Postal Zip Code 29319-0001  
City Area Code 864  
Local Phone Number 597-8000  
Title of 12(b) Security $.01 Par Value, Common Stock  
Trading Symbol DENN  
Security Exchange Name NASDAQ  
Entity Current Reporting Status Yes  
Entity Interactive Data Current Yes  
Entity Filer Category Large Accelerated Filer  
Entity Small Business false  
Entity Emerging Growth Company false  
Entity Shell Company false  
Entity Common Stock, Shares Outstanding   63,708,958
Entity Central Index Key 0000852772  
Current Fiscal Year End Date --12-25  
Document Fiscal Year Focus 2020  
Document Fiscal Period Focus Q1  
Amendment Flag false  
v3.20.2
Condensed Consolidated Balance Sheets - USD ($)
$ in Thousands
Jun. 24, 2020
Dec. 25, 2019
Current assets:    
Cash and cash equivalents $ 21,077 $ 3,372
Investments 2,240 3,649
Receivables, net 19,049 27,488
Inventories 1,107 1,325
Assets held for sale 1,973 1,925
Prepaid and other current assets 17,567 14,974
Total current assets 63,013 52,733
Property, net of accumulated depreciation of $149,156 and $147,445, respectively 93,759 97,626
Financing lease right-of-use assets, net of accumulated amortization of $9,036 and $8,468, respectively 10,672 11,720
Operating lease right-of-use assets, net 149,169 158,550
Goodwill 36,884 36,832
Intangible assets, net 52,681 53,956
Deferred financing costs, net 2,369 1,727
Deferred income taxes, net 28,597 14,718
Other noncurrent assets 31,559 32,525
Total assets 468,703 460,387
Current liabilities:    
Current finance lease liabilities 1,987 1,674
Current operating lease liabilities 18,479 16,344
Accounts payable 18,901 20,256
Other current liabilities 37,390 57,307
Total current liabilities 76,757 95,581
Long-term liabilities:    
Long-term debt 307,000 240,000
Noncurrent finance lease liabilities 14,144 14,779
Noncurrent operating lease liabilities 146,080 152,750
Liability for insurance claims, less current portion 11,371 11,454
Other noncurrent liabilities 130,858 83,887
Total long-term liabilities 609,453 502,870
Total liabilities 686,210 598,451
Shareholders' deficit    
Common stock $0.01 par value; 135,000 shares authorized; June 24, 2020: 109,719 shares issued and 55,709 shares outstanding; December 25, 2019: 109,415 shares issued and 57,095 shares outstanding 1,097 1,094
Paid-in capital 600,936 603,980
Deficit (203,350) (189,398)
Accumulated other comprehensive loss, net of tax (62,217) (33,960)
Treasury stock, at cost, 54,010 and 52,320 shares, respectively (553,973) (519,780)
Total shareholders' deficit (217,507) (138,064)
Total liabilities and shareholders' deficit $ 468,703 $ 460,387
v3.20.2
Condensed Consolidated Balance Sheets (Unaudited) (Parenthetical) - USD ($)
$ in Thousands
Jun. 24, 2020
Dec. 25, 2019
Assets [Abstract]    
Accumulated depreciation $ 149,156 $ 147,445
Accumulated amortization $ 9,036 $ 8,468
Shareholders' deficit    
Common stock, par value (in dollars per share) $ 0.01 $ 0.01
Common stock, shares authorized 135,000,000 135,000,000
Common stock, shares issued 109,719,000 109,415,000
Common stock, shares outstanding 55,709,000 57,095,000
Treasury stock, at cost, shares 54,010,000 52,320,000
v3.20.2
Condensed Consolidated Statements of Operations - USD ($)
shares in Thousands, $ in Thousands
3 Months Ended 6 Months Ended
Jun. 24, 2020
Jun. 26, 2019
Jun. 24, 2020
Jun. 26, 2019
Revenue:        
Total operating revenue $ 40,161 $ 151,884 $ 136,856 $ 303,295
Costs of company restaurant sales, excluding depreciation and amortization:        
Product costs 4,305 23,363 14,435 47,268
Payroll and benefits 8,039 36,866 25,145 76,698
Occupancy 2,728 5,498 5,891 11,282
Other operating expenses 4,534 14,103 10,253 28,695
Total costs of company restaurant sales 19,606 79,830 55,724 163,943
Costs of franchise and license revenue, excluding depreciation and amortization 15,244 28,871 44,414 55,929
General and administrative expenses 13,153 18,453 20,895 37,264
Depreciation and amortization 4,058 5,048 8,204 11,281
Operating (gains), losses and other charges, net 1,627 (26,433) 3,100 (35,368)
Total operating costs and expenses, net 53,688 105,769 132,337 233,049
Operating income (loss) (13,527) 46,115 4,519 70,246
Interest expense, net 4,947 5,382 8,898 10,789
Other nonoperating expense (income), net 9,565 (273) 12,328 (1,696)
Income (loss) before income taxes (28,039) 41,006 (16,707) 61,153
Provision for (benefit from) income taxes (5,074) 6,767 (2,755) 11,424
Net income (loss) $ (22,965) $ 34,239 $ (13,952) $ 49,729
Basic net income (loss) per share (in dollars per share) $ (0.41) $ 0.57 $ (0.25) $ 0.82
Diluted net income (loss) per share (in dollars per share) $ (0.41) $ 0.55 $ (0.25) $ 0.79
Basic weighted average shares outstanding (in shares) 55,686 60,290 55,993 60,970
Diluted weighted average shares outstanding (in shares) 55,686 62,082 55,993 62,937
Company restaurant sales        
Revenue:        
Total operating revenue $ 15,128 $ 95,447 $ 57,419 $ 193,992
Franchise and license revenue        
Revenue:        
Total operating revenue $ 25,033 $ 56,437 $ 79,437 $ 109,303
v3.20.2
Condensed Consolidated Statements of Comprehensive Income (Loss) - USD ($)
$ in Thousands
3 Months Ended 6 Months Ended
Jun. 24, 2020
Jun. 26, 2019
Jun. 24, 2020
Jun. 26, 2019
Statement of Comprehensive Income [Abstract]        
Net income (loss) $ (22,965) $ 34,239 $ (13,952) $ 49,729
Other comprehensive income (loss), net of tax:        
Minimum pension liability adjustment, net of tax of $6, $5, $12 and $11, respectively 16 16 33 32
Changes in the fair value of cash flow derivatives, net of tax of $(772), $(3,701), $(12,567) and $(8,323), respectively (2,230) (10,619) (35,158) (22,771)
Reclassification of cash flow derivatives to interest expense, net of tax of $334, $(3), $420 and $(10), respectively 967 (11) 1,206 (28)
Reclassification of loss related to dedesignation of derivatives to other nonoperating expense (income), net of tax of $1,892, $0, $1,892 and $0, respectively 5,462 0 5,462 0
Reclassification of unrealized losses related to derivatives to interest expense, net of tax of $69, $0, $69 and $0, respectively 200 0 200 0
Other comprehensive loss 4,415 (10,614) (28,257) (22,767)
Total comprehensive income (loss) $ (18,550) $ 23,625 $ (42,209) $ 26,962
v3.20.2
Condensed Consolidated Statements of Comprehensive Income (Parenthetical) - USD ($)
$ in Thousands
3 Months Ended 6 Months Ended
Jun. 24, 2020
Jun. 26, 2019
Jun. 24, 2020
Jun. 26, 2019
Statement of Comprehensive Income [Abstract]        
Tax effect of minimum pension liability adjustment $ 6 $ 5 $ 12 $ 11
Changes in fair value of cash flow derivatives, tax (772) (3,701) (12,567) (8,323)
Reclassification of cash flow derivatives to interest expense, tax 334 (3) 420 (10)
Reclassification of loss related to dedesignation of derivatives to other nonoperating expense (income), tax 1,892 0 1,892 0
Reclassification of unrealized losses related to derivatives to interest expense, tax $ 69 $ 0 $ 69 $ 0
v3.20.2
Condensed Consolidated Statements of Shareholders' Deficit - USD ($)
shares in Thousands, $ in Thousands
Total
Common Stock
Treasury Stock
Paid-in Capital
Deficit
Deficit
Revision of Prior Period, Accounting Standards Update, Adjustment
Accumulated Other Comprehensive Loss, Net
Accelerated Share Repurchase 2018
Treasury Stock
Balance as of beginning of period (in shares) at Dec. 26, 2018   108,585            
Balance as of beginning of period at Dec. 26, 2018 $ (133,345) $ 1,086 $ (416,815) $ 592,944 $ (306,414) $ (394) $ (4,146)  
Balance as of beginning of period, treasury stock (in shares) at Dec. 26, 2018     (47,052)          
Increase (Decrease) in Stockholders' Equity [Roll Forward]                
Purchase of treasury stock (in shares)               (400)
Purchase of treasury stock               $ (6,800)
Balance as of end of period (in shares) at Mar. 27, 2019   108,986            
Balance as of end of period at Mar. 27, 2019 (140,221) $ 1,090 $ (432,519) 598,825 (291,318)   (16,299)  
Balance as of end of period, treasury stock (in shares) at Mar. 27, 2019     (47,948)          
Balance as of beginning of period (in shares) at Dec. 26, 2018   108,585            
Balance as of beginning of period at Dec. 26, 2018 (133,345) $ 1,086 $ (416,815) 592,944 (306,414) $ (394) (4,146)  
Balance as of beginning of period, treasury stock (in shares) at Dec. 26, 2018     (47,052)          
Increase (Decrease) in Stockholders' Equity [Roll Forward]                
Net income (loss) 49,729       49,729      
Other comprehensive income (loss) (22,767)           (22,767)  
Share-based compensation on equity classified awards, net of withholding tax 1,652     1,652        
Purchase of treasury stock (in shares)     (2,043)         (389)
Purchase of treasury stock (37,997)   $ (37,997)          
Equity forward contract settlement     (6,763) 6,763        
Issuance of common stock for share-based compensation (in shares)   465            
Issuance of common stock for share-based compensation   $ 5   (5)        
Exercise of common stock options (in shares)   241            
Exercise of common stock options 550 $ 2   548        
Balance as of end of period (in shares) at Jun. 26, 2019   109,291            
Balance as of end of period at Jun. 26, 2019 (142,572) $ 1,093 $ (461,575) 601,902 (257,079)   (26,913)  
Balance as of end of period, treasury stock (in shares) at Jun. 26, 2019     (49,484)          
Balance as of beginning of period (in shares) at Mar. 27, 2019   108,986            
Balance as of beginning of period at Mar. 27, 2019 (140,221) $ 1,090 $ (432,519) 598,825 (291,318)   (16,299)  
Balance as of beginning of period, treasury stock (in shares) at Mar. 27, 2019     (47,948)          
Increase (Decrease) in Stockholders' Equity [Roll Forward]                
Net income (loss) 34,239       34,239      
Other comprehensive income (loss) (10,614)           (10,614)  
Share-based compensation on equity classified awards, net of withholding tax 2,637     2,637        
Purchase of treasury stock (in shares)     (1,536)          
Purchase of treasury stock (29,056)   $ (29,056)          
Issuance of common stock for share-based compensation (in shares)   118            
Issuance of common stock for share-based compensation   $ 2   (2)        
Exercise of common stock options (in shares)   187            
Exercise of common stock options 443 $ 1   442        
Balance as of end of period (in shares) at Jun. 26, 2019   109,291            
Balance as of end of period at Jun. 26, 2019 $ (142,572) $ 1,093 $ (461,575) 601,902 (257,079)   (26,913)  
Balance as of end of period, treasury stock (in shares) at Jun. 26, 2019     (49,484)          
Balance as of beginning of period (in shares) at Dec. 25, 2019 109,415 109,415            
Balance as of beginning of period at Dec. 25, 2019 $ (138,064) $ 1,094 $ (519,780) 603,980 (189,398)   (33,960)  
Balance as of beginning of period, treasury stock (in shares) at Dec. 25, 2019 (52,320)   (52,320)          
Increase (Decrease) in Stockholders' Equity [Roll Forward]                
Purchase of treasury stock (in shares) (1,700)              
Purchase of treasury stock $ (34,200)              
Balance as of end of period (in shares) at Mar. 25, 2020   109,677            
Balance as of end of period at Mar. 25, 2020 $ (200,492) $ 1,097 $ (553,973) 599,401 (180,385)   (66,632)  
Balance as of end of period, treasury stock (in shares) at Mar. 25, 2020     (54,010)          
Balance as of beginning of period (in shares) at Dec. 25, 2019 109,415 109,415            
Balance as of beginning of period at Dec. 25, 2019 $ (138,064) $ 1,094 $ (519,780) 603,980 (189,398)   (33,960)  
Balance as of beginning of period, treasury stock (in shares) at Dec. 25, 2019 (52,320)   (52,320)          
Increase (Decrease) in Stockholders' Equity [Roll Forward]                
Net income (loss) $ (13,952)       (13,952)      
Other comprehensive income (loss) (28,257)           (28,257)  
Share-based compensation on equity classified awards, net of withholding tax (3,107)     (3,107)        
Purchase of treasury stock (in shares)     (1,690)          
Purchase of treasury stock (34,193)   $ (34,193)          
Issuance of common stock for share-based compensation (in shares)   287            
Issuance of common stock for share-based compensation   $ 3   (3)        
Exercise of common stock options (in shares)   17            
Exercise of common stock options $ 66     66        
Balance as of end of period (in shares) at Jun. 24, 2020 109,719 109,719            
Balance as of end of period at Jun. 24, 2020 $ (217,507) $ 1,097 $ (553,973) 600,936 (203,350)   (62,217)  
Balance as of end of period, treasury stock (in shares) at Jun. 24, 2020 (54,010)   (54,010)          
Balance as of beginning of period (in shares) at Mar. 25, 2020   109,677            
Balance as of beginning of period at Mar. 25, 2020 $ (200,492) $ 1,097 $ (553,973) 599,401 (180,385)   (66,632)  
Balance as of beginning of period, treasury stock (in shares) at Mar. 25, 2020     (54,010)          
Increase (Decrease) in Stockholders' Equity [Roll Forward]                
Net income (loss) (22,965)       (22,965)      
Other comprehensive income (loss) 4,415           4,415  
Share-based compensation on equity classified awards, net of withholding tax 1,469     1,469        
Issuance of common stock for share-based compensation (in shares)   25            
Exercise of common stock options (in shares)   17            
Exercise of common stock options $ 66     66        
Balance as of end of period (in shares) at Jun. 24, 2020 109,719 109,719            
Balance as of end of period at Jun. 24, 2020 $ (217,507) $ 1,097 $ (553,973) $ 600,936 $ (203,350)   $ (62,217)  
Balance as of end of period, treasury stock (in shares) at Jun. 24, 2020 (54,010)   (54,010)          
v3.20.2
Condensed Consolidated Statements of Cash Flows - USD ($)
$ in Thousands
6 Months Ended
Jun. 24, 2020
Jun. 26, 2019
Cash flows from operating activities:    
Net income (loss) $ (13,952) $ 49,729
Adjustments to reconcile net income (loss) to cash flows provided by (used in) operating activities:    
Depreciation and amortization 8,204 11,281
Operating (gains), losses and other charges, net 3,100 (35,368)
Loss on interest rate swap derivatives 11,466 0
Amortization of deferred financing costs 340 304
Gains on investments (91) (106)
Losses (gains) on termination of leases 53 (83)
Deferred income tax expense (benefit) (3,705) 4,944
Share-based compensation expense (benefit) (26) 4,966
Changes in assets and liabilities:    
Receivables 9,342 7,545
Inventories 175 646
Other current assets (2,593) (4,748)
Other assets 106 (2,392)
Operating lease assets and liabilities 1,769 (481)
Accounts payable (537) (2,190)
Accrued payroll (11,519) (4,597)
Accrued taxes (712) (952)
Other accrued liabilities (6,551) (3,840)
Other noncurrent liabilities (2,827) 497
Net cash flows provided by (used in) operating activities (7,958) 25,155
Cash flows from investing activities:    
Capital expenditures (4,476) (6,777)
Acquisition of restaurants and real estate 0 (4,706)
Deposits on acquisitions of real estate 0 (4,320)
Proceeds from sales of restaurants, real estate and other assets 2,208 47,938
Investment purchases (1,400) (1,300)
Proceeds from sale of investments 2,900 0
Collections on notes receivable 918 858
Issuance of notes receivable (484) (718)
Net cash flows provided by (used in) investing activities (334) 30,975
Cash flows from financing activities:    
Revolver borrowings 130,000 66,500
Revolver payments (63,000) (82,000)
Long-term debt payments (594) (1,547)
Proceeds from exercise of stock options 66 550
Tax withholding on share-based payments (3,036) (3,178)
Deferred financing costs (982) 0
Purchase of treasury stock (36,008) (37,266)
Net bank overdrafts (449) (1,923)
Net cash flows provided by (used in) financing activities 25,997 (58,864)
Increase (decrease) in cash and cash equivalents 17,705 (2,734)
Cash and cash equivalents at beginning of period 3,372 5,026
Cash and cash equivalents at end of period $ 21,077 $ 2,292
v3.20.2
Introduction and Basis of Presentation
6 Months Ended
Jun. 24, 2020
Organization, Consolidation and Presentation of Financial Statements [Abstract]  
Introduction and Basis of Presentation Introduction and Basis of Presentation
Denny’s Corporation, or Denny’s or the Company, is one of America’s largest full-service restaurant chains based on number of restaurants. At June 24, 2020, the Denny's brand consisted of 1,683 restaurants, 1,616 of which were franchised/licensed restaurants and 67 of which were company operated.

The global crisis resulting from the spread of coronavirus ("COVID-19") has had a substantial impact on our restaurant operations for the two quarters ended June 24, 2020, which is expected to continue with the timing of recovery uncertain. During the two quarters ended June 24, 2020, many of our company and franchised and licensed restaurants were temporarily closed and most of the restaurants that remained open had limited operations. This has continued into the third quarter of 2020. Our operating results substantially depend upon the sales volumes, restaurant profitability, and financial stability of our company and franchised and licensed restaurants.

We cannot currently estimate the duration or future negative financial impact of the COVID-19 pandemic on our business; however, we expect that the COVID-19 pandemic will continue to impact our results of operations for the balance of 2020. Ongoing material adverse effects of the COVID-19 pandemic for an extended period could negatively affect our business, results of operations, liquidity and financial condition and could impact our impairment assessments of accounts receivable, intangible assets, long-lived assets and goodwill.

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 (“GAAP”) 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 are reasonable.

These interim condensed consolidated financial statements should be read in conjunction with our consolidated financial statements and notes thereto for the fiscal year ended December 25, 2019 which are contained in our audited Annual Report on Form 10-K for the fiscal year ended December 25, 2019. Certain reclassifications have been made to the prior year amounts to conform to the current year presentation. The results of operations for the interim periods presented are not necessarily indicative of the results for the entire fiscal year ending December 30, 2020.
v3.20.2
Summary of Significant Accounting Policies
6 Months Ended
Jun. 24, 2020
Accounting Policies [Abstract]  
Summary of Significant Accounting Policies Summary of Significant Accounting Policies
 
Newly Adopted Accounting Standards

In June 2016, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") 2016-13, Financial Instruments—Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments. The new guidance replaces the incurred loss impairment methodology in current GAAP with a methodology that reflects expected credit losses and requires consideration of a broader range of reasonable and supportable information to inform financial statement users of credit loss estimates. ASU 2016-13 is effective for annual and interim periods beginning after December 15, 2019 (our fiscal 2020) with early adoption permitted for annual and interim periods beginning after December 15, 2018 (our fiscal 2019). The adoption of this guidance did not have a material impact on our condensed consolidated financial statements.

In March 2020, the FASB issued ASU 2020-04, Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting. The new guidance provides optional guidance, for a limited time, to ease the potential burden in accounting for or recognizing the effects of reference rate reform on financial reporting. ASU 2020-04 is effective for a limited time, from March 12, 2020 through December 31, 2022. The Company adopted this ASU on March 12, 2020. The adoption of ASU 2020-04 did not have a significant impact on the Company’s consolidated financial position or results of operations.

In April 2020, the FASB staff issued interpretive guidance that indicated it would be acceptable for entities to make an election to account for lease concessions related to the effects of the COVID-19 pandemic consistent with how those concessions would
be accounted for under ASU 2016-02, Leases (Topic 842): Targeted Improvements, as though enforceable rights and obligations for those concessions existed (regardless of whether those enforceable rights and obligations for the concessions explicitly exist in the contract). Consequently, for concessions related to the effects of the COVID-19 pandemic, an entity will not have to analyze each contract to determine whether enforceable rights and obligations for concessions exist in the contract and can elect to apply or not apply the lease modification guidance in Topic 842 to those contracts. This election is available for concessions related to the effects of the COVID-19 pandemic that do not result in a substantial increase in the rights of the lessor or the obligations of the lessee.

We have elected to apply this interpretive guidance to the rent relief we have secured, and have assumed that enforceable rights and obligations for those concessions exist in the lease contract. As such, starting on the effective dates indicated above, we began recognizing abatements or deferrals in rents received from landlords as reductions in variable lease payments. This election will continue while these abatement or deferrals are in effect.

Accounting Standards to be Adopted

In December 2019, the FASB issued ASU 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes, which modifies Topic 740 to simplify the accounting for income taxes. ASU 2019-12 is effective for financial statements issued for annual periods beginning after December 15, 2020, and for the interim periods therein. The adoption of ASU 2019-12 is not expected to have a significant impact on the Company’s consolidated financial position or results of operations.
v3.20.2
Receivables
6 Months Ended
Jun. 24, 2020
Receivables [Abstract]  
Receivables Receivables
 
Receivables consisted of the following:
 
 June 24, 2020December 25, 2019
 (In thousands)
Receivables, net:  
Trade accounts receivable from franchisees$15,286  $14,551  
Financing receivables from franchisees1,499  2,230  
Vendor receivables768  3,260  
Credit card receivables497  6,806  
Other2,248  915  
Allowance for doubtful accounts(1,249) (274) 
Total receivables, net$19,049  $27,488  
Other noncurrent assets:
  
Financing receivables from franchisees$181  $364  

We recorded $1.0 million of bad debt expense during the two quarters ended June 24, 2020 based on expected losses on franchise-related receivables, primarily as a result of uncertainties related to the impacts of the COVID-19 pandemic.
v3.20.2
Goodwill and Other Intangible Assets
6 Months Ended
Jun. 24, 2020
Goodwill and Intangible Assets Disclosure [Abstract]  
Goodwill and Other Intangible Assets Goodwill and Other Intangible Assets
(In thousands)
Balance, December 25, 2019$36,832  
Reclassification from assets held for sale52  
Balance, June 24, 2020$36,884  
Other intangible assets consisted of the following:

 June 24, 2020December 25, 2019
 Gross Carrying AmountAccumulated AmortizationGross Carrying AmountAccumulated Amortization
 (In thousands)
Intangible assets with indefinite lives:
    
Trade names$44,087  $—  $44,087  $—  
Liquor licenses120  —  120  —  
Intangible assets with definite lives:
    
Reacquired franchise rights15,076  6,602  15,516  5,767  
Intangible assets, net$59,283  $6,602  $59,723  $5,767  

Due to the recent impact of the COVID-19 pandemic to the global economy, including but not limited to the volatility of the Company's stock price as well as that of its competitors, the negative impact on sales at company and franchised and licensed restaurants and the challenging environment for the restaurant industry generally, the Company determined that there were indicators of potential impairment of its goodwill and indefinite-lived intangible assets during the two quarters ended June 24, 2020. As such, the Company performed an impairment assessment for both goodwill and indefinite-lived intangible assets and concluded that the fair value of these assets substantially exceeded their carrying values. However, we recorded less than $0.1 million of impairment related to reacquired franchise rights during the two quarters ended June 24, 2020. See Note 9.
v3.20.2
Other Current Liabilities
6 Months Ended
Jun. 24, 2020
Other Liabilities, Current [Abstract]  
Other Current Liabilities Other Current Liabilities
 
Other current liabilities consisted of the following:
 June 24, 2020December 25, 2019
 (In thousands)
Accrued payroll$8,323  $19,689  
Current portion of liability for insurance claims
6,012  6,515  
Accrued taxes4,912  5,624  
Accrued advertising1,818  6,753  
Gift cards4,964  6,469  
Other11,361  12,257  
Other current liabilities$37,390  $57,307  
v3.20.2
Fair Value of Financial Instruments
6 Months Ended
Jun. 24, 2020
Fair Value Disclosures [Abstract]  
Fair Value of Financial Instruments Fair Value of Financial Instruments
Financial assets and liabilities measured at fair value on a recurring basis are summarized below:
 
 TotalQuoted Prices in Active Markets for Identical Assets/Liabilities
(Level 1)
Significant Other Observable Inputs
(Level 2)
Significant Unobservable Inputs
(Level 3)
 
(In thousands)
Fair value measurements as of June 24, 2020:
Deferred compensation plan investments (1)
$12,210  $12,210  $—  $—  
Interest rate swaps (2)
(94,612) —  (94,612) —  
Investments (3)
2,240  —  2,240  —  
Total$(80,162) $12,210  $(92,372) $—  
Fair value measurements as of December 25, 2019:
Deferred compensation plan investments (1)
$13,517  $13,517  $—  $—  
Interest rate swaps (2)
(44,670) —  (44,670) —  
Investments (3)
3,649  —  3,649  —  
Total$(27,504) $13,517  $(41,021) $—  

(1) The fair values of our deferred compensation plan investments are based on the closing market prices of the elected investments.
(2) The fair values of our interest rate swaps are based upon Level 2 inputs, which include valuation models as reported by our counterparties. The key inputs for the valuation models are quoted market prices, interest rates and forward yield curves. See Note 7 for details on the interest rate swaps.
(3) The fair values of our investments are valued using a readily determinable net asset value per share based on the fair value of the underlying securities. There are no significant redemption restrictions associated with these investments.

Those assets and liabilities measured at fair value on a nonrecurring basis are summarized below:
 
 Significant Unobservable Inputs
(Level 3)
Impairment Charges
 
Fair value measurements for the two quarters ended June 24, 2020:
Assets held and used (1)
$2,718  $2,181  

(1)During the first quarter of 2020, impaired assets were written down to their fair value. To determine fair value, we used the income approach, which assumes that the future cash flows reflect current market expectations. These fair value measurements require significant judgment using Level 3 inputs, such as discounted cash flows from operations, which are not observable from the market, directly or indirectly. There is uncertainty in the projected future cash flows used in the Company's impairment analysis, which requires the use of estimates and assumptions. If actual performance does not achieve the projections, or if the assumptions used change in the future, the Company may be required to recognize impairment charges in future periods.

Assets that are measured at fair value on a non-recurring basis include property, operating right-of-use assets, finance right-of-use assets and reacquired franchise rights. During the two quarters ended June 24, 2020, we recognized impairment charges of $2.2 million related to certain of these assets. See Note 9.

The carrying amounts of cash and cash equivalents, accounts receivables, accounts payable and accrued expenses are deemed to approximate fair value due to the immediate or short-term maturity of these instruments. The fair value of notes receivable approximates the carrying value after consideration of recorded allowances and related risk-based interest rates. The liabilities under our credit facility are carried at historical cost, which approximates fair value. The fair value of our senior secured revolver approximates its carrying value since it is a variable rate facility (Level 2).
v3.20.2
Long-Term Debt
6 Months Ended
Jun. 24, 2020
Debt Disclosure [Abstract]  
Long-Term Debt Long-Term Debt
Denny's and certain of its subsidiaries have a credit facility consisting of a five-year $400 million senior secured revolver (with a $30 million letter of credit sublimit). The credit facility includes an accordion feature that would allow us to increase the size of the revolver to $450 million, subject to approval. As of June 24, 2020, we had outstanding revolver loans of $307.0 million and outstanding letters of credit under the credit facility of $18.3 million. These balances resulted in availability of $74.7 million under the credit facility. The credit facility is available for working capital, capital expenditures and other general corporate purposes. The credit facility is guaranteed by Denny's and its material subsidiaries and is secured by assets of Denny's and its subsidiaries, including the stock of its subsidiaries (other than our insurance captive subsidiary).

On May 13, 2020, we entered into an amendment (the "Second Amendment") to our credit agreement. As a result of the Second Amendment, beginning May 13, 2020 until the date of delivery of our financial statements for the fiscal quarter ending June 30, 2021, the interest rate of the amended credit agreement was increased to LIBOR plus 3.00% and the commitment fee, which is paid on the unused portion of the credit facility, was increased to 0.40%. During this period, we will also have supplemental monthly reporting obligations to our lenders and will be prohibited from paying dividends and making stock repurchases and other general investments. Additionally, capital expenditures will be restricted to $10 million in the aggregate from May 13, 2020 through the fiscal quarter ending March 31, 2021.

The Second Amendment temporarily waives certain financial covenants. The consolidated fixed charge coverage ratio is waived until the fiscal quarter ending March 31, 2021, at which point the covenant level will revert to a minimum of 1.50x. The consolidated leverage ratio covenant is waived until the fiscal quarter ending March 31, 2021, at which point the covenant level will increase from 4.00x to 4.50x, stepping down to 4.25x in the second quarter of 2021 and 4.00x in the third fiscal quarter of 2021 and thereafter. In addition, the Second Amendment adds a monthly minimum liquidity covenant, defined as the sum of unrestricted cash and revolver availability, ranging from $60 million to $70 million, commencing on May 13, 2020 to May 26, 2021. We were in compliance with all financial covenants as of June 24, 2020.

Prior to considering the impact of our interest rate swaps, described below, the weighted-average interest rate on outstanding revolver loans was 3.18% and 3.47% as of June 24, 2020 and December 25, 2019, respectively. Taking into consideration our interest rate swaps, the weighted-average interest rate of outstanding revolver loans was 5.22% and 3.99% as of June 24, 2020 and December 25, 2019, respectively.

Interest Rate Hedges
We have receive-variable, pay-fixed interest rate swaps to hedge a portion of the forecasted cash flows of our floating rate debt. We initially designated the interest rate swaps as cash flow hedges of our exposure to variability in future cash flows attributable to variable interest payments due on forecasted notional amounts. A summary of our interest rate swaps as of June 24, 2020 is as follows:
Trade DateEffective DateMaturity DateNotional AmountFixed Rate
(In thousands)
March 20, 2015March 29, 2018March 31, 2025$120,000  2.44 %
October 1, 2015March 29, 2018March 31, 202650,000  2.46 %
February 15, 2018March 31, 2020December 31, 203380,000  (1)3.19 %

(1)  The notional amounts of the swaps entered into on February 15, 2018 increase annually beginning September 30, 2020 until they reach the maximum notional amount of $425.0 million on September 28, 2029.

To the extent the swaps are highly effective in offsetting the variability of the hedged cash flows, changes in the fair value of the swaps are not included in the Consolidated Statements of Operations but are reported as a component of accumulated other comprehensive loss, net.
For the quarter ended June 24, 2020, we determined that a portion of the underlying cash flows related to our hedging relationship entered into in 2018 (“2018 Swaps”) were no longer probable of occurring over the term of the interest rate swaps as a result of the ongoing impacts of the COVID-19 pandemic and using proceeds from our share offering described in Note 16 to repay a portion of our long-term debt. Accordingly, during the quarter ended June 24, 2020, we dedesignated the cash flow relationship and discontinued hedge accounting treatment for the 2018 Swaps. As a result, we reclassified approximately $7.4 million of losses from accumulated other comprehensive loss, net to other nonoperating expense (income), net in our Consolidated Statements of Operations for the quarter ended June 24, 2020 related to the portion of the forecasted transaction no longer considered probable of occurring. The remaining $65.1 million in unrealized losses related to the 2018 Swaps will continue to be included in accumulated other comprehensive loss, net and will be reclassified into the Consolidated Statements of Operations as a component of interest expense, net over the remaining term of the 2018 Swaps. For the quarter ended June 24, 2020, we reclassified unrealized losses of approximately $0.3 million to interest expense, net related to the 2018 Swaps. Additionally, as a result of the dedesignated cash flow relationship related to the 2018 Swaps, changes in the fair value of the 2018 Swaps will be recorded as a component of other nonoperating expense (income), net in our Consolidated Statements of Operations. For the quarter and two quarters ended June 24, 2020, we recorded approximately $4.1 million of unrealized losses as a component of nonoperating expense (income) related to the 2018 Swaps related to changes in fair value. The interest rate swaps entered into in 2015 continue to be designated as cash flow hedges with unrealized gain and losses recorded as a component of accumulated other comprehensive loss, net. As of June 24, 2020, the fair value of the interest rate swaps was $94.6 million, and recorded as a component of other noncurrent liabilities in our Condensed Consolidated Balance Sheets. We expect to reclassify approximately $4.5 million from accumulated other comprehensive loss, net to interest expense, net in our Consolidated Statements of Operations related to our interest rate swaps during the next twelve months.
v3.20.2
Revenues
6 Months Ended
Jun. 24, 2020
Revenue from Contract with Customer [Abstract]  
Revenues Revenues
Our revenues are derived primarily from two sales channels, which we operate as one segment: company restaurants and franchised and licensed restaurants. The following table disaggregates our revenue by sales channel and type of good or service:
 Quarter EndedTwo Quarters Ended
 June 24, 2020June 26, 2019June 24, 2020June 26, 2019
 (Dollars in thousands)
Company restaurant sales$15,128  $95,447  $57,419  $193,992  
Franchise and license revenue:
Royalties6,719  26,672  30,566  51,912  
Advertising revenue7,232  19,884  24,758  38,826  
Initial and other fees1,346  1,755  3,043  2,894  
Occupancy revenue 9,736  8,126  21,070  15,671  
Franchise and license revenue 
25,033  56,437  79,437  109,303  
Total operating revenue$40,161  $151,884  $136,856  $303,295  



Franchise occupancy revenue consisted of the following:
 Quarter EndedTwo Quarters Ended
 June 24, 2020June 26, 2019June 24, 2020June 26, 2019
 (In thousands)
Operating lease revenue$8,060  $5,846  $16,682  $11,271  
Variable lease revenue
1,676  2,280  4,388  4,400  
Total occupancy revenue
$9,736  $8,126  $21,070  $15,671  

Balances related to contracts with customers consist of receivables, deferred franchise revenue and deferred gift card revenue. See Note 3 for details on our receivables.
Deferred franchise revenue consists primarily of the unamortized portion of initial franchise fees that are currently being amortized into revenue and amounts related to development agreements and unopened restaurants that we will begin amortizing into revenue when the related restaurants are opened. Initial franchise fees are amortized over the term of the related franchise
agreement, generally 10-20 years. Deferred franchise revenue represents our remaining performance obligations to our franchisees, excluding amounts of variable consideration related to sales-based royalties and advertising. The components of the change in deferred franchise revenue are as follows:
 (In thousands)
Balance, December 25, 2019$23,256  
Fees received from franchisees389  
Revenue recognized (1)
(1,528) 
Balance, June 24, 202022,117  
Less current portion included in other current liabilities2,112  
Deferred franchise revenue included in other noncurrent liabilities$20,005  

(1) Of this amount $1.5 million was included in the deferred franchise revenue balance as of December 25, 2019.

Gift card liabilities consist of the unredeemed portion of gift cards sold in company restaurants and at third party locations. The balance of gift card liabilities represents our remaining performance obligations to our customers. The balance of gift card liabilities as of June 24, 2020 and December 25, 2019 was $5.0 million and $6.5 million, respectively. During the two quarters ended June 24, 2020, we recognized revenue of $0.5 million from gift card redemptions at company restaurants.
v3.20.2
Operating (Gains), Losses and Other Charges, Net
6 Months Ended
Jun. 24, 2020
Other Income and Expenses [Abstract]  
Operating (Gains), Losses and Other Charges, Net Operating (Gains), Losses and Other Charges, Net
Operating (gains), losses and other charges, net consisted of the following:
 
 Quarter EndedTwo Quarters Ended
 June 24, 2020June 26, 2019June 24, 2020June 26, 2019
 (In thousands)
(Gains) losses on sales of assets and other, net
$12  $(26,839) $(1,058) $(36,314) 
Restructuring charges and exit costs
1,615  406  1,977  946  
Impairment charges—  —  2,181  —  
Operating (gains), losses and other charges, net
$1,627  $(26,433) $3,100  $(35,368) 
 
During the two quarters ended June 24, 2020, (gains) losses on sales of assets and other, net were primarily related to the sales of two real estate parcels. During the quarter ended June 26, 2019, (gains) losses on sale of assets and other, net included $24.2 million in gains on the sale of 37 company restaurants and $3.1 million in gains on the sales of three parcels of real estate. During the two quarters ended June 26, 2019, (gains) losses on sales of assets and other, net included $26.4 million in gains on the sales of 40 company restaurants and $10.6 million on the sale of four parcels of real estate.

As of June 24, 2020, we had recorded assets held for sale at their carrying amount of $2.0 million (consists of property of $1.7 million and other assets of $0.3 million) related to five parcels of real estate. As of December 25, 2019, we had recorded assets held for sale at their carrying amount of $1.9 million (comprised of property of $1.6 million, other assets of $0.2 million and goodwill of $0.1 million) related to four company restaurants and two pieces of real estate. During the two quarters ended June 24, 2020, two pieces of real estate were sold and the four company restaurants were reclassified out of assets held for sale, as they were no longer expected to be sold in the next 12 months.

Restructuring charges and exit costs consisted of the following:
 
 Quarter EndedTwo Quarters Ended
 June 24, 2020June 26, 2019June 24, 2020June 26, 2019
 (In thousands)
Exit costs$50  $52  $94  $174  
Severance and other restructuring charges
1,565  354  1,883  772  
Total restructuring charges and exit costs
$1,615  $406  $1,977  $946  
Exit cost liabilities were $0.2 million as of June 24, 2020 and December 25, 2019. Exit cost liabilities related to lease costs are included as a component of operating lease liabilities in our Condensed Consolidated Balance Sheets.

As of June 24, 2020 and December 25, 2019, we had accrued severance and other restructuring charges of $1.6 million and $0.9 million, respectively. The balance as of June 24, 2020 is expected to be paid during the next 12 months.

We review our property, right-of-use assets ("ROU assets") and definite-lived intangible assets for impairment whenever events or changes in circumstances indicate that the carrying value of certain long-lived and ROU assets may not be recoverable. Based on our review, we recorded impairment charges of $2.2 million for the two quarters ended June 24, 2020 resulting from the impacts of the COVID-19 pandemic. The $2.2 million included $1.1 million related to property, $1.0 million related to operating lease ROU assets and less than $0.1 million related to each of finance lease ROU assets and reacquired franchise rights.
v3.20.2
Share-Based Compensation
6 Months Ended
Jun. 24, 2020
Share-based Payment Arrangement [Abstract]  
Share-Based Compensation Share-Based Compensation
Total share-based compensation included as a component of general and administrative expenses was as follows:
 Quarter EndedTwo Quarters Ended
 June 24, 2020June 26, 2019June 24, 2020June 26, 2019
 (In thousands)
Employee share awards$1,326  $2,463  $(420) $4,461  
Restricted stock units for board members
185  250  394  505  
Total share-based compensation
$1,511  $2,713  $(26) $4,966  
 
Employee Share Awards

Employee share awards consist of performance share units and restricted stock units (which are equity classified). During the quarter and two quarters ended June 24, 2020, as a component of our annual compensation program, we granted certain employees approximately 0.8 million restricted stock units with a grant date fair value of $10.46 per share that vest over a two-year period, as defined under the terms of the award. The vesting period for these restricted stock units is the two-year period beginning May 20, 2020 through May 20, 2022.

During the two quarters ended June 24, 2020, we issued 0.3 million shares of common stock related to vested performance share units. In addition, 0.1 million shares of common stock were withheld in lieu of taxes related to vested performance share units.
 
As of June 24, 2020, we had approximately $12.3 million of unrecognized compensation cost related to all unvested performance share awards and restricted share awards outstanding, which have a weighted average remaining contractual term of 1.7 years.
 
Restricted Stock Units for Board Members

During the quarter and two quarters ended June 24, 2020, we granted less than 0.1 million restricted stock units (which are equity classified) with a weighted average grant date fair value of $10.46 per unit to non-employee members of our Board of
Directors. The restricted stock units vest after a one year service period. A director may elect to convert these awards into
shares of common stock either on a specific date in the future (while still serving as a member of our Board of Directors), upon
termination as a member of our Board of Directors, or in three equal annual installments commencing after termination of
service as a member of our Board.

During the quarter and two quarters ended June 24, 2020, less than 0.1 million restricted stock units were converted into shares of common stock.
As of June 24, 2020, we had approximately $0.8 million of unrecognized compensation cost related to all unvested restricted stock unit awards outstanding, which have a weighted average remaining contractual term of 0.9 years.
v3.20.2
Income Taxes
6 Months Ended
Jun. 24, 2020
Income Tax Disclosure [Abstract]  
Income Taxes Income Taxes
The effective income tax rate was 18.1% for the quarter ended and 16.5% for the two quarters ended June 24, 2020, compared to 16.5% and 18.7% for the prior year periods, respectively. The 2020 quarterly and year-to-date rates included a benefit from the reclassification of cash flow derivatives from accumulated other comprehensive loss, net of 7.0% and 11.7%, respectively. During the quarter ended June 26, 2019, we completed an Internal Revenue Service federal income tax audit of the 2016 tax year. Upon completion of this audit, revaluations of certain tax positions were performed and as a result, we recognized a net benefit of 4.8% and 3.3% for the 2019 quarterly and year-to-date periods, respectively. In addition, the 2019 quarterly and year-to-date rates included the impact of excess tax benefits relating to share-based compensation of 3.6% and 2.8%, respectively.

On March 27, 2020, the Coronavirus Aid, Relief, and Economic Security (CARES) Act was signed into law as a response to the economic impacts of the COVID-19 pandemic. There is no significant impact on the Company for the quarter and year-to-date from the CARES Act.
v3.20.2
Net Income (Loss) Per Share
6 Months Ended
Jun. 24, 2020
Earnings Per Share [Abstract]  
Net Income Per Share Net Income (Loss) Per Share
 
The amounts used for the basic and diluted net income (loss) per share calculations are summarized below:
 Quarter EndedTwo Quarters Ended
 June 24, 2020June 26, 2019June 24, 2020June 26, 2019
 (In thousands, except for per share amounts)
Net income (loss)
$(22,965) $34,239  $(13,952) $49,729  
Weighted average shares outstanding - basic
55,686  60,290  55,993  60,970  
Effect of dilutive share-based compensation awards (1)
—  1,792  —  1,967  
Weighted average shares outstanding - diluted
55,686  62,082  55,993  62,937  
Basic net income (loss) per share
$(0.41) $0.57  $(0.25) $0.82  
Diluted net income (loss) per share
$(0.41) $0.55  $(0.25) $0.79  
Anti-dilutive share-based compensation awards(1)
3,493  630  3,493  630  
        
(1) For the quarter and two quarters ended June 24, 2020, share-based compensation awards have been omitted from the calculations because they have an anti-dilutive effect on loss per share.
v3.20.2
Shareholders' Deficit
6 Months Ended
Jun. 24, 2020
Stockholders' Equity Attributable to Parent [Abstract]  
Shareholders' Deficit Shareholders' Deficit
Share Repurchases

We suspended share repurchases as of February 27, 2020 and terminated our previously approved Rule 10b5-1 Repurchase Plan effective March 16, 2020 in light of uncertain market conditions arising from the COVID-19 pandemic. Under our amended credit agreement, we are prohibited, until the date of delivery of our financial statements for the fiscal quarter ending June 30, 2021, from making any stock repurchases.

Prior to entering into our amended credit agreement, during the quarter ended March 25, 2020, we repurchased a total of 1.7 million shares of our common stock for approximately $34.2 million. During the quarter ended March 25, 2020, we completed the $200 million share repurchase program that was approved by the Board of Directors in October 2017. In December 2019, our Board of Directors approved a share repurchase program authorizing us to repurchase up to $250 million of our common stock (in addition to the October 2017 authorization). At June 24, 2020, there was approximately $248.0 million remaining that can be used to repurchase our common stock under the current program. Repurchased shares are included as treasury stock in our Condensed Consolidated Balance Sheets and our Condensed Consolidated Statement of Shareholders' Deficit.
In November 2018, as part of our previously authorized share repurchase programs, we entered into a $25 million accelerated share repurchase (the "ASR") agreement with MUFG Securities EMEA plc (“MUFG”). We paid $25 million in cash and received approximately 1.1 million shares of our common stock (which represents the minimum shares to be delivered based on the cap price) and recorded $18.2 million of treasury stock related to these shares. The remaining balance of $6.8 million was recorded as additional paid-in capital in shareholders’ deficit as of December 26, 2018 as an equity forward contract.

During the quarter ended March 27, 2019, we settled the ASR agreement with MUFG. As a result, we received final delivery of an additional 0.4 million shares of our common stock. The total number of shares repurchased was based on a combined discounted volume-weighted average price (“VWAP”) of $17.04 per share, which was determined based on the average of the daily VWAP of our common stock, less a fixed discount, over the term of the ASR agreement. As a result of settling the ASR agreement, we recorded $6.8 million of treasury stock related to the settlement of the equity forward contract related to the ASR agreement.


Accumulated Other Comprehensive Loss, Net

The components of the change in accumulated other comprehensive loss, net were as follows:
Defined Benefit PlansDerivativesAccumulated Other Comprehensive Loss, Net
(In thousands)
Balance as of December 25, 2019$(781) $(33,179) $(33,960) 
Amortization of net loss (1)
45  —  45  
Changes in the fair value of cash flow derivatives—  (47,725) (47,725) 
Reclassification of cash flow derivatives to interest expense, net (2)
—  1,626  1,626  
Reclassification of loss related to dedesignation of derivatives to other nonoperating expense (income)(3)
—  7,354  7,354  
Reclassification of unrealized losses related to derivatives to interest expense, net(3)
—  269  269  
Income tax (expense) benefit related to items of other comprehensive loss
(12) 10,186  10,174  
Balance as of June 24, 2020$(748) $(61,469) $(62,217) 

(1) Amount related to our defined benefit plans that was reclassified from accumulated other comprehensive loss, net and included as a component of pension expense within general and administrative expenses in our Condensed Consolidated Statements of Operations during the two quarters ended June 24, 2020.
(2) Amounts reclassified from accumulated other comprehensive loss, net into interest expense, net in our Condensed Consolidated Statements of Operations represent payments either received from or made to the counterparty for the interest rate swaps. See Note 7 for additional details.
(3) During the quarter ended June 24, 2020, we dedesignated the cash flow relationship and discontinued hedge accounting treatment for the 2018 Swaps. As a result, we reclassified approximately $7.4 million of losses from accumulated other comprehensive loss, net to other nonoperating expense (income), net in our Condensed Consolidated Statements of Operations related to the portion of forecasted transaction no longer considered probable of occurring. The remaining losses related to the 2018 Swaps will continue to be included in accumulated other comprehensive loss, net and will be recognized in as a component of interest expense, net in our Condensed Consolidated Statements of Operations over the remaining term of the 2018 Swaps. For the quarter ended June 24, 2020, we reclassified approximately $0.3 million of losses to interest expense, net related to the 2018 Swaps. See Note 7 for additional details.
v3.20.2
Commitments and Contingencies
6 Months Ended
Jun. 24, 2020
Commitments and Contingencies Disclosure [Abstract]  
Commitments and Contingencies Commitments and ContingenciesWe have guarantees related to certain franchisee loans. Payments under these guarantees would result from the inability of a franchisee to fund required payments when due. Through June 24, 2020, no events had occurred that caused us to make payments under these guarantees. There were $0.4 million and $0.6 million of loans outstanding under these programs as of June 24, 2020 and December 25, 2019, respectively. As of June 24, 2020, the maximum amount payable under the loan guarantees was $0.4 million. As a result of these guarantees, we have recorded liabilities of less than $0.1 million as of both June 24, 2020 and December 25, 2019, which are included as a component of other noncurrent liabilities in our Condensed Consolidated Balance Sheets and other nonoperating expense (income), net in our Condensed Consolidated Statements of Operations. There are various claims and pending legal actions against or indirectly involving us, incidental to and arising out of the ordinary course of the business. In the opinion of management, based upon information currently available, the ultimate liability with respect to these proceedings and claims will not materially affect our consolidated results of operations or financial position.
v3.20.2
Supplemental Cash Flow Information
6 Months Ended
Jun. 24, 2020
Supplemental Cash Flow Information [Abstract]  
Supplemental Cash Flow Information Supplemental Cash Flow Information
 Two Quarters Ended
 June 24, 2020June 26, 2019
 (In thousands)
Income taxes paid, net$277  $11,992  
Interest paid$8,057  $10,230  
Noncash investing and financing activities:  
Issuance of common stock, pursuant to share-based compensation plans$5,808  $7,453  
Noncash consideration received in connection with the sale of real estate$—  $3,000  
Execution of finance leases$11  $305  
Treasury stock payable$—  $803  
Receivables in connection with disposition of property$—  $470  
v3.20.2
Subsequent Events
6 Months Ended
Jun. 24, 2020
Subsequent Events [Abstract]  
Subsequent Events Subsequent Events
Issuance and Sale of Common Stock

On July 1, 2020, the Company entered into an underwriting agreement with Wells Fargo Securities, LLC, as representative of the several underwriters named therein, for the issuance and sale by the Company of 8,000,000 shares of its common stock, par value $0.01 per share, in an underwritten public offering at a price to the public of $9.15 per share. On July 6, 2020, the Company received net proceeds of $69.6 million from the sale of shares, after deducting the underwriters' discounts and commissions and offering expenses.

Pursuant to the underwriting agreement, the Company also granted the underwriters a 30-day option to purchase up to an additional 1,200,000 shares of common stock.
v3.20.2
Summary of Significant Accounting Policies (Policies)
6 Months Ended
Jun. 24, 2020
Accounting Policies [Abstract]  
Newly Adopted Accounting Standards and Accounting Standards to be Adopted
Newly Adopted Accounting Standards

In June 2016, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") 2016-13, Financial Instruments—Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments. The new guidance replaces the incurred loss impairment methodology in current GAAP with a methodology that reflects expected credit losses and requires consideration of a broader range of reasonable and supportable information to inform financial statement users of credit loss estimates. ASU 2016-13 is effective for annual and interim periods beginning after December 15, 2019 (our fiscal 2020) with early adoption permitted for annual and interim periods beginning after December 15, 2018 (our fiscal 2019). The adoption of this guidance did not have a material impact on our condensed consolidated financial statements.

In March 2020, the FASB issued ASU 2020-04, Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting. The new guidance provides optional guidance, for a limited time, to ease the potential burden in accounting for or recognizing the effects of reference rate reform on financial reporting. ASU 2020-04 is effective for a limited time, from March 12, 2020 through December 31, 2022. The Company adopted this ASU on March 12, 2020. The adoption of ASU 2020-04 did not have a significant impact on the Company’s consolidated financial position or results of operations.

In April 2020, the FASB staff issued interpretive guidance that indicated it would be acceptable for entities to make an election to account for lease concessions related to the effects of the COVID-19 pandemic consistent with how those concessions would
be accounted for under ASU 2016-02, Leases (Topic 842): Targeted Improvements, as though enforceable rights and obligations for those concessions existed (regardless of whether those enforceable rights and obligations for the concessions explicitly exist in the contract). Consequently, for concessions related to the effects of the COVID-19 pandemic, an entity will not have to analyze each contract to determine whether enforceable rights and obligations for concessions exist in the contract and can elect to apply or not apply the lease modification guidance in Topic 842 to those contracts. This election is available for concessions related to the effects of the COVID-19 pandemic that do not result in a substantial increase in the rights of the lessor or the obligations of the lessee.

We have elected to apply this interpretive guidance to the rent relief we have secured, and have assumed that enforceable rights and obligations for those concessions exist in the lease contract. As such, starting on the effective dates indicated above, we began recognizing abatements or deferrals in rents received from landlords as reductions in variable lease payments. This election will continue while these abatement or deferrals are in effect.

Accounting Standards to be Adopted

In December 2019, the FASB issued ASU 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes, which modifies Topic 740 to simplify the accounting for income taxes. ASU 2019-12 is effective for financial statements issued for annual periods beginning after December 15, 2020, and for the interim periods therein. The adoption of ASU 2019-12 is not expected to have a significant impact on the Company’s consolidated financial position or results of operations.
v3.20.2
Receivables (Tables)
6 Months Ended
Jun. 24, 2020
Receivables [Abstract]  
Receivables, Net
Receivables consisted of the following:
 
 June 24, 2020December 25, 2019
 (In thousands)
Receivables, net:  
Trade accounts receivable from franchisees$15,286  $14,551  
Financing receivables from franchisees1,499  2,230  
Vendor receivables768  3,260  
Credit card receivables497  6,806  
Other2,248  915  
Allowance for doubtful accounts(1,249) (274) 
Total receivables, net$19,049  $27,488  
Other noncurrent assets:
  
Financing receivables from franchisees$181  $364  
v3.20.2
Goodwill and Other Intangible Assets (Tables)
6 Months Ended
Jun. 24, 2020
Goodwill and Intangible Assets Disclosure [Abstract]  
Goodwill Goodwill and Other Intangible Assets
(In thousands)
Balance, December 25, 2019$36,832  
Reclassification from assets held for sale52  
Balance, June 24, 2020$36,884  
Indefinite-Lived Intangible Assets
Other intangible assets consisted of the following:

 June 24, 2020December 25, 2019
 Gross Carrying AmountAccumulated AmortizationGross Carrying AmountAccumulated Amortization
 (In thousands)
Intangible assets with indefinite lives:
    
Trade names$44,087  $—  $44,087  $—  
Liquor licenses120  —  120  —  
Intangible assets with definite lives:
    
Reacquired franchise rights15,076  6,602  15,516  5,767  
Intangible assets, net$59,283  $6,602  $59,723  $5,767  
Finite-Lived Intangible Assets
Other intangible assets consisted of the following:

 June 24, 2020December 25, 2019
 Gross Carrying AmountAccumulated AmortizationGross Carrying AmountAccumulated Amortization
 (In thousands)
Intangible assets with indefinite lives:
    
Trade names$44,087  $—  $44,087  $—  
Liquor licenses120  —  120  —  
Intangible assets with definite lives:
    
Reacquired franchise rights15,076  6,602  15,516  5,767  
Intangible assets, net$59,283  $6,602  $59,723  $5,767  
v3.20.2
Other Current Liabilities (Tables)
6 Months Ended
Jun. 24, 2020
Other Liabilities, Current [Abstract]  
Schedule of Other Current Liabilities
Other current liabilities consisted of the following:
 June 24, 2020December 25, 2019
 (In thousands)
Accrued payroll$8,323  $19,689  
Current portion of liability for insurance claims
6,012  6,515  
Accrued taxes4,912  5,624  
Accrued advertising1,818  6,753  
Gift cards4,964  6,469  
Other11,361  12,257  
Other current liabilities$37,390  $57,307  
v3.20.2
Fair Value of Financial Instruments (Tables)
6 Months Ended
Jun. 24, 2020
Fair Value Disclosures [Abstract]  
Financial Assets and Liabilities Measured at Fair Value on a Recurring Basis
Financial assets and liabilities measured at fair value on a recurring basis are summarized below:
 
 TotalQuoted Prices in Active Markets for Identical Assets/Liabilities
(Level 1)
Significant Other Observable Inputs
(Level 2)
Significant Unobservable Inputs
(Level 3)
 
(In thousands)
Fair value measurements as of June 24, 2020:
Deferred compensation plan investments (1)
$12,210  $12,210  $—  $—  
Interest rate swaps (2)
(94,612) —  (94,612) —  
Investments (3)
2,240  —  2,240  —  
Total$(80,162) $12,210  $(92,372) $—  
Fair value measurements as of December 25, 2019:
Deferred compensation plan investments (1)
$13,517  $13,517  $—  $—  
Interest rate swaps (2)
(44,670) —  (44,670) —  
Investments (3)
3,649  —  3,649  —  
Total$(27,504) $13,517  $(41,021) $—  

(1) The fair values of our deferred compensation plan investments are based on the closing market prices of the elected investments.
(2) The fair values of our interest rate swaps are based upon Level 2 inputs, which include valuation models as reported by our counterparties. The key inputs for the valuation models are quoted market prices, interest rates and forward yield curves. See Note 7 for details on the interest rate swaps.
(3) The fair values of our investments are valued using a readily determinable net asset value per share based on the fair value of the underlying securities. There are no significant redemption restrictions associated with these investments.
Fair Value Measurements, Nonrecurring
Those assets and liabilities measured at fair value on a nonrecurring basis are summarized below:
 
 Significant Unobservable Inputs
(Level 3)
Impairment Charges
 
Fair value measurements for the two quarters ended June 24, 2020:
Assets held and used (1)
$2,718  $2,181  
(1)During the first quarter of 2020, impaired assets were written down to their fair value. To determine fair value, we used the income approach, which assumes that the future cash flows reflect current market expectations. These fair value measurements require significant judgment using Level 3 inputs, such as discounted cash flows from operations, which are not observable from the market, directly or indirectly. There is uncertainty in the projected future cash flows used in the Company's impairment analysis, which requires the use of estimates and assumptions. If actual performance does not achieve the projections, or if the assumptions used change in the future, the Company may be required to recognize impairment charges in future periods
v3.20.2
Long-Term Debt Long-Term Debt (Tables)
6 Months Ended
Jun. 24, 2020
Debt Disclosure [Abstract]  
Interest Rate Swaps A summary of our interest rate swaps as of June 24, 2020 is as follows:
Trade DateEffective DateMaturity DateNotional AmountFixed Rate
(In thousands)
March 20, 2015March 29, 2018March 31, 2025$120,000  2.44 %
October 1, 2015March 29, 2018March 31, 202650,000  2.46 %
February 15, 2018March 31, 2020December 31, 203380,000  (1)3.19 %

(1)  The notional amounts of the swaps entered into on February 15, 2018 increase annually beginning September 30, 2020 until they reach the maximum notional amount of $425.0 million on September 28, 2029.
v3.20.2
Revenues (Tables)
6 Months Ended
Jun. 24, 2020
Revenue from Contract with Customer [Abstract]  
Disaggregation of Revenue The following table disaggregates our revenue by sales channel and type of good or service:
 Quarter EndedTwo Quarters Ended
 June 24, 2020June 26, 2019June 24, 2020June 26, 2019
 (Dollars in thousands)
Company restaurant sales$15,128  $95,447  $57,419  $193,992  
Franchise and license revenue:
Royalties6,719  26,672  30,566  51,912  
Advertising revenue7,232  19,884  24,758  38,826  
Initial and other fees1,346  1,755  3,043  2,894  
Occupancy revenue 9,736  8,126  21,070  15,671  
Franchise and license revenue 
25,033  56,437  79,437  109,303  
Total operating revenue$40,161  $151,884  $136,856  $303,295  
Components of Lease Income
Franchise occupancy revenue consisted of the following:
 Quarter EndedTwo Quarters Ended
 June 24, 2020June 26, 2019June 24, 2020June 26, 2019
 (In thousands)
Operating lease revenue$8,060  $5,846  $16,682  $11,271  
Variable lease revenue
1,676  2,280  4,388  4,400  
Total occupancy revenue
$9,736  $8,126  $21,070  $15,671  
Components of the Change in Deferred Franchise Revenue The components of the change in deferred franchise revenue are as follows:
 (In thousands)
Balance, December 25, 2019$23,256  
Fees received from franchisees389  
Revenue recognized (1)
(1,528) 
Balance, June 24, 202022,117  
Less current portion included in other current liabilities2,112  
Deferred franchise revenue included in other noncurrent liabilities$20,005  

(1) Of this amount $1.5 million was included in the deferred franchise revenue balance as of December 25, 2019.
v3.20.2
Operating (Gains), Losses and Other Charges, Net (Tables)
6 Months Ended
Jun. 24, 2020
Other Income and Expenses [Abstract]  
Operating Gains Losses and Other Charges, Net
Operating (gains), losses and other charges, net consisted of the following:
 
 Quarter EndedTwo Quarters Ended
 June 24, 2020June 26, 2019June 24, 2020June 26, 2019
 (In thousands)
(Gains) losses on sales of assets and other, net
$12  $(26,839) $(1,058) $(36,314) 
Restructuring charges and exit costs
1,615  406  1,977  946  
Impairment charges—  —  2,181  —  
Operating (gains), losses and other charges, net
$1,627  $(26,433) $3,100  $(35,368) 
Restructuring Charges and Exit Costs
Restructuring charges and exit costs consisted of the following:
 
 Quarter EndedTwo Quarters Ended
 June 24, 2020June 26, 2019June 24, 2020June 26, 2019
 (In thousands)
Exit costs$50  $52  $94  $174  
Severance and other restructuring charges
1,565  354  1,883  772  
Total restructuring charges and exit costs
$1,615  $406  $1,977  $946  
v3.20.2
Share-Based Compensation (Tables)
6 Months Ended
Jun. 24, 2020
Share-based Payment Arrangement [Abstract]  
Total Share-based Compensation
Total share-based compensation included as a component of general and administrative expenses was as follows:
 Quarter EndedTwo Quarters Ended
 June 24, 2020June 26, 2019June 24, 2020June 26, 2019
 (In thousands)
Employee share awards$1,326  $2,463  $(420) $4,461  
Restricted stock units for board members
185  250  394  505  
Total share-based compensation
$1,511  $2,713  $(26) $4,966  
v3.20.2
Net Income (Loss) Per Share (Tables)
6 Months Ended
Jun. 24, 2020
Earnings Per Share [Abstract]  
Net Income Per Share
The amounts used for the basic and diluted net income (loss) per share calculations are summarized below:
 Quarter EndedTwo Quarters Ended
 June 24, 2020June 26, 2019June 24, 2020June 26, 2019
 (In thousands, except for per share amounts)
Net income (loss)
$(22,965) $34,239  $(13,952) $49,729  
Weighted average shares outstanding - basic
55,686  60,290  55,993  60,970  
Effect of dilutive share-based compensation awards (1)
—  1,792  —  1,967  
Weighted average shares outstanding - diluted
55,686  62,082  55,993  62,937  
Basic net income (loss) per share
$(0.41) $0.57  $(0.25) $0.82  
Diluted net income (loss) per share
$(0.41) $0.55  $(0.25) $0.79  
Anti-dilutive share-based compensation awards(1)
3,493  630  3,493  630  
        
(1) For the quarter and two quarters ended June 24, 2020, share-based compensation awards have been omitted from the calculations because they have an anti-dilutive effect on loss per share.
v3.20.2
Shareholders' Deficit (Tables)
6 Months Ended
Jun. 24, 2020
Stockholders' Equity Attributable to Parent [Abstract]  
Components of Accumulated Other Comprehensive Income (Loss)
The components of the change in accumulated other comprehensive loss, net were as follows:
Defined Benefit PlansDerivativesAccumulated Other Comprehensive Loss, Net
(In thousands)
Balance as of December 25, 2019$(781) $(33,179) $(33,960) 
Amortization of net loss (1)
45  —  45  
Changes in the fair value of cash flow derivatives—  (47,725) (47,725) 
Reclassification of cash flow derivatives to interest expense, net (2)
—  1,626  1,626  
Reclassification of loss related to dedesignation of derivatives to other nonoperating expense (income)(3)
—  7,354  7,354  
Reclassification of unrealized losses related to derivatives to interest expense, net(3)
—  269  269  
Income tax (expense) benefit related to items of other comprehensive loss
(12) 10,186  10,174  
Balance as of June 24, 2020$(748) $(61,469) $(62,217) 

(1) Amount related to our defined benefit plans that was reclassified from accumulated other comprehensive loss, net and included as a component of pension expense within general and administrative expenses in our Condensed Consolidated Statements of Operations during the two quarters ended June 24, 2020.
(2) Amounts reclassified from accumulated other comprehensive loss, net into interest expense, net in our Condensed Consolidated Statements of Operations represent payments either received from or made to the counterparty for the interest rate swaps. See Note 7 for additional details.
(3) During the quarter ended June 24, 2020, we dedesignated the cash flow relationship and discontinued hedge accounting treatment for the 2018 Swaps. As a result, we reclassified approximately $7.4 million of losses from accumulated other comprehensive loss, net to other nonoperating expense (income), net in our Condensed Consolidated Statements of Operations related to the portion of forecasted transaction no longer considered probable of occurring. The remaining losses related to the 2018 Swaps will continue to be included in accumulated other comprehensive loss, net and will be recognized in as a component of interest expense, net in our Condensed Consolidated Statements of Operations over the remaining term of the 2018 Swaps. For the quarter ended June 24, 2020, we reclassified approximately $0.3 million of losses to interest expense, net related to the 2018 Swaps. See Note 7 for additional details.
v3.20.2
Supplemental Cash Flow Information (Tables)
6 Months Ended
Jun. 24, 2020
Supplemental Cash Flow Information [Abstract]  
Supplemental Cash Flow Information Supplemental Cash Flow Information
 Two Quarters Ended
 June 24, 2020June 26, 2019
 (In thousands)
Income taxes paid, net$277  $11,992  
Interest paid$8,057  $10,230  
Noncash investing and financing activities:  
Issuance of common stock, pursuant to share-based compensation plans$5,808  $7,453  
Noncash consideration received in connection with the sale of real estate$—  $3,000  
Execution of finance leases$11  $305  
Treasury stock payable$—  $803  
Receivables in connection with disposition of property$—  $470  
v3.20.2
Introduction and Basis of Presentation (Details)
Jun. 24, 2020
restaurant
Franchisor Disclosure [Line Items]  
Number of restaurants 1,683
Franchised/licensed restaurants  
Franchisor Disclosure [Line Items]  
Number of restaurants 1,616
Company restaurants  
Franchisor Disclosure [Line Items]  
Number of restaurants 67
v3.20.2
Receivables (Details) - USD ($)
$ in Thousands
6 Months Ended
Jun. 24, 2020
Dec. 25, 2019
Receivables, net:    
Trade accounts receivable from franchisees $ 15,286 $ 14,551
Financing receivables from franchisees 1,499 2,230
Allowance for doubtful accounts (1,249) (274)
Total receivables, net 19,049 27,488
Other noncurrent assets:    
Financing receivables from franchisees 181 364
Additional bad debt expense 1,000  
Vendor receivables    
Receivables, net:    
Other receivables, gross, current 768 3,260
Credit card receivables    
Receivables, net:    
Other receivables, gross, current 497 6,806
Other    
Receivables, net:    
Other receivables, gross, current $ 2,248 $ 915
v3.20.2
Goodwill and Other Intangible Assets (Details) - USD ($)
$ in Thousands
6 Months Ended
Jun. 24, 2020
Dec. 25, 2019
Goodwill [Roll Forward]    
Balance, December 25, 2019 $ 36,832  
Reclassification from assets held for sale 52  
Balance, June 24, 2020 36,884  
Intangible Assets    
Gross Carrying Amount - Trade names 44,087 $ 44,087
Gross Carrying Amount - Liquor licenses 120 120
Gross Carrying Amount - Intangible assets with definite lives 15,076 15,516
Accumulated Amortization 6,602 5,767
Intangible assets, net 59,283 $ 59,723
Impairment of franchisee rights (less than) $ 100  
v3.20.2
Other Current Liabilities (Details) - USD ($)
$ in Thousands
Jun. 24, 2020
Dec. 25, 2019
Other Liabilities, Current [Abstract]    
Accrued payroll $ 8,323 $ 19,689
Current portion of liability for insurance claims 6,012 6,515
Accrued taxes 4,912 5,624
Accrued advertising 1,818 6,753
Gift cards 4,964 6,469
Other 11,361 12,257
Other current liabilities $ 37,390 $ 57,307
v3.20.2
Fair Value of Financial Instruments - Schedule of Assets and Liabilities on Recurring Basis (Details) - USD ($)
$ in Thousands
Jun. 24, 2020
Dec. 25, 2019
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]    
Interest rate swaps $ (94,600)  
Recurring    
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]    
Deferred compensation plan investments 12,210 $ 13,517
Interest rate swaps (94,612) (44,670)
Investments 2,240 3,649
Total (80,162) (27,504)
Recurring | Quoted Prices in Active Markets for Identical Assets/Liabilities (Level 1)    
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]    
Deferred compensation plan investments 12,210 13,517
Interest rate swaps 0 0
Investments 0 0
Total 12,210 13,517
Recurring | Significant Other Observable Inputs (Level 2)    
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]    
Deferred compensation plan investments 0 0
Interest rate swaps (94,612) (44,670)
Investments 2,240 3,649
Total (92,372) (41,021)
Recurring | Significant Unobservable Inputs (Level 3)    
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]    
Deferred compensation plan investments 0 0
Interest rate swaps 0 0
Investments 0 0
Total $ 0 $ 0
v3.20.2
Fair Value of Financial Instruments - Schedule of Assets and Liabilities Measured on Nonrecurring Basis (Details) - USD ($)
$ in Thousands
3 Months Ended 6 Months Ended
Jun. 24, 2020
Jun. 26, 2019
Jun. 24, 2020
Jun. 26, 2019
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]        
Impairment Charges $ 0 $ 0 $ 2,181 $ 0
Fair Value, Nonrecurring | Significant Unobservable Inputs (Level 3)        
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]        
Assets held and used $ 2,718   2,718  
Impairment Charges     $ 2,181  
v3.20.2
Long-Term Debt - Narrative (Details)
3 Months Ended 6 Months Ended
May 13, 2020
USD ($)
Jun. 24, 2020
USD ($)
Jun. 24, 2020
USD ($)
May 26, 2021
USD ($)
Mar. 25, 2020
USD ($)
Dec. 25, 2019
USD ($)
Jun. 26, 2019
USD ($)
Mar. 27, 2019
USD ($)
Dec. 26, 2018
USD ($)
Line of Credit Facility [Line Items]                  
Stockholders' equity   $ 217,507,000 $ 217,507,000   $ 200,492,000 $ 138,064,000 $ 142,572,000 $ 140,221,000 $ 133,345,000
Interest rate swaps liability   94,600,000 94,600,000            
Derivatives                  
Line of Credit Facility [Line Items]                  
Reclassification     1,626,000            
Stockholders' equity   61,469,000 61,469,000            
Derivatives                  
Line of Credit Facility [Line Items]                  
Reclassification     (7,354,000)            
Derivatives                  
Line of Credit Facility [Line Items]                  
Reclassification     269,000            
Other Nonoperating Income (Expense)                  
Line of Credit Facility [Line Items]                  
Unrealized loss on derivatives   4,100,000 4,100,000            
Interest Rate Swap                  
Line of Credit Facility [Line Items]                  
Expected reclassification within next twelve months     4,500,000            
2018 Swaps | Derivatives                  
Line of Credit Facility [Line Items]                  
Stockholders' equity   65,100,000 $ 65,100,000            
Senior Secured Revolver                  
Line of Credit Facility [Line Items]                  
Line of credit facility, term     5 years            
Line of credit facility, current borrowing capacity   400,000,000 $ 400,000,000            
Accordion feature that allows increase in size of facility   450,000,000 450,000,000            
Outstanding amount under credit facility   307,000,000.0 307,000,000.0            
Availability under the credit facility   $ 74,700,000 $ 74,700,000            
Commitment fee, percent 0.40%                
Capital expenditures restrictions $ 10,000,000                
Weighted-average interest rate   3.18% 3.18%     3.47%      
Senior Secured Revolver | LIBOR                  
Line of Credit Facility [Line Items]                  
Basis spread on variable rate debt (as a percent) 3.00%                
Senior Secured Revolver | Interest Rate Swap                  
Line of Credit Facility [Line Items]                  
Weighted-average interest rate   5.22% 5.22%     3.99%      
Letter of Credit                  
Line of Credit Facility [Line Items]                  
Line of credit facility, current borrowing capacity   $ 30,000,000 $ 30,000,000            
Outstanding amount of letters of credit   $ 18,300,000 $ 18,300,000            
Before the Amendment | Senior Secured Revolver | Letter of Credit                  
Line of Credit Facility [Line Items]                  
Covenant, leverage ratio 4.00                
Until Quarter Ending March 31, 2021 | Senior Secured Revolver | Letter of Credit                  
Line of Credit Facility [Line Items]                  
Fixed charge coverage ratio, minimum 1.50                
Covenant, leverage ratio 4.50                
Second quarter of 2021 | Senior Secured Revolver | Letter of Credit                  
Line of Credit Facility [Line Items]                  
Covenant, leverage ratio 4.25                
Third quarter 2021 and thereafter | Senior Secured Revolver | Letter of Credit                  
Line of Credit Facility [Line Items]                  
Covenant, leverage ratio 4.00                
Minimum | Senior Secured Revolver | Letter of Credit | Forecast                  
Line of Credit Facility [Line Items]                  
Liquidity requirement       $ 60,000,000          
Maximum | Senior Secured Revolver | Letter of Credit | Forecast                  
Line of Credit Facility [Line Items]                  
Liquidity requirement       $ 70,000,000          
v3.20.2
Long-Term Debt - Interest Rate Swaps (Details)
Jun. 24, 2020
USD ($)
Interest Rate Swap 2018-2025  
Derivative [Line Items]  
Notional Amount $ 120,000,000
Fixed Rate 2.44%
Interest Rate Swap 2018-2026  
Derivative [Line Items]  
Notional Amount $ 50,000,000
Fixed Rate 2.46%
Interest Rate Swap 2020-2033  
Derivative [Line Items]  
Notional Amount $ 80,000,000
Fixed Rate 3.19%
Interest Rate Swap 2020-2029 | Maximum  
Derivative [Line Items]  
Notional Amount $ 425,000,000.0
v3.20.2
Revenues - Disaggregation of Revenues (Details)
$ in Thousands
3 Months Ended 6 Months Ended
Jun. 24, 2020
USD ($)
Jun. 26, 2019
USD ($)
Jun. 24, 2020
USD ($)
sale_channel
segment
Jun. 26, 2019
USD ($)
Revenue from Contract with Customer [Abstract]        
Number of sales channels | sale_channel     2  
Number of segments | segment     1  
Disaggregation of Revenue [Line Items]        
Total operating revenue $ 40,161 $ 151,884 $ 136,856 $ 303,295
Company restaurant sales        
Disaggregation of Revenue [Line Items]        
Total operating revenue 15,128 95,447 57,419 193,992
Royalties        
Disaggregation of Revenue [Line Items]        
Total operating revenue 6,719 26,672 30,566 51,912
Advertising revenue        
Disaggregation of Revenue [Line Items]        
Total operating revenue 7,232 19,884 24,758 38,826
Initial and other fees        
Disaggregation of Revenue [Line Items]        
Total operating revenue 1,346 1,755 3,043 2,894
Occupancy revenue         
Disaggregation of Revenue [Line Items]        
Total operating revenue 9,736 8,126 21,070 15,671
Franchise and license revenue         
Disaggregation of Revenue [Line Items]        
Total operating revenue $ 25,033 $ 56,437 $ 79,437 $ 109,303
v3.20.2
Revenues - Schedule of Franchise Occupancy Revenue (Details) - USD ($)
$ in Thousands
3 Months Ended 6 Months Ended
Jun. 24, 2020
Jun. 26, 2019
Jun. 24, 2020
Jun. 26, 2019
Revenue from Contract with Customer [Abstract]        
Operating lease revenue $ 8,060 $ 5,846 $ 16,682 $ 11,271
Variable lease revenue 1,676 2,280 4,388 4,400
Total occupancy revenue $ 9,736 $ 8,126 $ 21,070 $ 15,671
v3.20.2
Revenues - Contract Balances (Details) - USD ($)
$ in Thousands
6 Months Ended
Dec. 25, 2019
Jun. 24, 2020
Movement in Deferred Revenue [Roll Forward]    
Balance, December 25, 2019   $ 23,256
Fees received from franchisees   389
Revenue recognized   (1,528)
Balance, June 24, 2020 $ 23,256 22,117
Less current portion included in other current liabilities   2,112
Deferred franchise revenue included in other noncurrent liabilities   $ 20,005
Deferred revenue recognized $ 1,500  
v3.20.2
Revenues - Narrative (Details) - USD ($)
$ in Thousands
6 Months Ended
Dec. 25, 2019
Jun. 24, 2020
Disaggregation of Revenue [Line Items]    
Liability balance   $ 2,112
Deferred revenue recognized $ 1,500  
Gift Card Redemption    
Disaggregation of Revenue [Line Items]    
Liability balance $ 6,500 5,000
Deferred revenue recognized   $ 500
Minimum | Deferred franchise revenue | Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Start Date [Axis]: 2020-06-25    
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction [Line Items]    
Deferred franchise revenue expected to be recognized, period   10 years
Maximum | Deferred franchise revenue | Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Start Date [Axis]: 2020-06-25    
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction [Line Items]    
Deferred franchise revenue expected to be recognized, period   20 years
v3.20.2
Operating (Gains), Losses and Other Charges, Net (Details) - USD ($)
$ in Thousands
3 Months Ended 6 Months Ended
Jun. 24, 2020
Jun. 26, 2019
Jun. 24, 2020
Jun. 26, 2019
Other Income and Expenses [Abstract]        
(Gains) losses on sales of assets and other, net $ 12 $ (26,839) $ (1,058) $ (36,314)
Restructuring charges and exit costs 1,615 406 1,977 946
Impairment charges 0 0 2,181 0
Operating (gains), losses and other charges, net 1,627 (26,433) 3,100 (35,368)
Restructuring Charges [Abstract]        
Exit costs 50 52 94 174
Severance and other restructuring charges 1,565 354 1,883 772
Total restructuring charges and exit costs $ 1,615 $ 406 $ 1,977 $ 946
v3.20.2
Operating (Gains), Losses and Other Charges, Net Narrative (Details)
$ in Thousands
3 Months Ended 6 Months Ended
Jun. 24, 2020
USD ($)
real_estate
restaurant
Jun. 26, 2019
USD ($)
parcel
restaurant
Jun. 24, 2020
USD ($)
restaurant
parcel
real_estate
Jun. 26, 2019
USD ($)
restaurant
parcel
Dec. 25, 2019
USD ($)
restaurant
real_estate
Income Statement, Balance Sheet and Additional Disclosures by Disposal Groups, Including Discontinued Operations [Line Items]          
Gains on sales of assets and other, net $ (12) $ 26,839 $ 1,058 $ 36,314  
Number of restaurants | restaurant 1,683   1,683    
Exit cost liabilities $ 200   $ 200   $ 200
Severance and other restructuring charges 1,600   1,600   900
Impairment charges 0 $ 0 2,181 $ 0  
Property impairment     1,100    
Operating lease right-of-use asset impairment     1,000    
Impairment of franchisee rights (less than)     $ 100    
Number of restaurants reclassified out of held for sale | restaurant     4    
Real Estate          
Income Statement, Balance Sheet and Additional Disclosures by Disposal Groups, Including Discontinued Operations [Line Items]          
Number of real estate properties sold | parcel   3 2 4  
Gains on sales of assets and other, net   $ 3,100   $ 10,600  
Company restaurant sales          
Income Statement, Balance Sheet and Additional Disclosures by Disposal Groups, Including Discontinued Operations [Line Items]          
Gains on sales of assets and other, net   $ 24,200   $ 26,400  
Number of restaurants sold | restaurant   37   40  
Held-for-sale          
Income Statement, Balance Sheet and Additional Disclosures by Disposal Groups, Including Discontinued Operations [Line Items]          
Carrying amount 2,000   $ 2,000   1,900
Property 1,700   1,700   1,600
Other assets $ 300   $ 300   $ 200
Number of real estate properties | real_estate 5   5   2
Goodwill         $ 100
Number of restaurants | restaurant         4
Disposed of by sale          
Income Statement, Balance Sheet and Additional Disclosures by Disposal Groups, Including Discontinued Operations [Line Items]          
Number of real estate properties sold | real_estate     2    
v3.20.2
Share-Based Compensation (Details) - USD ($)
$ / shares in Units, $ in Thousands, shares in Millions
3 Months Ended 6 Months Ended
Jun. 24, 2020
Jun. 26, 2019
Jun. 24, 2020
Jun. 26, 2019
Total share-based compensation [Abstract]        
Total share-based compensation $ 1,511 $ 2,713 $ (26) $ 4,966
Certain Employee        
Total share-based compensation [Abstract]        
Total share-based compensation 1,326 2,463 (420) 4,461
Restricted Stock Units [Abstract]        
Unrecognized compensation cost related to unvested share awards outstanding $ 12,300   $ 12,300  
Unrecognized compensation cost, expected weighted average period     1 year 8 months 12 days  
Board Members        
Restricted Stock Units [Abstract]        
Restricted stock units converted into shares of common stock (less than, in shares) 0.1   0.1  
Performance share awards | Certain Employee        
Restricted Stock Units [Abstract]        
Common stock, shares issued (in shares)     0.3  
Shares paid for tax withholding (in shares)     0.1  
Restricted stock units for board members | Certain Employee        
Restricted Stock Units [Abstract]        
Grants in periods (less than, in shares) 0.8   0.8  
Fair value of units granted (in dollars per share) $ 10.46   $ 10.46  
Award vesting period     2 years  
Restricted stock units for board members | Board Members        
Total share-based compensation [Abstract]        
Total share-based compensation $ 185 $ 250 $ 394 $ 505
Restricted Stock Units [Abstract]        
Grants in periods (less than, in shares) 0.1   0.1  
Fair value of units granted (in dollars per share) $ 10.46   $ 10.46  
Unrecognized compensation cost related to unvested share awards outstanding $ 800   $ 800  
Unrecognized compensation cost, expected weighted average period     10 months 24 days  
Award vesting period     1 year  
v3.20.2
Income Taxes (Details)
3 Months Ended 6 Months Ended
Jun. 24, 2020
Jun. 26, 2019
Jun. 24, 2020
Jun. 26, 2019
Income Tax Disclosure [Abstract]        
Effective tax rate expense (benefit), percent (18.10%) 16.50% (16.50%) 18.70%
Income tax benefit on reclassification of interest rate hedges from other comprehensive income 7.00%   11.70%  
Income tax benefit related to revaluation of certain tax positions   4.80%   3.30%
Excess tax benefits relating to share-based compensation   3.60%   2.80%
v3.20.2
Net Income (Loss) Per Share (Details) - USD ($)
$ / shares in Units, shares in Thousands, $ in Thousands
3 Months Ended 6 Months Ended
Jun. 24, 2020
Jun. 26, 2019
Jun. 24, 2020
Jun. 26, 2019
Earnings Per Share [Abstract]        
Net income (loss) $ (22,965) $ 34,239 $ (13,952) $ 49,729
Weighted average shares outstanding - basic (in shares) 55,686 60,290 55,993 60,970
Effect of dilutive share-based compensation awards (in shares) 0 1,792 0 1,967
Weighted average shares outstanding - diluted (in shares) 55,686 62,082 55,993 62,937
Basic net income (loss) per share (in dollars per share) $ (0.41) $ 0.57 $ (0.25) $ 0.82
Diluted net income (loss) per share (in dollars per share) $ (0.41) $ 0.55 $ (0.25) $ 0.79
Antidilutive share-based compensation awards (in shares) 3,493 630 3,493 630
v3.20.2
Shareholders' Deficit - Share Repurchase (Details) - USD ($)
$ / shares in Units, shares in Thousands
1 Months Ended 3 Months Ended 6 Months Ended
Nov. 30, 2018
Mar. 25, 2020
Jun. 26, 2019
Mar. 27, 2019
Jun. 24, 2020
Jun. 26, 2019
Dec. 25, 2019
Dec. 26, 2018
Equity, Class of Treasury Stock [Line Items]                
Purchase of treasury stock (in shares)   1,700            
Purchase of treasury stock   $ 34,200,000 $ 29,056,000   $ 34,193,000 $ 37,997,000    
Payments for repurchase of common stock         $ 36,008,000 $ 37,266,000    
Treasury Stock                
Equity, Class of Treasury Stock [Line Items]                
Purchase of treasury stock (in shares)     1,536   1,690 2,043    
Purchase of treasury stock     $ 29,056,000   $ 34,193,000 $ 37,997,000    
Share Repurchase Program 2017                
Equity, Class of Treasury Stock [Line Items]                
Share repurchase, authorized amount   $ 200,000,000            
Share Repurchase Program 2019                
Equity, Class of Treasury Stock [Line Items]                
Share repurchase, authorized amount             $ 250,000,000  
Remaining shares to be repurchased         $ 248,000,000.0      
Accelerated Share Repurchase 2018                
Equity, Class of Treasury Stock [Line Items]                
Purchase of treasury stock (in shares) 1,100              
Purchase of treasury stock $ 18,200,000              
Share repurchase, authorized amount 25,000,000              
Remaining shares to be repurchased               $ 6,800,000
Payments for repurchase of common stock $ 25,000,000              
Volume-weighted average price (in dollars per share)       $ 17.04        
Accelerated Share Repurchase 2018 | Treasury Stock                
Equity, Class of Treasury Stock [Line Items]                
Purchase of treasury stock (in shares)       400   389    
Purchase of treasury stock       $ 6,800,000        
v3.20.2
Shareholders' Deficit - Components of Accumulated Other Comprehensive Loss (Details)
$ in Thousands
6 Months Ended
Jun. 24, 2020
USD ($)
AOCI Attributable to Parent, Net of Tax [Roll Forward]  
Balance as of beginning of period $ (138,064)
Income tax (expense) benefit related to items of other comprehensive loss 10,174
Balance as of end of period (217,507)
Defined Benefit Plans  
AOCI Attributable to Parent, Net of Tax [Roll Forward]  
Balance as of beginning of period (781)
Reclassification 45
Income tax (expense) benefit related to items of other comprehensive loss (12)
Balance as of end of period (748)
Derivatives  
AOCI Attributable to Parent, Net of Tax [Roll Forward]  
Balance as of beginning of period (33,179)
Derivatives  
AOCI Attributable to Parent, Net of Tax [Roll Forward]  
Reclassification 1,626
Changes in the fair value of cash flow derivatives (47,725)
Income tax (expense) benefit related to items of other comprehensive loss 10,186
Balance as of end of period (61,469)
Derivatives  
AOCI Attributable to Parent, Net of Tax [Roll Forward]  
Reclassification (7,354)
Derivatives  
AOCI Attributable to Parent, Net of Tax [Roll Forward]  
Reclassification 269
Accumulated Other Comprehensive Loss, Net  
AOCI Attributable to Parent, Net of Tax [Roll Forward]  
Balance as of beginning of period (33,960)
Balance as of end of period $ (62,217)
v3.20.2
Commitments and Contingencies (Details) - USD ($)
Jun. 24, 2020
Dec. 25, 2019
Commitments and Contingencies Disclosure [Abstract]    
Loan amounts outstanding under the loan pools $ 400,000 $ 600,000
Maximum payments guaranteed 400,000  
Guarantee liabilities included as a component of other noncurrent liabilities (less than) $ 100,000 $ 100,000
v3.20.2
Supplemental Cash Flow Information (Details) - USD ($)
$ in Thousands
6 Months Ended
Jun. 24, 2020
Jun. 26, 2019
Supplemental Cash Flow Information [Abstract]    
Income taxes paid, net $ 277 $ 11,992
Interest paid 8,057 10,230
Noncash investing and financing activities:    
Issuance of common stock, pursuant to share-based compensation plans 5,808 7,453
Noncash consideration received in connection with the sale of real estate 0 3,000
Execution of finance leases 11 305
Treasury stock payable 0 803
Receivables in connection with disposition of property $ 0 $ 470
v3.20.2
Subsequent Events (Details) - USD ($)
$ / shares in Units, $ in Millions
Jul. 06, 2020
Jul. 01, 2020
Jun. 24, 2020
Dec. 25, 2019
Subsequent Event [Line Items]        
Common stock, par value (in dollars per share)     $ 0.01 $ 0.01
Subsequent Event        
Subsequent Event [Line Items]        
Number of shares sold   8,000,000    
Common stock, par value (in dollars per share)   $ 0.01    
Price per share   $ 9.15    
Proceeds from sale of stock $ 69.6      
Subsequent Event | Over-Allotment Option        
Subsequent Event [Line Items]        
Number of shares sold   1,200,000    
Duration of option to purchase additional stock   30 days