Denny’s(US:DENN)2025-11-04 02:10Sales Performance - Company restaurant sales increased by $4.7 million, or 8.9%, for the quarter ended September 24, 2025, and $10.3 million, or 6.4%, year-to-date compared to the prior year periods [100]. - Denny's same-store sales decreased by 1.4% for the current quarter and 0.8% year-to-date compared to the prior year periods [100]. - Keke's same-store sales increased by 5.2% for the current quarter and 2.9% year-to-date compared to the prior year periods [100]. Financial Overview - Total operating revenue for the quarter ended September 24, 2025, was $113.244 million, compared to $111.759 million for the same quarter in 2024 [95]. - Net income for the quarter ended September 24, 2025, was $632,000, compared to $6.516 million for the same quarter in 2024 [95]. - Operating income was $10.4 million for the quarter ended September 24, 2025, compared to $11.7 million for the prior year period [120]. - Net income was $0.6 million for the quarter and $3.4 million year-to-date, down from $6.5 million and $14.8 million in the prior year periods [126]. Costs and Expenses - Total costs of company restaurant sales as a percentage of company restaurant sales were 87.4% for the quarter ended September 24, 2025, compared to 88.8% for the prior year period [101]. - Product costs as a percentage of company restaurant sales were 25.5% for the quarter ended September 24, 2025, compared to 25.8% for the prior year period [102]. - Payroll and benefits as a percentage of company restaurant sales were 37.8% for the quarter ended September 24, 2025, compared to 37.6% for the prior year period [103]. - Occupancy costs as a percentage of company restaurant sales increased to 9.6% for the quarter ended September 24, 2025, from 8.4% for the prior year period, primarily due to a 1.0 percentage point increase in rent and property taxes [104]. - Other operating expenses decreased to $8.367 million, or 14.6% of company restaurant sales, for the quarter ended September 24, 2025, compared to $8.928 million, or 16.9%, for the prior year period [106]. - General and administrative expenses increased by $2.7 million, or 13.8%, for the quarter ended September 24, 2025, compared to the prior year period [114]. - Total depreciation and amortization expense increased to $4.434 million for the quarter ended September 24, 2025, compared to $3.622 million for the prior year period [116]. Franchise and Licensing - Franchise and license revenue decreased by $3.2 million, or 5.4%, for the quarter ended September 24, 2025, and by $5.4 million, or 3.0%, year-to-date compared to the prior year periods [108]. - Royalties decreased by $1.4 million, or 4.7%, for the quarter ended September 24, 2025, primarily due to a decrease of 59 Denny's franchise equivalent units [108]. - The Denny's brand consisted of 1,459 restaurants as of September 24, 2025, with 1,397 being franchised/licensed [92]. - Keke's brand consisted of 78 restaurants as of September 24, 2025, with 55 being franchised [92]. Debt and Cash Flow - Interest expense, net, was $5.318 million for the quarter ended September 24, 2025, compared to $4.571 million for the same quarter in 2024 [95]. - Interest expense, net increased by $0.7 million for the quarter and $1.6 million year-to-date, primarily due to increases in amortization of interest rate swap losses [122]. - Other nonoperating expense increased by $4.0 million for the quarter and $4.4 million year-to-date, mainly due to $3.7 million of debt issuance costs related to a proposed merger [123]. - Provision for income taxes was $1.3 million for the quarter and $2.9 million year-to-date, with an effective tax rate of 67.4% for the current quarter compared to 18.5% for the prior year [124]. - Net cash provided by operating activities was $30.3 million year-to-date, an increase from $20.9 million in the prior year, attributed to timing of payments for accounts payable [129]. - Net cash used in investing activities was $25.1 million year-to-date, including capital expenditures of $25.6 million and acquisitions of $4.1 million [130]. - As of September 24, 2025, the company had outstanding revolver loans of $259.5 million and outstanding letters of credit of $15.9 million, resulting in unused commitments of $124.6 million [136]. - As of September 24, 2025, the consolidated leverage ratio was 3.98 times and the fixed charge coverage ratio was 2.07 times, in compliance with all financial covenants [135]. Future Outlook - The company expects a beneficial cash flow impact in fiscal 2025 from the enhanced expensing provisions of the One Big Beautiful Bill Act [125]. - The company has committed approximately $4 million toward a new cloud-based restaurant technology platform, expected to enhance guest experience and continue through 2027 [139]. Impairments and Restructuring - Impairment charges of $3.3 million were recorded for the year-to-date period ended September 24, 2025, primarily related to closed franchise restaurants [118]. - Total restructuring and exit costs amounted to $271,000 for the quarter ended September 24, 2025, primarily due to severance costs from position eliminations [119].