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~~30, 2021

☐ 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 Carolina

29319-0001

(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 class

Trading Symbol(s)

Name of each exchange on which registered

$.01 Par Value, Common Stock

DENN

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 Filer

ý☐

Accelerated Filer

☐ý

Non-Accelerated Filer

☐

Smaller Reporting Company

☐

Emerging 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~~29, 2021, 64,199,998 shares of the registrant’s common stock, par value $0.01 per share, were outstanding.

TABLE OF CONTENTS

PART I - FINANCIAL INFORMATION

Item 1. Financial Statements

Denny’s Corporation and Subsidiaries

Condensed Consolidated Balance Sheets

(Unaudited)


		June 24, 2020		December 25, 2019			June 30, 2021		December 30, 2020
		(In thousands, except per share amounts)							(In thousands)
Assets	Assets					Assets
Current assets:	Current assets:					Current assets:
Cash and cash equivalents	Cash and cash equivalents	$	21,077	$	3,372	Cash and cash equivalents	$	10,882	$	3,892
Investments	Investments	2,240		3,649		Investments	2,069		2,272
Receivables, net	Receivables, net	19,049		27,488		Receivables, net	20,407		21,349
Inventories	Inventories	1,107		1,325		Inventories	1,280		1,181
Assets held for sale	Assets held for sale	1,973		1,925		Assets held for sale	1,621		1,125
Prepaid and other current assets	Prepaid and other current assets	17,567		14,974		Prepaid and other current assets	12,168		18,847
Total current assets	Total current assets	63,013		52,733		Total current assets	48,427		48,666
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
Property, net of accumulated depreciation of $149,516 and $146,583, respectively						Property, net of accumulated depreciation of $149,516 and $146,583, respectively	82,490		86,154
Financing lease right-of-use assets, net of accumulated amortization of $10,684 and $9,907, respectively						Financing lease right-of-use assets, net of accumulated amortization of $10,684 and $9,907, respectively	9,437		9,830
Operating lease right-of-use assets, net	Operating lease right-of-use assets, net	149,169		158,550		Operating lease right-of-use assets, net	135,229		139,534
Goodwill	Goodwill	36,884		36,832		Goodwill	36,884		36,884
Intangible assets, net	Intangible assets, net	52,681		53,956		Intangible assets, net	50,892		51,559
Deferred financing costs, net	Deferred financing costs, net	2,369		1,727		Deferred financing costs, net	1,727		2,414
Deferred income taxes, net	Deferred income taxes, net	28,597		14,718		Deferred income taxes, net	19,854		23,210
Other noncurrent assets	Other noncurrent assets	31,559		32,525		Other noncurrent assets	33,407		32,698
Total assets	Total assets	$	468,703	$	460,387	Total assets	$	418,347	$	430,949
Liabilities	Liabilities					Liabilities
Current liabilities:	Current liabilities:					Current liabilities:
Current finance lease liabilities	Current finance lease liabilities	$	1,987	$	1,674	Current finance lease liabilities	$	1,637	$	1,839
Current operating lease liabilities	Current operating lease liabilities	18,479		16,344		Current operating lease liabilities	16,348		16,856
Accounts payable	Accounts payable	18,901		20,256		Accounts payable	14,376		12,021
Other current liabilities	Other current liabilities	37,390		57,307		Other current liabilities	55,251		46,462
Total current liabilities	Total current liabilities	76,757		95,581		Total current liabilities	87,612		77,178
Long-term liabilities:	Long-term liabilities:					Long-term liabilities:
Long-term debt	Long-term debt	307,000		240,000		Long-term debt	180,000		210,000
Noncurrent finance lease liabilities	Noncurrent finance lease liabilities	14,144		14,779		Noncurrent finance lease liabilities	13,265		13,530
Noncurrent operating lease liabilities	Noncurrent operating lease liabilities	146,080		152,750		Noncurrent operating lease liabilities	132,959		137,534
Liability for insurance claims, less current portion	Liability for insurance claims, less current portion	11,371		11,454		Liability for insurance claims, less current portion	9,602		10,309
Other noncurrent liabilities	Other noncurrent liabilities	130,858		83,887		Other noncurrent liabilities	94,332		112,844
Total long-term liabilities	Total long-term liabilities	609,453		502,870		Total long-term liabilities	430,158		484,217
Total liabilities	Total liabilities	686,210		598,451		Total liabilities	517,770		561,395
Shareholders' deficit	Shareholders' deficit					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
Common stock $0.01 par value; 135,000 shares authorized; June 30, 2021: 64,200 shares issued and outstanding; December 30, 2020: 63,962 shares issued and outstanding						Common stock $0.01 par value; 135,000 shares authorized; June 30, 2021: 64,200 shares issued and outstanding; December 30, 2020: 63,962 shares issued and outstanding	$	642	$	640
Paid-in capital	Paid-in capital	600,936		603,980		Paid-in capital	129,176		123,833
Deficit	Deficit	(203,350)		(189,398)		Deficit	(172,161)		(194,514)
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)
Accumulated other comprehensive loss, net						Accumulated other comprehensive loss, net	(57,080)		(60,405)
Total shareholders' deficit	Total shareholders' deficit	(217,507)		(138,064)		Total shareholders' deficit	(99,423)		(130,446)
Total liabilities and shareholders' deficit	Total liabilities and shareholders' deficit	$	468,703	$	460,387	Total liabilities and shareholders' deficit	$	418,347	$	430,949

See accompanying notes

Denny’s Corporation and Subsidiaries

Condensed Consolidated Statements of Operations

(Unaudited)


		Quarter Ended						Two Quarters Ended							Quarter Ended				Two Quarters Ended
		June 24, 2020		June 26, 2019		June 24, 2020		June 26, 2019			June 30, 2021		June 24, 2020		June 30, 2021		June 24, 2020
		(In thousands, except per share amounts)															(In thousands, except per share amounts)
Revenue:	Revenue:									Revenue:
Company restaurant sales	Company restaurant sales	$	15,128	$	95,447	$	57,419	$	193,992	Company restaurant sales	$	47,572	$	15,128	$	81,141	$	57,419
Franchise and license revenue	Franchise and license revenue	25,033		56,437		79,437		109,303		Franchise and license revenue	58,593		25,033		105,600		79,437
Total operating revenue	Total operating revenue	40,161		151,884		136,856		303,295		Total operating revenue	106,165		40,161		186,741		136,856
Costs of company restaurant sales, excluding depreciation and amortization:	Costs of company restaurant sales, excluding depreciation and amortization:									Costs of company restaurant sales, excluding depreciation and amortization:
Product costs	Product costs	4,305		23,363		14,435		47,268		Product costs	11,447		4,305		19,719		14,435
Payroll and benefits	Payroll and benefits	8,039		36,866		25,145		76,698		Payroll and benefits	16,970		8,039		29,935		25,145
Occupancy	Occupancy	2,728		5,498		5,891		11,282		Occupancy	2,844		2,728		5,694		5,891
Other operating expenses	Other operating expenses	4,534		14,103		10,253		28,695		Other operating expenses	6,552		4,534		12,629		10,253
Total costs of company restaurant sales	Total costs of company restaurant sales	19,606		79,830		55,724		163,943		Total costs of company restaurant sales	37,813		19,606		67,977		55,724
Costs of franchise and license revenue, excluding depreciation and amortization	Costs of franchise and license revenue, excluding depreciation and amortization	15,244		28,871		44,414		55,929		Costs of franchise and license revenue, excluding depreciation and amortization	28,735		15,244		52,493		44,414
General and administrative expenses	General and administrative expenses	13,153		18,453		20,895		37,264		General and administrative expenses	17,548		13,153		34,495		20,895
Depreciation and amortization	Depreciation and amortization	4,058		5,048		8,204		11,281		Depreciation and amortization	3,897		4,058		7,558		8,204
Operating (gains), losses and other charges, net	Operating (gains), losses and other charges, net	1,627		(26,433)		3,100		(35,368)		Operating (gains), losses and other charges, net	(113)		1,627		419		3,100
Total operating costs and expenses, net	Total operating costs and expenses, net	53,688		105,769		132,337		233,049		Total operating costs and expenses, net	87,880		53,688		162,942		132,337
Operating income (loss)	Operating income (loss)	(13,527)		46,115		4,519		70,246		Operating income (loss)	18,285		(13,527)		23,799		4,519
Interest expense, net	Interest expense, net	4,947		5,382		8,898		10,789		Interest expense, net	4,066		4,947		8,343		8,898
Other nonoperating expense (income), net	Other nonoperating expense (income), net	9,565		(273)		12,328		(1,696)		Other nonoperating expense (income), net	16,251		9,565		(13,797)		12,328
Income (loss) before income taxes	Income (loss) before income taxes	(28,039)		41,006		(16,707)		61,153		Income (loss) before income taxes	(2,032)		(28,039)		29,253		(16,707)
Provision for (benefit from) income taxes	Provision for (benefit from) income taxes	(5,074)		6,767		(2,755)		11,424		Provision for (benefit from) income taxes	(1,204)		(5,074)		6,900		(2,755)
Net income (loss)	Net income (loss)	$	(22,965)	$	34,239	$	(13,952)	$	49,729	Net income (loss)	$	(828)	$	(22,965)	$	22,353	$	(13,952)

Basic net income (loss) per share	Basic net income (loss) per share	$	(0.41)	$	0.57	$	(0.25)	$	0.82	Basic net income (loss) per share	$	(0.01)	$	(0.41)	$	0.34	$	(0.25)
Diluted net income (loss) per share	Diluted net income (loss) per share	$	(0.41)	$	0.55	$	(0.25)	$	0.79	Diluted net income (loss) per share	$	(0.01)	$	(0.41)	$	0.34	$	(0.25)

Basic weighted average shares outstanding	Basic weighted average shares outstanding	55,686		60,290		55,993		60,970		Basic weighted average shares outstanding	65,294		55,686		65,273		55,993
Diluted weighted average shares outstanding	Diluted weighted average shares outstanding	55,686		62,082		55,993		62,937		Diluted weighted average shares outstanding	65,294		55,686		65,789		55,993

See accompanying notes

Denny’s Corporation and Subsidiaries

Condensed Consolidated Statements of Comprehensive Income (Loss)

(Unaudited)

Quarter Ended Two Quarters Ended
June 24, 2020 June 26, 2019 June 24, 2020 June 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


	Quarter Ended				Two Quarters Ended
	June 30, 2021		June 24, 2020		June 30, 2021		June 24, 2020
	(In thousands)
Net income (loss)	$	(828)	$	(22,965)	$	22,353	$	(13,952)
Other comprehensive income (loss), net of tax:
Minimum pension liability adjustment, net of tax of $11, $6, $21 and $12, respectively	29		16		59		33
Changes in the fair value of cash flow derivatives, net of tax of $(192), $(772), $571 and $(12,567), respectively	(561)		(2,230)		1,654		(35,158)
Reclassification of cash flow derivatives to interest expense, net of tax of $257, $334, $512 and $420, respectively	748		967		1,488		1,206
Reclassification of loss related to dedesignation of derivatives to other nonoperating expense (income), net of tax of $0, $1,892, $0 and $1,892, respectively	0		5,462		0		5,462
Amortization of unrealized losses related to dedesignated derivatives to interest expense, net of tax of $11, $69, $42 and $69, respectively	34		200		124		200
Other comprehensive income (loss)	250		4,415		3,325		(28,257)
Total comprehensive income (loss)	$	(578)	$	(18,550)	$	25,678	$	(42,209)

See accompanying notes

Denny’s Corporation and Subsidiaries

Condensed Consolidated Statements of Shareholders’ Deficit

For the Quarter Ended June ~~24, 2020~~30, 2021 and June ~~26, 2019~~24, 2020

(Unaudited)


		Common Stock				Treasury Stock						Paid-in Capital		Deficit				Accumulated Other Comprehensive Loss, Net		Total Shareholders’ Deficit	Common Stock			Treasury Stock				Paid-in Capital				Deficit			Accumulated Other Comprehensive Loss, Net	Total Shareholders’ Deficit
		Shares	Amount		Shares	Amount															Shares	Amount		Shares		Amount
		(In thousands)																																(In thousands)
Balance, March 25, 2020		109,677	$	1,097	(54,010)	$	(553,973)	$	599,401	$	(180,385)	$	(66,632)	$	(200,492)
Balance, March 31, 2021																Balance, March 31, 2021	64,145		$	641	0	$	0	$	125,950	$	(171,333)			$	(57,330)			(102,072)

Net loss	Net loss	—	—		—	—		—		(22,965)		—		(22,965)		Net loss	—		—		—	—		—		(828)		—				(828)
Other comprehensive income	Other comprehensive income	—	—		—	—		—		—		4,415		4,415		Other comprehensive income	—		—		—	—		—		—		250				250

Share-based compensation on equity classified awards, net of withholding tax	Share-based compensation on equity classified awards, net of withholding tax	—	—		—	—		1,469		—		—		1,469		Share-based compensation on equity classified awards, net of withholding tax	—		—		—	—		3,227		—		—				3,227

Issuance of common stock for share-based compensation	Issuance of common stock for share-based compensation	25	—		—	—		—		—		—		—		Issuance of common stock for share-based compensation	55		1		—	—		(1)		—		—				0
Exercise of common stock options		17	—		—	—		66		—		—		66
Balance, June 24, 2020		109,719	$	1,097	(54,010)	$	(553,973)	$	600,936	$	(203,350)	$	(62,217)	$	(217,507)

Balance, June 30, 2021																Balance, June 30, 2021	64,200		$	642	0	$	0	$	129,176	$	(172,161)	$	(57,080)			$	(99,423)

Common Stock Treasury Stock Paid-in Capital Deficit Accumulated
Other
Comprehensive Loss, Net Total
Shareholders’
Deficit
Shares Amount Shares Amount
(In thousands)
Balance, March 27, 2019 108,986 $ 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 compensation 118 2 — — (2) — — —
Exercise of common stock options 187 1 — — 442 — — 443
Balance, June 26, 2019 109,291 $ 1,093 (49,484) $ (461,575) $ 601,902 $ (257,079) $ (26,913) $ (142,572)


	Common Stock			Treasury Stock			Paid-in Capital		Deficit		Accumulated Other Comprehensive Loss, Net		Total Shareholders’ Deficit
	Shares	Amount		Shares	Amount
	(In thousands)
Balance, March 25, 2020	109,677	$	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 compensation	25	—		—	—		—		—		—		—
Exercise of common stock options	17	—		—	—		66		—		—		66
Balance, June 24, 2020	109,719	$	1,097	(54,010)	$	(553,973)	$	600,936	$	(203,350)	$	(62,217)	$	(217,507)

See accompanying notes

Denny’s Corporation and Subsidiaries

Condensed Consolidated Statements of Shareholders’ Deficit

For the Two Quarters Ended June ~~24, 2020~~30, 2021 and June ~~26, 2019~~24, 2020

(Unaudited)

Common Stock Treasury Stock Paid-in Capital Deficit Accumulated
Other
Comprehensive Loss, Net Total
Shareholders’
Deficit
Shares Amount Shares Amount
(In thousands)
Balance, December 25, 2019 109,415 $ 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 compensation 287 3 — — (3) — — —
Exercise of common stock options 17 — — — 66 — — 66
Balance, June 24, 2020 109,719 $ 1,097 (54,010) $ (553,973) $ 600,936 $ (203,350) $ (62,217) $ (217,507)

Common Stock Treasury Stock Paid-in Capital Deficit Accumulated
Other
Comprehensive Loss, Net Total
Shareholders’
Deficit
Shares Amount Shares Amount
(In thousands)
Balance, December 26, 2018 108,585 $ 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 compensation 465 5 — — (5) — — —
Exercise of common stock options 241 2 — — 548 — — 550
Balance, June 26, 2019 109,291 $ 1,093 (49,484) $ (461,575) $ 601,902 $ (257,079) $ (26,913) $ (142,572)


	Common Stock			Treasury Stock			Paid-in Capital		Deficit		Accumulated Other Comprehensive Loss, Net		Total Shareholders’ Deficit
	Shares	Amount		Shares	Amount
	(In thousands)
Balance, December 30, 2020	63,962	$	640	0	$	0	$	123,833	$	(194,514)	$	(60,405)	$	(130,446)

Net income	—	—		—	—		—		22,353		—		22,353
Other comprehensive income	—	—		—	—		—		—		3,325		3,325

Share-based compensation on equity classified awards, net of withholding tax	—	—		—	—		5,229		—		—		5,229



Issuance of common stock for share-based compensation	208	2		—	—		(2)		—		—		0
Exercise of common stock options	30	—		—	—		116		—		—		116
Balance, June 30, 2021	64,200	$	642	0	$	0	$	129,176	$	(172,161)	$	(57,080)	$	(99,423)


	Common Stock			Treasury Stock			Paid-in Capital		Deficit		Accumulated Other Comprehensive Loss, Net		Total Shareholders’ Deficit
	Shares	Amount		Shares	Amount
	(In thousands)
Balance, December 25, 2019	109,415	$	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 compensation	287	3		—	—		(3)		—		—		0
Exercise of common stock options	17	—		—	—		66		—		—		66
Balance, June 24, 2020	109,719	$	1,097	(54,010)	$	(553,973)	$	600,936	$	(203,350)	$	(62,217)	$	(217,507)

See accompanying notes

Denny’s Corporation and Subsidiaries

Condensed Consolidated Statements of Cash Flows

(Unaudited)


		Two Quarters Ended							Two Quarters Ended
		June 24, 2020		June 26, 2019			June 30, 2021		June 24, 2020
		(In thousands)							(In thousands)
Cash flows from operating activities:	Cash flows from operating activities:					Cash flows from operating activities:
Net income (loss)	Net income (loss)	$	(13,952)	$	49,729	Net income (loss)	$	22,353	$	(13,952)
Adjustments to reconcile net income (loss) to cash flows provided by (used in) operating activities:	Adjustments to reconcile net income (loss) to cash flows provided by (used in) operating activities:					Adjustments to reconcile net income (loss) to cash flows provided by (used in) operating activities:
Depreciation and amortization	Depreciation and amortization	8,204		11,281		Depreciation and amortization	7,558		8,204
Operating (gains), losses and other charges, net	Operating (gains), losses and other charges, net	3,100		(35,368)		Operating (gains), losses and other charges, net	419		3,100
Loss on interest rate swap derivatives		11,466		—
(Gains) losses and amortization on interest rate swap derivatives, net						(Gains) losses and amortization on interest rate swap derivatives, net	(12,506)		11,466
Amortization of deferred financing costs	Amortization of deferred financing costs	340		304		Amortization of deferred financing costs	688		340
Gains on investments		(91)		(106)
Losses (gains) on termination of leases		53		(83)
Losses (gains) on investments						Losses (gains) on investments	3		(91)
(Gains) losses on termination of leases						(Gains) losses on termination of leases	(72)		53
Deferred income tax expense (benefit)	Deferred income tax expense (benefit)	(3,705)		4,944		Deferred income tax expense (benefit)	2,211		(3,705)
Share-based compensation expense (benefit)	Share-based compensation expense (benefit)	(26)		4,966		Share-based compensation expense (benefit)	6,860		(26)
Changes in assets and liabilities:	Changes in assets and liabilities:					Changes in assets and liabilities:
Receivables	Receivables	9,342		7,545		Receivables	757		9,342
Inventories	Inventories	175		646		Inventories	(98)		175
Other current assets		(2,593)		(4,748)
Other assets		106		(2,392)
Prepaids and other current assets						Prepaids and other current assets	6,677		(2,593)
Other noncurrent assets						Other noncurrent assets	(1,317)		106
Operating lease assets and liabilities	Operating lease assets and liabilities	1,769		(481)		Operating lease assets and liabilities	(821)		1,769
Accounts payable	Accounts payable	(537)		(2,190)		Accounts payable	5,620		(537)
Accrued payroll	Accrued payroll	(11,519)		(4,597)		Accrued payroll	1,992		(11,519)
Accrued taxes	Accrued taxes	(712)		(952)		Accrued taxes	434		(712)
Other accrued liabilities	Other accrued liabilities	(6,551)		(3,840)		Other accrued liabilities	4,649		(6,551)
Other noncurrent liabilities	Other noncurrent liabilities	(2,827)		497		Other noncurrent liabilities	(2,036)		(2,827)
Net cash flows provided by (used in) operating activities	Net cash flows provided by (used in) operating activities	(7,958)		25,155		Net cash flows provided by (used in) operating activities	43,371		(7,958)
Cash flows from investing activities:	Cash flows from investing activities:					Cash flows from investing activities:
Capital expenditures	Capital expenditures	(4,476)		(6,777)		Capital expenditures	(3,108)		(4,476)
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 assets	Proceeds from sales of restaurants, real estate and other assets	2,208		47,938		Proceeds from sales of restaurants, real estate and other assets	1,612		2,208
Investment purchases	Investment purchases	(1,400)		(1,300)		Investment purchases	0		(1,400)
Proceeds from sale of investments	Proceeds from sale of investments	2,900		—		Proceeds from sale of investments	200		2,900
Collections on notes receivable	Collections on notes receivable	918		858		Collections on notes receivable	383		918
Issuance of notes receivable	Issuance of notes receivable	(484)		(718)		Issuance of notes receivable	(94)		(484)
Net cash flows provided by (used in) investing activities		(334)		30,975
Net cash flows used in investing activities						Net cash flows used in investing activities	(1,007)		(334)
Cash flows from financing activities:	Cash flows from financing activities:					Cash flows from financing activities:
Revolver borrowings	Revolver borrowings	130,000		66,500		Revolver borrowings	9,500		130,000
Revolver payments	Revolver payments	(63,000)		(82,000)		Revolver payments	(39,500)		(63,000)
Long-term debt payments	Long-term debt payments	(594)		(1,547)		Long-term debt payments	(980)		(594)
Proceeds from exercise of stock options	Proceeds from exercise of stock options	66		550		Proceeds from exercise of stock options	116		66
Tax withholding on share-based payments	Tax withholding on share-based payments	(3,036)		(3,178)		Tax withholding on share-based payments	(1,377)		(3,036)
Deferred financing costs	Deferred financing costs	(982)		—		Deferred financing costs	(8)		(982)
Purchase of treasury stock	Purchase of treasury stock	(36,008)		(37,266)		Purchase of treasury stock	0		(36,008)

Net bank overdrafts	Net bank overdrafts	(449)		(1,923)		Net bank overdrafts	(3,125)		(449)
Net cash flows provided by (used in) financing activities	Net cash flows provided by (used in) financing activities	25,997		(58,864)		Net cash flows provided by (used in) financing activities	(35,374)		25,997
Increase (decrease) in cash and cash equivalents		17,705		(2,734)
Increase in cash and cash equivalents						Increase in cash and cash equivalents	6,990		17,705
Cash and cash equivalents at beginning of period	Cash and cash equivalents at beginning of period	3,372		5,026		Cash and cash equivalents at beginning of period	3,892		3,372
Cash and cash equivalents at end of period	Cash and cash equivalents at end of period	$	21,077	$	2,292	Cash and cash equivalents at end of period	$	10,882	$	21,077

See accompanying notes

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,~~30, 2021, the Denny's brand consisted of ~~1,683~~1,645 restaurants, ~~1,616~~1,580 of which were franchised/licensed restaurants and 6765 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~~starting in the ~~two quarters~~quarter ended March 25, 2020 with continuing impacts into the current quarter ended June ~~24, 2020, which is expected~~30, 2021. While we have seen improvements compared to ~~continue with~~earlier periods during 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.

WeCOVID-19 pandemic, we cannot currently estimate the duration or future ~~negative~~ financial impact of the COVID-19 pandemic on our ~~business; however,~~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.2021.

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~~30, 2020 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.~~30, 2020. 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.~~29, 2021. Our significant interim accounting policies include the recognition of advertising and marketing costs, generally in proportion to revenue, and the recognition of income taxes using an estimated annual effective rate.

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

~~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~~Income Taxes~~ (Topic 740): Simplifying the Accounting for Income ~~Taxes~~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 isdid not ~~expected to~~ have a significant impact on the Company’s consolidated financial position or results of operations.

Accounting Standards to be Adopted

In January 2021, the FASB issued ASU 2021-01, “Reference Rate Reform (Topic 848): Scope” which clarified the guidance issued in March 2020, ASU 2020-04, “Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting”. The 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. The guidance is effective through December 31, 2022. The Company is currently evaluating the impact that the adoption of this new guidance will have on our consolidated financial position or results of operations and has not adopted any of the transition relief available under the new guidance as of June 30, 2021.

We reviewed all other newly issued accounting pronouncements and concluded that they are either not applicable to our business or are not expected to have a material effect on our consolidated financial statements as a result of future adoption.

Note 3. Receivables

Receivables consisted of the following:


		June 24, 2020		December 25, 2019			June 30, 2021		December 30, 2020
		(In thousands)							(In thousands)
Receivables, net:	Receivables, net:					Receivables, net:
Trade accounts receivable from franchisees	Trade accounts receivable from franchisees	$	15,286	$	14,551	Trade accounts receivable from franchisees	$	15,580	$	15,535
Financing receivables from franchisees	Financing receivables from franchisees	1,499		2,230		Financing receivables from franchisees	1,082		2,104

Vendor receivables	Vendor receivables	768		3,260		Vendor receivables	2,023		2,199
Credit card receivables	Credit card receivables	497		6,806		Credit card receivables	684		542
Other	Other	2,248		915		Other	2,062		2,668
Allowance for doubtful accounts	Allowance for doubtful accounts	(1,249)		(274)		Allowance for doubtful accounts	(1,024)		(1,699)
Total receivables, net	Total receivables, net	$	19,049	$	27,488	Total receivables, net	$	20,407	$	21,349

Other noncurrent assets:	Other noncurrent assets:					Other noncurrent assets:
Financing receivables from franchisees	Financing receivables from franchisees	$	181	$	364	Financing receivables from franchisees	$	398	$	502

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 sale~~	52
~~Balance, June 24, 2020~~	$	~~36,884~~

~~Other intangible~~Intangible assets consisted of the following:


		June 24, 2020						December 25, 2019							June 30, 2021				December 30, 2020
		Gross Carrying Amount		Accumulated Amortization		Gross Carrying Amount		Accumulated Amortization			Gross Carrying Amount		Accumulated Amortization		Gross Carrying Amount		Accumulated Amortization
		(In thousands)															(In thousands)
Intangible assets with indefinite lives:	Intangible assets with indefinite lives:									Intangible assets with indefinite lives:
Trade names	Trade names	$	44,087	$	—	$	44,087	$	—	Trade names	$	44,087	$	—	$	44,087	$	—
Liquor licenses	Liquor licenses	120		—		120		—		Liquor licenses	120		—		120		—
Intangible assets with definite lives:	Intangible assets with definite lives:									Intangible assets with definite lives:
Reacquired franchise rights	Reacquired franchise rights	15,076		6,602		15,516		5,767		Reacquired franchise rights	12,218		5,533		12,218		4,866
Intangible assets, net	Intangible assets, net	$	59,283	$	6,602	$	59,723	$	5,767	Intangible assets, net	$	56,425	$	5,533	$	56,425	$	4,866

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, 2020 December 25, 2019
(In thousands)
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


	June 30, 2021		December 30, 2020
	(In thousands)
Accrued payroll	$	19,452	$	17,076
Current portion of liability for insurance claims	4,424		4,667
Accrued taxes	5,283		4,850
Accrued advertising	11,570		4,318
Gift cards	5,573		6,127
Other	8,949		9,424
Other current liabilities	$	55,251	$	46,462

1110

Note 6. Fair Value of Financial Instruments

Financial assets and liabilities measured at fair value on a recurring basis are summarized below:


		Total		Quoted Prices in Active Markets for Identical Assets/Liabilities (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)			Total		Quoted Prices in Active Markets for Identical Assets/Liabilities (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
		(In thousands)															(In thousands)
Fair value measurements as of June 24, 2020:
Fair value measurements as of June 30, 2021:										Fair value measurements as of June 30, 2021:
Deferred compensation plan investments ⁽¹⁾	Deferred compensation plan investments ⁽¹⁾	$	12,210	$	12,210	$	—	$	—	Deferred compensation plan investments (1)	$	14,049	$	14,049	$	0	$	0
Interest rate swaps ⁽²⁾	Interest rate swaps ⁽²⁾	(94,612)		—		(94,612)		—		Interest rate swaps (2)	(57,738)		0		(57,738)		0
Investments ⁽³⁾	Investments ⁽³⁾	2,240		—		2,240		—		Investments (3)	2,069		0		2,069		0
Total	Total	$	(80,162)	$	12,210	$	(92,372)	$	—	Total	$	(41,620)	$	14,049	$	(55,669)	$	0

Fair value measurements as of December 25, 2019:
Fair value measurements as of December 30, 2020:										Fair value measurements as of December 30, 2020:
Deferred compensation plan investments ⁽¹⁾	Deferred compensation plan investments ⁽¹⁾	$	13,517	$	13,517	$	—	$	—	Deferred compensation plan investments (1)	$	13,627	$	13,627	$	0	$	0
Interest rate swaps ⁽²⁾	Interest rate swaps ⁽²⁾	(44,670)		—		(44,670)		—		Interest rate swaps (2)	(76,445)		0		(76,445)		0
Investments ⁽³⁾	Investments ⁽³⁾	3,649		—		3,649		—		Investments (3)	2,272		0		2,272		0
Total	Total	$	(27,504)	$	13,517	$	(41,021)	$	—	Total	$	(60,546)	$	13,627	$	(74,173)	$	0

(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.~~models. 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~~outstanding senior secured revolver is 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).

Note 7. Long-Term Debt

Denny's and certain of its subsidiaries have a credit facility, as amended, consisting of a five-year ~~$400~~$375 million senior secured revolver (with a $30 million letter of credit sublimit)~~. The credit facility includes an accordion feature that would allow us~~ which was reduced to ~~increase the size of the revolver to $450~~$350 million ~~subject to approval.~~on July 1, 2021. As of June ~~24, 2020,~~30, 2021, we had outstanding revolver loans of ~~$307.0~~$180.0 million and outstanding letters of credit under the credit facility of ~~$18.3~~$15.7 million. These balances resulted in availability of ~~$74.7~~$179.3 million as of June 30, 2021 under the credit facility prior to considering the liquidity covenant in our credit facility. Factoring in the liquidity covenant, our availability was $120.2 million as of June 30, 2021. 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, borrowings under the credit facility bore interest at a 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~~set to 0.40%. ~~During this period, we will also have supplemental monthly reporting obligations to our lenders and will be~~The maturity date for the credit facility is October 26, 2022.

The Company is prohibited from paying dividends and making stock repurchases and other general ~~investments. Additionally,~~investments through the delivery of its fiscal third quarter 2021 results. Limitations on capital expenditures ~~will be restricted to $10~~of $12 million are in effect for the ~~aggregate from~~period of May 13, 2020 through September 29, 2021. As of June 30, 2021, approximately $6.4 million of the ~~fiscal quarter ending March 31, 2021.~~$12 million has been utilized.

~~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~~was a minimum of ~~1.50x.~~1.00x for the quarter ended June 30, 2021, adjusting to 1.25x for the quarter ending September 29, 2021, and 1.50x for the quarter ending December 29, 2021 and thereafter. The consolidated leverage ratio covenant ~~is waived until the fiscal quarter ending March 31,~~was a maximum of 5.25x as of June 30, 2021, ~~at which point the covenant level will increase from 4.00x to 4.50x,~~ stepping down to ~~4.25x in the second quarter~~4.75x as of September 29, 2021, and 4.00x ~~in the third fiscal quarter~~as of December 29, 2021 and thereafter. In addition, the ~~Second Amendment adds~~Company is subject to a monthly minimum liquidity covenant, defined as the sum of unrestricted cash and revolver availability, ~~ranging from $60 million to~~of $70 million, ~~commencing on May 13, 2020 to May 26,~~until the date of delivery of the

financial statements for the fiscal quarter ending September 29, 2021. We were in compliance with all financial covenants as of June ~~24, 2020.~~30, 2021.

Prior to considering the impact of our interest rate swaps, described below, the weighted-average interest rate on outstanding revolver loans was ~~3.18%~~3.11% and ~~3.47%~~3.15% as of June ~~24, 2020~~30, 2021 and December ~~25, 2019,~~30, 2020, respectively. Taking into consideration our interest rate swaps that are designated as cash flow hedges, the weighted-average interest rate of outstanding revolver loans was ~~5.22%~~5.31% and ~~3.99%~~5.01% as of June ~~24, 2020~~30, 2021 and December ~~25, 2019,~~30, 2020, 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~~30, 2021 is as follows:

Trade Date Effective Date Maturity Date Notional Amount Fixed Rate
(In thousands)
March 20, 2015 March 29, 2018 March 31, 2025 $ 120,000 2.44 %
October 1, 2015 March 29, 2018 March 31, 2026 50,000 2.46 %
February 15, 2018 March 31, 2020 December 31, 2033 80,000 (1) 3.19 %


Trade Date	Effective Date	Maturity Date	Notional Amount			Fair Value		Fixed Rate
			(In thousands)
Swaps designated as cash flow hedges
March 20, 2015	March 29, 2018	March 31, 2025	$	120,000		$	7,921	2.44	%
October 1, 2015	March 29, 2018	March 31, 2026	$	50,000		$	3,783	2.46	%
Dedesignated swaps
February 15, 2018	March 31, 2020	December 31, 2033	$	100,000	(1)	$	46,034	3.19	%
Total			$	270,000		$	57,738

(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.

Swaps Designated as Cash Flow Hedges

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 other comprehensive income (loss). The interest rate swaps entered into in 2015 are designated as cash flow hedges with unrealized gain and losses recorded as a component of accumulated other comprehensive loss, net.

As of June 30, 2021, the fair value of swaps designated as cash flow hedges was a liability of $11.7 million and was recorded as a component of other noncurrent liabilities with an offsetting amount (before taxes) recorded as a component of accumulated other comprehensive loss, net in our Condensed Consolidated Balance Sheets. See Note 13 for amounts recorded in accumulated other comprehensive loss related to interest rate swaps. We expect to reclassify approximately $4.0 million from accumulated other comprehensive loss, net to interest expense, net in our Consolidated Statements of Operations related to swaps designated as cash flow hedges during the next 12 months.

Dedesignated Interest Rate Hedges

~~For~~

During the ~~quarter~~year ended ~~June 24,~~December 30, 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.~~swaps. 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~~a portion of losses from accumulated other comprehensive loss, net to other nonoperating expense (income), net in our Consolidated Statements of Operations ~~for~~and began amortizing the ~~quarter ended June 24, 2020 related to the portion~~remaining amounts 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~~from accumulated other comprehensive loss, net ~~and will be reclassified~~ into ~~the~~our Consolidated Statements of Operations as a component of interest expense, net over the remaining term of the 2018 Swaps. For the quarter and two quarters ended June ~~24, 2020,~~30, 2021, we reclassified unrealized losses of approximately ~~$0.3~~less than $0.1 million and $0.2 million, respectively, to interest expense, net related to the 2018 Swaps. ~~Additionally, as~~At June 30, 2021, approximately $64.2 million (before taxes) of unrealized losses remained in accumulated other comprehensive loss, net. We expect to amortize less than $0.1 million from accumulated other comprehensive loss, net to interest expense, net in our Consolidated Statements of Operations related to dedesignated interest rate swaps during the next 12 months.

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~~are 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,~~30, 2021, we recorded approximately ~~$4.1~~$17.2 million of ~~unrealized losses~~expense and $12.7 million of income, respectively, as a component of nonoperating expense (income) related to the 2018 Swaps ~~related to~~resulting from 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,~~30, 2021, the fair value of the dedesignated interest rate swaps was ~~$94.6~~a liability of $46.0 million and was 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 2 sales channels, which we operate as 1 segment: company restaurants and franchised and licensed restaurants. The following table disaggregates our revenue by sales channel and type of good or service:

Quarter Ended Two Quarters Ended
June 24, 2020 June 26, 2019 June 24, 2020 June 26, 2019
(Dollars in thousands)
Company restaurant sales $ 15,128 $ 95,447 $ 57,419 $ 193,992
Franchise and license revenue:
Royalties 6,719 26,672 30,566 51,912
Advertising revenue 7,232 19,884 24,758 38,826
Initial and other fees 1,346 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


	Quarter Ended				Two Quarters Ended
	June 30, 2021		June 24, 2020		June 30, 2021		June 24, 2020
	(In thousands)
Company restaurant sales	$	47,572	$	15,128	$	81,141	$	57,419
Franchise and license revenue:
Royalties	27,117		6,719		47,961		30,566
Advertising revenue	18,600		7,232		32,711		24,758
Initial and other fees	2,066		1,346		3,904		3,043
Occupancy revenue	10,810		9,736		21,024		21,070
Franchise and license revenue	58,593		25,033		105,600		79,437
Total operating revenue	$	106,165	$	40,161	$	186,741	$	136,856

Franchise occupancy revenue consisted of the following:

Quarter Ended Two Quarters Ended
June 24, 2020 June 26, 2019 June 24, 2020 June 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


	Quarter Ended				Two Quarters Ended
	June 30, 2021		June 24, 2020		June 30, 2021		June 24, 2020
	(In thousands)
Operating lease revenue	$	7,668	$	8,060	$	15,581	$	16,682
Variable lease revenue	3,142		1,676		5,443		4,388
Total occupancy revenue	$	10,810	$	9,736	$	21,024	$	21,070

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~~30, 2020	$	~~23,256~~20,806
Fees received from franchisees	~~389~~303
Revenue recognized ⁽¹⁾	~~(1,528)~~(1,175)
Balance, June ~~24, 2020~~30, 2021	~~22,117~~19,934
Less current portion included in other current liabilities	~~2,112~~1,946
Deferred franchise revenue included in other noncurrent liabilities	$	~~20,005~~17,988

(1) Of this amount ~~$1.5~~$1.2 million was included in the deferred franchise revenue balance as of December ~~25, 2019.~~30, 2020.

~~Gift~~Deferred gift card liabilities consist of the unredeemed portion of gift cards sold in company restaurants and at third party locations. The balance of deferred gift card liabilities represents our remaining performance obligations to our customers. The balance of deferred gift card liabilities as of June ~~24, 2020~~30, 2021 and December ~~25, 2019~~30, 2020 was ~~$5.0~~$5.6 million and ~~$6.5~~$6.1 million, respectively. During the two quarters ended June ~~24, 2020,~~30, 2021, we recognized revenue of ~~$0.5~~$0.2 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 Ended						Two Quarters Ended							Quarter Ended				Two Quarters Ended
		June 24, 2020		June 26, 2019		June 24, 2020		June 26, 2019			June 30, 2021		June 24, 2020		June 30, 2021		June 24, 2020
		(In thousands)															(In thousands)
(Gains) losses on sales of assets and other, net	(Gains) losses on sales of assets and other, net	$	12	$	(26,839)	$	(1,058)	$	(36,314)	(Gains) losses on sales of assets and other, net	$	(65)	$	12	$	(1,007)	$	(1,058)
Restructuring charges and exit costs	Restructuring charges and exit costs	1,615		406		1,977		946		Restructuring charges and exit costs	(48)		1,615		1,426		1,977
Impairment charges	Impairment charges	—		—		2,181		—		Impairment charges	0		0		0		2,181
Operating (gains), losses and other charges, net	Operating (gains), losses and other charges, net	$	1,627	$	(26,433)	$	3,100	$	(35,368)	Operating (gains), losses and other charges, net	$	(113)	$	1,627	$	419	$	3,100

During the two quarters ended June 30, 2021, gains on sales of assets and other, net were primarily related to the sale of 1 parcel of real estate. During the two quarters ended June 24, 2020, (gains) losses on sales of assets and other, net were primarily related to the ~~sales~~sale of 2 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 3 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 4 parcels of real estate.

As of June ~~24,~~30, 2021, we had recorded assets held for sale consisting of property at their carrying amount of $1.6 million related to 2 parcels of real estate. As of December 30, 2020, we had recorded assets held for sale at their carrying amount of ~~$2.0~~$1.1 million ~~(consists~~(consisting of property of ~~$1.7~~$1.0 million and other assets of $0.3 million) related to 5 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 ~~4 company restaurants and~~ 2 ~~pieces~~parcels of real estate. During the two quarters ended June 24, 2020, 2 pieces of real estate were sold and the 4 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 Ended Two Quarters Ended
June 24, 2020 June 26, 2019 June 24, 2020 June 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


	Quarter Ended				Two Quarters Ended
	June 30, 2021		June 24, 2020		June 30, 2021		June 24, 2020
	(In thousands)
Exit costs	$	141	$	50	$	223	$	94
Severance and other restructuring charges	(189)		1,565		1,203		1,883
Total restructuring charges and exit costs	$	(48)	$	1,615	$	1,426	$	1,977

Exit costs primarily consist of costs related to closed restaurants. Exit cost liabilities were ~~$0.2~~$0.1 million as of both June ~~24, 2020~~30, 2021 and December ~~25, 2019.~~30, 2020. 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~~30, 2021 and December ~~25, 2019,~~30, 2020, we had accrued severance and other restructuring charges of ~~$1.6~~$0.7 million and ~~$0.9~~$0.6 million, respectively. The balance as of June ~~24, 2020~~30, 2021 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 Ended						Two Quarters Ended							Quarter Ended				Two Quarters Ended
		June 24, 2020		June 26, 2019		June 24, 2020		June 26, 2019			June 30, 2021		June 24, 2020		June 30, 2021		June 24, 2020
		(In thousands)															(In thousands)
Employee share awards	Employee share awards	$	1,326	$	2,463	$	(420)	$	4,461	Employee share awards	$	3,164	$	1,326	$	6,417	$	(420)
Restricted stock units for board members	Restricted stock units for board members	185		250		394		505		Restricted stock units for board members	224		185		443		394
Total share-based compensation	Total share-based compensation	$	1,511	$	2,713	$	(26)	$	4,966	Total share-based compensation	$	3,388	$	1,511	$	6,860	$	(26)

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,~~30, 2021, we granted certain employees approximately 0.5 million performance share units ("PSUs") with a grant date fair value of $24.74 per share that vest based on the total shareholder return (“TSR”) of our common stock compared to the TSRs of a group of peer companies (from 0% to 200% of the target award). As the TSR based performance shares contain a market condition, a Monte Carlo valuation was used to determine the grant date fair value. The performance period for these PSUs is the three year fiscal period beginning December 31, 2020 and ending December 27, 2023. The PSUs will completely vest and be earned at the end of the performance period at which point the TSR will be determined.

We also granted certain employees approximately 0.2 million restricted stock units ("RSUs") with a grant date fair value of $15.91 per share. The RSUs vest evenly over the three year period ending December 27, 2023.

During the two quarters ended June 30, 2021, we issued ~~0.3~~0.2 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.

We recognize compensation cost associated with our PSU and RSU awards on a straight-line basis over the entire performance period of the awards. As of June ~~24, 2020,~~30, 2021, we had approximately ~~$12.3~~$19.1 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~~2.0 years.

Restricted Stock Units for Board Members

During the quarter and two quarters ended June ~~24, 2020,~~30, 2021, 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~~$17.35 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~~3 equal annual installments commencing after termination of

service as a member of our Board.

During the quarter and two quarters ended June ~~24, 2020,~~30, 2021, less than 0.1 million restricted stock units were converted into shares of common stock.

As of June ~~24, 2020,~~30, 2021, 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.

Note 11. Income Taxes

The effective income tax rate was ~~18.1%~~59.3% for the quarter ~~ended~~ and ~~16.5%~~23.6% for the two quarters ended June ~~24, 2020,~~30, 2021, compared to ~~16.5%~~18.1% and ~~18.7%~~16.5% for the prior year periods, respectively. The 2021 quarterly and year-to-date rates included the impact of excess tax benefits relating to share-based compensation of 13.4% and (1.2)%, 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 Ended						Two Quarters Ended							Quarter Ended				Two Quarters Ended
		June 24, 2020		June 26, 2019		June 24, 2020		June 26, 2019			June 30, 2021		June 24, 2020		June 30, 2021		June 24, 2020
		(In thousands, except for per share amounts)															(In thousands, except per share amounts)
Net income (loss)	Net income (loss)	$	(22,965)	$	34,239	$	(13,952)	$	49,729	Net income (loss)	$	(828)	$	(22,965)	$	22,353	$	(13,952)

Weighted average shares outstanding - basic	Weighted average shares outstanding - basic	55,686		60,290		55,993		60,970		Weighted average shares outstanding - basic	65,294		55,686		65,273		55,993
Effect of dilutive share-based compensation awards⁽¹⁾	Effect of dilutive share-based compensation awards⁽¹⁾	—		1,792		—		1,967		Effect of dilutive share-based compensation awards(1)	0		0		516		0
Weighted average shares outstanding - diluted	Weighted average shares outstanding - diluted	55,686		62,082		55,993		62,937		Weighted average shares outstanding - diluted	65,294		55,686		65,789		55,993

Basic net income (loss) per share	Basic net income (loss) per share	$	(0.41)	$	0.57	$	(0.25)	$	0.82	Basic net income (loss) per share	$	(0.01)	$	(0.41)	$	0.34	$	(0.25)
Diluted net income (loss) per share	Diluted net income (loss) per share	$	(0.41)	$	0.55	$	(0.25)	$	0.79	Diluted net income (loss) per share	$	(0.01)	$	(0.41)	$	0.34	$	(0.25)

Anti-dilutive share-based compensation awards⁽¹⁾	Anti-dilutive share-based compensation awards⁽¹⁾	3,493		630		3,493		630		Anti-dilutive share-based compensation awards(1)	998		3,493		483		3,493

(1) For the quarter ended June 30, 2021 and 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.~~effect.

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,~~September 29, 2021, from making any stock repurchases.

Prior to ~~entering into our amended credit agreement,~~suspending share repurchases, 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,~~30, 2021, there was approximately $248.0 million remaining that can be used to repurchase our common stock under the current program. Repurchased shares ~~are~~were included as treasury stock in our Condensed Consolidated Balance Sheets and our Condensed Consolidated Statement of Shareholders' Deficit. In the fourth quarter of fiscal 2020, the Board approved the retirement of 54.0 million shares of treasury stock at a weighted average share price of $10.26. As of June 30, 2021, 0 shares remained in treasury stock.

1716

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 Plans Derivatives Accumulated 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)


	Defined Benefit Plans		Derivatives		Accumulated Other Comprehensive Loss, Net
	(In thousands)
Balance as of December 30, 2020	$	(978)	$	(59,427)	$	(60,405)

Amortization of net loss (1)	80		—		80

Changes in the fair value of cash flow derivatives	—		2,225		2,225
Reclassification of cash flow derivatives to interest expense, net (2)	—		2,000		2,000

Amortization of unrealized losses related to dedesignated derivatives to interest expense, net (3)	—		166		166
Income tax expense related to items of other comprehensive income	(21)		(1,125)		(1,146)
Balance as of June 30, 2021	$	(919)	$	(56,161)	$	(57,080)

(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.~~30, 2021.

(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~~amortized 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~~two quarters ended June ~~24, 2020,~~30, 2021, we ~~reclassified~~amortized approximately ~~$0.3~~$0.2 million of losses to interest expense, net related to the 2018 Swaps. We expect to amortize less than $0.1 million from accumulated other comprehensive loss related to our interest rate swaps during the next 12 months. 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.

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							Two Quarters Ended
		June 24, 2020		June 26, 2019			June 30, 2021		June 24, 2020
		(In thousands)							(In thousands)
Income taxes paid, net	Income taxes paid, net	$	277	$	11,992	Income taxes paid, net	$	1,942	$	277
Interest paid	Interest paid	$	8,057	$	10,230	Interest paid	$	8,478	$	8,057

Noncash investing and financing activities:	Noncash investing and financing activities:					Noncash investing and financing activities:

Issuance of common stock, pursuant to share-based compensation plans	Issuance of common stock, pursuant to share-based compensation plans	$	5,808	$	7,453	Issuance of common stock, pursuant to share-based compensation plans	$	3,087	$	5,808
Noncash consideration received in connection with the sale of real estate		$	—	$	3,000

Execution of finance leases	Execution of finance leases	$	11	$	305	Execution of finance leases	$	464	$	11
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.~~

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,~~30, 2020, the Company's Quarterly Report on Form 10-Q for the quarter ended March ~~25, 2020,~~31, 2021, 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.~~

Current Trends

Domestic system-wide same-store sales¹ ~~sequentially improved on a weekly basis during~~for the ~~second~~ quarter ended June ~~24, 2020, as~~30, 2021 decreased 1.2% compared to the equivalent ~~weeks~~fiscal period in 2019 and increased 117.0% compared to the equivalent fiscal period in 2020. Over 99% of ~~2019. During the second quarter, dine-in restrictions continued to ease with most~~Denny’s restaurants were operating with ~~streamlined menus and reduced operating hours. Due to~~open dining rooms as of the ~~recent significant increase in COVID-19 cases, various states reinstated dining room closures and~~end of the ~~Company experienced a slight decline in domestic system-wide same-store sales~~¹ ~~in fiscal July.~~current quarter with an effective capacity of approximately 98%.

Total off-premise sales at domestic and franchised restaurants, inclusive of virtual brands, have remained strong at approximately 24% of average weekly sales in July 2021 compared to pre-pandemic levels in February 2020 of approximately 12%.

Sales at domestic and franchised restaurants in the quarter benefited from over 1,100 active locations with the Company’s first virtual brand, The Burger Den. The Company began a phased rollout of its second virtual brand, The Meltdown, in April 2021 and is expected to be substantially complete with the rollout during the third quarter at approximately half of its domestic locations. Transactions from these two virtual brands are highly incremental and leverage labor during underutilized dayparts with nearly 70% of transactions occurring during dinner and late night.

Nearly 40% of domestic company and franchised restaurants were operating 24/7 at the end of the second quarter with staffing challenges being the primary headwind preventing restaurants from opening at the late night daypart. To address the industry-wide staffing challenges, the Company conducted a hiring tour and engaged a third-party vendor to enhance its online recruiting allowing franchisees to post open positions on its career website with greater visibility to potential applicants.

In an effort to provide greater transparency due to the COVID-19 pandemic, Denny's is providing the following ~~tables~~table that ~~present second and third quarter weekly~~presents monthly same-store sales1 results compared to the equivalent fiscal ~~weeks in~~periods during 2019:

Domestic System-Wide Same-Store Sales¹~~for the Weeks Ended:~~

Fiscal April: (76%) Fiscal May: (65%) Fiscal June: (41%)
4/01 4/08 4/15 4/22 4/29 5/06 5/13 5/20 5/27 6/03 6/10 6/17 6/24
(79%) (78%) (76%) (72%) (72%) (68%) (63%) (60%) (55%) (47%) (39%) (37%) (29%)

Fiscal July: (39%)*
7/01 7/08 7/15 7/22*
(33%) (42%) (41%) (41%)

*~~Preliminary results~~ Compared to 2019 Fiscal Periods

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


	Domestic System-Wide Same-Store Sales1
	Fiscal Year 2021*
	Jan	Feb	Mar	Apr	May	Jun	Jul*
System	(31%)	(25%)	(9%)	(2%)	(3%)	1%	3%

24/7 Units	(20%)	(16%)	2%	11%	11%	14%	15%
Limited Hour Units	(38%)	(32%)	(16%)	(11%)	(12%)	(8%)	(7%)
	*July results are preliminary.

Fiscal April Fiscal May Fiscal June
4/01 4/08 4/15 4/22 4/29 5/6 5/13 5/20 5/27 6/03 6/10 6/17 6/24
7 2 2 2 11 339 521 646 967 1,116 1,234 1,355 1,424

Fiscal July
7/1 7/8 7/15 7/22
1,430 1,124 1,032 1,035

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 sales~~¹ 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

~~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.


	Domestic Average Units
	Fiscal Year 2021
	Jan	Feb	Mar	Apr	May	Jun	Jul *
System	1,504	1,501	1,501	1,499	1,498	1,497	1,495

24/7 Units	519	532	569	566	561	566	576
Limited Hour Units	939	928	912	920	926	920	909
	*July results are preliminary.

______________

(1) Domestic system-wide same-store sales include sales at company restaurants and non-consolidated franchised and licensed restaurants that were open during the ~~same period in the prior year.~~comparable periods noted. 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.

2219

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 Ended																		Two Quarters Ended																			Quarter Ended						Two Quarters Ended
		June 24, 2020								June 26, 2019							June 24, 2020										June 26, 2019							June 30, 2021					June 24, 2020					June 30, 2021	June 24, 2020
		(Dollars in thousands)																																								(Dollars in thousands)
Revenue:	Revenue:																					Revenue:
Company restaurant sales	Company restaurant sales	$	15,128		37.7	%	$	95,447		62.8	%	$	57,419		42.0	%	$	193,992		64.0	%	Company restaurant sales	$	47,572		44.8		%	$	15,128		37.7	%	$	81,141		43.5	%	$	57,419		42.0	%
Franchise and license revenue	Franchise and license revenue	25,033			62.3	%	56,437			37.2	%	79,437			58.0	%	109,303			36.0	%	Franchise and license revenue	58,593			55.2		%	25,033			62.3	%	105,600			56.5	%	79,437			58.0	%
Total operating revenue	Total operating revenue	40,161			100.0	%	151,884			100.0	%	136,856			100.0	%	303,295			100.0	%	Total operating revenue	106,165			100.0		%	40,161			100.0	%	186,741			100.0	%	136,856			100.0	%
Costs of company restaurant sales, excluding depreciation and amortization (a):	Costs of company restaurant sales, excluding depreciation and amortization (a):																					Costs of company restaurant sales, excluding depreciation and amortization (a):
Product costs	Product costs	4,305			28.5	%	23,363			24.5	%	14,435			25.1	%	47,268			24.4	%	Product costs	11,447			24.1		%	4,305			28.5	%	19,719			24.3	%	14,435			25.1	%
Payroll and benefits	Payroll and benefits	8,039			53.1	%	36,866			38.6	%	25,145			43.8	%	76,698			39.5	%	Payroll and benefits	16,970			35.7		%	8,039			53.1	%	29,935			36.9	%	25,145			43.8	%
Occupancy	Occupancy	2,728			18.0	%	5,498			5.8	%	5,891			10.3	%	11,282			5.8	%	Occupancy	2,844			6.0		%	2,728			18.0	%	5,694			7.0	%	5,891			10.3	%
Other operating expenses	Other operating expenses	4,534			30.0	%	14,103			14.8	%	10,253			17.9	%	28,695			14.8	%	Other operating expenses	6,552			13.8		%	4,534			30.0	%	12,629			15.6	%	10,253			17.9	%
Total costs of company restaurant sales	Total costs of company restaurant sales	19,606			129.6	%	79,830			83.6	%	55,724			97.0	%	163,943			84.5	%	Total costs of company restaurant sales	37,813			79.5		%	19,606			129.6	%	67,977			83.8	%	55,724			97.0	%
Costs of franchise and license revenue, excluding depreciation and amortization (a)	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	%	Costs of franchise and license revenue, excluding depreciation and amortization (a)	28,735			49.0		%	15,244			60.9	%	52,493			49.7	%	44,414			55.9	%
General and administrative expenses	General and administrative expenses	13,153			32.8	%	18,453			12.1	%	20,895			15.3	%	37,264			12.3	%	General and administrative expenses	17,548			16.5		%	13,153			32.8	%	34,495			18.5	%	20,895			15.3	%
Depreciation and amortization	Depreciation and amortization	4,058			10.1	%	5,048			3.3	%	8,204			6.0	%	11,281			3.7	%	Depreciation and amortization	3,897			3.7		%	4,058			10.1	%	7,558			4.0	%	8,204			6.0	%
Operating (gains), losses and other charges, net	Operating (gains), losses and other charges, net	1,627			4.1	%	(26,433)			(17.4)	%	3,100			2.3	%	(35,368)			(11.7)	%	Operating (gains), losses and other charges, net	(113)			(0.1)		%	1,627			4.1	%	419			0.2	%	3,100			2.3	%
Total operating costs and expenses, net	Total operating costs and expenses, net	53,688			133.7	%	105,769			69.6	%	132,337			96.7	%	233,049			76.8	%	Total operating costs and expenses, net	87,880			82.8		%	53,688			133.7	%	162,942			87.3	%	132,337			96.7	%
Operating income (loss)	Operating income (loss)	(13,527)			(33.7)	%	46,115			30.4	%	4,519			3.3	%	70,246			23.2	%	Operating income (loss)	18,285			17.2		%	(13,527)			(33.7)	%	23,799			12.7	%	4,519			3.3	%
Interest expense, net	Interest expense, net	4,947			12.3	%	5,382			3.5	%	8,898			6.5	%	10,789			3.6	%	Interest expense, net	4,066			3.8		%	4,947			12.3	%	8,343			4.5	%	8,898			6.5	%
Other nonoperating expense (income), net	Other nonoperating expense (income), net	9,565			23.8	%	(273)			(0.2)	%	12,328			9.0	%	(1,696)			(0.6)	%	Other nonoperating expense (income), net	16,251			15.3		%	9,565			23.8	%	(13,797)			(7.4)	%	12,328			9.0	%
Income (loss) before income taxes	Income (loss) before income taxes	(28,039)			(69.8)	%	41,006			27.0	%	(16,707)			(12.2)	%	61,153			20.2	%	Income (loss) before income taxes	(2,032)			(1.9)		%	(28,039)			(69.8)	%	29,253			15.7	%	(16,707)			(12.2)	%
Provision for (benefit from) income taxes	Provision for (benefit from) income taxes	(5,074)			(12.6)	%	6,767			4.5	%	(2,755)			(2.0)	%	11,424			3.8	%	Provision for (benefit from) income taxes	(1,204)			(1.1)		%	(5,074)			(12.6)	%	6,900			3.7	%	(2,755)			(2.0)	%
Net income (loss)	Net income (loss)	$	(22,965)		(57.2)	%	$	34,239		22.5	%	$	(13,952)		(10.2)	%	$	49,729		16.4	%	Net income (loss)	$	(828)		(0.8)		%	$	(22,965)		(57.2)	%	$	22,353		12.0	%	$	(13,952)		(10.2)	%

Other Data:	Other Data:																					Other Data:
Company average unit sales	Company average unit sales	$	246				$	612				$	890				$	1,193				Company average unit sales	$	732					$	246				$	1,257				$	890
Franchise average unit sales	Franchise average unit sales	$	183				$	419				$	589				$	821				Franchise average unit sales	$	416					$	183				$	742				$	589
Company equivalent units (b)	Company equivalent units (b)	62					156					64					163					Company equivalent units (b)	65						62					65					64
Franchise equivalent units (b)	Franchise equivalent units (b)	1,622					1,543					1,627					1,539					Franchise equivalent units (b)	1,582						1,622					1,583					1,627
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		%
Company same-store sales increase (decrease) vs. prior year (c)(e)																						Company same-store sales increase (decrease) vs. prior year (c)(e)	172.1		%				(64.9)		%			46.8		%			(35.9)		%
Domestic franchise same-store sales increase (decrease) vs. prior year (c)(e)																						Domestic franchise same-store sales increase (decrease) vs. prior year (c)(e)	113.2		%				(56.1)		%			30.8		%			(28.4)		%
Company same-store sales increase (decrease) vs. 2019 (c)(d)(e)																						Company same-store sales increase (decrease) vs. 2019 (c)(d)(e)	1.9		%				N/A					(10.6)		%			N/A
Domestic franchise same-store sales decrease vs. 2019 (c)(d)(e)																						Domestic franchise same-store sales decrease vs. 2019 (c)(d)(e)	(1.5)		%				N/A					(10.2)		%			N/A

(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 during the comparable periods noted.

(d)In an effort to provide greater transparency due to the COVID-19 pandemic, we are providing additional same-store sales information for 2021 that includes sales from company restaurants or non-consolidated franchised and licensed restaurants that were open the same period in ~~the prior year.~~fiscal 2019.

~~(d)~~(e)Prior year amounts have not been restated for ~~2020~~2021 comparable units.

2321

Unit Activity


		Quarter Ended			Two Quarters Ended				Quarter Ended		Two Quarters Ended
		June 24, 2020	June 26, 2019	June 24, 2020	June 26, 2019		June 30, 2021	June 24, 2020	June 30, 2021	June 24, 2020
Company restaurants, beginning of period	Company restaurants, beginning of period	67	170	68	173	Company restaurants, beginning of period	65	67	65	68
Units opened	Units opened	—	—	—	—	Units opened	—	—	—	—
Units acquired from franchisees		—	—	—	—
Units sold to franchisees		—	(37)	—	(40)

Units closed	Units closed	—	—	(1)	—	Units closed	—	—	—	(1)
End of period	End of period	67	133	67	133	End of period	65	67	65	67

Franchised and licensed restaurants, beginning of period	Franchised and licensed restaurants, beginning of period	1,628	1,535	1,635	1,536	Franchised and licensed restaurants, beginning of period	1,584	1,628	1,585	1,635
Units opened	Units opened	3	6	11	8	Units opened	3	3	6	11
Units purchased from Company		—	37	—	40
Units acquired by Company		—	—	—	—

Units closed	Units closed	(15)	(9)	(30)	(15)	Units closed	(7)	(15)	(11)	(30)
End of period	End of period	1,616	1,569	1,616	1,569	End of period	1,580	1,616	1,580	1,616
Total restaurants, end of period	Total restaurants, end of period	1,683	1,702	1,683	1,702	Total restaurants, end of period	1,645	1,683	1,645	1,683

Company Restaurant Operations

~~During~~Company restaurant sales increased $32.4 million, or 214.5%, for the quarter ended June ~~24, 2020,~~30, 2021 and $23.7 million, or 41.3%, year-to-date compared to the prior year periods, respectively. The increases in company restaurant sales ~~decreased $80.3 million, or 84.2%,~~were primarily ~~resulting from 94~~due to reduced dine-in restrictions and fewer ~~equivalent company restaurants~~temporary closures related to the COVID-19 pandemic in the current periods as compared to the prior year ~~period and a 64.9% decrease in company~~periods. Company same-store sales ~~caused primarily by dine-in restrictions~~increased 172.1% for the current year quarter 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 restaurants46.8% year-to-date 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.~~periods.

Total costs of company restaurant sales as a percentage of company restaurant sales was ~~129.6%~~79.5% for the quarter ended June 30, 2021 and ~~97.0%~~83.8% year-to-date compared to ~~83.6%~~129.6% and ~~84.5%~~97.0%, respectively, for the prior year periods.

Product costs were ~~28.5%~~24.1% for the quarter ended June 30, 2021 and ~~25.1%~~24.3% year-to-date compared to ~~24.5%~~28.5% and ~~24.4%~~25.1%, respectively, for the prior year ~~periods as a result of~~periods. The prior year included increases in paper ~~products~~product costs due to ~~the increase in~~higher delivery and to-go orders as a percentage of sales related to the COVID-19 pandemic.

Payroll and benefits were ~~53.1%~~35.7% for the quarter ended June 30, 2021 and ~~43.8%~~36.9% year-to-date compared to ~~38.6%~~53.1% and ~~39.5%~~43.8%, respectively,in the prior year periods. ~~The increases as a percentage of sales were primarily~~For the ~~result of sales deleveraging caused by lower sales resulting from the COVID-19 pandemic. For the~~current year quarter and year-to-date periods, management and staff payroll, including payroll taxes, ~~increased 17.0~~decreased 19.4 percentage points and ~~4.7~~6.6 percentage points, respectively, as a percentage of sales. The primary driver of these ~~increases~~decreases was anthe leveraging effect of the increase in ~~management~~sales caused by higher sales as guests return to our restaurants due to the easing of COVID-19 restrictions. Also contributing to the decreases were lower staffing and deployment levels in the current year due to challenges in the labor market as ~~we retained~~compared to the prior year's retention of a significant portion of our management staff during ~~the~~a time that restaurants were closed or operating under government restrictions. ~~To a limited extent, reductions~~Increases in unit level incentive compensation costs and workers' compensation costs ~~have~~ partially offset the ~~negative impact~~leveraging benefit of ~~lower~~higher sales. For the current year quarter and year-to-date periods, incentive compensation costs ~~decreased~~increased 0.8 percentage points and ~~0.6~~0.7 percentage points, respectively, as a result of the ~~decrease~~improvement in ~~unit level profitability caused by the COVID-19 pandemic.~~operating performance. For the current year quarter, ~~worker’s~~workers' compensation costs ~~decreased~~increased 2.2 percentage points ~~as a result of fewer claims and~~resulting from positive claims ~~development.~~development in the prior year.

Occupancy costs were ~~18.0%~~6.0% for the quarter ended June 30, 2021 and ~~10.3%~~7.0% year-to-date compared to ~~5.8% for~~18.0% and 10.3%, respectively, in the ~~respective~~ prior year periods. The ~~increases~~decreases as a percentage of sales were primarily due to the ~~sales deleveraging~~leveraging 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.~~improved sales.

2422

Other operating expenses ~~were comprised~~consist of the following amounts and percentages of company restaurant sales:

Quarter Ended Two Quarters Ended
June 24, 2020 June 26, 2019 June 24, 2020 June 26, 2019
(Dollars in thousands)
Utilities $ 1,098 7.3 % $ 3,106 3.3 % $ 2,534 4.4 % $ 6,478 3.3 %
Repairs and maintenance 428 2.8 % 2,080 2.2 % 1,217 2.1 % 3,968 2.0 %
Marketing 607 4.0 % 3,239 3.4 % 1,726 3.0 % 6,946 3.6 %
Other direct costs 2,401 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 %


	Quarter Ended								Two Quarters Ended
	June 30, 2021				June 24, 2020				June 30, 2021				June 24, 2020
	(Dollars in thousands)
Utilities	$	1,390	2.9	%	$	1,098	7.3	%	$	2,615	3.2	%	$	2,534	4.4	%
Repairs and maintenance	635		1.3	%	428		2.8	%	1,168		1.4	%	1,217		2.1	%
Marketing	1,365		2.9	%	607		4.0	%	2,332		2.9	%	1,726		3.0	%

Other direct costs	3,162		6.6	%	2,401		15.9	%	6,514		8.0	%	4,776		8.3	%
Other operating expenses	$	6,552	13.8	%	$	4,534	30.0	%	$	12,629	15.6	%	$	10,253	17.9	%

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

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 Ended														Two Quarters Ended																Quarter Ended					Two Quarters Ended
		June 24, 2020						June 26, 2019						June 24, 2020								June 26, 2019						June 30, 2021				June 24, 2020				June 30, 2021	June 24, 2020
		(Dollars in thousands)																																(Dollars in thousands)
Royalties	Royalties	$	6,719	26.8	%	$	26,672	47.3	%	$	30,566	38.5	%	$	51,912	47.5	%	Royalties	$	27,117	46.3		%	$	6,719	26.8	%	$	47,961	45.4	%	$	30,566	38.5	%
Advertising revenue	Advertising revenue	7,232		28.9	%	19,884		35.2	%	24,758		31.2	%	38,826		35.5	%	Advertising revenue	18,600		31.7		%	7,232		28.9	%	32,711		31.0	%	24,758		31.2	%
Initial and other fees	Initial and other fees	1,346		5.4	%	1,755		3.1	%	3,043		3.8	%	2,894		2.6	%	Initial and other fees	2,066		3.5		%	1,346		5.4	%	3,904		3.7	%	3,043		3.8	%
Occupancy revenue	Occupancy revenue	9,736		38.9	%	8,126		14.4	%	21,070		26.5	%	15,671		14.3	%	Occupancy revenue	10,810		18.4		%	9,736		38.9	%	21,024		19.9	%	21,070		26.5	%
Franchise and license revenue	Franchise and license revenue	$	25,033	100.0	%	$	56,437	100.0	%	$	79,437	100.0	%	$	109,303	100.0	%	Franchise and license revenue	$	58,593	100.0		%	$	25,033	100.0	%	$	105,600	100.0	%	$	79,437	100.0	%

Advertising costs	Advertising costs	$	7,232	28.9	%	$	19,884	35.2	%	$	24,758	31.2	%	$	38,826	35.5	%	Advertising costs	$	18,600	31.7		%	$	7,232	28.9	%	$	32,711	31.0	%	$	24,758	31.2	%
Occupancy costs	Occupancy costs	5,829		23.3	%	5,512		9.8	%	13,238		16.7	%	10,761		9.8	%	Occupancy costs	6,879		11.7		%	5,829		23.3	%	13,418		12.7	%	13,238		16.7	%
Other direct costs	Other direct costs	2,183		8.7	%	3,475		6.2	%	6,418		8.1	%	6,342		5.8	%	Other direct costs	3,256		5.6		%	2,183		8.7	%	6,364		6.0	%	6,418		8.1	%
Costs of franchise and license revenue	Costs of franchise and license revenue	$	15,244	60.9	%	$	28,871	51.2	%	$	44,414	55.9	%	$	55,929	51.2	%	Costs of franchise and license revenue	$	28,735	49.0		%	$	15,244	60.9	%	$	52,493	49.7	%	$	44,414	55.9	%

Franchise and license revenue ~~decreased $31.4~~increased $33.6 million, or ~~55.6%~~134.1%, for the quarter ended June 30, 2021 and ~~$29.9~~$26.2 million, or ~~27.3%~~32.9%, year-to-date compared to the prior year periods. Royalties ~~decreased $20.0~~increased $20.4 million, or ~~74.8%~~303.6%, and ~~$21.3~~$17.4 million, or ~~41.1%~~56.9%, for the current quarter and year-to-date periods, respectively, compared to the prior year periods. Advertising revenue ~~decreased $12.7~~increased $11.4 million, or ~~63.6%~~157.2%, for the current quarter and ~~$14.1~~$8.0 million, or ~~36.2%~~32.1%, year-to-date compared to the prior year periods. The ~~decreases~~increases in royalty and advertising revenue primarily resulted from ~~56.1%~~113.2% and ~~28.4% decreases~~30.8% increases in domestic same-store sales for the respective periods. Additionally, ~~we abated~~the prior year periods included abatements of $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 in the year-to-date period to help our franchisees weather the impact of the COVID-19 pandemic. Partially offsetting these ~~decreases~~increases for both periods were ~~increases in~~decreases of 40 and 44 equivalent units ~~of 79 and 88 on a quarter-to-date~~for the quarterly and year-to-date ~~basis, respectively, resulting from our refranchising and development strategy in 2019.~~periods, respectively.

Initial and other fees ~~decreased $0.4~~increased $0.7 million, or ~~23.3%~~53.5%, for the quarter ended June 30, 2021 and ~~increased $0.1~~$0.9 million, or ~~5.1%~~28.3%, year-to-date compared to the prior year periods. Occupancy revenue increased ~~$1.6~~$1.1 million, or ~~19.8%~~11.0%, for the current quarter and decreased less than $0.1 million, or 0.2%, year-to-date compared to the prior year periods. The increase in occupancy revenue for the current quarter primarily resulted from higher percentage rents as a result of sales increases due to reduced dine-in restrictions and temporary closures related to the COVID-19 pandemic.

Costs of franchise and license revenue increased $13.5 million, or 88.5%, for the quarter ended June 30, 2021 and ~~$5.4~~$8.1 million, or ~~34.5%~~18.2%, year-to-date compared to the prior year periods. The increases were primarily related to the increases in advertising costs year-over-year, which corresponded to the related advertising revenue increases noted above. Occupancy costs increased $1.1 million, or 18.0%, for the current quarter and $0.2 million, or 1.4%, year-to-date compared to prior year periods. The increase in occupancy ~~revenue~~costs for the current quarter primarily resulted from ~~additional leases and subleases to franchisees~~higher percentage rent expense as a result of ~~our refranchising and development strategy in 2019.~~sales

~~Costs of~~increases. Other direct franchise ~~and license revenue decreased $13.6~~costs increased $1.1 million, or ~~47.2%~~49.1%, for the current quarter and ~~$11.5~~decreased $0.1 million, or ~~20.6%~~0.8%, 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~~

~~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 current quarter ~~was mostly due to a reduction in franchise administrative costs. Year-to-date, the decrease~~and year-to-date periods included increases in franchise administrative costs, ~~was~~partially offset by ~~a $1.0 million~~ bad debt allowance ~~resulting from expected losses on franchise-related receivables due~~reversals of $0.4 million and $0.7 million for the quarterly and year-to-date periods, respectively. Due to the ~~COVID-19 pandemic. As a result,~~increase in revenue, costs of franchise and license revenue ~~increased~~decreased to ~~60.9%~~49.0% and ~~55.9%~~49.7% for the quarter and two quarters ended June ~~24, 2020~~30, 2021 from ~~51.2%~~60.9% and 55.9% 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 Ended Two Quarters Ended
June 24, 2020 June 26, 2019 June 24, 2020 June 26, 2019
(In thousands)
Corporate administrative expenses $ 9,701 $ 12,436 $ 21,482 $ 25,305
Share-based compensation 1,511 2,713 (26) 4,966
Incentive compensation 1 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


	Quarter Ended				Two Quarters Ended
	June 30, 2021		June 24, 2020		June 30, 2021		June 24, 2020
	(In thousands)
Corporate administrative expenses	$	10,345	$	9,701	$	21,217	$	21,482
Share-based compensation	3,388		1,511		6,860		(26)
Incentive compensation	3,032		1		5,118		15
Deferred compensation valuation adjustments	783		1,940		1,300		(576)
Total general and administrative expenses	$	17,548	$	13,153	$	34,495	$	20,895

Corporate administrative expenses ~~decreased $2.7~~increased $0.6 million for the quarter ended June 30, 2021 and ~~$3.8~~decreased $0.3 million ~~year-to-date~~year-to-date. The increase for the current quarter was primarily due to prior year temporary cost ~~savings initiatives~~reductions related to the COVID-19 pandemic, ~~as well as~~partially offset by retention credits of $0.5 million in the ~~rationalization of certain business costs in connection with our refranchising and development strategy.~~current year quarter. Share-based compensation ~~decreased $1.2~~increased $1.9 million for the current quarter and ~~$5.0~~$6.9 million year-to-date. Incentive compensation ~~decreased $2.9~~increased $3.0 million for the current quarter and ~~$5.4~~$5.1 million year-to-date. The ~~decreases~~increases in share-based compensation and incentive compensation primarily resulted from ~~lower expectations~~adjustments recorded in the prior year as a result of not meeting performance measures for the respective compensation plans 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 Ended Two Quarters Ended
June 24, 2020 June 26, 2019 June 24, 2020 June 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


	Quarter Ended				Two Quarters Ended
	June 30, 2021		June 24, 2020		June 30, 2021		June 24, 2020
	(In thousands)
Depreciation of property and equipment	$	2,938	$	2,810	$	5,653	$	5,691
Amortization of financing lease right-of-use assets	428		467		856		967
Amortization of intangible and other assets	531		781		1,049		1,546
Total depreciation and amortization expense	$	3,897	$	4,058	$	7,558	$	8,204

The decreases in depreciation and amortization expense during the ~~current~~ quarter ended June 30, 2021 and year-to-date periods were primarily ~~related~~due to ~~refranchising restaurants as part of our refranchising and development strategy during 2019.~~certain intangible assets becoming fully amortized in the prior year.

2624

Operating (gains), losses and other charges, net consisted of the following:

Quarter Ended Two Quarters Ended
June 24, 2020 June 26, 2019 June 24, 2020 June 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)


	Quarter Ended				Two Quarters Ended
	June 30, 2021		June 24, 2020		June 30, 2021		June 24, 2020
	(In thousands)
(Gains) losses on sales of assets and other, net	$	(65)	$	12	$	(1,007)	$	(1,058)
Restructuring charges and exit costs	(48)		1,615		1,426		1,977
Impairment charges	—		—		—		2,181
Operating (gains), losses and other charges, net	$	(113)	$	1,627	$	419	$	3,100

~~(Gains) losses~~Gains on sales of assets and other, net for the two quarters ended June 30, 2021 were primarily related to the sale of one parcel of real estate. Gains 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 Ended						Two Quarters Ended							Quarter Ended				Two Quarters Ended
		June 24, 2020		June 26, 2019		June 24, 2020		June 26, 2019			June 30, 2021		June 24, 2020		June 30, 2021		June 24, 2020
		(In thousands)															(In thousands)
Exit costs	Exit costs	$	50	$	52	$	94	$	174	Exit costs	$	141	$	50	$	223	$	94
Severance and other restructuring charges	Severance and other restructuring charges	1,565		354		1,883		772		Severance and other restructuring charges	(189)		1,565		1,203		1,883
Total restructuring and exit costs	Total restructuring and exit costs	$	1,615	$	406	$	1,977	$	946	Total restructuring and exit costs	$	(48)	$	1,615	$	1,426	$	1,977

~~During~~Restructuring and exit costs decreased by $1.7 million for the current quarter ~~ended June 24, 2020,~~and $0.6 million year-to-date compared to the prior year periods. The decrease for the current quarter and year-to-date period was primarily due to the Company permanently ~~separated~~separating with approximately 50 support center ~~staff. As a result, severance~~staff in the prior year period. Restructuring and ~~other restructuring charges increased $1.2 million and $1.1 million during~~exit costs for the ~~quarter and~~ two quarters ended June ~~24, 2020, respectively.~~30, 2021 include relocation costs associated with moving certain employees to our support center in the Dallas, Texas area.

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 $18.3 million for the current quarter and $23.8 million year-to-date compared to 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 Ended						Two Quarters Ended							Quarter Ended				Two Quarters Ended
		June 24, 2020		June 26, 2019		June 24, 2020		June 26, 2019			June 30, 2021		June 24, 2020		June 30, 2021		June 24, 2020
		(In thousands)															(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 credit facility										Interest on credit facility	$	1,554	$	2,160	$	3,255	$	4,539
Interest on interest rate swaps										Interest on interest rate swaps	1,006		1,570		2,001		1,895
Interest on financing lease liabilities	Interest on financing lease liabilities	774		1,318		1,559		2,834		Interest on financing lease liabilities	746		774		1,514		1,559
Letters of credit and other fees	Letters of credit and other fees	250		320		511		624		Letters of credit and other fees	377		250		732		511
Interest income	Interest income	(37)		(43)		(67)		(85)		Interest income	(7)		(37)		(15)		(67)
Total cash interest		4,717		5,122		8,437		10,270
Total cash interest, net										Total cash interest, net	3,676		4,717		7,487		8,437
Amortization of deferred financing costs	Amortization of deferred financing costs	188		152		340		304		Amortization of deferred financing costs	344		188		688		340
Amortization of interest rate swap losses										Amortization of interest rate swap losses	46		—		167		—
Interest accretion on other liabilities	Interest accretion on other liabilities	42		108		121		215		Interest accretion on other liabilities	—		42		1		121
Total interest expense, net	Total interest expense, net	$	4,947	$	5,382	$	8,898	$	10,789	Total interest expense, net	$	4,066	$	4,947	$	8,343	$	8,898

2725

~~Interest~~Total cash interest expense, net decreased by ~~$0.4~~$1.0 million for both the quarter ended June 30, 2021 and ~~$1.9~~year-to-date periods as compared to the respective prior year periods. Combined interest on credit facility borrowings and interest rate swaps decreased by $1.2 million for both the current quarter and year-to-date periods. These decreases primarily ~~due~~resulted from decreased average borrowings in the current quarter and year-to-date periods and lower average interest rates on the credit facility for the year-to-date period.Partially offsetting these decreases to ~~a reduction in financing lease~~total interest ~~during~~expense net, for both the quarter and year-to-date periods were $0.2 million and $0.3 million increases in the amortization of deferred financing costs resulting from ~~sales of restaurants to franchisees during the~~ prior year ~~and lower net interest rates on borrowings during the year-to-date period.~~credit facility amendments.

Other nonoperating expense (income), net was expense of ~~$9.6~~$16.3 million for the quarter and ~~$12.3~~income of $13.8 million year-to-date, compared to ~~income~~expense of ~~$0.3~~$9.6 million and ~~$1.7~~$12.3 million, respectively, for the prior year periods. Other nonoperating expense (income) for the current quarter primarily consisted of $17.2 million of losses related to interest rate swap valuation adjustments, partially offset by $0.8 million of gains on deferred compensation plan investments. The year-to-date period primarily consisted of $12.7 million of gains on interest rate swap valuation adjustments in addition to $1.4 million of gains on deferred compensation plan investments. Prior year other nonoperating expense for the quarter and year-to-date periods 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.~~swaps.

Provision for (benefit from) income taxes was a benefit of ~~$5.1~~$1.2 million for the quarter ended June 30, 2021 and ~~$2.8~~a provision of $6.9 million year-to-date, compared to ~~expense~~benefits of ~~$6.8~~$5.1 million and ~~$11.4~~$2.8 million for the prior year periods. The effective tax rate was ~~18.1%~~59.3% for the quarter and ~~16.5%~~23.6% year-to-date, compared to ~~16.5%~~18.1% and ~~18.7%~~16.5%, respectively, for the prior year periods. The 2021 quarterly and year-to-date rates included the impact of excess tax benefits relating to share-based compensation of 13.4% and (1.2%), 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.

Net income (loss) was a net loss of ~~$23.0~~$0.8 million for the quarter ended June 30, 2021 and ~~$14.0~~net income of $22.4 million year-to-date compared ~~with~~to net ~~income~~loss of ~~$34.2~~$23.0 million and ~~$49.7~~$14.0 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							Two Quarters Ended
		June 24, 2020		June 26, 2019			June 30, 2021		June 24, 2020
		(In thousands)							(In thousands)
Net cash provided by (used in) operating activities	Net cash provided by (used in) operating activities	$	(7,958)	$	25,155	Net cash provided by (used in) operating activities	$	43,371	$	(7,958)
Net cash provided by (used in) investing activities		(334)		30,975
Net cash used in investing activities						Net cash used in investing activities	(1,007)		(334)
Net cash provided by (used in) financing activities	Net cash provided by (used in) financing activities	25,997		(58,864)		Net cash provided by (used in) financing activities	(35,374)		25,997
Increase (decrease) in cash and cash equivalents		$	17,705	$	(2,734)
Increase in cash and cash equivalents						Increase in cash and cash equivalents	$	6,990	$	17,705

Net cash flows provided by operating activities were $43.4 million for the two quarters ended June 30, 2021 compared to net cash flows used in operating activities ~~were~~of $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.~~2020. The ~~decrease~~increase in cash flows provided by operating activities was primarily due to the improvement of operating results in 2021 and the timing of prior year accrual ~~payments and the impacts of the COVID-19 pandemic during the two quarters ended June 24, 2020.~~payments. We believe that our estimated cash flows from operations for ~~2020,~~2021, 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 $1.0 million for the two quarters ended June 30, 2021. These cash flows primarily consisted of capital expenditures of $3.1 million, partially offset by proceeds from sales of restaurants, real estate and other assets of $1.6 million, collections on notes receivable of $0.4 million, and proceeds from sales of investments of $0.2 million. 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~~consisted 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.

2826

Our principal capital requirements have been largely associated with the following:


		Two Quarters Ended							Two Quarters Ended
		June 24, 2020		June 26, 2019			June 30, 2021		June 24, 2020
		(In thousands)							(In thousands)
Facilities	Facilities	$	1,966	$	3,108	Facilities	$	1,626	$	1,966
New construction	New construction	114		1,901		New construction	—		114
Remodeling	Remodeling	965		1,019		Remodeling	356		965
Information technology	Information technology	1,138		641		Information technology	842		1,138
Other	Other	293		108		Other	284		293
Capital expenditures (excluding acquisitions)		$	4,476	$	6,777
Capital expenditures						Capital expenditures	$	3,108	$	4,476

Cash flows used in financing activities were $35.4 million for the two quarters ended June 30, 2021, which included net long-term debt repayments of $31.0 million, in addition to net bank overdraft payments of $3.1 million and payments of tax withholdings on share-based compensation of $1.4 million. 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~~$39.2 million at June ~~24, 2020~~30, 2021 compared to ~~$42.8~~$28.5 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.~~30, 2020. The ~~decrease~~increase in working capital deficit was primarily related to ~~additional revolver borrowings made during~~ the ~~two quarters ended~~increase in current liabilities as of June ~~24, 2020 in response to the COVID-19 outbreak.~~30, 2021. 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 for 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

~~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, borrowings under the credit facility bore interest at a 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~~set to 0.40%. ~~During this period, we will also have supplemental monthly reporting obligations to our lenders and will be~~The maturity date for the credit facility is October 26, 2022.

The Company is prohibited from paying dividends and making stock repurchases and other general investments. ~~Additionally,~~Limitations on capital expenditures ~~will be restricted to $10~~of $12 million are in effect for the ~~aggregate, from~~period of May 13, 2020 through ~~the fiscal quarter ending March 31,~~September 29, 2021.

~~Issuance and Sale of Common Stock~~

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,~~30, 2021, 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~~30, 2021 is as follows:


Trade Date	Trade Date	Effective Date	Maturity Date	Notional Amount			Fixed Rate		Trade Date	Effective Date	Maturity Date	Notional Amount			Fair Value		Fixed Rate
				(In thousands)								(In thousands)
Swaps designated as cash flow hedges									Swaps designated as cash flow hedges
March 20, 2015	March 20, 2015	March 29, 2018	March 31, 2025	$	120,000		2.44	%	March 20, 2015	March 29, 2018	March 31, 2025	$	120,000		$	7,921	2.44	%
October 1, 2015	October 1, 2015	March 29, 2018	March 31, 2026	50,000			2.46	%	October 1, 2015	March 29, 2018	March 31, 2026	$	50,000		$	3,783	2.46	%
Dedesignated swaps									Dedesignated swaps
February 15, 2018	February 15, 2018	March 31, 2020	December 31, 2033	80,000		(1)	3.19	%	February 15, 2018	March 31, 2020	December 31, 2033	$	100,000	(1)	$	46,034	3.19	%
Total									Total			$	270,000		$	57,738

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,~~30, 2021, the ~~fair value~~total notional amount of ~~the~~our interest rate swaps was ~~$94.6 million and is recorded as a component~~in excess of ~~other noncurrent liabilities in~~100% of our ~~Condensed Consolidated Balance Sheets. The interest~~floating 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.

Based on the levels of borrowings under the credit facility at June ~~24, 2020,~~30, 2021, 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~~not change. However, depending on market considerations, fluctuations in the ~~impact~~fair values of ~~hypothetical interest rates on the credit facility at June 24, 2020, taking into consideration the~~our interest rate swaps ~~that will~~could 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.~~

significant. 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, 7 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~~Executive 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 ended June 30, 2021 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~~There have been no material changes in the ~~Risk Factors previously disclosed~~risk factors set forth in Part I, Item 1A, ~~of the~~“Risk Factors” in our 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,~~30, 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.

•~~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~~

•~~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

~~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.

3429

Item 6. Exhibits

The following are included as exhibits to this report:


Exhibit No.						Description
10.1						~~2020 Long-Term Incentive Program Restricted Stock Unit Award Certificate.~~Summary of Non-Employee Director Compensation as of May 19, 2021.

10.2						~~Second Amendment to Third Amended and Restated Credit Agreement, dated May 13, 2020, among Denny's Inc., as the Borrower,~~ Denny's Corporation ~~as Parent, and each of the Subsidiaries of Parent party thereto, as Guarantors, and Wells Fargo Bank, National Association, as Administrative Agent on behalf of the Lenders~~2021 Omnibus Incentive Plan (incorporated by reference to Exhibit ~~10.1~~99.1 to the ~~Current Report~~Denny's Corporation Registration Statement on Form ~~8-K of Denny's Corporation~~S-8 filed with the Securities anand Exchange Commission on May ~~14, 2020.)~~19, 2021).

31.1						Certification of John C. Miller, Chief Executive Officer of Denny's Corporation, pursuant to Rule 13a-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

31.2						Certification of Robert P. Verostek, ~~Senior~~Executive Vice President and Chief Financial Officer of Denny's Corporation, pursuant to Rule 13a-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

32.1						Certification of John C. Miller, Chief Executive Officer of Denny's Corporation, and Robert P. Verostek, ~~Senior~~Executive Vice President and Chief Financial Officer of Denny's Corporation, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

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.SCH						Inline XBRL Taxonomy Extension Schema Document

101.CAL						Inline XBRL Taxonomy Extension Calculation Linkbase Document

101.LAB						Inline XBRL Taxonomy Extension Label Linkbase Document

101.PRE						Inline XBRL Taxonomy Extension Presentation Linkbase Document

101.DEF						Inline XBRL Taxonomy Extension Definition Linkbase Document

104						Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101)

3530

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, 2020~~August 3, 2021

By:

/s/ Robert P. Verostek

Robert P. Verostek

~~Senior~~Executive Vice President and
Chief Financial Officer

Date:

~~July 31, 2020~~August 3, 2021

By:

/s/ Jay C. Gilmore

Jay C. Gilmore

Senior Vice President,
Chief Accounting Officer and
Corporate Controller

3631


			Page
PART I - FINANCIAL INFORMATION

Item 1. Financial Statements (Unaudited)
Condensed Consolidated Balance Sheets			3
Condensed Consolidated Statements of Operations			4
Condensed Consolidated Statements of Comprehensive Income (Loss)			5
Condensed Consolidated Statements of Shareholders' Deficit			6
Condensed Consolidated Statements of Cash Flows			8
Notes to Condensed Consolidated Financial Statements			9
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations			2018
Item 3. Quantitative and Qualitative Disclosures About Market Risk			3028
Item 4. Controls and Procedures			3128

PART II - OTHER INFORMATION

Item 1. Legal Proceedings			3129
Item 1A. Risk Factors			3129
Item 6. Exhibits			3530
Signatures			3631


	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


Fiscal April: (76%)							Fiscal May: (65%)						Fiscal June: (41%)
4/01	4/08	4/15	4/22	4/29	5/06	5/13	5/20	5/27	6/03	6/10	6/17	6/24
(79%)	(78%)	(76%)	(72%)	(72%)	(68%)	(63%)	(60%)	(55%)	(47%)	(39%)	(37%)	(29%)


Fiscal April							Fiscal May						Fiscal June
4/01	4/08	4/15	4/22	4/29	5/6	5/13	5/20	5/27	6/03	6/10	6/17	6/24
7	2	2	2	11	339	521	646	967	1,116	1,234	1,355	1,424