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 28,~~September 27, 2023

☐ 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

☐

Accelerated Filer

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 27,~~October 26, 2023, ~~55,464,084~~53,085,444 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

Consolidated Balance Sheets

(Unaudited)


		June 28, 2023		December 28, 2022			September 27, 2023		December 28, 2022
		(In thousands, except per share amounts)					(In thousands, except per share amounts)
Assets	Assets					Assets
Current assets:	Current assets:					Current assets:
Cash and cash equivalents	Cash and cash equivalents	$	1,130	$	3,523	Cash and cash equivalents	$	1,022	$	3,523
Investments	Investments	3,075		1,746		Investments	1,255		1,746
Receivables, net	Receivables, net	18,469		25,576		Receivables, net	16,950		25,576
Inventories	Inventories	2,534		5,538		Inventories	2,354		5,538
Assets held for sale	Assets held for sale	1,551		1,403		Assets held for sale	1,557		1,403
Prepaid and other current assets	Prepaid and other current assets	10,043		12,529		Prepaid and other current assets	11,816		12,529
Total current assets	Total current assets	36,802		50,315		Total current assets	34,954		50,315
Property, net of accumulated depreciation of $156,690 and $153,334, respectively		91,407		94,469
Finance lease right-of-use assets, net of accumulated amortization of $9,348 and $9,847, respectively		6,239		6,499
Property, net of accumulated depreciation of $158,275 and $153,334, respectively						Property, net of accumulated depreciation of $158,275 and $153,334, respectively	91,248		94,469
Finance lease right-of-use assets, net of accumulated amortization of $9,205 and $9,847, respectively						Finance lease right-of-use assets, net of accumulated amortization of $9,205 and $9,847, respectively	5,988		6,499
Operating lease right-of-use assets, net	Operating lease right-of-use assets, net	120,136		126,065		Operating lease right-of-use assets, net	119,436		126,065
Goodwill	Goodwill	72,142		72,740		Goodwill	72,142		72,740
Intangible assets, net	Intangible assets, net	94,220		95,034		Intangible assets, net	93,845		95,034
Deferred financing costs, net	Deferred financing costs, net	2,020		2,337		Deferred financing costs, net	1,861		2,337

Other noncurrent assets	Other noncurrent assets	42,659		50,876		Other noncurrent assets	60,361		50,876
Total assets	Total assets	$	465,625	$	498,335	Total assets	$	479,835	$	498,335
Liabilities	Liabilities					Liabilities
Current liabilities:	Current liabilities:					Current liabilities:
Current finance lease liabilities	Current finance lease liabilities	$	1,449	$	1,683	Current finance lease liabilities	$	1,393	$	1,683
Current operating lease liabilities	Current operating lease liabilities	15,179		15,310		Current operating lease liabilities	14,917		15,310
Accounts payable	Accounts payable	13,079		19,896		Accounts payable	15,560		19,896
Other current liabilities	Other current liabilities	56,968		56,762		Other current liabilities	59,071		56,762
Total current liabilities	Total current liabilities	86,675		93,651		Total current liabilities	90,941		93,651
Long-term liabilities:	Long-term liabilities:					Long-term liabilities:
Long-term debt	Long-term debt	247,000		261,500		Long-term debt	248,100		261,500
Noncurrent finance lease liabilities	Noncurrent finance lease liabilities	9,355		9,555		Noncurrent finance lease liabilities	9,094		9,555
Noncurrent operating lease liabilities	Noncurrent operating lease liabilities	117,218		123,404		Noncurrent operating lease liabilities	117,027		123,404
Liability for insurance claims, less current portion	Liability for insurance claims, less current portion	7,020		7,324		Liability for insurance claims, less current portion	6,693		7,324
Deferred income taxes, net	Deferred income taxes, net	8,937		7,419		Deferred income taxes, net	12,867		7,419
Other noncurrent liabilities	Other noncurrent liabilities	32,038		32,598		Other noncurrent liabilities	30,911		32,598
Total long-term liabilities	Total long-term liabilities	421,568		441,800		Total long-term liabilities	424,692		441,800
Total liabilities	Total liabilities	508,243		535,451		Total liabilities	515,633		535,451
Shareholders' deficit	Shareholders' deficit					Shareholders' deficit
Common stock $0.01 par value; 135,000 shares authorized; June 28, 2023: 65,708 shares issued and 55,708 outstanding; December 28, 2022: 64,998 shares issued and 56,728 shares outstanding		$	657	$	650
Common stock $0.01 par value; 135,000 shares authorized; September 27, 2023: 65,711 shares issued and 54,031 outstanding; December 28, 2022: 64,998 shares issued and 56,728 shares outstanding						Common stock $0.01 par value; 135,000 shares authorized; September 27, 2023: 65,711 shares issued and 54,031 outstanding; December 28, 2022: 64,998 shares issued and 56,728 shares outstanding	$	657	$	650
Paid-in capital	Paid-in capital	144,506		142,136		Paid-in capital	147,393		142,136
Deficit	Deficit	(32,594)		(41,729)		Deficit	(24,686)		(41,729)
Accumulated other comprehensive loss, net	Accumulated other comprehensive loss, net	(40,321)		(42,697)		Accumulated other comprehensive loss, net	(27,760)		(42,697)
Treasury stock, at cost, 10,000 and 8,270 shares, respectively		(114,866)		(95,476)
Treasury stock, at cost, 11,680 and 8,270 shares, respectively						Treasury stock, at cost, 11,680 and 8,270 shares, respectively	(131,402)		(95,476)
Total shareholders' deficit	Total shareholders' deficit	(42,618)		(37,116)		Total shareholders' deficit	(35,798)		(37,116)
Total liabilities and shareholders' deficit	Total liabilities and shareholders' deficit	$	465,625	$	498,335	Total liabilities and shareholders' deficit	$	479,835	$	498,335

See accompanying notes

Denny’s Corporation and Subsidiaries

Consolidated Statements of Operations

(Unaudited)


		Quarter Ended				Two Quarters Ended					Quarter Ended				Three Quarters Ended
		June 28, 2023		June 29, 2022		June 28, 2023		June 29, 2022			September 27, 2023		September 28, 2022		September 27, 2023		September 28, 2022
		(In thousands, except per share amounts)									(In thousands, except per share amounts)
Revenue:	Revenue:									Revenue:
Company restaurant sales	Company restaurant sales	$	54,881	$	49,167	$	108,333	$	93,143	Company restaurant sales	$	53,153	$	52,211	$	161,486	$	145,354
Franchise and license revenue	Franchise and license revenue	62,034		65,850		126,053		124,981		Franchise and license revenue	61,030		65,245		187,083		190,226
Total operating revenue	Total operating revenue	116,915		115,017		234,386		218,124		Total operating revenue	114,183		117,456		348,569		335,580
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	14,170		13,168		28,209		24,412		Product costs	13,587		14,462		41,796		38,874
Payroll and benefits	Payroll and benefits	20,488		18,336		40,728		35,422		Payroll and benefits	19,754		20,176		60,482		55,598
Occupancy	Occupancy	4,105		3,782		8,199		7,022		Occupancy	4,182		4,294		12,381		11,316
Other operating expenses	Other operating expenses	7,805		9,542		15,924		16,597		Other operating expenses	8,370		9,519		24,294		26,116
Total costs of company restaurant sales, excluding depreciation and amortization	Total costs of company restaurant sales, excluding depreciation and amortization	46,568		44,828		93,060		83,453		Total costs of company restaurant sales, excluding depreciation and amortization	45,893		48,451		138,953		131,904
Costs of franchise and license revenue, excluding depreciation and amortization	Costs of franchise and license revenue, excluding depreciation and amortization	30,460		35,265		62,847		65,934		Costs of franchise and license revenue, excluding depreciation and amortization	29,810		34,579		92,657		100,513
General and administrative expenses	General and administrative expenses	20,160		16,623		40,278		33,581		General and administrative expenses	18,237		16,607		58,515		50,188
Depreciation and amortization	Depreciation and amortization	3,617		3,590		7,273		7,138		Depreciation and amortization	3,605		3,914		10,878		11,052
Operating (gains), losses and other charges, net	Operating (gains), losses and other charges, net	1,176		846		(153)		846		Operating (gains), losses and other charges, net	2,620		(1,897)		2,467		(1,051)
Total operating costs and expenses, net	Total operating costs and expenses, net	101,981		101,152		203,305		190,952		Total operating costs and expenses, net	100,165		101,654		303,470		292,606
Operating income	Operating income	14,934		13,865		31,081		27,172		Operating income	14,018		15,802		45,099		42,974
Interest expense, net	Interest expense, net	4,402		2,878		8,907		5,838		Interest expense, net	4,381		3,691		13,288		9,529
Other nonoperating expense (income), net	Other nonoperating expense (income), net	(666)		(19,795)		9,427		(39,410)		Other nonoperating expense (income), net	43		(10,461)		9,470		(49,871)
Income before income taxes	Income before income taxes	11,198		30,782		12,747		60,744		Income before income taxes	9,594		22,572		22,341		83,316
Provision for income taxes	Provision for income taxes	2,660		7,779		3,612		15,886		Provision for income taxes	1,686		5,489		5,298		21,375
Net income	Net income	$	8,538	$	23,003	$	9,135	$	44,858	Net income	$	7,908	$	17,083	$	17,043	$	61,941

Net income per share - basic	Net income per share - basic	$	0.15	$	0.37	$	0.16	$	0.71	Net income per share - basic	$	0.14	$	0.29	$	0.30	$	1.01
Net income per share - diluted	Net income per share - diluted	$	0.15	$	0.37	$	0.16	$	0.71	Net income per share - diluted	$	0.14	$	0.29	$	0.30	$	1.00

Basic weighted average shares outstanding	Basic weighted average shares outstanding	56,787		62,306		57,212		62,822		Basic weighted average shares outstanding	55,869		59,020		56,764		61,558
Diluted weighted average shares outstanding	Diluted weighted average shares outstanding	57,051		62,430		57,423		63,003		Diluted weighted average shares outstanding	56,082		59,040		56,973		61,686

See accompanying notes

Denny’s Corporation and Subsidiaries

Consolidated Statements of Comprehensive Income

(Unaudited)


		Quarter Ended				Two Quarters Ended					Quarter Ended				Three Quarters Ended
		June 28, 2023		June 29, 2022		June 28, 2023		June 29, 2022			September 27, 2023		September 28, 2022		September 27, 2023		September 28, 2022
		(In thousands)									(In thousands)
Net income	Net income	$	8,538	$	23,003	$	9,135	$	44,858	Net income	$	7,908	$	17,083	$	17,043	$	61,941
Other comprehensive income (loss), net of tax:	Other comprehensive income (loss), net of tax:									Other comprehensive income (loss), net of tax:
Minimum pension liability adjustment, net of tax of $4, $7, $26 and $15, respectively		10		22		77		46
Changes in the fair value of cash flow hedges, net of tax of $975, $613, $1,296 and $2,286, respectively		2,870		1,840		3,812		6,855
Reclassification of cash flow hedges to interest expense, net of tax of $(313), $180, $(549) and $428, respectively		(922)		541		(1,616)		1,283
Minimum pension liability adjustment, net of tax of $4, $8, $30 and $23, respectively										Minimum pension liability adjustment, net of tax of $4, $8, $30 and $23, respectively	9		23		86		69
Changes in the fair value of cash flow hedges, net of tax of $4,597, $956, $5,893 and $3,242, respectively										Changes in the fair value of cash flow hedges, net of tax of $4,597, $956, $5,893 and $3,242, respectively	13,516		2,868		17,328		9,723
Reclassification of cash flow hedges to interest expense, net of tax of $(352), $27, $(901) and $455, respectively										Reclassification of cash flow hedges to interest expense, net of tax of $(352), $27, $(901) and $455, respectively	(1,034)		80		(2,650)		1,363

Amortization of unrealized losses related to interest rate swaps to interest expense, net of tax of $21, $1, $35 and $1, respectively		61		5		103		5
Amortization of unrealized losses related to interest rate swaps to interest expense, net of tax of $24, $3, $59 and $4, respectively										Amortization of unrealized losses related to interest rate swaps to interest expense, net of tax of $24, $3, $59 and $4, respectively	70		7		173		12
Other comprehensive income	Other comprehensive income	2,019		2,408		2,376		8,189		Other comprehensive income	12,561		2,978		14,937		11,167
Total comprehensive income	Total comprehensive income	$	10,557	$	25,411	$	11,511	$	53,047	Total comprehensive income	$	20,469	$	20,061	$	31,980	$	73,108

See accompanying notes

Denny’s Corporation and Subsidiaries

Consolidated Statements of Shareholders’ Deficit

For the ~~Quarter~~Quarters Ended ~~June 28,~~September 27, 2023 and ~~June 29,~~September 28, 2022

(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 29, 2023		65,468	$	655	(9,076)	$	(104,443)			$	142,258						$	(41,132)			$	(42,340)		$	(45,002)
Balance, June 28, 2023																						Balance, June 28, 2023	65,708			$	657		(10,000)	$	(114,866)		$	144,506		$	(32,594)		$	(40,321)		$	(42,618)

Net income	Net income	—	—		—	—		—				8,538			—				8,538			Net income	—			—			—	—		—			7,908			—			7,908
Other comprehensive income	Other comprehensive income	—	—		—	—		—				—			2,019				2,019			Other comprehensive income	—			—			—	—		—			—			12,561			12,561

Share-based compensation on equity classified awards, net of withholding tax	Share-based compensation on equity classified awards, net of withholding tax	—	—		—	—		2,250				—			—				2,250			Share-based compensation on equity classified awards, net of withholding tax	—			—			—	—		2,887			—			—			2,887
Purchase of treasury stock, including excise tax	Purchase of treasury stock, including excise tax	—	—		(924)	(10,423)		—				—			—				(10,423)			Purchase of treasury stock, including excise tax	—			—			(1,680)	(16,536)		—			—			—			(16,536)

Issuance of common stock for share-based compensation	Issuance of common stock for share-based compensation	240	2		—	—		(2)				—			—				—			Issuance of common stock for share-based compensation	3			—			—	—		—			—			—			—

Balance, June 28, 2023		65,708	$	657	(10,000)	$	(114,866)	$	144,506			$	(32,594)		$	(40,321)			$	(42,618)
Balance, September 27, 2023																						Balance, September 27, 2023	65,711			$	657		(11,680)	$	(131,402)	$	147,393		$	(24,686)		$	(27,760)		$	(35,798)


		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 30, 2022		64,457	$	645	(2,744)	$	(42,457)			$	137,332						$	(94,586)			$	(48,689)		$	(47,755)
Balance, June 29, 2022																						Balance, June 29, 2022	64,998			$	650		(6,654)	$	(79,841)		$	138,347		$	(71,583)		$	(46,281)		$	(58,708)

Net income	Net income	—	—		—	—		—				23,003			—				23,003			Net income	—			—			—	—		—			17,083			—			17,083
Other comprehensive income	Other comprehensive income	—	—		—	—		—				—			2,408				2,408			Other comprehensive income	—			—			—	—		—			—			2,978			2,978

Share-based compensation on equity classified awards, net of withholding tax	Share-based compensation on equity classified awards, net of withholding tax	—	—		—	—		1,020				—			—				1,020			Share-based compensation on equity classified awards, net of withholding tax	—			—			—	—		1,887			—			—			1,887
Purchase of treasury stock	Purchase of treasury stock	—	—		(3,910)	(37,384)		—				—			—				(37,384)			Purchase of treasury stock	—			—			(843)	(7,870)		—			—			—			(7,870)

Issuance of common stock for share-based compensation		541	5		—	—		(5)				—			—				—

Balance, June 29, 2022		64,998	$	650	(6,654)	$	(79,841)	$	138,347			$	(71,583)		$	(46,281)			$	(58,708)

Balance, September 28, 2022																						Balance, September 28, 2022	64,998			$	650		(7,497)	$	(87,711)	$	140,234		$	(54,500)		$	(43,303)		$	(44,630)

See accompanying notes

Denny’s Corporation and Subsidiaries

Consolidated Statements of Shareholders’ Deficit

For the ~~Two~~Three Quarters Ended ~~June 28,~~September 27, 2023 and ~~June 29,~~September 28, 2022

(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, December 28, 2022	Balance, December 28, 2022	64,998	$	650	(8,270)	$	(95,476)			$	142,136						$	(41,729)			$	(42,697)		$	(37,116)	Balance, December 28, 2022		64,998			$	650			(8,270)			$	(95,476)			$	142,136			$	(41,729)			$	(42,697)	$	(37,116)

Net income	Net income	—	—		—	—		—				9,135			—				9,135			Net income	—			—				—			—			—				17,043				—				17,043
Other comprehensive income	Other comprehensive income	—	—		—	—		—				—			2,376				2,376			Other comprehensive income	—			—				—			—			—				—				14,937				14,937

Share-based compensation on equity classified awards, net of withholding tax	Share-based compensation on equity classified awards, net of withholding tax	—	—		—	—		2,377				—			—				2,377			Share-based compensation on equity classified awards, net of withholding tax	—			—				—			—			5,264				—				—				5,264
Purchase of treasury stock, including excise tax	Purchase of treasury stock, including excise tax	—	—		(1,730)	(19,390)		—				—			—				(19,390)			Purchase of treasury stock, including excise tax	—			—				(3,410)			(35,926)			—				—				—				(35,926)

Issuance of common stock for share-based compensation	Issuance of common stock for share-based compensation	710	7		—	—		(7)				—			—				—			Issuance of common stock for share-based compensation	713			7				—			—			(7)				—				—				—

Balance, June 28, 2023		65,708	$	657	(10,000)	$	(114,866)	$	144,506			$	(32,594)		$	(40,321)			$	(42,618)
Balance, September 27, 2023																						Balance, September 27, 2023	65,711			$	657			(11,680)			$	(131,402)		$	147,393			$	(24,686)			$	(27,760)			$	(35,798)


		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, December 29, 2021	Balance, December 29, 2021	64,200	$	642	(1,990)	$	(30,592)			$	135,596						$	(116,441)			$	(54,470)		$	(65,265)	Balance, December 29, 2021		64,200			$	642			(1,990)			$	(30,592)			$	135,596			$	(116,441)			$	(54,470)	$	(65,265)

Net income	Net income	—	—		—	—		—				44,858			—				44,858			Net income	—			—				—			—			—				61,941				—				61,941
Other comprehensive income	Other comprehensive income	—	—		—	—		—				—			8,189				8,189			Other comprehensive income	—			—				—			—			—				—				11,167				11,167

Share-based compensation on equity classified awards, net of withholding tax	Share-based compensation on equity classified awards, net of withholding tax	—	—		—	—		2,759				—			—				2,759			Share-based compensation on equity classified awards, net of withholding tax	—			—				—			—			4,646				—				—				4,646
Purchase of treasury stock	Purchase of treasury stock	—	—		(4,664)	(49,249)		—				—			—				(49,249)			Purchase of treasury stock	—			—				(5,507)			(57,119)			—				—				—				(57,119)

Issuance of common stock for share-based compensation	Issuance of common stock for share-based compensation	798	8		—	—		(8)				—			—				—			Issuance of common stock for share-based compensation	798			8				—			—			(8)				—				—				—

Balance, June 29, 2022		64,998	$	650	(6,654)	$	(79,841)	$	138,347			$	(71,583)		$	(46,281)			$	(58,708)
Balance, September 28, 2022																						Balance, September 28, 2022	64,998			$	650			(7,497)			$	(87,711)		$	140,234			$	(54,500)			$	(43,303)			$	(44,630)

See accompanying notes

Denny’s Corporation and Subsidiaries

Consolidated Statements of Cash Flows

(Unaudited)


		Two Quarters Ended					Three Quarters Ended
		June 28, 2023		June 29, 2022			September 27, 2023		September 28, 2022
		(In thousands)					(In thousands)
Cash flows from operating activities:	Cash flows from operating activities:					Cash flows from operating activities:
Net income	Net income	$	9,135	$	44,858	Net income	$	17,043	$	61,941
Adjustments to reconcile net income to cash flows provided by operating activities:	Adjustments to reconcile net income to cash flows provided by operating activities:					Adjustments to reconcile net income to cash flows provided by operating activities:
Depreciation and amortization	Depreciation and amortization	7,273		7,138		Depreciation and amortization	10,878		11,052
Operating (gains), losses and other charges, net	Operating (gains), losses and other charges, net	(153)		846		Operating (gains), losses and other charges, net	2,467		(1,051)
Losses (gains) and amortization on interest rate swaps, net	Losses (gains) and amortization on interest rate swaps, net	10,744		(41,924)		Losses (gains) and amortization on interest rate swaps, net	10,838		(52,678)
Amortization of deferred financing costs	Amortization of deferred financing costs	317		317		Amortization of deferred financing costs	476		475
(Gains) losses on investments	(Gains) losses on investments	(29)		223		(Gains) losses on investments	(59)		289
Losses on early termination of debt and leases		—		24
Gains on early termination of debt and leases						Gains on early termination of debt and leases	—		(29)
Deferred income tax expense	Deferred income tax expense	710		10,766		Deferred income tax expense	369		15,669
Share-based compensation expense	Share-based compensation expense	5,613		7,520		Share-based compensation expense	8,477		9,467
Changes in assets and liabilities, excluding acquisitions and dispositions:	Changes in assets and liabilities, excluding acquisitions and dispositions:					Changes in assets and liabilities, excluding acquisitions and dispositions:
Receivables	Receivables	6,760		(3,419)		Receivables	8,235		(4,788)
Inventories	Inventories	3,004		(7,148)		Inventories	3,184		(3,866)
Prepaids and other current assets	Prepaids and other current assets	2,488		3,563		Prepaids and other current assets	712		1,683
Other noncurrent assets	Other noncurrent assets	247		6,125		Other noncurrent assets	(902)		3,189
Operating lease assets and liabilities	Operating lease assets and liabilities	(359)		(466)		Operating lease assets and liabilities	(479)		(560)
Accounts payable	Accounts payable	(7,754)		(1,541)		Accounts payable	(7,079)		(3,115)
Other accrued liabilities	Other accrued liabilities	(1,646)		(11,062)		Other accrued liabilities	(1,319)		(3,483)
Other noncurrent liabilities	Other noncurrent liabilities	(699)		(6,211)		Other noncurrent liabilities	(2,073)		(9,245)
Net cash flows provided by operating activities	Net cash flows provided by operating activities	35,651		9,609		Net cash flows provided by operating activities	50,768		24,950
Cash flows from investing activities:	Cash flows from investing activities:					Cash flows from investing activities:
Capital expenditures	Capital expenditures	(3,307)		(5,771)		Capital expenditures	(5,499)		(10,146)

Acquisition of restaurant and real estate						Acquisition of restaurant and real estate	(1,227)		(750)
Acquisition of Keke's Breakfast Cafe						Acquisition of Keke's Breakfast Cafe	—		(81,500)
Initial operating lease direct costs						Initial operating lease direct costs	(400)		—
Proceeds from sales of restaurants, real estate and other assets	Proceeds from sales of restaurants, real estate and other assets	3,088		170		Proceeds from sales of restaurants, real estate and other assets	3,161		4,114
Investment purchases	Investment purchases	(1,300)		(1,200)		Investment purchases	(1,300)		(1,200)

Proceeds from sale of investments						Proceeds from sale of investments	1,850		1,700
Refund of deposits for real estate acquisitions						Refund of deposits for real estate acquisitions	—		3,624
Collections on notes receivable	Collections on notes receivable	347		126		Collections on notes receivable	391		184

Net cash flows used in investing activities	Net cash flows used in investing activities	(1,172)		(6,675)		Net cash flows used in investing activities	(3,024)		(83,974)
Cash flows from financing activities:	Cash flows from financing activities:					Cash flows from financing activities:
Revolver borrowings	Revolver borrowings	65,200		45,325		Revolver borrowings	100,300		156,325
Revolver payments	Revolver payments	(79,700)		(28,325)		Revolver payments	(113,700)		(59,825)
Repayments of finance leases	Repayments of finance leases	(938)		(1,018)		Repayments of finance leases	(1,359)		(1,513)

Tax withholding on share-based payments	Tax withholding on share-based payments	(2,999)		(4,782)		Tax withholding on share-based payments	(3,007)		(4,781)

Purchase of treasury stock	Purchase of treasury stock	(19,667)		(46,249)		Purchase of treasury stock	(35,415)		(57,460)

Net bank overdrafts	Net bank overdrafts	1,232		2,851		Net bank overdrafts	2,936		—
Net cash flows used in financing activities		(36,872)		(32,198)
Net cash flows (used in) provided by financing activities						Net cash flows (used in) provided by financing activities	(50,245)		32,746
Decrease in cash and cash equivalents	Decrease in cash and cash equivalents	(2,393)		(29,264)		Decrease in cash and cash equivalents	(2,501)		(26,278)
Cash and cash equivalents at beginning of period	Cash and cash equivalents at beginning of period	3,523		30,624		Cash and cash equivalents at beginning of period	3,523		30,624
Cash and cash equivalents at end of period	Cash and cash equivalents at end of period	$	1,130	$	1,360	Cash and cash equivalents at end of period	$	1,022	$	4,346

See accompanying notes

Denny’s Corporation and Subsidiaries

Notes to Consolidated Financial Statements

(Unaudited)

Note 1. Introduction and Basis of Presentation

Denny’s Corporation, or the Company, is one of America’s largest full-service restaurant chains based on number of restaurants. As of ~~June 28,~~September 27, 2023, the Company consisted of ~~1,646~~1,644 restaurants, ~~1,572~~1,570 of which were franchised/licensed restaurants and 74 of which were company operated.

The Company consists of the Denny’s brand ("Denny's") and the Keke’s Breakfast Café brand (“Keke’s”). Keke’s was acquired on July 20, 2022. As of ~~June 28,~~September 27, 2023, the Denny's brand consisted of ~~1,591~~1,588 restaurants, ~~1,525~~1,522 of which were franchised/licensed restaurants and 66 of which were company operated. At ~~June 28,~~September 27, 2023, the Keke's brand consisted of 5556 restaurants, 4748 of which were franchised restaurants and eight of which were company operated.

Through the current quarter ended June 28, 2023, many Denny’s restaurants have not returned to full operating hours, since closing or reducing hours in 2020 due to the COVID-19 pandemic, particularly at the late night daypart. Additionally, our restaurant operations have been negatively impacted by a tight labor market and inflated commodity costs. Our operating results substantially depend upon the sales volumes, restaurant profitability, and financial stability of our company and franchised and licensed restaurants. We cannot currently estimate the duration or future negative financial impact of these economic conditions on our business. Ongoing material adverse effects of these economic conditions for an extended period could negatively affect our business, results of operations, liquidity and financial condition and could impact our impairment assessments of accounts receivable, intangible assets, long-lived assets and goodwill.

Our unaudited consolidated financial statements have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission for interim financial information. 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 consolidated financial statements should be read in conjunction with our consolidated financial statements and notes thereto as of and for the fiscal year ended December 28, 2022 which are contained in our audited Annual Report on Form 10-K for the fiscal year ended December 28, 2022. The results of operations for the interim periods presented are not necessarily indicative of the results for the entire fiscal year ending December 27, 2023. 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 March 2020, the FASB issued ASU 2020-04, “Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting” which was later clarified in January 2021 by ASU 2021-01, “Reference Rate Reform (Topic 848): Scope”. Additionally, in December 2022, the FASB issued ASU 2022-06, “Reference Rate Reform (Topic 848): Deferral of the Sunset Date of Topic 848”, which allows ASU 2020-04 to be adopted and applied prospectively to contract modifications made on or before December 31, 2024. 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 Company adopted ASU 2020-04 on March 12, 2020. The adoption of and future elections under this new guidance did not and are not expected to have a material impact on the Company’s consolidated financial position or results of operations. The guidance is effective through December 31, 2024.

Accounting Standards to be Adopted

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 28, 2023		December 28, 2022			September 27, 2023		December 28, 2022
		(In thousands)					(In thousands)
Receivables, net:	Receivables, net:					Receivables, net:
Trade accounts receivable from franchisees	Trade accounts receivable from franchisees	$	12,908	$	13,314	Trade accounts receivable from franchisees	$	12,544	$	13,314
Other receivables from franchisees		1,486		6,731
Notes and loan receivables from franchisees						Notes and loan receivables from franchisees	486		6,731

Vendor receivables	Vendor receivables	1,768		3,466		Vendor receivables	1,677		3,466
Credit card receivables	Credit card receivables	738		896		Credit card receivables	645		896
Other	Other	1,856		1,545		Other	1,795		1,545
Allowance for doubtful accounts	Allowance for doubtful accounts	(287)		(376)		Allowance for doubtful accounts	(197)		(376)
Total receivables, net	Total receivables, net	$	18,469	$	25,576	Total receivables, net	$	16,950	$	25,576

Note 4. Goodwill and Intangible Assets

The following table reflects the changes in carrying amount of goodwill:


				June 28, 2023					September 27, 2023
				(In thousands)					(In thousands)
Balance, beginning of year	Balance, beginning of year			$	72,740	Balance, beginning of year			$	72,740

Reclassifications to assets held for sale	Reclassifications to assets held for sale			(598)		Reclassifications to assets held for sale			(598)

Balance, end of period	Balance, end of period			$	72,142	Balance, end of period			$	72,142

Goodwill by segment consisted of the following:	Goodwill by segment consisted of the following:					Goodwill by segment consisted of the following:
		June 28, 2023		December 28, 2022			September 27, 2023		December 28, 2022
		(In thousands)					(In thousands)

Denny’s	Denny’s	$	37,527	$	37,527	Denny’s	$	37,527	$	37,527
Other	Other	34,615		35,213		Other	34,615		35,213
Total goodwill	Total goodwill	$	72,142	$	72,740	Total goodwill	$	72,142	$	72,740

Intangible assets consisted of the following:


		June 28, 2023				December 28, 2022					September 27, 2023				December 28, 2022
		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	$	79,687	$	—	$	79,687	$	—	Trade names	$	79,687	$	—	$	79,687	$	—
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	9,594		5,288		10,489		5,697		Reacquired franchise rights	9,594		5,495		10,489		5,697
Franchise agreements	Franchise agreements	10,700		593		10,700		265		Franchise agreements	10,700		761		10,700		265
Intangible assets, net	Intangible assets, net	$	100,101	$	5,881	$	100,996	$	5,962	Intangible assets, net	$	100,101	$	6,256	$	100,996	$	5,962

Amortization expense for intangible assets with definite lives totaled $0.4 million and ~~$0.8~~$1.2 million for the quarter and year-to-date period ended ~~June 28,~~September 27, 2023, respectively. Amortization expense for intangible assets with definite lives totaled ~~$0.3~~$0.4 million and ~~$0.6~~$1.1 million for the quarter and year-to-date period ended ~~June 29,~~September 28, 2022, respectively.

Note 5. Other Current Liabilities

Other current liabilities consisted of the following:


		June 28, 2023		December 28, 2022			September 27, 2023		December 28, 2022
		(In thousands)					(In thousands)
Accrued payroll	Accrued payroll	$	14,458	$	17,903	Accrued payroll	$	15,313	$	17,903
Current portion of liability for insurance claims	Current portion of liability for insurance claims	3,461		3,492		Current portion of liability for insurance claims	3,448		3,492
Accrued taxes	Accrued taxes	4,497		4,452		Accrued taxes	6,068		4,452
Accrued advertising	Accrued advertising	7,590		6,069		Accrued advertising	7,906		6,069
Gift cards	Gift cards	6,212		7,675		Gift cards	5,720		7,675
Accrued legal settlements	Accrued legal settlements	5,644		5,446		Accrued legal settlements	5,708		5,446
Accrued interest	Accrued interest	4,320		1,142		Accrued interest	4,513		1,142
Other	Other	10,786		10,583		Other	10,395		10,583
Other current liabilities	Other current liabilities	$	56,968	$	56,762	Other current liabilities	$	59,071	$	56,762

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 28, 2023:
Fair value measurements as of September 27, 2023:										Fair value measurements as of September 27, 2023:
Deferred compensation plan investments (1)	Deferred compensation plan investments (1)	$	11,342	$	11,342	$	—	$	—	Deferred compensation plan investments (1)	$	11,211	$	11,211	$	—	$	—
Interest rate swaps (2)	Interest rate swaps (2)	10,597		—		10,597		—		Interest rate swaps (2)	27,324		—		27,324		—
Investments (3)	Investments (3)	3,075		—		3,075		—		Investments (3)	1,255		—		1,255		—
Total	Total	$	25,014	$	11,342	$	13,672	$	—	Total	$	39,790	$	11,211	$	28,579	$	—

Fair value measurements as of December 28, 2022:	Fair value measurements as of December 28, 2022:									Fair value measurements as of December 28, 2022:
Deferred compensation plan investments (1)	Deferred compensation plan investments (1)	$	10,818	$	10,818	$	—	$	—	Deferred compensation plan investments (1)	$	10,818	$	10,818	$	—	$	—
Interest rate swaps (2)	Interest rate swaps (2)	20,047		—		20,047		—		Interest rate swaps (2)	20,047		—		20,047		—
Investments (3)	Investments (3)	1,746		—		1,746		—		Investments (3)	1,746		—		1,746		—
Total	Total	$	32,611	$	10,818	$	21,793	$	—	Total	$	32,611	$	10,818	$	21,793	$	—

(1) The fair values of our deferred compensation plan investments are based on the closing market prices of the elected investments and are included in other noncurrent assets in our Consolidated Balance Sheets.

(2) The fair values of our interest rate swaps are based upon Level 2 inputs, which include valuation models. The key inputs for the valuation models are quoted market prices, interest rates, forward yield curves and credit risk adjustments that are necessary to reflect the probability of default by the counterparty or us. For disclosures about the fair value measurements of our derivative instruments, see Note 7.

(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 non-recurring basis are summarized below:


		Significant Unobservable Inputs (Level 3)		Impairment Charges for the Quarter Ended September 27, 2023
		(In thousands)
Fair value measurements as of September 27, 2023:
Assets held and used (1)		$	—	$	1,711

(1)	As of September 27, 2023, 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, goodwill and intangible assets. During the quarter and year-to-date period ended ~~June 28,~~September 27, 2023, we recognized impairment charges of ~~$0.1~~$1.7 million and $1.8 million, respectively, related to certain of these assets. See Note 9.

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

Note 7. Long-Term Debt

The Company and certain of its subsidiaries have a credit facility consisting of a five-year $400 million senior secured revolver (with a $25 million letter of credit sublimit). The maturity date for the credit facility is August 26, 2026. The credit facility includes an accordion feature that would allow us to increase the size of the facility to $450 million. Borrowings bear a tiered interest rate, which is based on the Company's consolidated leverage ratio. ~~During the quarter ended June 28,~~On March 31, 2023, the credit facility was amended to change the benchmark interest rate from LIBOR to Adjusted Daily Simple SOFR.

The credit facility is available for working capital, capital expenditures and other general corporate purposes. The credit facility is guaranteed by the Company and its material subsidiaries and is secured by assets of the Company and its subsidiaries, including the stock of its subsidiaries (other than its insurance captive subsidiary). It includes negative covenants that are usual for facilities and transactions of this type. The credit facility also includes certain financial covenants with respect to a maximum consolidated leverage ratio and a minimum consolidated fixed charge coverage ratio. We were in compliance with all financial covenants as of ~~June 28,~~September 27, 2023.

As of ~~June 28,~~September 27, 2023, we had outstanding revolver loans of ~~$247.0~~$248.1 million and outstanding letters of credit under the credit facility of ~~$12.3~~$11.5 million. These balances resulted in unused commitments of ~~$140.7~~$140.4 million as of ~~June 28,~~September 27, 2023 under the credit facility.

As of ~~June 28,~~September 27, 2023, borrowings under the credit facility bore interest at a rate of Adjusted Daily Simple SOFR plus 2.25%. Letters of credit under the credit facility bore interest at a rate of 2.38%. The commitment fee, paid on the unused portion of the credit facility, was set to 0.35%.

Prior to considering the impact of our interest rate swaps, described below, the weighted-average interest rate on outstanding revolver loans was ~~7.40%~~7.66% and 6.37% as of ~~June 28,~~September 27, 2023 and December 28, 2022, 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 ~~5.26%~~5.28% and 5.31% as of ~~June 28,~~September 27, 2023 and December 28, 2022, respectively.

Interest Rate Hedges

We have receive-variable, pay-fixed interest rate swaps to hedge the forecasted cash flows of our floating rate debt. A summary of our interest rate swaps as of ~~June 28,~~September 27, 2023 is as follows:


Trade Date	Trade Date	Effective Date	Maturity Date	Notional Amount			Fair Value		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										Swaps designated as cash flow hedges
March 20, 2015	March 20, 2015	March 29, 2018	March 31, 2025	$	120,000		$	4,814	2.34	%	March 20, 2015	March 29, 2018	March 31, 2025	$	120,000		$	4,937	2.34	%
October 1, 2015	October 1, 2015	March 29, 2018	March 31, 2026	$	50,000		$	2,417	2.37	%	October 1, 2015	March 29, 2018	March 31, 2026	$	50,000		$	2,851	2.37	%
February 15, 2018	February 15, 2018	March 31, 2020	December 31, 2033	$	26,000	(1)	$	3,366	3.09	%	February 15, 2018	March 31, 2020	December 31, 2033	$	31,000	(1)	$	19,536	3.09	%
Total	Total			$	196,000		$	10,597			Total			$	201,000		$	27,324

(1) The notional amounts of the swaps entered into on February 15, 2018 increase periodically until they reach the maximum notional amount of $335 million on August 31, 2033.

On March 31, 2023, the Company entered into amendments of its credit facility and interest rate swaps. The amendments transition our credit facility and interest rate swap benchmark interest rates from LIBOR to Adjusted Daily Simple SOFR, as such the fixed ~~rate~~rates in the table above ~~has~~have been adjusted to the appropriate fixed ~~rate.~~rates. The conversion to Adjusted Daily Simple SOFR did not have a material impact on the Company's consolidated financial position or results of operations.

Termination and Designation of Certain Interest Rate Swaps

During the quarter ended March 29, 2023, we terminated a portion of our hedging relationship entered into in 2018 (“2018 Swaps”), reducing the previous maximum notional amount of $425 million on August 31, 2033 to $335 million. As a result, we expect our total swaps to approximate 80% of our outstanding debt prospectively. We received $1.5 million of cash as a result of the termination which is recorded as a component of operating activities in our Consolidated ~~Statements~~Statement of Cash ~~Flow~~Flows for the year-to-date period ended ~~June 28,~~September 27, 2023.

In addition, during the quarter ended March 29, 2023, we designated the remaining 2018 Swaps as cash flow hedges of our exposure to variability in future cash flows attributable to variable rate interest payments due on forecasted notional amounts.

Changes in Fair Value of Interest Rate Swaps

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). Our interest rate swaps are designated as cash flow hedges with unrealized gains and losses recorded as a component of accumulated other comprehensive loss, net.

As of ~~June 28,~~September 27, 2023, the fair value of the swaps designated as cash flow hedges was an asset of ~~$10.6~~$27.3 million, recorded as a component of other noncurrent assets. The designated swaps have an offsetting amount (before taxes) recorded as a component of accumulated other comprehensive loss, net in our Consolidated Balance Sheets. See Note 13 for amounts recorded in accumulated other comprehensive loss related to interest rate swaps. We expect to reclassify ~~$5.3~~$5.9 million from accumulated other comprehensive loss, net as a reduction to interest expense, net in our Consolidated Statements of Operations related to swaps designated as cash flow hedges during the next 12 months.

For the periods prior to their designation as cash flow hedges, changes in the fair value of the 2018 Swaps were recorded as a component of other nonoperating expense (income), net in our Consolidated Statements of Operations. For the year-to-date period ended ~~June 28,~~September 27, 2023, we recorded expense of $10.6 million, and for the quarter and year-to-date period ended ~~June 29,~~September 28, 2022, we recorded income of ~~$21.7~~$10.8 million and ~~$41.9~~$52.7 million, respectively, as a component of other nonoperating expense (income), net related to the 2018 Swaps resulting from changes in fair value.

Amortization of Certain Amounts Included in Accumulated Other Comprehensive Loss, Net

At ~~June 28,~~September 27, 2023, we had a total of ~~$64.4~~$64.3 million (before taxes) included in accumulated other comprehensive loss, net related to i) the discontinuance of hedge accounting treatment related to certain cash flow hedges in prior years and ii) the fair value of certain swaps at the date of designation as cash flow hedges that are being amortized into our Consolidated Statements of Operations as a component of interest expense, net over the remaining term of the related swap.

For the quarter and year-to-date period ended ~~June 28,~~September 27, 2023, we recorded unrealized losses of $0.1 million and $0.2 million, respectively, to interest expense, net. For the quarter and year-to-date period ended ~~June 29,~~September 28, 2022, we recorded unrealized losses of less than $0.1 million to interest expense, net. We expect to amortize ~~$0.5~~$0.6 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.

Note 8. Revenues

The following table disaggregates our revenue by sales channel and type of good or service:


		Quarter Ended				Two Quarters Ended					Quarter Ended				Three Quarters Ended
		June 28, 2023		June 29, 2022		June 28, 2023		June 29, 2022			September 27, 2023		September 28, 2022		September 27, 2023		September 28, 2022
		(In thousands)									(In thousands)
Company restaurant sales	Company restaurant sales	$	54,881	$	49,167	$	108,333	$	93,143	Company restaurant sales	$	53,153	$	52,211	$	161,486	$	145,354
Franchise and license revenue:	Franchise and license revenue:									Franchise and license revenue:
Royalties	Royalties	30,376		28,759		60,403		55,284		Royalties	29,703		28,992		90,106		84,276
Advertising revenue	Advertising revenue	19,853		19,486		39,521		37,692		Advertising revenue	19,297		18,950		58,818		56,642
Initial and other fees	Initial and other fees	2,616		7,779		7,606		12,286		Initial and other fees	3,388		7,749		10,994		20,035
Occupancy revenue	Occupancy revenue	9,189		9,826		18,523		19,719		Occupancy revenue	8,642		9,554		27,165		29,273
Franchise and license revenue	Franchise and license revenue	62,034		65,850		126,053		124,981		Franchise and license revenue	61,030		65,245		187,083		190,226
Total operating revenue	Total operating revenue	$	116,915	$	115,017	$	234,386	$	218,124	Total operating revenue	$	114,183	$	117,456	$	348,569	$	335,580

Franchise occupancy revenue consisted of the following:


		Quarter Ended				Two Quarters Ended					Quarter Ended				Three Quarters Ended
		June 28, 2023		June 29, 2022		June 28, 2023		June 29, 2022			September 27, 2023		September 28, 2022		September 27, 2023		September 28, 2022
		(In thousands)									(In thousands)
Operating lease revenue	Operating lease revenue	$	6,683	$	7,253	$	13,554	$	14,671	Operating lease revenue	$	6,461	$	7,074	$	20,015	$	21,745
Variable lease revenue	Variable lease revenue	2,506		2,573		4,969		5,048		Variable lease revenue	2,181		2,480		7,150		7,528
Total occupancy revenue	Total occupancy revenue	$	9,189	$	9,826	$	18,523	$	19,719	Total occupancy revenue	$	8,642	$	9,554	$	27,165	$	29,273

Balances related to contracts with customers ~~consists~~consist of receivables, contract assets, 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 will begin amortizing into revenue when the related restaurants are opened. 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 28, 2022	$	20,751
Fees received from franchisees	~~990~~1,243

Revenue recognized (1)	~~(1,608)~~(2,387)
Balance, ~~June 28,~~September 27, 2023	~~20,133~~19,607
Less current portion included in other current liabilities	~~2,204~~2,179
Deferred franchise revenue included in other noncurrent liabilities	$	~~17,929~~17,428

(1) Of this amount ~~$1.4~~$2.0 million was included in the deferred franchise revenue balance as of December 28, 2022.

We record contract assets related to incentives and subsidies provided to franchisees related to new unit openings and/or equipment upgrades. These amounts will be recognized as a component of franchise and license revenue over the remaining term of the related franchise agreements.

The components of the change in contract assets are as follows:


	(In thousands)
Balance, December 28, 2022	$	5,361
Franchisee deferred costs	~~1,103~~2,371
Contract asset amortization	~~(740)~~(1,032)
Balance, ~~June 28,~~September 27, 2023	~~5,724~~6,700
Less current portion included in other current assets	~~915~~1,016
Contract assets included in other noncurrent assets	$	~~4,809~~5,684

The Company purchases equipment related to various programs for franchise restaurants, including kitchen and point-of-sale system equipment. We bill our franchisees and recognize revenue when the related equipment is installed, less amounts contributed from the Company, which have been deferred as contract assets in the table above. We recognized ~~$0.5~~$1.7 million and ~~$2.9~~$4.6 million of revenue, recorded as a component of initial and other fees, related to the sale of equipment to franchisees during the quarter and year-to-date period ended ~~June 28,~~September 27, 2023, respectively. We recognized $5.8 million and ~~for~~$13.8 million of revenue, recorded as a component of initial and other fees, related to the sale of equipment to franchisees during the quarter and year-to-date period ended ~~June 29,~~September 28, 2022, ~~we recognized $5.7 million and $7.9 million of revenue,~~ respectively. As of ~~June 28,~~September 27, 2023, we had ~~$1.0~~$0.8 million in inventory and ~~$1.5~~$0.6 million in receivables related to the purchased equipment. As of December 28, 2022, we had $3.6 million in inventory and $6.6 million in receivables related to the kitchen equipment rollout.

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 28,~~September 27, 2023 and December 28, 2022 was ~~$6.2~~$5.7 million and $7.7 million, respectively. During the year-to-date period ended ~~June 28,~~September 27, 2023, we recognized revenue of ~~$0.3~~$0.4 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
June 28, 2023 June 29, 2022 June 28, 2023 June 29, 2022
(In thousands)
Gains on sales of assets and other, net $ (522) $ (99) $ (2,044) $ (245)
Restructuring charges and exit costs 1,698 679 1,762 825
Impairment charges — 266 129 266
Operating (gains), losses and other charges, net $ 1,176 $ 846 $ (153) $ 846


	Quarter Ended				Three Quarters Ended
	September 27, 2023		September 28, 2022		September 27, 2023		September 28, 2022
	(In thousands)
Gains on sales of assets and other, net	$	(88)	$	(3,066)	$	(2,132)	$	(3,311)
Restructuring charges and exit costs	997		472		2,759		1,297
Impairment charges	1,711		697		1,840		963
Operating (gains), losses and other charges, net	$	2,620	$	(1,897)	$	2,467	$	(1,051)

~~We recorded impairment charges of $0.1 million related to property for~~

During the year-to-date period ended ~~June~~September 27, 2023, gains on sales of assets and other, net were primarily related to the sale of three parcels of real estate. During the quarter and year-to-date period ended September 28, ~~2023, resulting from~~2022, gains on sales of assets ~~being classified as held for sale.~~ and other, net were primarily related to the sale of two parcels of real estate.

As of ~~June 28,~~September 27, 2023, we had recorded assets held for sale at the lesser of the carrying value or fair value amount of $1.6 million (consisting of property of $0.9 million, goodwill of $0.6 million and other assets of $0.1 million) related to one parcel of real estate and three Keke's restaurants. As of December 28, 2022, we had recorded assets held for sale at their carrying amount of $1.4 million (consisting of property of $1.1 million and other assets of $0.3 million) related to four parcels of real estate.

Restructuring charges and exit costs consisted of the following:


		Quarter Ended				Two Quarters Ended					Quarter Ended				Three Quarters Ended
		June 28, 2023		June 29, 2022		June 28, 2023		June 29, 2022			September 27, 2023		September 28, 2022		September 27, 2023		September 28, 2022
		(In thousands)									(In thousands)
Exit costs	Exit costs	$	52	$	38	$	52	$	50	Exit costs	$	12	$	38	$	64	$	88
Severance and other restructuring charges	Severance and other restructuring charges	1,646		641		1,710		775		Severance and other restructuring charges	985		434		2,695		1,209
Total restructuring charges and exit costs	Total restructuring charges and exit costs	$	1,698	$	679	$	1,762	$	825	Total restructuring charges and exit costs	$	997	$	472	$	2,759	$	1,297

Exit costs primarily consist of costs related to closed restaurants. Exit cost liabilities related to lease costs are included as a component of operating lease liabilities in our Consolidated Balance Sheets.

As of ~~June 28,~~September 27, 2023 and December 28, 2022, we had accrued severance and other restructuring charges of ~~$1.8~~$2.1 million and $0.7 million, respectively. The balance as of ~~June 28,~~September 27, 2023 is expected to be paid primarily during the next 12 months.

We recorded impairment charges of $1.7 million and $1.8 million related to property and right-of-use assets for the quarter and year-to-date period ended September 27, 2023, respectively, resulting from our assessment of underperforming restaurants and assets being classified as held for sale. The $1.7 million included $0.9 million related to property and $0.8 million related to operating lease right-of-use assets. The $1.8 million included $1.0 million related to property and $0.8 million related to operating lease right-of-use assets.

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				Three Quarters Ended
		June 28, 2023		June 29, 2022		June 28, 2023		June 29, 2022			September 27, 2023		September 28, 2022		September 27, 2023		September 28, 2022
		(In thousands)									(In thousands)
Employee share awards	Employee share awards	$	2,287	$	3,284	$	5,134	$	7,078	Employee share awards	$	2,659	$	1,706	$	7,793	$	8,784
Restricted stock units for board members	Restricted stock units for board members	232		221		479		442		Restricted stock units for board members	205		241		684		683
Total share-based compensation	Total share-based compensation	$	2,519	$	3,505	$	5,613	$	7,520	Total share-based compensation	$	2,864	$	1,947	$	8,477	$	9,467

Employee Share Awards

During the year-to-date period ended ~~June 28,~~September 27, 2023, we granted certain employees 0.3 million performance share units ("PSUs") with a weighted average grant date fair value of $18.39 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 and 0.3 million PSUs with a weighted average grant date fair value of $11.90 per share that vest based on our Adjusted EPS growth rate versus plan, as defined under the terms of the award. As the TSR based PSUs 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 29, 2022 and ending December 31, 2025. The PSUs will ~~completely~~ vest and be earned at the end of the performance period at which point the relative TSR and Adjusted EPS growth rate achievement percentages will be applied to the vested units (from 0% to 200% of the target award). We recognize compensation cost associated with 0.5 million of these PSU awards over the entire performance period on a straight-line basis, with compensation cost for the remaining 0.1 million PSU awards recognized on a graded-vesting basis due to the accelerated vesting terms for certain retirement eligible individuals.

During the year-to-date period ended ~~June 28,~~September 27, 2023, we also granted certain employees 0.7 million restricted stock units ("RSUs") with a weighted average grant date fair value of $11.83 per share. These RSUs generally vest evenly over the three-year fiscal period beginning December 29, 2022 and ending December 31, 2025. We recognize compensation cost associated with these RSU awards on a straight-line basis over the entire performance period of the award.

During the year-to-date period ended ~~June 28,~~September 27, 2023, we issued 0.5 million shares of common stock related to vested PSUs and RSUs. In addition, 0.3 million shares of common stock were withheld in lieu of taxes related to vested PSUs and RSUs.

As of ~~June 28,~~September 27, 2023, we had ~~$19.5~~$16.3 million of unrecognized compensation cost related to unvested PSU awards and RSU awards outstanding, which have a weighted average remaining contractual term of ~~2.1~~1.9 years.

Restricted Stock Units for Board Members

During the ~~quarter and~~ year-to-date period ended ~~June 28,~~September 27, 2023, we granted less than 0.1 million RSUs (which are equity classified) with a grant date fair value of $10.71 per unit to non-employee members of our Board of Directors. The RSUs vest after a one year service period. A director may elect to convert these awards into shares of common stock either on a specific date in the future (while still serving as a member of our Board of Directors), upon termination as a member of our Board of Directors, or in three equal annual installments commencing after termination of service as a member of our Board of Directors.

During the ~~quarter and~~ year-to-date period ended ~~June 28,~~September 27, 2023, 0.2 million RSUs were converted into shares of common stock.

As of ~~June 28,~~September 27, 2023, we had ~~$0.7~~$0.5 million of unrecognized compensation cost related to unvested RSU awards outstanding, which have a weighted average remaining contractual term of ~~0.9~~0.6 years.

Note 11. Income Taxes

The effective income tax rate was ~~23.8%~~17.6% for the quarter and ~~28.3%~~23.7% for the year-to-date period ended ~~June 28,~~September 27, 2023, compared to ~~25.3%~~24.3% and ~~26.2%~~25.7% for the prior year periods, respectively. The effective income tax rate for the quarter and year-to-date period ended ~~June 28,~~September 27, 2023 included discrete items relating to share-based compensation of ~~(3.9)~~(2.5)% and ~~2.5%~~0.4%, respectively.

Note 12. Net Income Per Share

The amounts used for the basic and diluted net income per share calculations are summarized below:


		Quarter Ended				Two Quarters Ended					Quarter Ended				Three Quarters Ended
		June 28, 2023		June 29, 2022		June 28, 2023		June 29, 2022			September 27, 2023		September 28, 2022		September 27, 2023		September 28, 2022
		(In thousands, except per share amounts)									(In thousands, except per share amounts)
Net income	Net income	$	8,538	$	23,003	$	9,135	$	44,858	Net income	$	7,908	$	17,083	$	17,043	$	61,941

Weighted average shares outstanding - basic	Weighted average shares outstanding - basic	56,787		62,306		57,212		62,822		Weighted average shares outstanding - basic	55,869		59,020		56,764		61,558
Effect of dilutive share-based compensation awards	Effect of dilutive share-based compensation awards	264		124		211		181		Effect of dilutive share-based compensation awards	213		20		209		128
Weighted average shares outstanding - diluted	Weighted average shares outstanding - diluted	57,051		62,430		57,423		63,003		Weighted average shares outstanding - diluted	56,082		59,040		56,973		61,686

Net income per share - basic	Net income per share - basic	$	0.15	$	0.37	$	0.16	$	0.71	Net income per share - basic	$	0.14	$	0.29	$	0.30	$	1.01
Net income per share - diluted	Net income per share - diluted	$	0.15	$	0.37	$	0.16	$	0.71	Net income per share - diluted	$	0.14	$	0.29	$	0.30	$	1.00

Anti-dilutive share-based compensation awards	Anti-dilutive share-based compensation awards	—		740		814		785		Anti-dilutive share-based compensation awards	735		641		788		737

Note 13. Shareholders' Deficit

Share Repurchases

Our credit facility permits the repurchase of the Company's stock and the payment of cash dividends subject to certain limitations. Our Board of Directors approves share repurchases of our common stock. Under these authorizations, we may, from time to time, purchase shares in the open market (including pre-arranged stock trading plans in accordance with the guidelines specified in Rule 10b5-1 under the Securities Exchange Act of 1934, as amended) or in privately negotiated transactions, subject to market and business conditions. Currently, we are operating under a $250 million share repurchase authorization approved by the Board of Directors in December 2019.

During the year-to-date period ended ~~June 28,~~September 27, 2023, we repurchased a total of ~~1.7~~3.4 million shares of our common stock for ~~$19.4~~$35.9 million, including excise ~~taxes, under the current authorization.~~taxes. This brings the total amount repurchased under the current authorization to ~~$116.9~~$133.4 million, leaving ~~$133.1~~$116.6 million that can be used to repurchase our common stock under this authorization as of ~~June 28,~~September 27, 2023. Repurchased shares are included as treasury stock in our Consolidated Balance Sheets and our Consolidated Statements of Shareholders' Deficit.

As of ~~June 28,~~September 27, 2023, ~~10.0~~11.7 million shares were held in treasury stock.

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			Defined Benefit Plans		Derivatives		Accumulated Other Comprehensive Loss, Net
		(In thousands)							(In thousands)
Balance as of December 28, 2022	Balance as of December 28, 2022	$	(555)	$	(42,142)	$	(42,697)	Balance as of December 28, 2022	$	(555)	$	(42,142)	$	(42,697)

Amortization of net loss (1)	Amortization of net loss (1)	103		—		103		Amortization of net loss (1)	116		—		116

Changes in the fair value of cash flow hedges	Changes in the fair value of cash flow hedges	—		5,108		5,108		Changes in the fair value of cash flow hedges	—		23,221		23,221
Reclassification of cash flow hedges to interest expense, net (2)	Reclassification of cash flow hedges to interest expense, net (2)	—		(2,165)		(2,165)		Reclassification of cash flow hedges to interest expense, net (2)	—		(3,551)		(3,551)

Amortization of unrealized losses related to interest rate swaps to interest expense, net	Amortization of unrealized losses related to interest rate swaps to interest expense, net	—		138		138		Amortization of unrealized losses related to interest rate swaps to interest expense, net	—		232		232
Income tax expense related to items of other comprehensive income (loss)	Income tax expense related to items of other comprehensive income (loss)	(26)		(782)		(808)		Income tax expense related to items of other comprehensive income (loss)	(30)		(5,051)		(5,081)
Balance as of June 28, 2023		$	(478)	$	(39,843)	$	(40,321)
Balance as of September 27, 2023								Balance as of September 27, 2023	$	(469)	$	(27,291)	$	(27,760)

(1) Before-tax 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 Consolidated Statements of Operations during the year-to-date period ended ~~June 28,~~September 27, 2023.

(2) Amounts reclassified from accumulated other comprehensive loss, net into interest expense, net in our Consolidated Statements of Operations represent payments either (received from) or made to the counterparty for the interest rate hedges. See Note 7 for additional details.

Note 14. Commitments and Contingencies

Legal Proceedings

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					Three Quarters Ended
		June 28, 2023		June 29, 2022			September 27, 2023		September 28, 2022
		(In thousands)					(In thousands)
Income taxes paid, net	Income taxes paid, net	$	3,910	$	4,644	Income taxes paid, net	$	6,531	$	6,161
Interest paid	Interest paid	$	5,372	$	5,617	Interest paid	$	9,346	$	9,117

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

Business acquisition payable						Business acquisition payable	$	—	$	1,000
Accrued purchase of property						Accrued purchase of property	$	102	$	—
Issuance of common stock, pursuant to share-based compensation plans	Issuance of common stock, pursuant to share-based compensation plans	$	5,612	$	9,547	Issuance of common stock, pursuant to share-based compensation plans	$	5,638	$	9,547
Receipt of real estate receivable	Receipt of real estate receivable	$	—	$	3,000	Receipt of real estate receivable	$	—	$	3,000
Execution of finance leases	Execution of finance leases	$	496	$	311	Execution of finance leases	$	593	$	506
Treasury stock payable	Treasury stock payable	$	265	$	3,633	Treasury stock payable	$	1,053	$	292

Note 16. Segment Information

We manage our business by brand and as a result have identified two operating segments, Denny’s and Keke’s. In addition, we have identified Denny’s as a reportable segment. The Denny’s reportable segment includes the results of all company and franchised and licensed Denny’s restaurants. Our Keke’s operating segment, which includes the results of all company and franchised Keke's restaurants, is included in Other.

The primary sources of revenues for all operating segments are the sale of food and beverages at our company restaurants and the collection of royalties, advertising revenue, initial and other fees, including occupancy revenue, from restaurants operated by our franchisees. We do not rely on any major customer as a source of sales and the customers and assets of all operating segments are located predominantly in the United States. There are no material transactions between segments.

Management’s measure of segment income is restaurant-level operating margin. The Company defines restaurant-level operating margin as operating income excluding the following three items: general and administrative expenses, depreciation and amortization, and operating (gains), losses and other charges, net. The Company excludes general and administrative expenses, which include primarily non restaurant-level costs associated with support of company and franchised restaurants and other activities at their corporate office. The Company excludes depreciation and amortization expense, substantially all of which is related to company restaurant-level assets, because such expenses represent historical sunk costs which do not reflect current cash outlays for the restaurants. The Company excludes operating (gains), losses and other charges, net, to provide a clearer perspective of its ongoing operating performance. Restaurant-level operating margin is used by our chief operating decision maker (“CODM”) to evaluate restaurant-level operating efficiency and performance.

The following tables present revenues by segment and a reconciliation of restaurant-level operating margin to ~~operating~~net income:


		Quarter Ended				Two Quarters Ended					Quarter Ended				Three Quarters Ended
		June 28, 2023		June 29, 2022		June 28, 2023		June 29, 2022			September 27, 2023		September 28, 2022		September 27, 2023		September 28, 2022
Revenues by operating segment:	Revenues by operating segment:	(In thousands)								Revenues by operating segment:	(In thousands)
Denny’s	Denny’s	$	111,586	$	115,017	$	223,816	$	218,124	Denny’s	$	109,136	$	113,725	$	332,952	$	331,849
Other	Other	5,329		—		10,570		—		Other	5,047		3,731		15,617		3,731
Total operating revenue	Total operating revenue	$	116,915	$	115,017	$	234,386	$	218,124	Total operating revenue	$	114,183	$	117,456	$	348,569	$	335,580

Segment income:	Segment income:									Segment income:
Denny’s	Denny’s	$	37,941	$	34,924	$	74,581	$	68,737	Denny’s	$	36,944	$	33,227	$	111,525	$	101,964
Other	Other	1,946		—		3,898		—		Other	1,536		1,199		5,434		1,199
Total restaurant-level operating margin	Total restaurant-level operating margin	$	39,887	$	34,924	$	78,479	$	68,737	Total restaurant-level operating margin	$	38,480	$	34,426	$	116,959	$	103,163

General and administrative expenses	General and administrative expenses	$	20,160	$	16,623	$	40,278	$	33,581	General and administrative expenses	$	18,237	$	16,607	$	58,515	$	50,188
Depreciation and amortization	Depreciation and amortization	3,617		3,590		7,273		7,138		Depreciation and amortization	3,605		3,914		10,878		11,052
Operating (gains), losses and other charges, net	Operating (gains), losses and other charges, net	1,176		846		(153)		846		Operating (gains), losses and other charges, net	2,620		(1,897)		2,467		(1,051)
Total other operating expenses	Total other operating expenses	24,953		21,059		47,398		41,565		Total other operating expenses	24,462		18,624		71,860		60,189
Operating income	Operating income	14,934		13,865		31,081		27,172		Operating income	14,018		15,802		45,099		42,974
Interest expense, net	Interest expense, net	4,402		2,878		8,907		5,838		Interest expense, net	4,381		3,691		13,288		9,529
Other nonoperating expense (income), net	Other nonoperating expense (income), net	(666)		(19,795)		9,427		(39,410)		Other nonoperating expense (income), net	43		(10,461)		9,470		(49,871)
Income before income taxes	Income before income taxes	11,198		30,782		12,747		60,744		Income before income taxes	9,594		22,572		22,341		83,316
Provision for income taxes	Provision for income taxes	2,660		7,779		3,612		15,886		Provision for income taxes	1,686		5,489		5,298		21,375
Net income	Net income	$	8,538	$	23,003	$	9,135	$	44,858	Net income	$	7,908	$	17,083	$	17,043	$	61,941

June 28, 2023 December 28, 2022
Segment assets: (In thousands)
Denny’s $ 362,443 $ 394,051
Other 103,182 104,284
Total assets $ 465,625 $ 498,335


	September 27, 2023		December 28, 2022
Segment assets:	(In thousands)
Denny’s	$	376,123	$	394,051
Other	103,712		104,284
Total assets	$	479,835	$	498,335

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

The following Management’s Discussion and Analysis of Financial Condition and Results of Operations ("MD&A") should be read in conjunction with our Consolidated Financial Statements and the notes thereto that appear elsewhere in this report and the MD&A contained in our Annual Report on Form 10-K for the fiscal year ended December 28, 2022.

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 of 1933, as amended and Section 21E of the Securities Exchange Act of 1934, as amended (the "Exchange Act"). 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: economic, public health and political conditions that impact consumer confidence and spending; commodity and labor inflation; the ability to effectively staff ~~restaurants;~~restaurants and support personnel; our ability to maintain adequate levels of liquidity for our cash needs, including debt obligations, payment of dividends, planned share repurchases and capital expenditures as well as the ability of our customers, suppliers, franchisees and lenders to access sources of liquidity to provide for their own cash needs; competitive pressures from within the restaurant industry; our ability to integrate and derive the expected benefits from our acquisition of Keke's; 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 and geopolitical events (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 fiscal year ended December 28, 2022 and in the Company's subsequent quarterly reports on Form 10-Q.

~~Acquisition of Keke's~~Overview

~~On July 20, 2022,~~We manage our business by brand and as a result have identified two operating segments, Denny’s and Keke’s. As of September 27, 2023, the ~~Company completed its acquisition~~Denny's brand consisted of ~~Keke's.~~1,588 restaurants, 1,522 of which were franchised/licensed restaurants and 66 of which were company operated. At ~~June 28,~~September 27, 2023, the Keke's brand consisted of 5556 restaurants, 4748 of which were franchised restaurants and eight of which were company operated. ~~For further details, refer to Note 3 to our Consolidated Financial Statements in Part IV, Item 15~~

In addition, we have identified Denny’s as a reportable segment. The Denny’s reportable segment includes the results of ~~our Form 10-K~~all company and franchised and licensed Denny’s restaurants. We completed the acquisition of Keke's on July 20, 2022. Total revenues at Keke’s for the ~~fiscal year~~quarter and three quarters ended ~~December 28, 2022.~~September 27, 2023 represented less than 5% of total consolidated revenues, therefore, the Keke’s operating segment is included in Other for segment reporting purposes.

Information discussed in Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations relates to the Denny’s brand unless otherwise noted.

Statements of Operations

The following table contains information derived from our 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								Three Quarters Ended
		June 28, 2023				June 29, 2022				June 28, 2023				June 29, 2022					September 27, 2023				September 28, 2022				September 27, 2023				September 28, 2022
		(In thousands)																	(In thousands)
Revenue:	Revenue:																	Revenue:
Company restaurant sales	Company restaurant sales	$	54,881	46.9	%	$	49,167	42.7	%	$	108,333	46.2	%	$	93,143	42.7	%	Company restaurant sales	$	53,153	46.6	%	$	52,211	44.5	%	$	161,486	46.3	%	$	145,354	43.3	%
Franchise and license revenue	Franchise and license revenue	62,034		53.1	%	65,850		57.3	%	126,053		53.8	%	124,981		57.3	%	Franchise and license revenue	61,030		53.4	%	65,245		55.5	%	187,083		53.7	%	190,226		56.7	%
Total operating revenue	Total operating revenue	116,915		100.0	%	115,017		100.0	%	234,386		100.0	%	218,124		100.0	%	Total operating revenue	114,183		100.0	%	117,456		100.0	%	348,569		100.0	%	335,580		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	14,170		25.8	%	13,168		26.8	%	28,209		26.0	%	24,412		26.2	%	Product costs	13,587		25.6	%	14,462		27.7	%	41,796		25.9	%	38,874		26.7	%
Payroll and benefits	Payroll and benefits	20,488		37.3	%	18,336		37.3	%	40,728		37.6	%	35,422		38.0	%	Payroll and benefits	19,754		37.2	%	20,176		38.6	%	60,482		37.5	%	55,598		38.3	%
Occupancy	Occupancy	4,105		7.5	%	3,782		7.7	%	8,199		7.6	%	7,022		7.5	%	Occupancy	4,182		7.9	%	4,294		8.2	%	12,381		7.7	%	11,316		7.8	%
Other operating expenses	Other operating expenses	7,805		14.2	%	9,542		19.4	%	15,924		14.7	%	16,597		17.8	%	Other operating expenses	8,370		15.7	%	9,519		18.2	%	24,294		15.0	%	26,116		18.0	%
Total costs of company restaurant sales, excluding depreciation and amortization	Total costs of company restaurant sales, excluding depreciation and amortization	46,568		84.9	%	44,828		91.2	%	93,060		85.9	%	83,453		89.6	%	Total costs of company restaurant sales, excluding depreciation and amortization	45,893		86.3	%	48,451		92.8	%	138,953		86.0	%	131,904		90.7	%
Costs of franchise and license revenue, excluding depreciation and amortization (a)	Costs of franchise and license revenue, excluding depreciation and amortization (a)	30,460		49.1	%	35,265		53.6	%	62,847		49.9	%	65,934		52.8	%	Costs of franchise and license revenue, excluding depreciation and amortization (a)	29,810		48.8	%	34,579		53.0	%	92,657		49.5	%	100,513		52.8	%
General and administrative expenses	General and administrative expenses	20,160		17.2	%	16,623		14.5	%	40,278		17.2	%	33,581		15.4	%	General and administrative expenses	18,237		16.0	%	16,607		14.1	%	58,515		16.8	%	50,188		15.0	%
Depreciation and amortization	Depreciation and amortization	3,617		3.1	%	3,590		3.1	%	7,273		3.1	%	7,138		3.3	%	Depreciation and amortization	3,605		3.2	%	3,914		3.3	%	10,878		3.1	%	11,052		3.3	%
Operating (gains), losses and other charges, net	Operating (gains), losses and other charges, net	1,176		1.0	%	846		0.7	%	(153)		(0.1)	%	846		0.4	%	Operating (gains), losses and other charges, net	2,620		2.3	%	(1,897)		(1.6)	%	2,467		0.7	%	(1,051)		(0.3)	%
Total operating costs and expenses, net	Total operating costs and expenses, net	101,981		87.2	%	101,152		87.9	%	203,305		86.7	%	190,952		87.5	%	Total operating costs and expenses, net	100,165		87.7	%	101,654		86.5	%	303,470		87.1	%	292,606		87.2	%
Operating income	Operating income	14,934		12.8	%	13,865		12.1	%	31,081		13.3	%	27,172		12.5	%	Operating income	14,018		12.3	%	15,802		13.5	%	45,099		12.9	%	42,974		12.8	%
Interest expense, net	Interest expense, net	4,402		3.8	%	2,878		2.5	%	8,907		3.8	%	5,838		2.7	%	Interest expense, net	4,381		3.8	%	3,691		3.1	%	13,288		3.8	%	9,529		2.8	%
Other nonoperating expense (income), net	Other nonoperating expense (income), net	(666)		(0.6)	%	(19,795)		(17.2)	%	9,427		4.0	%	(39,410)		(18.1)	%	Other nonoperating expense (income), net	43		0.0	%	(10,461)		(8.9)	%	9,470		2.7	%	(49,871)		(14.9)	%
Income before income taxes	Income before income taxes	11,198		9.6	%	30,782		26.8	%	12,747		5.4	%	60,744		27.8	%	Income before income taxes	9,594		8.4	%	22,572		19.2	%	22,341		6.4	%	83,316		24.8	%
Provision for income taxes	Provision for income taxes	2,660		2.3	%	7,779		6.8	%	3,612		1.5	%	15,886		7.3	%	Provision for income taxes	1,686		1.5	%	5,489		4.7	%	5,298		1.5	%	21,375		6.4	%
Net income	Net income	$	8,538	7.3	%	$	23,003	20.0	%	$	9,135	3.9	%	$	44,858	20.6	%	Net income	$	7,908	6.9	%	$	17,083	14.5	%	$	17,043	4.9	%	$	61,941	18.5	%

(a)Costs of company restaurant sales percentages are as a percentage of company restaurant sales. Costs of franchise and license revenue percentages are as a percentage of franchise and license revenue. All other percentages are as a percentage of total operating revenue.


Statistical Data	Statistical Data	Quarter Ended						Two Quarters Ended						Statistical Data	Quarter Ended		Three Quarters Ended
		June 28, 2023			June 29, 2022			June 28, 2023			June 29, 2022				September 27, 2023	September 28, 2022	September 27, 2023	September 28, 2022
		(Dollars in thousands)													(Dollars in thousands)
Denny's	Denny's													Denny's
Company average unit sales	Company average unit sales	$	786		$	761		$	1,548		$	1,443		Company average unit sales	$755	$766	$2,303	$2,209
Franchise average unit sales	Franchise average unit sales	$	466		$	442		$	918		$	846		Franchise average unit sales	$458	$435	$1,376	$1,281
Company equivalent units (a)	Company equivalent units (a)	65			64			65			64			Company equivalent units (a)	66	65	65	64
Franchise equivalent units (a)	Franchise equivalent units (a)	1,525			1,567			1,527			1,570			Franchise equivalent units (a)	1,523	1,560	1,525	1,566
Company same-store sales increase vs. prior year (b)(c)		3.0		%	3.8		%	7.0		%	14.9		%
Company same-store sales (decrease) increase vs. prior year (b)(c)														Company same-store sales (decrease) increase vs. prior year (b)(c)	(1.4)%	7.1%	4.1%	12.1%
Domestic franchise same-store sales increase vs. prior year (b)(c)	Domestic franchise same-store sales increase vs. prior year (b)(c)	3.0		%	2.4		%	5.5		%	11.2		%	Domestic franchise same-store sales increase vs. prior year (b)(c)	2.1%	1.1%	4.3%	7.6%

Keke's (d)	Keke's (d)													Keke's (d)
Company average unit sales	Company average unit sales	$	459		$	—		$	925		$	—		Company average unit sales	$429	$334	$1,354	$334
Franchise average unit sales	Franchise average unit sales	$	476		$	—		$	967		$	—		Franchise average unit sales	$430	$349	$1,397	$349
Company equivalent units (a)	Company equivalent units (a)	8			—			8			—			Company equivalent units (a)	8	6	8	2
Franchise equivalent units (a)	Franchise equivalent units (a)	47			—			46			—			Franchise equivalent units (a)	48	34	47	11
Company same-store sales decrease (b)														Company same-store sales decrease (b)	(3.4)%	N/A	(3.4)%	N/A
Franchise same-store sales decrease (b)														Franchise same-store sales decrease (b)	(5.3)%	N/A	(5.3)%	N/A

(a)Equivalent units are calculated as the weighted average number of units in operation during a defined time period.

(b)Same-store sales include sales from company restaurants or non-consolidated franchised and licensed restaurants that were open during the comparable periods noted.

(c)Prior year amounts have not been restated for 2023 comparable units.

(d)~~Same-store sales~~Effective July 20, 2022, the Company acquired Keke's, as such data for ~~Keke's is not reported due to the acquisition being completed during~~ the quarter and year-to-date period ended September 28, ~~2022.~~2022 only represent post-acquisition results.

Unit Activity Quarter Ended Two Quarters Ended
June 28, 2023 June 29, 2022 June 28, 2023 June 29, 2022
Denny's
Company restaurants, beginning of period 66 65 66 65
Units opened — — — —
Units closed — — — —
End of period 66 65 66 65
Franchised and licensed restaurants, beginning of period 1,528 1,569 1,536 1,575
Units opened 9 4 14 9
Units closed (12) (7) (25) (18)
End of period 1,525 1,566 1,525 1,566
Total restaurants, end of period 1,591 1,631 1,591 1,631

Keke's
Company restaurants, beginning of period 8 — 8 —
Units opened — — — —
Units closed — — — —
End of period 8 — 8 —
Franchised restaurants, beginning of period 46 — 46 —
Units opened 1 — 1 —
Units closed — — — —
End of period 47 — 47 —
Total restaurants, end of period 55 — 55 —


Unit Activity	Quarter Ended		Three Quarters Ended
	September 27, 2023	September 28, 2022	September 27, 2023	September 28, 2022
Denny's
Company restaurants, beginning of period	66	65	66	65

Units acquired from franchisees	—	1	—	1


End of period	66	66	66	66

Franchised and licensed restaurants, beginning of period	1,525	1,566	1,536	1,575
Units opened	7	7	21	16

Units acquired by Company	—	(1)	—	(1)
Units closed	(10)	(25)	(35)	(43)
End of period	1,522	1,547	1,522	1,547
Total restaurants, end of period	1,588	1,613	1,588	1,613


	Quarter Ended		Three Quarters Ended
	September 27, 2023	September 28, 2022	September 27, 2023	September 28, 2022
Keke's
Company restaurants, beginning of period	8	—	8	—

Units acquired	—	8	—	8

End of period	8	8	8	8

Franchised restaurants, beginning of period	47	—	46	—
Units opened	1	1	2	1
Units acquired	—	44	—	44

End of period	48	45	48	45
Total restaurants, end of period	56	53	56	53

Company Restaurant Operations

Company restaurant sales increased ~~$5.7~~$0.9 million, or ~~11.6%~~1.8%, for the quarter ended ~~June 28,~~September 27, 2023 and ~~$15.2~~$16.1 million, or ~~16.3%~~11.1%, year-to-date compared to the prior year periods. ~~The increases in~~Company sales ~~include $3.7~~from Keke's increased $0.8 million and ~~$7.4~~$8.1 million ~~in sales from Keke's~~ during the quarter and year-to-date period ended ~~June 28,~~September 27, 2023, ~~respectively. Also contributing to the sales increases were higher sales at Denny's company stores,~~respectively, as ~~same-store sales increased 3.0% for the current quarter and 7.0% year-to-date as compared to the prior year periods.~~a result of its acquisition on July 20, 2022. The increases in Denny's sales were primarily driven by increases in guest check average resulting from price increases to partially offset inflationary ~~costs.~~costs and one additional equivalent unit during the quarter and year-to-date period ended September 27, 2023. Denny's same-store sales decreased 1.4% for the current quarter and increased 4.1% year-to-date as compared to the prior year periods.

Total costs of company restaurant sales as a percentage of company restaurant sales were ~~84.9%~~86.3% for the quarter ended ~~June 28,~~September 27, 2023 and ~~85.9%~~86.0% year-to-date compared to ~~91.2%~~92.8% and ~~89.6%~~90.7% for the prior year periods, respectively.

Product costs as a percentage of company restaurant sales were ~~25.8%~~25.6% for the quarter ended ~~June 28,~~September 27, 2023 and ~~26.0%~~25.9% year-to-date compared to ~~26.8%~~27.7% and ~~26.2%~~26.7% for the prior year periods, respectively, primarily due to increased pricing for both the quarter and year-to-date period, partially offset by higher commodity ~~costs.~~costs for the year-to-date period.

Payroll and benefits as a percentage of company restaurant sales were ~~37.3%~~37.2% for the quarter ended ~~June 28,~~September 27, 2023 and ~~37.6%~~37.5% year-to-date compared to ~~37.3%~~38.6% and ~~38.0%~~38.3%, respectively, in the prior year periods. The current quarter ~~remained flat~~decreased as a percentage of company restaurant sales primarily due to ~~the leveraging effect of higher sales and~~ a ~~0.3~~0.6 percentage point decrease in incentive ~~compensation, partially offset by a 0.5 percentage point increase in workers' compensation costs primarily resulting from positive claims development in the prior year period.~~compensation. The year-to-date decrease was primarily due to a ~~0.7~~0.8 percentage point decrease in payroll costs due to the leveraging effect of higher sales and a 0.4 percentage point decrease in incentive ~~compensation,~~compensation. The decrease was partially offset by a ~~0.8~~0.5 percentage point increase in workers' compensation costs primarily resulting from positive claims development in the prior year period.

Occupancy costs as a percentage of company restaurant sales were ~~7.5%~~7.9% for the quarter ended ~~June 28,~~September 27, 2023 and ~~7.6%~~7.7% year-to-date compared to ~~7.7%~~8.2% and ~~7.5%~~7.8%, respectively, in the prior year periods. The current quarter decrease as a percentage of company restaurant sales was primarily due to a ~~1.0~~0.8 percentage point decrease in general liability insurance costs resulting from ~~positive~~negative claims development in the ~~current~~prior year period, partially offset by a ~~0.8~~0.4 percentage point increase in rents and property taxes. The year-to-date ~~increase~~decrease as a percentage of company restaurant sales was primarily due to a ~~0.4 percentage point increase in rents and property taxes, partially offset by a 0.3~~0.5 percentage point decrease in general liability costs primarily resulting from ~~positive~~negative claims development in the ~~current~~prior year ~~period.~~period, partially offset by a 0.4 percentage point increase in rents and property taxes.

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


		Quarter Ended								Two Quarters Ended									Quarter Ended								Three Quarters Ended
		June 28, 2023				June 29, 2022				June 28, 2023				June 29, 2022					September 27, 2023				September 28, 2022				September 27, 2023				September 28, 2022
		(In thousands)																	(In thousands)
Utilities	Utilities	$	1,860	3.4	%	$	1,650	3.4	%	$	3,917	3.6	%	$	3,227	3.5	%	Utilities	$	2,120	4.0	%	$	1,984	3.8	%	$	6,037	3.7	%	$	5,211	3.6	%
Repairs and maintenance	Repairs and maintenance	782		1.4	%	889		1.8	%	1,671		1.5	%	1,714		1.8	%	Repairs and maintenance	996		1.9	%	1,089		2.1	%	2,667		1.7	%	2,803		1.9	%
Marketing	Marketing	1,419		2.6	%	1,330		2.7	%	2,814		2.6	%	2,537		2.7	%	Marketing	1,393		2.6	%	1,340		2.6	%	4,207		2.6	%	3,877		2.7	%
Legal settlements	Legal settlements	121		0.2	%	2,379		4.8	%	230		0.2	%	2,656		2.9	%	Legal settlements	245		0.5	%	1,567		3.0	%	475		0.3	%	4,223		2.9	%
Other direct costs	Other direct costs	3,623		6.6	%	3,294		6.7	%	7,292		6.7	%	6,463		6.9	%	Other direct costs	3,616		6.8	%	3,539		6.8	%	10,908		6.8	%	10,002		6.9	%
Other operating expenses	Other operating expenses	$	7,805	14.2	%	$	9,542	19.4	%	$	15,924	14.7	%	$	16,597	17.8	%	Other operating expenses	$	8,370	15.7	%	$	9,519	18.2	%	$	24,294	15.0	%	$	26,116	18.0	%

Other ~~direct costs~~operating expenses were lower as a percentage of company restaurant sales as compared to the prior year periods primarily due to unfavorable developments in certain legal claims during the prior year periods.

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								Three Quarters Ended
		June 28, 2023				June 29, 2022				June 28, 2023				June 29, 2022					September 27, 2023				September 28, 2022				September 27, 2023				September 28, 2022
		(In thousands)																	(In thousands)
Royalties	Royalties	$	30,376	49.0	%	$	28,759	43.7	%	$	60,403	47.9	%	$	55,284	44.2	%	Royalties	$	29,703	48.7	%	$	28,992	44.4	%	$	90,106	48.2	%	$	84,276	44.3	%
Advertising revenue	Advertising revenue	19,853		32.0	%	19,486		29.6	%	39,521		31.4	%	37,692		30.2	%	Advertising revenue	19,297		31.6	%	18,950		29.0	%	58,818		31.4	%	56,642		29.8	%
Initial and other fees	Initial and other fees	2,616		4.2	%	7,779		11.8	%	7,606		6.0	%	12,286		9.8	%	Initial and other fees	3,388		5.6	%	7,749		11.9	%	10,994		5.9	%	20,035		10.5	%
Occupancy revenue	Occupancy revenue	9,189		14.8	%	9,826		14.9	%	18,523		14.7	%	19,719		15.8	%	Occupancy revenue	8,642		14.2	%	9,554		14.6	%	27,165		14.5	%	29,273		15.4	%
Franchise and license revenue	Franchise and license revenue	$	62,034	100.0	%	$	65,850	100.0	%	$	126,053	100.0	%	$	124,981	100.0	%	Franchise and license revenue	$	61,030	100.0	%	$	65,245	100.0	%	$	187,083	100.0	%	$	190,226	100.0	%

Advertising costs	Advertising costs	$	19,853	32.0	%	$	19,486	29.6	%	$	39,521	31.4	%	$	37,692	30.2	%	Advertising costs	$	19,297	31.6	%	$	18,950	29.0	%	$	58,818	31.4	%	$	56,642	29.8	%
Occupancy costs	Occupancy costs	5,792		9.3	%	6,064		9.2	%	11,464		9.1	%	12,441		10.0	%	Occupancy costs	5,389		8.8	%	5,910		9.1	%	16,853		9.0	%	18,351		9.6	%
Other direct costs	Other direct costs	4,815		7.8	%	9,715		14.8	%	11,862		9.4	%	15,801		12.6	%	Other direct costs	5,124		8.4	%	9,719		14.9	%	16,986		9.1	%	25,520		13.4	%
Costs of franchise and license revenue	Costs of franchise and license revenue	$	30,460	49.1	%	$	35,265	53.6	%	$	62,847	49.9	%	$	65,934	52.8	%	Costs of franchise and license revenue	$	29,810	48.8	%	$	34,579	53.0	%	$	92,657	49.5	%	$	100,513	52.8	%

Franchise and license revenue decreased ~~$3.8~~$4.2 million, or ~~5.8%~~6.5%, for the quarter ended ~~June 28,~~September 27, 2023 and ~~increased $1.1~~decreased $3.1 million, or ~~0.9%~~1.7%, year-to-date compared to the prior year periods. Royalties increased ~~$1.6~~$0.7 million, or ~~5.6%~~2.5%, and ~~$5.1~~$5.8 million, or ~~9.3%~~6.9%, for the current quarter and year-to-date period, respectively, compared to the prior year periods. ~~The increase in royalties includes $1.3 million and $2.7 million~~Royalties from Keke's franchise restaurants increased $0.3 million and $2.9 million during the quarter and year-to-date period ended ~~June 28,~~September 27, 2023, ~~respectively.~~respectively, as a result of its acquisition on July 20, 2022. The increase in royalties ~~was~~ also ~~supported by~~includes Denny's domestic franchise same-store sales increases of ~~3.0%~~2.1% for the current quarter and ~~5.5%~~4.3% year-to-date as compared to the prior year periods. These increases were partially offset by the impacts of fewer Denny's franchise equivalent units for the current quarter and year-to-date period.

Advertising revenue increased ~~$0.4~~$0.3 million, or ~~1.9%~~1.8%, for the current quarter and ~~$1.8~~$2.2 million, or ~~4.9%~~3.8%, year-to-date compared to the prior year periods. The ~~increase~~increases in advertising revenue ~~was supported by~~also include the ~~3.0%~~impact from the 2.1% and ~~5.5%~~4.3% increases in Denny's franchise domestic same-store sales for the current quarter and year-to-date period, respectively, compared to the prior year periods. The ~~increase~~increases during the current quarter and year-to-date period ~~was~~were also partially due to $0.2 million and $0.4 million collected from Keke's franchise ~~restaurants. This increase was~~restaurants, respectively. These increases were partially offset by the impact of fewer Denny's franchise equivalent units for the current quarter and year-to-date period.

Initial and other fees decreased ~~$5.2~~$4.4 million, or ~~66.4%~~56.3%, for the quarter ended ~~June 28,~~September 27, 2023 and ~~$4.7~~$9.0 million, or ~~38.1%~~45.1%, year-to-date compared to the prior year periods. The decreases in initial and other fees primarily resulted from a ~~$5.2~~$4.2 million and ~~$5.0~~$9.2 million decrease in revenue from the sale of equipment to franchisees during the current quarter and year-to-date period, respectively, as our kitchen modernization program ~~was~~has been substantially ~~completed during the quarter ended June 28, 2023.~~completed. The revenue recorded related to the sale of equipment has an equal and offsetting expense recorded in other direct costs as described below. Occupancy revenue

decreased ~~$0.6~~$0.9 million, or ~~6.5%~~9.5%, for the current quarter and ~~$1.2~~$2.1 million, or ~~6.1%~~7.2%, year-to-date compared to the prior year periods, primarily due to lease terminations.

Costs of franchise and license revenue decreased $4.8 million, or ~~13.6%~~13.8%, for the quarter ended ~~June 28,~~September 27, 2023 and ~~$3.1~~$7.9 million, or ~~4.7%~~7.8%, year-to-date compared to the prior year periods. Advertising costs increased ~~$0.4~~$0.3 million, or ~~1.9%~~1.8%, for the current quarter and ~~$1.8~~$2.2 million, or ~~4.9%~~3.8%, year-to-date, which corresponds to the related advertising revenue increase noted above. Occupancy costs decreased ~~$0.3~~$0.5 million, or ~~4.5%~~8.8%, for the current quarter and ~~$1.0~~$1.5 million, or ~~7.8%~~8.2%, year-to-date compared to the prior year periods, primarily due to lease terminations, which corresponds to the related occupancy revenue decrease noted above. Other direct franchise costs decreased ~~$4.9~~$4.6 million, or ~~50.4%~~47.3%, for the current quarter and ~~$3.9~~$8.5 million, or ~~24.9%~~33.4%, year-to-date compared to the prior year periods. The ~~decrease~~decreases in other direct franchise costs ~~was partially~~were primarily due to a decrease of ~~$5.1~~$4.2 million of expense for the current quarter and ~~$4.8~~$9.2 million of expense year-to-date related to the ~~costs~~cost of equipment sold to franchisees as mentioned above. Additionally, other direct franchise costs included an increase of $0.4 million and ~~$0.6~~$0.7 million in franchise administrative costs for the current quarter and year-to-date period, respectively. As a result of the changes in franchise and license revenue discussed above, costs of franchise and license revenue decreased to ~~49.1%~~48.8% and ~~49.9%~~49.5% of franchise and license revenue for the quarter and year-to-date period ended ~~June 28,~~September 27, 2023, respectively, from ~~53.6%~~53.0% and 52.8% for the prior year periods, respectively.

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					Quarter Ended				Three Quarters Ended
		June 28, 2023		June 29, 2022		June 28, 2023		June 29, 2022			September 27, 2023		September 28, 2022		September 27, 2023		September 28, 2022
		(In thousands)									(In thousands)
Corporate administrative expenses	Corporate administrative expenses	$	15,160	$	13,162	$	29,339	$	24,545	Corporate administrative expenses	$	14,580	$	13,758	$	43,919	$	38,303
Share-based compensation	Share-based compensation	2,519		3,505		5,613		7,520		Share-based compensation	2,864		1,947		8,477		9,467
Incentive compensation	Incentive compensation	1,899		1,639		4,286		3,758		Incentive compensation	1,049		1,187		5,335		4,945
Deferred compensation valuation adjustments	Deferred compensation valuation adjustments	582		(1,683)		1,040		(2,242)		Deferred compensation valuation adjustments	(256)		(285)		784		(2,527)
Total general and administrative expenses	Total general and administrative expenses	$	20,160	$	16,623	$	40,278	$	33,581	Total general and administrative expenses	$	18,237	$	16,607	$	58,515	$	50,188

Corporate administrative expenses increased ~~$2.0~~$0.8 million for the quarter ended ~~June 28,~~September 27, 2023 and ~~$4.8~~$5.6 million for year-to-date period ended ~~June 28,~~September 27, 2023 compared to the prior year periods. The increases were primarily due to compensation increases and administrative costs related to Keke's. Share-based compensation ~~decreased $1.0~~increased $0.9 million for the current quarter ~~and $1.9~~primarily due to having three long-term incentive plans vesting compared to two plans in the prior year quarter as a result of the 2020 long-term incentive plan fully vesting in May 2022. Share-based compensation decreased $1.0 million year-to-date primarily due to forfeitures compared to the prior year periods. Incentive compensation increased $0.2 million for the current quarter and $0.5 million year-to-date compared to the prior year periods, primarily related to the addition of Keke's.forfeitures. 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					Quarter Ended				Three Quarters Ended
		June 28, 2023		June 29, 2022		June 28, 2023		June 29, 2022			September 27, 2023		September 28, 2022		September 27, 2023		September 28, 2022
		(In thousands)									(In thousands)
Depreciation of property and equipment	Depreciation of property and equipment	$	2,697	$	2,702	$	5,396	$	5,349	Depreciation of property and equipment	$	2,722	$	2,944	$	8,118	$	8,293
Amortization of finance lease ROU assets	Amortization of finance lease ROU assets	356		437		751		879		Amortization of finance lease ROU assets	348		414		1,099		1,293
Amortization of intangible and other assets	Amortization of intangible and other assets	564		451		1,126		910		Amortization of intangible and other assets	535		556		1,661		1,466
Total depreciation and amortization expense	Total depreciation and amortization expense	$	3,617	$	3,590	$	7,273	$	7,138	Total depreciation and amortization expense	$	3,605	$	3,914	$	10,878	$	11,052

Depreciation and amortization expense ~~increased~~decreased during the quarter and year-to-date period ended ~~June 28,~~September 27, 2023, ~~resulting from the acquisition of Keke's.~~primarily due to certain assets becoming fully depreciated.

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


		Quarter Ended				Two Quarters Ended					Quarter Ended				Three Quarters Ended
		June 28, 2023		June 29, 2022		June 28, 2023		June 29, 2022			September 27, 2023		September 28, 2022		September 27, 2023		September 28, 2022
		(In thousands)									(In thousands)
Gains on sales of assets and other, net	Gains on sales of assets and other, net	$	(522)	$	(99)	$	(2,044)	$	(245)	Gains on sales of assets and other, net	$	(88)	$	(3,066)	$	(2,132)	$	(3,311)
Restructuring charges and exit costs	Restructuring charges and exit costs	1,698		679		1,762		825		Restructuring charges and exit costs	997		472		2,759		1,297
Impairment charges	Impairment charges	—		266		129		266		Impairment charges	1,711		697		1,840		963
Operating (gains), losses and other charges, net	Operating (gains), losses and other charges, net	$	1,176	$	846	$	(153)	$	846	Operating (gains), losses and other charges, net	$	2,620	$	(1,897)	$	2,467	$	(1,051)

Gains on sales of assets and other, net for the year-to-date period ended September 27, 2023 were primarily related to the sale of three parcels of real estate. Gains on sales of assets and other, net for the quarter and year-to-date period ended ~~June~~September 28, ~~2023~~2022 were primarily related to the sale of two parcels of real ~~estate during the quarter and three parcels of real estate year-to-date.~~estate.

~~Impairment charges for the year-to-date period ended June 28, 2023 were related to a unit which is expected to be sold in the next 12 months.~~

Restructuring charges and exit costs consisted of the following:


		Quarter Ended				Two Quarters Ended					Quarter Ended				Three Quarters Ended
		June 28, 2023		June 29, 2022		June 28, 2023		June 29, 2022			September 27, 2023		September 28, 2022		September 27, 2023		September 28, 2022
		(In thousands)									(In thousands)
Exit costs	Exit costs	$	52	$	38	$	52	$	50	Exit costs	$	12	$	38	$	64	$	88
Severance and other restructuring charges	Severance and other restructuring charges	1,646		641		1,710		775		Severance and other restructuring charges	985		434		2,695		1,209
Total restructuring and exit costs	Total restructuring and exit costs	$	1,698	$	679	$	1,762	$	825	Total restructuring and exit costs	$	997	$	472	$	2,759	$	1,297

Total restructuring and exit costs increased $0.5 million and $1.5 million for the quarter and year-to-date period ended September 27, 2023, respectively. The current quarter and year-to-date increases were primarily due to severance costs related to changes in our leadership team.

We recorded impairment charges of $1.7 million (consisting of property and right-of-use assets) during the quarter ended September 27, 2023, resulting from our assessment of underperforming restaurants and recoverability of right-of-use assets. We recorded impairment charges of $0.7 million and $1.0 million (consisting of property and right-of-use assets) during the quarter and year-to-date period ended September 28, 2022, respectively, resulting from our assessment of underperforming restaurants and recoverability of right-of-use assets.

Operating income was ~~$14.9~~$14.0 million for the current quarter and ~~$31.1~~$45.1 million year-to-date compared to ~~$13.9~~$15.8 million and ~~$27.2~~$43.0 million, respectively, for the prior year periods.

Interest expense, net consisted of the following:


		Quarter Ended				Two Quarters Ended					Quarter Ended				Three Quarters Ended
		June 28, 2023		June 29, 2022		June 28, 2023		June 29, 2022			September 27, 2023		September 28, 2022		September 27, 2023		September 28, 2022
		(In thousands)									(In thousands)
Interest on credit facility	Interest on credit facility	$	4,717	$	1,130	$	9,230	$	2,029	Interest on credit facility	$	4,823	$	2,637	$	14,053	$	4,666
Interest (income) expense on interest rate swaps	Interest (income) expense on interest rate swaps	(1,235)		721		(2,165)		1,711		Interest (income) expense on interest rate swaps	(1,386)		106		(3,551)		1,817
Interest on finance lease liabilities	Interest on finance lease liabilities	538		595		1,089		1,202		Interest on finance lease liabilities	529		581		1,618		1,783
Letters of credit and other fees	Letters of credit and other fees	200		279		396		588		Letters of credit and other fees	202		224		598		812
Interest income	Interest income	(59)		(12)		(99)		(16)		Interest income	(40)		(26)		(139)		(42)
Total cash interest, net	Total cash interest, net	4,161		2,713		8,451		5,514		Total cash interest, net	4,128		3,522		12,579		9,036
Amortization of deferred financing costs	Amortization of deferred financing costs	158		159		317		317		Amortization of deferred financing costs	159		158		476		475
Amortization of interest rate swap losses	Amortization of interest rate swap losses	82		6		138		6		Amortization of interest rate swap losses	93		10		231		16
Interest accretion on other liabilities	Interest accretion on other liabilities	1		—		1		1		Interest accretion on other liabilities	1		1		2		2
Total interest expense, net	Total interest expense, net	$	4,402	$	2,878	$	8,907	$	5,838	Total interest expense, net	$	4,381	$	3,691	$	13,288	$	9,529

Total cash interest expense, net increased by ~~$1.4~~$0.6 million for the current quarter and ~~$2.9~~$3.5 million year-to-date compared to the prior year periods. These increases were primarily due to increased average borrowings and higher average interest rates, partially offset by our effective interest rate swaps.

Other nonoperating expense (income), net was ~~income~~expense of ~~$0.7~~less than $0.1 million for the current quarter and ~~expense of $9.4~~$9.5 million year-to-date, compared to income of ~~$19.8~~$10.5 million and ~~$39.4~~$49.9 million for the prior year periods, respectively. Other nonoperating ~~income, net~~expense for the current quarter primarily consisted of ~~$0.6~~$0.1 million of ~~gains~~losses on deferred compensation plan investments. The year-to-date period primarily consisted of $10.6 million of losses related to valuation adjustments for dedesignated interest rate hedges, partially offset by gains of ~~$1.1~~$1.0 million on deferred compensation plan investments. Prior year other nonoperating income, net for the quarter primarily consisted of ~~$21.7~~$10.8 million of gains related to dedesignated interest rate swap valuation adjustments, partially offset by losses of ~~$1.7~~$0.3 million on deferred compensation plan investments. The prior year-to-date period primarily consisted of ~~$41.9~~$52.7 million of gains on interest rate swap valuation adjustments, partially offset by ~~$2.3~~$2.6 million of losses on deferred compensation plan investments.

During the quarter ended March 29, 2023, we terminated a portion of our hedging relationship entered into in 2018 (“2018 Swaps”), reducing the previous maximum notional amount of $425 million on August 31, 2033 to $335 million. As a result, we expect our total swaps to approximate 80% of our outstanding debt prospectively. In addition, during the quarter ended March 29, 2023, we designated the remaining 2018 Swaps as cash flow hedges of our exposure to variability in future cash flows attributable to variable rate interest payments due on forecasted notional amounts. As a result, subsequent to the designation of the 2018 Swaps, gains and losses related to these cash flow hedges have been and will be recorded as a component of accumulated other comprehensive loss, net.

Provision for income taxes was ~~$2.7~~$1.7 million for the quarter ended ~~June 28,~~September 27, 2023 and ~~$3.6~~$5.3 million year-to-date, compared to ~~$7.8~~$5.5 million and ~~$15.9~~$21.4 million, respectively, for the prior year periods. The effective tax rate was ~~23.8%~~17.6% for the current quarter and ~~28.3%~~23.7% year-to-date, compared to ~~25.3%~~24.3% and ~~26.2%~~25.7% for the prior year periods. The effective income tax rate for the quarter and year-to-date period ended ~~June 28,~~September 27, 2023 included the impact of discrete items relating to share-based compensation of ~~(3.9)~~(2.5)% and ~~2.5%~~0.4%, respectively. We expect the 2023 fiscal year effective tax rate to be between 27% and 31%. The annual effective tax rate cannot be determined until the end of the fiscal year; therefore, the actual rate could differ from our current estimates.

Net income was ~~$8.5~~$7.9 million for the quarter ended ~~June 28,~~September 27, 2023 and ~~$9.1~~$17.0 million year-to-date compared to ~~$23.0~~$17.1 million and ~~$44.9~~$61.9 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, the repurchase of shares of our common stock, and in the prior year, the acquisition of Keke's.

The following table presents a summary of our sources and uses of cash and cash equivalents for the periods indicated:


		Two Quarters Ended					Three Quarters Ended
		June 28, 2023		June 29, 2022			September 27, 2023		September 28, 2022
		(In thousands)					(In thousands)
Net cash provided by operating activities	Net cash provided by operating activities	$	35,651	$	9,609	Net cash provided by operating activities	$	50,768	$	24,950
Net cash used in investing activities	Net cash used in investing activities	(1,172)		(6,675)		Net cash used in investing activities	(3,024)		(83,974)
Net cash used in financing activities		(36,872)		(32,198)
Net cash (used in) provided by financing activities						Net cash (used in) provided by financing activities	(50,245)		32,746
Decrease in cash and cash equivalents	Decrease in cash and cash equivalents	$	(2,393)	$	(29,264)	Decrease in cash and cash equivalents	$	(2,501)	$	(26,278)

Net cash flows provided by operating activities were ~~$35.7~~$50.8 million for the year-to-date period ended ~~June 28,~~September 27, 2023 compared to ~~$9.6~~$25.0 million for the year-to-date period ended ~~June 29,~~September 28, 2022. The increase in net cash flows provided by operating activities was primarily due to the timing of inventory purchases, receivable collections, and accrual payments related to our franchise kitchen equipment project over the past two years. We believe that our estimated cash flows from operations, 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 ~~$1.2~~$3.0 million for the year-to-date period ended ~~June 28,~~September 27, 2023. These cash flows included capital expenditures of ~~$3.3~~$5.5 million, ~~and~~ investment purchases of $1.3 million, and a real estate acquisition of $1.2 million, partially offset by net proceeds from the sale of three parcels of real estate for $3.1 million and net investment proceeds of $1.9 million. Net cash flows used in investing activities were ~~$6.7~~$84.0 million for the year-to-date period ended ~~June 29,~~September 28, 2022. These cash flows ~~primarily consisted~~included $81.5 million for the acquisition of Keke's, $0.8 million for the acquisition of one Denny's franchised restaurant and capital expenditures of ~~$5.8~~$10.1 million, partially offset by proceeds from the sale of two parcels of real estate of $4.1 million, real estate deposit refunds of $3.6 million and net investment ~~purchases~~proceeds of ~~$1.2~~$0.5 million.

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


		Two Quarters Ended					Three Quarters Ended
		June 28, 2023		June 29, 2022			September 27, 2023		September 28, 2022
		(In thousands)					(In thousands)
Facilities	Facilities	$	2,118	$	2,004	Facilities	$	3,199	$	3,618
New construction	New construction	146		—		New construction	730		29
Remodeling	Remodeling	387		2,524		Remodeling	404		3,738
Information technology	Information technology	419		824		Information technology	732		2,246
Other	Other	237		419		Other	434		515
Capital expenditures	Capital expenditures	$	3,307	$	5,771	Capital expenditures	$	5,499	$	10,146

Net cash flows used in financing activities were ~~$36.9~~$50.2 million for the year-to-date period ended ~~June 28,~~September 27, 2023, including cash payments for stock repurchases of ~~$19.7~~$35.4 million, payments of tax withholding on share-based compensation of $3.0 million and net long-term debt payments of ~~$15.4~~$14.8 million, partially offset by net bank overdrafts of ~~$1.2~~$2.9 million. Net cash flows ~~used in~~provided by financing activities were ~~$32.2~~$32.7 million for the year-to-date period ended ~~June 29,~~September 28, 2022, which included net long-term debt borrowings of $95.0 million primarily for funding the Keke's acquisition, partially offset by cash payments for stock repurchases of ~~$46.2~~$57.5 million and payments of tax withholding on share-based compensation of $4.8 ~~million, partially offset by net long-term borrowings of $16.0 million and net bank overdrafts of $2.9~~ million.

Our working capital deficit was ~~$49.9~~$56.0 million at ~~June 28,~~September 27, 2023 compared to $43.3 million at December 28, 2022, primarily due to a decrease in receivables and inventories related to our franchise equipment projects during the year-to-date period ended ~~June 28,~~September 27, 2023. 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

The Company and certain of its subsidiaries have a credit facility consisting of a five-year $400 million senior secured revolver (with a $25 million letter of credit sublimit). The credit facility includes an accordion feature that would allow us to increase the size of the facility to $450 million. Borrowings bear a tiered interest rate, which is based on the Company's consolidated leverage ratio. The maturity date for the credit facility is August 26, 2026.

As of ~~June 28,~~September 27, 2023, borrowings under the credit facility bore interest at a rate of Adjusted Daily Simple SOFR plus 2.25% and the commitment fee, paid on the unused portion of the credit facility, was set to 0.35%.

Technology Transformation Initiatives

The Company ~~is rolling out~~has committed to investing approximately $4 million toward a new cloud-based restaurant technology platform ~~throughout the~~in domestic ~~system~~franchise restaurants, which will lay the foundation for future technology initiatives to further enhance the guest experience. ~~The~~We currently expect the rollout ~~is expected~~ to ~~continue into~~occur in 2024 and 2025. ~~The Company has committed to investing approximately $4 million toward the new cloud-based restaurant technology platform in domestic franchise restaurants.~~

Contractual Obligations

Our future contractual obligations relating to long-term debt and related interest obligations as of ~~June 28,~~September 27, 2023 are as follows:

Payments Due by Period
Total Less than 1 Year 1-2 Years 3-4 Years 5 Years and Thereafter
(In thousands)
Long-term debt $ 247,000 $ — $ — $ 247,000 $ —
Interest obligations (a) 40,338 6,422 25,215 8,701 —
Total $ 287,338 $ 6,422 $ 25,215 $ 255,701 $ —

~~(a)~~Interest obligations represent payments related to our long-term debt outstanding at June 28, 2023. For long-term debt with variable rates, we have used the rate applicable at June 28, 2023 to project interest over the periods presented in the table above, taking into consideration the impact of the interest rate swaps that are designated as cash flow hedges for the applicable periods.


		Payments Due by Period
		Total		Less than 1 Year		1-2 Years		3-4 Years		5 Years and Thereafter
		(In thousands)
	Long-term debt	$	248,100	$	—	$	—	$	248,100	$	—
	Interest obligations (a)	37,457		3,243		25,474		8,740		—
	Total	$	285,557	$	3,243	$	25,474	$	256,840	$	—

(a)	Interest obligations represent payments related to our long-term debt outstanding at September 27, 2023. For long-term debt with variable rates, we have used the rate applicable at September 27, 2023 to project interest over the periods presented in the table above, taking into consideration the impact of the interest rate swaps that are designated as cash flow hedges for the applicable periods.

See Management's Discussion and Analysis of Financial Condition and Results of Operations contained in our Annual Report on Form 10-K for the year ended December 28, 2022 for information concerning other future contractual obligations and commitments.

Critical Accounting Policies and Estimates

For information regarding our Critical Accounting Policies and Estimates, see the "Critical Accounting Policies and Estimates" section in Part II, Item 7, "Management’s Discussion and Analysis of Financial Condition and Results of Operations" in our Annual Report on Form 10-K for the fiscal year ended December 28, 2022.

Implementation of New Accounting Standards

Information regarding the implementation of new accounting standards is incorporated by reference from Note 2 to our unaudited 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 28,~~September 27, 2023, borrowings under our credit facility bore interest at variable rates based on Adjusted Daily Simple SOFR plus 2.25% per annum.


Trade Date	Trade Date	Effective Date	Maturity Date	Notional Amount			Fair Value		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										Swaps designated as cash flow hedges
March 20, 2015	March 20, 2015	March 29, 2018	March 31, 2025	$	120,000		$	4,814	2.34	%	March 20, 2015	March 29, 2018	March 31, 2025	$	120,000		$	4,937	2.34	%
October 1, 2015	October 1, 2015	March 29, 2018	March 31, 2026	$	50,000		$	2,417	2.37	%	October 1, 2015	March 29, 2018	March 31, 2026	$	50,000		$	2,851	2.37	%
February 15, 2018	February 15, 2018	March 31, 2020	December 31, 2033	$	26,000	(1)	$	3,366	3.09	%	February 15, 2018	March 31, 2020	December 31, 2033	$	31,000	(1)	$	19,536	3.09	%
Total	Total			$	196,000		$	10,597			Total			$	201,000		$	27,324

(1) The notional amounts of the swaps entered into on February 15, 2018 increase periodically until they reach the maximum notional amount of $335 million on August 31, 2033.

On March 31, 2023, the Company entered into an amendment of its credit facility. The amendment transitions our credit facility benchmark interest rate from LIBOR to Adjusted Daily Simple SOFR, as such the fixed ~~rate~~rates in the table above ~~has~~have been adjusted to the appropriate fixed ~~rate.~~rates. The conversion to Adjusted Daily Simple SOFR isdid not ~~expected to~~ have a material impact on the Company's consolidated financial position or results of operations.

As of ~~June 28,~~September 27, 2023, our swaps effectively increased our ratio of fixed rate debt from 4% of total debt to ~~80%~~82% of total debt. Based on the levels of borrowings under the credit facility at ~~June 28,~~September 27, 2023, if interest rates changed by 100 basis points, our annual cash flow and income before taxes would change by ~~$0.4~~$0.3 million. This computation is determined by considering the impact of hypothetical interest rates on the credit facility at ~~June 28,~~September 27, 2023, taking into consideration the interest rate swaps that will be in effect during the next 12 months. However, the nature and amount of our borrowings may vary as a result of future business requirements, market conditions and other factors.

Depending on market considerations, fluctuations in the fair values of our interest rate swaps could be 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 Note 6, Note 7 and Note 13 to our unaudited 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 Exchange Act, our management conducted an evaluation (under the supervision and with the participation of our Chief Executive Officer, Kelli F. Valade, and our 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, Ms. Valade and Mr. 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 Ms. Valade and Mr. Verostek, as appropriate to allow timely decisions regarding required disclosure.

On July 20, 2022, we closed on the acquisition of substantially all of the assets of Keke’s. We are in the process of integrating Keke's into our internal control structure and expect that this effort will be completed in fiscal 2023.

Other than as discussed above, 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 fiscal quarter ended ~~June 28,~~September 27, 2023 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 Consolidated Financial Statements set forth in Part I, Item 1 of this report.

Item 1A. Risk Factors

There have been no material changes in the risk factors set forth in Part I, Item 1A, “Risk Factors” in our Annual Report on Form 10-K for the fiscal year ended December 28, 2022.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

Purchases of Equity Securities by the Issuer

The table below provides information concerning repurchases of shares of our common stock during the quarter ended ~~June 28,~~September 27, 2023.

Period
Total Number of Shares Purchased
Average Price Paid Per Share (1)
Total Number of Shares Purchased as Part of Publicly Announced Programs (2)
Dollar Value of Shares that May Yet be Purchased Under the Programs (2)
(In thousands, except per share amounts)
March 30, 2023 - April 26, 2023 328 $ 11.08 328 $ 139,924
April 27, 2023 - May 24, 2023 374 10.90 374 $ 135,833
May 25, 2023 - June 28, 2023 222 11.68 222 $ 133,138
Total 924 $ 11.15 924


Period	Total Number of Shares Purchased	Average Price Paid Per Share (1)		Total Number of Shares Purchased as Part of Publicly Announced Programs (2)	Dollar Value of Shares that May Yet be Purchased Under the Programs (2)
	(In thousands, except per share amounts)
June 29, 2023 - July 26, 2023	230	$	11.47	230	$	130,497
July 27, 2023 - August 23, 2023	475	10.29		475	$	125,598
August 24, 2023 - September 27, 2023	975	9.04		975	$	116,601
Total	1,680	$	9.73	1,680

(1)Average price paid per share excludes commissions and any excise taxes paid.

(2)On December 2, 2019, we announced that our Board of Directors approved a share repurchase program, authorizing us to repurchase up to an additional $250 million of our common stock (in addition to prior authorizations). Such repurchases may take place from time to time in the open market (including pre-arranged stock trading plans in accordance with the guidelines specified in Rule 10b5-1 under the Exchange Act) or in privately negotiated transactions, subject to market and business conditions. During the quarter ended ~~June 28,~~September 27, 2023, we purchased ~~0.9~~1.7 million shares of our common stock for an aggregate consideration of ~~$10.4~~$16.5 million pursuant to the share repurchase program.

Item 5. Other Information

Rule 10b5-1 Trading Plans

During the quarter ended ~~June 28,~~September 27, 2023, none of the Company’s directors or officers informed the Company of the adoption or termination of a “Rule 10b5-1 trading arrangement” or “non-Rule 10b5-1 trading arrangement,” as those terms are defined in Regulation S-K, Item 408.

Item 6. Exhibits

The following are included as exhibits to this report:


Exhibit No.						Description
10.1						Denny's Corporation Executive Severance Pay Plan, effective August 30, 2023 (incorporated by reference to Exhibit 10.1 to the Current Report on Form 8-K of Denny's Corporation filed with the Securities and Exchange Commission on September 1, 2023).

31.1						Certification of Kelli F. Valade, 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, 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 Kelli F. Valade, Chief Executive Officer of Denny's Corporation, and Robert P. Verostek, 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)

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:

~~August 1,~~October 30, 2023

By:

/s/ Robert P. Verostek

Robert P. Verostek

Executive Vice President and
Chief Financial Officer

Date:

~~August 1,~~October 30, 2023

By:

/s/ Jay C. Gilmore

Jay C. Gilmore

Senior Vice President,
Chief Accounting Officer and
Corporate Controller


			Page
PART I - FINANCIAL INFORMATION

Item 1. Financial Statements (Unaudited)
Consolidated Balance Sheets			3
Consolidated Statements of Operations			4
Consolidated Statements of Comprehensive Income			5
Consolidated Statements of Shareholders' Deficit			6
Consolidated Statements of Cash Flows			8
Notes to Consolidated Financial Statements			9
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations			20
Item 3. Quantitative and Qualitative Disclosures About Market Risk			29
Item 4. Controls and Procedures			30

PART II - OTHER INFORMATION

Item 1. Legal Proceedings			3031
Item 1A. Risk Factors			3031
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds			31
Item 5. Other Information			31
Item 6. Exhibits			32
Signatures			33