Registration File No. 333-239004
| | Per Share | | | Total | |
Public Offering Price | | | $ | | | $ |
Underwriting Discount | | | $ | | | $ |
Proceeds, before expenses, to Denny’s | | | $ | | | $ |
Wells Fargo Securities | Citizens Capital Markets | Regions Securities LLC |
| | Per Share | | | Total | |
Public Offering Price | | | $ | | | $ |
Underwriting Discount | | | $ | | | $ |
Proceeds, before expenses, to Denny’s | | | $ | | | $ |
Wells Fargo Securities | Citizens Capital Markets | Regions Securities LLC |
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• | our Annual Report on Form 10-K for the fiscal year ended December 25, 2019 (including portions of our definitive proxy statement on Schedule 14A filed with the SEC on April 9, 2020); |
• | our Quarterly Report on Form 10-Q for the quarter ended March 25, 2020; |
• | our Current Reports on Form 8-K filed with the SEC on February 4, 2020, March 4, 2020, March 16, 2020 (excluding Item 7.01 and Exhibit 99.1), April 7, 2020 (excluding Item 2.02), May 4, 2020 (excluding Item 2.02 and Exhibit 99.1), May 14, 2020 (excluding Item 2.02 and Exhibit 99.1) and May 27, 2020; and |
• | the description of our common stock set forth in our Registration Statement on Form 8-A filed with the SEC on January 7, 1998 under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), including any amendment or report filed for the purpose of updating such description. |
• | Same-Store Sales include sales at Company restaurants and non-consolidated franchised and licensed restaurants that were open during the same period in the prior year. Total operating revenue is limited to Company restaurant sales and royalties, advertising revenue, fees and occupancy revenue from non-consolidated franchised and licensed restaurants. |
• | Total System Sales represents the sum of sales generated at all Denny’s locations worldwide, including franchise and licensed restaurants which are non-consolidated entities. |
• | We define Total 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. We exclude general and administrative expenses, which includes primarily non restaurant level costs associated with support of company and franchised restaurants and other activities at our corporate office. We exclude 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. We exclude special items, included within operating (gains), losses and other charges, net, to provide investors with a clearer perspective of our ongoing operating performance and a more relevant comparison to prior period results. Total Operating Margin is equal to the sum of Company Restaurant Operating Margin and Franchise Operating Margin. We define Company Restaurant Operating Margin as Company restaurant sales less costs of Company restaurant sales (which include product costs, Company restaurant level payroll and benefits, occupancy costs, and other operating costs including utilities, repairs and maintenance, marketing and other expenses). We define Franchise Operating Margin as franchise and license revenue (which includes franchise royalties and other non food and beverage revenue streams such as initial franchise fees, advertising revenue and occupancy revenue) less costs of franchise and license revenue. |
• | Adjusted EBITDA is used as a measure of operating performance, and is defined as net income excluding income taxes, interest expense, depreciation and amortization and special items, including operating gains, losses and other charges, other non-operating income or expense, share-based compensation expense, deferred compensation plan market valuation adjustments, cash payments for restructuring charges and exit costs, and cash payments for share-based compensation. |
• | Adjusted Free Cash Flow is defined as Adjusted EBITDA less the cash portion of interest expense net of interest income, capital expenditures, and cash taxes. |
• | We define Adjusted Net Income as net income, less tax-adjusted gains and losses from unique events, including the sale of assets and impairment charges. |
• | Please see “Summary—Denny’s” for a reconciliation of Adjusted EBITDA, Adjusted Free Cash Flow, Adjusted Net Income and Adjusted Net Income Per Share to net income and Total Operating Margin to operating income, the most closely comparable financial measures calculated in accordance with GAAP. |
(in billions) | | | 2015 | | | 2016 | | | 2017 | | | 2018 | | | 2019 |
Total System Sales | | | $2.73 | | | $2.79 | | | $2.85 | | | $2.89 | | | $2.93 |
(in millions, except per share amounts) | | | 2015 | | | 2016 | | | 2017 | | | 2018 | | | 2019 |
Net Income | | | $36.0 | | | $19.4 | | | $39.6 | | | $43.7 | | | $117.4 |
Provision for Income Taxes | | | 17.8 | | | 16.5 | | | 17.2 | | | 8.6 | | | 31.8 |
Operating (Gains) Losses and Other Charges, Net | | | 2.4 | | | 26.9 | | | 4.3 | | | 2.6 | | | (91.2) |
Other Non-Operating (Income) Expense, Net | | | 0.1 | | | (1.1) | | | (1.7) | | | 0.6 | | | (2.8) |
Share-Based Compensation | | | 6.6 | | | 7.6 | | | 8.5 | | | 6.0 | | | 6.7 |
Deferred Compensation Plan Valuation Adjustments | | | — | | | 0.9 | | | 1.6 | | | (1.0) | | | 2.6 |
Interest Expense, Net | | | 9.3 | | | 12.2 | | | 15.6 | | | 20.7 | | | 18.5 |
Depreciation and Amortization | | | 21.5 | | | 22.2 | | | 23.7 | | | 27.0 | | | 19.8 |
Cash Payments for Restructuring Charges & Exit Costs | | | (1.5) | | | (1.8) | | | (1.7) | | | (1.1) | | | (2.6) |
Cash Payments for Share-Based Compensation | | | (3.4) | | | (2.5) | | | (3.9) | | | (1.9) | | | (3.6) |
Adjusted EBITDA(1) | | | $88.8 | | | $100.2 | | | $103.3 | | | $105.3 | | | $96.8 |
Cash Interest Expense, Net | | | (8.3) | | | (11.2) | | | (14.6) | | | (19.6) | | | (17.6) |
Cash Taxes | | | (5.4) | | | (3.0) | | | (6.4) | | | (3.3) | | | (24.1) |
Capital Expenditures | | | (32.8) | | | (34.0) | | | (31.2) | | | (32.4) | | | (25.3) |
Adjusted Free Cash Flow(1) | | | $42.3 | | | $51.9 | | | $51.2 | | | $50.0 | | | $29.8 |
Net Income | | | $36.0 | | | $19.4 | | | $39.6 | | | $43.7 | | | $117.4 |
Pension Settlement Loss | | | — | | | 24.3 | | | — | | | — | | | — |
(Gains) Losses on Sales of Assets and Other, Net | | | (0.1) | | | — | | | 3.5 | | | (0.5) | | | (93.6) |
Impairment Charges | | | 0.9 | | | 1.1 | | | 0.3 | | | 1.6 | | | — |
Early Extinguishment of Debt | | | 0.3 | | | — | | | — | | | — | | | — |
Tax Reform | | | — | | | — | | | (1.6) | | | — | | | — |
Tax Effect of Adjustments(2) | | | (0.4) | | | (2.5) | | | (1.2) | | | (0.2) | | | 24.1 |
Adjusted Net Income | | | $36.7 | | | $42.3 | | | $40.7 | | | $44.6 | | | $47.9 |
Diluted Net Income Per Share | | | $0.42 | | | $0.25 | | | $0.56 | | | $0.67 | | | $1.90 |
Adjustments Per Share | | | $0.01 | | | $0.30 | | | $0.02 | | | $0.01 | | | ($1.13) |
Adjusted Net Income Per Share | | | $0.43 | | | $0.55 | | | $0.58 | | | $0.68 | | | $0.77 |
Diluted Weighted Average Shares Outstanding (000’s) | | | 84,729 | | | 77,206 | | | 70,403 | | | 65,562 | | | 61,833 |
(1) | Beginning in 2018, historical presentations of Adjusted EBITDA and Adjusted Free Cash Flow have been restated to exclude the impact of market valuation changes in our non-qualified deferred compensation plan liabilities. |
(2) | Tax adjustments for full year 2015, 2017 and 2018 use full year effective tax rates of 33.0%, 30.3% and 16.4%, respectively. The tax adjustment for the loss on pension termination for the year ended December 28, 2016 is calculated using an effective tax rate of 8.8%. The remaining tax adjustments for the year ended December 28, 2016 are calculated using the Company's effective tax rate of 30.9%. Tax adjustments for the gains on sales of assets and other, net in full year 2019 are calculated using an effective tax rate of 25.7%. |
(in millions) | | | 2015 | | | 2016 | | | 2017 | | | 2018 | | | 2019 |
Operating Income | | | $63.2 | | | $47.0 | | | $70.7 | | | $73.6 | | | $165.0 |
General and Administrative Expenses | | | 66.6 | | | 68.0 | | | 66.4 | | | 63.8 | | | 69.0 |
Depreciation and Amortization | | | 21.5 | | | 22.2 | | | 23.7 | | | 27.0 | | | 19.8 |
Operating (Gains) Losses and Other Charges, Net | | | 2.4 | | | 26.9 | | | 4.3 | | | 2.6 | | | (91.2) |
Total Operating Margin | | | $153.6 | | | $164.0 | | | $165.2 | | | $167.1 | | | $162.7 |
Total Operating Margin Consists Of: | | | | | | | | | | | |||||
Company Restaurant Operating Margin | | | 58.7 | | | 65.2 | | | 65.6 | | | 63.2 | | | 48.0 |
Franchise Operating Margin | | | 94.9 | | | 98.8 | | | 99.5 | | | 104.0 | | | 114.7 |
Total Operating Margin | | | $153.6 | | | $164.0 | | | $165.2 | | | $167.1 | | | $162.7 |
| Fiscal April | | | Fiscal May | | | Fiscal June | | ||||||||||||||||||||||||
| 4/1 | | | 4/8 | | | 4/15 | | | 4/22 | | | 4/29 | | | 5/6 | | | 5/13 | | | 5/20 | | | 5/27 | | | 6/03 | | | 6/10 | |
| -79% | | | -78% | | | -76% | | | -72% | | | -72% | | | -68% | | | -63% | | | -60% | | | -55% | | | -47% | | | -40% | |
| 4/29 | | | 5/6 | | | 5/13 | | | 5/20 | | | 5/27 | | | 6/03 | | | 6/10 | |
| 11 | | | 339 | | | 521 | | | 646 | | | 967 | | | 1,116 | | | 1,234 | |
| 4/29 | | | 5/6 | | | 5/13 | | | 5/20 | | | 5/27 | | | 6/03 | | | 6/10 | |
| 71% | | | 76% | | | 82% | | | 84% | | | 90% | | | 92% | | | 94% | |
(in thousands) | | | 4/1 | | | 4/8 | | | 4/15 | | | 4/22 | | | 4/29 | | | 5/6 | | | 5/13 | | | 5/20 | | | 5/27 | | | 6/03 | | | 6/10 |
Off Premise Sales | | | $7.1 | | | $7.5 | | | $8.5 | | | $10.0 | | | $9.7 | | | $9.6 | | | $10.3 | | | $8.8 | | | $8.3 | | | $7.7 | | | $7.2 |
Dine In Sales | | | 0.3 | | | 0.2 | | | 0.2 | | | 0.3 | | | 0.3 | | | 1.5 | | | 3.3 | | | 5.2 | | | 8.1 | | | 10.4 | | | 13.3 |
Total Sales | | | 7.4 | | | 7.7 | | | 8.7 | | | 10.3 | | | 10.0 | | | 11.2 | | | 13.6 | | | 13.9 | | | 16.4 | | | 18.1 | | | 20.6 |
• | Disruptions or restrictions on our employees’ ability to work effectively due to travel bans, quarantines, shelter-in-place orders or other limitations. |
• | Temporary restrictions on and closures of our Company operated restaurants and our franchisees’ restaurants or our suppliers. |
• | Failure of third parties on which we rely, including our franchisees and suppliers, to meet their respective obligations to the Company, or significant disruptions in their ability to do so, which may be caused by their own financial or operational difficulties or issues with the regional or national supply chain. |
• | Increased or volatile commodity costs due to the COVID-19 outbreak. |
• | Disruptions or uncertainties related to the COVID-19 outbreak for a sustained period of time which could hinder our ability to achieve our strategic goals and our ability to meet financial obligations as they come due. |
• | the ongoing implications of the COVID-19 pandemic on our business and operations, which include, among other things, reduced customer traffic at our restaurants, potential increases in commodity costs, closures of or reduced operating hours at our affected restaurants, our ability to implement growth plans, adverse effects on the health of our workforce, our financial results and liquidity, and may also include potential inability to obtain supplies and our ability to comply with covenants under our Amended Credit Agreement; |
• | delays in the planned openings of new restaurants; |
• | temporary or prolonged restaurant closures; |
• | actual or anticipated quarterly fluctuations in our operating results and financial conditions; |
• | anticipated or pending investigations, proceedings, or litigation that involve or affect us; |
• | stock price performance of our competitors; |
• | future sales of our common stock; |
• | changes in the price and availability of food commodities; |
• | fluctuations in stock market prices and volumes; |
• | actions by competitors; |
• | changes in senior management or key personnel; |
• | changes in financial estimates by securities analysts; |
• | negative earnings or other announcements by us or other restaurant companies; |
• | downgrades in our credit ratings or the credit ratings of our competitors; |
• | incurrence of indebtedness or issuances of capital stock; |
• | global economic, legal and regulatory factors unrelated to our performance; and |
• | the other factors incorporated by reference in this prospectus supplement and the accompanying prospectus. |
• | the authorization of undesignated preferred stock, the terms of which may be established and shares of which may be issued without stockholder approval; |
• | restrictions on the ability of our stockholders to fill a vacancy on our board of directors; |
• | advance notice requirements for stockholder nominations of directors and other proposals; and |
• | restrictions on the ability of stockholders to call a special meeting of stockholders. |
• | banks, insurance companies or other financial institutions; |
• | persons who hold or receive our common stock pursuant to the exercise of any employee stock option or otherwise as compensation; |
• | qualified foreign pension funds as defined in Section 897(l)(2) of the Code and entities all of the interest which are held by qualified foreign pension funds; |
• | tax-qualified retirement plans; |
• | tax-exempt organizations or governmental organizations; |
• | controlled foreign corporations, passive foreign investment companies and corporations that accumulate earnings to avoid U.S. federal income tax; |
• | partnerships or other entities or arrangements treated as partnerships for U.S. federal income tax purposes; |
• | dealers in securities or currencies; |
• | traders in securities that elect to use a mark-to-market method of accounting for their securities holdings; |
• | persons that own, directly or indirectly, more than five percent of our common stock, except to the extent specifically set forth below; |
• | real estate investment trusts or regulated investment companies; |
• | certain former citizens or long-term residents of the United States; or |
• | persons who hold our common stock as part of a straddle, hedge, conversion, constructive sale, or other integrated security transaction. |
• | an individual who is a citizen or resident of the United States; |
• | a corporation (or any other entity treated as a corporation for U.S. federal income tax purposes) that is created or organized under the laws of the United States, any state thereof or the District of Columbia; |
• | an estate the income of which is subject to U.S. federal income taxation regardless of its source; or |
• | a trust if (A) a court within the United States is able to exercise primary control over its administration and one or more “United States persons” (as defined in the Code) have the authority to control all substantial decisions of such trust, or (B) the trust has made a valid election under the applicable Treasury regulations to be treated as a U.S. person for U.S. federal income tax purposes. |
i. | the gain is effectively connected with the conduct by such Non-U.S. Holder of a trade or business within the United States (and, if required by an applicable income tax treaty, is attributable to a permanent establishment or fixed base within the United States), |
ii. | in the case of an individual, such Non-U.S. Holder is present in the United States for 183 or more days in the taxable year of the disposition and certain other conditions are satisfied, or |
iii. | our common stock constitutes a U.S. real property interest by reason of our status as a U.S. real property holding corporation (a “USRPHC”) under the Foreign Investment in Real Property Tax Act (“FIRPTA”) for U.S. federal income tax purposes. |
Underwriter | | | Number of Shares |
Wells Fargo Securities, LLC | | | |
Citizens Capital Markets, Inc. | | | |
Regions Securities LLC | | | |
Total | | | 8,000,000 |
| | No Exercise | | | Full Exercise | |
Per Share | | | $ | | | $ |
Total | | | $ | | | $ |
(a) | to any legal entity which is a qualified investor as defined under the Prospectus Regulation; |
(b) | to fewer than 150 natural or legal persons (other than qualified investors as defined under the Prospectus Regulation), subject to obtaining the prior consent of the underwriters for any such offer; or |
(c) | in any other circumstances falling within Article 1(4) of the Prospectus Regulation; |
• | shares of common stock, $0.01 par value; |
• | shares of preferred stock, $0.10 par value; and |
• | warrants to purchase shares of common stock or preferred stock. |
• | at a fixed price or at final prices, which may be changed; |
• | at market prices prevailing at the time of sale; |
• | at prices related to such prevailing market prices; or |
• | at negotiated prices. |
• | the business combination or the transaction that resulted in the interested stockholder becoming an interested stockholder is approved by the corporation’s board of directors prior to the time the interested stockholder becomes an interested stockholder; |
• | upon consummation of the transaction that resulted in the interested stockholder becoming an interested stockholder, the interested stockholder owned at least 85% of the voting stock of the corporation, other than stock held by directors who are also officers or by specified employee stock plans; or |
• | at or after the time the stockholder becomes an interested stockholder, the business combination is approved by a majority of the board of directors and, at an annual or special meeting, by the affirmative vote of two-thirds of the outstanding voting stock that is not owned by the interested stockholder. |
• | for any breach of the director’s duty of loyalty to the Company or its stockholders, |
• | for acts or omissions not in good faith or which involve intentional misconduct or a knowing violation of law, |
• | under section 174 of the DGCL, which pertains, among other things, to liability for the unlawful payment of dividends, or |
• | for any transaction from which the director derived an improper personal benefit. |
• | the title of such warrants; |
• | the aggregate number of such warrants; |
• | the price or prices at which such warrants will be issued; |
• | the currency or currencies, in which the price of such warrants will be payable; |
• | the securities purchasable upon exercise of such warrants; |
• | the price at which and the currency or currencies in which the securities or other rights purchasable upon exercise of such warrants may be purchased; |
• | the date on which the right to exercise such warrants shall commence and the date on which such right shall expire; |
• | if applicable, the minimum or maximum amount of such warrants which may be exercised at any one time; |
• | if applicable, the designation and terms of the securities with which such warrants are issued and the number of such warrants issued with each such security; |
• | if applicable, the date on and after which such warrants and the related securities will be separately transferable; |
• | information with respect to book-entry procedures, if any; |
• | if applicable, a discussion of any material United States federal income tax considerations; and |
• | any other terms of such warrants, including terms, procedures and limitations relating to the exchange and exercise of such warrants. |
• | our Annual Report on Form 10-K for the fiscal year ended December 25, 2019 (including portions of our definitive proxy statement on Schedule 14A filed with the SEC on April 9, 2020); |
• | our Quarterly Report on Form 10-Q for the quarter ended March 25, 2020; |
• | our Current Reports on Form 8-K filed with the SEC on February 4, 2020, March 4, 2020, March 16, 2020 (excluding Item 7.01 and Exhibit 99.1), April 7, 2020 (excluding Item 2.02), May 4, 2020 (excluding Item 2.02 and Exhibit 99.1), May 14, 2020 (excluding Item 2.02 and Exhibit 99.1) and May 27, 2020; and |
• | the description of our common stock set forth in our Registration Statement on Form 8-A filed with the SEC on January 7, 1998 under the Exchange Act, including any amendment or report filed for the purpose of updating such description. |
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