DENNYS CORP (Form: 10-Q, Received: 05/03/2011 17:26:56)

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE

SECURITIES EXCHANGE ACT OF 1934

For the Quarterly Period Ended March 30, 2011

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		(I.R.S. Employer
incorporation or organization		Identification No.)

203 East Main Street

Spartanburg, South Carolina 29319-0001

(Address of principal executive offices)

(Registrant’s telephone number, including area code)

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.

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted 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 and post such files).

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer	o	Accelerated filer	þ	Non-accelerated filer	o	Smaller reporting company	o
				(Do not check if a smaller reporting company)

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

As of April 28, 2011, 98,915,195 shares of the registrant’s common stock, par value $.01 per share, were outstanding.

TABLE OF CONTENTS

		Page
Part I - FINANCIAL INFORMATION

Item 1. Financial Statements
Condensed Consolidated Statements of Operations
Quarter Ended March 30, 2011 and March 31, 2010 (unaudited)		3
Condensed Consolidated Balance Sheets (unaudited)		4
Condensed Consolidated Statement of Shareholders' Deficit and Comprehensive Income (unaudited)		5
Condensed Consolidated Statements of Cash Flows (unaudited)		6
Notes to Condensed Consolidated Financial Statements (unaudited)		7
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations		15
Item 3. Quantitative and Qualitative Disclosures About Market Risk		19
Item 4. Controls and Procedures		20

PART II - OTHER INFORMATION

Item 1. Legal Proceedings		20
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds		20
Item 6. Exhibits		21
Signatures		22

PART I - FINANCIAL INFORMATION

Item 1. Financial Statements

Denny’s Corporation and Subsidiaries

Condensed Consolidated Statements of Operations

(Unaudited)

	Quarter Ended
	March 30, 2011			March 31, 2010
	(In thousands, except per share amounts)
Revenue:
Company restaurant sales	$	104,555		$	107,783
Franchise and license revenue		31,250			29,789
Total operating revenue		135,805			137,572
Costs of company restaurant sales:
Product costs		25,635			25,692
Payroll and benefits		44,196			44,176
Occupancy		6,860			7,401
Other operating expenses		15,257			15,864
Total costs of company restaurant sales		91,948			93,133
Costs of franchise and license revenue		11,565			12,366
General and administrative expenses		14,139			13,074
Depreciation and amortization		7,188			7,373
Operating (gains), losses and other changes, net		(529	)		423
Total operating costs and expenses		124,311			126,369
Operating income		11,494			11,203
Other expenses:
Interest expense, net		5,693			6,398
Other nonoperating expense (income), net		1,478			(12	)
Total other expenses, net		7,171			6,386
Net income before income taxes		4,323			4,817
Provision for income taxes		199			229
Net income	$	4,124		$	4,588

Basic and diluted net income per share	$	0.04		$	0.05

Weighted average shares outstanding:
Basic		98,980			97,095
Diluted		101,362			100,153

See accompanying notes

Denny’s Corporation and Subsidiaries

Condensed Consolidated Balance Sheets

(Unaudited)

	March 30, 2011			December 29, 2010
	(In thousands)
Assets
Current Assets:
Cash and cash equivalents	$	19,171		$	29,074
Receivables, less allowance for doubtful accounts of $387 and $207, respectively		15,266			17,280
Inventories		3,862			4,037
Assets held for sale		548			1,933
Prepaid and other current assets		10,293			10,162
Total Current Assets		49,140			62,486

Property, net of accumulated depreciation of $247,909 and $247,492, respectively		128,274			129,518

Other Assets:
Goodwill		31,308			31,308
Intangible assets, net		51,400			52,054
Deferred financing costs, net		7,581			5,286
Other noncurrent assets		29,065			30,554
Total Assets	$	296,768		$	311,206

Liabilities
Current Liabilities:
Current maturities of notes and debentures	$	2,585		$	2,583
Current maturities of capital lease obligations		4,213			4,109
Accounts payable		20,379			25,957
Other current liabilities		58,877			57,685
Total Current Liabilities		86,054			90,334

Long-Term Liabilities:
Notes and debentures, less current maturities, net of discount of $3,012 and $3,455, respectively		224,564			234,143
Capital lease obligations, less current maturities		19,009			18,988
Liability for insurance claims, less current portion		18,030			18,810
Deferred income taxes		13,351			13,339
Other noncurrent liabilities and deferred credits		38,017			39,304
Total Long-Term Liabilities		312,971			324,584
Total Liabilities		399,025			414,918

Commitments and contingencies

Shareholders' Deficit
Common stock $0.01 par value; authorized - 135,000; issued –101,818 and 100,073, respectively		1,018			1,001
Paid-in capital		553,383			548,490
Deficit		(625,990	)		(630,114	)
Accumulated other comprehensive loss, net of tax		(19,199	)		(19,199	)
		(90,788	)		(99,822	)
Treasury stock, at cost, 3,000 and 1,037 shares, respectively		(11,469	)		(3,890	)
Total Shareholders' Deficit		(102,257	)		(103,712	)
Total Liabilities and Shareholders' Deficit	$	296,768		$	311,206

See accompanying notes

Denny’s Corporation and Subsidiaries

Condensed Consolidated Statement of Shareholders’ Deficit and Comprehensive Income

(Unaudited)

	Common Stock				Treasury Stock						Paid-in					Accumulated Other Comprehensive			Total Shareholders’
	Shares		Amount		Shares			Amount			Capital		(Deficit)			Loss, Net			Deficit
	(In thousands)
Balance, December 29, 2010		100,073	$	1,001		(1,037	)	$	(3,890	)	$	548,490	$	(630,114	)	$	(19,199	)	$	(103,712	)
Comprehensive income:
Net income		—		—		—			—			—		4,124			—			4,124
Comprehensive income		—		—		—			—			—		4,124			—			4,124
Share-based compensation on equity classified awards		—		—		—			—			806		—			—			806
Purchase of treasury stock		—		—		(1,963	)		(7,579	)		—		—			—			(7,579	)
Issuance of common stock for share-based compensation		19		—		—			—			—		—			—			—
Exercise of common stock options		1,726		17		—			—			4,087		—			—			4,104
Balance, March 30, 2011		101,818	$	1,018		(3,000	)	$	(11,469	)	$	553,383	$	(625,990	)	$	(19,199	)	$	(102,257	)

See accompanying notes

Denny’s Corporation and Subsidiaries

Condensed Consolidated Statements of Cash Flows

(Unaudited)

	Quarter Ended
	March 30, 2011			March 31, 2010
	(In thousands)
Cash Flows from Operating Activities:
Net income	$	4,124		$	4,588
Adjustments to reconcile net income to cash flows provided by operating activities:
Depreciation and amortization		7,188			7,373
Operating (gains), losses and other charges, net		(529	)		423
Amortization of deferred financing costs		292			259
Amortization of debt discount		144			—
Loss on early extinguishment of debt		1,717			26
Loss on interest rate swap		—			167
Deferred income tax expense		12			29
Share-based compensation		973			1,358
Changes in assets and liabilities, net of effects of acquisitions and dispositions:
Decrease (increase) in assets:
Receivables		2,467			2,692
Inventories		175			352
Other current assets		(131	)		(1,828	)
Other assets		984			(1,380	)
Increase (decrease) in liabilities:
Accounts payable		(1,333	)		6,140
Accrued salaries and vacations		1,539			(5,822	)
Accrued taxes		(265	)		(275	)
Other accrued liabilities		(157	)		1,390
Other noncurrent liabilities and deferred credits		(2,607	)		(826	)
Net cash flows provided by operating activities		14,593			14,666

Cash Flows from Investing Activities:
Purchase of property		(5,770	)		(3,164	)
Proceeds from disposition of property		2,452			4
Collections on notes receivable		236			1,890
Net cash flows used in investing activities		(3,082	)		(1,270	)

Cash Flows from Financing Activities:
Long-term debt payments		(11,038	)		(5,924	)
Proceeds from exercise of stock options		4,104			3,116
Debt transaction costs		(770	)		—
Deferred financing costs		(3,085	)		—
Purchase of treasury stock		(7,579	)		—
Net bank overdrafts		(3,046	)		(3,372	)
Net cash flows used in financing activities		(21,414	)		(6,180	)

(Decrease) increase in cash and cash equivalents		(9,903	)		7,216

Cash and Cash Equivalents at:
Beginning of period		29,074			26,525
End of period	$	19,171		$	33,741

See accompanying notes

Denny’s Corporation and Subsidiaries

Notes to Condensed Consolidated Financial Statements

(Unaudited)

Note 1. Introduction and Basis of Presentation

Denny’s Corporation (Denny’s or the Company) is one of America’s largest family-style restaurant chains. At March 30, 2011, the Denny’s brand consisted of 1,665 restaurants, 1,439 (86%) of which were franchised/licensed restaurants and 226 (14%) of which were company-owned and operated.

The following table shows the unit activity for the quarter ended March 30, 2011 and March 31, 2010:

	Quarter Ended
	March 30, 2011			March 31, 2010
Company-owned restaurants, beginning of period		232			233
Units opened		5			4
Units sold to franchisees		(9	)		—
Units closed		(2	)		—
End of period		226			237

Franchised and licensed restaurants, beginning of period		1,426			1,318
Units opened		13			6
Units purchased from Company		9			—
Units closed		(9	)		(2	)
End of period		1,439			1,322
Total company-owned, franchised and licensed restaurants, end of period		1,665			1,559

Of the 18 units opened during the quarter ended March 30, 2011, five company-owned and seven franchise units represent conversions of restaurants at Pilot Flying J Travel Centers. Of the ten units opened during the quarter ended March 31, 2010, the four company-owned units represent conversions of restaurants at Pilot Flying J Travel Centers.

Our unaudited condensed consolidated financial statements have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission. Therefore, certain information and notes normally included in financial statements prepared in accordance with U.S. generally accepted accounting principles 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, including those for the above-described items, are reasonable.

These interim condensed consolidated financial statements should be read in conjunction with our consolidated financial statements and notes thereto for the year ended December 29, 2010 and the related Management’s Discussion and Analysis of Financial Condition and Results of Operations, both of which are contained in our Annual Report on Form 10-K for the fiscal year ended December 29, 2010. The results of operations for the interim periods presented are not necessarily indicative of the results for the entire fiscal year ending December 28, 2011.

Note 2. Summary of Significant Accounting Policies

Newly Adopted Accounting Standards

Fair Value

ASU No. 2010-06, “Fair Value Measurements and Disclosures (Topic 820): Improving Disclosures about Fair Value Measurements”

Effective December 30, 2011, we adopted the disclosure requirements of ASU No. 2010-06 about purchases, sales, issuances and settlements relating to Level 3 measurements. The adoption did not have any impact on the disclosures included in our Condensed Consolidated Financial Statements.

Receivables

ASU No. 2010-20, “Disclosures about the Credit Quality of Financing Receivables and the Allowance for Credit Losses”

Effective December 30, 2011, we adopted the disclosure provisions of ASU No. 2010-20 requiring a rollforward of the allowance for credit losses and new disclosures about modifications. The adoption resulted in increased notes receivable disclosure, but did not have any impact on our Condensed Consolidated Financial Statements.

Goodwill

ASU No. 2010-28, “ Intangibles—Goodwill and Other (Topic 350): When to Perform Step 2 of the Goodwill Impairment Test for Reporting Units with Zero or Negative Carrying Amounts (a consensus of the FASB Emerging Issues Task Force)”

Effective December 30, 2011, we adopted ASU No. 2010-28, which modifies Step 1 of the goodwill impairment test for reporting units with zero or negative carrying amounts. The guidance requires an entity to perform Step 2 of the goodwill impairment test if it is more likely than not that a goodwill impairment exists. In determining whether it is more likely than not that a goodwill impairment exists, an entity should consider whether there are any adverse qualitative factors indicating that an impairment may exist. The adoption did not have a material impact on our Condensed Consolidated Financial Statements.

Accounting Standards to be Adopted

We reviewed significant newly issued accounting pronouncements and concluded that they are either not applicable to the our business or that no material effect is expected on the financial statements as a result of future adoption.

Note 3. Receivables

Receivables, net were comprised of the following:

	March 30, 2011			December 29, 2010
	(In thousands)
Current assets:
Receivables:
Trade accounts receivable from franchisees	$	10,859		$	11,538
Notes receivable from franchisees and third parties		1,474			1,020
Vendor receivables		1,067			2,571
Credit card receivables		977			1,206
Other		1,276			1,152
Allowance for doubtful accounts		(387	)		(207	)
	$	15,266		$	17,280
Direct financing lease receivables (included as a component of prepaid and other current assets)	$	74		$	74

Noncurrent assets (included as a component of other noncurrent assets):
Notes receivable from franchisees and third parties	$	1,140		$	1,329
Direct financing lease receivables		5,318			5,119
	$	6,458		$	6,448

We recorded provisions for credit losses of $0.2 million for the period ended March 30, 2011. We reversed provisions for credit losses of less than $0.1 million for the period ended March 31, 2010.

Note 4. Assets Held for Sale

Assets held for sale of $0.5 million and $1.9 million as of March 30, 2011 and December 29, 2010, respectively, include restaurants and real estate to be sold to franchisees. We expect to sell each of these assets within 12 months. Our credit facility (as described in Note 8) requires us to make mandatory prepayments to reduce outstanding indebtedness with the net cash proceeds from the sale of restaurant assets and restaurant operations to franchisees, net of a voluntary $25.0 million annual exclusion. As of March 30, 2011 and December 29, 2010, no reclassification of long-term debt to current liabilities was necessary pursuant to this requirement. There were no impairment charges recognized related to assets held for sale for the quarters ended March 30, 2011 and March 31, 2010, respectively.

Note 5. Goodwill and Other Intangible Assets

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

	March 30, 2011
	(In thousands)
Balance, beginning of year	$	31,308
Adjustments associated with sale of restaurants		16
Reclassification to assets held for sale		(16	)
Balance, end of period	$	31,308

Goodwill and intangible assets were comprised of the following:

	March 30, 2011				December 29, 2010
	Gross Carrying Amount		Accumulated Amortization		Gross Carrying Amount		Accumulated Amortization
	(In thousands)
Goodwill	$	31,308	$	—	$	31,308	$	—

Intangible assets with indefinite lives:
Trade names	$	42,495	$	—	$	42,493	$	—
Liquor licenses		164		—		164		—
Intangible assets with definite lives:
Franchise and license agreements		43,155		34,489		46,088		36,769
Foreign license agreements		241		166		241		163
Intangible assets	$	86,055	$	34,655	$	88,986	$	36,932

Other assets with definite lives:
Software development costs	$	33,742		30,957	$	33,673	$	30,426

Note 6. Operating (Gains), Losses and Other Charges, Net

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

	Quarter Ended
	March 30, 2011				March 31, 2010
	(In thousands)
Gains on sales of assets and other, net		$	(996	)		$	(210	)
Restructuring charges and exit costs			467				633
Impairment charges			—				—
Operating (gains), losses and other charges, net		$	(529	)		$	423

Gains on Sales of Assets

During the quarter ended March 30, 2011, we recognized $0.7 million of gains on the sale of nine restaurant operations to two franchisees for net proceeds of $3.0 million (which included notes receivable of $0.5 million). In addition, during the quarter ended March 30, 2011, we recognized deferred gains of $0.3 million, primarily related to a restaurant sold to a franchisee during a prior period. During the quarter ended March 31, 2010, we did not sell any restaurant operations to franchisees.

Restructuring Charges and Exit Costs

Restructuring charges and exit costs were comprised of the following:

	Quarter Ended
	March 30, 2011			March 31, 2010
	(In thousands)
Exit costs		$	362		$	628
Severance and other restructuring charges			105			5
Total restructuring and exit costs		$	467		$	633

The components of the change in accrued exit cost liabilities are as follows:

	(In thousands)
Balance at December 29, 2010	$	4,948
Provisions for units closed during the year (1)		20
Changes in estimates of accrued exit costs, net (1)		342
Payments, net of sublease receipts		(585	)
Interest accretion		115
Balance at March 30, 2011		4,840
Less current portion included in other current liabilities		1,519
Long-term portion included in other noncurrent liabilities	$	3,321

(1)	Included as a component of operating (gains), losses and other charges, net.

Estimated net cash payments related to exit cost liabilities in the next five years are as follows:

	(In thousands)
Remainder of 2011	$	1,204
2012		1,260
2013		771
2014		634
2015		342
Thereafter		1,204
Total		5,415
Less imputed interest		575
Present value of exit cost liabilities	$	4,840

As of March 30, 2011 and December 29, 2010, we had accrued severance and other restructuring charges of $0.1 million and $0.1 million, respectively. The balance as of March 30, 2011 is expected to be paid during the next 12 months.

Note 7. Fair Value of Financial Instruments

Fair Value of Assets and Liabilities Measured on a Recurring and Nonrecurring Basis

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

	Fair Value Measurements as of March 30, 2011
	Total		Quoted Prices in Active Markets for Identical Assets/Liabilities (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Valuation Technique
	(In thousands )
Deferred compensation plan investments	$	4,791	$	4,791	$	—	$	—	market approach
Total	$	4,791	$	4,791	$	—	$	—

	Fair Value Measurements as of March 31, 2010
	Total		Quoted Prices in Active Markets for Identical Assets/Liabilities (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Valuation Technique
	(In thousands )
Deferred compensation plan investments	$	6,374	$	6,374	$	—	$	—	market approach
Total	$	6,374	$	6,374	$	—	$	—

In addition to the financial assets and liabilities that are measured at fair value on a recurring basis, we measure certain assets and liabilities at fair value on a nonrecurring basis. As of March 30, 2011 and March 31, 2010, there were no such nonrecurring measurements.

Fair Value of Long-Term Debt

The book value and estimated fair value of our long-term debt, excluding capital lease obligations, was as follows:

	March 30, 2011		December 29, 2010
	(In thousands)
Book value:
Fixed rate long-term debt	$	161	$	181
Variable rate long-term debt		230,000		240,000
Long term debt excluding capital lease obligations	$	230,161	$	240,181

Estimate fair value:
Fixed rate long-term debt	$	161	$	181
Variable rate long-term debt		231,150		243,000
Long term debt excluding capital lease obligations	$	231,311	$	243,181

The difference between the estimated fair value of long-term debt compared with its historical cost reported in our Condensed Consolidated Balance Sheets at March 30, 2011 and December 29, 2010 relates to market quotations for our senior secured term loan.

Note 8. Long-Term Debt

Re-pricing of Credit Facility

On March 1, 2011, our subsidiaries Denny’s, Inc. and Denny’s Realty, LLC, amended our credit facility principally to take advantage of lower interest rates available in the current senior secured debt market. The credit facility, as amended, at March 1, 2011, was in an aggregate principal amount of $290 million consisting of a $50 million five year senior secured revolver (with a $30 million letter of credit sublimit) and a $240 million six year senior secured term loan. The credit facility includes an accordion feature that allows us to increase the size of the facility by $25 million subject to lender approval. On March 25, 2011, we used the credit facility’s accordion feature to increase the amount available under the revolver to $60 million.

A commitment fee of 0.625% is paid on the unused portion of the revolving credit facility. Interest on the credit facility is payable at per annum rates equal to LIBOR plus 375 basis points with a LIBOR floor of 1.50% for the term loan and no LIBOR floor for the revolver. The term loan was originally issued at 98.5% reflecting an original issue discount (“OID”) of $3.8 million. The OID is being amortized into interest expense over the life of the term loan using the effective interest rate method. The maturity date for the revolver is September 30, 2015. The maturity date for the term loan is September 30, 2016. The term loan amortizes in equal quarterly installments of $625,000 with all remaining amounts due on the maturity date. Mandatory prepayments will be required under certain circumstances and we will have the option to make certain prepayments under the credit facility.

The credit facility is guaranteed by the Company and its material subsidiaries and is secured by substantially all of the assets of the Company and its subsidiaries, including the stock of the Company’s subsidiaries. The credit facility includes certain financial covenants with respect to a maximum leverage ratio, a maximum lease-adjusted leverage ratio, a minimum fixed charged coverage ratio and limitations on capital expenditures.

As a result of this debt amendment, we recorded $1.4 million of losses on early extinguishment of debt, consisting primarily of $0.8 million of transaction costs, $0.4 million from the write-off of deferred financing costs and $0.2 million from the write-off of OID. These losses are included as a component of other nonoperating expense in the condensed Consolidated Statements of Operations.

During the quarter ended March 30, 2011, we paid $10.0 million (which included $9.4 million of prepayments and $0.6 million of scheduled payments) on the term loan in the Amended Credit Facility through a combination of proceeds on sales of restaurant operations to franchisees, real estate and other assets, as well as cash generated from operations. As a result of these prepayments, we recorded $0.3 million of losses on early extinguishment of debt resulting from the write-off of $0.2 million in deferred financing costs and $0.1 million in OID. These losses are included as a component of other nonoperating expense in our condensed Consolidated Statements of Operations.

As of March 30, 2011, we had an outstanding term loan of $227.0 million ($230.0 million less unamortized OID of $3.0 million) and outstanding letters of credit of $24.9 million under our revolving letter of credit facility. There were no revolving loans outstanding at March 30, 2011. These balances resulted in availability of $35.1 million under the revolving facility. We believe that our estimated cash flows from operations for 2011, combined with our capacity for additional borrowings under our credit facility, will enable us to meet our anticipated cash requirements and fund capital expenditures over the next twelve months. The weighted-average interest rate under the term loan was 5.25% and 6.50%, as of March 30, 2011 and December 29, 2010.

Note 9. Defined Benefit Plans

The components of net periodic benefit cost were as follows:

	Pension Plan								Other Defined Benefit Plans
	Quarter Ended								Quarter Ended
	March 30, 2011				March 31, 2010				March 30, 2011			March 31, 2010
	(In thousands)
Service cost		$	94			$	94			$	—		$	—
Interest cost			832				858				32			35
Expected return on plan assets			(1,045	)			(985	)			—			—
Amortization of net loss			239				217				8			5
Net periodic benefit cost		$	120			$	184			$	40		$	40

We did not make any contributions to our qualified pension plan during the quarters ended March 30, 2011 and March 31, 2010. We made contributions of less than $0.1 million to our other defined benefit plans during both the quarters ended March 30, 2011 and March 31, 2010. We expect to contribute an additional $1.9 million to our qualified pension plan and an additional $0.1 million to our other defined benefit plans over the remainder of fiscal 2011.

Additional minimum pension liability of $19.2 million is reported as a component of accumulated other comprehensive loss in the Condensed Consolidated Statement of Shareholders’ Deficit and Comprehensive Income as of March 30, 2011 and December 29, 2010.

Note 10. Share-Based Compensation

Total share-based compensation included as a component of net income was as follows:

	Quarter Ended
	March 30, 2011		March 31, 2010
	(In thousands)
Share-based compensation related to liability classified restricted stock units	$	167	$	724
Share-based compensation related to equity classified awards:
Stock options	$	258	$	310
Restricted stock units		440		303
Board deferred stock units		108		21
Total share-based compensation related to equity classified awards		806		634
Total share-based compensation	$	973	$	1,358

During the quarter ended March 30, 2011, we granted approximately 0.9 million stock options to certain employees. These stock options vest evenly over 3 years and have a 10-year contractual life.

The weighted average fair value per option for options granted during the quarter ended March 30, 2011 was $1.98. The fair value of these stock options was estimated at the date of grant using the Black-Scholes option pricing model. Use of this option pricing model requires the input of subjective assumptions. These assumptions include estimating the length of time employees will retain their vested stock options before exercising them (“expected term”), the estimated volatility of our common stock price over the expected term and the number of options that will ultimately not complete their vesting requirements (i.e., forfeitures). Changes in the subjective assumptions can materially affect the estimate of the fair value of share-based compensation and, consequently, the related amount recognized in the Condensed Consolidated Statements of Operations.

We used the following weighted average assumptions for the stock option grants for the quarter ended March 30, 2011:

Dividend yield		0.0	%
Expected volatility		60.3	%
Risk-free interest rate		2.02	%
Weighted average expected term	4.7 years

The dividend yield assumption was based on our dividend payment history and expectations of future dividend payments. The expected volatility was based on the historical volatility of our stock for a period approximating the expected life. The risk-free interest rate was based on published U.S. Treasury spot rates in effect at the time of grant with terms approximating the expected life of the option. The weighted average expected term of the options represents the period of time the options are expected to be outstanding based on historical trends.

As of March 30, 2011, we had approximately $2.4 million of unrecognized compensation cost related to unvested stock option awards outstanding, which is expected to be recognized over a weighted average of 2.1 years.

Restricted Stock Units

In February 2011, we granted approximately 0.2 million performance shares and related performance-based target cash awards of $0.7 million to certain employees. As these awards contain a market condition, a Monte Carlo valuation was used to determine the performance shares' grant date fair value of $4.63 per share and the payout probability of the target cash awards. The awards granted to our named executive officers also contain a performance condition based on certain operating measures for the fiscal year ended December 28, 2011. The performance period is the three year fiscal period beginning December 30, 2010 and ending December 25, 2013. The performance shares and cash awards will vest and be earned (from 0% to 150% of the target award for each such increment) at the end of the performance period based on the Total Shareholder Return of our stock compared to the Total Shareholder Returns of a group of peer companies.

Also in February 2011, we granted approximately 0.2 million performance-based restricted stock units as an employment incentive related to the hiring of our new Chief Executive Officer. As these awards contain a market condition, a Monte Carlo valuation was used to determine the grant date fair value. The weighted average fair value per share was $3.29. The units will vest and be earned if the closing price of Denny’s common stock meets or exceeds set price hurdles for 20 consecutive days. The performance period is the five year period beginning February 1, 2011 and ending February 1, 2016.

Accrued compensation expense included as a component of the Condensed Consolidated Balance Sheet was as follows:

	March 30, 2011		December 29, 2010
	(In thousands)
Liability classified restricted stock units:
Other current liabilities	$	665	$	414
Other noncurrent liabilities	$	281	$	365

Equity classified restricted stock units:
Additional paid-in capital	$	4,699	$	4,259

As of March 30, 2011, we had approximately $3.3 million of unrecognized compensation cost (approximately $0.8 million for liability classified units and approximately $2.5 million for equity classified units) related to all unvested restricted stock unit awards outstanding, which is expected to be recognized over a weighted average of 1.1 years.

Board Deferred Stock Units

During the quarter ended March 30, 2011, we granted less than 0.1 million deferred stock units (which are equity classified) with a weighted average grant date fair value of $4.06 per unit to non-employee members of our Board of Directors. The directors 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 the Board of Directors) or upon termination as a member of the Board of Directors. During the quarter ended March 30, 2011, less than 0.1 million deferred stock units were converted into shares of common stock.

Note 11. Comprehensive Income and Accumulated Other Comprehensive Loss

Total comprehensive income was $4.1 million and $4.8 million for the quarters ended March 30, 2011 and March 31, 2010, respectively.

Accumulated Other Comprehensive Loss, Net in the Condensed Consolidated Statement of Shareholder’s Deficit and Comprehensive Loss was comprised of additional minimum pension liability of $19.2 million as of both March 30, 2011 and December 29, 2010.

Note 12. Income Taxes

In conjunction with our ongoing review of our actual results and anticipated future earnings, we have reassessed the possibility of releasing all or a portion of the valuation allowance currently in place for our deferred tax assets. Based upon this assessment, a release of the valuation allowance is not appropriate as of March 30, 2011, but may occur during 2011 or 2012. The required accounting for a release of the valuation allowance may result in a significant tax benefit and impact earnings in the quarter in which it is deemed appropriate to release all or a portion of the reserve.

Note 13. Net Income Per Share

	Quarter Ended
	March 30, 2011		March 31, 2010
	(In thousands, except per share amounts)
Numerator:
Numerator for basic and diluted net income per share - net income	$	4,124	$	4,588

Denominator:
Denominator for basic net income per share - weighted average shares		98,980		97,095
Effect of dilutive securities:
Options		1,273		1,877
Restricted stock units and awards		1,109		1,181
Denominator for diluted net income per share - adjusted weighted average shares and assumed c onversions of dilutive securities		101,362		100,153

Basic and diluted net income per share	$	0.04	$	0.05

Stock options excluded (1)		2,088		3,068
Restricted stock units and awards excluded (1)		843		—

(1)	Excluded from diluted weighted-average shares outstanding as the impact would have been antidilutive.

Note 14. Supplemental Cash Flow Information

	Quarter Ended
	March 30, 2011		March 31, 2010
	(In thousands)
Income taxes paid, net	$	163	$	380
Interest paid	$	8,031	$	1,971

Noncash investing activities:
Notes received in connection with disposition of property	$	500	$	—
Execution of direct financing leases	$	218	$	—

Noncash financing activities:
Issuance of common stock, pursuant to share-based compensation plans	$	40	$	438
Execution of capital leases	$	1,220	$	760
Accrued deferred financing costs and debt transaction costs	$	150	$	—

Note 15. Share Repurchase

Our credit facility permits the payment of cash dividends and/or the purchase of Denny’s stock subject to certain limitations. In November 2010, the Board of Directors approved a share repurchase program authorizing us to repurchase up to 3.0 million shares of our Common Stock. Under the program, we could, from time to time, purchase shares through December 31, 2011 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) or in privately negotiated transactions, subject to market and business conditions. During the first quarter of 2011, we repurchased 2.0 million shares for approximately $7.6 million. As of March 30, 2011, we had repurchased 3.0 million shares of Common Stock for approximately $11.5 million under the share repurchase program, thus completing the program. The repurchased shares are included as treasury stock in the condensed Consolidated Balance Sheets and the condensed Consolidated Statements of Shareholders' Deficit and Comprehensive Loss.

On April 4, 2011, subsequent to quarter-end, we announced that the Board of Directors approved a new share repurchase program to repurchase up to an additional 6.0 million shares of our Common Stock. Under the new program, 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) or in privately negotiated transactions, subject to market and business conditions.

Note 16. Commitments and Contingencies

There are various claims and pending legal actions against or indirectly involving us, including actions involving employees and guests, other employment related matters, taxes, sales of franchise rights and businesses and other matters. Based on our examination of these matters and our experience to date, we have recorded reserves reflecting our best estimate of liability, if any, with respect to these matters. However, the ultimate disposition of these matters cannot be determined with certainty. We record legal expenses and other litigation costs as those costs are incurred.

Note 17. Subsequent Events

We performed an evaluation of subsequent events and determined that no events required disclosure, other than disclosed elsewhere within the notes to the Condensed Consolidated Financial Statements.

Forward-Looking Statements

The following discussion is intended to highlight significant changes in our financial position as of March 30, 2011 and results of operations for the quarter ended March 30, 2011 compared to the quarter ended March 31, 2010. The forward-looking statements included in Management’s Discussion and Analysis of Financial Condition and Results of Operations, which reflect our best judgment based on factors currently known, involve risks, uncertainties, and other factors which may cause our actual performance to be materially different from the performance indicated or implied by such statements. Such factors include, among others: competitive pressures from within the restaurant industry; the level of success of our operating initiatives and advertising and promotional efforts; adverse publicity; changes in business strategy or development plans; terms and availability of capital; regional weather conditions; overall changes in the general economy (including with regard to energy costs), particularly at the retail level; political environment (including acts of war and terrorism); and other factors included in the discussion below, or in Part II. Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations and Part I. Item 1A. Risk Factors, contained in our Annual Report on Form 10-K for the year ended December 29, 2010.

Statements of Operations

The following table contains information derived from our Condensed Consolidated Statements of Operations expressed as a percentage of total operating revenues, except as noted below. Percentages may not add due to rounding.

	Quarter Ended
	March 30, 2011					March 31, 2010
	(Dollars in thousands)
Revenue:
Company restaurant sales	$	104,555		77.0	%	$	107,783		78.3	%
Franchise and license revenue		31,250		23.0	%		29,789		21.7	%
Total operating revenue		135,805		100.0	%		137,572		100.0	%

Costs of company restaurant sales (a):
Product costs		25,635		24.5	%		25,692		23.8	%
Payroll and benefits		44,196		42.3	%		44,176		41.0	%
Occupancy		6,860		6.6	%		7,401		6.9	%
Other operating expenses		15,257		14.6	%		15,864		14.7	%
Total costs of company restaurant sales		91,948		87.9	%		93,133		86.4	%

Costs of franchise and license revenue (a)		11,565		37.0	%		12,366		41.5	%

General and administrative expenses		14,139		10.4	%		13,074		9.5	%
Depreciation and amortization		7,188		5.3	%		7,373		5.4	%
Operating, (gains), losses and other charges, net		(529	)	(0.4	%)		423		0.3	%
Total operating costs and expenses		124,311		91.5	%		126,369		91.9	%
Operating income		11,494		8.5	%		11,203		8.1	%
Other expenses:
Interest expense, net		5,693		4.2	%		6,398		4.7	%
Other nonoperating expense (income), net		1,478		1.1	%		(12	)	(0.0	%)
Total other expenses, net		7,171		5.3	%		6,386		4.6	%
Net income before income taxes		4,323		3.2	%		4,817		3.5	%
Provision for income taxes		199		0.1	%		229		0.2	%
Net income	$	4,124		3.0	%	$	4,588		3.3	%

Other Data:
Company-owned average unit sales	$	452				$	458
Franchise average unit sales	$	339				$	342
Company-owned equivalent units (b)		231					235
Franchise equivalent units (b)		1,430					1,320
Same-store sales decrease (company-owned) (c)(d)		(1.3	%)				(5.5	%)
Guest check average (decrease) increase (d)		(0.1	%)				0.1	%
Guest count decrease (d)		(1.1	%)				(5.6	%)
Same-store sales decrease (franchised and licensed units) (c)(d)		(1.7	%)				(6.3	%)

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

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

(c)	Same-store sales include sales from restaurants that were open the same period in the prior year.

(d)	Prior year amounts have not been restated for 2011 comparable units.

Quarter Ended March 30, 2011 Compared with Quarter Ended March 31, 2010

	Quarter Ended
	March 30, 2011			March 31, 2010
Company-owned restaurants, beginning of period		232			233
Units opened		5			4
Units sold to franchisees		(9	)		—
Units closed		(2	)		—
End of period		226			237

Franchised and licensed restaurants, beginning of period		1,426			1,318
Units opened		13			6
Units purchased from Company		9			—
Units closed		(9	)		(2	)
End of period		1,439			1,322
Total company-owned, franchised and licensed restaurants, end of period		1,665			1,559

Company Restaurant Operations

During the quarter ended March 30, 2011, we incurred a 1.3% decrease in same-store sales, comprised of a 0.1% decrease in guest check average and a 1.1% decrease in guest counts. Company restaurant sales decreased $3.2 million, or 3.0%, primarily resulting from a four equivalent-unit decrease in company-owned restaurants, as compared to the prior year, and the decrease in same-store sales for the quarter. The decrease in equivalent units primarily resulted from the sale of company-owned restaurants to franchisees.

Total costs of company restaurant sales as a percentage of company restaurant sales increased to 87.9% from 86.4%. Product costs increased to 24.5% from 23.8% primarily due to the impact of increased commodity costs and a high mix of value priced items . Payroll and benefits increased to 42.3% from 41.0% primarily as a result of an increase in incentive compensation and unfavorable workers' compensation claims development. Occupancy costs decreased to 6.6% from 6.9%. Other operating expenses were comprised of the following amounts and percentages of company restaurant sales:

	Quarter Ended
	March 30, 2011				March 31, 2010
	(Dollars in thousands)
Utilities	$	4,389	4.2	%	$	4,651	4.3	%
Repairs and maintenance		1,842	1.8	%		1,944	1.8	%
Marketing		3,841	3.7	%		4,302	4.0	%
Legal settlement costs		77	0.1	%		123	0.1	%
Other direct costs		5,108	4.9	%		4,844	4.5	%
Other operating expenses	$	15,257	14.6	%	$	15,864	14.7	%

Marketing costs decreased 0.3 percentage points primarily as a result of the additional corporate investment in media in the prior year period. Other direct costs increased 0.4 percentage points primarily as a result of expenses related to new store openings.

Franchise Operations

Franchise and license revenue and related costs were comprised of the following amounts and percentages of franchise and license revenue for the periods indicated:

	Quarter Ended
	March 30, 2011				March 31, 2010
	(Dollars in thousands)
Royalties	$	19,294	61.7	%	$	17,994	60.4	%
Initial and other fees		905	2.9	%		433	1.5	%
Occupancy revenue		11,051	35.4	%		11,362	38.1	%
Franchise and license revenue		31,250	100.0	%		29,789	100.0	%

Occupancy costs		8,560	27.4	%		8,678	29.1	%
Other direct costs		3,005	9.6	%		3,688	12.4	%
Costs of franchise and license revenue	$	11,565	37.0	%	$	12,366	41.5	%

Royalties increased by $1.3 million, or 7.2%, primarily resulting from a 110 equivalent unit increase in franchised and licensed units, as compared to the prior year, partially offset by the effects of a 1.7% decrease in same-store sales. The increase in equivalent units primarily resulted from the conversion of 79 restaurants at Pilot Flying J Travel Centers during 2010. Initial fees increased by $0.5 million, or 109.0%. The increase in initial fees resulted from the higher number of restaurants opened by franchisees and the higher number of restaurants sold to franchisees during the current year quarter. The decrease in occupancy revenue of $0.3 million, or 2.7%, is primarily the result of the lease expirations and terminations where the franchisee has obtained their own lease with the landlord and we are no longer party to the lease.

Costs of franchise and license revenue decreased by $0.8 million, or 6.5%. The decrease in occupancy costs of $0.1 million, or 1.4% is primarily the result of lease expirations and terminations as described above. Other direct costs decreased by $0.7 million, or 18.5%, primarily as a result of franchise-related costs associated with our Super Bowl promotion in the prior year, partially offset by a $0.5 million one-time franchisee settlement. As a result, costs of franchise and license revenue as a percentage of franchise and license revenue decreased to 37.0% for the quarter ended March 30, 2011 from 41.5% for the quarter ended March 31, 2010.

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 were comprised of the following:

	Quarter Ended
	March 30, 2011			March 31, 2010
	(In thousands)
Share-based compensation		$	973		$	1,358
Other general and administrative expenses			13,166			11,716
Total general and administrative expenses		$	14,139		$	13,074

The $0.4 million decrease in share-based compensation expense is primarily due to the adoption of lower cost share-based compensation plans during recent years. The $1.5 million increase in other general and administrative expenses is primarily the result of a $1.1 million increase in incentive compensation.

Depreciation and amortization was comprised of the following:

	Quarter Ended
	March 30, 2011			March 31, 2010
	(In thousands)
Depreciation of property and equipment		$	5,281		$	5,468
Amortization of capital lease assets			719			654
Amortization of intangible assets			1,188			1,251
Total depreciation and amortization expense		$	7,188		$	7,373

The overall decrease in depreciation and amortization expense is due to the sale of company-owned restaurants to franchisees during fiscal 2010.

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

	Quarter Ended
	March 30, 2011				March 31, 2010
	(In thousands)
Gains on sales of assets and other, net		$	(996	)		$	(210	)
Restructuring charges and exit costs			467				633
Impairment charges			—				—
Operating (gains), losses and other charges, net		$	(529	)		$	423

During the quarter ended March 30, 2011, we recognized $0.7 million of gains on the sale of nine restaurant operations to two franchisees for net proceeds of $3.0 million (which included a note receivable of $0.5 million). In addition, during the quarter ended March 30, 2011, we recognized deferred gains of $0.3 million, primarily related to a restaurant sold to a franchisee during a prior period. During the quarter ended March 31, 2010, we did not sell any restaurant operations to franchisees.

Restructuring charges and exit costs were comprised of the following:

	Quarter Ended
	March 30 2011			March 31, 2010
	(In thousands)
Exit costs		$	362		$	628
Severance and other restructuring charges			105			5
Total restructuring and exit costs		$	467		$	633

Operating income was $11.5 million for the quarter ended March 30, 2011 compared with $11.2 million for the quarter ended March 31, 2010.

Interest expense, net was comprised of the following:

	Quarter Ended
	March 30, 2011			March 31, 2010
	(In thousands)
Interest on credit facilities	$	3,715		$	483
Interest on senior notes		—			4,363
Interest on capital lease liabilities		1,008			933
Letters of credit and other fees		553			389
Interest income		(302	)		(450	)
Total cash interest		4,974			5,718
Amortization of deferred financing costs		292			259
Amortization of debt discount		144			—
Interest accretion on other liabilities		283			421
Total interest expense, net	$	5,693		$	6,398

The decrease in interest expense resulted from a decrease in interest rates related to the 2010 refinancing and 2011 re-pricing of our credit facility, as well as debt reductions during 2010.

Other nonoperating expense (income), net was $1.5 million of expense for the quarter ended March 30, 2011 compared with other nonoperating income of less than $0.1 million for the quarter ended March 31, 2010. The increase in expense primarily resulted from the recognition of $1.4 million of losses on early extinguishment of debt related to the debt re-pricing.

The provision for income taxes was $0.2 million for both the quarter ended March 30, 2011 and the quarter ended March 31, 2010. The provision for income taxes for the first quarters of 2011 and 2010 was determined using our effective rate estimated for the entire fiscal year. We have provided valuation allowances related to any benefits from income taxes resulting from the application of a statutory tax rate to our net operating losses (NOL) generated in previous periods. In conjunction with our ongoing review of our actual results and anticipated future earnings, we have reassessed the possibility of releasing all or a portion of the valuation allowance currently in place for our deferred tax assets. Based upon this assessment, a release of the valuation allowance is not appropriate as of March 30, 2011, but may occur during 2011 or 2012. The required accounting for a release of the valuation allowance may result in a significant tax benefit and impact earnings in the quarter in which it is deemed appropriate to release all or a portion of the reserve.

Net income was $4.1 million for the quarter ended March 30, 2011 compared with $4.6 million for the quarter ended March 31, 2010 due to the factors noted above.

Liquidity and Capital Resources

Our primary sources of liquidity and capital resources are cash generated from operations, borrowings under our credit facility (as described below) and, in recent years, cash proceeds from sales of restaurant operations to franchisees and sales of surplus properties, to the extent allowed by our credit facility. Principal uses of cash are operating expenses, capital expenditures and debt repayments.

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

	Quarter Ended
	March 30, 2011			March 31, 2010
	(In thousands)
Net cash provided by operating activities	$	14,593		$	14,666
Net cash used in investing activities		(3,082	)		(1,270	)
Net cash used in financing activities		(21,414	)		(6,180	)
Net (decrease) increase in cash and cash equivalents	$	(9,903	)	$	7,216

We believe that our estimated cash flows from operations for 2011, combined with our capacity for additional borrowings under our credit facility, will enable us to meet our anticipated cash requirements and fund capital expenditures over the next twelve months.

Net cash flows used in investing activities were $3.1 million for the quarter ended March 30, 2011. These cash flows include capital expenditures of $5.8 million, partially offset by $2.5 million in proceeds from asset sales and collections of notes receivable of $0.2 million. Our principal capital requirements have been largely associated with the following:

	Quarter Ended
	March 30, 2011		March 31, 2010
	(In thousands)
Facilities	$	1,158	$	1,142
New construction		4,106		1,140
Remodeling		301		136
Information technology		50		380
Strategic initiatives		4		9
Other		151		357
Capital expenditures	$	5,770	$	3,164

The increase in new construction is primarily the result of the conversion of restaurants at Pilot Flying J Travel Centers. We generally expect our capital requirements to trend downward as we reduce our company-owned restaurant portfolio and remain selective in our new restaurant investments. Capital expenditures for fiscal 2011 are expected to be approximately $18 million, comprised primarily of costs related to the conversion of Pilot Flying J Travel Centers, facilities and new construction.

Cash flows used in financing activities were $21.4 million for the quarter ended March 30, 2011, which included long-term debt payments of $11.0 million, deferred financing costs of $3.1 million and stock repurchases of $7.6 million.

Our working capital deficit was $36.9 million at March 30, 2011 compared with $27.8 million at December 29, 2010. The increase in working capital deficit primarily related to a decrease in cash resulting from term loan prepayments made during the quarter ended March 30, 2011 of $9.4 million. We are able to operate with a substantial working capital deficit because (1) restaurant operations and most food service operations are conducted primarily on a cash (and cash equivalent) basis with a low level of accounts receivable, (2) rapid turnover allows a limited investment in inventories, and (3) accounts payable for food, beverages and supplies usually become due after the receipt of cash from the related sales.

Re-pricing of Credit Facility

Implementation of New Accounting Standards

See Note 2 to our Condensed Consolidated Financial Statements.

We have exposure to interest rate risk related to certain instruments entered into for other than trading purposes. Specifically, as of March 30, 2011, borrowings under the term loan and revolver bear interest at variable rates based on LIBOR plus a spread of 375 basis points per annum with a LIBOR floor of 1.50% for the term loan and no LIBOR floor for the revolver.

Based on the levels of borrowings under the credit facility at March 30, 2011, if interest rates changed by 100 basis points, there would be no impact to our annual cash flow or our income before income taxes. This computation is determined by considering the impact of hypothetical interest rates on the credit facility at March 30, 2011, taking into consideration the 1.50% LIBOR floor for the term loan. However, the nature and amount of our borrowings under the credit facility may vary as a result of future business requirements, market conditions and other factors. The estimated fair value of our borrowings under the credit facility was approximately $231.2 million compared with a book value of $230.0 million at March 30, 2011. This computation is based on market quotations for the same or similar debt issues or the estimated borrowing rates available to us. Our other outstanding long-term debt bears fixed rates of interest.

We also have exposure to interest rate risk related to our pension plan, other defined benefit plans and self-insurance liabilities. A 25 basis point increase or decrease in discount rate would decrease or increase our projected benefit obligation related to our pension plan by approximately $1.9 million and would impact the pension plan's net periodic benefit cost by $0.1 million. The impact of a 25 basis point increase or decrease in discount rate would decrease or increase our projected benefit obligation related to our other defined benefit plans by less than $0.1 million while the plans' net periodic benefit cost would remain flat. A 25 basis point increase or decrease in discount rate related to our self-insurance liabilities would result in a decrease or increase of $0.2 million, respectively.

Commodity Price Risk

We purchase certain food products, such as beef, poultry, pork, eggs and coffee, and utilities such as gas and electricity, which are affected by commodity pricing and are, therefore, subject to price volatility caused by weather, production problems, delivery difficulties and other factors that are outside our control and which are generally unpredictable. Changes in commodity prices affect us and our competitors generally and often simultaneously. In general, we purchase food products and utilities based upon market prices established with vendors. Although many of the items purchased are subject to changes in commodity prices, the majority of our purchasing arrangements are structured to contain features that minimize price volatility by establishing fixed pricing and/or price ceilings and floors. We use these types of purchase arrangements to control costs as an alternative to using financial instruments to hedge commodity prices. In many cases, we believe we will be able to address commodity cost increases which are significant and appear to be long-term in nature by adjusting our menu pricing or changing our product delivery strategy. However, competitive circumstances could limit such actions and, in those circumstances, increases in commodity prices could lower our margins. Because of the often short-term nature of commodity pricing aberrations and our ability to change menu pricing or product delivery strategies in response to commodity price increases, we believe that the impact of commodity price risk is not significant.

We have established a policy to identify, control and manage market risks which may arise from changes in interest rates, commodity prices and other relevant rates and prices. We do not use derivative instruments for trading purposes.

As required by Rule 13a-15(b) under the Securities Exchange Act of 1934, as amended, (the “Exchange Act”) our management conducted an evaluation (under the supervision and with the participation of our President and Chief Executive Officer, John C. Miller, and our Executive Vice President, Chief Administrative Officer and Chief Financial Officer, F. Mark Wolfinger) as of the end of the period covered by this report, of the effectiveness of our disclosure controls and procedures as defined in Rule 13a-15(e) under the Exchange Act. Based on that evaluation, Messrs. Miller and Wolfinger each concluded that our disclosure controls and procedures are effective to provide reasonable assurance that information required to be disclosed in the reports that we file or submit under the Exchange Act (i) is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms and (ii) is accumulated and communicated to our management, including Messrs. Miller and Wolfinger, as appropriate to allow timely decisions regarding required disclosure.

There have been no changes in our internal control over financial reporting identified in connection with the evaluation required by Rule 13a-15(d) of the Exchange Act that occurred during our last fiscal quarter that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

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 March 30, 2011.

Period	Total Number of Shares Purchased		Average Price Paid Per Share (1)		Total Number of Shares Purchased as Part of Publicly Announced Programs (2)(3)		Maximum Number of Shares that May Yet be Purchased Under the Program (3)
	(In thousands, except per share amounts)
December 30, 2010 - January 26, 2011		1,000	$	3.75		1,000		963
January 27, 2011 - February 23, 2011		231		3.86		231		732
February 24, 2011 - March 30, 2011		732		3.93		732		—
Total 2011		1,963	$	3.83		1,963		—

(1)	Average price paid per share excludes commissions.
(2)	On November 9, 2010, we announced that our Board of Directors had approved the repurchase of 3 million shares of Common Stock, which may take place from time to time on the open market (including in pre-arranged stock trading plans in accordance with the guidelines specified in Rule 10b5-1 under the Securities Exchange Act of 1934) or through negotiated transactions, subject to market and business conditions.
(3)	During the quarter ended March 30, 2011, we purchased 1,963,200 shares of Common Stock for an aggregate consideration of approximately $7.6 million, pursuant to the share repurchase program. This brought the total purchased under the previously-announced program to 3,000,000 shares of Common Stock for an aggregate consideration of approximately $11.5 million, completing the purchases under the program.

On April 4, 2011, subsequent to quarter-end, we announced that our Board of Directors approved a new share repurchase program authorizing us to repurchase up to an additional 6.0 million shares of our Common Stock. Under the new program, we may purchase our Common Stock 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 Securities Exchange Act of 1934) or in privately negotiated transactions, subject to market and business conditions.

The following are included as exhibits to this report:

Exhibit No.		Description

10.1		Form of the 2011 Long-Term Performance Incentive Program Performance Shares and Target Cash Opportunity Award Certificate

10.2		Written Description of the Denny's 2011 Long-Term Performance Incentive Program

10.3		Employment offer letter dated January 6, 2011 between Denny’s Corporation and John C. Miller

10.4		First Amendment to the Second Amended and Restated Credit Agreement, dated as of March 1, 2011, among Denny's Inc. and Denny's Realty, LLC as the Borrowers, Denny's Corporation and DFO, LLC as Guarantors, each lender from time to time party hererto, and Bank of America, N.A., as Administrative Agent and L/C Issuer (incorporated by reference to Exhibit 10.31 to the Annual Report on Form 10-K of Denny's Corporation for the year ended December 29, 2010).

31.1		Certification of John C. Miller, President and 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 F. Mark Wolfinger, Executive Vice President, Chief Administrative Officer and Chief Financial Officer of Denny’s Corporation, pursuant to Rule 13a-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

32.1		Certification of John C. Miller, President and Chief Executive Officer of Denny’s Corporation and F. Mark Wolfinger, Executive Vice President, Chief Administrative Officer 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.

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, and the undersigned also has signed this report in his capacity as the registrant's Chief Financial Officer.

	DENNY'S CORPORATION

Date: May 3, 2011	By:	/s/ F. Mark Wolfinger
		F. Mark Wolfinger
		Executive Vice President, Chief Administrative Officer and Chief Financial Officer

2011 Long-Term Performance Incentive Program	Denny’s Corporation
Performance Shares and Target Cash Opportunity	203 East Main Street
Award Certificate	Spartanburg, SC 29319

«Name» (“Grantee”)

Denny’s Corporation (the “Company”) has granted to you a performance award (the “Award”), denominated in performance shares (the “Performance Shares”) and in cash (the “Target Cash Opportunity”). The Award is granted under the Denny’s Corporation 2004 Omnibus Incentive Plan (the “Plan”) and pursuant to the 2011 Long-Term Performance Incentive Program Description (the “Program Description”). The Performance Shares entitle you to earn shares of the Company’s $0.01 par value common stock (“Shares”), on a one-for-one basis, and the Target Cash Opportunity entitles you to earn a cash payment, as set forth below. By accepting the Award, Grantee shall be deemed to have agreed to the terms and conditions set forth in this Award Certificate, the Program Description and the Plan.

Grant Date of Award: February 1, 2011

Number of Performance Shares: «Perf_Shares»

Target Cash Opportunity: «Target_Cash»

The Award is granted as a Qualified Performance-Based Award under the Section 14.11 of the Plan. If the Company achieves at least $50,000,000 in Adjusted EBITDA for the fiscal year ending December 28, 2011 (the “Threshold Performance Goal”), then the Award shall be considered earned in an amount equal to 150% of the Performance Shares and Target Cash Opportunity; provided, however, that the number of Performance Shares and the amount of the Target Cash Opportunity actually paid under the Award will be subject to reduction based on the TSR Comparison described below, or otherwise in the discretion of the Committee, and is also subject to your continuous employment during the vesting period described below. Prior to any conversion or payout of the Award, the Compensation and Incentives Committee of the Company’s Board of Directors shall certify in writing that the Threshold Performance Goal has been satisfied.

If the Threshold Performance Goal is satisfied, then the Award will vest (become non-forfeitable) on December 25, 2013, subject to your continued employment with the Company through such date, unless vesting is accelerated under Section 2 of the Terms and Conditions on the following page.

If the Threshold Performance Goal is satisfied and the vesting condition is satisfied, the actual number of Performance Shares and the amount of the Target Cash Opportunity to be paid to the Grantee will be adjusted to an amount between 0% and 150% of the number and amount originally granted, based on the Company’s Total Shareholder Return (“TSR,” as defined below) ranking relative to the Company’s Peer Group (as defined in the Program Description) over a three-year fiscal period ending on December 25, 2013 (the “Performance Period”), as further described in the Program Description (the “TSR Comparison”), or based on any other criteria determined by the Committee in its discretion.

For purposes of this Award Certificate, TSR will be calculated as follows:

TSR = (ending stock price – beginning stock price + reinvested dividends) / beginning stock price

This Award is governed by the terms of the Plan and the Program Description, and subject to the Terms and Conditions on the following page. Capitalized terms used herein and not otherwise defined shall have the meanings assigned to such terms in the Plan.

		February 9, 2011
Jill Van Pelt - Vice President, Human Resources For Denny’s Corporation		Date

TERMS AND CONDITIONS

1. Vesting and Forfeiture of Award . If the Threshold Performance Goal is satisfied, the Award will vest and become non-forfeitable on December 25, 2013, subject to accelerated vesting under certain circumstances as provided in Section 2 below (the “Vesting Date”). If Grantee’s employment with the Company terminates for any reason other than as set forth in paragraph (a) of Section 2 below, Grantee shall forfeit all of Grantee’s right, title and interest in and to any unvested Performance Shares and unvested Target Cash Opportunity under the Award as of the date of termination of employment. In addition, if Grantee’s employment is terminated by the Company for Cause, Grantee shall also forfeit any vested Performance Shares and Target Cash Opportunity that has not yet been paid.

2. Acceleration of Vesting . The Award shall be subject to accelerated vesting as set forth below, in each case subject to the TSR Comparison adjustment as described.

(a) Upon Grantee’s termination of employment with the Company due to death or Disability, a pro rata portion of the Performance Shares and the Target Cash Opportunity will vest and become non-forfeitable (the pro rata portion shall be determined by multiplying each of the number of Performance Shares and the amount of the Target Cash Opportunity by a fraction, the numerator of which is the number of days elapsed from December 30, 2010 to the termination date, and the denominator of which is 1,092). The TSR Comparison shall then be applied, and the pro rata number of Performance Shares and the pro rata amount of Target Cash Opportunity shall be adjusted, based on the Company’s TSR ranking relative to the Peer Group as of the end of the Company’s fiscal quarter immediately following the termination of employment due to death or Disability (as if the Performance Period had ended on such fiscal quarter ending date).

(b) Upon a Change in Control of the Company, the Performance Shares and the Target Cash Opportunity will vest and become non-forfeitable. The TSR Comparison shall then be applied, and the number of Performance Shares and the Target Cash Opportunity amount shall be adjusted, based on the Company’s TSR ranking relative to the Peer Group as of the date of the Change in Control (as if the Performance Period had ended on the date of the Change in Control).

3. TSR Comparison and Award Adjustment . The number of Performance Shares and the amount of the Target Cash Opportunity shall be adjusted following the end of the Performance Period or upon a Change in Control (or the pro rata portion shall be adjusted following the end of the Company’s fiscal quarter following a termination of employment due to death or Disability) based on the TSR Comparison, as follows:

	Company’s TSR Percentile Ranking Relative to Peer Group	Adjustment Factor *
Below Threshold	Less than 25%	0%
Threshold	25%	50%
Target	50%	100%
Maximum	90%	150%

* TSR Comparison is interpolated on a straight-line basis for performance between points.

In addition, the Committee retains the discretion to increase (but not above 150% of the original award amounts) or decrease the number of Performance Shares and the amount of the Target Cash Opportunity to be paid based on such other factors as the Committee deems appropriate.

4. Conversion to Shares and Cash Payment . The Performance Shares (as adjusted based on the TSR Comparison) will be converted to actual Shares, and the Target Cash Opportunity (as adjusted based on the TSR Comparison) will be paid in cash, as soon as practicable following the end of the Performance Period, and no later than January 31, 2014. Stock certificates evidencing Shares paid upon conversion of the Performance Shares will be registered on the books of the Company in Grantee’s name as of the date of payment and delivered to Grantee as soon as practical thereafter.

5. Limitation of Rights . The Award does not confer to Grantee or Grantee’s beneficiary any rights of a stockholder of the Company unless and until Shares are in fact issued to such person in connection with the Award. Nothing in this Award Certificate shall interfere with or limit in any way the right of the Company or any Affiliate to terminate Grantee’s employment at any time, nor confer upon Grantee any right to continue in employment of the Company or any Affiliate.

6. Payment of Taxes . The Company or any Affiliate employing Grantee has the authority and the right to deduct or withhold, or require Grantee to remit to the employer, an amount sufficient to satisfy federal, state, and local taxes (including Grantee’s FICA obligation) required by law to be withheld with respect to any taxable event arising as a result of the vesting or settlement of the Award. The withholding requirement with respect to the Performance Shares only may be satisfied, in whole or in part, by withholding from the settlement of the Performance Shares a number of Shares having a fair market value equal to the minimum amount (and not any greater amount) required to be withheld for tax purposes, all in accordance with such procedures as the Company establishes. The obligations of the Company under this Award Certificate will be conditional on such payment or arrangements, and the Company, and, where applicable, its Affiliates will, to the extent permitted by law, have the right to deduct any such taxes from any payment of any kind otherwise.

7. Restrictions on Issuance of Shares . If at any time the Committee shall determine in its discretion, that registration, listing or qualification of the Shares underlying the Performance Shares upon any securities exchange or similar self-regulatory organization or under any foreign, federal, or local law or practice, or the consent or approval of any governmental regulatory body, is necessary or desirable as a condition to the settlement of the Performance Shares, the Shares will not be paid unless and until such registration, listing, qualification, consent or approval shall have been effected or obtained free of any conditions not acceptable to the Committee.

8. Plan Controls . The terms contained in the Plan are incorporated into and made a part of this Award Certificate and this Award Certificate shall be governed by and construed in

accordance with the Plan. In the event of any actual or alleged conflict between the provisions of the Plan and the provisions of this Award Certificate, the provisions of the Plan shall be controlling and determinative.

9. Successors . This Award Certificate shall be binding upon any successor of the Company, in accordance with the terms of this Award Certificate and the Plan.

10. Severability . If any one or more of the provisions contained in this Award Certificate is deemed to be invalid, illegal or unenforceable, the other provisions of this Award Certificate will be construed and enforced as if the invalid, illegal or unenforceable provision had never been included.

11. Notice . Notices and communications under this Award Certificate must be in writing and either personally delivered or sent by registered or certified United States mail, return receipt requested, postage prepaid. Notices to the Company must be addressed to Denny’s Corporation, 203 East Main Street, Spartanburg, SC 29319-0001, Attn: Secretary, or any other address designated by the Company in a written notice to Grantee. Notices to Grantee will be directed to the address of Grantee then currently on file with the Company, or at any other address given by Grantee in a written notice to the Company.

Denny’s 2011 Long-Term Performance Incentive Program Description

Program Concept

The Compensation and Incentives Committee of the Board of Directors (the “Compensation Committee”) has approved the 2011 Long-Term Performance Incentive (LTPI) Program, an incentive compensation program pursuant to and subject to the Denny’s Corporation 2004 Omnibus Incentive Plan.

Under the program, participants are granted a target number of performance shares and a target cash award. From 0% to 150% of the target number of performance shares and the target amount of cash may be earned based on the results of Denny’s Total Shareholder Return (TSR), discussed further below. Once earned, the performance shares convert to and are settled in shares of Denny’s stock on a one-for-one basis.

The number of shares and the percentage of the cash target earned will be contingent upon Denny’s TSR results as compared to its peers (refer to Peer Group listed below).

Please refer to your individual award agreement for your target number of performance shares and target cash award.

Your award agreement and the 2004 Omnibus Incentive Plan govern the terms of this award. Please read these documents carefully. If any term in this document conflicts with the award agreement, the terms of the award agreement will control the award.

Eligibility

Vice Presidents and above are eligible for the 2011 performance long-term incentive awards. At the discretion of the Executive Committee, and with approval by the Compensation Committee, certain director-level and senior director-level employees may be eligible for these awards based on individual performance and contributions to the Company.

Performance Period & Vesting Schedule

The performance period will be the three-year fiscal period beginning December 30, 2010 and ending December 25, 2013. Performance shares will vest and be earned at the end of the performance period. Participants will have no voting or dividend rights until the shares are distributed. The cash award will also vest and be earned at the end of the performance period.

Participants must be employed on the vesting date in order to vest in the award (except in cases of death or disability, or otherwise as noted below). Termination for cause results in forfeiture of all unpaid awards, including otherwise vested awards.

How Performance Is Measured

Performance will be measured based on the Total Shareholder Return (TSR) of Denny’s stock compared to the Total Shareholder Returns of the stocks of Denny’s Peer Group over the three-year performance period. TSR combines share price appreciation and dividends paid to show the total return to the shareholder. TSR will be calculated as follows:

TSR = (ending stock price – beginning stock price + reinvested dividends) / beginning stock price

A 20-trading day average will be used to determine the beginning and ending stock prices for Denny’s and its Peer Group. Based on this definition, Denny’s beginning stock price as of December 30, 2010 is $3.64.

Denny’s TSR performance ranking compared to its Peer Group determines the payout level as shown below.

	Denny’s TSR Performance Ranking vs. Peers	Payout as a % of Target
Below Threshold	< 25th %ile	0%
Threshold	25th %ile	50%
Target	50th %ile	100%
Maximum	90th %ile	150%

Note: Linear interpolation will be used to determine payouts which fall between given points on this scale.

Peer Group

Denny’s TSR will be measured against the TSR of the following twenty-one peer companies:

Bob Evans Farms

Brinker International

Buffalo Wild Wings

California Pizza Kitchen

Chipotle Mexican Grill

Cracker Barrel

DineEquity

Domino’s Pizza

Einstein Noah Restaurant Group

Jack in the Box

McCormick & Schmick’s Seafood Restaurants

O’Charley’s

Panera Bread

Papa John’s International

P.F. Chang’s China Bistro

Red Robin

Ruby Tuesday

Sonic Corporation

Texas Roadhouse

The Cheesecake Factory

Wendy’s/Arby’s Group

Form and Timing of Payout, and Taxation

Participants will receive their earned shares and cash as soon as practicable following the end of the performance period, but no later than January 31, 2014. Participants will be taxed on the value of the vested shares and the vested cash on the date of payout. All applicable federal, state, and local taxes will be withheld from the payment due to the participant. The closing stock price of Denny’s stock on the last trading day preceding the date of payout will be used to determine the taxable value of the shares.

It is intended that the payments under the LTPI Program shall either be exempt from the application of, or comply with, the requirements of Section 409A of the Internal Revenue Code. The Program shall be construed in a manner that effects such intent. Nevertheless, the tax treatment of the Program is not warranted or guaranteed. Neither the Company, its affiliates nor their respective directors, officers, employees or advisers (other than in his or her capacity as a participant in the Program) shall be held liable for any taxes, interest, penalties or other monetary amounts owed by any participant or other taxpayer as a result of the LTPI Program.

Impact of Termination Events

Participation in the Plan does not constitute an offer or guarantee of employment. The table below shows the impact of various termination events and a change in control:

Termination Event	Payout
Death or disability	· Termination due to death or disability prior to vesting will result in pro rata vesting of the amount earned, calculated at the end of the quarter following the termination due to death or disability, and paid out as soon as administratively practicable thereafter. · Termination due to death or disability occurring between the vesting and payout dates will result in no change to the amount that would have been paid had the termination event not occurred.
Termination for Cause	· Vested but unpaid and unvested awards will be forfeited. No payout will occur even if awards had vested.
Voluntary Termination (Resignation, Retirement)	· Vested but unpaid awards will be paid out in accordance with the regular payout schedule. Unvested awards will be forfeited.
Involuntary Termination Not for Cause	· Vested but unpaid awards will be paid out in accordance with the regular payout schedule. Unvested awards will be forfeited.
Change in Control	· Vested but unpaid awards will be paid out in accordance with the regular payout schedule, but no later than the date of the Change in Control. Unvested awards will be deemed to be fully earned based on actual performance up to the date of the Change in Control, and will be paid out as soon as practicable but in no event sooner than 15 days or later than 60 days following the Change in Control.

Impact on Other Plans

Awards are not considered pay for purposes of Denny’s retirement or welfare plans. There will be no specific deferral opportunities under this plan.

January 6, 2011

John Miller

1205 Perdenalas Trail

Westlake, TX 76262

Dear John:

I am delighted to offer you the opportunity to join Denny’s Corporation as President and Chief Executive Officer reporting to the Denny’s Corporation Board of Directors (“Board”). This letter contains the terms of our offer, contingent upon the outcome of your pre-employment drug test and acceptance of the terms of this offer letter. In addition, should you accept this offer, you will be required to sign a restrictive covenants agreement (including non-compete provisions), as well as acknowledge the Company’s incentive compensation clawback policy.

Please review the offer and confirm your acceptance by signing and returning this letter at your earliest convenience. A copy is enclosed for your records.

START DATE

Your anticipated start date will be on February 1, 2011 and you will be expected to attend our Board meeting in Atlanta on January 25 – 26, 2011.

BASE SALARY

Your salary will be $550,000 annually and will be paid to you via a biweekly direct deposit of $21,153.85.

ANNUAL INCENTIVE

You will be eligible to participate in the Denny’s annual Corporate Incentive Plan beginning with the 2011 performance year. Your target incentive opportunity for 2011 is 100% of your base salary. Bonus payouts for the 2011 performance year will be pro-rated based on your start date. Goals and associated metrics for the 2011 plan have been determined in conjunction with the Compensation and Incentives Committee (“Compensation Committee”). In future years, you will lead the executive team in creating the architecture for the annual incentive plans and related goals and performance metrics for presentation and approval by the Compensation Committee.

SIGNING BONUS

You will have the opportunity to receive a signing bonus in the total gross amount of $250,000, less applicable tax withholdings (the “Signing Bonus”). The Signing Bonus will be payable within 30 days following your start date. In the event that you voluntarily leave the Company for any reason or you are terminated for Cause (as defined in the Denny’s Corporation Executive Severance Pay Plan) within 12 months following your start date, you agree to reimburse the Company the full amount of the Signing Bonus. In the event that you voluntarily leave the Company for any reason or you are terminated for Cause within the 13 th month through the 36 th month following your start date, you agree to reimburse the Company for a pro rata portion of the Signing Bonus, calculated by multiplying the full amount of the Signing Bonus by a fraction, the numerator of which is the number of full months remaining following your termination date until the 36 th month anniversary of your start date, and the denominator of which is 36. You hereby authorize Denny’s to withhold the repayable amount from any monies owed to you.

You are expected to establish a residence in the local Greenville/Spartanburg area. The Signing Bonus is intended as an inducement to join Denny’s as well as offset temporary housing expenses, incidental moving expenses and other fees associated with your move the Greenville/Spartanburg area. As such, payment of the Signing Bonus to you is in lieu of any other relocation assistance, including our standard relocation program.

LONG-TERM INCENTIVE AWARDS

As an inducement to your employment, following your start date, you will receive an equity award comprised of 200,000 stock options which will be granted on the earlier of (i) the grant date of stock options awarded to participants under the 2011 Long-Term Performance Incentive (LTPI) Program, if such grant date occurs after your start date, or (ii) the first trading day of the first quarter after your start date. The exercise price will be the Fair Market Value of the Company stock (closing stock price) on the date of the grant. The stock options will vest in three equal annual installments beginning on the first anniversary of the grant date, subject to your continued employment, and will have a term of 10 years from the date of grant.

As further inducement to your employment, on the same date as the stock options are granted to you, you will be granted 200,000 restricted stock units (RSU’s). These RSU’s will vest and convert to shares of Denny’s common stock upon the attainment of the stock price goals shown below. All unvested RSU’s will be forfeited 5 years from your start date, or upon your termination from employment for any reason.

o	50,000 RSU’s will vest to you when the closing price of DENN stock equals $5.00 or higher for 20 consecutive trading days after your start date

o	50,000 RSU’s will vest to you when the closing price of DENN stock equals $5.50 or higher for 20 consecutive trading days after your start date

o	50,000 RSU’s will vest to you when the closing price of DENN stock equals $6.00 or higher for 20 consecutive trading days after your start date

o	50,000 RSU’s will vest to you when the closing price of DENN stock equals $6.50 or higher for 20 consecutive trading days after your start date

In addition, you will be granted a target number of 50,000 performance shares as part of the 2011 LTPI Program. Such awards will be granted pursuant to and subject to the Denny’s Corporation 2008 Omnibus Incentive Plan. Under this program, from 0% to 150% of the target number of performance shares may be earned based on the results of Denny’s Total Shareholder Return (TSR) as compared to Denny’s 2011 Peer Group over a three-year performance period (Denny’s fiscal years 2011 through 2013). Once earned, the performance shares convert to and are settled in shares of Denny’s stock on a one-for-one basis.

The award agreements covering these grants will contain all terms and conditions of the awards. The equity awards noted above are in lieu of any other long-term incentive grants or programs for 2011. However, you will be eligible to participate in future long-term incentive award programs if you are employed at the time of the grant and have met the performance criteria for participation.

ANNUAL PERFORMANCE EVALUATION

Your performance will be reviewed annually by the Board and adjustments to your compensation may be approved by the Compensation Committee in the future based on, among other things, a review of market data and your demonstrated performance.

APPOINTMENT TO BOARD OF DIRECTORS

In connection with your serving as Denny’s Chief Executive Officer, the Board of Directors shall take action to increase the size of the Board by one, and shall appoint you to serve as a member of the Board of Directors. Beginning with the 2011 Annual Meeting, and continuing for so long as you continue to serve as the Company’s Chief Executive Officer, the Board of Directors will annually nominate you to serve on the Board, subject to approval by the Company’s shareholders at the next annual meeting. In the event you cease to serve as the Company’s Chief Executive Officer for any reason, you will be deemed to have resigned as a member of the Board of Directors, and such resignation shall be effective immediately. Your right to receive any severance benefits in connection with your termination of service as Chief Executive Officer shall be conditioned upon your resignation as a member of the Board of Directors.

BENEFITS

You will be eligible to enroll in our group benefits program immediately following your start date. You may enroll for medical, dental, vision, and additional life insurance coverage at any time during your first 30 days of employment. These coverages can be effective retroactive to your start date or may be deferred until 30 days after your start date. Also, as an executive officer of the Company, you will be reimbursed up to $1,500 each year for an annual physical.

As a Denny’s Highly Compensated Employee, you can make limited contributions to the 401(k) Plan; however, you are not eligible to receive the company match. As another retirement plan option, you will be eligible to participate in the Denny’s, Inc. Deferred Compensation Plan. This Plan provides matching contributions for participants in the Plan.

Our Deferred Compensation administrative services provider, The Newport Group, will be sending to you, via your work email, a comprehensive enrollment kit that describes the plan features and provides other information, including the investment options and the election forms necessary to participate. Please note that you have 30 days from the date of the email to enroll. If you do not enroll in the plan at this time, you will have to wait until the annual enrollment period.

SEVERANCE

You will be covered under the Denny’s Corporation Executive Severance Pay Plan. For regular severance, the plan generally provides for a severance payment equal to 100% of your base salary (paid in biweekly installments), a prorated bonus in the year of termination, and 12 monthly payments equal to the cost of providing certain group health benefits sponsored by the Company. For severance benefits in a Change in Control, the plan generally provides for a severance payment equal to 200% of your base salary plus 200% of your target annual bonus, a prorated target bonus, and a lump sum payment equal to the cost of providing certain group health benefits sponsored by the Company for 24 months. Specific details are explained in the Denny’s Corporation Executive Severance Pay Plan.

CAR ALLOWANCE

You will receive a car allowance of $13,200 annually paid in biweekly installments via direct deposit. Applicable taxes will be withheld. You will, however, be reimbursed for all reasonable and documented business mileage.

TELECOM ALLOWANCE

You will receive a telecom allowance of $1,560 annually paid in biweekly installments via direct deposit. All applicable taxes will be withheld.

VACATION

You will be eligible for four weeks of vacation annually. Vacation hours accrue each month up to a maximum of 160 hours, at which time no additional hours will accrue. Should you voluntarily leave the Company for any reason or be terminated for cause, you will be paid your balance of accrued but unused vacation hours up to a maximum of 80 hours.

REQUIRED PRE-EMPLOYMENT DRUG TEST

As stated above, our offer of employment to you is contingent upon the outcome of the required pre-employment drug test.

ORIENTATION AND ON-BOARDING

The Immigration Reform and Control Act requires us to hire only U.S. Citizens or those who are legally authorized to work in the United States. Please provide us with two forms of identification in order to complete the I-9 Employment Eligibility Verification form, as well as a voided check for direct deposit.

To ensure you experience a smooth transition to Denny’s, we will develop an orientation and onboarding plan for your first several months to ensure you meet with key stakeholders and team members, as well as to provide you with an overview of our existing marketing and operations programs and processes and involve you in our key strategic initiatives.

John, we are all very impressed with your background and experience and look forward to having you lead the Denny’s team. If these terms are agreeable to you, please sign and date this letter below and return it to me at your earliest convenience but not later than January 7, 2011 . Should you have any questions about any portion of this offer, please call me directly at 864-597-8242. Welcome to Denny’s!

Sincerely,

/s/ Debra Smithart-Oglesby

Debra Smithart-Oglesby

Chair, Denny’s Corporation Board of Directors

Agreed and accepted:

/s/ John C. Miller January 7, 2011

John Miller

I, John C. Miller, certify that:

1. I have reviewed this report on Form 10-Q of Denny’s Corporation;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a) designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b) designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c) evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d) disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent function):

a) all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal controls over financial reporting.


Date: May 3, 2011	By:	/s/ John C. Miller
		John C. Miller
		President and Chief Executive Officer

I, F. Mark Wolfinger, certify that:

1. I have reviewed this report on Form 10-Q of Denny’s Corporation;

b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal controls over financial reporting.


Date: May 3, 2011	By:	/s/ F. Mark Wolfinger
		F. Mark Wolfinger
		Executive Vice President,
		Chief Administrative Officer and
		Chief Financial Officer

President and Chief Executive Officer of Denny’s Corporation

Executive Vice President, Chief Administrative Officer and Chief Financial Officer

Pursuant to 18 U.S.C. Section 1350,

As Adopted Pursuant to

Section 906 of the Sarbanes-Oxley Act of 2002

In connection with the Quarterly Report of Denny’s Corporation (the “Company”) on Form 10-Q for the period ended March 30, 2011 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, John C. Miller, President and Chief Executive Officer of the Company, and I, F. Mark Wolfinger, Executive Vice President, Chief Administrative Officer and Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

1) The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.


Date: May 3, 2011	By:	/s/ John C. Miller
		John C. Miller
		President and Chief Executive Officer


Date: May 3, 2011	By:	/s/ F. Mark Wolfinger
		F. Mark Wolfinger
		Executive Vice President,
		Chief Administrative Officer and
		Chief Financial Officer