UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-Q
 
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
 
For the Quarterly Period Ended March 26, 2014


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)
(Zip Code)

(864) 597-8000
(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.  

Yes   R     No   £
 
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).

Yes   R     No   £
 
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
£
Accelerated filer
R
Non-accelerated filer
£
Smaller reporting company
£
 
 
 
 
 
(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).

Yes   £    No   R

 As of April 24, 2014 , 87,085,971 shares of the registrant’s common stock, par value $.01 per share, were outstanding.



TABLE OF CONTENTS
 
 
Page
 
 
 
 
 
 
 
 
 
 
 
 

2


PART I - FINANCIAL INFORMATION

Item 1.     Financial Statements
 
Denny’s Corporation and Subsidiaries
Condensed Consolidated Balance Sheets
(Unaudited)
 
March 26, 2014
 
December 25, 2013
 
(In thousands)
Assets
 
 
 
Current assets:
 
 
 
Cash and cash equivalents
$
1,414

 
$
2,943

Receivables
14,216

 
17,321

Inventories
2,916

 
2,881

Current deferred tax asset
22,336

 
23,264

Prepaid and other current assets
5,940

 
7,417

Total current assets
46,822

 
53,826

Property, net of accumulated depreciation of $253,137 and $255,966 respectively
106,480

 
105,620

Goodwill
31,451

 
31,451

Intangible assets, net
47,516

 
47,925

Deferred financing costs, net
1,976

 
2,097

Noncurrent deferred tax asset
27,193

 
28,290

Other noncurrent assets
26,293

 
26,568

Total assets
$
287,731

 
$
295,777

 
 
 
 
Liabilities
 

 
 

Current liabilities:
 

 
 

Current maturities of long-term debt
$
3,000

 
$
3,000

Current maturities of capital lease obligations
4,234

 
4,150

Accounts payable
15,817

 
14,237

Other current liabilities
46,708

 
52,698

Total current liabilities
69,759

 
74,085

Long-term liabilities:
 

 
 

Long-term debt, less current maturities
152,250

 
150,000

Capital lease obligations, less current maturities
15,248

 
15,923

Liability for insurance claims, less current portion
18,218

 
18,249

Other noncurrent liabilities and deferred credits
26,514

 
29,089

Total long-term liabilities
212,230

 
213,261

Total liabilities
281,989

 
287,346

 
 
 
 
Commitments and contingencies

 

 
 
 
 
Shareholders' equity
 

 
 

Common stock $0.01 par value; shares authorized - 135,000; March 26, 2014: 105,177 shares issued and 88,038 shares outstanding; December 25, 2013: 105,014 shares issued and 89,232 shares outstanding
$
1,052

 
$
1,050

Paid-in capital
567,688

 
567,505

Deficit
(464,515
)
 
(470,946
)
Accumulated other comprehensive loss, net of tax
(17,050
)
 
(16,842
)
Shareholders’ equity before treasury stock
87,175

 
80,767

Treasury stock, at cost, 17,139 and 15,782 shares, respectively
(81,433
)
 
(72,336
)
Total shareholders' equity
5,742

 
8,431

Total liabilities and shareholders' equity
$
287,731

 
$
295,777

See accompanying notes

3


Denny’s Corporation and Subsidiaries
Condensed Consolidated Statements of Income
(Unaudited)

 
Quarter Ended
 
March 26, 2014
 
March 27, 2013
 
(In thousands, except per share amounts)
Revenue:
 
 
 
Company restaurant sales
$
79,304

 
$
81,030

Franchise and license revenue
32,616

 
33,460

Total operating revenue
111,920

 
114,490

Costs of company restaurant sales:
 
 
 
Product costs
20,583

 
21,146

Payroll and benefits
33,099

 
31,546

Occupancy
5,128

 
5,228

Other operating expenses
11,365

 
11,200

Total costs of company restaurant sales
70,175

 
69,120

Costs of franchise and license revenue
10,697

 
11,402

General and administrative expenses
14,116

 
15,159

Depreciation and amortization
5,238

 
5,224

Operating (gains), losses and other charges, net
422

 
134

Total operating costs and expenses, net
100,648

 
101,039

Operating income
11,272

 
13,451

Interest expense, net
2,322

 
2,800

Other nonoperating (income) expense, net
(100
)
 
1

Net income before income taxes
9,050

 
10,650

Provision for income taxes
2,619

 
3,569

Net income
$
6,431

 
$
7,081

 
 
 
 
Basic net income per share
$
0.07

 
$
0.08

Diluted net income per share
$
0.07

 
$
0.07

 
 
 
 
Basic weighted average shares outstanding
88,803

 
92,350

Diluted weighted average shares outstanding
90,816

 
94,461

 
See accompanying notes

4

Denny’s Corporation and Subsidiaries
Condensed Consolidated Statements of Comprehensive Income
(Unaudited)

 
Quarter Ended
 
March 26, 2014
 
March 27, 2013
 
(In thousands)
Net income
$
6,431

 
$
7,081

Other comprehensive (loss) income, net of tax:
 
 
 
Minimum pension liability adjustment, net of tax expense of $90 and $165
141

 
254

Recognition of unrealized loss on hedge transaction, net of tax benefit of $224
(349
)
 
—

Other comprehensive (loss) income
(208
)
 
254

Total comprehensive income
$
6,223

 
$
7,335


See accompanying notes



5


Denny’s Corporation and Subsidiaries
Condensed Consolidated Statement of Shareholders’ Equity
(Unaudited)

 
Common Stock
 
Treasury Stock
 
Paid-in
 
 
 
Accumulated
Other
Comprehensive
 
Total
Shareholders’
 
Shares
 
Amount
 
Shares
 
Amount
 
Capital
 
(Deficit)
 
Loss, Net
 
Equity
 
(In thousands)
Balance, December 25, 2013
105,014

 
$
1,050

 
(15,782
)
 
$
(72,336
)
 
$
567,505

 
$
(470,946
)
 
$
(16,842
)
 
$
8,431

Net income
—

 
—

 
—

 
—

 
—

 
6,431

 
—

 
6,431

Other comprehensive loss
—

 
—

 
—

 
—

 
—

 
—

 
(208
)
 
(208
)
Share-based compensation on equity classified awards
—

 
—

 
—

 
—

 
416

 
—

 
—

 
416

Purchase of treasury stock
—

 
—

 
(1,357
)
 
(9,097
)
 
—

 
—

 
—

 
(9,097
)
Issuance of common stock for share-based compensation
151

 
2

 
—

 
—

 
(2
)
 
—

 
—

 
—

Exercise of common stock options
12

 
—

 
—

 
—

 
44

 
—

 
—

 
44

Tax expense from share-based compensation
—

 
—

 
—

 
—

 
(275
)
 
—

 
—

 
(275
)
Balance, March 26, 2014
105,177

 
$
1,052

 
(17,139
)
 
$
(81,433
)
 
$
567,688

 
$
(464,515
)
 
$
(17,050
)
 
$
5,742

 
See accompanying notes

6


Denny’s Corporation and Subsidiaries
Condensed Consolidated Statements of Cash Flows
(Unaudited)
 
Quarter Ended
 
March 26, 2014
 
March 27, 2013
 
(In thousands)
Cash flows from operating activities:
 
 
 
Net income
$
6,431

 
$
7,081

Adjustments to reconcile net income to cash flows provided by operating activities:
 
 
 
Depreciation and amortization
5,238

 
5,224

Operating (gains), losses and other charges, net
422

 
134

Amortization of deferred financing costs
121

 
133

(Gain) loss on early extinguishment of debt
(1
)
 
349

Loss on change in the fair value of interest rate caps
10

 
2

Deferred income tax expense
2,159

 
2,875

Share-based compensation
1,164

 
1,175

Changes in assets and liabilities:
 
 
 
Decrease (increase) in assets:
 
 
 
Receivables
2,836

 
2,398

Inventories
(36
)
 
(35
)
Other current assets
1,478

 
2,218

Other assets
(586
)
 
(1,036
)
Increase (decrease) in liabilities:
 
 
 
Accounts payable
3,306

 
(2,658
)
Accrued salaries and vacations
(3,967
)
 
(5,574
)
Accrued taxes
(320
)
 
(117
)
Other accrued liabilities
(3,961
)
 
(2,679
)
Other noncurrent liabilities and deferred credits
(963
)
 
(2,135
)
Net cash flows provided by operating activities
13,331

 
7,355

Cash flows from investing activities:
 
 
 
Capital expenditures
(6,857
)
 
(3,006
)
Proceeds from disposition of property
4

 
22

Collections on notes receivable
727

 
1,234

Issuance of notes receivable
(305
)
 
(404
)
Net cash flows used in investing activities
(6,431
)
 
(2,154
)
Cash flows from financing activities:
 
 
 
Net revolver borrowings under new credit agreement
3,000

 
—

Long-term debt payments
(1,746
)
 
(5,072
)
Proceeds from exercise of stock options
44

 
688

Tax withholding on share-based payments
(419
)
 
(464
)
Tax expense for share-based compensation
(275
)
 
(97
)
Purchase of treasury stock
(8,596
)
 
(2,272
)
Net bank overdrafts
(437
)
 
(1,286
)
Net cash flows used in financing activities
(8,429
)
 
(8,503
)
Decrease in cash and cash equivalents
(1,529
)
 
(3,302
)
Cash and cash equivalents at beginning of period
2,943

 
13,565

Cash and cash equivalents at end of period
$
1,414

 
$
10,263

 
See accompanying notes

7


Denny’s Corporation and Subsidiaries
Notes to Condensed Consolidated Financial Statements
(Unaudited)

Note 1.     Introduction and Basis of Presentation

Denny’s Corporation, or Denny’s, is one of America’s largest full-service restaurant chains based on number of restaurants. The following table shows the unit activity for the quarter ended March 26, 2014 and March 27, 2013 , respectively:

 
Quarter Ended
 
March 26, 2014
 
March 27, 2013
Company restaurants, beginning of period
163

 
164

Units opened
—

 
—

Units closed
(2
)
 
—

End of period
161

 
164

 
 
 
 
Franchised and licensed restaurants, beginning of period
1,537

 
1,524

Units opened
4

 
7

Units closed
(6
)
 
(6
)
End of period
1,535

 
1,525

Total restaurants, end of period
1,696

 
1,689


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 25, 2013 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 25, 2013 . The results of operations for the interim periods presented are not necessarily indicative of the results for the entire fiscal year ending December 31, 2014 .

Note 2.     Summary of Significant Accounting Policies
 
Accounting Standards to be Adopted

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

8



Note 3.     Receivables
 
Receivables were comprised of the following:
 
 
March 26, 2014
 
December 25, 2013
 
(In thousands)
Current assets:
 
 
 
Receivables:
 
 
 
Trade accounts receivable from franchisees
$
9,874

 
$
10,072

Notes receivable from franchisees
1,532

 
1,800

Vendor receivables
944

 
2,516

Credit card receivables
884

 
2,162

Other
1,216

 
1,002

Allowance for doubtful accounts
(234
)
 
(231
)
Total current receivables, net
$
14,216

 
$
17,321

 
 
 
 
Noncurrent assets (included as a component of other noncurrent assets):
 
 
 
Notes receivable from franchisees
$
613

 
$
766


For the quarters ended March 26, 2014 and March 27, 2013 , we recorded provisions for credit losses of less than $0.1 million . These amounts are included as a component of costs of franchise and license revenue on our Condensed Consolidated Statements of Income.

For the quarters ended March 26, 2014 and March 27, 2013 , we recognized interest income on notes receivable from franchisees of less than $0.1 million . These amounts are included as a component of interest expense, net on our Condensed Consolidated Statements of Income.
 
Note 4.    Goodwill and Other Intangible Assets

Goodwill had a carrying amount of $31.5 million as of March 26, 2014 and December 25, 2013 .
 
Other intangible assets were comprised of the following:
 
 
March 26, 2014
 
December 25, 2013
 
Gross Carrying Amount
 
Accumulated Amortization
 
Gross Carrying Amount
 
Accumulated Amortization
 
(In thousands)
Intangible assets with indefinite lives:
 
 
 
 
 
 
 
Trade names
$
44,055

 
$
—

 
$
44,055

 
$
—

Liquor licenses
126

 
—

 
126

 
—

Intangible assets with definite lives:
 
 
 
 
 
 
 
Franchise and license agreements
22,727

 
20,806

 
31,248

 
29,007

Reacquired franchise rights
1,857

 
443

 
1,857

 
354

Intangible assets
$
68,765

 
$
21,249

 
$
77,286

 
$
29,361

 
The $8.5 million decrease in franchise and license agreements primarily resulted from the removal of fully amortized agreements.

9



Note 5.     Operating (Gains), Losses and Other Charges, Net

Operating (gains), losses and other charges, net   are comprised of the following:
 
 
Quarter Ended
 
March 26, 2014
 
March 27, 2013
 
(In thousands)
(Gains) losses on sales of assets and other, net
$
(8
)
 
$
18

Restructuring charges and exit costs
430

 
116

Impairment charges
—

 
—

Operating (gains), losses and other charges, net
$
422

 
$
134

 
Restructuring Charges and Exit Costs
 
Restructuring charges and exit costs were comprised of the following: 
 
 
Quarter Ended
 
March 26, 2014
 
March 27, 2013
 
(In thousands)
Exit costs
$
54

 
$
56

Severance and other restructuring charges
376

 
60

Total restructuring charges and exit costs
$
430

 
$
116


The components of the change in accrued exit cost liabilities are as follows:
 
 
(In thousands)
Balance, December 25, 2013
$
3,149

Exit costs (1)
54

Payments, net of sublease receipts
(355
)
Interest accretion
52

Balance, March 26, 2014
2,900

Less current portion included in other current liabilities
1,182

Long-term portion included in other noncurrent liabilities
$
1,718


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

Estimated net cash payments related to exit cost liabilities are as follows:
 
 
(In thousands)
Remainder of 2014
$
1,082

2015
566

2016
295

2017
296

2018
299

Thereafter
986

Total
3,524

Less imputed interest
624

Present value of exit cost liabilities
$
2,900

 

10


As of March 26, 2014 and December 25, 2013 , we had accrued severance and other restructuring charges of $0.2 million and $0.1 million , respectively. The balance as of March 26, 2014 is expected to be paid during the next 12 months.

Note 6.     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:
 
 
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 )
 
 
Fair value measurements as of March 26, 2014:
 
 
 
 
 
 
 
 
 
Deferred compensation plan investments (1)
$
8,668

 
$
8,668

 
$
—

 
$
—

 
market approach
Interest rate swaps (2)
$
2,458

 
—

 
2,458

 
—

 
income approach
Interest rate caps (2)
$
1

 
$
—

 
$
1

 
$
—

 
income approach
Total
$
11,127

 
$
8,668

 
$
2,459

 
$
—

 
 
 
 
 
 
 
 
 
 
 
 
Fair value measurements as of December 25, 2013:
 
 
 
 
 
 
 
 
 
Deferred compensation plan investments (1)
$
8,168

 
$
8,168

 
$
—

 
$
—

 
market approach
Interest rate swaps (2)
$
3,032

 
$
—

 
$
3,032

 
$
—

 
income approach
Interest rate caps (2)
$
11

 
$
—

 
$
11

 
$
—

 
income approach
Total
$
11,211

 
$
8,168

 
$
3,043

 
$
—

 
 
 
(1)
The fair values of our deferred compensation plan investments are based on the closing market prices of the participants’ elected investments.
(2)
The fair values of our interest rate swaps and interest rate caps are based upon Level 2 inputs, which include valuation models as reported by our counterparties. The key inputs for the valuation models are quoted market prices, interest rates and forward yield curves. See Note 7 for details on the interest rate swaps and interest rate caps.
 
Those assets and liabilities measured at fair value on a nonrecurring basis are summarized below:

 
Total
 
Quoted Prices in Active Markets for Identical Assets/Liabilities
(Level 1)
 
Significant Other Observable Inputs
(Level 2)
 
Significant Unobservable Inputs
(Level 3)
 
Valuation Technique
 
(In thousands )
 
 
Fair value measurements as of December 25, 2013:
 
 
 
 
 
 
 
 
 
Assets held and used (1)
$
1,198

 
$
—

 
$
—

 
$
1,198

 
income approach
Total
$
1,198

 
$
—

 
$
—

 
$
1,198

 
 

(1)
As of December 25, 2013, impaired assets related to an underperforming restaurant were written down to their fair value. Impairment charges of $4.8 million were recognized as a component of operating (gains), losses and other charges, net in our Condensed Consolidated Statements of Income. To determine fair value, we used the income approach, which assumes that the future cash flows reflect current market expectations. These fair value measurements require significant judgment using Level 3 inputs, such as discounted cash flows from operations, which are not observable from the market, directly or indirectly.


11


Note 7.     Long-Term Debt

As of March 26, 2014 , Denny's Corporation and certain of its subsidiaries had a credit facility comprised of a senior secured term loan in an original principal amount of $60 million and a $190 million senior secured revolver (with a $30 million letter of credit sublimit). As of March 26, 2014 , we had outstanding term loan borrowings under the credit facility of $57.0 million and outstanding letters of credit under the senior secured revolver of $24.6 million . There were $98.3 million of revolving loans outstanding at March 26, 2014 . These balances resulted in availability of $67.1 million under the revolving facility. The weighted-average interest rate under the term loan and on outstanding revolver loans was 2.16% and 2.17% as of March 26, 2014 and December 25, 2013 , respectively.

A commitment fee of 0.35% is paid on the unused portion of the revolving credit facility. Borrowings under the credit facility bear a tiered interest rate based on the Company's consolidated leverage ratio and was initially set at LIBOR plus 200 basis points. The credit facility includes an accordion feature that would allow us to increase the size of the facility to $300 million . The maturity date for the credit facility is April 24, 2018 .

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. It includes negative covenants that are usual for facilities and transactions of this type. The credit facility also includes certain financial covenants with respect to a maximum consolidated leverage ratio, a minimum consolidated fixed charge coverage ratio and maximum capital expenditures.
The term loan under the credit facility requires amortization of the original term loan balance of 5% per year in the first two years, 7.5% in the subsequent two years and 10% in the fifth year with the balance due at maturity. We will be required to make certain mandatory prepayments under certain circumstances and will have the option to make certain prepayments under the credit facility. The credit facility includes events of default (and related remedies, including acceleration and increased interest rates following an event of default) that are usual for facilities and transactions of this type.
During the quarter ended March 26, 2014 , we paid $0.8 million on the term loan under the credit facility.
   
Interest Rate Hedges
We have entered into interest rate hedges that cap the LIBOR rate on borrowings under our credit facility. The 200 basis point LIBOR cap applies to $125 million of borrowings from April 14, 2013 through April 13, 2014 and to $150 million of borrowings from April 14, 2014 through March 31, 2015.

We also have entered into interest rate swaps to hedge a portion of the cash flows of our floating rate debt from March 31, 2015 through March 29, 2018. We designated the interest rate swaps as cash flow hedges of our exposure to variability in future cash flows attributable to payments of LIBOR due on a related $150 million notional debt obligation from March 31, 2015 through March 31, 2017 and a related $140 million notional debt obligation from April 1, 2017 through March 29, 2018. Under the terms of the swaps, we will pay an average fixed rate of 3.12% on the notional amounts and receive payments from a counterparty based on the 30-day LIBOR rate. As of March 26, 2014 , the fair value of the interest rate swaps was $2.5 million , which is recorded as a component of other noncurrent assets on our Condensed Consolidated Balance Sheets. See Note 13 for the amounts recorded in accumulated other comprehensive loss related to the interest rate swaps.

We believe that our estimated cash flows from operations for 2014 , 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.


12


Note 8.     Defined Benefit Plans
 
The components of net periodic benefit cost were as follows:

 
Quarter Ended
 
March 26, 2014
 
March 27, 2013
 
(In thousands)
Pension Plan:
 
 
 
Service cost
$
95

 
$
100

Interest cost
779

 
754

Expected return on plan assets
(989
)
 
(1,124
)
Amortization of net loss
231

 
419

Net periodic benefit cost
$
116

 
$
149

 
 
 
 
Other Defined Benefit Plans:
 
 
 
Interest cost
$
31

 
$
28

Amortization of net loss
15

 
18

Net periodic benefit cost
$
46

 
$
46

 
We made contributions of $1.3 million and $1.4 million to our qualified pension plan during the quarter s ended March 26, 2014 and March 27, 2013 , respectively. We made contributions of less than $0.1 million to our other defined benefit plans during both the quarter s ended March 26, 2014 and March 27, 2013 . We expect to contribute an additional $1.3 million to our qualified pension plan and an additional $0.1 million to our other defined benefit plans over the remainder of fiscal 2014 .

Additional minimum pension liability of $18.5 million and $18.7 million is reported as a component of accumulated other comprehensive loss in the Condensed Consolidated Statement of Shareholders’ Equity as of March 26, 2014 and December 25, 2013 , respectively.
 
Note 9.     Share-Based Compensation

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

 
Quarter Ended
 
March 26, 2014
 
March 27, 2013
 
(In thousands)
Stock options
$
52

 
$
164

Performance share awards
928

 
831

Restricted stock units
184

 
180

Total share-based compensation
$
1,164

 
$
1,175

 
Stock Options

As of March 26, 2014 , there was no unrecognized compensation cost related to unvested stock option awards outstanding.
 

13


Performance Share Awards
 
In February 2014, we granted approximately 0.2 million performance shares and related performance-based target cash awards of $2.2 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 $7.65 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 31, 2014. The performance period is the three year fiscal period beginning December 26, 2013 and ending December 28, 2016. The performance shares and cash awards will vest and be earned (from 0% to 200% 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.

During the quarter ended March 26, 2014 , we made payments of $1.1 million in cash and issued 0.1 million shares of common stock related to performance share awards.
 
As of March 26, 2014 , we had approximately $6.6 million of unrecognized compensation cost related to all unvested performance share awards outstanding, which is expected to be recognized over a weighted average of 1.6 years .
 
Restricted Stock Units for Board Members

During the quarter ended March 26, 2014 , we granted less than 0.1 million restricted stock units (which are equity classified) with a weighted average grant date fair value of $7.19 per unit to non-employee members of our Board of Directors. A director may elect to convert these awards into shares of common stock either on a specific date in the future (while still serving as a member of our Board of Directors) or upon termination as a member of our Board of Directors. During the quarter ended March 26, 2014 , less than 0.1 million restricted stock units were converted into shares of common stock. As of March 26, 2014 , we had approximately $0.1 million of unrecognized compensation cost related to all unvested restricted stock unit awards outstanding, which is expected to be recognized over a weighted average of 0.1 years .
 
Note 10.     Income Taxes

The provision for income taxes was $2.6 million and $3.6 million for the quarters ended March 26, 2014 and March 27, 2013 , respectively. For the 2014 period, the difference in the overall effective rate from the U.S. Statutory rate was due to two discrete tax items. State job tax credits of $0.3 million were claimed during the 2014 period resulting from the prior year's hiring activity . In addition, share-based compensation adjustments resulted in an out-of-period tax benefit of $0.5 million . We do not believe the out-of-period adjustment was material to any prior or current year financial statements or on earnings trends. For the 2013 period, the differ ence in the overall effective rate from the U.S. Statutory rate was due to a discrete tax item. The passage of the American Tax Payer Relief Act of 2012 resulted in deferred tax benefits of $0.5 million related to work opportunity credits generated in 2012, which were allowed retroactively during 2013.

Note 11.     Net Income Per Share
 
The amounts used for the basic and diluted net income per share calculation are summarized below:
 
Quarter Ended
 
March 26, 2014
 
March 27, 2013
 
(In thousands, except for per share amounts)
Net income
$
6,431

 
$
7,081

 
 
 
 
Weighted average shares outstanding - basic
88,803

 
92,350

Effect of dilutive share-based compensation awards
2,013

 
2,111

Weighted average shares outstanding - diluted
90,816

 
94,461

 
 
 
 
Basic net income per share
$
0.07

 
$
0.08

Diluted net income per share
$
0.07

 
$
0.07

 
 
 
 
Anti-dilutive share-based compensation awards
573

 
331

    

14


Note 12.     Supplemental Cash Flow Information

 
Quarter Ended
 
March 26, 2014
 
March 27, 2013
 
(In thousands)
Income taxes paid, net
$
820

 
$
343

Interest paid
$
2,069

 
$
2,526

 
 
 
 
Noncash investing and financing activities:
 
 
 
Issuance of common stock, pursuant to share-based compensation plans
$
1,030

 
$
1,586

Execution of capital leases
$
423

 
$
1,313

Treasury stock payable
$
721

 
$
177

 
Note 13.     Shareholders' Equity

Share Repurchase
 
Our credit facility permits the payment of cash dividends and the purchase of Denny’s stock subject to certain limitations. In April 2013, we announced that our Board of Directors approved a share repurchase program authorizing us to repurchase up to an additional 10.0 million shares of our Common Stock. Under this 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. During the quarter ended March 26, 2014 , we repurchased 1.4 million shares of our Common Stock for approximately $9.1 million . This brings the total amount repurchased under this program to 2.1 million shares of our Common Stock for approximately $14.1 million , leaving 7.9 million shares remaining to be repurchased as of March 26, 2014 .

Accumulated Other Comprehensive Loss

The components of the change in accumulated other comprehensive loss were as follows:

 
Pensions
 
Derivatives
 
Accumulated Other Comprehensive Loss
 
(In thousands)
Balance as of December 25, 2013
(18,690
)
 
1,848

 
(16,842
)
Amortization of net loss (1)
231

 
—

 
231

Net change in fair value of derivatives
—

 
(573
)
 
(573
)
Income tax (expense) benefit related to items of other comprehensive income
(90
)
 
224

 
134

Balance as of March 26, 2014
$
(18,549
)
 
$
1,499

 
$
(17,050
)

(1)
Before-tax amount that was reclassified from accumulated other comprehensive loss and included as a component of pension expense within general and administrative expenses in our Condensed Consolidated Statements of Income during the quarter ended March 26, 2014 . See Note 8 for additional details.



15


Note 14.     Commitments and Contingencies

We have guarantees related to leases and franchisees’ loans on certain Pilot Flying J locations. In addition, we have arranged loan programs for specific new franchise restaurants and franchise restaurant remodels. Payments under these guarantees would result from the inability of a franchisee to fund required payments when due. Through March 26, 2014 , no events had occurred that caused us to make payments under the guarantees.
There were $6.2 million and $6.1 million of loans outstanding under these programs as of March 26, 2014 and December 25, 2013 , respectively. As of March 26, 2014 , the maximum amounts payable under the lease guarantee and loan guarantees were $2.0 million and $1.0 million , respectively. As a result of these guarantees, we have recorded liabilities of approximately $0.1 million as of March 26, 2014 and December 25, 2013 , which are included as a component of other noncurrent liabilities and deferred credits in our Condensed Consolidated Balance Sheets and other nonoperating expense in our Condensed Consolidated Statements of Income.
There are various claims and pending legal actions against or indirectly involving us, incidental to and arising out of the ordinary course of the business. In the opinion of management, based upon information currently available, the ultimate liability with respect to these proceedings and claims will not materially affect the Company's consolidated results of operations or financial position. 
Note 15.     Subsequent Events

We performed an evaluation of subsequent events and determined that no events required disclosure.


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

Forward-Looking Statements

The following discussion is intended to highlight significant changes in our financial position as of March 26, 2014 and results of operations for the quarter ended March 26, 2014 compared to the quarter ended March 27, 2013 . This report contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. 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 and are intended to speak only as of the date such statements are made, 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 25, 2013 .

16



Statements of Income
 
The following table contains information derived from our Condensed Consolidated Statements of Income expressed as a percentage of total operating revenues, except as noted below. Percentages may not add due to rounding.
 
 
Quarter Ended
 
March 26, 2014
 
March 27, 2013
 
(Dollars in thousands)
Revenue:
 
 
 
 
 
 
 
Company restaurant sales
$
79,304

 
70.9
 %
 
$
81,030

 
70.8
%
Franchise and license revenue
32,616

 
29.1
 %
 
33,460

 
29.2
%
Total operating revenue
111,920

 
100.0
 %
 
114,490

 
100.0
%
Costs of company restaurant sales (a):
 

 
 
 
 

 
 
Product costs
20,583

 
26.0
 %
 
21,146

 
26.1
%
Payroll and benefits
33,099

 
41.7
 %
 
31,546

 
38.9
%
Occupancy
5,128

 
6.5
 %
 
5,228

 
6.5
%
Other operating expenses
11,365

 
14.3
 %
 
11,200

 
13.8
%
Total costs of company restaurant sales
70,175

 
88.5
 %
 
69,120

 
85.3
%
Costs of franchise and license revenue (a)
10,697

 
32.8
 %
 
11,402

 
34.1
%
General and administrative expenses
14,116

 
12.6
 %
 
15,159

 
13.2
%
Depreciation and amortization
5,238

 
4.7
 %
 
5,224

 
4.6
%
Operating (gains), losses and other charges, net
422

 
0.4
 %
 
134

 
0.1
%
Total operating costs and expenses
100,648

 
89.9
 %
 
101,039

 
88.3
%
Operating income
11,272

 
10.1
 %
 
13,451

 
11.7
%
Interest expense, net
2,322

 
2.1
 %
 
2,800

 
2.4
%
Other nonoperating (income) expense, net
(100
)
 
(0.1
)%
 
1

 
0.0
%
Net income before income taxes
9,050

 
8.1
 %
 
10,650

 
9.3
%
Provision for income taxes
2,619

 
2.3
 %
 
3,569

 
3.1
%
Net income
$
6,431

 
5.7
 %
 
$
7,081

 
6.2
%
 
 
 
 
 
 
 
 
Other Data:
 

 
 

 
 

 
 

Company average unit sales
$
498

 
 

 
$
494

 
 

Franchise average unit sales
$
356

 
 

 
$
349

 
 

Company equivalent units (b)
159

 
 

 
164

 
 

Franchise equivalent units (b)
1,536

 
 

 
1,526

 
 

Company same-store sales increase (decrease) (c)(d)
3.2

%
 

 
(1.5
)
%
 

Domestic franchise same-store sales increase (decrease) (c)
1.5

%
 

 
(0.5
)
%
 

            
(a)
Costs of company restaurant sales percentages are as a percentage of company restaurant sales. Costs of franchise and license revenue percentages are as a percentage of franchise and license revenue. All other percentages are as a percentage of total operating revenue.
(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 2014 comparable units.


17


Quarter Ended March 26, 2014 Compared with Quarter Ended March 27, 2013
  
Unit Activity

 
Quarter Ended
 
March 26, 2014
 
March 27, 2013
Company restaurants, beginning of period
163

 
164

Units opened
—

 
—

Units closed
(2
)
 
—

End of period
161

 
164

 
 
 
 
Franchised and licensed restaurants, beginning of period
1,537

 
1,524

Units opened 
4

 
7

Units closed
(6
)
 
(6
)
End of period
1,535

 
1,525

Total restaurants, end of period
1,696

 
1,689


Company Restaurant Operations

During the quarter ended March 26, 2014 , we realized a 3.2% increase in same-store sales. Company restaurant sales decreased $1.7 million , or 2.1% , primarily resulting from a five equivalent-unit decrease in company restaurants.
 
Total costs of company restaurant sales as a percentage of company restaurant sales increased to 88.5% from 85.3% . Product costs decreased slightly to  26.0% from 26.1% . Payroll and benefits increased to 41.7% from 38.9% primarily due to a 1.4 percentage point increase in workers' compensation costs and increased group insurance and incentive compensation costs. The increase in workers' compensation was due to $0.4 million in unfavorable claims development during the current year period, as compared to $0.5 million in favorable workers' compensation claims development in the prior year's period. Occupancy costs remained flat at  6.5% . Other operating expenses were comprised of the following amounts and percentages of company restaurant sales:

 
Quarter Ended
 
March 26, 2014
 
March 27, 2013
 
(Dollars in thousands)
Utilities
$
3,331

 
4.2
%
 
$
3,127

 
3.9
%
Repairs and maintenance
1,459

 
1.8
%
 
1,349

 
1.7
%
Marketing
3,007

 
3.8
%
 
3,016

 
3.7
%
Legal
54

 
0.1
%
 
276

 
0.3
%
Other direct costs
3,514

 
4.4
%
 
3,432

 
4.2
%
Other operating expenses
$
11,365

 
14.3
%
 
$
11,200

 
13.8
%


18


Franchise Operations

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

 
Quarter Ended
 
March 26, 2014
 
March 27, 2013
 
(Dollars in thousands)
Royalties
$
21,481

 
65.9
%
 
$
21,027

 
62.9
%
Initial fees
117

 
0.3
%
 
280

 
0.8
%
Occupancy revenue
11,018

 
33.8
%
 
12,153

 
36.3
%
Franchise and license revenue
$
32,616

 
100.0
%
 
$
33,460

 
100.0
%
 
 
 
 
 
 
 
 
Occupancy costs
8,268

 
25.4
%
 
8,853

 
26.5
%
Other direct costs
2,429

 
7.4
%
 
2,549

 
7.6
%
Costs of franchise and license revenue
$
10,697

 
32.8
%
 
$
11,402

 
34.1
%
 
Royalties increase d by $0.5 million , or 2.2% , primarily resulting from a ten equivalent unit increase in franchised and licensed units and a 1.5% increase in domestic same-store sales, as compared to the prior year. Initial fees decrease d by $0.2 million , or 58.2% , as fewer restaurants were opened by franchisees during the current year period. The decrease in occupancy revenue of $1.1 million , or 9.3% , is primarily the result of lease expirations.

Costs of franchise and license revenue decrease d by $0.7 million , or 6.2% . The decrease in occupancy costs of $0.6 million , or 6.6% , is primarily the result of lease expirations. Other direct costs decrease d by $0.1 million , or 4.7% . As a result, costs of franchise and license revenue as a percentage of franchise and license revenue decrease d to 32.8% for the quarter ended March 26, 2014 from 34.1% for the quarter ended March 27, 2013 .
 
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 26, 2014
 
March 27, 2013
 
(In thousands)
Share-based compensation
$
1,164

 
$
1,175

Other general and administrative expenses
12,952

 
13,984

Total general and administrative expenses
$
14,116

 
$
15,159

 
The $1.0 million decrease in general and administrative expenses is primarily the result of reductions in payroll and relocation costs of $0.4 million, incentive compensation of $0.3 million and deferred compensation of $0.2 million.

19


Depreciation and amortization was comprised of the following:

 
Quarter Ended
 
March 26, 2014
 
March 27, 2013
 
(In thousands)
Depreciation of property and equipment
$
3,817

 
$
3,693

Amortization of capital lease assets
888

 
798

Amortization of intangible and other assets
533

 
733

Total depreciation and amortization expense
$
5,238

 
$
5,224

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

 
Quarter Ended
 
March 26, 2014
 
March 27, 2013
 
(In thousands)
(Gains) losses on sales of assets and other, net
$
(8
)
 
$
18

Restructuring charges and exit costs
430

 
116

Impairment charges
—

 
—

Operating (gains), losses and other charges, net
$
422

 
$
134

 
Restructuring charges and exit costs were comprised of the following:
         
 
Quarter Ended
 
March 26, 2014
 
March 27, 2013
 
(In thousands)
Exit costs 
$
54

 
$
56

Severance and other restructuring charges
376

 
60

Total restructuring and exit costs
$
430

 
$
116

  
Operating income was $11.3 million for the quarter ended March 26, 2014 and $13.5 million for the quarter ended March 27, 2013 .
 
Interest expense, net was comprised of the following:

 
Quarter Ended
 
March 26, 2014
 
March 27, 2013
 
(In thousands)
Interest on credit facilities
$
840

 
$
1,269

Interest on capital lease liabilities
880

 
900

Letters of credit and other fees
353

 
337

Other interest income
(21
)
 
(21
)
Total cash interest
2,052

 
2,485

Amortization of deferred financing costs
121

 
133

Interest accretion on other liabilities
149

 
182

Total interest expense, net
$
2,322

 
$
2,800

 
The decrease in interest expense primarily resulted from a decrease in interest rates related to the 2013 refinancing of our credit facility.


20


The provision for income taxes was $2.6 million for the quarter ended March 26, 2014 compared to $3.6 million for the quarter ended March 27, 2013 . For the 2014 period, the difference in the overall effective rate from the U.S. Statutory rate was due to two discrete tax items. State job tax credits of $0.3 million were claimed during the 2014 period resulting from the prior year's hiring activity. In addition, share-based compensation adjustments resulted in an out-of-period tax benefit of $0.5 million. We do not believe the out-of-period adjustment was material to any prior or current year financial statements or on earnings trends. For the 2013 period, the difference in the overall effective rate from the U.S. Statutory rate was due to a discrete tax item. The passage of the American Tax Payer Relief Act of 2012 resulted in deferred tax benefits of $0.5 million related to work opportunity credits generated in 2012, which were allowed retroactively during 2013. 

Net income was $6.4 million for the quarter ended March 26, 2014 compared with $7.1 million for the quarter ended March 27, 2013 .
 
Liquidity and Capital Resources

Our primary sources of liquidity and capital resources are cash generated from operations and borrowings under our credit facility (as described below). Principal uses of cash are operating expenses, capital expenditures, debt repayments and the repurchase of shares of our Common Stock.
 
The following table presents a summary of our sources and uses of cash and cash equivalents for the periods indicated:
 
 
Quarter Ended
 
March 26, 2014
 
March 27, 2013
 
(In thousands)
Net cash provided by operating activities
$
13,331

 
$
7,355

Net cash used in investing activities
(6,431
)
 
(2,154
)
Net cash used in financing activities
(8,429
)
 
(8,503
)
Decrease in cash and cash equivalents
$
(1,529
)
 
$
(3,302
)
  
We believe that our estimated cash flows from operations for 2014 , 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 $6.4 million for the quarter ended March 26, 2014 . These cash flows include capital expenditures of $6.9 million and issuances of notes receivable of $0.3 million , partially offset by  $0.7 million in collections of notes receivable. Our principal capital requirements have been largely associated with the following:
  
 
Quarter Ended
 
March 26, 2014
 
March 27, 2013
 
(In thousands)
Facilities
$
1,363

 
$
1,199

New construction 
33

 
400

Remodeling
4,406

 
1,030

Information technology
79

 
96

Other
976

 
281

Capital expenditures
$
6,857

 
$
3,006

 
Capital expenditures for fiscal 2014 are expected to be approximately $20-$22 million, including approximately 40 remodels completed at company restaurants.
 
Cash flows used in financing activities were $8.4 million for the quarter ended March 26, 2014 , which included stock repurchases of $8.6 million , partially offset by a net increase in long-term debt of $1.3 million.


21


Our working capital deficit was $22.9 million at March 26, 2014 compared with $20.3 million at December 25, 2013 . The increase in working capital deficit is primarily related to the timing of payments impacting prepaid and payable balances. 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.

Credit Facility

As of March 26, 2014 , we had outstanding term loan borrowings under the credit facility of $57.0 million and outstanding letters of credit under the senior secured revolver of $24.6 million . There were $98.3 million in revolving loans outstanding at March 26, 2014 . These balances resulted in availability of $67.1 million under the revolving facility. The weighted-average interest rates under the term loan and on outstanding revolver loans as of March 26, 2014 were 2.16% .

A commitment fee of 0.35% is paid on the unused portion of the revolving credit facility. Borrowings under the credit facility bear a tiered interest rate based on the Company's consolidated leverage ratio and was initially set at LIBOR plus 200 basis points. The credit facility includes an accordion feature that would allow us to increase the size of the facility to $300 million. The maturity date for the credit facility is April 24, 2018.
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. It includes negative covenants that are usual for facilities and transactions of this type. The credit facility also includes certain financial covenants with respect to a maximum consolidated leverage ratio, a minimum consolidated fixed charge coverage ratio and maximum capital expenditures.
The term loan under the credit facility requires amortization of 5% per year in the first two years, 7.5% in the subsequent two years and 10% in the fifth year with the balance due at maturity. We will be required to make certain mandatory prepayments under certain circumstances and will have the option to make certain prepayments under the credit facility. The credit facility includes events of default (and related remedies, including acceleration and increased interest rates following an event of default) that are usual for facilities and transactions of this type.
Interest Rate Hedges

We have entered into interest rate hedges that cap the LIBOR rate on borrowings under our credit facility. The 200 basis point LIBOR cap applies to $125 million of borrowings from April 14, 2013 through April 13, 2014 and to $150 million of borrowings from April 14, 2014 through March 31, 2015.
We also have entered into interest rate swaps to hedge a portion of the cash flows of our floating rate debt from March 31, 2015 through March 29, 2018. We designated the interest rate swaps as cash flow hedges of our exposure to variability in future cash flows attributable to payments of LIBOR due on a related $150 million notional debt obligation from March 31, 2015 through March 31, 2017 and a related $140 million notional debt obligation from April 1, 2017 through March 29, 2018. Under the terms of the swaps, we will pay an average fixed rate of 3.12% on the notional amounts and receive payments from a counterparty based on the 30-day LIBOR rate.

Implementation of New Accounting Standards

See Note 2 to our Condensed Consolidated Financial Statements.


22


Item 3.     Quantitative and Qualitative Disclosures About Market Risk
 
Interest Rate Risk
 
We have exposure to interest rate risk related to certain instruments entered into for other than trading purposes. Specifically, as of March 26, 2014 , borrowings under our term loan and revolver bore interest at variable rates based on LIBOR plus a spread of 200 basis points per annum. Through April 13, 2014, up to $125 million of the term loan borrowing has a 200 basis point LIBOR point cap.
 
Based on the levels of borrowings under the credit facility at March 26, 2014 , if interest rates changed by 100 basis points, our annual cash flow and income before taxes would change by approximately $1.6 million. This computation is determined by considering the impact of hypothetical interest rates on the credit facility at March 26, 2014 , taking into consideration the interest rate cap. However, the nature and amount of our borrowings may vary as a result of future business requirements, market conditions and other factors.
 
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 increase or decrease our projected benefit obligation related to our pension plan by approximately $2.0 million and would impact the pension plan's net periodic benefit cost by approximately $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. 
 
Item 4.     Controls and Procedures

As required by Rule 13a-15(b) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), our management conducted an evaluation (under the supervision and with the participation of our 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 Quarterly Report on Form 10-Q, of the effectiveness of our disclosure controls and procedures as defined in Rule 13a-15(e) under the Exchange Act. Based on that evaluation, Messrs. Miller and 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.
 

23



PART II - OTHER INFORMATION

Item 1.     Legal Proceedings

There are various claims and pending legal actions against or indirectly involving us, incidental to and arising out of the ordinary course of the business. In the opinion of management, based upon information currently available, the ultimate liability with respect to these proceedings and claims will not materially affect the Company's consolidated results of operations or financial position.

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 26, 2014 . 
 
Period
 
Total Number of Shares Purchased
 
 Average Price Paid Per Share (1)
 
Total Number of Shares Purchased as Part of Publicly Announced Programs (2)
 
Maximum Number of Shares that May Yet be Purchased Under the Programs (2)
 
(In thousands, except per share amounts)
 
 
December 26, 2013 - January 22, 2014
180

 
$
7.13

 
180

 
9,038

January 23, 2014 - February 19, 2014
456

 
6.57

 
456

 
8,582

February 20, 2014 - March 26, 2014
721

 
6.64

 
721

 
7,861

Total
1,357

 
$
6.68

 
1,357

 
 
 
(1)
Average price paid per share excludes commissions.
(2)
On April 25, 2013, we announced that our Board of Directors approved a new share repurchase program, authorizing us to repurchase up to an additional 10 million shares of our Common Stock. Such repurchases 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 Exchange Act) or in privately negotiated transactions, subject to market and business conditions. During the quarter ended March 26, 2014 , we purchased 1,357,017 shares of Common Stock for an aggregate consideration of approximately $9.1 million , pursuant to the share repurchase program.


24


Item 6.     Exhibits
 
The following are included as exhibits to this report: 
Exhibit No.
 
Description 
 
 
 
10.1
 
Form of the 2014 Long-Term Performance Incentive Program Performance Shares and Target Cash Opportunity Award Certificate
 
 
 
10.2
 
Written Description of the Denny's 2014 Long-Term Performance Incentive Program
 
 
 
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.
 
 
 
101.INS*
 
XBRL Instance Document
 
 
 
101.SCH*
 
XBRL Taxonomy Extension Schema Document
 
 
 
101.CAL*
 
XBRL Taxonomy Extension Calculation Linkbase Document
 
 
 
101.LAB*
 
XBRL Taxonomy Extension Label Linkbase Document
 
 
 
101.PRE*
 
XBRL Taxonomy Extension Presentation Linkbase Document
 
 
 
101.DEF*
 
XBRL Taxonomy Extension Definition Linkbase Document
 
* In accordance with Regulation S-T, the XBRL-related information in Exhibit 101 to this Quarterly Report on Form 10-Q shall be deemed "furnished" and not "filed."

25


SIGNATURES
 
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

 
 
 
 
DENNY'S CORPORATION
 
 
 
 
 
 
Date:
April 28, 2014
By:    
/s/ F. Mark Wolfinger
 
 
 
 
F. Mark Wolfinger
 
 
 
 
Executive Vice President,
Chief Administrative Officer and
Chief Financial Officer
 
 
 
 
 
 
Date:
April 28, 2014
By:    
/s/ Jay C. Gilmore
 
 
 
 
Jay C. Gilmore
 
 
 
 
Vice President,
Chief Accounting Officer and
Corporate Controller
 

26


Exhibit 10.1


2014 Long-Term Incentive Program
Denny’s Corporation
Performance Shares and Target Cash Opportunity
203 East Main Street
Award Certificate
Spartanburg, SC 29319

(“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 2012 Omnibus Incentive Plan (the “Plan”) and pursuant to the 2014 Long-Term 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 3, 2014

Number of Performance Shares:

Target Cash Opportunity:

The Award is granted as a Qualified Performance-Based Award under the Section 14.11 of the Plan. If the Company achieves at least $60,000,000 in Adjusted EBITDA for the fiscal year ending December 31, 2014 (the “Threshold Performance Goal”), then the Award shall be considered earned in an amount equal to 200% 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, 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 28, 2016, 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 200% 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 28, 2016 (the “Performance Period”), as further described in the Program Description (the “TSR Comparison”).






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 3, 2014
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 28, 2016, subject to accelerated vesting under certain circumstances as provided in Section 2 below (the “Vesting Date”). Notwithstanding anything contained in the Plan to the contrary, 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 and Payout . 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 26, 2013 to the termination date, and the denominator of which is 1,099). 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 in which the termination of employment due to death or Disability occurs (as if the Performance Period had ended on such fiscal quarter ending date), and such Performance Shares and the Target Cash Opportunity, as adjusted, shall be paid out within 30 days following the termination of employment .
(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), and the Performance Shares and the Target Cash Opportunity, as adjusted, shall be paid out within 30 days following 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%
200%
* TSR Comparison is interpolated on a straight-line basis for performance between points.

Notwithstanding anything contained herein to the contrary, the Committee retains the discretion to increase (but not above 200% of the original award amounts) or decrease the number of Performance Shares and the amount of the Target Cash Opportunity to be paid in extraordinary circumstances to account for unusual or non-recurring events not anticipated at the time of grant.

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, 2017. 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.





Exhibit 10.2
Denny’s 2014 Long-Term Incentive Program Description
Program Concept
The Compensation and Incentives Committee (the “Compensation Committee”) of the Board of Directors of Denny’s Corporation (the “Company” or “Denny’s”) has approved the 2014 Long-Term Incentive (LTI) Program, an incentive compensation program pursuant to and subject to the Denny’s Corporation 2012 Omnibus Incentive Plan.
Under the program, participants are granted a target number of performance shares and a target cash award. From 0% to 200% 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 Denny’s Corporation 2012 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 2014 long-term incentive awards. At the discretion of the Company’s Executive Committee, and with approval by the Compensation Committee, certain director-level and senior director-level employees also may be eligible for these awards.
Performance Period & Vesting Schedule
The performance period will be the three-year fiscal period beginning December 26, 2013 and ending December 28, 2016. 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.

1


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 (based on the last 20 trading days immediately prior to the beginning and ending performance period dates, respectively) 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 26, 2013 is $7.23.

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
200%

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:
BJ’s Restaurants, Inc.                Einstein Noah Restaurant Group, Inc.
Bob Evans Farms, Inc.                Jack in the Box, Inc.
Brinker International, Inc.            Krispy Kreme Doughnuts, Inc.
Buffalo Wild Wings, Inc.             Panera Bread Company
The Cheesecake Factory Incorporated        Papa John’s International, Inc.
Chipotle Mexican Grill, Inc.            Red Robin Gourmet Burgers, Inc.
Cracker Barrel Old Country Store, Inc.         Ruby Tuesday, Inc.
DineEquity, Inc.                 Sonic Corporation
Domino’s Pizza, Inc.                Texas Roadhouse, Inc.
Dunkin Brands Group, Inc.            The Wendy’s Company


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, 2017. 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.

2


It is intended that the payments under the LTI 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 affects 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 advisors (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 LTI 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
Ÿ
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 in which the termination due to death or disability occurs, and paid out within 30 days following the termination.
 
Ÿ
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
Ÿ
Vested but unpaid and unvested awards will be forfeited. No payout will occur even if awards had vested.
Voluntary Termination (Resignation, Retirement)
Ÿ
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
Ÿ
Vested but unpaid awards will be paid out in accordance with the regular payout schedule. Unvested awards will be forfeited.
Change in Control
Ÿ
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 within 30 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.


3


Exhibit 31.1
 
 
CERTIFICATION
 
 
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: April 28, 2014
By:
/s/ John C. Miller
 
 
 
John C. Miller
 
 
 
President and Chief Executive Officer
 
 
 
 
 





Exhibit 31.2
 
 
CERTIFICATION
 
 
I, F. Mark Wolfinger, 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: April 28, 2014
By:
/s/ F. Mark Wolfinger
 
 
 
F. Mark Wolfinger
 
 
 
Executive Vice President,
 
 
 
Chief Administrative Officer and
 
 
 
Chief Financial Officer
 





Exhibit 32.1
 
 
CERTIFICATION
 
 
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
 
 
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 Annual Report of Denny’s Corporation (the “Company”) on Form 10-Q for the period ended March 26, 2014 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: April 28, 2014
By:
/s/ John C. Miller
 
 
 
John C. Miller
 
 
 
President and Chief Executive Officer
 
 
Date: April 28, 2014
By:
/s/ F. Mark Wolfinger
 
 
 
F. Mark Wolfinger
 
 
 
Executive Vice President,
 
 
 
Chief Administrative Officer and
 
 
 
Chief Financial Officer
 
 
A signed original of this written statement required by Section 906, or other document authenticating, acknowledging, or otherwise adopting the signature that appears in typed form within the electronic version of this written statement required by Section 906, has been provided to Denny’s Corporation and will be retained by Denny’s Corporation and furnished to the Securities and Exchange Commission or its staff upon request.