Delaware
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13-3487402
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(State or other jurisdiction of
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(I.R.S. Employer
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incorporation or organization
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Identification No.)
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Large accelerated filer
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þ
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Accelerated filer
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¨
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Non-accelerated filer
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¨
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Smaller reporting company
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¨
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Emerging growth company
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¨
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(Do not check if a smaller
reporting company)
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Page
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March 28, 2018
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December 27, 2017
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(In thousands)
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||||||
Assets
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||||
Current assets:
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Cash and cash equivalents
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$
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3,919
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$
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4,983
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Receivables, net
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19,512
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21,384
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Inventories
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3,101
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3,134
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Prepaid and other current assets
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9,048
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11,788
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Total current assets
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35,580
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41,289
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Property, net of accumulated depreciation of $245,365 and $243,325, respectively
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141,357
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139,856
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Goodwill
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39,843
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38,269
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Intangible assets, net
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61,628
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57,109
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Deferred financing costs, net
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2,790
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2,942
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Deferred income taxes
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22,294
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16,945
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Other noncurrent assets
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30,097
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27,372
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Total assets
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$
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333,589
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$
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323,782
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Liabilities
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Current liabilities:
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Current maturities of capital lease obligations
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$
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3,126
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$
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3,168
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Accounts payable
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25,411
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32,487
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Other current liabilities
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51,707
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59,246
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Total current liabilities
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80,244
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94,901
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Long-term liabilities:
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Long-term debt, less current maturities
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282,000
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259,000
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Capital lease obligations, less current maturities
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28,734
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27,054
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Liability for insurance claims, less current portion
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12,465
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12,236
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Other noncurrent liabilities
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51,561
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27,951
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Total long-term liabilities
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374,760
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326,241
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Total liabilities
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455,004
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421,142
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Commitments and contingencies
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Shareholders' equity (deficit)
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Common stock $0.01 par value; shares authorized - 135,000; March 28, 2018:108,259 shares issued and 64,037 shares outstanding; December 27, 2017: 107,740 shares issued and 64,589 shares outstanding
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$
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1,083
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$
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1,077
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Paid-in capital
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595,069
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594,166
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Deficit
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(340,348
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)
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(334,661
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)
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Accumulated other comprehensive loss, net of tax
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(5,407
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)
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(2,316
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)
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Shareholders’ equity before treasury stock
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250,397
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258,266
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Treasury stock, at cost, 44,222 and 43,151 shares, respectively
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(371,812
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)
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(355,626
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)
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Total shareholders' deficit
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(121,415
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)
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(97,360
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)
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Total liabilities and shareholders' deficit
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$
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333,589
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$
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323,782
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Quarter Ended
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||||||
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March 28, 2018
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March 29, 2017
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(In thousands, except per share amounts)
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Revenue:
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Company restaurant sales
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$
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101,193
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$
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93,779
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Franchise and license revenue
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54,080
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34,131
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Total operating revenue
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155,273
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127,910
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Costs of company restaurant sales:
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Product costs
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24,935
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23,133
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Payroll and benefits
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41,226
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37,397
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Occupancy
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5,647
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4,734
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Other operating expenses
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15,050
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12,571
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Total costs of company restaurant sales
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86,858
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77,835
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Costs of franchise and license revenue
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28,556
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9,746
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General and administrative expenses
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16,560
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17,509
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Depreciation and amortization
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6,514
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5,736
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Operating (gains), losses and other charges, net
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360
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783
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Total operating costs and expenses, net
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138,848
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111,609
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Operating income
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16,425
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16,301
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Interest expense, net
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4,625
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3,541
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Other nonoperating expense (income), net
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212
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(357
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)
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Net income before income taxes
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11,588
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13,117
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Provision for income taxes
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1,829
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4,744
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Net income
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$
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9,759
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$
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8,373
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Basic net income per share
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$
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0.15
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$
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0.12
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Diluted net income per share
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$
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0.15
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$
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0.11
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Basic weighted average shares outstanding
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64,432
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71,004
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Diluted weighted average shares outstanding
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66,946
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73,241
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Quarter Ended
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||||||
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March 28, 2018
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March 29, 2017
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(In thousands)
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Net income
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$
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9,759
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$
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8,373
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Other comprehensive income, net of tax:
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Minimum pension liability adjustment, net of tax of $6 and $9, respectively
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22
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14
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Recognition of unrealized loss on hedge transactions, net of tax of $(1,085) and $(397), respectively
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(3,113
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(623
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Other comprehensive loss
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(3,091
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(609
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)
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Total comprehensive income
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$
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6,668
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$
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7,764
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Common Stock
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Treasury Stock
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Paid-in Capital
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Deficit
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Accumulated
Other
Comprehensive
Loss, Net
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Total
Shareholders’
Deficit
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||||||||||||||||||
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Shares
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Amount
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Shares
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Amount
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(In thousands)
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Balance, December 27, 2017
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107,740
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$
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1,077
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(43,151
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)
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$
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(355,626
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)
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$
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594,166
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$
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(334,661
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)
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$
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(2,316
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)
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$
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(97,360
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)
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Cumulative effect adjustment
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—
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—
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—
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—
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—
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(15,446
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)
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—
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(15,446
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)
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Net income
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—
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—
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—
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—
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—
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9,759
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—
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9,759
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Other comprehensive loss
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—
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—
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—
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—
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—
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—
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(3,091
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)
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(3,091
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)
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Share-based compensation on equity classified awards
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—
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—
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—
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—
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(104
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)
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—
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—
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(104
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)
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Purchase of treasury stock
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—
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—
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(1,071
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)
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(16,186
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)
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—
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—
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—
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(16,186
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)
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||||||
Issuance of common stock for share-based compensation
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233
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3
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—
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—
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(3
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)
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—
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—
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—
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||||||
Exercise of common stock options
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286
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3
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—
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—
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1,010
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—
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—
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1,013
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||||||
Balance, March 28, 2018
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108,259
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$
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1,083
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(44,222
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)
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$
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(371,812
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)
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$
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595,069
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$
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(340,348
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)
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$
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(5,407
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)
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$
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(121,415
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)
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Quarter Ended
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||||||
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March 28, 2018
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March 29, 2017
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(In thousands)
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Cash flows from operating activities:
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Net income
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$
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9,759
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$
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8,373
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Adjustments to reconcile net income to cash flows provided by operating activities:
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||||
Depreciation and amortization
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6,514
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5,736
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Operating (gains), losses and other charges, net
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360
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|
783
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Amortization of deferred financing costs
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152
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148
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Loss on early extinguishments of debt and leases
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—
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73
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|
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Deferred income tax expense
|
1,118
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|
3,225
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|
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Share-based compensation
|
1,350
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|
1,973
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|
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Changes in assets and liabilities:
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|
||||
Decrease (increase) in assets:
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|
||||
Receivables
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1,821
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3,345
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Inventories
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33
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(41
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)
|
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Other current assets
|
2,739
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|
|
3,131
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Other assets
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(160
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)
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(2,312
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)
|
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Increase (decrease) in liabilities:
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|
|
||||
Accounts payable
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(9,865
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)
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(2,277
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)
|
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Accrued salaries and vacations
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(4,048
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)
|
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(11,584
|
)
|
||
Accrued taxes
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38
|
|
|
(215
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)
|
||
Other accrued liabilities
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(5,948
|
)
|
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(1,204
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)
|
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Other noncurrent liabilities
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(413
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)
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(1,133
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)
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Net cash flows provided by operating activities
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3,450
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|
8,021
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Cash flows from investing activities:
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|
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Capital expenditures
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(4,148
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)
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(3,017
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)
|
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Acquisition of restaurants and real estate
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(8,418
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)
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(3,800
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)
|
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Proceeds from disposition of property
|
4
|
|
|
252
|
|
||
Collections on notes receivable
|
859
|
|
|
612
|
|
||
Issuance of notes receivable
|
(1,934
|
)
|
|
(1,010
|
)
|
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Net cash flows used in investing activities
|
(13,637
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)
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|
(6,963
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)
|
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Cash flows from financing activities:
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|
|
|
||||
Revolver borrowings
|
39,500
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31,000
|
|
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Revolver payments
|
(16,500
|
)
|
|
(19,500
|
)
|
||
Long-term debt payments
|
(823
|
)
|
|
(826
|
)
|
||
Proceeds from exercise of stock options
|
1,013
|
|
|
130
|
|
||
Tax withholding on share-based payments
|
(1,696
|
)
|
|
—
|
|
||
Purchase of treasury stock
|
(15,691
|
)
|
|
(11,742
|
)
|
||
Net bank overdrafts
|
3,320
|
|
|
(972
|
)
|
||
Net cash flows provided by (used in) financing activities
|
9,123
|
|
|
(1,910
|
)
|
||
Decrease in cash and cash equivalents
|
(1,064
|
)
|
|
(852
|
)
|
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Cash and cash equivalents at beginning of period
|
4,983
|
|
|
2,592
|
|
||
Cash and cash equivalents at end of period
|
$
|
3,919
|
|
|
$
|
1,740
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Quarter Ended
|
||||||
|
March 28, 2018
|
March 29, 2017
(1)
|
|||||
|
(Dollars in thousands)
|
||||||
Company restaurant sales
|
$
|
101,193
|
|
|
$
|
93,779
|
|
Franchise and license revenue:
|
|
|
|
||||
Royalties
|
25,165
|
|
|
24,544
|
|
||
Advertising revenue
|
19,310
|
|
|
—
|
|
||
Initial and other fees
|
1,417
|
|
|
484
|
|
||
Occupancy revenue
|
8,188
|
|
|
9,103
|
|
||
Franchise and license revenue
|
54,080
|
|
|
34,131
|
|
||
Total operating revenue
|
$
|
155,273
|
|
|
$
|
127,910
|
|
(1)
|
As disclosed in Note 2, prior period amounts have not been adjusted under the modified retrospective method of adoption of Topic 606.
|
|
March 28, 2018
|
||||||||||
Consolidated Balance Sheet
|
As Reported
|
|
Adjustments
|
|
Balances without adoption of Topic 606
|
||||||
|
(In thousands)
|
||||||||||
Prepaid and other current assets
|
$
|
9,048
|
|
|
$
|
509
|
|
|
$
|
9,557
|
|
Deferred income taxes
|
22,294
|
|
|
(5,282
|
)
|
|
17,012
|
|
|||
Other current liabilities
|
51,707
|
|
|
(1,158
|
)
|
|
50,549
|
|
|||
Other noncurrent liabilities
|
51,561
|
|
|
(18,624
|
)
|
|
32,937
|
|
|||
Deficit
|
(340,348
|
)
|
|
15,009
|
|
|
(325,339
|
)
|
|
Quarter ended March 28, 2018
|
||||||||||
Consolidated Statement of Income
|
As Reported
|
|
Adjustments
|
|
Balances without adoption of Topic 606
|
||||||
|
(In thousands, except per share amounts)
|
||||||||||
Franchise and license revenue
|
$
|
54,080
|
|
|
$
|
(20,307
|
)
|
|
$
|
33,773
|
|
Costs of franchise and license revenue
|
28,556
|
|
|
(19,764
|
)
|
|
8,792
|
|
|||
Provision for income taxes
|
1,829
|
|
|
(140
|
)
|
|
1,689
|
|
|||
Net income
|
9,759
|
|
|
(403
|
)
|
|
9,356
|
|
|||
Basic net income per share
|
$
|
0.15
|
|
|
$
|
(0.01
|
)
|
|
$
|
0.14
|
|
Diluted net income per share
|
$
|
0.15
|
|
|
$
|
(0.01
|
)
|
|
$
|
0.14
|
|
|
Quarter ended March 28, 2018
|
||||||||||
Consolidated Statement of Comprehensive Income
|
As Reported
|
|
Adjustments
|
|
Balances without adoption of Topic 606
|
||||||
|
(In thousands)
|
||||||||||
Net income
|
$
|
9,759
|
|
|
$
|
(403
|
)
|
|
$
|
9,356
|
|
Total comprehensive income
|
6,668
|
|
|
(403
|
)
|
|
6,265
|
|
|
Quarter ended March 28, 2018
|
||||||||||
Consolidated Statement of Cash Flow
|
As Reported
|
|
Adjustments
|
|
Balances without adoption of Topic 606
|
||||||
|
(In thousands)
|
||||||||||
Net income
|
$
|
9,759
|
|
|
$
|
(403
|
)
|
|
$
|
9,356
|
|
Deferred income tax expense
|
1,118
|
|
|
(140
|
)
|
|
978
|
|
|||
Changes in assets and liabilities:
|
|
|
|
|
|
||||||
Other current assets
|
2,739
|
|
|
(509
|
)
|
|
2,230
|
|
|||
Other accrued liabilities
|
(5,948
|
)
|
|
923
|
|
|
(5,025
|
)
|
|||
Other noncurrent liabilities
|
(413
|
)
|
|
129
|
|
|
(284
|
)
|
|||
Net cash flows provided by operating activities
|
3,450
|
|
|
—
|
|
|
3,450
|
|
•
|
Upon adoption of Topic 606, we recorded a cumulative effect adjustment related to previously recognized initial franchise fees resulting in a
$21.0 million
increase to deferred franchise revenue, a
$15.6 million
increase to opening deficit and a
$5.4 million
increase to deferred tax assets. The deferred franchise revenue resulting from the cumulative effect adjustment will be amortized over the remaining lives of the individual franchise agreements. Also upon adoption, we recorded a cumulative effect adjustment to recognize breakage in proportion to redemptions that occurred prior to December 28, 2017 resulting in a decrease of
$0.6 million
to gift card liability (a component of other current liabilities), a
$0.5 million
increase to accrued advertising (a component of other current liabilities) and a
$0.1 million
decrease to opening deficit.
|
•
|
We recognized
$19.2 million
of franchise and license revenue and
$19.2 million
of costs of franchise and license revenue resulting from the recording of advertising revenues and expenditures on a gross basis under Topic 606 versus recording these amounts on a net basis under Topic 605.
|
•
|
We recognized an additional
$0.5 million
of franchise and license revenue under Topic 606 than we would have recognized under Topic 605, resulting from the timing of recognition of initial franchise fees.
|
•
|
We recognized
$0.5 million
of franchise and license revenue and
$0.5 million
of costs of franchise and license revenue resulting from the recording of other franchise services fees on a gross basis under Topic 606 versus recording these amount on a net basis under Topic 605.
|
|
(In thousands)
|
||
Balance, December 27, 2017
|
$
|
1,643
|
|
Cumulative effect adjustment recognized upon adoption of Topic 606
|
20,976
|
|
|
Fees received from franchisees
|
239
|
|
|
Revenue recognized
(1)
|
(930
|
)
|
|
Balance, March 28, 2018
|
21,928
|
|
|
Less current portion included in other current liabilities
|
3,303
|
|
|
Deferred franchise revenue included in other noncurrent liabilities
|
$
|
18,625
|
|
|
(In thousands)
|
||
Remainder of 2018
|
$
|
1,646
|
|
2019
|
2,105
|
|
|
2020
|
1,981
|
|
|
2021
|
1,769
|
|
|
2022
|
1,661
|
|
|
Thereafter
|
11,270
|
|
|
Development agreements and unopened restaurants
|
1,496
|
|
|
Deferred franchise revenue
|
$
|
21,928
|
|
|
March 28, 2018
|
|
December 27, 2017
|
||||
|
(In thousands)
|
||||||
Receivables, net:
|
|
|
|
||||
Trade accounts receivable from franchisees
|
$
|
10,379
|
|
|
$
|
10,688
|
|
Financing receivables from franchisees
|
4,675
|
|
|
5,084
|
|
||
Vendor receivables
|
1,791
|
|
|
3,256
|
|
||
Credit card receivables
|
1,549
|
|
|
1,870
|
|
||
Other
|
1,545
|
|
|
762
|
|
||
Allowance for doubtful accounts
|
(427
|
)
|
|
(276
|
)
|
||
Total receivables, net
|
$
|
19,512
|
|
|
$
|
21,384
|
|
|
|
|
|
||||
Other noncurrent assets:
|
|
|
|
||||
Financing receivables from franchisees
|
$
|
1,573
|
|
|
$
|
427
|
|
|
(In thousands)
|
||
Balance, December 27, 2017
|
$
|
38,269
|
|
Additions related to acquisition
|
1,574
|
|
|
Balance, March 28, 2018
|
$
|
39,843
|
|
|
March 28, 2018
|
|
December 27, 2017
|
||||||||||||
|
Gross Carrying Amount
|
|
Accumulated Amortization
|
|
Gross Carrying Amount
|
|
Accumulated Amortization
|
||||||||
|
(In thousands)
|
||||||||||||||
Intangible assets with indefinite lives:
|
|
|
|
|
|
|
|
||||||||
Trade names
|
$
|
44,081
|
|
|
$
|
—
|
|
|
$
|
44,080
|
|
|
$
|
—
|
|
Liquor licenses
|
166
|
|
|
—
|
|
|
166
|
|
|
—
|
|
||||
Intangible assets with definite lives:
|
|
|
|
|
|
|
|
||||||||
Reacquired franchise rights
|
20,553
|
|
|
3,172
|
|
|
15,252
|
|
|
2,389
|
|
||||
Intangible assets
|
$
|
64,800
|
|
|
$
|
3,172
|
|
|
$
|
59,498
|
|
|
$
|
2,389
|
|
|
March 28, 2018
|
|
December 27, 2017
|
||||
|
(In thousands)
|
||||||
Accrued payroll
|
$
|
16,989
|
|
|
$
|
20,998
|
|
Accrued insurance, primarily current portion of liability for insurance claims
|
6,863
|
|
|
6,922
|
|
||
Accrued taxes
|
7,422
|
|
|
7,384
|
|
||
Accrued advertising
|
5,499
|
|
|
8,417
|
|
||
Gift cards
|
4,419
|
|
|
6,480
|
|
||
Other
|
10,515
|
|
|
9,045
|
|
||
Other current liabilities
|
$
|
51,707
|
|
|
$
|
59,246
|
|
|
Quarter Ended
|
||||||
|
March 28, 2018
|
|
March 29, 2017
|
||||
|
(In thousands)
|
||||||
Software implementation costs
|
$
|
—
|
|
|
$
|
2,124
|
|
Gains on sales of assets and other, net
|
(37
|
)
|
|
(1,440
|
)
|
||
Restructuring charges and exit costs
|
360
|
|
|
99
|
|
||
Impairment charges
|
37
|
|
|
—
|
|
||
Operating (gains), losses and other charges, net
|
$
|
360
|
|
|
$
|
783
|
|
|
Quarter Ended
|
||||||
|
March 28, 2018
|
|
March 29, 2017
|
||||
|
(In thousands)
|
||||||
Exit costs
|
$
|
24
|
|
|
$
|
31
|
|
Severance and other restructuring charges
|
336
|
|
|
68
|
|
||
Total restructuring charges and exit costs
|
$
|
360
|
|
|
$
|
99
|
|
|
(In thousands)
|
||
Balance, December 27, 2017
|
$
|
1,180
|
|
Exit costs
(1)
|
24
|
|
|
Payments, net of sublease receipts
|
(128
|
)
|
|
Interest accretion
|
21
|
|
|
Balance, March 28, 2018
|
1,097
|
|
|
Less current portion included in other current liabilities
|
333
|
|
|
Long-term portion included in other noncurrent liabilities
|
$
|
764
|
|
(1)
|
Included as a component of operating (gains), losses and other charges, net.
|
|
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 28, 2018:
|
|
|
|
|
|
|
|
|
|
||||||||
Deferred compensation plan investments
(1)
|
$
|
12,424
|
|
|
$
|
12,424
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
market approach
|
Interest rate swaps, net
(2)
|
(6,385
|
)
|
|
—
|
|
|
(6,385
|
)
|
|
—
|
|
|
income approach
|
||||
Total
|
$
|
6,039
|
|
|
$
|
12,424
|
|
|
$
|
(6,385
|
)
|
|
$
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Fair value measurements as of December 27, 2017:
|
|
|
|
|
|
|
|
|
|
||||||||
Deferred compensation plan investments
(1)
|
$
|
12,663
|
|
|
$
|
12,663
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
market approach
|
Interest rate swaps, net
(2)
|
(2,187
|
)
|
|
—
|
|
|
(2,187
|
)
|
|
—
|
|
|
income approach
|
||||
Total
|
$
|
10,476
|
|
|
$
|
12,663
|
|
|
$
|
(2,187
|
)
|
|
$
|
—
|
|
|
|
(1)
|
The fair values of our deferred compensation plan investments are based on the closing market prices of the elected investments.
|
(2)
|
The fair values of our interest rate swaps are based upon Level 2 inputs, which include valuation models as reported by our counterparties. The key inputs for the valuation models are quoted market prices, interest rates and forward yield curves. See Note 9 for details on the interest rate swaps.
|
Trade Date
|
|
Effective Date
|
|
Maturity Date
|
|
Notional Amount
|
|
Fixed Rate
|
|||
|
|
|
|
|
|
(In thousands)
|
|
|
|||
April 30, 2013
|
|
March 31, 2015
|
|
March 29, 2018
|
|
$
|
120,000
|
|
|
1.13
|
%
|
March 20, 2015
|
|
March 29, 2018
|
|
March 31, 2025
|
|
120,000
|
|
|
2.44
|
%
|
|
October 1, 2015
|
|
March 29, 2018
|
|
March 31, 2026
|
|
50,000
|
|
|
2.46
|
%
|
|
February 15, 2018
|
|
March 31, 2020
|
|
December 31, 2033
|
|
80,000
|
|
(1)
|
3.19
|
%
|
(1)
|
The notional amount of the swaps entered into on February 15, 2018 increases annually beginning September 30, 2020 until they reach the maximum notional amount of
$425.0 million
on September 28, 2029.
|
|
Quarter Ended
|
||||||
|
March 28, 2018
|
|
March 29, 2017
|
||||
|
(In thousands)
|
||||||
Interest cost
|
$
|
19
|
|
|
$
|
21
|
|
Amortization of net loss
|
28
|
|
|
23
|
|
||
Net periodic benefit cost
|
$
|
47
|
|
|
$
|
44
|
|
|
Quarter Ended
|
||||||
|
March 28, 2018
|
|
March 29, 2017
|
||||
|
(In thousands)
|
||||||
Performance share awards
|
$
|
1,078
|
|
|
$
|
1,940
|
|
Restricted stock units for board members
|
272
|
|
|
33
|
|
||
Total share-based compensation
|
$
|
1,350
|
|
|
$
|
1,973
|
|
|
Quarter Ended
|
||||||
|
March 28, 2018
|
|
March 29, 2017
|
||||
|
(In thousands, except for per share amounts)
|
||||||
Net income
|
$
|
9,759
|
|
|
$
|
8,373
|
|
|
|
|
|
||||
Weighted average shares outstanding - basic
|
64,432
|
|
|
71,004
|
|
||
Effect of dilutive share-based compensation awards
|
2,514
|
|
|
2,237
|
|
||
Weighted average shares outstanding - diluted
|
66,946
|
|
|
73,241
|
|
||
|
|
|
|
||||
Basic net income per share
|
$
|
0.15
|
|
|
$
|
0.12
|
|
Diluted net income per share
|
$
|
0.15
|
|
|
$
|
0.11
|
|
|
|
|
|
||||
Anti-dilutive share-based compensation awards
|
471
|
|
|
580
|
|
|
Quarter Ended
|
||||||
|
March 28, 2018
|
|
March 29, 2017
|
||||
|
(In thousands)
|
||||||
Income taxes paid, net
|
$
|
423
|
|
|
$
|
395
|
|
Interest paid
|
$
|
4,272
|
|
|
$
|
3,261
|
|
|
|
|
|
||||
Noncash investing and financing activities:
|
|
|
|
||||
Issuance of common stock, pursuant to share-based compensation plans
|
$
|
3,513
|
|
|
$
|
4,946
|
|
Execution of capital leases
|
$
|
2,478
|
|
|
$
|
1,523
|
|
Treasury stock payable
|
$
|
615
|
|
|
$
|
862
|
|
Notes received in connection with disposition of property
|
$
|
—
|
|
|
$
|
1,750
|
|
|
Pensions
|
|
Derivatives
|
|
Accumulated Other Comprehensive Loss
|
||||||
|
(In thousands)
|
||||||||||
Balance as of December 27, 2017
|
$
|
(982
|
)
|
|
$
|
(1,334
|
)
|
|
$
|
(2,316
|
)
|
Amortization of net loss
(1)
|
28
|
|
|
—
|
|
|
28
|
|
|||
Net change in fair value of derivatives
|
—
|
|
|
(4,058
|
)
|
|
(4,058
|
)
|
|||
Reclassification of derivatives to interest expense, net
(2)
|
—
|
|
|
(140
|
)
|
|
(140
|
)
|
|||
Income tax (expense) benefit related to items of other comprehensive loss
|
(6
|
)
|
|
1,085
|
|
|
1,079
|
|
|||
Balance as of March 28, 2018
|
$
|
(960
|
)
|
|
$
|
(4,447
|
)
|
|
$
|
(5,407
|
)
|
(1)
|
Before-tax amount related to our Other Defined Benefit Plans 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 28, 2018
. See Note 10 for additional details.
|
(2)
|
Amounts reclassified from accumulated other comprehensive loss into income represent payments either received from or made to the counterparty for the effective portions of the interest rate swaps. These amounts are included as a component of interest expense, net in our Condensed Consolidated Statements of Income. We expect to make payments to the counterparty and reclassify approximately
$1.0 million
from accumulated other comprehensive loss related to our interest rate swaps during the next twelve months. See Note 9 for additional details.
|
•
|
Under Topic 606, advertising revenues and expenditures are recorded on a gross basis within the Consolidated Statements of Income. Under the previous guidance of Topic 605, we recorded franchise advertising expense net of contributions from franchisees to our advertising programs, including local co-operatives. While this change materially impacts the gross amount of reported franchise and license revenue and costs of franchise and license revenue, the impact is generally an offsetting increase to both revenue and expense with little, if any, impact on operating income and net income. Similarly, upon adoption, other franchise services fees are recorded on a gross basis within the Consolidated Statements of Income, whereas, under previous guidance, they were netted against the related expenses.
|
•
|
Under Topic 606, recognition of initial franchise fees is deferred until the commencement date of the agreement and occurs over time based on the term of the underlying franchise agreement. In the event a franchise agreement is terminated, any remaining deferred fees are recognized in the period of termination. Under the previous guidance, initial franchise fees were recognized upon the opening of a franchise restaurant. The effect of the required deferral of initial franchise fees received in a given year is mitigated by the recognition of revenue from fees received in prior periods.
|
•
|
Under previous guidance, we recorded gift card breakage when the likelihood of redemption was remote. Breakage was recorded as a benefit to our advertising fund or reduction to other operating expenses, depending on where the gift cards were sold. Under Topic 606, gift card breakage is recognized proportionally as redemptions occur. Our gift card breakage primarily relates to cards sold by third parties. Breakage revenue related to third party sales is recorded as advertising revenue (included as a component of franchise and license revenue) with an offsetting amount recorded as advertising expense (included as a component of costs of franchise and license revenue).
|
|
Quarter Ended
|
||||||||||||
|
March 28, 2018
|
|
March 29, 2017
|
||||||||||
|
(Dollars in thousands)
|
||||||||||||
Revenue:
|
|
|
|
|
|
|
|
||||||
Company restaurant sales
|
$
|
101,193
|
|
|
65.2
|
%
|
|
$
|
93,779
|
|
|
73.3
|
%
|
Franchise and license revenue
|
54,080
|
|
|
34.8
|
%
|
|
34,131
|
|
|
26.7
|
%
|
||
Total operating revenue
|
155,273
|
|
|
100.0
|
%
|
|
127,910
|
|
|
100.0
|
%
|
||
Costs of company restaurant sales (a):
|
|
|
|
|
|
|
|
|
|
||||
Product costs
|
24,935
|
|
|
24.6
|
%
|
|
23,133
|
|
|
24.7
|
%
|
||
Payroll and benefits
|
41,226
|
|
|
40.7
|
%
|
|
37,397
|
|
|
39.9
|
%
|
||
Occupancy
|
5,647
|
|
|
5.6
|
%
|
|
4,734
|
|
|
5.0
|
%
|
||
Other operating expenses
|
15,050
|
|
|
14.9
|
%
|
|
12,571
|
|
|
13.4
|
%
|
||
Total costs of company restaurant sales
|
86,858
|
|
|
85.8
|
%
|
|
77,835
|
|
|
83.0
|
%
|
||
Costs of franchise and license revenue
(a)
|
28,556
|
|
|
52.8
|
%
|
|
9,746
|
|
|
28.6
|
%
|
||
General and administrative expenses
|
16,560
|
|
|
10.7
|
%
|
|
17,509
|
|
|
13.7
|
%
|
||
Depreciation and amortization
|
6,514
|
|
|
4.2
|
%
|
|
5,736
|
|
|
4.5
|
%
|
||
Operating (gains), losses and other charges, net
|
360
|
|
|
0.2
|
%
|
|
783
|
|
|
0.6
|
%
|
||
Total operating costs and expenses, net
|
138,848
|
|
|
89.4
|
%
|
|
111,609
|
|
|
87.3
|
%
|
||
Operating income
|
16,425
|
|
|
10.6
|
%
|
|
16,301
|
|
|
12.7
|
%
|
||
Interest expense, net
|
4,625
|
|
|
3.0
|
%
|
|
3,541
|
|
|
2.8
|
%
|
||
Other nonoperating expense (income), net
|
212
|
|
|
0.1
|
%
|
|
(357
|
)
|
|
(0.3
|
)%
|
||
Net income before income taxes
|
11,588
|
|
|
7.5
|
%
|
|
13,117
|
|
|
10.3
|
%
|
||
Provision for income taxes
|
1,829
|
|
|
1.2
|
%
|
|
4,744
|
|
|
3.7
|
%
|
||
Net income
|
$
|
9,759
|
|
|
6.3
|
%
|
|
$
|
8,373
|
|
|
6.5
|
%
|
|
|
|
|
|
|
|
|
||||||
Other Data:
|
|
|
|
|
|
|
|
|
|
|
|
||
Company average unit sales
|
$
|
565
|
|
|
|
|
|
$
|
553
|
|
|
|
|
Franchise average unit sales
|
$
|
396
|
|
|
|
|
|
$
|
385
|
|
|
|
|
Company equivalent units (b)
|
179
|
|
|
|
|
|
170
|
|
|
|
|
||
Franchise equivalent units (b)
|
1,543
|
|
|
|
|
|
1,561
|
|
|
|
|
||
Company same-store sales increase (decrease) (c)(d)
|
3.2
|
%
|
|
|
|
|
(1.6
|
)%
|
|
|
|
||
Domestic franchise same-store sales increase (decrease) (c)(d)
|
1.2
|
%
|
|
|
|
|
(1.1
|
)%
|
|
|
|
(a)
|
Costs of company restaurant sales percentages are as a percentage of company restaurant sales. Costs of franchise and license revenue percentages are as a percentage of franchise and license revenue. All other percentages are as a percentage of total operating revenue.
|
(b)
|
Equivalent units are calculated as the weighted average number of units outstanding during a defined time period.
|
(c)
|
Same-store sales include sales from company restaurants or non-consolidated franchised and licensed restaurants that were open the same period in the prior year.
|
(d)
|
Prior year amounts have not been restated for
2018
comparable units.
|
|
Quarter Ended
|
||||
|
March 28, 2018
|
|
March 29, 2017
|
||
Company restaurants, beginning of period
|
178
|
|
|
169
|
|
Units opened
|
—
|
|
|
—
|
|
Units acquired from franchisees
|
5
|
|
|
3
|
|
Units closed
|
(1
|
)
|
|
—
|
|
End of period
|
182
|
|
|
172
|
|
|
|
|
|
||
Franchised and licensed restaurants, beginning of period
|
1,557
|
|
|
1,564
|
|
Units opened
|
10
|
|
|
8
|
|
Units acquired by Company
|
(5
|
)
|
|
(3
|
)
|
Units closed
|
(20
|
)
|
|
(10
|
)
|
End of period
|
1,542
|
|
|
1,559
|
|
Total restaurants, end of period
|
1,724
|
|
|
1,731
|
|
|
Quarter Ended
|
||||||||||||
|
March 28, 2018
|
|
March 29, 2017
|
||||||||||
|
(Dollars in thousands)
|
||||||||||||
Utilities
|
$
|
3,405
|
|
|
3.4
|
%
|
|
$
|
3,053
|
|
|
3.3
|
%
|
Repairs and maintenance
|
1,890
|
|
|
1.9
|
%
|
|
1,663
|
|
|
1.8
|
%
|
||
Marketing
|
3,765
|
|
|
3.7
|
%
|
|
3,621
|
|
|
3.9
|
%
|
||
Other direct costs
|
5,990
|
|
|
5.9
|
%
|
|
4,234
|
|
|
4.5
|
%
|
||
Other operating expenses
|
$
|
15,050
|
|
|
14.9
|
%
|
|
$
|
12,571
|
|
|
13.4
|
%
|
|
Quarter Ended
|
||||||||||||
|
March 28, 2018
|
|
March 29, 2017
|
||||||||||
|
(Dollars in thousands)
|
||||||||||||
Royalties
|
$
|
25,165
|
|
|
46.5
|
%
|
|
$
|
24,544
|
|
|
71.9
|
%
|
Advertising revenue
|
19,310
|
|
|
35.7
|
%
|
|
—
|
|
|
—
|
%
|
||
Initial and other fees
|
1,417
|
|
|
2.6
|
%
|
|
484
|
|
|
1.4
|
%
|
||
Occupancy revenue
|
8,188
|
|
|
15.1
|
%
|
|
9,103
|
|
|
26.7
|
%
|
||
Franchise and license revenue
|
$
|
54,080
|
|
|
100.0
|
%
|
|
$
|
34,131
|
|
|
100.0
|
%
|
|
|
|
|
|
|
|
|
||||||
Advertising costs
|
$
|
19,310
|
|
|
35.7
|
%
|
|
$
|
525
|
|
|
1.5
|
%
|
Occupancy costs
|
$
|
5,829
|
|
|
10.8
|
%
|
|
$
|
6,506
|
|
|
19.1
|
%
|
Other direct costs
|
3,417
|
|
|
6.3
|
%
|
|
2,715
|
|
|
8.0
|
%
|
||
Costs of franchise and license revenue
|
$
|
28,556
|
|
|
52.8
|
%
|
|
$
|
9,746
|
|
|
28.6
|
%
|
|
Quarter Ended
|
||||||
|
March 28, 2018
|
|
March 29, 2017
|
||||
|
(In thousands)
|
||||||
Share-based compensation
|
$
|
1,350
|
|
|
$
|
1,973
|
|
Other general and administrative expenses
|
15,210
|
|
|
15,536
|
|
||
Total general and administrative expenses
|
$
|
16,560
|
|
|
$
|
17,509
|
|
|
Quarter Ended
|
||||||
|
March 28, 2018
|
|
March 29, 2017
|
||||
|
(In thousands)
|
||||||
Depreciation of property and equipment
|
$
|
4,480
|
|
|
$
|
4,217
|
|
Amortization of capital lease assets
|
1,071
|
|
|
994
|
|
||
Amortization of intangible and other assets
|
963
|
|
|
525
|
|
||
Total depreciation and amortization expense
|
$
|
6,514
|
|
|
$
|
5,736
|
|
|
Quarter Ended
|
||||||
|
March 28, 2018
|
|
March 29, 2017
|
||||
|
(In thousands)
|
||||||
Software implementation costs
|
—
|
|
|
2,124
|
|
||
Gains on sales of assets and other, net
|
(37
|
)
|
|
(1,440
|
)
|
||
Restructuring charges and exit costs
|
360
|
|
|
99
|
|
||
Impairment charges
|
37
|
|
|
—
|
|
||
Operating (gains), losses and other charges, net
|
$
|
360
|
|
|
$
|
783
|
|
|
Quarter Ended
|
||||||
|
March 28, 2018
|
|
March 29, 2017
|
||||
|
(In thousands)
|
||||||
Exit costs
|
$
|
24
|
|
|
$
|
31
|
|
Severance and other restructuring charges
|
336
|
|
|
68
|
|
||
Total restructuring and exit costs
|
$
|
360
|
|
|
$
|
99
|
|
|
Quarter Ended
|
||||||
|
March 28, 2018
|
|
March 29, 2017
|
||||
|
(In thousands)
|
||||||
Interest on credit facilities
|
$
|
2,590
|
|
|
$
|
1,498
|
|
Interest on interest rate swaps
|
(140
|
)
|
|
108
|
|
||
Interest on capital lease liabilities
|
1,604
|
|
|
1,393
|
|
||
Letters of credit and other fees
|
320
|
|
|
280
|
|
||
Interest income
|
(29
|
)
|
|
(15
|
)
|
||
Total cash interest
|
4,345
|
|
|
3,264
|
|
||
Amortization of deferred financing costs
|
152
|
|
|
148
|
|
||
Interest accretion on other liabilities
|
128
|
|
|
129
|
|
||
Total interest expense, net
|
$
|
4,625
|
|
|
$
|
3,541
|
|
|
Quarter Ended
|
||||||
|
March 28, 2018
|
|
March 29, 2017
|
||||
|
(In thousands)
|
||||||
Net cash provided by operating activities
|
$
|
3,450
|
|
|
$
|
8,021
|
|
Net cash used in investing activities
|
(13,637
|
)
|
|
(6,963
|
)
|
||
Net provided by cash (used in) financing activities
|
9,123
|
|
|
(1,910
|
)
|
||
Decrease in cash and cash equivalents
|
$
|
(1,064
|
)
|
|
$
|
(852
|
)
|
|
Quarter Ended
|
||||||
|
March 28, 2018
|
|
March 29, 2017
|
||||
|
(In thousands)
|
||||||
Facilities
|
$
|
2,208
|
|
|
$
|
1,767
|
|
New construction
|
205
|
|
|
109
|
|
||
Remodeling
|
126
|
|
|
230
|
|
||
Information technology
|
215
|
|
|
86
|
|
||
Other
|
1,394
|
|
|
825
|
|
||
Capital expenditures (excluding acquisitions)
|
$
|
4,148
|
|
|
$
|
3,017
|
|
Trade Date
|
|
Effective Date
|
|
Maturity Date
|
|
Notional Amount
|
|
Fixed Rate
|
|||
|
|
|
|
|
|
(In thousands)
|
|
|
|||
April 30, 2013
|
|
March 31, 2015
|
|
March 29, 2018
|
|
$
|
120,000
|
|
|
1.13
|
%
|
March 20, 2015
|
|
March 29, 2018
|
|
March 31, 2025
|
|
120,000
|
|
|
2.44
|
%
|
|
October 1, 2015
|
|
March 29, 2018
|
|
March 31, 2026
|
|
50,000
|
|
|
2.46
|
%
|
|
February 15, 2018
|
|
March 31, 2020
|
|
December 31, 2033
|
|
80,000
|
|
(1)
|
3.19
|
%
|
(1)
|
The notional amount of the swaps entered into on February 15, 2018 increases annually beginning September 28, 2020 until they reach the maximum notional amount of
$425.0 million
on September 26, 2029.
|
|
Payments Due by Period
|
||||||||||||||||||
|
Total
|
|
Less than 1 Year
|
|
1-2 Years
|
|
3-4 Years
|
|
5 Years and Thereafter
|
||||||||||
|
(In thousands)
|
||||||||||||||||||
Long-term debt
|
$
|
282,000
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
282,000
|
|
|
$
|
—
|
|
Interest obligations (a)
|
54,698
|
|
|
11,934
|
|
|
23,868
|
|
|
18,896
|
|
|
—
|
|
|||||
Total
|
$
|
336,698
|
|
|
$
|
11,934
|
|
|
$
|
23,868
|
|
|
$
|
300,896
|
|
|
$
|
—
|
|
(a)
|
Interest obligations represent payments related to our long-term debt outstanding at
March 28, 2018
. For long-term debt with variable rates, we have used the rate applicable at
March 28, 2018
to project interest over the periods presented in the table above, taking into consideration the impact of the interest rate swaps for the applicable periods.
|
Period
|
Total Number of Shares Purchased
|
|
Average Price Paid Per Share
(1)
|
|
Total Number of Shares Purchased as Part of Publicly Announced Programs
(2)
|
|
Approximate Dollar Value of Shares that May Yet be Purchased Under the Programs
(2)
|
||||||
|
(In thousands, except per share amounts)
|
||||||||||||
December 28, 2017 - January 24, 2018
|
281
|
|
|
$
|
14.46
|
|
|
281
|
|
|
$
|
192,249
|
|
January 25, 2018 - February 21, 2018
|
291
|
|
|
14.92
|
|
|
291
|
|
|
$
|
187,898
|
|
|
February 22, 2018 - March 28, 2018
|
500
|
|
|
15.52
|
|
|
500
|
|
|
$
|
180,127
|
|
|
Total
|
1,072
|
|
|
$
|
15.08
|
|
|
1,072
|
|
|
|
(1)
|
Average price paid per share excludes commissions.
|
(2)
|
On October 27, 2017, we announced that our Board of Directors approved a new share repurchase program, authorizing us to repurchase up to an additional $200 million of our common stock (in addition to prior authorizations). Such repurchases may take place from time to time in the open market (including pre-arranged stock trading plans in accordance with the guidelines specified in Rule 10b5-1 under the Exchange Act) or in privately negotiated transactions, subject to market and business conditions. During the quarter ended
March 28, 2018
, we purchased
1,071,910
shares of our common stock for an aggregate consideration of approximately
$16.2 million
pursuant to the share repurchase program.
|
Exhibit No.
|
|
Description
|
|
|
|
10.1
|
|
|
|
|
|
10.2
|
|
|
|
|
|
31.1
|
|
|
|
|
|
31.2
|
|
|
|
|
|
32.1
|
|
|
|
|
|
101.INS
|
|
XBRL Instance Document
|
|
|
|
101.SCH
|
|
XBRL Taxonomy Extension Schema Document
|
|
|
|
101.CAL
|
|
XBRL Taxonomy Extension Calculation Linkbase Document
|
|
|
|
101.LAB
|
|
XBRL Taxonomy Extension Label Linkbase Document
|
|
|
|
101.PRE
|
|
XBRL Taxonomy Extension Presentation Linkbase Document
|
|
|
|
101.DEF
|
|
XBRL Taxonomy Extension Definition Linkbase Document
|
|
|
DENNY'S CORPORATION
|
|
|
|
|
|
|
|
Date:
|
May 4, 2018
|
By:
|
/s/ F. Mark Wolfinger
|
|
|
|
|
F. Mark Wolfinger
|
|
|
|
|
Executive Vice President,
Chief Administrative Officer and
Chief Financial Officer
|
|
|
|
|
|
|
Date:
|
May 4, 2018
|
By:
|
/s/ Jay C. Gilmore
|
|
|
|
|
Jay C. Gilmore
|
|
|
|
|
Vice President,
Chief Accounting Officer and
Corporate Controller
|
|
•
|
Target Award of TSR Performance Share Units = ($ * 50%) / $XX.XX
1
=
|
•
|
Target Award of Adjusted EPS Growth Performance Share Units = ($ * 50%) /$XX.XX
2
=
|
•
|
Total Target Number of Performance Share Units:
|
•
|
Target Award of TSR Performance Share Units = ($ * 50%) / $XX.XX
1
=
|
•
|
Target Award of Adjusted EPS Growth Performance Share Units = ($ * 50%) /$XX.XX
2
=
|
•
|
Total Target Number of Performance Share Units:
|
|
|
|
|
Date: May 4, 2018
|
By:
|
/s/ John C. Miller
|
|
|
|
John C. Miller
|
|
|
|
President and Chief Executive Officer
|
|
|
|
|
|
Date: May 4, 2018
|
By:
|
/s/ F. Mark Wolfinger
|
|
|
|
F. Mark Wolfinger
|
|
|
|
Executive Vice President,
|
|
|
|
Chief Administrative Officer and
|
|
|
|
Chief Financial Officer
|
|
Date: May 4, 2018
|
By:
|
/s/ John C. Miller
|
|
|
|
John C. Miller
|
|
|
|
President and Chief Executive Officer
|
|
Date: May 4, 2018
|
By:
|
/s/ F. Mark Wolfinger
|
|
|
|
F. Mark Wolfinger
|
|
|
|
Executive Vice President,
|
|
|
|
Chief Administrative Officer and
|
|
|
|
Chief Financial Officer
|
|