Press Release

John Miller, President and Chief Executive Officer, stated, “During the second quarter, we achieved our fifth consecutive quarter of positive system-wide same-store sales along with the highest quarterly two-year same-store sales we have generated in almost five years. Despite the persistently challenging economic environment, we continue to deliver solid financial results and make progress in our efforts to differentiate Denny's in the market place. By executing on our strategies to further reinforce our position as America's Diner and globally as your local diner, we will build on our efforts to increase shareholder value. As Denny's approaches its 60th anniversary and 1,700th location, we believe that Denny's will become one of the largest American full service brands in the world. Our recent partnership to open units in southern China is the first significant step toward that goal.”

For the second quarter of 2012, franchise and license revenue increased 5.2% to $33.5 million compared with $31.8 million in the prior year quarter. The $1.7 million increase in franchise revenue was primarily driven by a $0.9 million increase in royalties due to 51 additional equivalent franchise restaurants and the effects of higher same-store sales in addition to higher occupancy revenue. Company restaurant sales of $91.2 million decreased $12.8 million due to 36 fewer equivalent company restaurants compared with the prior year quarter. Denny's total operating revenue, including both company restaurant sales and franchise revenue, was $124.7 million compared with $135.9 million in the prior year quarter.

As a percentage of total operating revenue, total operating margin increased 3.0 percentage points to 28.5%. Franchise operating margin, as a percentage of franchise and license revenue, was 66.0%, an increase of 0.8 percentage points compared with the prior year quarter. Company restaurant operating margin (as a percentage of company restaurant sales) was 14.8%, an increase of 1.5 percentage points compared with the prior year quarter. The increase in company restaurant operating margin was primarily driven by lower other operating costs and lower payroll and benefit costs compared to the prior year quarter.

Depreciation and amortization expense decreased by $1.4 million compared with the prior year quarter, primarily as a result of the sale of restaurants over the past two years. Net operating gains, losses and other charges, which reflect restructuring charges, exit costs, impairment charges and gains or losses on the sale of assets, increased $3.6 million in the quarter. The increase was primarily the result of the sale of more company-owned units to franchisees.

In the second quarter, the provision for income taxes increased $2.8 million, primarily due to a higher effective tax rate of 41.1% compared to 4.8% effective tax rate in the prior year quarter. The change in the effective tax rate compared to the prior year resulted from the release of a substantial portion of the valuation allowance on certain deferred tax assets based on our improved historical and projected pre-tax income. Due to the use of net operating loss and tax credit carryforwards, the Company only paid $1.2 million in cash taxes in the second quarter.

Denny's net income was $4.6 million for the second quarter 2012, or $0.05 per diluted share, compared with prior year period net income of $8.1 million, or $0.08 per diluted share. Net income was impacted by the refinancing of our credit facility which resulted in a charge to other nonoperating expense of $7.9 million for the unamortized portion of deferred financing costs and original issue discount related to the prior facility, and portion of the fees related to the new facility. Adjusted Income Before Taxes*, Denny's metric for earnings guidance, increased 34.6% to $12.9 million compared with the prior year quarter Adjusted Income Before Taxes* of $9.6 million.

Mark Wolfinger, Executive Vice President, Chief Administrative Officer and Chief Financial Officer, stated, “Our franchised-focused business model has enabled us to deliver another solid quarter of financial performance as demonstrated by our year-over-year increases in same-store sales, profitability, and cash flow. Our total debt ratio is now below 2.5x which lowers the interest rate on our term loan by 25 bps. to around 3.0%, based on current rates. Our business model provides financial stability and flexibility while enabling us to continue to return value to shareholders through debt repayment and share repurchases.”



Component	Full Year 2012 Guidance
	Previous**	Current
Franchise Same-Store Sales	1.0% to 3.0%	No Change
Company Same-Store Sales	0.0% to 2.0%	No Change
New System Units	45 - 50 (includes 1 company-owned unit)	No Change
Adjusted EBITDA* ($M)	$80 to $84	No Change
Adjusted Income Before Taxes* ($M)	$45 to $49	No Change
Interest Expense, net ($M)	$12.5 to $13.5 (includes $10.5 to $11.5 of net cash interest expense)	No Change
Cash Capital Expenditure ($M)	$15 to $16	No Change
Cash Taxes ($M)	$3 to $4	No Change
Free Cash Flow* ($M)	$51 to $55	No Change

Denny's will provide further commentary on the results for the second quarter of 2012 on its quarterly investor conference call today, Tuesday, July 31, 2012 at 5:00 p.m. ET. Interested parties are invited to listen to a live broadcast of the conference call accessible through the investor relations section of Denny's website at ir.dennys.com. A replay of the call may be accessed at the same location later in the day and will remain available for 30 days.

Denny's is the franchisor and operator of one of America's largest full-service restaurant chains, based on number of units. As of June 27, 2012, Denny's had 1,684 franchised, licensed, and company-owned restaurants across the United States, Canada, Costa Rica, Mexico, Honduras, Guam, Curaçao, Puerto Rico, Dominican Republic and New Zealand. For further information on Denny's, including news releases, links to SEC filings and other financial information, please visit the Denny's investor relations website.

The Company urges caution in considering its current trends and any outlook on earnings disclosed in this press release. In addition, certain matters discussed in this release may constitute forward-looking statements. These forward-looking statements, which reflect our best judgment based on factors currently known, are intended to speak only as of the date such statements are made and involve risks, uncertainties, and other factors that may cause the actual performance of Denny's Corporation, its subsidiaries and underlying restaurants to be materially different from the performance indicated or implied by such statements. Words such as “expects”, “anticipates”, “believes”, “intends”, “plans”, “hopes”, and variations of such words and similar expressions are intended to identify such forward-looking statements. Except as may be required by law, the Company expressly disclaims any obligation to update these forward-looking statements to reflect events or circumstances after the date of this release or to reflect the occurrence of unanticipated events. Factors that could cause actual performance to differ materially from the performance indicated by these forward-looking statements include, among others: the competitive pressures from within the restaurant industry; the level of success of the Company's strategic and operating initiatives, 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, particularly at the retail level; political environment (including acts of war and terrorism); and other factors from time to time set forth in the Company's SEC reports and other filings, including but not limited to the discussion in Management's Discussion and Analysis and the risks identified in Item 1A. Risk Factors contained in the Company's Annual Report on Form 10-K for the year ended December 28, 2011 (and in the Company's subsequent quarterly reports on Form 10-Q).



DENNY’S CORPORATION
Condensed Consolidated Statements of Comprehensive Income
(Unaudited)

			Quarter			Quarter
			Ended			Ended
(In thousands, except per share amounts)			6/27/2012			6/29/2011
Revenue:
	Company restaurant sales		$	91,239		$	104,021
	Franchise and license revenue		33,492			31,832
		Total operating revenue	124,731			135,853
Costs of company restaurant sales			77,743			90,154
Costs of franchise and license revenue			11,386			11,085
General and administrative expenses			14,785			14,092
Depreciation and amortization			5,827			7,234
Operating (gains), losses and other charges, net			(4,009		)	(419		)
		Total operating costs and expenses	105,732			122,146
Operating income			18,999			13,707
Other expenses:
	Interest expense, net		2,993			4,901
	Other nonoperating expense, net		8,198			268
		Total other expenses, net	11,191			5,169
Net income before income taxes			7,808			8,538
Provision for income taxes			3,207			408
Net income			$	4,601		$	8,130


Net income per share:
	Basic		$	0.05		$	0.08
	Diluted		$	0.05		$	0.08

Weighted average shares outstanding:
	Basic		95,637			98,421
	Diluted		97,408			100,602

Comprehensive income			$	4,869		$	8,130



DENNY’S CORPORATION
Condensed Consolidated Statements of Comprehensive Income
(Unaudited)

			Two Quarters			Two Quarters
			Ended			Ended
(In thousands, except per share amounts)			6/27/2012			6/29/2011
Revenue:
	Company restaurant sales		$	185,402		$	208,576
	Franchise and license revenue		66,067			63,082
		Total operating revenue	251,469			271,658
Costs of company restaurant sales			157,698			182,102
Costs of franchise and license revenue			22,698			22,650
General and administrative expenses			30,448			28,231
Depreciation and amortization			11,887			14,422
Operating (gains), losses and other charges, net			(4,174		)	(948		)
		Total operating costs and expenses	218,557			246,457
Operating income			32,912			25,201
Other expenses:
	Interest expense, net		7,449			10,594
	Other nonoperating expense, net		7,903			1,746
		Total other expenses, net	15,352			12,340
Net income before income taxes			17,560			12,861
Provision for income taxes			7,094			607
Net income			$	10,466		$	12,254


Net income per share:
	Basic		$	0.11		$	0.12
	Diluted		$	0.11		$	0.12

Weighted average shares outstanding:
	Basic		95,856			98,700
	Diluted		97,651			100,976

Comprehensive income			$	11,002		$	12,254



DENNY’S CORPORATION
Condensed Consolidated Balance Sheets
(Unaudited)

(In thousands)				6/27/2012			12/28/2011
ASSETS
	Current Assets
		Cash and cash equivalents		$	20,997		$	13,740
		Receivables, net		13,781			14,971
		Assets held for sale		486			2,351
		Current deferred tax asset		20,324			15,519
		Other		8,491			14,712
				64,079			61,293
	Property, net			102,626			112,772
	Goodwill			30,476			30,764
	Intangible assets, net			49,804			50,921
	Noncurrent deferred tax asset			49,137			60,636
	Other assets			32,758			34,115
			Total Assets	$	328,880		$	350,501

LIABILITIES AND SHAREHOLDERS’ DEFICIT
	Current Liabilities
		Current maturities of long-term debt		$	12,054		$	2,591
		Current maturities of capital lease obligations		4,368			4,380
		Accounts payable		17,035			25,935
		Other current liabilities		50,971			54,289
				84,428			87,195
	Long-Term Liabilities
		Long-term debt, less current maturities		171,000			193,257
		Capital lease obligations, less current maturities		16,996			18,077
		Other		59,228			61,648
				247,224			272,982
			Total Liabilities	331,652			360,177

	Shareholders' Deficit
		Common stock		1,030			1,027
		Paid-in capital		559,160			557,396
		Deficit		(507,361		)	(517,827		)
		Accumulated other comprehensive loss, net of tax		(24,277		)	(24,813		)
		Treasury stock		(31,324		)	(25,459		)
			Total Shareholders' Deficit	(2,772		)	(9,676		)
			Total Liabilities and Shareholders' Deficit	$	328,880		$	350,501

Debt Balances
(In thousands)				6/27/2012			12/28/2011
Credit facility term loan due 2017, net of discount of $0 and $2,251, respectively				$	183,054		$	195,749
Capital leases and other debt				21,364			22,556
	Total Debt			$	204,418		$	218,305



DENNY’S CORPORATION
Income, EBITDA, Free Cash Flow and G&A Reconciliations
(Unaudited)

		Quarter			Quarter			Two Quarters			Two Quarters
Income and EBITDA Reconciliation		Ended			Ended			Ended			Ended
(In thousands)		6/27/2012			6/29/2011			6/27/2012			6/29/2011
Net income		$	4,601		$	8,130		$	10,466		$	12,254

Provision for (benefit from) income taxes		3,207			408			7,094			607
Operating (gains), losses and other charges, net		(4,009		)	(419		)	(4,174		)	(948		)
Other nonoperating expense, net		8,198			268			7,903			1,746
Share-based compensation		876			1,176			1,666			2,149

Adjusted Income Before Taxes ⁽¹⁾		$	12,873		$	9,563		$	22,955		$	15,808

Interest expense, net		2,993			4,901			7,449			10,594
Depreciation and amortization		5,827			7,234			11,887			14,422
Cash payments for restructuring charges and exit costs		(543		)	(747		)	(1,324		)	(1,453		)
Cash payments for share-based compensation		—			(99		)	(355		)	(99		)

Adjusted EBITDA ⁽¹⁾		$	21,150		$	20,852		$	40,612		$	39,272

Cash interest expense, net		(2,579		)	(4,111		)	(6,329		)	(9,085		)
Cash paid for income taxes, net		(1,152		)	(574		)	(1,365		)	(737		)
Cash paid for capital expenditures		(2,443		)	(3,084		)	(4,279		)	(8,854		)

Free Cash Flow ⁽¹⁾		$	14,976		$	13,083		$	28,639		$	20,596

		Quarter			Quarter			Two Quarters			Two Quarters
General and Administrative Expenses Reconciliation		Ended			Ended			Ended			Ended
(In thousands)		6/27/2012			6/29/2011			6/27/2012			6/29/2011
	Share-based compensation	$	876		$	1,176		$	1,666		$	2,149
	Other general and administrative expenses	13,909			12,916			28,782			26,082
	Total general and administrative expenses	$	14,785		$	14,092		$	30,448		$	28,231



(1)	We believe that, in addition to other financial measures, Adjusted Income Before Taxes, Adjusted EBITDA and Free Cash Flow are appropriate indicators to assist in the evaluation of our operating performance on a period-to-period basis. We also use Adjusted Income, Adjusted EBITDA and Free Cash Flow internally as performance measures for planning purposes, including the preparation of annual operating budgets, and for compensation purposes, including bonuses for certain employees. Adjusted EBITDA is also used to evaluate our ability to service debt because the excluded charges do not have an impact on our prospective debt servicing capability and these adjustments are contemplated in our credit facility for the computation of our debt covenant ratios. Free Cash Flow, defined as Adjusted EBITDA less cash portion of interest expense net of interest income, capital expenditures, and cash taxes, is used to evaluate operating effectiveness and decisions regarding the allocation of resources. However, Adjusted Income, Adjusted EBITDA and Free Cash Flow should be considered as a supplement to, not a substitute for, operating income, net income or other financial performance measures prepared in accordance with U.S. generally accepted accounting principles.



DENNY’S CORPORATION
Operating Margins
(Unaudited)

				Quarter					Quarter
				Ended					Ended
(In thousands)				6/27/2012					6/29/2011
Company restaurant operations: ⁽²⁾
	Company restaurant sales			$	91,239		100	%	$	104,021		100	%
	Costs of company restaurant sales:
		Product costs		22,702			24.9	%	25,613			24.6	%
		Payroll and benefits		36,617			40.1	%	42,419			40.8	%
		Occupancy		6,222			6.8	%	6,793			6.5	%
		Other operating costs:
			Utilities	3,592			3.9	%	4,590			4.4	%
			Repairs and maintenance	1,634			1.8	%	1,890			1.8	%
			Marketing	3,389			3.7	%	3,971			3.8	%
			Legal settlements	71			0.1	%	(14		)	—	%
			Other	3,516			3.9	%	4,892			4.7	%
	Total costs of company restaurant sales			$	77,743		85.2	%	$	90,154		86.7	%
	Company restaurant operating margin ⁽³⁾			$	13,496		14.8	%	$	13,867		13.3	%

Franchise operations: ⁽⁴⁾
	Franchise and license revenue
	Royalty and license revenue			$	20,874		62.3	%	$	19,926		62.6	%
	Initial and other fee revenue			1,003			3	%	708			2.2	%
	Occupancy revenue			11,615			34.7	%	11,198			35.2	%
	Total franchise and license revenue			$	33,492		100	%	$	31,832		100	%

	Costs of franchise and license revenue
	Direct franchise costs			$	2,681		8	%	$	2,427		7.6	%
	Occupancy costs			8,705			26	%	8,658			27.2	%
	Total costs of franchise and license revenue			$	11,386		34	%	$	11,085		34.8	%
	Franchise operating margin ⁽³⁾			$	22,106		66	%	$	20,747		65.2	%

Total operating revenue ⁽¹⁾				$	124,731		100	%	$	135,853		100	%
Total costs of operating revenue ⁽¹⁾				89,129			71.5	%	101,239			74.5	%
Total operating margin ⁽¹⁾⁽³⁾				$	35,602		28.5	%	$	34,614		25.5	%

Other operating expenses: ⁽¹⁾⁽³⁾
	General and administrative expenses			$	14,785		11.9	%	$	14,092		10.4	%
	Depreciation and amortization			5,827			4.7	%	7,234			5.3	%
	Operating gains, losses and other charges, net			(4,009		)	(3.2	)%	(419		)	(0.3	)%
	Total other operating expenses			$	16,603		13.3	%	$	20,907		15.4	%

Operating income ⁽¹⁾				$	18,999		15.2	%	$	13,707		10.1	%



(1)	As a percentage of total operating revenue
(2)	As a percentage of company restaurant sales
(3)	Other operating expenses such as general and administrative expenses and depreciation and amortization relate to both company and franchise operations and are not allocated to costs of company restaurant sales and costs of franchise and license revenue. As such, operating margin is considered a non-GAAP financial measure. Operating margins should be considered as a supplement to, not as a substitute for, operating income, net income or other financial measures prepared in accordance with U.S. generally accepted accounting principles.
(4)	As a percentage of franchise and license revenue



DENNY’S CORPORATION
Operating Margins
(Unaudited)

				Two Quarters					Two Quarters
				Ended					Ended
(In thousands)				6/27/2012					6/29/2011
Company restaurant operations: ⁽²⁾
	Company restaurant sales			$	185,402		100	%	$	208,576		100	%
	Costs of company restaurant sales:
		Product costs		46,235			24.9	%	51,248			24.6	%
		Payroll and benefits		74,370			40.1	%	86,615			41.5	%
		Occupancy		11,996			6.5	%	13,653			6.5	%
		Other operating costs:
			Utilities	7,306			3.9	%	8,979			4.3	%
			Repairs and maintenance	3,322			1.8	%	3,732			1.8	%
			Marketing	6,924			3.7	%	7,812			3.7	%
			Legal settlements	169			0.1	%	63			—	%
			Other	7,376			4	%	10,000			4.8	%
	Total costs of company restaurant sales			$	157,698		85.1	%	$	182,102		87.3	%
	Company restaurant operating margin ⁽³⁾			$	27,704		14.9	%	$	26,474		12.7	%

Franchise operations: ⁽⁴⁾
	Franchise and license revenue
	Royalty and license revenue			$	41,401		62.7	%	$	39,220		62.2	%
	Initial and other fee revenue			1,439			2.2	%	1,613			2.6	%
	Occupancy revenue			23,227			35.1	%	22,249			35.2	%
	Total franchise and license revenue			$	66,067		100	%	$	63,082		100	%

	Costs of franchise and license revenue
	Direct franchise costs			$	5,270		8	%	$	5,432		8.6	%
	Occupancy costs			17,428			26.4	%	17,218			27.3	%
	Total costs of franchise and license revenue			$	22,698		34.4	%	$	22,650		35.9	%
	Franchise operating margin ⁽³⁾			$	43,369		65.6	%	$	40,432		64.1	%

Total operating revenue ⁽¹⁾				$	251,469		100	%	$	271,658		100	%
Total costs of operating revenue (1)				180,396			71.7	%	204,752			75.4	%
Total operating margin ⁽¹⁾⁽³⁾				$	71,073		28.3	%	$	66,906		24.6	%

Other operating expenses: ⁽¹⁾⁽³⁾
	General and administrative expenses			$	30,448		12.1	%	$	28,231		10.4	%
	Depreciation and amortization			11,887			4.7	%	14,422			5.3	%
	Operating gains, losses and other charges, net			(4,174		)	(1.7	)%	(948		)	(0.3	)%
	Total other operating expenses			$	38,161		15.2	%	$	41,705		15.4	%

Operating income ⁽¹⁾				$	32,912		13.1	%	$	25,201		9.3	%



(1)	As a percentage of total operating revenue
(2)	As a percentage of company restaurant sales
(3)	Other operating expenses such as general and administrative expenses and depreciation and amortization relate to both company and franchise operations and are not allocated to costs of company restaurant sales and costs of franchise and license revenue. As such, operating margin is considered a non-GAAP financial measure. Operating margins should be considered as a supplement to, not as a substitute for, operating income, net income or other financial measures prepared in accordance with U.S. generally accepted accounting principles.
(4)	As a percentage of franchise and license revenue



DENNY’S CORPORATION
Statistical Data
(Unaudited)

			Quarter			Quarter			Two Quarters			Two Quarters
Same-Store Sales			Ended			Ended			Ended			Ended
(increase/(decrease) vs. prior year)			6/27/2012			6/29/2011			6/27/2012			6/29/2011
	Company Restaurants		0.0		%	2.6		%	0.4		%	0.6		%
	Franchised Restaurants		0.9		%	1.8		%	1.8		%	0.0		%
	System-wide Restaurants		0.8		%	2.0		%	1.6		%	0.2		%

Company Restaurant Sales Detail
	Guest Check Average		1.7		%	1.2		%	2.0		%	0.5		%
	Guest Counts		(1.6		)%	1.4		%	(1.6		)%	0.1		%


			Quarter			Quarter			Two Quarters			Two Quarters
Average Unit Sales			Ended			Ended			Ended			Ended
(In thousands)			6/27/2012			6/29/2011			6/27/2012			6/29/2011
	Company Restaurants		$	484		$	463		$	954		$	915
	Franchised Restaurants		$	354		$	349		$	703		$	688


						Franchised
Restaurant Unit Activity			Company			& Licensed			Total
Ending Units 3/28/12			197			1,483			1,680
	Units Opened		0			9			9
	Units Refranchised		(17		)	17			0
	Units Closed (Including Units Relocated)		(3		)	(2		)	(5		)
		Net Change	(20		)	24			4
Ending Units 6/27/12			177			1,507			1,684

Equivalent Units
	Second Quarter 2012		188			1,493			1,681
	Second Quarter 2011		224			1,442			1,666
			(36		)	51			15


						Franchised
Restaurant Unit Activity			Company			& Licensed			Total
Ending Units 12/28/11			206			1,479			1,685
	Units Opened		0			15			15
	Units Refranchised		(23		)	23			0
	Units Closed (Including Units Relocated)		(6		)	(10		)	(16		)
		Net Change	(29		)	28			(1		)
Ending Units 6/27/12			177			1,507			1,684

Equivalent Units
	Year-to-Date 2012		194			1,487			1,681
	Year-to-Date 2011		228			1,436			1,664
			(34		)	51			17



Investor Contact:	Whit Kincaid
	877-784-7167

Media Contact	Liz Brady, ICO
	646-277-1226


•	System-wide same-store sales grew 0.8%, which marks the fifth consecutive quarter that system-wide same-store sales have been positive, achieving two-year same-store sales of positive 2.8%.


•	Opened nine franchised units, including two international units in the Dominican Republic and Canada.


•	Signed largest international development agreement to date for 50 units in southern China.


•	Franchise operating margin increased 0.8 percentage points to 66.0% compared with the prior year.


•	Company restaurant operating margin increased 1.5 percentage points to 14.8% compared with the prior year.


•	Adjusted EBITDA* margin increased 1.7 percentage points to 17.0% compared with the prior year.


•	Net income of $4.6 million, or $0.05 per diluted share, was impacted by a charge to other nonoperating expense of $7.9 million as a result of the refinancing of our credit facility in April 2012.


•	Adjusted Income Before Taxes* grew 34.6% to $12.9 million compared with the prior year.


•	Free Cash Flow* increased 14.5% to $15.0 million compared with the prior year.


•	Reduced outstanding term loan debt by $7 million to $183 million bringing Total Debt to Adjusted EBITDA Ratio below 2.5x.


•	Repurchased 1.4 million shares in the second quarter bringing total shares repurchased since November 2010 to 8.1 million.


*	Please refer to the historical reconciliation of net income to Adjusted Income Before Taxes, Adjusted EBITDA, and Free Cash Flow included in the tables below.


**	As announced in First Quarter 2012 Earnings Release on April 30, 2012.