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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 29, 2021
or
☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from _______________ to ________________
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 incorporation or organization) |  | (I.R.S. Employer 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)
Securities registered pursuant to Section 12(b) of the Act:

Title of each class |  | Trading Symbol(s) |  | Name of each exchange on which registered
$.01 Par Value, Common Stock |  | DENN |  | The Nasdaq Stock Market LLC

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 ý No ☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted 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 such files). Yes ý No ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large Accelerated Filer | ☐ | Accelerated Filer | ý | Non-Accelerated Filer | ☐ | Smaller Reporting Company | ☐ | Emerging Growth Company | ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ¨
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
Yes ☐ No ý
As of October 28, 2021, 63,386,061 shares of the registrant’s common stock, par value $0.01 per share, were outstanding.

TABLE OF CONTENTS

| Page
PART I - FINANCIAL INFORMATION |
Item 1. Financial Statements (Unaudited) |
Condensed Consolidated Balance Sheets | 3
Condensed Consolidated Statements of Operations | 4
Condensed Consolidated Statements of Comprehensive Income (Loss) | 5
Condensed Consolidated Statements of Shareholders' Deficit | 6
Condensed Consolidated Statements of Cash Flows | 8
Notes to Condensed Consolidated Financial Statements | 9
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations | 19
Item 3. Quantitative and Qualitative Disclosures About Market Risk | 30
Item 4. Controls and Procedures | 31
PART II - OTHER INFORMATION |
Item 1. Legal Proceedings | 32
Item 1A. Risk Factors | 32
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds | 32
Item 6. Exhibits | 33
Signatures | 34

2

PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
Denny’s Corporation and Subsidiaries
Condensed Consolidated Balance Sheets
(Unaudited)

| September 29, 2021 |  | December 30, 2020
| (In thousands)
Assets |  |  |
Current assets: |  |  |
Cash and cash equivalents | $ | 10,203 |  |  | $ | 3,892 |
Investments | 2,082 |  |  | 2,272 |
Receivables, net | 16,903 |  |  | 21,349 |
Inventories | 1,230 |  |  | 1,181 |
Assets held for sale | 1,627 |  |  | 1,125 |
Prepaid and other current assets | 14,550 |  |  | 18,847 |
Total current assets | 46,595 |  |  | 48,666 |
Property, net of accumulated depreciation of $151,887 and $146,583, respectively | 81,897 |  |  | 86,154 |
Financing lease right-of-use assets, net of accumulated amortization of $11,217 and $9,907, respectively | 9,403 |  |  | 9,830 |
Operating lease right-of-use assets, net | 131,616 |  |  | 139,534 |
Goodwill | 36,884 |  |  | 36,884 |
Intangible assets, net | 50,559 |  |  | 51,559 |
Deferred financing costs, net | 3,123 |  |  | 2,414 |
Deferred income taxes, net | 18,069 |  |  | 23,210 |
Other noncurrent assets | 32,878 |  |  | 32,698 |
Total assets | $ | 411,024 |  |  | $ | 430,949 |
Liabilities |  |  |
Current liabilities: |  |  |
Current finance lease liabilities | $ | 2,016 |  |  | $ | 1,839 |
Current operating lease liabilities | 15,907 |  |  | 16,856 |
Accounts payable | 15,152 |  |  | 12,021 |
Other current liabilities | 56,985 |  |  | 46,462 |
Total current liabilities | 90,060 |  |  | 77,178 |
Long-term liabilities: |  |  |
Long-term debt | 170,000 |  |  | 210,000 |
Noncurrent finance lease liabilities | 12,825 |  |  | 13,530 |
Noncurrent operating lease liabilities | 129,409 |  |  | 137,534 |
Liability for insurance claims, less current portion | 9,037 |  |  | 10,309 |
Other noncurrent liabilities | 89,330 |  |  | 112,844 |
Total long-term liabilities | 410,601 |  |  | 484,217 |
Total liabilities | 500,661 |  |  | 561,395 |
Shareholders' deficit |  |  |
Common stock $0.01 par value; 135,000 shares authorized; September 29, 2021: 64,200 shares issued and 63,795 outstanding; December 30, 2020: 63,962 shares issued and outstanding | $ | 642 |  |  | $ | 640 |
Paid-in capital | 132,436 |  |  | 123,833 |
Deficit | (159,896) |  |  | (194,514) |
Accumulated other comprehensive loss, net | (56,256) |  |  | (60,405) |
Treasury stock, at cost, 405 and 0 shares, respectively | (6,563) |  |  | — |
Total shareholders' deficit | (89,637) |  |  | (130,446) |
Total liabilities and shareholders' deficit | $ | 411,024 |  |  | $ | 430,949 |

See accompanying notes
3

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

| Quarter Ended |  | Three Quarters Ended
| September 29, 2021 |  | September 23, 2020 |  | September 29, 2021 |  | September 23, 2020
| (In thousands, except per share amounts)
Revenue: |  |  |  |  |  |  |
Company restaurant sales | $ | 46,470 |  |  | $ | 27,849 |  |  | $ | 127,611 |  |  | $ | 85,268 |
Franchise and license revenue | 57,324 |  |  | 43,795 |  |  | 162,924 |  |  | 123,232 |
Total operating revenue | 103,794 |  |  | 71,644 |  |  | 290,535 |  |  | 208,500 |
Costs of company restaurant sales, excluding depreciation and amortization: |  |  |  |  |  |  |
Product costs | 11,430 |  |  | 7,106 |  |  | 31,149 |  |  | 21,541 |
Payroll and benefits | 17,404 |  |  | 11,925 |  |  | 47,339 |  |  | 37,070 |
Occupancy | 3,013 |  |  | 2,638 |  |  | 8,707 |  |  | 8,529 |
Other operating expenses | 6,722 |  |  | 5,701 |  |  | 19,351 |  |  | 15,954 |
Total costs of company restaurant sales | 38,569 |  |  | 27,370 |  |  | 106,546 |  |  | 83,094 |
Costs of franchise and license revenue, excluding depreciation and amortization | 27,469 |  |  | 24,073 |  |  | 79,962 |  |  | 68,487 |
General and administrative expenses | 16,497 |  |  | 13,694 |  |  | 50,992 |  |  | 34,589 |
Depreciation and amortization | 3,822 |  |  | 4,048 |  |  | 11,380 |  |  | 12,252 |
Operating (gains), losses and other charges, net | (215) |  |  | (781) |  |  | 204 |  |  | 2,319 |
Total operating costs and expenses, net | 86,142 |  |  | 68,404 |  |  | 249,084 |  |  | 200,741 |
Operating income | 17,652 |  |  | 3,240 |  |  | 41,451 |  |  | 7,759 |
Interest expense, net | 3,671 |  |  | 4,422 |  |  | 12,014 |  |  | 13,320 |
Other nonoperating expense (income), net | (2,368) |  |  | (8,477) |  |  | (16,165) |  |  | 3,851 |
Income (loss) before income taxes | 16,349 |  |  | 7,295 |  |  | 45,602 |  |  | (9,412) |
Provision for (benefit from) income taxes | 4,084 |  |  | 818 |  |  | 10,984 |  |  | (1,937) |
Net income (loss) | $ | 12,265 |  |  | $ | 6,477 |  |  | $ | 34,618 |  |  | $ | (7,475) |
Basic net income (loss) per share | $ | 0.19 |  |  | $ | 0.10 |  |  | $ | 0.53 |  |  | $ | (0.13) |
Diluted net income (loss) per share | $ | 0.19 |  |  | $ | 0.10 |  |  | $ | 0.53 |  |  | $ | (0.13) |
Basic weighted average shares outstanding | 65,447 |  |  | 63,793 |  |  | 65,413 |  |  | 59,350 |
Diluted weighted average shares outstanding | 65,829 |  |  | 64,027 |  |  | 65,814 |  |  | 59,350 |

See accompanying notes
4

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

| Quarter Ended |  | Three Quarters Ended
| September 29, 2021 |  | September 23, 2020 |  | September 29, 2021 |  | September 23, 2020
| (In thousands)
Net income (loss) | $ | 12,265 |  |  | $ | 6,477 |  |  | $ | 34,618 |  |  | $ | (7,475) |
Other comprehensive income (loss), net of tax: |  |  |  |  |  |  |
Minimum pension liability adjustment, net of tax of $10, $5, $31 and $17, respectively | 30 |  |  | 17 |  |  | 89 |  |  | 50 |
Changes in the fair value of cash flow derivatives, net of tax of $14, $151, $585 and $(12,416), respectively | 43 |  |  | 435 |  |  | 1,697 |  |  | (34,723) |
Reclassification of cash flow derivatives to interest expense, net of tax of $259, $121, $771 and $541, respectively | 751 |  |  | 350 |  |  | 2,239 |  |  | 1,556 |
Reclassification of loss related to dedesignation of derivatives to other nonoperating expense (income), net of tax of $0, $0, $0 and $1,892, respectively | — |  |  | — |  |  | — |  |  | 5,462 |
Amortization of unrealized losses related to dedesignated derivatives to interest expense, net of tax of $0, $73, $42 and $142, respectively | — |  |  | 210 |  |  | 124 |  |  | 410 |
Other comprehensive income (loss) | 824 |  |  | 1,012 |  |  | 4,149 |  |  | (27,245) |
Total comprehensive income (loss) | $ | 13,089 |  |  | $ | 7,489 |  |  | $ | 38,767 |  |  | $ | (34,720) |

See accompanying notes
5

Denny’s Corporation and Subsidiaries
Condensed Consolidated Statements of Shareholders’ Deficit
For the Quarter Ended September 29, 2021 and September 23, 2020
(Unaudited)

| Common Stock |  | Treasury Stock |  | Paid-in Capital |  | Deficit |  | Accumulated Other Comprehensive Loss, Net |  | Total Shareholders’ Deficit
| Shares |  | Amount |  | Shares |  | Amount |  |  |  |
| (In thousands)
Balance, June 30, 2021 | 64,200 |  |  | $ | 642 |  |  | — |  |  | $ | — |  |  | $ | 129,176 |  |  | $ | (172,161) |  |  | $ | (57,080) |  |  | (99,423) |
Net income | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | 12,265 |  |  | — |  |  | 12,265 |
Other comprehensive income | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | 824 |  |  | 824 |
Share-based compensation on equity classified awards, net of withholding tax | — |  |  | — |  |  | — |  |  | — |  |  | 3,260 |  |  | — |  |  | — |  |  | 3,260 |
Purchase of treasury stock | — |  |  | — |  |  | (405) |  |  | (6,563) |  |  | — |  |  | — |  |  | — |  |  | (6,563) |
Balance, September 29, 2021 | 64,200 |  |  | $ | 642 |  |  | (405) |  |  | $ | (6,563) |  |  | $ | 132,436 |  |  | $ | (159,896) |  |  | $ | (56,256) |  |  | $ | (89,637) |

| Common Stock |  | Treasury Stock |  | Paid-in Capital |  | Deficit |  | Accumulated Other Comprehensive Loss, Net |  | Total Shareholders’ Deficit
| Shares |  | Amount |  | Shares |  | Amount |  |  |  |
| (In thousands)
Balance, June 24, 2020 | 109,719 |  |  | $ | 1,097 |  |  | (54,010) |  |  | $ | (553,973) |  |  | $ | 600,936 |  |  | $ | (203,350) |  |  | $ | (62,217) |  |  | $ | (217,507) |
Net income | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | 6,477 |  |  | — |  |  | 6,477 |
Other comprehensive income | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | 1,012 |  |  | 1,012 |
Issuance of common stock | 8,000 |  |  | 80 |  |  |  |  |  |  | 69,491 |  |  | — |  |  | — |  |  | 69,571 |
Share-based compensation on equity classified awards, net of withholding tax | — |  |  | — |  |  | — |  |  | — |  |  | 1,930 |  |  | — |  |  | — |  |  | 1,930 |
Issuance of common stock for share-based compensation | 22 |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |
Exercise of common stock options | 37 |  |  | 1 |  |  | — |  |  | — |  |  | 145 |  |  | — |  |  | — |  |  | 146 |
Balance, September 23, 2020 | 117,778 |  |  | $ | 1,178 |  |  | (54,010) |  |  | $ | (553,973) |  |  | $ | 672,502 |  |  | $ | (196,873) |  |  | $ | (61,205) |  |  | $ | (138,371) |

See accompanying notes
6

Denny’s Corporation and Subsidiaries
Condensed Consolidated Statements of Shareholders’ Deficit
For the Three Quarters Ended September 29, 2021 and September 23, 2020
(Unaudited)

| Common Stock |  | Treasury Stock |  | Paid-in Capital |  | Deficit |  | Accumulated Other Comprehensive Loss, Net |  | Total Shareholders’ Deficit
| Shares |  | Amount |  | Shares |  | Amount |  |  |  |
| (In thousands)
Balance, December 30, 2020 | 63,962 |  |  | $ | 640 |  |  | — |  |  | $ | — |  |  | $ | 123,833 |  |  | $ | (194,514) |  |  | $ | (60,405) |  |  | $ | (130,446) |
Net income | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | 34,618 |  |  | — |  |  | 34,618 |
Other comprehensive income | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | 4,149 |  |  | 4,149 |
Share-based compensation on equity classified awards, net of withholding tax | — |  |  | — |  |  | — |  |  | — |  |  | 8,489 |  |  | — |  |  | — |  |  | 8,489 |
Purchase of treasury stock | — |  |  | — |  |  | (405) |  |  | (6,563) |  |  | — |  |  | — |  |  | — |  |  | (6,563) |
Issuance of common stock for share-based compensation | 208 |  |  | 2 |  |  | — |  |  | — |  |  | (2) |  |  | — |  |  | — |  |  | — |
Exercise of common stock options | 30 |  |  | — |  |  | — |  |  | — |  |  | 116 |  |  | — |  |  | — |  |  | 116 |
Balance, September 29, 2021 | 64,200 |  |  | $ | 642 |  |  | (405) |  |  | $ | (6,563) |  |  | $ | 132,436 |  |  | $ | (159,896) |  |  | $ | (56,256) |  |  | $ | (89,637) |

| Common Stock |  | Treasury Stock |  | Paid-in Capital |  | Deficit |  | Accumulated Other Comprehensive Loss, Net |  | Total Shareholders’ Deficit
| Shares |  | Amount |  | Shares |  | Amount |  |  |  |
| (In thousands)
Balance, December 25, 2019 | 109,415 |  |  | $ | 1,094 |  |  | (52,320) |  |  | $ | (519,780) |  |  | $ | 603,980 |  |  | $ | (189,398) |  |  | $ | (33,960) |  |  | $ | (138,064) |
Net loss | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | (7,475) |  |  | — |  |  | (7,475) |
Other comprehensive loss | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | (27,245) |  |  | (27,245) |
Issuance of common stock | 8,000 |  |  | 80 |  |  | — |  |  | — |  |  | 69,491 |  |  | — |  |  | — |  |  | 69,571 |
Share-based compensation on equity classified awards, net of withholding tax | — |  |  | — |  |  | — |  |  | — |  |  | (1,177) |  |  | — |  |  | — |  |  | (1,177) |
Purchase of treasury stock | — |  |  | — |  |  | (1,690) |  |  | (34,193) |  |  | — |  |  | — |  |  | — |  |  | (34,193) |
Issuance of common stock for share-based compensation | 309 |  |  | 3 |  |  | — |  |  | — |  |  | (3) |  |  | — |  |  | — |  |  | — |
Exercise of common stock options | 54 |  |  | 1 |  |  | — |  |  | — |  |  | 211 |  |  | — |  |  | — |  |  | 212 |
Balance, September 23, 2020 | 117,778 |  |  | $ | 1,178 |  |  | (54,010) |  |  | $ | (553,973) |  |  | $ | 672,502 |  |  | $ | (196,873) |  |  | $ | (61,205) |  |  | $ | (138,371) |

See accompanying notes
7

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

| Three Quarters Ended
| September 29, 2021 |  | September 23, 2020
| (In thousands)
Cash flows from operating activities: |  |  |
Net income (loss) | $ | 34,618 |  |  | $ | (7,475) |
Adjustments to reconcile net income (loss) to cash flows provided by (used in) operating activities: |  |  |
Depreciation and amortization | 11,380 |  |  | 12,252 |
Operating (gains), losses and other charges, net | 204 |  |  | 2,319 |
(Gains) losses and amortization on interest rate swap derivatives, net | (14,771) |  |  | 4,185 |
Amortization of deferred financing costs | 946 |  |  | 591 |
Gains on investments | (11) |  |  | (117) |
(Gains) losses on early termination of debt and leases | (52) |  |  | 43 |
Deferred income tax expense (benefit) | 3,713 |  |  | (2,505) |
Share-based compensation expense | 10,212 |  |  | 1,972 |
Changes in assets and liabilities: |  |  |
Receivables | 4,182 |  |  | 7,465 |
Inventories | (49) |  |  | 265 |
Prepaids and other current assets | 4,296 |  |  | (3,865) |
Other noncurrent assets | (1,021) |  |  | 474 |
Operating lease assets and liabilities | (1,150) |  |  | 1,231 |
Accounts payable | 6,360 |  |  | (8,540) |
Accrued payroll | 1,462 |  |  | (8,739) |
Accrued taxes | 1,253 |  |  | 971 |
Other accrued liabilities | 5,890 |  |  | (6,512) |
Other noncurrent liabilities | (4,233) |  |  | (5,625) |
Net cash flows provided by (used in) operating activities | 63,229 |  |  | (11,610) |
Cash flows from investing activities: |  |  |
Capital expenditures | (5,321) |  |  | (5,476) |
Proceeds from sales of real estate and other assets | 1,785 |  |  | 4,536 |
Investment purchases | — |  |  | (1,400) |
Proceeds from sale of investments | 200 |  |  | 2,900 |
Collections on notes receivable | 539 |  |  | 1,385 |
Issuance of notes receivable | (115) |  |  | (670) |
Net cash flows provided by (used in) investing activities | (2,912) |  |  | 1,275 |
Cash flows from financing activities: |  |  |
Revolver borrowings | 181,000 |  |  | 140,500 |
Revolver payments | (221,000) |  |  | (150,500) |
Long-term debt payments | (1,583) |  |  | (1,115) |
Proceeds from exercise of stock options | 116 |  |  | 212 |
Tax withholding on share-based payments | (1,377) |  |  | (3,049) |
Deferred financing costs | (1,809) |  |  | (982) |
Purchase of treasury stock | (6,228) |  |  | (36,008) |
Proceeds from issuance of common stock | — |  |  | 69,571 |
Net bank overdrafts | (3,125) |  |  | (449) |
Net cash flows provided by (used in) financing activities | (54,006) |  |  | 18,180 |
Increase in cash and cash equivalents | 6,311 |  |  | 7,845 |
Cash and cash equivalents at beginning of period | 3,892 |  |  | 3,372 |
Cash and cash equivalents at end of period | $ | 10,203 |  |  | $ | 11,217 |

See accompanying notes
8

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 or the Company, is one of America’s largest full-service restaurant chains based on number of restaurants. At September 29, 2021, the Denny's brand consisted of 1,647 restaurants, 1,582 of which were franchised/licensed restaurants and 65 of which were company operated.
The global crisis resulting from the spread of coronavirus ("COVID-19") has had a substantial impact on our restaurant operations starting in the quarter ended March 25, 2020 with continuing impacts into the current quarter ended September 29, 2021. While we have seen improvements compared to earlier periods during the COVID-19 pandemic, we cannot currently estimate the duration or future financial impact of the COVID-19 pandemic on our business.
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 (“GAAP”) 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 are reasonable.
These interim condensed consolidated financial statements should be read in conjunction with our consolidated financial statements and notes thereto for the fiscal year ended December 30, 2020 which are contained in our audited Annual Report on Form 10-K for the fiscal year ended December 30, 2020. The results of operations for the interim periods presented are not necessarily indicative of the results for the entire fiscal year ending December 29, 2021. Our significant interim accounting policies include the recognition of advertising and marketing costs, generally in proportion to revenue, and the recognition of income taxes using an estimated annual effective rate.
Note 2. Summary of Significant Accounting Policies
Newly Adopted Accounting Standards
In December 2019, the FASB issued ASU 2019-12, "Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes", which modifies Topic 740 to simplify the accounting for income taxes. ASU 2019-12 is effective for financial statements issued for annual periods beginning after December 15, 2020, and for the interim periods therein. The adoption of ASU 2019-12 did not have a significant impact on the Company’s consolidated financial position or results of operations.
Accounting Standards to be Adopted
In January 2021, the FASB issued ASU 2021-01, “Reference Rate Reform (Topic 848): Scope” which clarified the guidance issued in March 2020, ASU 2020-04, “Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting”. The guidance provides optional guidance, for a limited time, to ease the potential burden in accounting for or recognizing the effects of reference rate reform on financial reporting. The guidance is effective through December 31, 2022. The Company is currently evaluating the impact that the adoption of this new guidance will have on our consolidated financial position or results of operations.
We reviewed all other 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 our consolidated financial statements as a result of future adoption.
9

Note 3. Receivables
Receivables consisted of the following:

| September 29, 2021 |  | December 30, 2020
| (In thousands)
Receivables, net: |  |  |
Trade accounts receivable from franchisees | $ | 13,194 |  |  | $ | 15,535 |
Financing receivables from franchisees | 1,022 |  |  | 2,104 |
Vendor receivables | 2,396 |  |  | 2,199 |
Credit card receivables | 473 |  |  | 542 |
Other | 742 |  |  | 2,668 |
Allowance for doubtful accounts | (924) |  |  | (1,699) |
Total receivables, net | $ | 16,903 |  |  | $ | 21,349 |
Other noncurrent assets: |  |  |
Financing receivables from franchisees | $ | 342 |  |  | $ | 502 |

Note 4. Intangible Assets
Intangible assets consisted of the following:

| September 29, 2021 |  | December 30, 2020
| Gross Carrying Amount |  | Accumulated Amortization |  | Gross Carrying Amount |  | Accumulated Amortization
| (In thousands)
Intangible assets with indefinite lives: |  |  |  |  |  |  |
Trade names | $ | 44,087 |  |  | $ | — |  |  | $ | 44,087 |  |  | $ | — |
Liquor licenses | 120 |  |  | — |  |  | 120 |  |  | — |
Intangible assets with definite lives: |  |  |  |  |  |  |
Reacquired franchise rights | 12,218 |  |  | 5,866 |  |  | 12,218 |  |  | 4,866 |
Intangible assets, net | $ | 56,425 |  |  | $ | 5,866 |  |  | $ | 56,425 |  |  | $ | 4,866 |

Note 5. Other Current Liabilities
Other current liabilities consisted of the following:

| September 29, 2021 |  | December 30, 2020
| (In thousands)
Accrued payroll | $ | 18,973 |  |  | $ | 17,076 |
Current portion of liability for insurance claims | 4,371 |  |  | 4,667 |
Accrued taxes | 6,103 |  |  | 4,850 |
Accrued advertising | 12,350 |  |  | 4,318 |
Gift cards | 5,204 |  |  | 6,127 |
Other | 9,984 |  |  | 9,424 |
Other current liabilities | $ | 56,985 |  |  | $ | 46,462 |

10

Note 6. Fair Value of Financial Instruments
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)
| (In thousands)
Fair value measurements as of September 29, 2021: |  |  |  |  |  |  |
Deferred compensation plan investments (1) | $ | 13,626 |  |  | $ | 13,626 |  |  | $ | — |  |  | $ | — |
Interest rate swaps (2) | (53,874) |  |  | — |  |  | (53,874) |  |  | — |
Investments (3) | 2,082 |  |  | — |  |  | 2,082 |  |  | — |
Total | $ | (38,166) |  |  | $ | 13,626 |  |  | $ | (51,792) |  |  | $ | — |
Fair value measurements as of December 30, 2020: |  |  |  |  |  |  |
Deferred compensation plan investments (1) | $ | 13,627 |  |  | $ | 13,627 |  |  | $ | — |  |  | $ | — |
Interest rate swaps (2) | (76,445) |  |  | — |  |  | (76,445) |  |  | — |
Investments (3) | 2,272 |  |  | — |  |  | 2,272 |  |  | — |
Total | $ | (60,546) |  |  | $ | 13,627 |  |  | $ | (74,173) |  |  | $ | — |

(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. 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.
(3) The fair values of our investments are valued using a readily determinable net asset value per share based on the fair value of the underlying securities. There are no significant redemption restrictions associated with these investments.
The carrying amounts of cash and cash equivalents, receivables, accounts payable and accrued expenses are deemed to approximate fair value due to the immediate or short-term maturity of these instruments. The fair value of notes receivable approximates the carrying value after consideration of recorded allowances and related risk-based interest rates. The outstanding senior secured revolver is carried at historical cost, which approximates fair value. The fair value of our senior secured revolver approximates its carrying value since it is a variable rate facility (Level 2).
Note 7. Long-Term Debt
Refinancing of Credit Facility
On August 26, 2021, the Company and certain of its subsidiaries refinanced the existing credit facility (the "Old Credit Facility") and entered into a new five-year $400 million senior secured revolver (with a $25 million letter of credit sublimit) (the "New Credit Facility"). The New Credit Facility includes an accordion feature that would allow us to increase the size of the facility to $450 million. Borrowings bear a tiered interest rate, which is based on the Company's consolidated leverage ratio and is initially set at LIBOR plus 2.25%. The maturity date for the New Credit Facility is August 26, 2026.
The New Credit Facility was used to refinance the Old Credit Facility and is available for working capital, capital expenditures and other general corporate purposes. The New Credit Facility is guaranteed by Denny's and its material subsidiaries and is secured by assets of Denny's and its subsidiaries, including the stock of its subsidiaries (other than its insurance captive subsidiary). It includes negative covenants that are usual for facilities and transactions of this type. The New Credit Facility also includes certain financial covenants with respect to a maximum consolidated leverage ratio and a minimum consolidated fixed charge coverage ratio. We were in compliance with all financial covenants as of September 29, 2021.
As of September 29, 2021, we had outstanding revolver loans of $170.0 million and outstanding letters of credit under the New Credit Facility of $15.7 million. These balances resulted in availability of $214.3 million as of September 29, 2021 under the New Credit Facility.
As of September 29, 2021, borrowings under the New Credit Facility bore interest at a rate of LIBOR plus 2.25% and the commitment fee, paid on the unused portion of the New Credit Facility, was set to 0.35%.
11

Prior to considering the impact of our interest rate swaps, described below, the weighted-average interest rate on outstanding revolver loans was 2.33% and 3.15% as of September 29, 2021 and December 30, 2020, respectively. Taking into consideration our interest rate swaps that are designated as cash flow hedges, the weighted-average interest rate of outstanding revolver loans was 4.69% and 5.01% as of September 29, 2021 and December 30, 2020, respectively.
Interest Rate Hedges
We have receive-variable, pay-fixed interest rate swaps to hedge the forecasted cash flows of our floating rate debt. We initially designated the interest rate swaps as cash flow hedges of our exposure to variability in future cash flows attributable to variable interest payments due on forecasted notional amounts. A summary of our interest rate swaps as of September 29, 2021 is as follows:

Trade Date |  | Effective Date |  | Maturity Date |  | Notional Amount |  | Fair Value |  | Fixed Rate
|  |  |  |  |  | (In thousands) |  |
Swaps designated as cash flow hedges |  |  |  |  |  |  |  |  |  |
March 20, 2015 |  | March 29, 2018 |  | March 31, 2025 |  | $ | 120,000 |  |  | $ | 7,208 |  |  | 2.44 | %
October 1, 2015 |  | March 29, 2018 |  | March 31, 2026 |  | $ | 50,000 |  |  | $ | 3,429 |  |  | 2.46 | %
Dedesignated swaps |  |  |  |  |  |  |  |  |  |
February 15, 2018 |  | March 31, 2020 |  | December 31, 2033 |  | $ | 100,000 |  | (1) | $ | 43,237 |  |  | 3.19 | %
Total |  |  |  |  |  | $ | 270,000 |  |  | $ | 53,874 |  |  |

(1) The notional amounts of the swaps entered into on February 15, 2018 increase periodically until they reach the maximum notional amount of $425.0 million on September 28, 2029.
Swaps Designated as Cash Flow Hedges
To the extent the swaps are highly effective in offsetting the variability of the hedged cash flows, changes in the fair value of the swaps are not included in the Consolidated Statements of Operations but are reported as a component of other comprehensive income (loss). The interest rate swaps entered into in 2015 are designated as cash flow hedges with unrealized gain and losses recorded as a component of accumulated other comprehensive loss, net.
As of September 29, 2021, the fair value of swaps designated as cash flow hedges was a liability of $10.6 million and was recorded as a component of other noncurrent liabilities with an offsetting amount (before taxes) recorded as a component of accumulated other comprehensive loss, net in our Condensed Consolidated Balance Sheets. See Note 13 for amounts recorded in accumulated other comprehensive loss related to interest rate swaps. We expect to reclassify approximately $4.0 million from accumulated other comprehensive loss, net to interest expense, net in our Consolidated Statements of Operations related to swaps designated as cash flow hedges during the next 12 months.
Dedesignated Interest Rate Hedges
During the year ended December 30, 2020, we determined that a portion of the underlying cash flows related to our hedging relationship entered into in 2018 (“2018 Swaps”) were no longer probable of occurring over the term of the interest rate swaps. Accordingly, we dedesignated the cash flow relationship and discontinued hedge accounting treatment for the 2018 Swaps. As a result, we reclassified a portion of losses from accumulated other comprehensive loss, net to other nonoperating expense (income), net in our Consolidated Statements of Operations and began amortizing the remaining amounts of unrealized losses related to the 2018 Swaps from accumulated other comprehensive loss, net into our Consolidated Statements of Operations as a component of interest expense, net over the remaining term of the 2018 Swaps. For the quarter and three quarters ended September 29, 2021, no unrealized losses and approximately $0.2 million of unrealized losses, respectively, were reclassified to interest expense, net related to the 2018 Swaps. For the quarter and three quarters ended September 23, 2020, we reclassified unrealized losses of approximately $0.3 million and $0.6 million, respectively, to interest expense, net related to the 2018 Swaps. At September 29, 2021, approximately $64.2 million (before taxes) of unrealized losses remained in accumulated other comprehensive loss, net. We expect to amortize less than $0.1 million from accumulated other comprehensive loss, net to interest expense, net in our Consolidated Statements of Operations related to dedesignated interest rate swaps during the next 12 months.
12

As a result of the dedesignated cash flow relationship related to the 2018 Swaps, changes in the fair value of the 2018 Swaps are recorded as a component of other nonoperating expense (income), net in our Consolidated Statements of Operations. For the quarter and three quarters ended September 29, 2021, we recorded income of approximately $2.3 million and $14.9 million, respectively, as a component of nonoperating expense (income) related to the 2018 Swaps resulting from changes in fair value. For the quarter and three quarters ended September 23, 2020, we recorded income of approximately $7.8 million and $3.7 million, respectively, as a component of nonoperating expense (income) related to the 2018 Swaps resulting from changes in fair value. As of September 29, 2021, the fair value of the dedesignated interest rate swaps was a liability of $43.2 million and was recorded as a component of other noncurrent liabilities in our Condensed Consolidated Balance Sheets.
Note 8. Revenues
Our revenues are derived primarily from two sales channels, which we operate as one segment: company restaurants and franchised and licensed restaurants. The following table disaggregates our revenue by sales channel and type of good or service:

| Quarter Ended |  | Three Quarters Ended
| September 29, 2021 |  | September 23, 2020 |  | September 29, 2021 |  | September 23, 2020
| (In thousands)
Company restaurant sales | $ | 46,470 |  |  | $ | 27,849 |  |  | $ | 127,611 |  |  | $ | 85,268 |
Franchise and license revenue: |  |  |  |  |  |  |
Royalties | 27,336 |  |  | 17,896 |  |  | 75,297 |  |  | 48,462 |
Advertising revenue | 18,215 |  |  | 13,927 |  |  | 50,926 |  |  | 38,685 |
Initial and other fees | 1,442 |  |  | 1,890 |  |  | 5,346 |  |  | 4,933 |
Occupancy revenue | 10,331 |  |  | 10,082 |  |  | 31,355 |  |  | 31,152 |
Franchise and license revenue | 57,324 |  |  | 43,795 |  |  | 162,924 |  |  | 123,232 |
Total operating revenue | $ | 103,794 |  |  | $ | 71,644 |  |  | $ | 290,535 |  |  | $ | 208,500 |

Franchise occupancy revenue consisted of the following:

| Quarter Ended |  | Three Quarters Ended
| September 29, 2021 |  | September 23, 2020 |  | September 29, 2021 |  | September 23, 2020
| (In thousands)
Operating lease revenue | $ | 7,594 |  |  | $ | 8,277 |  |  | $ | 23,175 |  |  | $ | 24,959 |
Variable lease revenue | 2,737 |  |  | 1,805 |  |  | 8,180 |  |  | 6,193 |
Total occupancy revenue | $ | 10,331 |  |  | $ | 10,082 |  |  | $ | 31,355 |  |  | $ | 31,152 |

Balances related to contracts with customers consist of receivables, deferred franchise revenue and deferred gift card revenue. See Note 3 for details on our receivables.
Deferred franchise revenue consists primarily of the unamortized portion of initial franchise fees that are currently being amortized into revenue and amounts related to development agreements and unopened restaurants that we will begin amortizing into revenue when the related restaurants are opened. Deferred franchise revenue represents our remaining performance obligations to our franchisees, excluding amounts of variable consideration related to sales-based royalties and advertising.
The components of the change in deferred franchise revenue are as follows:

| (In thousands)
Balance, December 30, 2020 | $ | 20,806 |
Fees received from franchisees | 381 |
Revenue recognized (1) | (1,721) |
Balance, September 29, 2021 | 19,466 |
Less current portion included in other current liabilities | 1,924 |
Deferred franchise revenue included in other noncurrent liabilities | $ | 17,542 |

(1) Of this amount $1.7 million was included in the deferred franchise revenue balance as of December 30, 2020.
13

Deferred gift card liabilities consist of the unredeemed portion of gift cards sold in company restaurants and at third party locations. The balance of deferred gift card liabilities represents our remaining performance obligations to our customers. The balance of deferred gift card liabilities as of September 29, 2021 and December 30, 2020 was $5.2 million and $6.1 million, respectively. During the three quarters ended September 29, 2021, we recognized revenue of $0.3 million from gift card redemptions at company restaurants.
Note 9. Operating (Gains), Losses and Other Charges, Net
Operating (gains), losses and other charges, net consisted of the following:

| Quarter Ended |  | Three Quarters Ended
| September 29, 2021 |  | September 23, 2020 |  | September 29, 2021 |  | September 23, 2020
| (In thousands)
Gains on sales of assets and other, net | $ | (93) |  |  | $ | (1,202) |  |  | $ | (1,100) |  |  | $ | (2,260) |
Restructuring charges and exit costs | (122) |  |  | 83 |  |  | 1,304 |  |  | 2,060 |
Impairment charges | — |  |  | 338 |  |  | — |  |  | 2,519 |
Operating (gains), losses and other charges, net | $ | (215) |  |  | $ | (781) |  |  | $ | 204 |  |  | $ | 2,319 |

During the three quarters ended September 29, 2021, gains on sales of assets and other, net were primarily related to the sale of one parcel of real estate. During the quarter and three quarters ended September 23, 2020, gains on sales of assets and other, net were primarily related to the sale of three and five real estate parcels, respectively.
As of September 29, 2021, we had recorded assets held for sale consisting of property at their carrying amount of $1.6 million related to two parcels of real estate. As of December 30, 2020, we had recorded assets held for sale at their carrying amount of $1.1 million (consisting of property of $1.0 million and other assets of $0.1 million) related to two parcels of real estate.
Restructuring charges and exit costs consisted of the following:

| Quarter Ended |  | Three Quarters Ended
| September 29, 2021 |  | September 23, 2020 |  | September 29, 2021 |  | September 23, 2020
| (In thousands)
Exit costs | $ | 101 |  |  | $ | 75 |  |  | $ | 324 |  |  | $ | 169 |
Severance and other restructuring charges | (223) |  |  | 8 |  |  | 980 |  |  | 1,891 |
Total restructuring charges and exit costs | $ | (122) |  |  | $ | 83 |  |  | $ | 1,304 |  |  | $ | 2,060 |

Exit costs primarily consist of costs related to closed restaurants. Exit cost liabilities were $0.1 million as of both September 29, 2021 and December 30, 2020. Exit cost liabilities related to lease costs are included as a component of operating lease liabilities in our Condensed Consolidated Balance Sheets.
As of September 29, 2021 and December 30, 2020, we had accrued severance and other restructuring charges of $0.3 million and $0.6 million, respectively. The balance as of September 29, 2021 is expected to be paid during the next 12 months.
Note 10. Share-Based Compensation
Total share-based compensation included as a component of general and administrative expenses was as follows:

| Quarter Ended |  | Three Quarters Ended
| September 29, 2021 |  | September 23, 2020 |  | September 29, 2021 |  | September 23, 2020
| (In thousands)
Employee share awards | $ | 3,127 |  |  | $ | 1,784 |  |  | $ | 9,544 |  |  | $ | 1,364 |
Restricted stock units for board members | 225 |  |  | 214 |  |  | 668 |  |  | 608 |
Total share-based compensation | $ | 3,352 |  |  | $ | 1,998 |  |  | $ | 10,212 |  |  | $ | 1,972 |

14

Employee Share Awards
During the three quarters ended September 29, 2021, we granted certain employees approximately 0.5 million performance share units ("PSUs") with a grant date fair value of $24.74 per share that vest based on the total shareholder return (“TSR”) of our common stock compared to the TSRs of a group of peer companies (from 0% to 200% of the target award). As the TSR based performance shares contain a market condition, a Monte Carlo valuation was used to determine the grant date fair value. The performance period for these PSUs is the three year fiscal period beginning December 31, 2020 and ending December 27, 2023. The PSUs will completely vest and be earned at the end of the performance period at which point the TSR will be determined.
We also granted certain employees approximately 0.2 million restricted stock units ("RSUs") with a grant date fair value of $15.91 per share. The RSUs vest evenly over the three year period ending December 27, 2023.
During the three quarters ended September 29, 2021, we issued 0.2 million shares of common stock related to vested performance share units. In addition, 0.1 million shares of common stock were withheld in lieu of taxes related to vested performance share units.
We recognize compensation cost associated with our PSU and RSU awards on a straight-line basis over the entire performance period of the awards. As of September 29, 2021, we had approximately $15.9 million of unrecognized compensation cost related to unvested performance share awards and restricted share awards outstanding, which have a weighted average remaining contractual term of 1.9 years.
Restricted Stock Units for Board Members
During the three quarters ended September 29, 2021, we granted approximately 0.1 million restricted stock units (which are equity classified) with a weighted average grant date fair value of $17.33 per unit to non-employee members of our Board of Directors. The restricted stock units vest after a one year service period. 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), upon termination as a member of our Board of Directors, or in three equal annual installments commencing after termination of service as a member of our Board.
During the three quarters ended September 29, 2021, less than 0.1 million restricted stock units were converted into shares of common stock.
As of September 29, 2021, we had approximately $0.6 million of unrecognized compensation cost related to unvested restricted stock unit awards outstanding, which have a weighted average remaining contractual term of 0.6 years.
Note 11. Income Taxes
The effective income tax rate was 25.0% for the quarter and 24.1% for the three quarters ended September 29, 2021, compared to 11.2% and 20.6% for the prior year periods, respectively. The 2020 year-to-date rate included a net benefit of 22.2% from the reclassification of cash flow derivatives from accumulated other comprehensive loss.
15

Note 12. Net Income (Loss) Per Share
The amounts used for the basic and diluted net income (loss) per share calculations are summarized below:

| Quarter Ended |  | Three Quarters Ended
| September 29, 2021 |  | September 23, 2020 |  | September 29, 2021 |  | September 23, 2020
| (In thousands, except per share amounts)
Net income (loss) | $ | 12,265 |  |  | $ | 6,477 |  |  | $ | 34,618 |  |  | $ | (7,475) |
Weighted average shares outstanding - basic | 65,447 |  |  | 63,793 |  |  | 65,413 |  |  | 59,350 |
Effect of dilutive share-based compensation awards(1) | 382 |  |  | 234 |  |  | 401 |  |  | — |
Weighted average shares outstanding - diluted | 65,829 |  |  | 64,027 |  |  | 65,814 |  |  | 59,350 |
Basic net income (loss) per share | $ | 0.19 |  |  | $ | 0.10 |  |  | $ | 0.53 |  |  | $ | (0.13) |
Diluted net income (loss) per share | $ | 0.19 |  |  | $ | 0.10 |  |  | $ | 0.53 |  |  | $ | (0.13) |
Anti-dilutive share-based compensation awards | 365 |  |  | 568 |  |  | 445 |  |  | 1,975 |

(1) For the three quarters ended September 23, 2020, share-based compensation awards have been omitted from the calculations because they have an anti-dilutive effect.
Note 13. Shareholders' Deficit
Share Repurchases
Our New Credit Facility permits the repurchase of Denny’s stock and the payment of cash dividends subject to certain limitations. Our Board of Directors approves share repurchases of our common stock. Under these authorizations, 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, as amended) or in privately negotiated transactions, subject to market and business conditions. Currently, we are operating under a $250 million share repurchase authorization approved by the Board of Directors in December 2019.
During the quarter ended March 25, 2020, we suspended share repurchases as of February 27, 2020 and terminated our previously approved Rule 10b5-1 Repurchase Plan effective March 16, 2020 in light of uncertain market conditions arising from the COVID-19 pandemic. Prior to the refinancing of our New Credit Facility in the third quarter of 2021, share repurchase restrictions were in place under our Old Credit Facility. As a result of refinancing of our credit facility in the third quarter of 2021, we resumed our share repurchase program.
During the quarter ended September 29, 2021, we repurchased a total of 0.4 million shares of our common stock for approximately $6.6 million. This brings the total amount repurchased under the current authorization to approximately $8.6 million, leaving approximately $241.4 million that can be used to repurchase our common stock under this authorization as of September 29, 2021. Repurchased shares are included as treasury stock in our Condensed Consolidated Balance Sheets and our Condensed Consolidated Statement of Shareholders' Deficit.
In the fourth quarter of fiscal 2020, the Board approved the retirement of 54.0 million shares of treasury stock at a weighted average share price of $10.26. As of September 29, 2021, 0.4 million shares were held in treasury stock.
16

Issuance and Sale of Common Stock
During the quarter ended September 23, 2020, the Company entered into an underwriting agreement with Wells Fargo Securities, LLC, as representative of the several underwriters named therein, for the issuance and sale by the Company of 8,000,000 shares of its common stock, par value $0.01 per share, in an underwritten public offering at a price to the public of $9.15 per share. On July 6, 2020, the Company received net proceeds of $69.6 million from the sale of shares, after deducting the underwriters' discounts and commissions and offering expenses.
Accumulated Other Comprehensive Loss, Net
The components of the change in accumulated other comprehensive loss, net were as follows:

| Defined Benefit Plans |  | Derivatives |  | Accumulated Other Comprehensive Loss, Net
| (In thousands)
Balance as of December 30, 2020 | $ | (978) |  |  | $ | (59,427) |  |  | $ | (60,405) |
Amortization of net loss (1) | 120 |  |  | — |  |  | 120 |
Changes in the fair value of cash flow derivatives | — |  |  | 2,282 |  |  | 2,282 |
Reclassification of cash flow derivatives to interest expense, net (2) | — |  |  | 3,010 |  |  | 3,010 |
Amortization of unrealized losses related to dedesignated derivatives to interest expense, net (3) | — |  |  | 166 |  |  | 166 |
Income tax expense related to items of other comprehensive income | (31) |  |  | (1,398) |  |  | (1,429) |
Balance as of September 29, 2021 | $ | (889) |  |  | $ | (55,367) |  |  | $ | (56,256) |

(1) Amount related to our defined benefit plans that was reclassified from accumulated other comprehensive loss, net and included as a component of pension expense within general and administrative expenses in our Condensed Consolidated Statements of Operations during the three quarters ended September 29, 2021.
(2) Amounts reclassified from accumulated other comprehensive loss, net into interest expense, net in our Condensed Consolidated Statements of Operations represent payments either received from or made to the counterparty for the interest rate swaps. See Note 7 for additional details.
(3) The losses related to the 2018 Swaps will continue to be included in accumulated other comprehensive loss, net and will be amortized as a component of interest expense, net in our Consolidated Statements of Operations over the remaining term of the 2018 Swaps. For the three quarters ended September 29, 2021, we amortized approximately $0.2 million of losses to interest expense, net related to the 2018 Swaps. We expect to amortize less than $0.1 million from accumulated other comprehensive loss related to our interest rate swaps during the next 12 months. See Note 7 for additional details.
Note 14. Commitments and Contingencies
Purchase Obligations
During the quarter ended September 29, 2021, the Company entered into equipment purchase contracts of approximately $18.1 million related to the rollout of kitchen equipment for franchise restaurants, which will be paid by the franchisees as the equipment is installed, less approximately $5.7 million in commitments from the Company.
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 our consolidated results of operations or financial position.
17

Note 15. Supplemental Cash Flow Information

| Three Quarters Ended
| September 29, 2021 |  | September 23, 2020
| (In thousands)
Income taxes paid, net | $ | 5,638 |  |  | $ | 545 |
Interest paid | $ | 11,189 |  |  | $ | 11,851 |
Noncash investing and financing activities: |  |  |
Issuance of common stock, pursuant to share-based compensation plans | $ | 3,087 |  |  | $ | 6,042 |
Execution of finance leases | $ | 992 |  |  | $ | 95 |
Treasury stock payable | $ | 335 |  |  | $ | — |
Accrued deferred financing costs | $ | 36 |  |  | $ | — |

18

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
Forward-Looking Statements
This report includes forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, as codified in Section 27A of the Securities Act and Section 21E of the Securities Exchange Act of 1934, as amended. The Company urges caution in considering its current trends and any outlook on its operations and financial results disclosed in this report. In addition, certain matters discussed in this report may constitute forward-looking statements. These forward-looking statements, which reflect management's 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 “expect”, “anticipate”, “believe”, “intend”, “plan”, “hope”, "will" 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 report 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 rapidly evolving COVID-19 pandemic and related containment measures, including the potential for further operational disruption from government mandates affecting restaurants; economic, public health and political conditions that impact consumer confidence and spending, including COVID-19; our ability to maintain adequate levels of liquidity for our cash needs, including debt obligations, payment of dividends, planned share repurchases and capital expenditures as well as the ability of our customers, suppliers, franchisees and lenders to access sources of liquidity to provide for their own cash needs; competitive pressures from within the restaurant industry; the level of success of our operating initiatives and advertising and promotional efforts; adverse publicity; health concerns arising from food-related pandemics, outbreaks of flu viruses, or other diseases; 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 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 30, 2020, the Company's Quarterly Reports on Form 10-Q for the quarters ended March 31, 2021 and June 30, 2021 and this report on Form 10-Q.
Current Trends
Domestic system-wide same-store sales 1 for the quarter ended September 29, 2021 decreased 0.1% compared to the equivalent fiscal period in 2019 and increased 50.2% compared to the equivalent fiscal period in 2020.
Total off-premise sales at domestic and franchised restaurants, inclusive of virtual brands, have remained strong at approximately 23% of average weekly sales during the third quarter of 2021 compared to a pre-pandemic level in February 2020 of approximately 12%.
Over 40% of domestic company and franchised restaurants were operating 24/7 at the end of the third quarter with staffing challenges being the primary headwind preventing restaurants from extending late night operating hours. To address the industry-wide staffing challenges, the Company has conducted hiring tours and engaged a third-party vendor to enhance its online recruiting allowing franchisees to post open positions on its career website with greater visibility to potential applicants.
In an effort to provide greater transparency due to the COVID-19 pandemic, Denny's is providing the following table that presents monthly same-store sales 1 results compared to the equivalent fiscal periods during 2019:
Domestic System-Wide Same-Store Sales 1 Compared to 2019 Fiscal Periods
and Domestic Average Units for 2021 Fiscal Periods

| Domestic System-Wide Same-Store Sales 1
| System Year-to-Date October 2021*: (6%)
| Jan | Feb | Mar | Apr | May | Jun | Jul | Aug | Sep | Oct*
System | (31%) | (25%) | (9%) | (2%) | (3%) | 1% | 3% | (2%) | (1%) | 1%
24/7 Units | (20%) | (16%) | 2% | 11% | 11% | 14% | 15% | 9% | 9% | 10%
Limited Hour Units | (38%) | (32%) | (16%) | (11%) | (12%) | (8%) | (7%) | (10%) | (10%) | (9%)
| *October results are preliminary. |  |  |  |  |  |

19

| Domestic Average Units
| Jan | Feb | Mar | Apr | May | Jun | Jul | Aug | Sep | Oct*
System | 1,504 | 1,501 | 1,501 | 1,499 | 1,498 | 1,497 | 1,495 | 1,493 | 1,495 | 1,494
24/7 Units | 519 | 532 | 569 | 566 | 561 | 566 | 576 | 590 | 626 | 665
Limited Hour Units | 939 | 928 | 912 | 920 | 926 | 920 | 909 | 894 | 861 | 822
| *October results are preliminary. |  |  |  |  |  |

______________
(1) Domestic system-wide same-store sales include sales at company restaurants and non-consolidated franchised and licensed restaurants that were open during the comparable periods noted. Total operating revenue is limited to company restaurant sales and royalties, advertising revenue, fees and occupancy revenue from non-consolidated franchised and licensed restaurants. Accordingly, domestic system-wide same-store sales should be considered as a supplement to, not a substitute for, the Company's results as reported under GAAP.
20

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

| Quarter Ended |  | Three Quarters Ended
| September 29, 2021 |  | September 23, 2020 |  | September 29, 2021 |  | September 23, 2020
| (Dollars in thousands)
Revenue: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Company restaurant sales | $ | 46,470 |  |  | 44.8 | % |  | $ | 27,849 |  |  | 38.9 | % |  | $ | 127,611 |  |  | 43.9 | % |  | $ | 85,268 |  |  | 40.9 | %
Franchise and license revenue | 57,324 |  |  | 55.2 | % |  | 43,795 |  |  | 61.1 | % |  | 162,924 |  |  | 56.1 | % |  | 123,232 |  |  | 59.1 | %
Total operating revenue | 103,794 |  |  | 100.0 | % |  | 71,644 |  |  | 100.0 | % |  | 290,535 |  |  | 100.0 | % |  | 208,500 |  |  | 100.0 | %
Costs of company restaurant sales, excluding depreciation and amortization (a): |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Product costs | 11,430 |  |  | 24.6 | % |  | 7,106 |  |  | 25.5 | % |  | 31,149 |  |  | 24.4 | % |  | 21,541 |  |  | 25.3 | %
Payroll and benefits | 17,404 |  |  | 37.5 | % |  | 11,925 |  |  | 42.8 | % |  | 47,339 |  |  | 37.1 | % |  | 37,070 |  |  | 43.5 | %
Occupancy | 3,013 |  |  | 6.5 | % |  | 2,638 |  |  | 9.5 | % |  | 8,707 |  |  | 6.8 | % |  | 8,529 |  |  | 10.0 | %
Other operating expenses | 6,722 |  |  | 14.5 | % |  | 5,701 |  |  | 20.5 | % |  | 19,351 |  |  | 15.2 | % |  | 15,954 |  |  | 18.7 | %
Total costs of company restaurant sales | 38,569 |  |  | 83.0 | % |  | 27,370 |  |  | 98.3 | % |  | 106,546 |  |  | 83.5 | % |  | 83,094 |  |  | 97.5 | %
Costs of franchise and license revenue, excluding depreciation and amortization (a) | 27,469 |  |  | 47.9 | % |  | 24,073 |  |  | 55.0 | % |  | 79,962 |  |  | 49.1 | % |  | 68,487 |  |  | 55.6 | %
General and administrative expenses | 16,497 |  |  | 15.9 | % |  | 13,694 |  |  | 19.1 | % |  | 50,992 |  |  | 17.6 | % |  | 34,589 |  |  | 16.6 | %
Depreciation and amortization | 3,822 |  |  | 3.7 | % |  | 4,048 |  |  | 5.7 | % |  | 11,380 |  |  | 3.9 | % |  | 12,252 |  |  | 5.9 | %
Operating (gains), losses and other charges, net | (215) |  |  | (0.2) | % |  | (781) |  |  | (1.1) | % |  | 204 |  |  | 0.1 | % |  | 2,319 |  |  | 1.1 | %
Total operating costs and expenses, net | 86,142 |  |  | 83.0 | % |  | 68,404 |  |  | 95.5 | % |  | 249,084 |  |  | 85.7 | % |  | 200,741 |  |  | 96.3 | %
Operating income | 17,652 |  |  | 17.0 | % |  | 3,240 |  |  | 4.5 | % |  | 41,451 |  |  | 14.3 | % |  | 7,759 |  |  | 3.7 | %
Interest expense, net | 3,671 |  |  | 3.5 | % |  | 4,422 |  |  | 6.2 | % |  | 12,014 |  |  | 4.1 | % |  | 13,320 |  |  | 6.4 | %
Other nonoperating expense (income), net | (2,368) |  |  | (2.3) | % |  | (8,477) |  |  | (11.8) | % |  | (16,165) |  |  | (5.6) | % |  | 3,851 |  |  | 1.8 | %
Income (loss) before income taxes | 16,349 |  |  | 15.8 | % |  | 7,295 |  |  | 10.2 | % |  | 45,602 |  |  | 15.7 | % |  | (9,412) |  |  | (4.5) | %
Provision for (benefit from) income taxes | 4,084 |  |  | 3.9 | % |  | 818 |  |  | 1.1 | % |  | 10,984 |  |  | 3.8 | % |  | (1,937) |  |  | (0.9) | %
Net income (loss) | $ | 12,265 |  |  | 11.8 | % |  | $ | 6,477 |  |  | 9.0 | % |  | $ | 34,618 |  |  | 11.9 | % |  | $ | (7,475) |  |  | (3.6) | %
Other Data: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Company average unit sales | $ | 717 |  |  |  |  | $ | 423 |  |  |  |  | $ | 1,974 |  |  |  |  | $ | 1,313 |  |  |
Franchise average unit sales | $ | 424 |  |  |  |  | $ | 282 |  |  |  |  | $ | 1,166 |  |  |  |  | $ | 868 |  |  |
Company equivalent units (b) | 65 |  |  |  |  | 66 |  |  |  |  | 65 |  |  |  |  | 65 |  |  |
Franchise equivalent units (b) | 1,578 |  |  |  |  | 1,608 |  |  |  |  | 1,581 |  |  |  |  | 1,620 |  |  |
Company same-store sales increase (decrease) vs. prior year (c)(e) | 67.7 | % |  |  |  | (40.2) | % |  |  |  | 54.1 | % |  |  |  | (37.4) | % |  |
Domestic franchise same-store sales increase (decrease) vs. prior year (c)(e) | 48.9 | % |  |  |  | (33.1) | % |  |  |  | 37.2 | % |  |  |  | (30.1) | % |  |
Company same-store sales increase (decrease) vs. 2019 (c)(d)(e) | 1.9 | % |  |  |  | N/A |  |  |  | (6.4) | % |  |  |  | N/A |  |
Domestic franchise same-store sales decrease vs. 2019 (c)(d)(e) | (0.3) | % |  |  |  | N/A |  |  |  | (6.7) | % |  |  |  | N/A |  |

21

(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 during the comparable periods noted.
(d)In an effort to provide greater transparency due to the COVID-19 pandemic, we are providing additional same-store sales information for 2021 that includes sales from company restaurants or non-consolidated franchised and licensed restaurants that were open the same period in fiscal 2019.
(e)Prior year amounts have not been restated for 2021 comparable units.
22

Unit Activity

| Quarter Ended |  | Three Quarters Ended
| September 29, 2021 |  | September 23, 2020 |  | September 29, 2021 |  | September 23, 2020
Company restaurants, beginning of period | 65 |  |  | 67 |  |  | 65 |  |  | 68 |
Units opened | — |  |  | — |  |  | — |  |  | — |
Units closed | — |  |  | (1) |  |  | — |  |  | (2) |
End of period | 65 |  |  | 66 |  |  | 65 |  |  | 66 |
Franchised and licensed restaurants, beginning of period | 1,580 |  |  | 1,616 |  |  | 1,585 |  |  | 1,635 |
Units opened | 7 |  |  | 5 |  |  | 13 |  |  | 16 |
Units closed | (5) |  |  | (23) |  |  | (16) |  |  | (53) |
End of period | 1,582 |  |  | 1,598 |  |  | 1,582 |  |  | 1,598 |
Total restaurants, end of period | 1,647 |  |  | 1,664 |  |  | 1,647 |  |  | 1,664 |

Company Restaurant Operations
Company restaurant sales increased $18.6 million, or 66.9%, for the quarter ended September 29, 2021 and $42.3 million, or 49.7%, year-to-date compared to the prior year periods, respectively. The increases in company restaurant sales were primarily due to reduced dine-in restrictions and fewer temporary closures related to the COVID-19 pandemic in the current periods as compared to the prior year periods. Company same-store sales increased 67.7% for the current year quarter and 54.1% year-to-date as compared to the prior year periods.
Total costs of company restaurant sales as a percentage of company restaurant sales was 83.0% for the quarter ended September 29, 2021 and 83.5% year-to-date compared to 98.3% and 97.5%, respectively, for the prior year periods.
Product costs were 24.6% of company restaurant sales for the quarter ended September 29, 2021 and 24.4% year-to-date compared to 25.5% and 25.3%, respectively, for the prior year periods. The decreases as a percentage of sales were primarily due to leverage gained from favorable product mix and increased pricing, partly offset by increased commodity costs. The prior year also included increases in paper product costs due to higher delivery and to-go orders as a percentage of sales related to the COVID-19 pandemic.
Payroll and benefits were 37.5% of company restaurant sales for the quarter ended September 29, 2021 and 37.1% year-to-date compared to 42.8% and 43.5%, respectively, in the prior year periods. For the current year quarter and year-to-date periods, management and staff payroll, including payroll taxes, decreased 5.6 percentage points and 6.3 percentage points, respectively, as a percentage of sales. The primary driver of these decreases was the leveraging effect of higher sales. Also contributing to the decreases were lower relative staffing levels in the current year due to challenges in the labor market as compared to the prior year. Additionally, during the prior year, we retained a significant portion of our management staff during a time that restaurants were closed or operating under government restrictions. For the current year quarter, a 0.8 percentage point increase in workers' compensation costs, resulting from positive claims development in the prior year, was partially offset by the leveraging benefit of higher sales. For the year-to-date period, unit level incentive compensation costs increased 0.5 percentage points as a result of the improvement in operating performance.
Occupancy costs were 6.5% of company restaurant sales for the quarter ended September 29, 2021 and 6.8% year-to-date compared to 9.5% and 10.0%, respectively, in the prior year periods. The decreases as a percentage of sales were primarily due to the leveraging effect of higher sales.
23

Other operating expenses consist of the following amounts and percentages of company restaurant sales:

| Quarter Ended |  | Three Quarters Ended
| September 29, 2021 |  | September 23, 2020 |  | September 29, 2021 |  | September 23, 2020
| (Dollars in thousands)
Utilities | $ | 1,660 |  |  | 3.6 | % |  | $ | 1,281 |  |  | 4.6 | % |  | $ | 4,275 |  |  | 3.4 | % |  | $ | 3,815 |  |  | 4.5 | %
Repairs and maintenance | 722 |  |  | 1.6 | % |  | 711 |  |  | 2.6 | % |  | 1,890 |  |  | 1.5 | % |  | 1,928 |  |  | 2.3 | %
Marketing | 1,239 |  |  | 2.7 | % |  | 1,045 |  |  | 3.8 | % |  | 3,571 |  |  | 2.8 | % |  | 2,771 |  |  | 3.2 | %
Other direct costs | 3,101 |  |  | 6.7 | % |  | 2,664 |  |  | 9.6 | % |  | 9,615 |  |  | 7.5 | % |  | 7,440 |  |  | 8.7 | %
Other operating expenses | $ | 6,722 |  |  | 14.5 | % |  | $ | 5,701 |  |  | 20.5 | % |  | $ | 19,351 |  |  | 15.2 | % |  | $ | 15,954 |  |  | 18.7 | %

Other direct costs were lower as a percentage of sales due to the leveraging effect of higher sales.
Franchise Operations
Franchise and license revenue and costs of franchise and license revenue consisted of the following amounts and percentages of franchise and license revenue for the periods indicated:

| Quarter Ended |  | Three Quarters Ended
| September 29, 2021 |  | September 23, 2020 |  | September 29, 2021 |  | September 23, 2020
| (Dollars in thousands)
Royalties | $ | 27,336 |  |  | 47.7 | % |  | $ | 17,896 |  |  | 40.9 | % |  | $ | 75,297 |  |  | 46.2 | % |  | $ | 48,462 |  |  | 39.3 | %
Advertising revenue | 18,215 |  |  | 31.8 | % |  | 13,927 |  |  | 31.8 | % |  | 50,926 |  |  | 31.3 | % |  | 38,685 |  |  | 31.4 | %
Initial and other fees | 1,442 |  |  | 2.5 | % |  | 1,890 |  |  | 4.3 | % |  | 5,346 |  |  | 3.3 | % |  | 4,933 |  |  | 4.0 | %
Occupancy revenue | 10,331 |  |  | 18.0 | % |  | 10,082 |  |  | 23.0 | % |  | 31,355 |  |  | 19.2 | % |  | 31,152 |  |  | 25.3 | %
Franchise and license revenue | $ | 57,324 |  |  | 100.0 | % |  | $ | 43,795 |  |  | 100.0 | % |  | $ | 162,924 |  |  | 100.0 | % |  | $ | 123,232 |  |  | 100.0 | %
Advertising costs | $ | 18,216 |  |  | 31.8 | % |  | $ | 13,927 |  |  | 31.8 | % |  | $ | 50,927 |  |  | 31.3 | % |  | $ | 38,685 |  |  | 31.4 | %
Occupancy costs | 6,445 |  |  | 11.2 | % |  | 6,858 |  |  | 15.7 | % |  | 19,863 |  |  | 12.2 | % |  | 20,096 |  |  | 16.3 | %
Other direct costs | 2,808 |  |  | 4.9 | % |  | 3,288 |  |  | 7.5 | % |  | 9,172 |  |  | 5.6 | % |  | 9,706 |  |  | 7.9 | %
Costs of franchise and license revenue | $ | 27,469 |  |  | 47.9 | % |  | $ | 24,073 |  |  | 55.0 | % |  | $ | 79,962 |  |  | 49.1 | % |  | $ | 68,487 |  |  | 55.6 | %

Franchise and license revenue increased $13.5 million, or 30.9%, for the quarter ended September 29, 2021 and $39.7 million, or 32.2%, year-to-date compared to the prior year periods, respectively. Royalties increased $9.4 million, or 52.8%, and $26.8 million, or 55.4%, for the current quarter and year-to-date periods, respectively, compared to the prior year periods. Advertising revenue increased $4.3 million, or 30.8%, for the current quarter and $12.2 million, or 31.6%, year-to-date compared to the prior year periods, respectively. The increases in royalty and advertising revenue primarily resulted from 48.9% and 37.2% increases in domestic same-store sales for the respective periods. Additionally, the prior year periods included abatements of $0.2 million and $5.0 million of royalties in the quarter-to-date and year-to-date periods, respectively, and $1.3 million in abatements of advertising fees in the year-to-date period to help our franchisees weather the impact of the COVID-19 pandemic. Partially offsetting these increases for both periods were decreases of 30 and 39 equivalent units for the quarterly and year-to-date periods, respectively, which were primarily driven by closures in the prior year.
Initial and other fees decreased $0.5 million, or 23.8%, for the quarter ended September 29, 2021 and increased $0.4 million, or 8.4%, year-to-date compared to the prior year periods, respectively. The quarter-to-date decrease was primarily due to a reduction in front end fees. The year-to-date increase was primarily due to menu production revenue, partially offset by reduced front end fees. Occupancy revenue increased $0.2 million, or 2.5%, for the current quarter and $0.2 million, or 0.7%, year-to-date compared to the prior year periods, respectively. The increase in occupancy revenue primarily resulted from higher percentage rents as a result of sales increases due to reduced dine-in restrictions and temporary closures related to the COVID-19 pandemic, partially offset by reductions in rent income due to lease terminations.
Costs of franchise and license revenue increased $3.4 million, or 14.1%, for the quarter ended September 29, 2021 and $11.5 million, or 16.8%, year-to-date compared to the prior year periods, respectively. The increases were primarily related to the
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increases in advertising costs year-over-year, which corresponded to the related advertising revenue increases noted above. Occupancy costs decreased $0.4 million, or 6.0%, for the current quarter and $0.2 million, or 1.2%, year-to-date compared to prior year periods, respectively. The decreases in occupancy costs for the current quarter primarily resulted from lease terminations. Other direct franchise costs decreased $0.5 million, or 14.6%, for the current quarter and $0.5 million, or 5.5%, year-to-date compared to the prior year periods, respectively. The decreases in other direct franchise costs were primarily due to reductions in bad debt allowance expenses of $0.6 million and $2.2 million for the quarter and year-to-date periods, respectively, partially offset by increases of $0.8 million in menu production expense and $0.8 million in franchise administrative costs in the year-to-date period. Due to the increase in revenue, costs of franchise and license revenue decreased to 47.9% and 49.1% for the quarter and three quarters ended September 29, 2021, respectively, from 55.0% and 55.6% for the respective prior year periods.
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 consisted of the following:

| Quarter Ended |  | Three Quarters Ended
| September 29, 2021 |  | September 23, 2020 |  | September 29, 2021 |  | September 23, 2020
| (In thousands)
Corporate administrative expenses | $ | 11,157 |  |  | $ | 9,820 |  |  | $ | 32,374 |  |  | $ | 31,302 |
Share-based compensation | 3,352 |  |  | 1,998 |  |  | 10,212 |  |  | 1,972 |
Incentive compensation | 1,893 |  |  | 1,290 |  |  | 7,011 |  |  | 1,305 |
Deferred compensation valuation adjustments | 95 |  |  | 586 |  |  | 1,395 |  |  | 10 |
Total general and administrative expenses | $ | 16,497 |  |  | $ | 13,694 |  |  | $ | 50,992 |  |  | $ | 34,589 |

Corporate administrative expenses increased $1.3 million for the quarter ended September 29, 2021 and $1.1 million year-to-date. The increase for the current quarter was primarily due to prior year temporary cost reductions related to the COVID-19 pandemic and retention credits of $0.8 million in the prior year quarter. Share-based compensation increased $1.4 million for the current quarter and $8.2 million year-to-date. Incentive compensation increased $0.6 million for the current quarter and $5.7 million year-to-date. The increases in share-based compensation and incentive compensation primarily resulted from adjustments recorded in the prior year as a result of not meeting performance measures for the respective compensation plans due to the impacts of the COVID-19 pandemic. Additionally, increases in share-based compensation resulted from plan modifications in the fourth quarter of 2020 impacting 2021 expense, related valuations, and plan design of grants made in 2020 and 2021. Changes in deferred compensation valuation adjustments have offsetting gains or losses on the underlying nonqualified deferred plan investments included as a component of other non-operating expense (income), net, for the corresponding periods.
Depreciation and amortization consisted of the following:

| Quarter Ended |  | Three Quarters Ended
| September 29, 2021 |  | September 23, 2020 |  | September 29, 2021 |  | September 23, 2020
| (In thousands)
Depreciation of property and equipment | $ | 2,758 |  |  | $ | 2,834 |  |  | $ | 8,411 |  |  | $ | 8,525 |
Amortization of financing lease right-of-use assets | 556 |  |  | 456 |  |  | 1,412 |  |  | 1,423 |
Amortization of intangible and other assets | 508 |  |  | 758 |  |  | 1,557 |  |  | 2,304 |
Total depreciation and amortization expense | $ | 3,822 |  |  | $ | 4,048 |  |  | $ | 11,380 |  |  | $ | 12,252 |

The decreases in depreciation and amortization expense during the quarter ended September 29, 2021 and year-to-date periods were primarily due to certain intangible assets becoming fully amortized in the prior year.
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Operating (gains), losses and other charges, net consisted of the following:

| Quarter Ended |  | Three Quarters Ended
| September 29, 2021 |  | September 23, 2020 |  | September 29, 2021 |  | September 23, 2020
| (In thousands)
Gains on sales of assets and other, net | $ | (93) |  | $ | (1,202) |  | $ | (1,100) |  | $ | (2,260)
Restructuring charges and exit costs | (122) |  | 83 |  | 1,304 |  | 2,060
Impairment charges | — |  | 338 |  | — |  | 2,519
Operating (gains), losses and other charges, net | $ | (215) |  | $ | (781) |  | $ | 204 |  | $ | 2,319

Gains on sales of assets and other, net for the three quarters ended September 29, 2021 were primarily related to the sale of one parcel of real estate. Gains on sales of assets and other, net were primarily related to the sale of three parcels of real estate during the quarter and five parcels of real estate during the three quarters ended September 23, 2020.
Restructuring charges and exit costs consisted of the following:

| Quarter Ended |  | Three Quarters Ended
| September 29, 2021 |  | September 23, 2020 |  | September 29, 2021 |  | September 23, 2020
| (In thousands)
Exit costs | $ | 101 |  |  | $ | 75 |  |  | $ | 324 |  |  | $ | 169 |
Severance and other restructuring charges | (223) |  |  | 8 |  |  | 980 |  |  | 1,891 |
Total restructuring and exit costs | $ | (122) |  |  | $ | 83 |  |  | $ | 1,304 |  |  | $ | 2,060 |

Restructuring and exit costs decreased by $0.2 million for the current quarter and $0.8 million year-to-date compared to the prior year periods, respectively. The decrease for the current quarter was primarily due to reversals of estimated relocation cost accruals associated with moving certain employees to our support center in the Dallas, Texas area. The decrease for the year-to-date period was primarily due to the Company permanently separating with approximately 50 support center staff in the prior year period. Restructuring and exit costs for the three quarters ended September 29, 2021 include relocation costs associated with moving certain employees to our support center in the Dallas, Texas area.
Impairment charges of $0.3 million and $2.5 million during the quarter and three quarters ended September 23, 2020, respectively, were the result of an assessment of the recoverability of assets resulting from the impact of the COVID-19 pandemic. The $2.5 million included $1.3 million related to property, $1.1 million related to operating lease ROU assets and less than $0.1 million related to each of finance lease ROU assets and reacquired franchise rights.
Operating income was $17.7 million for the current quarter and $41.5 million year-to-date compared to $3.2 million and $7.8 million, respectively, for the prior year periods.
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Interest expense, net consisted of the following:

| Quarter Ended |  | Three Quarters Ended
| September 29, 2021 |  | September 23, 2020 |  | September 29, 2021 |  | September 23, 2020
| (In thousands)
Interest on credit facility | $ | 1,286 |  |  | $ | 2,251 |  |  | $ | 4,541 |  |  | $ | 6,790 |
Interest on interest rate swaps | 1,009 |  |  | 471 |  |  | 3,010 |  |  | 2,097 |
Interest on financing lease liabilities | 738 |  |  | 789 |  |  | 2,252 |  |  | 2,348 |
Letters of credit and other fees | 384 |  |  | 349 |  |  | 1,116 |  |  | 860 |
Interest income | (5) |  |  | (11) |  |  | (20) |  |  | (78) |
Total cash interest, net | 3,412 |  |  | 3,849 |  |  | 10,899 |  |  | 12,017 |
Amortization of deferred financing costs | 258 |  |  | 251 |  |  | 946 |  |  | 591 |
Amortization of interest rate swap losses | — |  |  | 283 |  |  | 167 |  |  | 552 |
Interest accretion on other liabilities | 1 |  |  | 39 |  |  | 2 |  |  | 160 |
Total interest expense, net | $ | 3,671 |  |  | $ | 4,422 |  |  | $ | 12,014 |  |  | $ | 13,320 |

Total cash interest expense, net decreased by $0.4 million and $1.1 million for the quarter and three quarters ended September 29, 2021, as compared to the respective prior year periods. Combined interest on credit facility borrowings and interest rate swaps decreased by $0.4 million and $1.3 million for the current quarter and year-to-date period, respectively. These decreases primarily resulted from decreased average borrowings and lower average interest rates in both the current quarter and year-to-date periods, compared to the respective prior year periods.
Other nonoperating expense (income), net was income of $2.4 million for the quarter and $16.2 million year-to-date, compared to income of $8.5 million and expense of $3.9 million, respectively, for the prior year periods. Other nonoperating expense (income) for the current quarter primarily consisted of $2.3 million of gains related to interest rate swap valuation adjustments. The current year-to-date period primarily consisted of $14.9 million of gains on interest rate swap valuation adjustments in addition to $1.5 million of gains on deferred compensation plan investments. Prior year other nonoperating expense (income) for the quarter primarily consisted of $7.8 million in income related to interest rate swap valuation adjustments in addition to $0.6 million of gains on deferred compensation plan investments. The prior year-to-date period included losses on interest rate swaps of $7.4 million resulting from the discontinuance of hedge accounting treatment on a portion of our interest rate swaps and income of $3.7 million related to interest rate swap valuation adjustments on dedesignated interest rate swaps.
Provision for (benefit from) income taxes was an expense of $4.1 million for the quarter ended September 29, 2021 and an expense of $11.0 million year-to-date, compared to an expense of $0.8 million and a benefit of $1.9 million for the prior year periods, respectively. The effective tax rate was 25.0% for the quarter and 24.1% year-to-date, compared to 11.2% and 20.6%, respectively, for the prior year periods. The 2020 year-to-date rate included a net benefit of 22.2% from the reclassification of cash flow derivatives from accumulated other comprehensive loss.
Net income (loss) was net income of $12.3 million for the quarter ended September 29, 2021 and net income of $34.6 million year-to-date compared to net income of $6.5 million and net loss of $7.5 million, respectively, for the prior year periods.
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 and the repurchase of shares of our common stock.
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The following table presents a summary of our sources and uses of cash and cash equivalents for the periods indicated:

| Three Quarters Ended
| September 29, 2021 |  | September 23, 2020
| (In thousands)
Net cash provided by (used in) operating activities | $ | 63,229 |  |  | $ | (11,610) |
Net cash provided by (used in) investing activities | (2,912) |  |  | 1,275 |
Net cash provided by (used in) financing activities | (54,006) |  |  | 18,180 |
Increase in cash and cash equivalents | $ | 6,311 |  |  | $ | 7,845 |

Net cash flows provided by operating activities were $63.2 million for the three quarters ended September 29, 2021 compared to net cash flows used in operating activities of $11.6 million for the three quarters ended September 23, 2020. The increase in cash flows provided by operating activities was primarily due to the improvement of operating results in 2021 and the timing of prior year accrual payments. We believe that our estimated cash flows from operations for 2021, combined with our capacity for additional borrowings under our credit facility and cash on hand, will enable us to meet our anticipated cash requirements and fund capital expenditures over the next 12 months.
Net cash flows used in investing activities were $2.9 million for the three quarters ended September 29, 2021. These cash flows primarily consisted of capital expenditures of $5.3 million, partially offset by proceeds from sales of real estate and other assets of $1.8 million, collections on notes receivable of $0.5 million, and proceeds from sales of investments of $0.2 million. Net cash flows provided by investing activities were $1.3 million for the three quarters ended September 23, 2020. These cash flows were primarily comprised of proceeds from sales of real estate of $4.5 million and proceeds from the sale of investments of $2.9 million, partially offset by capital expenditures of $5.5 million and investment purchases of $1.4 million.
Our principal capital requirements have been largely associated with the following:

| Three Quarters Ended
| September 29, 2021 |  | September 23, 2020
| (In thousands)
Facilities | $ | 2,262 |  |  | $ | 2,808 |
New construction | — |  |  | 114 |
Remodeling | 818 |  |  | 991 |
Information technology | 1,276 |  |  | 1,164 |
Other | 965 |  |  | 399 |
Capital expenditures | $ | 5,321 |  |  | $ | 5,476 |

Net cash flows used in financing activities were $54.0 million for the three quarters ended September 29, 2021, which included net long-term debt repayments of $41.6 million, in addition to cash payments for stock repurchases of $6.2 million, net bank overdraft payments of $3.1 million and deferred financing costs of $1.8 million. Net cash flows provided by financing activities were $18.2 million for the three quarters ended September 23, 2020, which included proceeds of $69.6 million from the issuance of common stock, partially offset by net long-term debt repayments of $11.1 million and cash payments for stock repurchases of $36.0 million.
Our working capital deficit was $43.5 million at September 29, 2021 compared to $28.5 million at December 30, 2020. The increase in working capital deficit was primarily related to the increase in current liabilities as of September 29, 2021. 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 for a limited investment in inventories, and (3) accounts payable for food, beverages and supplies usually becomes due after the receipt of cash from the related sales.
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Refinancing of Credit Facility
On August 26, 2021, the Company and certain of its subsidiaries refinanced the existing credit facility (the "Old Credit Facility") and entered into a new five-year $400 million senior secured revolver (with a $25 million letter of credit sublimit) (the "New Credit Facility"). The New Credit Facility includes an accordion feature that would allow us to increase the size of the facility to $450 million. Borrowings bear a tiered interest rate, which is based on the Company's consolidated leverage ratio and is initially set at LIBOR plus 225 basis points. The maturity date for the New Credit Facility is August 26, 2026.
The New Credit Facility was used to refinance the Old Credit Facility and is also available for working capital, capital expenditures and other general corporate purposes. The New Credit Facility is guaranteed by Denny's and its material subsidiaries and is secured by assets of Denny's and its subsidiaries, including the stock of its subsidiaries (other than its insurance captive subsidiary). It includes negative covenants that are usual for facilities and transactions of this type. The New Credit Facility also includes certain financial covenants with respect to a maximum consolidated leverage ratio and a minimum consolidated fixed charge coverage ratio. We were in compliance with all financial covenants as of September 29, 2021.
As of September 29, 2021, we had outstanding revolver loans of $170.0 million and outstanding letters of credit under the credit facility of $15.7 million. These balances resulted in availability of $214.3 million as of September 29, 2021 under the New Credit Facility.
As of September 29, 2021, borrowings under the New Credit Facility bore interest at a rate of LIBOR plus 2.25% and the commitment fee, paid on the unused portion of the New Credit Facility, was set to 0.35%.
Prior to considering the impact of our interest rate swaps, described below, the weighted-average interest rate on outstanding revolver loans was 2.33% and 3.15% as of September 29, 2021 and December 30, 2020, respectively. Taking into consideration our interest rate swaps that are designated as cash flow hedges, the weighted-average interest rate of outstanding revolver loans was 4.69% and 5.01% as of September 29, 2021 and December 30, 2020, respectively.
Technology Transformation and Kitchen Modernization Initiatives
The Company intends to initiate the rollout of a new cloud-based restaurant technology platform throughout the domestic system which will lay the foundation for future technology initiatives to further enhance the guest experience. The rollout is expected to begin during the first half of 2022 and be substantially completed by the end of 2023.
The Company also intends to upgrade and improve its kitchen equipment throughout the domestic system. The rollout is expected to begin during the first quarter of 2022 and be substantially completed by the end of 2022. This investment is expected to yield long-term benefits through menu enhancements across all dayparts but especially the dinner daypart with new comfort food offerings. The new equipment is also expected to provide immediate benefits through increased kitchen efficiency and productivity while also reducing food waste.
The Company has committed to investing approximately $10 million towards the cost and installation of the point of sale platform and kitchen equipment package in domestic franchise restaurants. Additionally, the Company has negotiated favorable financing terms on behalf of its franchisees for the remaining cost.
As of September 29, 2021, the Company has entered into contracts for the purchase of approximately $18.1 million of equipment related to the rollout of kitchen equipment for franchise restaurants, which will be paid by the franchisees as the equipment is installed, less approximately $5.7 million in commitments from the Company. See Contractual Obligations below.
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Contractual Obligations
Our future contractual obligations relating to long-term debt and related interest obligations and purchase obligations as of September 29, 2021 are as follows:

| Payments Due by Period
| Total |  | Less than 1 Year |  | 1-2 Years |  | 3-4 Years |  | 5 Years and Thereafter
| (In thousands)
Long-term debt | $ | 170,000 |  |  | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | 170,000 |
Interest obligations (a) | 39,226 |  |  | 1,995 |  |  | 15,956 |  |  | 15,956 |  |  | 5,319 |
Purchase obligations (b) | 18,087 |  |  | 4,177 |  |  | 13,910 |  |  | — |  |  | — |
Total | $ | 227,313 |  |  | $ | 6,172 |  |  | $ | 29,866 |  |  | $ | 15,956 |  |  | $ | 175,319 |

(a)Interest obligations represent payments related to our long-term debt outstanding at September 29, 2021. For long-term debt with variable rates, we have used the rate applicable at September 29, 2021 to project interest over the periods presented in the table above, taking into consideration the impact of the interest rate swaps that are designated as cash flow hedges for the applicable periods.
(b)Purchase obligations include amounts payable for kitchen equipment to be installed at franchisee restaurants.
See Management's Discussion and Analysis of Financial Condition and Results of Operations contained in our Annual Report on Form 10-K for the year ended December 30, 2020 for information concerning other future contractual obligations and commitments.
Implementation of New Accounting Standards
Information regarding the implementation of new accounting standards is incorporated by reference from Note 2 to our unaudited Condensed Consolidated Financial Statements set forth in Part I, Item 1 of this report.
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 September 29, 2021, borrowings under our credit facility bore interest at variable rates based on LIBOR plus 2.25% per annum.
We have receive-variable, pay-fixed interest rate swaps to hedge the forecasted cash flows of our floating rate debt.
A summary of our interest rate swaps as of September 29, 2021 is as follows:

Trade Date |  | Effective Date |  | Maturity Date |  | Notional Amount |  | Fair Value |  | Fixed Rate
|  |  |  |  |  | (In thousands) |  |
Swaps designated as cash flow hedges |  |  |  |  |  |  |  |  |  |
March 20, 2015 |  | March 29, 2018 |  | March 31, 2025 |  | $ | 120,000 |  |  | $ | 7,208 |  |  | 2.44 | %
October 1, 2015 |  | March 29, 2018 |  | March 31, 2026 |  | $ | 50,000 |  |  | $ | 3,429 |  |  | 2.46 | %
Dedesignated swaps |  |  |  |  |  |  |  |  |  |
February 15, 2018 |  | March 31, 2020 |  | December 31, 2033 |  | $ | 100,000 |  | (1) | $ | 43,237 |  |  | 3.19 | %
Total |  |  |  |  |  | $ | 270,000 |  |  | $ | 53,874 |  |  |

(1) The notional amounts of the swaps entered into on February 15, 2018 increase periodically until they reach the maximum notional amount of $425.0 million on September 28, 2029.
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As of September 29, 2021, the total notional amount of our interest rate swaps was in excess of 100% of our floating rate debt. Based on the levels of borrowings under the credit facility at September 29, 2021, if interest rates changed by 100 basis points, our annual cash flow and income before taxes would not change. However, depending on market considerations, fluctuations in the fair values of our interest rate swaps could be significant. With the exception of these changes in the fair value of our interest rate swaps and in the levels of borrowings under our credit facility, there have been no material changes in our quantitative and qualitative market risks since the prior reporting period. For additional information related to our interest rate swaps, including changes in the fair value, refer to Notes 6, 7 and 13 to our unaudited Condensed Consolidated Financial Statements in Part I, Item 1 of this report.
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 Chief Executive Officer, John C. Miller, and our Executive Vice President and Chief Financial Officer, Robert P. Verostek) 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 Verostek 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 Verostek, as appropriate to allow timely decisions regarding required disclosure.
There were 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 fiscal quarter ended September 29, 2021 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
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PART II - OTHER INFORMATION
Item 1. Legal Proceedings
Information regarding legal proceedings is incorporated by reference from Note 14 to our unaudited Condensed Consolidated Financial Statements set forth in Part I, Item 1 of this report.
Item 1A. Risk Factors
There have been no material changes in the risk factors set forth in Part I, Item 1A, “Risk Factors” in our Annual Report on Form 10-K for the fiscal year ended December 30, 2020.
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 September 29, 2021.

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)
July 1, 2021 - July 28, 2021 | — |  |  | $ | — |  |  | — |  |  | $ | 248,004 |
July 29, 2021 - August 25, 2021 | — |  |  | — |  |  | — |  |  | $ | 248,004 |
August 26, 2021 - September 29, 2021 | 404,737 |  |  | 16.20 |  |  | 404,737 |  |  | $ | 241,441 |
Total | 404,737 |  |  | $ | 16.20 |  |  | 404,737 |  |  |

(1)Average price paid per share excludes commissions.
(2)On December 2, 2019, we announced that our Board of Directors approved a new share repurchase program, authorizing us to repurchase up to an additional $250 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 September 29, 2021, we purchased 0.4 million shares of our common stock for an aggregate consideration of approximately $6.6 million pursuant to the share repurchase program.
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Item 6. Exhibits
The following are included as exhibits to this report:

Exhibit No. |  | Description
10.1 |  | Fourth Amended and Restated Credit Agreement dated as of August 26, 2021 among Denny's, Inc., as the Borrower, Denny's Corporation, as Parent, and Certain Subsidiaries of Parent, as Guarantors, Wells Fargo Bank, National Association, as Administrative Agent and L/C Issuer, Truist Bank, Bank of the West, and Regions Bank, as Co-Syndication Agents, Cadence Bank N.A. and Fifth Third Bank, National Association as Co-Documentation Agents, and The Other Lenders Party Hereto, Wells Fargo Securities, LLC, Truist Securities, Inc., Bank of the West, and Regions Capital Markets, A Division of Regions Bank, as Joint Lead Arrangers and Joint Bookrunners. (incorporated by reference to Exhibit 10.1 to the Current Report on Form 8-K of Denny's Corporation filed with the Commission on August 26, 2021).
10.2 |  | Fourth Amended and Restated Guarantee and Collateral Agreement dated as of August 26, 2021 among Denny's Inc., Denny's Realty, LLC, Denny's Corporation, DFO, LLC, the other Subsidiaries of Parent from time to time party hereto, and Wells Fargo Bank, National Association, as Administrative Agent. (incorporated by reference to Exhibit 10.2 to the Current Report on Form 8-K of Denny's Corporation filed with the Commission on August 26, 2021).
31.1 |  | Certification of John C. Miller, 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 Robert P. Verostek, Executive Vice President 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, Chief Executive Officer of Denny's Corporation, and Robert P. Verostek, Executive Vice President 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 |  | Inline XBRL Instance Document (the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document)
101.SCH |  | Inline XBRL Taxonomy Extension Schema Document
101.CAL |  | Inline XBRL Taxonomy Extension Calculation Linkbase Document
101.LAB |  | Inline XBRL Taxonomy Extension Label Linkbase Document
101.PRE |  | Inline XBRL Taxonomy Extension Presentation Linkbase Document
101.DEF |  | Inline XBRL Taxonomy Extension Definition Linkbase Document
104 |  | Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101)

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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: | November 2, 2021 | By: | /s/ Robert P. Verostek |
|  |  | Robert P. Verostek |
|  |  | Executive Vice President and Chief Financial Officer |
Date: | November 2, 2021 | By: | /s/ Jay C. Gilmore |
|  |  | Jay C. Gilmore |
|  |  | Senior Vice President, Chief Accounting Officer and Corporate Controller |

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