Denny's Reports Same-Store Sales Decline

Denny's Corporation (NASDAQ:DENN) today reported same-store sales for its company-owned and franchised restaurants during the quarter ended September 24, 2008 compared with the related period in fiscal year 2007.

Nelson Marchioli, President and Chief Executive Officer, stated, 'We expect to report strong income growth in the third quarter despite the ongoing macroeconomic decline. We believe our recent sales initiatives positively impacted our business but were unable to offset reduced consumer spending, particularly in our lead states of California and Florida. Our ongoing transition towards a franchise-based business model and our focus on profitable sales programs have allowed us to protect operating margins and maximize restaurant level cash flow.'

Denny's ended the third quarter with a system mix of 78% franchised and licensed restaurants and 22% company restaurants compared with 66% franchised and licensed restaurants and 34% company restaurants prior to the launch of the Franchise Growth Initiative (FGI) in early 2007. During the third quarter, Denny's closed one company restaurant and sold 21 company restaurants to franchisee operators under FGI. Also during the quarter, franchisees opened eight new restaurants, closed fourteen and purchased 21 company restaurants.

Based on preliminary, unaudited results for the third quarter of 2008, Denny's expects adjusted income before taxes in the range of $8.0 to $8.5 million, an increase of 38-47% compared with adjusted income of $5.8 million in the prior year period. The improvement in Denny's third quarter earnings is due primarily to growth in its higher-margin franchise business and proactive menu management, as well as lower depreciation expense from asset sales and lower interest expense from debt reduction. In addition, the company expects to report total operating revenue of approximately $189.0 million compared with $241.4 million in the prior year period due primarily to the sale of 136 company restaurants over the last four quarters.

Denny's expects to release financial and operating results for its third quarter ended September 24, 2008 after the markets close on Tuesday, October 28, 2008.


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