UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 OR 15(d) of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): February 14, 2005
Denny's Corporation
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(Exact name of registrant as specified in its charter)
Delaware 0-18051 13-3487402
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(State or other (Commission File (IRS Employer
jurisdiction of Number) Identification No.)
incorporation)
203 East Main Street, Spartanburg, SC 29319-0001
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(Address of Principal Executive Offices) (Zip Code)
Registrant's telephone number, including area code (864) 597-8000
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(Former name or former address, if changed since last report)
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Check the appropriate box below if the Form 8-K filing is intended to
simultaneously satisfy the filing obligation of the registrant under any of the
following provisions (see General Instruction A.2. below):
[ ] Written communications pursuant to Rule 425 under the Securities Act (17
CFR 230.425)
[ ] Soliciting material pursuant to Rule 14a-12 under the Exchange Act
(17 CFR 240.14a-12)
[ ] Pre-commencement communications pursuant to Rule 14d-2(b) under the
Exchange Act (17 CFR 240.14d-2(b))
[ ] Pre-commencement communications pursuant to Rule 13e-4(c) under the
Exchange Act (17 CFR 240-13e-4(c))
Item 2.02 Results of Operations and Financial Condition
On February 17, 2005, Denny's Corporation issued a press release announcing
financial results for the fourth quarter and year ended December 29, 2004. A
copy of the press release is attached as Exhibit 99.1 hereto and incorporated
herein by reference.
Item 4.02 Non-Reliance on Previously Issued Financial Statements or a Related
Audit Report or Completed Interim Review.
(a) This filing describes certain adjustments which Denny's Corporation, Inc.
(the "Company") has determined to make in the course of restating certain of its
prior period financial statements. These adjustments were not attributable to
any material noncompliance with any financial reporting requirements under
securities laws by any employee, officer, or director of the Company as a result
of any misconduct. The restatement has no impact on the Company's previously
reported cash flows, revenue or same-store sales, or on the Company's compliance
with covenants under its current credit facilities or other debt instruments.
Historically, when accounting for leases with renewal terms, the Company has
consistently followed the practice of using the initial lease term for
determining whether a lease was a capital lease or operating lease and for
calculating straight-line rent. Leased buildings and leasehold improvements on
leased properties have been depreciated over a period that included both the
initial non-cancelable term of the lease and additional option periods provided
for in the lease, or the useful lives of the assets, if shorter.
The Company believed that this accounting treatment was permitted under
generally accepted accounting principles ("GAAP") and that such treatment was
consistent with the practices of other public companies. Following a review of
its lease accounting treatment and relevant accounting literature in
consultation with KPMG LLP, its current independent registered public accounting
firm, the Company determined that it should: i) conform the depreciable lives
for buildings on leased land and other leasehold improvements to the shorter of
the economic life of the asset or the lease term used for determining the
capital versus operating lease classification and calculating straight-line
rent, and ii) include option periods in the depreciable lives assigned to leased
buildings and leasehold improvements only in instances in the which the exercise
of the option period can be reasonably assured (the "Accounting Treatment").
On February 14, 2005, the Audit and Finance Committee of the Company's Board of
Directors, its senior management and its current independent auditors met to
discuss the results of the Company's review of its accounting policies, the
analysis of its records and the authoritative accounting literature with respect
to the treatment of lease accounting and leasehold depreciation and the other
matters discussed in this Current Report on Form 8-K. At that meeting, it was
determined that the Company's accounting treatment for leasehold improvements
should be corrected in accordance with the Accounting Treatment and that the
correction should be presented through the restatement of previously issued
financial statements for the Company's 2003 and 2002 fiscal years. As a result,
the Audit and Finance Committee concluded at that time that the previously
issued financial statements covering these periods should no longer be relied
upon to the extent of the resulting restatement as further described herein.
The application of the Accounting Treatment resulted in the acceleration of
depreciation for certain leasehold improvements. The cumulative balance sheet
effect of the restatement related to the Accounting Treatment was an increase in
accumulated depreciation of $3.2 million as of December 31, 2003 relating to
fiscal years 1998 through 2003. Of this amount, $0.9 million and $0.7 million
was recorded as additional depreciation and amortization expense for fiscal
years 2003 and 2002, respectively.
The Company also determined it was appropriate to record additional adjustments
related to fiscal years 1998 through 2003 which previously were deemed
immaterial. The cumulative balance sheet effects of these adjustments as of
December 31, 2003 consist of a decrease in goodwill of $0.2 million, an increase
in other long-term assets of $0.9 million, an increase in liability for
insurance claims of $1.3 million, and an increase in other noncurrent
liabilities and deferred credits of $2.0 million. Of these amounts, $1.3 million
was recorded as additional payroll and benefits expense for the year ended
December 31, 2003, and $0.3 million was recorded as additional costs of
franchise and license revenue for the year ended December 25, 2002.
The impact of the restatement in the fourth quarter of 2003 is to increase the
net loss by $2.2 million. The effect of the restatement to all other previously
reported interim periods of 2003 and 2004 is not material.
The adjustments noted above are subject to change as the Company's current and
former independent registered public accounting firms complete their review of
these matters. The Company will amend prior period financial statements through
the filing of its Form 10-K with the Securities and Exchange Commission for
fiscal year 2004.
The following schedules reflect the adjustments described above:
DENNY'S CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET AS RESTATED
December 31, 2003
(In thousands)
(Unaudited)
As Reported Adjustments Restated
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ASSETS
Current Assets:
Cash and cash equivalents..................................................... $ 7,363 $ $ 7,363
Receivables, less allowance for doubtful accounts of $1,706................... 9,771 9,771
Inventories................................................................... 8,158 8,158
Other......................................................................... 6,326 6,326
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Total Current Assets............................................................ 31,618 31,618
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Property, net................................................................... 296,995 (3,219) 293,776
Other Assets:
Goodwill...................................................................... 50,404 (218) 50,186
Intangible assets, net........................................................ 83,879 83,879
Deferred financing costs, net................................................. 9,887 9,887
Other......................................................................... 26,907 933 27,840
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Total Assets.................................................................... $ 499,690 $ (2,504) $ 497,186
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LIABILITIES
Current Liabilities:
Current maturities of notes and debentures.................................... $ 51,714 $ $ 51,714
Current maturities of capital lease obligations............................... 3,462 3,462
Accounts payable.............................................................. 40,617 40,617
Other......................................................................... 96,294 96,294
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Total Current Liabilities....................................................... 192,087 192,087
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Long-Term Liabilities:
Notes and debentures, less current maturities................................. 509,593 509,593
Capital lease obligations, less current maturities............................ 28,728 28,728
Liability for insurance claims................................................ 25,585 1,300 26,885
Other noncurrent liabilities and deferred credits............................. 56,629 1,993 58,622
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Total Long-Term Liabilities..................................................... 620,535 3,293 623,828
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Total Liabilities............................................................... 812,622 3,293 815,915
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Commitments and contingencies
SHAREHOLDERS' DEFICIT
Common Stock:
$0.01 par value; shares authorized -- 100,000;
issued and outstanding -- 41,003............................................ 410 410
Paid-in capital................................................................. 417,816 417,816
Deficit......................................................................... (713,216) (5,797) (719,013)
Accumulated other comprehensive loss............................................ (17,942) (17,942)
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Total Shareholders' Deficit..................................................... (312,932) (5,797) (318,729)
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Total Liabilities and Shareholders' Deficit..................................... $ 499,690 $ (2,504) $ 497,186
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DENNY'S CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF OPERATIONS AS RESTATED
Fiscal Year Ended December 31, 2003
(In thousands, except per share data)
(Unaudited)
As Reported Adjustments Restated
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Revenue:
Company restaurant sales................................ $ 851,853 $ $ 851,853
Franchise and license revenue........................... 89,092 89,092
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Total operating revenue.............................. 940,945 940,945
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Costs of company restaurant sales:
Product costs........................................... 219,193 219,193
Payroll and benefits.................................... 368,641 1,300 369,941
Occupancy............................................... 49,033 49,033
Other operating expenses................................ 118,563 118,563
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Total costs of company restaurant sales.............. 755,430 1,300 756,730
Costs of franchise and license revenue.................... 27,125 27,125
General and administrative expenses....................... 51,268 51,268
Depreciation and other amortization....................... 60,000 919 60,919
Restructuring charges and exit costs...................... 613 613
Impairment charges........................................ 3,986 3,986
Gains on disposition of assets and other, net............. (5,844) (5,844)
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Total operating costs and expenses................... 892,578 2,219 894,797
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Operating income.......................................... 48,367 (2,219) 46,148
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Other expenses:
Interest expense, net................................... 78,190 78,190
Other nonoperating expense, net......................... 901 901
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Total other expenses, net............................ 79,091 79,091
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Loss before income taxes.................................. (30,724) (2,219) (32,943)
Provision for income taxes................................ 759 759
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Net loss.................................................. $ (31,483) $ (2,219) $ (33,702)
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Basic and diluted net loss per share...................... $ (0.77) $ (0.83)
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Basic and diluted weighted average and equivalent
shares outstanding........................................ 40,687 40,687
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DENNY'S CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF OPERATIONS AS RESTATED
Fiscal Year Ended December 25, 2002
(In thousands, except per share data)
(Unaudited)
As Reported Adjustments Restated
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Revenue:
Company restaurant sales................................ $ 858,569 $ $ 858,569
Franchise and license revenue........................... 90,015 90,015
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Total operating revenue.............................. 948,584 948,584
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Costs of company restaurant sales:
Product costs........................................... 205,036 205,036
Payroll and benefits.................................... 361,483 361,483
Occupancy............................................... 49,198 49,198
Other operating expenses................................ 122,491 122,491
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Total costs of company restaurant sales.............. 738,208 738,208
Costs of franchise and license revenue.................... 28,576 332 28,908
General and administrative expenses....................... 50,001 50,001
Depreciation and other amortization....................... 83,251 735 83,986
Restructuring charges and exit costs...................... 3,521 3,521
Impairment charges........................................ 4,556 4,556
Gains on disposition of assets and other, net............. (9,127) (9,127)
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Total operating costs and expenses................... 898,986 1,067 900,053
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Operating income.......................................... 49,598 (1,067) 48,531
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Other expenses:
Interest expense, net................................... 76,401 76,401
Other nonoperating income, net.......................... (32,915) (32,915)
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Total other expenses, net............................ 43,486 43,486
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Income before income taxes................................ 6,112 (1,067) 5,045
Benefit from income taxes................................. (1,422) (1,422)
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Income from continuing operations......................... 7,534 (1,067) 6,467
Discontinued operations:
Income from operations of discontinued operations,
net of income tax benefit -- $3,500................... 4,040 4,040
Gain on disposal of discontinued operations, net of
income tax provision -- $160.......................... 56,562 56,562
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Net income................................................ $ 68,136 $ (1,067) $ 67,069
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Basic earnings per share:
Income from continuing operations....................... $ 0.19 $ 0.17
Discontinued operations, net............................ 1.50 1.50
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Net income.............................................. $ 1.69 $ 1.67
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Diluted earnings per share:
Income from continuing operations....................... $ 0.19 $ 0.16
Discontinued operations, net............................ 1.49 1.49
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Net income.............................................. $ 1.68 $ 1.65
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Weighted average and equivalent shares outstanding:
Basic................................................... 40,270 40,270
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Diluted................................................. 40,583 40,583
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Item 9.01 Financial Statements and Exhibits
(c) Exhibits
Exhibit 99.1 -- Press release issued by Denny's Corporation on
February 17, 2005.
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 hereunto duly authorized.
Denny's Corporation
Date: February 17, 2005 /s/ Andrew F. Green
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Andrew F. Green
Senior Vice President
and Chief Financial Officer