10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE

SECURITIES EXCHANGE ACT OF 1934

For the Quarterly Period Ended June 28, 2017

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	(I.R.S. Employer
incorporation or organization	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)

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  þ  No  ¨

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted 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 and post such files).

Yes  þ  No  ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, 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	þ	Accelerated filer	¨	Non-accelerated filer	¨	Smaller reporting company	¨	Emerging growth company	¨
				(Do not check if a smaller reporting 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  þ

 As of July 31, 2017, 67,175,070 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
Condensed Consolidated Balance Sheets (Unaudited)	3
Condensed Consolidated Statements of Income (Unaudited)	4
Condensed Consolidated Statements of Comprehensive Income (Unaudited)	5
Condensed Consolidated Statement of Shareholders' Deficit (Unaudited)	6
Condensed Consolidated Statements of Cash Flows (Unaudited)	7
Notes to Condensed Consolidated Financial Statements (Unaudited)	8
Item 2.   Management's Discussion and Analysis of Financial Condition and Results of Operations	18
Item 3.   Quantitative and Qualitative Disclosures About Market Risk	26
Item 4.   Controls and Procedures	26
PART II - OTHER INFORMATION
Item 1.   Legal Proceedings	26
Item 1A.   Risk Factors	26
Item 2.   Unregistered Sales of Equity Securities and Use of Proceeds	27
Item 6.   Exhibits	27
Signatures	28

2

PART I - FINANCIAL INFORMATION

Item 1.     Financial Statements

Denny’s Corporation and Subsidiaries

Condensed Consolidated Balance Sheets

(Unaudited)

	June 28, 2017			December 28, 2016
	(In thousands)
Assets
Current assets:
Cash and cash equivalents	$	1,668		$	2,592
Receivables	16,742			19,841
Inventories	3,047			3,046
Assets held for sale	732			1,020
Prepaid and other current assets	5,821			9,408
Total current assets	28,010			35,907
Property, net of accumulated depreciation of $239,689 and $255,185, respectively	135,653			133,102
Goodwill	36,308			35,233
Intangible assets, net	56,391			54,493
Deferred financing costs, net	1,639			1,936
Deferred income taxes	21,754			17,683
Other noncurrent assets	27,149			27,797
Total assets	$	306,904		$	306,151
Liabilities
Current liabilities:
Current maturities of capital lease obligations	$	3,324		$	3,285
Accounts payable	21,428			25,289
Other current liabilities	56,521			64,796
Total current liabilities	81,273			93,370
Long-term liabilities:
Long-term debt, less current maturities	235,000			218,500
Capital lease obligations, less current maturities	26,362			23,806
Liability for insurance claims, less current portion	14,635			14,853
Other noncurrent liabilities	29,533			26,734
Total long-term liabilities	305,530			283,893
Total liabilities	386,803			377,263
Commitments and contingencies
Shareholders' equity (deficit)
Common stock $0.01 par value; shares authorized - 135,000; June 28, 2017: 107,540 shares issued and 68,183 shares outstanding; December 28, 2016: 107,115 shares issued and 71,358 shares outstanding	$	1,075		$	1,071
Paid-in capital	589,351			577,951
Deficit	(357,301		)	(382,843		)
Accumulated other comprehensive loss, net of tax	(3,546		)	(1,407		)
Shareholders’ equity before treasury stock	229,579			194,772
Treasury stock, at cost, 39,357 and 35,757 shares, respectively	(309,478		)	(265,884		)
Total shareholders' deficit	(79,899		)	(71,112		)
Total liabilities and shareholders' deficit	$	306,904		$	306,151

See accompanying notes

3

Denny’s Corporation and Subsidiaries

Condensed Consolidated Statements of Income

(Unaudited)

	Quarter Ended						Two Quarters Ended
	June 28, 2017			June 29, 2016			June 28, 2017			June 29, 2016
	(In thousands, except per share amounts)
Revenue:
Company restaurant sales	$	98,355		$	89,210		$	192,134		$	179,596
Franchise and license revenue	35,021			35,105			69,152			69,361
Total operating revenue	133,376			124,315			261,286			248,957
Costs of company restaurant sales:
Product costs	24,769			21,781			47,902			44,434
Payroll and benefits	38,492			34,088			75,889			68,549
Occupancy	5,503			4,993			10,237			9,793
Other operating expenses	12,933			11,975			25,504			24,172
Total costs of company restaurant sales	81,697			72,837			159,532			146,948
Costs of franchise and license revenue	10,244			10,759			19,990			20,762
General and administrative expenses	16,581			16,206			34,090			33,133
Depreciation and amortization	5,799			5,105			11,535			10,598
Operating (gains), losses and other charges, net	2,046			24,241			2,829			24,116
Total operating costs and expenses, net	116,367			129,148			227,976			235,557
Operating income (loss)	17,009			(4,833		)	33,310			13,400
Interest expense, net	3,740			3,014			7,281			5,788
Other nonoperating income, net	(410		)	(119		)	(767		)	(92		)
Net income (loss) before income taxes	13,679			(7,728		)	26,796			7,704
Provision for income taxes	4,930			3,824			9,674			9,302
Net income (loss)	$	8,749		$	(11,552	)	$	17,122		$	(1,598	)
Basic net income (loss) per share	$	0.13		$	(0.15	)	$	0.24		$	(0.02	)
Diluted net income (loss) per share	$	0.12		$	(0.15	)	$	0.24		$	(0.02	)
Basic weighted average shares outstanding	69,407			76,730			70,205			76,895
Diluted weighted average shares outstanding	71,661			76,730			72,459			76,895

See accompanying notes

4

Denny’s Corporation and Subsidiaries

Condensed Consolidated Statements of Comprehensive Income

(Unaudited)

	Quarter Ended						Two Quarters Ended
	June 28, 2017			June 29, 2016			June 28, 2017			June 29, 2016
	(In thousands)
Net income (loss)	$	8,749		$	(11,552	)	$	17,122		$	(1,598	)
Other comprehensive income, net of tax:
Minimum pension liability adjustment, net of tax of $9, $2,152, $18 and $2,160	14			21,825			28			21,838
Recognition of unrealized loss on hedge transactions, net of tax of $(985), $(2,057), $(1,382) and $(5,054)	(1,544		)	(3,221		)	(2,167		)	(7,914		)
Other comprehensive (loss) income	(1,530		)	18,604			(2,139		)	13,924
Total comprehensive income	$	7,219		$	7,052		$	14,983		$	12,326

See accompanying notes

5

Denny’s Corporation and Subsidiaries

Condensed Consolidated Statement of Shareholders’ Deficit

(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 28, 2016	107,115	$	1,071	(35,757	)	$	(265,884	)	$	577,951		$	(382,843	)	$	(1,407	)	$	(71,112	)
Cumulative effect adjustment	—	—		—		—			551			8,420			—			8,971
Net income	—	—		—		—			—			17,122			—			17,122
Other comprehensive loss	—	—		—		—			—			—			(2,139		)	(2,139		)
Share-based compensation on equity classified awards	—	—		—		—			3,834			—			—			3,834
Purchase of treasury stock	—	—		(3,046	)	(36,710		)	—			—			—			(36,710		)
Equity forward contract settlement	—	—		(554	)	(6,884		)	6,884			—			—			—
Issuance of common stock for share-based compensation	398	4		—		—			(4		)	—			—			—
Exercise of common stock options	27	—		—		—			135			—			—			135
Balance, June 28, 2017	107,540	$	1,075	(39,357	)	$	(309,478	)	$	589,351		$	(357,301	)	$	(3,546	)	$	(79,899	)

See accompanying notes

6

Denny’s Corporation and Subsidiaries

Condensed Consolidated Statements of Cash Flows

(Unaudited)

	Two Quarters Ended
	June 28, 2017			June 29, 2016
	(In thousands)
Cash flows from operating activities:
Net income (loss)	$	17,122		$	(1,598	)
Adjustments to reconcile net income (loss) to cash flows provided by operating activities:
Depreciation and amortization	11,535			10,598
Operating (gains), losses and other charges, net	2,829			24,116
Amortization of deferred financing costs	297			296
(Gain) loss on early extinguishments of debt and leases	68			(52		)
Deferred income tax expense	6,291			5,390
Share-based compensation	4,053			3,850
Changes in assets and liabilities:
Decrease (increase) in assets:
Receivables	3,741			2,455
Inventories	(1		)	322
Other current assets	3,587			7,275
Other assets	(3,869		)	(1,113		)
Increase (decrease) in liabilities:
Accounts payable	(1,986		)	(671		)
Accrued salaries and vacations	(9,692		)	(12,730		)
Accrued taxes	276			94
Other accrued liabilities	(365		)	(13,405		)
Other noncurrent liabilities	(1,068		)	(1,975		)
Net cash flows provided by operating activities	32,818			22,852
Cash flows from investing activities:
Capital expenditures	(8,208		)	(7,973		)
Acquisition of restaurants and real estate	(6,871		)	(1,476		)
Proceeds from disposition of property	1,032			1,883
Collections on notes receivable	3,186			730
Issuance of notes receivable	(1,825		)	(637		)
Net cash flows used in investing activities	(12,686		)	(7,473		)
Cash flows from financing activities:
Revolver borrowings	58,500			30,000
Revolver payments	(42,000		)	(27,000		)
Long-term debt payments	(1,633		)	(1,555		)
Proceeds from exercise of stock options	135			323
Purchase of treasury stock	(35,629		)	(7,764		)
Net bank overdrafts	(429		)	(4,361		)
Net cash flows used in financing activities	(21,056		)	(10,357		)
Increase (decrease) in cash and cash equivalents	(924		)	5,022
Cash and cash equivalents at beginning of period	2,592			1,671
Cash and cash equivalents at end of period	$	1,668		$	6,693

See accompanying notes

7

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, is one of America’s largest full-service restaurant chains based on number of restaurants. At June 28, 2017, the Denny's brand consisted of 1,724 restaurants, 1,552 of which were franchised/licensed restaurants and 172 of which were company operated.

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, including those for the above-described items, are reasonable.

These interim condensed consolidated financial statements should be read in conjunction with our consolidated financial statements and notes thereto for the year ended December 28, 2016 and the related Management’s Discussion and Analysis of Financial Condition and Results of Operations, both of which are contained in our Annual Report on Form 10-K for the fiscal year ended December 28, 2016. The results of operations for the interim periods presented are not necessarily indicative of the results for the entire fiscal year ending December 27, 2017.

Note 2.     Summary of Significant Accounting Policies

Newly Adopted Accounting Standards

Effective December 29, 2016, we adopted Accounting Standards Update (“ASU”) 2016-09, “Compensation - Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting”. The new guidance simplifies several aspects of the accounting for share-based payment transactions, including the recognition of excess tax benefits and deficiencies, the classification of those excess tax benefits on the statement of cash flows, an accounting policy election for forfeitures, the amount an employer can withhold to cover income taxes and still qualify for equity classification and the classification of those taxes paid on the statement of cash flows.

As required by the guidance, excess tax benefits recognized on share-based compensation expense are reflected on a prospective basis in our condensed consolidated statements of income as a component of the provision for income taxes rather than paid-in capital. The cumulative-effect adjustment to retained earnings from previously unrecognized excess tax benefits resulted in an $8.8 million increase in deferred tax assets and a decrease to opening deficit.

In addition, we have elected to account for forfeitures as they occur. The cumulative-effect adjustment to retained earnings from previously estimated forfeitures resulted in a $0.4 million increase to opening deficit, a $0.2 million increase in deferred tax assets and a $0.6 million increase to additional paid-in capital. As allowed by the update, on a retrospective basis, cash flows related to excess tax benefits recognized on stock-based compensation expense are classified as operating activities in the condensed consolidated statements of cash flows. There was no material impact on the prior periods retrospectively adjusted. Cash paid on employees’ behalf related to shares withheld for tax purposes continues to be classified as financing activites.

In January 2017, the Financial Accounting Standards Board (“FASB”) issued ASU 2017-04, “Intangibles—Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment”. The new guidance simplifies the subsequent measurement of goodwill by eliminating the second step of the two-step impairment test. Impairment is measured based on the excess of a reporting unit's carrying amount over its fair value. A qualitative assessment may still be completed first for an entity to determine if a quantitative impairment test is necessary. We early adopted ASU 2017-04 as of March 29, 2017 on a prospective basis. The adoption of this guidance did not have any impact on our consolidated financial statements.

8

Accounting Standards to be Adopted

In May 2014, the FASB issued ASU 2014-09, “Revenue from Contracts with Customers (Topic 606)”. The new guidanceclarifies the principles used to recognize revenue for all entities and requires companies to recognize revenue when it transfers goods or service to a customer in an amount that reflects the consideration to which a company expects to be entitled. The FASB has subsequently amended this guidance by issuing additional ASUs that provide clarification and further guidance around areas identified as potential implementation issues, including principal versus agent considerations, licensing and identifying performance obligations, assessing collectability, presentation of sales taxes received from customers, noncash consideration, contract modification and clarification of using the full retrospective approach upon adoption. All of the standards are effective for annual and interim periods beginning after December 15, 2017 (our fiscal 2018). The guidance allows for either a retrospective or cumulative effect transition method with early application permitted.

The guidance is not expected to impact the recognition of company restaurant sales or royalties from franchised restaurants. Upon adoption, initial franchise fees, which are currently recognized upon the opening of a franchise restaurant, are expected to be deferred and recognized over the term of the underlying franchise agreement. The effect of the required deferral of initial franchise fees received in a given year will be mitigated by the recognition of revenue from fees retrospectively deferred from prior years. We are currently reviewing our franchise agreements to obtain the data necessary to implement the guidance and cannot quantify the impact at this time.

We also believe the new guidance will impact our advertising arrangements with franchisees. Currently we record advertising expense net of contributions from franchisees to our advertising programs, including local co-operatives. Under the new guidance, we would include franchisee contributions to and expenditures from our advertising programs on a gross basis within the consolidated statements of income. While this change will materially impact the gross amount of reported franchise and license revenue and costs of franchise and license revenue, the impact would be an offsetting increase to both revenue and expense such that there will not be a significant, if any, impact on operating income and net income.

We are currently evaluating the impact this guidance will have on the recognition of other transactions on our consolidated financial statements, including gift card breakage and the effect it will have on our disclosures. We have not yet selected a transition method.

In January 2016, the FASB issued ASU 2016-01, “Financial Instruments—Overall (Subtopic 825-10): Recognition and Measurement of Financial Assets and Financial Liabilities”. The new guidance requires equity investments (except those accounted for under the equity method of accounting, or those that result in consolidation of the investee) to be measured at fair value with changes in fair value recognized in net income, requires public business entities to use the exit price notion when measuring the fair value of financial instruments for disclosure purposes, requires separate presentation of financial assets and financial liabilities by measurement category and form of financial asset, and eliminates the requirement for public business entities to disclose the method(s) and significant assumptions used to estimate the fair value that is required to be disclosed for financial instruments measured at amortized cost. ASU 2016-01 is effective for annual and interim periods beginning after December 15, 2017 (our fiscal 2018) with early adoption permitted. We are currently evaluating the impact the adoption of this guidance will have on our consolidated financial statements.

In June 2016, the FASB issued ASU 2016-13, “Financial Instruments—Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments”. The new guidance replaces the incurred loss impairment methodology in current GAAP with a methodology that reflects expected credit losses and requires consideration of a broader range of reasonable and supportable information to inform financial statement users of credit loss estimates. ASU 2016-13 is effective for annual and interim periods beginning after December 15, 2019 (our fiscal 2020) with early adoption permitted for annual and interim periods beginning after December 15, 2018 (our fiscal 2019). We do not expect the adoption of this guidance to have a material impact on our consolidated financial statements.

In February 2016, the FASB issued ASU 2016-02, “Leases (Topic 842)”,which provides guidance for accounting for leases. The new guidance requires companies to recognize the assets and liabilities for the rights and obligations created by leased assets. The accounting guidance for lessors is largely unchanged. ASU 2016-02 is effective for annual and interim periods beginning after December 15, 2018 (our fiscal 2019) with early adoption permitted. The guidance will be adopted using a modified retrospective approach. Based on a preliminary assessment, we expect the adoption will result in a significant increase in the assets and liabilities on our consolidated balance sheets, as most of our operating lease commitments will be recognized as operating lease liabilities and right-of-use assets. We are continuing our evaluation, which may identify additional impacts this standard will have on our consolidated financial statements and related disclosures.

9

In August 2016, the FASB issued ASU 2016-15, “Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments (a consensus of the Emerging Issues Task Force)”. The new guidance addresses eight specific cash flow issues with the objective of reducing the existing diversity in practice. ASU 2016-15 is effective for annual and interim periods beginning after December 15, 2017 (our fiscal 2018) with early adoption permitted. The guidance is to be applied using a retrospective transition method to each period presented. We do not expect the adoption of this guidance to have a material impact on our consolidated financial statements.

In January 2017, the FASB issued ASU 2017-01, “Business Combinations (Topic 805): Clarifying the Definition of a Business”. The new guidance clarifies the definition of a business. ASU 2017-01 is effective for annual and interim periods beginning after December 15, 2017 (our fiscal 2018) with early adoption permitted. The guidance is to be applied prospectively. We do not expect the adoption of this guidance to have a material impact on our consolidated financial statements.

In March 2017, the FASB issued ASU 2017-07, “Compensation—Retirement Benefits (Topic 715): Improving the Presentation of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Cost”. The new guidance requires an entity to report the service cost component in the same line on the income statement as other compensation costs arising from services rendered by the pertinent employees during the period. The other components of net benefit cost are required to be presented in the income statement separately from the service cost component and outside the subtotal of income from operations, if one is presented. If a separate line item is not used, the line item used in the income statement must be disclosed. ASU 2017-07 is effective for annual and interim periods beginning after December 15, 2017 (our fiscal 2018) with early adoption permitted. The guidance is to be applied prospectively. We do not expect the adoption of this guidance to have a material impact on our consolidated financial statements.

In May 2017, the FASB issued ASU 2017-09, “Compensation—Stock Compensation (Topic 718): Scope of Modification Accounting”. The new update provides guidance about which changes to the terms or conditions of a share-based payment award require an entity to apply modification accounting. ASU 2017-09 is effective for annual and interim periods beginning after December 15, 2017 (our fiscal 2018) with early adoption permitted. The guidance is to be applied prospectively. We do not expect the adoption of this guidance to have a material impact on our consolidated financial statements.

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.

Note 3.     Receivables

Receivables were comprised of the following:

	June 28, 2017			December 28, 2016
	(In thousands)
Current assets:
Receivables:
Trade accounts receivable from franchisees	$	10,088		$	10,513
Financing receivables from franchisees	3,397			2,804
Vendor receivables	1,844			3,865
Credit card receivables	1,379			1,678
Other	314			1,261
Allowance for doubtful accounts	(280		)	(280		)
Total current receivables, net	$	16,742		$	19,841
Noncurrent assets (included as a component of other noncurrent assets):
Financing receivables from franchisees	$	480		$	732

During the two quarters ended June 28, 2017, we wrote-off $0.2 million of financing receivables from a franchisee.

10

Note 4.    Goodwill and Other Intangible Assets

The following table reflects the changes in carrying amounts of goodwill.

	(In thousands)
Balance, December 28, 2016	$	35,233
Additions related to acquisition	1,060
Adjustments related to the sale of restaurants	15
Balance, June 28, 2017	$	36,308

Other intangible assets were comprised of the following:

	June 28, 2017				December 28, 2016
	Gross Carrying Amount		Accumulated Amortization		Gross Carrying Amount		Accumulated Amortization
	(In thousands)
Intangible assets with indefinite lives:
Trade names	$	44,077	$	—	$	44,076	$	—
Liquor licenses	166		—		166		—
Intangible assets with definite lives:
Franchise and license agreements	—		—		190		186
Reacquired franchise rights	14,175		2,027		11,498		1,251
Intangible assets	$	58,418	$	2,027	$	55,930	$	1,437

During the two quarters ended June 28, 2017, we acquired six franchised restaurants for $4.5 million, of which $2.7 million was allocated to reacquired franchise rights, $0.8 million to property and $1.1 million to goodwill. In addition, we recorded $1.2 million of capital leases in connection with the acquired franchised restaurants. We account for the acquisition of franchised restaurants using the acquisition method of accounting for business combinations. The purchase price allocations were based on Level 3 fair value estimates.

Note 5.     Other Current Liabilities

Other current liabilities consisted of the following:

	June 28, 2017		December 28, 2016
	(In thousands)
Accrued salaries and vacation	$	17,693	$	27,056
Accrued insurance, primarily current portion of liability for insurance claims	6,528		6,651
Accrued taxes	7,683		7,407
Accrued advertising	8,759		8,051
Gift cards	4,602		5,474
Other	11,256		10,157
Other current liabilities	$	56,521	$	64,796

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Note 6.     Operating (Gains), Losses and Other Charges, Net

Operating (gains), losses and other charges, netare comprised of the following:

	Quarter Ended					Two Quarters Ended
	June 28, 2017		June 29, 2016			June 28, 2017			June 29, 2016
	(In thousands)
Pension settlement loss	$	—	$	24,297		$	—		$	24,297
Software implementation costs	1,544		—			3,668			—
Losses (gains) on sales of assets and other, net	205		(43		)	(1,235		)	(687		)
Restructuring charges and exit costs	297		(13		)	396			506
Operating (gains), losses and other charges, net	$	2,046	$	24,241		$	2,829		$	24,116

Software implementation costs of $3.7 million for the two quarters ended June 28, 2017 were the result of our investment in a new cloud-based Enterprise Resource Planning system. Gains on sales of assets and other, net of $1.2 million for the two quarters ended June 28, 2017 primarily related to real estate sold to a franchisee. The pre-tax pension settlement loss of $24.3 million related to the completion of the liquidation of the Advantica Pension Plan (the "Pension Plan") during the two quarters ended June 29, 2016. Gains on sales of assets and other, net of $0.7 million for the two quarters ended June 29, 2016 primarily related to restaurants sold to franchisees.

Restructuring charges and exit costs were comprised of the following: 

	Quarter Ended					Two Quarters Ended
	June 28, 2017		June 29, 2016			June 28, 2017		June 29, 2016
	(In thousands)
Exit costs	$	295	$	(36	)	$	326	$	115
Severance and other restructuring charges	2		23			70		391
Total restructuring charges and exit costs	$	297	$	(13	)	$	396	$	506

The components of the change in accrued exit cost liabilities are as follows:

	(In thousands)
Balance, December 28, 2016	$	1,896
Exit costs (1)	326
Payments, net of sublease receipts	(928		)
Interest accretion	49
Balance, June 28, 2017	1,343
Less current portion included in other current liabilities	319
Long-term portion included in other noncurrent liabilities	$	1,024

(1) Included as a component of operating (gains), losses and other charges, net.

As of June 28, 2017 and December 28, 2016, we had accrued severance and other restructuring charges of $0.2 million and $0.4 million, respectively. The balance as of June 28, 2017 is expected to be paid during the next 12 months.

12

Note 7.     Fair Value of Financial Instruments

Fair Value of Assets and Liabilities Measured on a Recurring and Nonrecurring Basis

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)		Valuation Technique
	(In thousands)
Fair value measurements as of June 28, 2017:
Deferred compensation plan investments (1)	$	11,818		$	11,818	$	—		$	—	market approach
Interest rate swaps, net (2)	(4,305		)	—		(4,305		)	—		income approach
Total	$	7,513		$	11,818	$	(4,305	)	$	—
Fair value measurements as of December 28, 2016:
Deferred compensation plan investments (1)	$	11,248		$	11,248	$	—		$	—	market approach
Interest rate swaps (2)	(756		)	—		(756		)	—		income approach
Total	$	10,492		$	11,248	$	(756	)	$	—

(1) The fair values of our deferred compensation plan investments are based on the closing market prices of the elected investments.

(2) The fair values of our interest rate swaps are based upon Level 2 inputs, which include valuation models as reported by our counterparties. The key inputs for the valuation models are quoted market prices, interest rates and forward yield curves. See Note 8 for details on the interest rate swaps.

Those assets and liabilities measured at fair value on a nonrecurring basis are summarized below:

	Significant Other Observable Inputs (Level 2)		Impairment Charges		Valuation Technique
	(In thousands)
Fair value measurements as of June 28, 2017:
Assets held for sale (1)	$	732	$	—	market approach
Fair value measurements as of December 28, 2016:
Assets held for sale (1)	$	1,020	$	1,098	market approach

(1) As of June 28, 2017 and December 28, 2016, assets were classified as assets held for sale and, if necessary, were written down to their fair value. The fair value of assets held for sale is based upon Level 2 inputs, which include sales agreements.

Note 8.     Long-Term Debt

Denny's Corporation and certain of its subsidiaries have a credit facility consisting of a five-year $325 million senior secured revolver (with a $30 million letter of credit sublimit). As of June 28, 2017, we had outstanding revolver loans of $235.0 million and outstanding letters of credit under the senior secured revolver of $21.7 million. These balances resulted in availability of $68.3 million under the revolving facility. Prior to considering the impact of our interest rate swaps, described below, the weighted-average interest rate on outstanding revolver loans was 3.13% and 2.45% as of June 28, 2017 and December 28, 2016, respectively. Taking into consideration our interest rate swaps, the weighted-average interest rate of outstanding revolver loans was 3.17% and 2.74% as of June 28, 2017 and December 28, 2016, respectively.

A commitment fee is paid on the unused portion of the revolving credit facility and was 0.30% as of June 28, 2017. Borrowings under the credit facility bear a tiered interest rate, which is based on the Company’s consolidated leverage ratio and was set at LIBOR plus 200 basis points as of June 28, 2017. The maturity date for the credit facility is March 30, 2020.

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The credit facility is available for working capital, capital expenditures and other general corporate purposes. The credit facility is guaranteed by the Company and its material subsidiaries and is secured by assets of the Company and its subsidiaries, including the stock of the Company's subsidiaries. It includes negative covenants that are usual for facilities and transactions of this type. The 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 June 28, 2017.

Interest Rate Hedges

We have interest rate swaps to hedge a portion of the cash flows of our floating rate debt. We designated the interest rate swaps as cash flow hedges of our exposure to variability in future cash flows attributable to payments of LIBOR due on specific notional debt obligations.

Based on the interest rate as determined by our consolidated leverage ratio in effect as of June 28, 2017, under the terms of the swaps, we will pay the following fixed rates on the notional amounts noted:

Period Covered	Notional Amount		Fixed Rate
	(In thousands)
March 31, 2015 - March 29, 2018	$	120,000	3.13	%
March 29, 2018 - March 31, 2025	170,000		4.44	%
April 1, 2025 - March 31, 2026	50,000		4.46	%

As of June 28, 2017, the fair value of the interest rate swaps was a net liability of $4.3 million, which is comprised of assets of $0.1 million recorded as a component of other noncurrent assets and liabilities of $4.4 million recorded as a component of other noncurrent liabilities in our Condensed Consolidated Balance Sheets. See Note 14 for the amounts recorded in accumulated other comprehensive loss related to the interest rate swaps.

Note 9.     Defined Benefit Plans

During the second quarter of 2016, we completed the liquidation of the Advantica Pension Plan (the “Pension Plan”). Accordingly, we made a final contribution of $9.5 million to the Pension Plan. The resulting $67.7 million in Pension Plan assets were used to make lump sum payments and purchase annuity contracts, which are administered by a third-party provider. In addition, during the quarter, we recognized a pre-tax settlement loss of $24.3 million related to the liquidation, reflecting the recognition of unamortized actuarial losses that were recorded in accumulated other comprehensive income.

The components of net periodic benefit cost were as follows:

	Quarter Ended				Two Quarters Ended
	June 28, 2017		June 29, 2016		June 28, 2017		June 29, 2016
	(In thousands)
Pension Plan:
Service cost	$	—	$	—	$	—	$	105
Net periodic benefit cost	$	—	$	—	$	—	$	105
Other Defined Benefit Plans:
Interest cost	$	21	$	23	$	42	$	46
Amortization of net loss	23		22		46		43
Net periodic benefit cost	$	44	$	45	$	88	$	89

We made contributions of $0.2 million and $0.1 million to our other defined benefit plans during the two quarters ended June 28, 2017 and June 29, 2016, respectively. We expect to contribute $0.1 million to our other defined benefit plans over the remainder of fiscal 2017.

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Additional minimum pension liability, net of tax, of $0.9 million related to our other defined benefit plans is reported as a component of accumulated other comprehensive loss in our Condensed Consolidated Statement of Shareholders’ Equity as of both June 28, 2017 and December 28, 2016, respectively.

Note 10.     Share-Based Compensation

Refer to Note 2 for the impact of the adoption of ASU 2016-09. Total share-based compensation cost included as a component of net income was as follows:

	Quarter Ended				Two Quarters Ended
	June 28, 2017		June 29, 2016		June 28, 2017		June 29, 2016
	(In thousands)
Performance share awards	$	1,904	$	1,688	$	3,844	$	3,422
Restricted stock units for board members	176		214		209		428
Total share-based compensation	$	2,080	$	1,902	$	4,053	$	3,850

Performance Share Awards

During the two quarters ended June 28, 2017, we granted certain employees approximately 0.3 million performance shares that vest based on the total shareholder return (“TSR”) of our common stock compared to the TSRs of a group of peer companies and 0.3 million performance shares that vest based on our Adjusted EBITDA growth rate, as defined under the terms of the award. As the TSR based performance shares contain a market condition, a Monte Carlo valuation was used to determine the grant date fair value of $13.05 per share. The performance shares based on the Adjusted EBITDA growth rate have a grant date fair value of $12.17 per share, the market value of our common stock on the date of grant. The awards granted to our named executive officers also contain a performance condition based on the attainment of an operating measure for the fiscal year ended December 27, 2017. The performance period for these performance shares is the three year fiscal period beginning December 29, 2016 and ending December 25, 2019. They will vest and be earned (from 0% to 150% of the target award for each such increment) at the end of the performance period.

During the two quarters ended June 28, 2017, we made payments of $3.9 million in cash and issued 0.4 million shares of common stock related to performance share awards.

As of June 28, 2017, we had approximately $11.4 million of unrecognized compensation cost related to all unvested performance share awards outstanding, which is expected to be recognized over a weighted average of 1.9 years.

Restricted Stock Units for Board Members

During the two quarters ended June 28, 2017, we granted approximately 0.1 million deferred stock units (which are equity classified) with a weighted average grant date fair value of $12.04 per unit to non-employee members of our Board of Directors. The deferred 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) or upon termination as a member of our Board of Directors. Also during the two quarters ended June 28, 2017, we made cash payments of $0.5 million related to the replacement cash awards issued in 2016 related to the canceled deferred stock units awards. As of June 28, 2017, we had approximately $1.0 million of unrecognized compensation cost related to all unvested restricted stock unit awards outstanding, which is expected to be recognized over a weighted average of 1.1 years.

Note 11.     Income Taxes

The effective income tax rate was 36.0% for the quarter ended June 28, 2017 and 36.1% for the two quarters ended June 28, 2017 compared to (49.5)% and 120.7%, respectively, for the prior year periods. Refer to Note 2 for the impact of the adoption of ASU 2016-09. The 2016 period benefited by 3.2 percentage points from state jobs tax credits claimed for prior years' hiring activity. In addition, the 2016 rates were impacted by the recognition of a $2.1 million tax benefit related to the $24.3 million pre-tax settlement loss on the Pension Plan liquidation. This benefit was at a rate lower than the effective tax rate due to the previous recognition of an approximate $7.2 million tax benefit recognized with the reversal of our valuation allowance in 2011. Excluding the impact of the Pension Plan liquidation, our effective income tax rate would have been 35.8% for the two quarters ended June 29, 2016.

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Note 12.     Net Income Per Share

The amounts used for the basic and diluted net income per share calculations are summarized below:

	Quarter Ended					Two Quarters Ended
	June 28, 2017		June 29, 2016			June 28, 2017		June 29, 2016
						(In thousands, except for per share amounts)
Net income (loss)	$	8,749	$	(11,552	)	$	17,122	$	(1,598	)
Weighted average shares outstanding - basic	69,407		76,730			70,205		76,895
Effect of dilutive share-based compensation awards	2,254		—			2,254		—
Weighted average shares outstanding - diluted	71,661		76,730			72,459		76,895
Basic net income (loss) per share	$	0.13	$	(0.15	)	$	0.24	$	(0.02	)
Diluted net income (loss) per share	$	0.12	$	(0.15	)	$	0.24	$	(0.02	)
Anti-dilutive share-based compensation awards	606		2,636			606		2,636

Note 13.     Supplemental Cash Flow Information

	Two Quarters Ended
	June 28, 2017		June 29, 2016
	(In thousands)
Income taxes paid, net	$	2,668	$	938
Interest paid	$	6,718	$	5,215
Noncash investing and financing activities:
Property acquisition payable	$	—	$	2,973
Issuance of common stock, pursuant to share-based compensation plans	$	4,961	$	3,597
Execution of capital leases	$	4,225	$	4,623
Treasury stock payable	$	1,394	$	147
Notes received in connection with disposition of property	$	1,750	$	—

Note 14.     Shareholders' Equity

Share Repurchase

Our credit facility permits the purchase of Denny’s stock and the payment of cash dividends subject to certain limitations. In May 2016, our Board of Directors approved a share repurchase program authorizing us to repurchase up to $100 million of our common stock (in addition to prior authorizations). Under this program, 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.

In November 2016, as part of our previously authorized share repurchase programs, we entered into a variable term, capped accelerated share repurchase (the “ASR”) agreement with MUFG Securities EMEA plc (“MUFG”), to repurchase an aggregate of $25 million of our common stock. Pursuant to the terms of the ASR agreement, we paid $25 million in cash and received approximately 1.5 million shares of our common stock (which represents the minimum shares to be delivered based on the cap price) and recorded $18.1 million of treasury stock related to these shares. The remaining balance of $6.9 million was recorded as additional paid-in capital in shareholders' equity as of December 28, 2016 as an equity forward contract.

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During the two quarters ended June 28, 2017, we settled the ASR agreement with MUFG. As a result, we received final delivery of an additional 0.5 million shares of our common stock, bringing the total number of shares repurchased pursuant to the ASR agreement to 2.0 million. The total number of shares repurchased was based on a combined discounted volume-weighted average price (“VWAP”) of $12.36 per share, which was determined based on the average of the daily VWAP of our common stock, less a fixed discount, over the term of the ASR agreement. As a result of settling the ASR agreement, we recorded $6.9 million of treasury stock related to the settlement of the equity forward contract related to the ASR agreement.

In addition to the settlement of the ASR agreement, during the two quarters ended June 28, 2017, we repurchased 3.0 million shares of our common stock for approximately $36.7 million. This brings the total amount repurchased under the May 2016 repurchase program to 4.7 million shares of our common stock for approximately $57.5 million, leaving approximately $42.5 million of our common stock that can be repurchased under this program as of June 28, 2017.

Repurchased shares are included as treasury stock in our Condensed Consolidated Balance Sheets and our Condensed Consolidated Statement of Shareholders' Equity.

Accumulated Other Comprehensive Loss

The components of the change in accumulated other comprehensive loss were as follows:

	Pensions			Derivatives			Accumulated Other Comprehensive Loss
	(In thousands)
Balance as of December 28, 2016	$	(945	)	$	(462	)	$	(1,407	)
Amortization of net loss (1)	46			—			46
Net change in fair value of derivatives	—			(3,403		)	(3,403		)
Reclassification of derivatives to interest expense (2)	—			(146		)	(146		)
Income tax (expense) benefit related to items of other comprehensive loss	(18		)	1,382			1,364
Balance as of June 28, 2017	$	(917	)	$	(2,629	)	$	(3,546	)

(1) Before-tax amount related to our Other Defined Benefit Plans that was reclassified from accumulated other comprehensive loss and included as a component of pension expense within general and administrative expenses in our Condensed Consolidated Statements of Income during the two quarters ended June 28, 2017. See Note 9 for additional details.

(2) Amounts reclassified from accumulated other comprehensive loss into income, represent payments made to the counterparty for the effective portions of the interest rate swaps. These amounts are included as a component of interest expense in our Condensed Consolidated Statements of Income. We expect to reclassify approximately $0.7 million from accumulated other comprehensive loss related to our interest rate swaps during the next twelve months. See Note 8 for additional details.

Note 15.     Commitments and Contingencies

We have guarantees related to certain franchisee loans. Payments under these guarantees would result from the inability of a franchisee to fund required payments when due. Through June 28, 2017, no events had occurred that caused us to make payments under these guarantees. There were $6.4 million and $7.9 million of loans outstanding under these programs as of June 28, 2017 and December 28, 2016, respectively. As of June 28, 2017, the maximum amounts payable under the loan guarantees was $1.2 million. As a result of these guarantees, we have recorded liabilities of less than $0.1 million as of both June 28, 2017 and December 28, 2016, which are included as a component of other noncurrent liabilities in our Condensed Consolidated Balance Sheets and other nonoperating expense in our Condensed Consolidated Statements of Income.

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 the Company's consolidated results of operations or financial position. 

17

Note 16.     Subsequent Events

Subsequent to the quarter ended June 28, 2017, through July 31, 2017, we repurchased 1.0 million shares of our common stock for approximately $11.7 million. This brings the total amount repurchased under the May 2016 repurchase program to 5.7 million shares of our common stock for approximately $69.2 million, leaving approximately $30.8 million of our common stock that can be repurchased under this program as of July 31, 2017.

Item 2.     Management’s Discussion and Analysis of Financial Condition and Results of Operations

Forward-Looking Statements

This report contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. The forward-looking statements reflect our best judgment based on factors currently known and are intended to speak only as of the date such statements are made. Forward-looking statements involve risks, uncertainties, and other factors which may cause our actual performance to be materially different from the performance indicated or implied by such statements. You should consider our forward-looking statements in light of the risks discussed under Part I, Item 1A, “Risk Factors” in our most recent Annual Report on Form 10-K, as well as our consolidated financial statements, related notes, and the other financial information appearing elsewhere in this report and our other filings with the United States Securities and Exchange Commission. While we may elect to update forward-looking statements at some point in the future, we expressly disclaim any obligation to update any forward-looking statements, whether as a result of new information, future events, or otherwise, except as required by law.

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Statements of Income

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

	Quarter Ended										Two Quarters Ended
	June 28, 2017					June 29, 2016					June 28, 2017					June 29, 2016
											(Dollars in thousands)
Revenue:
Company restaurant sales	$	98,355		73.7	%	$	89,210		71.8	%	$	192,134		73.5	%	$	179,596		72.1	%
Franchise and license revenue	35,021			26.3	%	35,105			28.2	%	69,152			26.5	%	69,361			27.9	%
Total operating revenue	133,376			100.0	%	124,315			100.0	%	261,286			100.0	%	248,957			100.0	%
Costs of company restaurant sales (a):
Product costs	24,769			25.2	%	21,781			24.4	%	47,902			24.9	%	44,434			24.7	%
Payroll and benefits	38,492			39.1	%	34,088			38.2	%	75,889			39.5	%	68,549			38.2	%
Occupancy	5,503			5.6	%	4,993			5.6	%	10,237			5.3	%	9,793			5.5	%
Other operating expenses	12,933			13.1	%	11,975			13.4	%	25,504			13.3	%	24,172			13.5	%
Total costs of company restaurant sales	81,697			83.1	%	72,837			81.6	%	159,532			83.0	%	146,948			81.8	%
Costs of franchise and license revenue(a)	10,244			29.3	%	10,759			30.6	%	19,990			28.9	%	20,762			29.9	%
General and administrative expenses	16,581			12.4	%	16,206			13.0	%	34,090			13.0	%	33,133			13.3	%
Depreciation and amortization	5,799			4.3	%	5,105			4.1	%	11,535			4.4	%	10,598			4.3	%
Operating (gains), losses and other charges, net	2,046			1.5	%	24,241			19.5	%	2,829			1.1	%	24,116			9.7	%
Total operating costs and expenses, net	116,367			87.2	%	129,148			103.9	%	227,976			87.3	%	235,557			94.6	%
Operating income (loss)	17,009			12.8	%	(4,833		)	(3.9	)%	33,310			12.7	%	13,400			5.4	%
Interest expense, net	3,740			2.8	%	3,014			2.4	%	7,281			2.8	%	5,788			2.3	%
Other nonoperating (income) expense, net	(410		)	(0.3	)%	(119		)	(0.1	)%	(767		)	(0.3	)%	(92		)	0.0	%
Net income (loss) before income taxes	13,679			10.3	%	(7,728		)	(6.2	)%	26,796			10.3	%	7,704			3.1	%
Provision for income taxes	4,930			3.7	%	3,824			3.1	%	9,674			3.7	%	9,302			3.7	%
Net income (loss)	$	8,749		6.6	%	$	(11,552	)	(9.3	)%	$	17,122		6.6	%	$	(1,598	)	(0.6	)%
Other Data:
Company average unit sales	$	576				$	562				$	1,129				$	1,116
Franchise average unit sales	$	400				$	390				$	785				$	778
Company equivalent units (b)	171					159					170					161
Franchise equivalent units (b)	1,559					1,555					1,560					1,551
Company same-store sales increase (decrease) (c)(d)	2.7		%			(0.1		)%			0.6		%			1.7		%
Domestic franchise same-store sales increase (decrease) (c)(d)	2.6		%			(0.5		)%			0.8		%			0.9		%

(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 restaurants that were open the same period in the prior year.

(d) Prior year amounts have not been restated for 2017 comparable units.

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Unit Activity

	Quarter Ended				Two Quarters Ended
	June 28, 2017		June 29, 2016		June 28, 2017		June 29, 2016
Company restaurants, beginning of period	172		162		169		164
Units opened	1		—		1		1
Units acquired from franchisees	3		2		6		3
Units sold to franchisees	(4	)	(2	)	(4	)	(6	)
Units closed	—		—		—		—
End of period	172		162		172		162
Franchised and licensed restaurants, beginning of period	1,559		1,551		1,564		1,546
Units opened	7		13		15		24
Units purchased from Company	4		2		4		6
Units acquired by Company	(3	)	(2	)	(6	)	(3	)
Units closed	(15	)	(6	)	(25	)	(15	)
End of period	1,552		1,558		1,552		1,558
Total restaurants, end of period	1,724		1,720		1,724		1,720

Company Restaurant Operations

During the quarter ended June 28, 2017, company restaurant sales increased$9.1 million, or 10.3%, primarily resulting from a 12 equivalent unit increase in company restaurants and a 2.7%increase in company same-store sales as compared to the prior year period. During the two quarters ended June 28, 2017, company restaurant sales increased$12.5 million, or 7.0%, primarily resulting from a 0.6%increase in company same-store sales and a nine equivalent unit increase in company restaurants as compared to the prior year period.

Total costs of company restaurant sales as a percentage of company restaurant sales increased to 83.1% for the quarter and 83.0% year-to-date from 81.6% and 81.8%, respectively, in the prior year periods.

Product costs were 25.2% for the quarter and 24.9% year-to-date compared to 24.4% and 24.7%, respectively, in the prior year periods. The increase for the quarter was primarily due to increased commodity costs.

Payroll and benefits were 39.1% for the quarter and 39.5% year-to-date compared to 38.2% for both prior year periods. The increase for the quarter was primarily due to a 0.7 percentage point increase in workers' compensation costs, as the current quarter included $0.1 million in favorable workers' compensation claims development compared to $0.8 million of favorable workers' compensation claims development in the prior year period. The increase year-to-date was primarily due to a 0.7 percentage point increase in workers' compensation costs and a 0.4 percentage point increase in labor costs. The two quarters ended June 28, 2017 included $0.3 million in favorable workers' compensation claims development, as compared to $1.7 million of favorable workers' compensation claims development in the prior year period.

Occupancy costs remained flat at 5.6% for the quarter and decreased to 5.3% year-to-date from 5.5% in the prior year period. The decrease was primarily due to a decrease in general liability insurance costs.

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

	Quarter Ended								Two Quarters Ended
	June 28, 2017				June 29, 2016				June 28, 2017				June 29, 2016
	(Dollars in thousands)
Utilities	$	3,053	3.1	%	$	2,852	3.2	%	$	6,106	3.2	%	$	5,803	3.2	%
Repairs and maintenance	1,667		1.7	%	1,732		1.9	%	3,330		1.7	%	3,334		1.9	%
Marketing	3,621		3.7	%	3,381		3.8	%	7,242		3.8	%	6,623		3.7	%
Other direct costs	4,592		4.7	%	4,010		4.5	%	8,826		4.6	%	8,412		4.7	%
Other operating expenses	$	12,933	13.1	%	$	11,975	13.4	%	$	25,504	13.3	%	$	24,172	13.5	%

Franchise Operations

Franchise and license revenue and costs of franchise and license revenue were comprised of the following amounts and percentages of franchise and license revenue for the periods indicated:

	Quarter Ended								Two Quarters Ended
	June 28, 2017				June 29, 2016				June 28, 2017				June 29, 2016
	(Dollars in thousands)
Royalties	$	25,338	72.4	%	$	24,511	69.8	%	$	49,882	72.1	%	$	48,655	70.1	%
Initial fees	588		1.7	%	798		2.3	%	1,072		1.6	%	1,324		1.9	%
Occupancy revenue	9,095		26.0	%	9,796		27.9	%	18,198		26.3	%	19,382		28.0	%
Franchise and license revenue	$	35,021	100.0	%	$	35,105	100.0	%	$	69,152	100.0	%	$	69,361	100.0	%
Occupancy costs	$	6,571	18.8	%	$	7,287	20.8	%	$	13,077	18.9	%	$	14,350	20.7	%
Other direct costs	3,673		10.5	%	3,472		9.9	%	6,913		10.0	%	6,412		9.2	%
Costs of franchise and license revenue	$	10,244	29.3	%	$	10,759	30.6	%	$	19,990	28.9	%	$	20,762	29.9	%

During the quarter ended June 28, 2017, royalties increased $0.8 million, or 3.4%, primarily resulting from a 4 equivalent unit increase in franchised and licensed restaurants, a 2.6%increase in domestic same-store sales and a higher average royalty rate as compared to the prior year period. During the two quarters ended June 28, 2017, royalties increased $1.2 million, or 2.5%, primarily resulting from a 9 equivalent unit increase in franchised and licensed restaurants, a 0.8%increase in domestic same-store sales and a higher average royalty rate as compared to the prior year period. Initial fees decreased $0.2 million for the quarter and $0.3 million year-to-date as a higher number of restaurants were opened by franchisees during the prior year periods. The decrease in occupancy revenue of $0.7 million, or 7.2%, for the quarter and $1.2 million, or 6.1%, year-to-date was primarily the result of lease expirations.

Costs of franchise and license revenue decreased $0.5 million, or 4.8%, for the quarter and decreased $0.8 million, or 3.7%, year-to-date. Occupancy costs decreased $0.7 million, or 9.8%, for the quarter and $1.3 million, or 8.9%, year-to-date, primarily resulting from lease expirations. Other direct costs increased $0.2 million, or 5.8%, for the quarter and $0.5 million, or 7.8%, year-to-date. The increase for the quarter primarily resulted from the write-off of financing receivables from a franchisee. The increase for the year-to-date period primarily resulted from increased franchise administration costs. As a result, costs of franchise and license revenue as a percentage of franchise and license revenue decreased to 29.3% for the quarter from 30.6% for the prior year quarter and decreased to 28.9% year-to-date from 29.9% for the prior year period.

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.

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General and administrativeexpenses were comprised of the following:

	Quarter Ended				Two Quarters Ended
	June 28, 2017		June 29, 2016		June 28, 2017		June 29, 2016
	(In thousands)
Share-based compensation	$	2,080	$	1,902	$	4,053	$	3,850
Other general and administrative expenses	14,501		14,304		30,037		29,283
Total general and administrative expenses	$	16,581	$	16,206	$	34,090	$	33,133

Other general and administrative expenses increased by $0.2 million for the quarter and $0.8 million year-to-date. The increase for the quarter primarily resulted from $0.8 million in investments in personnel and $0.3 million related to market valuation changes in our non-qualified deferred compensation plan liabilities. These increases were partially offset by a $1.0 million decrease in incentive compensation. The increase for the year-to-date period primarily resulted from $1.7 million in investments in personnel and service fees related to cloud-based Enterprise Resource Planning (“ERP”) systems and $0.8 million related to market valuation changes in our non-qualified deferred compensation plan liabilities. These increases were partially offset by a $1.7 million decrease in incentive compensation. Offsetting gains on the underlying non-qualified deferred plan investments are included as a component of other non-operating income, net. The software implementation costs related to the ERP systems have been expensed as incurred and included as a component of operating (gains), losses and other charges, net.

Depreciation and amortization was comprised of the following:

	Quarter Ended				Two Quarters Ended
	June 28, 2017		June 29, 2016		June 28, 2017		June 29, 2016
	(In thousands)
Depreciation of property and equipment	$	4,233	$	3,928	$	8,450	$	8,279
Amortization of capital lease assets	996		862		1,990		1,688
Amortization of intangible and other assets	570		315		1,095		631
Total depreciation and amortization expense	$	5,799	$	5,105	$	11,535	$	10,598

The increase in amortization of intangible and other assets is primarily due to the increase in reacquired franchise rights related to acquisitions of franchised restaurants during the current and prior years.

Operating (gains), losses and other charges, net were comprised of the following:

	Quarter Ended					Two Quarters Ended
	June 28, 2017		June 29, 2016			June 28, 2017			June 29, 2016
	(In thousands)
Pension settlement loss	$	—	$	24,297		$	—		$	24,297
Software implementation costs	1,544		—			3,668			—
Losses (gains) on sales of assets and other, net	205		(43		)	(1,235		)	(687		)
Restructuring charges and exit costs	297		(13		)	396			506
Operating (gains), losses and other charges, net	$	2,046	$	24,241		$	2,829		$	24,116

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Software implementation costs of $3.7 million for the two quarters ended June 28, 2017 were the result of our investment in a new cloud-based ERP system. We expect to recognize additional costs of approximately $1.3 million during 2017 to complete the implementation. Gains on sales of assets and other, net of $1.2 million for the two quarters ended June 28, 2017 primarily related to real estate sold to a franchisee. The pre-tax pension settlement loss of $24.3 million related to the completion of the Pension Plan liquidation during the two quarters ended June 29, 2016. Gains on sales of assets and other, net of $0.7 million for the two quarters ended June 29, 2016 primarily related to restaurants sold to franchisees.

Restructuring charges and exit costs were comprised of the following:

	Quarter Ended					Two Quarters Ended
	June 28, 2017		June 29, 2016			June 28, 2017		June 29, 2016
	(In thousands)
Exit costs	$	295	$	(36	)	$	326	$	115
Severance and other restructuring charges	2		23			70		391
Total restructuring and exit costs	$	297	$	(13	)	$	396	$	506

Operating income (loss) was income of $17.0 million for the quarter and $33.3 million year-to-date compared with a loss of $4.8 million and income of $13.4 million, respectively, for the prior year periods. The 2016 periods were significantly impacted by the $24.3 million pre-tax settlement loss related to the Pension Plan liquidation.

Interest expense, net was comprised of the following:

	Quarter Ended						Two Quarters Ended
	June 28, 2017			June 29, 2016			June 28, 2017			June 29, 2016
	(In thousands)
Interest on credit facilities	$	1,757		$	1,148		$	3,255		$	2,194
Interest on interest rate swaps	38			209			146			421
Interest on capital lease liabilities	1,423			1,107			2,816			2,102
Letters of credit and other fees	303			313			583			591
Interest income	(49		)	(14		)	(64		)	(27		)
Total cash interest	3,472			2,763			6,736			5,281
Amortization of deferred financing costs	149			148			297			296
Interest accretion on other liabilities	119			103			248			211
Total interest expense, net	$	3,740		$	3,014		$	7,281		$	5,788

Interest expense, net increased by $0.7 million for the quarter and $1.5 million year-to-date primarily due to the increased balance of our credit facility and an increase in capital leases.

Other nonoperating income, net was $0.4 million for the quarter and $0.8 million year-to-date compared to $0.1 million for both prior year periods. The current year income was primarily the result of gains on deferred compensation plan investments.

The provision for income taxes was $4.9 million for the quarter and $9.7 million year-to-date compared to $3.8 million and $9.3 million, respectively, for the prior year periods. The effective tax rate was 36.0% for the quarter and 36.1% year-to-date compared to (49.5)% and 120.7%, respectively, for the prior year periods. Refer to Note 2 for the impact of the adoption of ASU 2016-09. We expect the 2017 fiscal year effective tax rate to be between 35% and 37%. The annual effective tax rate cannot be determined until the end of the fiscal year; therefore, the actual rate could differ from our current estimates.

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The 2016 year-to-date rate benefited by 3.2 percentage points from state jobs tax credits claimed for the prior years' hiring activity. In addition, the 2016 rates were also impacted by the recognition of a $2.1 million tax benefit related to the $24.3 million pre-tax settlement loss on the Pension Plan liquidation. This benefit was at a rate lower than the effective tax rate due to the previous recognition of an approximate $7.2 million tax benefit in connection with the reversal of our valuation allowance in 2011. Excluding the impact of the Pension Plan liquidation, our effective income tax rate would have been 36.0% for the quarter and 35.8% for the two quarters ended June 29, 2016.

Net income (loss) was income of $8.7 million for the quarter and $17.1 million year-to-date compared with losses of $11.6 million and $1.6 million, respectively, for the prior year periods. The 2016 periods were significantly impacted by the $24.3 million pre-tax settlement loss related to the Pension Plan liquidation.

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.

The following table presents a summary of our sources and uses of cash and cash equivalents for the periods indicated:

	Two Quarters Ended
	June 28, 2017			June 29, 2016
	(In thousands)
Net cash provided by operating activities	$	32,818		$	22,852
Net cash used in investing activities	(12,686		)	(7,473		)
Net cash used in financing activities	(21,056		)	(10,357		)
Increase (decrease) in cash and cash equivalents	$	(924	)	$	5,022

Net cash flows provided by operating activities were $32.8 million for the two quarters ended June 28, 2017 compared to $22.9 million for the two quarters ended June 29, 2016. The increase in cash flows provided by operating activities was primarily due to the funding of our pension liability during the two quarters ended June 29, 2016. We believe that our estimated cash flows from operations for 2017, combined with our capacity for additional borrowings under our credit facility, 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 $12.7 million for the two quarters ended June 28, 2017. These cash flows were primarily comprised of capital expenditures of $8.2 million and acquisitions of restaurants and real estate of $6.9 million. Cash flows for acquisitions include $2.4 million of real estate associated with relocating a high-performing company restaurant due to the impending loss of property control and $4.5 million for the reacquisition of six franchised restaurants.

Our principal capital requirements have been largely associated with the following:

	Two Quarters Ended
	June 28, 2017		June 29, 2016
	(In thousands)
Facilities	$	3,605	$	3,064
New construction	2,400		1,529
Remodeling	884		2,688
Information technology	221		385
Other	1,098		307
Capital expenditures	$	8,208	$	7,973

Capital expenditures and acquisitions for fiscal 2017 are expected to be approximately $25 to $27 million, including the relocation of three high-performing company restaurants due to the impending loss of property control and the above mentioned acquisitions of real estate and franchised restaurants.

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Cash flows used in financing activities were $21.1 million for the two quarters ended June 28, 2017, which included cash payments for stock repurchases of $35.6 million, partially offset by net long-term debt borrowings of $14.9 million.

Our working capital deficit was $53.3 million at June 28, 2017 compared to $57.5 million at December 28, 2016. The decrease in working capital deficit was primarily related to the payout of accrued incentive compensation during the two quarters ended June 28, 2017. 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 a limited investment in inventories, and (3) accounts payable for food, beverages and supplies usually become due after the receipt of cash from the related sales.

Credit Facility

As of June 28, 2017, we had outstanding revolver loans of $235.0 million and outstanding letters of credit under the senior secured revolver of $21.7 million. These balances resulted in availability of $68.3 million under the revolving facility. Prior to considering the impact of our interest rate swaps, described below, the weighted-average interest rate on outstanding revolver loans was 3.13% as of June 28, 2017. Taking into consideration our interest rate swaps, the weighted-average interest rate of outstanding revolver loans was 3.17% as of June 28, 2017.

A commitment fee is paid on the unused portion of the revolving credit facility and was 0.30% as of June 28, 2017. Borrowings under the credit facility bear a tiered interest rate, which is based on the Company’s consolidated leverage ratio and was set at LIBOR plus 200 basis points as of June 28, 2017. The maturity date for the credit facility is March 30, 2020.

The credit facility is available for working capital, capital expenditures and other general corporate purposes. The credit facility is guaranteed by the Company and its material subsidiaries and is secured by assets of the Company and its subsidiaries, including the stock of the Company's subsidiaries. It includes negative covenants that are usual for facilities and transactions of this type. The 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 June 28, 2017.

Interest Rate Hedges

We have interest rate swaps to hedge a portion of the cash flows of our floating rate debt. We designated the interest rate swaps as cash flow hedges of our exposure to variability in future cash flows attributable to payments of LIBOR due on specific notional debt obligations.

Based on the interest rate as determined by our consolidated leverage ratio in effect as of June 28, 2017, under the terms of the swaps, we will pay the following fixed rates on the notional amounts noted:

Period Covered	Notional Amount		Fixed Rate
	(In thousands)
March 31, 2015 - March 29, 2018	$	120,000	3.13	%
March 29, 2018 - March 31, 2025	170,000		4.44	%
April 1, 2025 - March 31, 2026	50,000		4.46	%

As of June 28, 2017, the fair value of the interest rate swaps was a net liability of $4.3 million, which is comprised of assets of $0.1 million recorded as a component of other noncurrent assets and liabilities of $4.4 million recorded as a component of other noncurrent liabilities in our Condensed Consolidated Balance Sheets.

Implementation of New Accounting Standards

Information regarding the implementation of new accounting standards is incorporated by reference from Note 2 to our condensed consolidated financial statements set forth in Part I of this report.

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Item 3.     Quantitative and Qualitative Disclosures About Market Risk

With the exception of changes in the fair value of our interest rate swaps and the related expected reclassification from accumulated other comprehensive income, 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, refer to Notes 8 and 14 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 President and Chief Executive Officer, John C. Miller, and our Executive Vice President, Chief Administrative Officer and Chief Financial Officer, F. Mark Wolfinger) 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 Wolfinger 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 Wolfinger, as appropriate to allow timely decisions regarding required disclosure. 

During the first quarter of 2017, we implemented a new human resources and payroll system as well as new lease administration software. During the second quarter of 2017, we introduced additional functionality and enhancements related to the new human resources and payroll system. These new systems resulted in changes to certain of our processes and procedures for internal control over financial reporting. We are currently evaluating how these changes impact the effectiveness of internal controls over financial reporting.

There were no other 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 last fiscal quarter that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

PART II - OTHER INFORMATION

Item 1.     Legal Proceedings

Information regarding legal proceedings is incorporated by reference from Note 15 to our condensed consolidated financial statements set forth in Part I 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 28, 2016.

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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 June 28, 2017. 

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)
March 30, 2017 - April 26, 2017	380	$	12.41	380	$	62,155
April 27, 2017 - May 24, 2017	658	11.82		658	$	54,360
May 25, 2017 - June 28, 2017	1,024	11.60		1,024	$	42,461
Total	2,062	$	11.82	2,062

(1)  Average price paid per share excludes commissions.

(2) On May 26, 2016, we announced that our Board of Directors approved a new share repurchase program, authorizing us to repurchase up to an additional $100 million of our common stock (in addition to prior authorizations). Such repurchases may take place from time to time on 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 June 28, 2017, we purchased 2,061,931 shares of our common stock for an aggregate consideration of approximately $24.4 million, pursuant to the share repurchase program.

Item 6.     Exhibits

The following are included as exhibits to this report: 

Exhibit No.	Description
10.1	Third Amendment to Second Amended and Restated Credit Agreement dated July 31, 2017 among Denny's Inc., as the Borrower, Denny's Corporation, as Parent, and each of the Subsidiaries of Parent party thereto, as Guarantors, and Wells Fargo Bank, National Association, as Administrative Agent on behalf of the Lenders.
10.2	Denny's Corporation 2017 Omnibus Incentive Plan (incorporated by reference to Exhibit 99.1 to the Registration Statement on Form S-8 of Denny's Corporation (Commission File No. 333-217843).
31.1	Certification of John C. Miller, President and 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 F. Mark Wolfinger, Executive Vice President, Chief Administrative Officer 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, President and Chief Executive Officer of Denny's Corporation, and F. Mark Wolfinger, Executive Vice President, Chief Administrative Officer 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	XBRL Instance Document
101.SCH	XBRL Taxonomy Extension Schema Document
101.CAL	XBRL Taxonomy Extension Calculation Linkbase Document
101.LAB	XBRL Taxonomy Extension Label Linkbase Document
101.PRE	XBRL Taxonomy Extension Presentation Linkbase Document
101.DEF	XBRL Taxonomy Extension Definition Linkbase Document

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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:	August 1, 2017	By:	/s/ F. Mark Wolfinger
			F. Mark Wolfinger
			Executive Vice President, Chief Administrative Officer and Chief Financial Officer
Date:	August 1, 2017	By:	/s/ Jay C. Gilmore
			Jay C. Gilmore
			Vice President, Chief Accounting Officer and Corporate Controller

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EX-10.1

THIRD AMENDMENT TO

SECOND AMENDED AND RESTATED CREDIT AGREEMENT

THIS THIRD AMENDMENT TO SECOND AMENDED AND RESTATED CREDIT AGREEMENT (this “Amendment”), dated as of July 31, 2017, is by and among DENNY’S, INC., a Florida corporation (“Denny’s” or the “Borrower”), DENNY’S CORPORATION, a Delaware corporation (“Parent”), each of those Subsidiaries of Parent party hereto (Parent and such Subsidiaries, each a “Guarantor” and collectively, the “Guarantors”), WELLS FARGO BANK, NATIONAL ASSOCIATION, as administrative agent on behalf of the Lenders under the Credit Agreement (as hereinafter defined) (in such capacity, the “Administrative Agent”), and the Lenders party hereto.

W I T N E S S E T H

WHEREAS, the Borrower, the Parent, the other Guarantors, certain banks and financial institutions from time to time party thereto (the “Lenders”) and the Administrative Agent are parties to that certain Second Amended and Restated Credit Agreement dated as of March 30, 2015 (as amended by that certain First Amendment to Second Amended and Restated Credit Agreement dated as of October 30, 2015, as amended by that certain Second Amendment to Second Amended and Restated Credit Agreement dated as of April 8, 2016 and as further amended, modified, extended, restated, replaced, or supplemented from time to time, the “Credit Agreement”; capitalized terms used herein and not otherwise defined herein shall have the meanings ascribed thereto in the Credit Agreement);

WHEREAS, the Loan Parties have requested that the Required Lenders make certain amendments to the Credit Agreement as set forth herein; and

WHEREAS, the Required Lenders have agreed to amend the Credit Agreement, in each case, subject to the terms and conditions set forth herein.

NOW, THEREFORE, in consideration of the agreements hereinafter set forth, and for other good and valuable consideration, the receipt and adequacy of which are hereby acknowledged, the parties hereto agree as follows:

ARTICLE I

AMENDMENTS TO CREDIT AGREEMENT

1.1Amendment to “Consolidated EBITDA”. The definition of “Consolidated EBITDA” in Section 1.01 of the Credit Agreement is hereby amended and restated in its entirety as follows:

“Consolidated EBITDA” means, at any date of determination, an amount equal to Consolidated Net Income of Parent and its Subsidiaries on a consolidated basis for the most recently completed Measurement Period plus (a) the following to the extent

deducted in calculating such Consolidated Net Income: (i) Consolidated Interest Expense, (ii) the provision for Federal, state, local and foreign income taxes payable, (iii) depreciation and amortization expense, (iv) other non‑cash charges (including, without limitation, stock compensation expenses, deferred compensation adjustments, impairment charges, restructuring and exit costs, losses resulting from the Advantica Pension Plan Termination and other non‑operating expenses (income)), (v) the cumulative effect of any change in accounting principles, (vi) any net loss attributable to an Asset Sale, (vii) any non‑recurring expenses related to, arising out of or incurred in connection with the Transactions (in each case of or by Parent and its Subsidiaries for such Measurement Period), (viii) lease buy‑out payments in an amount not to exceed $1,000,000 in any Measurement Period, (ix) cash payments in connection with the Advantica Pension Plan Termination in an aggregate amount not to exceed $15,000,000 for all Measurement Periods and (x) for the fiscal year ending December 27, 2017 only, the one-time non-recurring expenses incurred in connection with the Borrower’s human capital management system and the one-time non-recurring expenses related to the implementation of the Borrower’s cloud-based ERP system in an aggregate amount for both such matters not to exceed $6,000,000 and minus, (b) the following to the extent included in calculating such Consolidated Net Income: (i) the amount of cash expended in such Measurement Period in respect of any amount that, under clause (a)(iv) above, was taken into account in determining Consolidated EBITDA for such or any prior Measurement Period, (ii) any net gain attributable to an Asset Sale, (iii) Federal, state, local and foreign income tax credits and (iv) other non‑cash items (including, without limitation, stock compensation benefits, deferred compensation adjustments, restructuring and exit cost reversals, gains resulting from the Advantica Pension Plan Termination and other non‑operating income) increasing Consolidated Net Income (in each case of or by Parent and its Subsidiaries for such Measurement Period); provided, however, that after the occurrence of any acquisition of any Person by Parent or any Subsidiary of Parent, Consolidated EBITDA for each Measurement Period that includes the date of occurrence of such acquisition will, solely for purposes of determining compliance with Section 7.10(a), be determined on a pro forma basis, based on the actual historical results of operations of such Person, as if such acquisition had occurred on the first day of such Measurement Period.

1.2Amendment to Exhibit C [Form of Compliance Certificate]. Schedule 2 to Exhibit C [Form of Compliance Certificate] to the Credit Agreement is hereby amended by inserting the following as a new Item A(a)(11) immediately after Item A(a)(10) therein:

11.for the fiscal year ending December 27, 2017

only, the one-time non-recurring expenses

incurred in connection with the Borrower’s human

capital management system and the one-time

non-recurring expenses related to the

implementation of the Borrower’s cloud-based ERP

system in an aggregate amount for both such

matters not to exceed $6,000,000: $_________

2

ARTICLE II

CONDITIONS

2.1Closing Conditions. This Amendment shall be deemed effective as of the date set forth above upon receipt by the Administrative Agent of a copy of this Amendment duly executed by each of the Loan Parties, the Administrative Agent and the Required Lenders.

ARTICLE III

MISCELLANEOUS

3.1Amended Terms. On and after the date hereof, all references to the Credit Agreement in each of the Loan Documents shall hereafter mean the Credit Agreement as amended by this Amendment. Except as specifically amended hereby or otherwise agreed, the Credit Agreement is hereby ratified and confirmed and shall remain in full force and effect according to its terms.

3.2Representations and Warranties of the Loan Parties. Each of the Loan Parties represents and warrants as follows:

(a)Each Loan Party has all requisite power and authority and has taken all necessary corporate and other action to authorize the execution, delivery and performance of this Amendment in accordance with its terms.

(b)This Amendment has been duly executed and delivered by the duly authorized officers of each Loan Party that is a party hereto and constitutes a legal, valid and binding obligation of each Loan Party, enforceable against each Loan Party that is party thereto in accordance with its terms.

(c)No approval, consent, exemption, authorization, or other action by, or notice to, or filing with, any Governmental Authority or any other Person is necessary or required for the execution, delivery, performance, validity or enforceability of this Amendment.

(d)The representations and warranties set forth in Article V of the Credit Agreement and in any other Loan Document are true and correct in all material respects as of the date hereof (except for (i) those which expressly relate to an earlier date, which shall be true and correct in all material respects as of such earlier date, (ii) those that are qualified by materiality or reference to Material Adverse Effect, which are true and correct in all respects and (iii) those contained in subsections (a) and (b) of Section 5.05 shall be deemed to refer to the most recent financial statements furnished pursuant to clauses (a) and (b), respectively, of Section 6.01 of the Credit Agreement).

(e)No event has occurred and is continuing which constitutes a Default or an Event of Default.

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(f)The Collateral Documents continue to create a valid security interest in, and Lien upon, the Collateral, in favor of the Administrative Agent, for the benefit of the Lenders, which security interests and Liens are perfected in accordance with the terms of the Collateral Documents and prior to all Liens other than Permitted Liens.

(g)Each Guarantor affirms all of its obligations under the Loan Documents and agrees that this Amendment and all documents executed in connection herewith do not operate to reduce or discharge its obligations under the Credit Agreement or the other Loan Documents.

(h)The Obligations of the Loan Parties are not reduced or modified by this Amendment and are not subject to any offsets, defenses or counterclaims.

3.3Reaffirmation of Obligations. Each Loan Party hereby ratifies the Credit Agreement and each other Loan Document to which it is a party and acknowledges and reaffirms (a) that it is bound by all terms of the Credit Agreement and each other Loan Document to which it is a party applicable to it and (b) that it is responsible for the observance and full performance of its respective obligations under the Loan Documents.

3.4Loan Document. This Amendment shall constitute a Loan Document under the terms of the Credit Agreement.

3.5Expenses. The Borrower agrees to pay all reasonable costs and expenses of Administrative Agent in connection with the preparation, execution and delivery of this Amendment, including without limitation the reasonable fees and expenses of the Administrative Agent’s legal counsel.

3.6Entirety. This Amendment and the other Loan Documents embody the entire agreement among the parties hereto and supersede all prior agreements and understandings, oral or written, if any, relating to the subject matter hereof.

3.7Counterparts; Telecopy. This Amendment may be executed in any number of counterparts, each of which when so executed and delivered shall be an original, but all of which shall constitute one and the same instrument. Delivery of an executed counterpart to this Amendment by telecopy or other electronic means shall be as delivery of a manually executed counterpart of this Amendment.

3.8GOVERNING LAW.THIS AMENDMENT SHALL BE GOVERNED BY, AND SHALL BE CONSTRUED AND ENFORCED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK.

3.9Successors and Assigns. This Amendment shall be binding upon and inure to the benefit of the parties hereto and their respective permitted successors and assigns.

4

3.10Consent to Jurisdiction; Service of Process; Waiver of Jury Trial. The jurisdiction, services of process and waiver of jury trial provisions set forth in Sections 10.14 and 10.15 of the Credit Agreement are hereby incorporated by reference, mutatis mutandis.

[Signature pages to follow]

5

IN WITNESS WHEREOF the parties hereto have caused this Amendment to be duly executed on the date first above written.

BORROWER:DENNY’S, INC.,

a Florida corporation

By: /s/ F. Mark Wolfinger            

Name: F. Mark Wolfinger

Title: Executive Vice President, Chief

Administrative Officer and Chief Financial

Officer

GUARANTORS:                    DENNY’S CORPORATION,

a Delaware corporation

By: /s/ F. Mark Wolfinger            

Name: F. Mark Wolfinger

Title: Executive Vice President, Chief

Administrative Officer and Chief Financial

Officer

DENNY’S REALTY, LLC,

a Delaware limited liability company

By:DFO, LLC, its Sole Member

By: Denny’s Inc., its Sole Member

By: /s/ F. Mark Wolfinger    

Name: F. Mark Wolfinger

Title: Executive Vice President,

Chief Administrative Officer and

Chief Financial Officer

DFO, LLC,

a Delaware limited liability company

By:Denny’s Inc., its Sole Member

By: /s/ F. Mark Wolfinger        

Name: F. Mark Wolfinger

Title: Executive Vice President, Chief

Administrative Officer and Chief Financial

Officer

DENNY’S, INC.

THIRD AMENDMENT TO

SECOND AMENDED AND RESTATED CREDIT AGREEMENT

AGENT AND LENDERS:WELLS FARGO BANK, NATIONAL

ASSOCIATION, as Administrative Agent,

Issuing Lender and Lender

By:     /s/ Maureen S. Malphus        

Name:     Maureen S. Malphus

Title:     Vice President

DENNY’S, INC.

THIRD AMENDMENT TO

SECOND AMENDED AND RESTATED CREDIT AGREEMENT

REGIONS BANK

By: /s/ Kelly Nyquist            

Name: Kelly Nyquist

Title: Director

DENNY’S, INC.

THIRD AMENDMENT TO

SECOND AMENDED AND RESTATED CREDIT AGREEMENT

CITIZENS BANK, N.A.

By: /s/ Annie M. Spagnolo        

Name: Annie M. Spagnolo

Title: Assistant Vice President

DENNY’S, INC.

THIRD AMENDMENT TO

SECOND AMENDED AND RESTATED CREDIT AGREEMENT

BANK OF AMERICA, N.A.

By: /s/ Allan R. Watson, Jr.        

Name: Allan R. Watson, Jr.

Title: Vice President

DENNY’S, INC.

THIRD AMENDMENT TO

SECOND AMENDED AND RESTATED CREDIT AGREEMENT

BRANCH BANKING & TRUST COMPANY

By:     /s/ Kelly Attayek            

Name: Kelly Attayek

Title: Assistant Vice President

DENNY’S, INC.

THIRD AMENDMENT TO

SECOND AMENDED AND RESTATED CREDIT AGREEMENT

SYNOVUS BANK

By: /s/ Michael Sawicki        

Name: Michael Sawicki

Title: Director, Corporate Banking

DENNY’S, INC.

THIRD AMENDMENT TO

SECOND AMENDED AND RESTATED CREDIT AGREEMENT

FIFTH THIRD BANK

By: /s/ Christopher Capecci        

Name: Christopher Capecci

Title: Director

DENNY’S, INC.

THIRD AMENDMENT TO

SECOND AMENDED AND RESTATED CREDIT AGREEMENT

BANK OF THE WEST

By: /s/ Mary King            

Name: Mary King

Title: Vice President

DENNY’S, INC.

THIRD AMENDMENT TO

SECOND AMENDED AND RESTATED CREDIT AGREEMENT

CADENCE BANK, N.A.

By: /s/ John M. Huss            

Name: John M. Huss

Title: Managing Director

DENNY’S, INC.

THIRD AMENDMENT TO

SECOND AMENDED AND RESTATED CREDIT AGREEMENT

MUFG UNION BANK, N.A.

By: /s/ Charles W. Shaw        

Name: Charles W. Shaw

Title: Authorized Signatory

DENNY’S, INC.

THIRD AMENDMENT TO

SECOND AMENDED AND RESTATED CREDIT AGREEMENT

EX-31.1

Exhibit 31.1

CERTIFICATION

I, John C. Miller, certify that:

1. I have reviewed this report on Form 10-Q of Denny’s Corporation;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a) designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b) designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c) evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d) disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent function):

a) all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal controls over financial reporting.

Date: August 1, 2017	By:	/s/ John C. Miller
		John C. Miller
		President and Chief Executive Officer

EX-31.2

Exhibit 31.2

CERTIFICATION

I, F. Mark Wolfinger, certify that:

1. I have reviewed this report on Form 10-Q of Denny’s Corporation;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a) designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b) designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c) evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d) disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent function):

a) all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal controls over financial reporting.

Date: August 1, 2017	By:	/s/ F. Mark Wolfinger
		F. Mark Wolfinger
		Executive Vice President,
		Chief Administrative Officer and
		Chief Financial Officer

EX-32.1

Exhibit 32.1

CERTIFICATION

John C. Miller

President and Chief Executive Officer of Denny’s Corporation

and

F. Mark Wolfinger

Executive Vice President, Chief Administrative Officer and Chief Financial Officer

Pursuant to 18 U.S.C. Section 1350,

As Adopted Pursuant to

Section 906 of the Sarbanes-Oxley Act of 2002

In connection with the Quarterly Report of Denny’s Corporation (the “Company”) on Form 10-Q for the period ended June 28, 2017 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, John C. Miller, President and Chief Executive Officer of the Company, and I, F. Mark Wolfinger, Executive Vice President, Chief Administrative Officer and Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

1) The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Date: August 1, 2017	By:	/s/ John C. Miller
		John C. Miller
		President and Chief Executive Officer

Date: August 1, 2017	By:	/s/ F. Mark Wolfinger
		F. Mark Wolfinger
		Executive Vice President,
		Chief Administrative Officer and
		Chief Financial Officer

A signed original of this written statement required by Section 906, or other document authenticating, acknowledging, or otherwise adopting the signature that appears in typed form within the electronic version of this written statement required by Section 906, has been provided to Denny’s Corporation and will be retained by Denny’s Corporation and furnished to the Securities and Exchange Commission or its staff upon request.

XML

Document and Entity Information - shares	6 Months Ended
	Jun. 28, 2017	Jul. 31, 2017
Document and Entity Information [Abstract]
Entity Registrant Name	DENNYS CORP
Entity Central Index Key	0000852772
Current Fiscal Year End Date	--12-27
Entity Well-known Seasoned Issuer	No
Entity Voluntary Filers	No
Entity Current Reporting Status	Yes
Entity Filer Category	Large Accelerated Filer
Entity Common Stock, Shares Outstanding		67,175,070
Document Fiscal Year Focus	2017
Document Fiscal Period Focus	Q2
Document Type	10-Q
Amendment Flag	false
Document Period End Date	Jun. 28, 2017

XML

Condensed Consolidated Balance Sheets (Unaudited) - USD ($) $ in Thousands	Jun. 28, 2017	Dec. 28, 2016
Current assets:
Cash and cash equivalents	$ 1,668	$ 2,592
Receivables	16,742	19,841
Inventories	3,047	3,046
Assets held for sale	732	1,020
Prepaid and other current assets	5,821	9,408
Total current assets	28,010	35,907
Property, net of accumulated depreciation of $239,689 and $255,185, respectively	135,653	133,102
Goodwill	36,308	35,233
Intangible assets, net	56,391	54,493
Deferred financing costs, net	1,639	1,936
Deferred income taxes	21,754	17,683
Other noncurrent assets	27,149	27,797
Total assets	306,904	306,151
Current liabilities:
Current maturities of capital lease obligations	3,324	3,285
Accounts payable	21,428	25,289
Other current liabilities	56,521	64,796
Total current liabilities	81,273	93,370
Long-term liabilities:
Long-term debt, less current maturities	235,000	218,500
Capital lease obligations, less current maturities	26,362	23,806
Liability for insurance claims, less current portion	14,635	14,853
Other noncurrent liabilities	29,533	26,734
Total long-term liabilities	305,530	283,893
Total liabilities	386,803	377,263
Commitments and contingencies
Shareholders' equity (deficit)
Common stock $0.01 par value; shares authorized - 135,000; June 28, 2017: 107,540 shares issued and 68,183 shares outstanding; December 28, 2016: 107,115 shares issued and 71,358 shares outstanding	1,075	1,071
Paid-in capital	589,351	577,951
Deficit	(357,301)	(382,843)
Accumulated other comprehensive loss, net of tax	(3,546)	(1,407)
Shareholders’ equity before treasury stock	229,579	194,772
Treasury stock, at cost, 39,357 and 35,757 shares, respectively	(309,478)	(265,884)
Total shareholders' deficit	(79,899)	(71,112)
Total liabilities and shareholders' deficit	$ 306,904	$ 306,151

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Condensed Consolidated Balance Sheets (Unaudited) (Parenthetical) - USD ($) shares in Thousands, $ in Thousands	Jun. 28, 2017	Dec. 28, 2016
Assets [Abstract]
Accumulated depreciation	$ 239,689	$ 255,185
Shareholders' equity (deficit)
Common stock, par value (in dollars per share)	$ 0.01	$ 0.01
Common stock, shares authorized	135,000	135,000
Common stock, shares issued	107,540	107,115
Common stock, shares outstanding	68,183	71,358
Treasury stock, at cost, shares	39,357	35,757

XML

Condensed Consolidated Statements of Income (Unaudited) - USD ($) shares in Thousands, $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 28, 2017	Jun. 29, 2016	Jun. 28, 2017	Jun. 29, 2016
Revenue:
Company restaurant sales	$ 98,355	$ 89,210	$ 192,134	$ 179,596
Franchise and license revenue	35,021	35,105	69,152	69,361
Total operating revenue	133,376	124,315	261,286	248,957
Costs of company restaurant sales:
Product costs	24,769	21,781	47,902	44,434
Payroll and benefits	38,492	34,088	75,889	68,549
Occupancy	5,503	4,993	10,237	9,793
Other operating expenses	12,933	11,975	25,504	24,172
Total costs of company restaurant sales	81,697	72,837	159,532	146,948
Costs of franchise and license revenue	10,244	10,759	19,990	20,762
General and administrative expenses	16,581	16,206	34,090	33,133
Depreciation and amortization	5,799	5,105	11,535	10,598
Operating (gains), losses and other charges, net	2,046	24,241	2,829	24,116
Total operating costs and expenses, net	116,367	129,148	227,976	235,557
Operating income (loss)	17,009	(4,833)	33,310	13,400
Interest expense, net	3,740	3,014	7,281	5,788
Other nonoperating income, net	(410)	(119)	(767)	(92)
Net income (loss) before income taxes	13,679	(7,728)	26,796	7,704
Provision for income taxes	4,930	3,824	9,674	9,302
Net income (loss)	$ 8,749	$ (11,552)	$ 17,122	$ (1,598)
Basic net income (loss) per share	$ 0.13	$ (0.15)	$ 0.24	$ (0.02)
Diluted net income (loss) per share	$ 0.12	$ (0.15)	$ 0.24	$ (0.02)
Basic weighted average shares outstanding	69,407	76,730	70,205	76,895
Diluted weighted average shares outstanding	71,661	76,730	72,459	76,895

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Condensed Consolidated Statements of Comprehensive Income (Unaudited) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 28, 2017	Jun. 29, 2016	Jun. 28, 2017	Jun. 29, 2016
Statement of Comprehensive Income [Abstract]
Net income (loss)	$ 8,749	$ (11,552)	$ 17,122	$ (1,598)
Other comprehensive income, net of tax:
Minimum pension liability adjustment, net of tax of $9, $2,152, $18 and $2,160	14	21,825	28	21,838
Recognition of unrealized loss on hedge transactions, net of tax of $(985), $(2,057), $(1,382) and $(5,054)	(1,544)	(3,221)	(2,167)	(7,914)
Other comprehensive (loss) income	(1,530)	18,604	(2,139)	13,924
Total comprehensive income	$ 7,219	$ 7,052	$ 14,983	$ 12,326

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Condensed Consolidated Statements of Comprehensive Income (Unaudited) (Parenthetical) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 28, 2017	Jun. 29, 2016	Jun. 28, 2017	Jun. 29, 2016
Statement of Comprehensive Income [Abstract]
Minimum pension liability adjustment, tax	$ 9	$ 2,152	$ 18	$ 2,160
Unrealized loss on hedge transactions, tax	$ (985)	$ (2,057)	$ (1,382)	$ (5,054)

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Condensed Consolidated Statement of Shareholders' Deficit (Unaudited) - USD ($) shares in Thousands, $ in Thousands	Total	Common Stock [Member]	Treasury Stock [Member]	Paid-in Capital [Member]	(Deficit) [Member]	Accumulated Other Comprehensive Loss, Net [Member]	November 2016 Accelerated Share Repurchase [Member] Treasury Stock [Member]
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Cumulative effect adjustment	$ 8,971			$ 551	$ 8,420
Balance at Dec. 28, 2016	$ (71,112)	$ 1,071	$ (265,884)	577,951	(382,843)	$ (1,407)
Balance, common stock, shares issued at Dec. 28, 2016	107,115	107,115
Balance, treasury stock, at cost, shares at Dec. 28, 2016	(35,757)		(35,757)
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Net income	$ 17,122				17,122
Other comprehensive loss	(2,139)					(2,139)
Share-based compensation on equity classified awards	3,834			3,834
Purchase of treasury stock	(36,710)		$ (36,710)
Purchase of treasury stock (in shares)			(3,046)				(554)
Equity forward contract settlement	0		$ (6,884)	6,884
Issuance of common stock for share-based compensation	0	$ 4		(4)
Issuance of common stock for share-based compensation (in shares)		398
Exercise of common stock options	135	$ 0		135
Exercise of common stock options (in shares)		27
Balance at Jun. 28, 2017	$ (79,899)	$ 1,075	$ (309,478)	$ 589,351	$ (357,301)	$ (3,546)
Balance, common stock, shares issued at Jun. 28, 2017	107,540	107,540
Balance, treasury stock, at cost, shares at Jun. 28, 2017	(39,357)		(39,357)

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Condensed Consolidated Statements of Cash Flows (Unaudited) - USD ($) $ in Thousands	6 Months Ended
	Jun. 28, 2017	Jun. 29, 2016
Cash flows from operating activities:
Net income (loss)	$ 17,122	$ (1,598)
Adjustments to reconcile net income (loss) to cash flows provided by operating activities:
Depreciation and amortization	11,535	10,598
Operating (gains), losses and other charges, net	2,829	24,116
Amortization of deferred financing costs	297	296
(Gain) loss on early extinguishments of debt and leases	68	(52)
Deferred income tax expense	6,291	5,390
Share-based compensation	4,053	3,850
Decrease (increase) in assets:
Receivables	3,741	2,455
Inventories	(1)	322
Other current assets	3,587	7,275
Other assets	(3,869)	(1,113)
Increase (decrease) in liabilities:
Accounts payable	(1,986)	(671)
Accrued salaries and vacations	(9,692)	(12,730)
Accrued taxes	276	94
Other accrued liabilities	(365)	(13,405)
Other noncurrent liabilities	(1,068)	(1,975)
Net cash flows provided by operating activities	32,818	22,852
Cash flows from investing activities:
Capital expenditures	(8,208)	(7,973)
Acquisition of restaurants and real estate	(6,871)	(1,476)
Proceeds from disposition of property	1,032	1,883
Collections on notes receivable	3,186	730
Issuance of notes receivable	(1,825)	(637)
Net cash flows used in investing activities	(12,686)	(7,473)
Cash flows from financing activities:
Revolver borrowings	58,500	30,000
Revolver payments	(42,000)	(27,000)
Long-term debt payments	(1,633)	(1,555)
Proceeds from exercise of stock options	135	323
Purchase of treasury stock	(35,629)	(7,764)
Net bank overdrafts	(429)	(4,361)
Net cash flows used in financing activities	(21,056)	(10,357)
Increase (decrease) in cash and cash equivalents	(924)	5,022
Cash and cash equivalents at beginning of period	2,592	1,671
Cash and cash equivalents at end of period	$ 1,668	$ 6,693

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Introduction and Basis of Presentation

6 Months Ended

Jun. 28, 2017

Organization, Consolidation and Presentation of Financial Statements [Abstract]

Introduction and Basis of Presentation

Introduction and Basis of Presentation

Denny’s Corporation, or Denny’s, is one of America’s largest full-service restaurant chains based on number of restaurants. At June 28, 2017, the Denny's brand consisted of 1,724 restaurants, 1,552 of which were franchised/licensed restaurants and 172 of which were company operated.

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, including those for the above-described items, are reasonable.

These interim condensed consolidated financial statements should be read in conjunction with our consolidated financial statements and notes thereto for the year ended December 28, 2016 and the related Management’s Discussion and Analysis of Financial Condition and Results of Operations, both of which are contained in our Annual Report on Form 10-K for the fiscal year ended December 28, 2016. The results of operations for the interim periods presented are not necessarily indicative of the results for the entire fiscal year ending December 27, 2017.

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Summary of Significant Accounting Policies

6 Months Ended

Jun. 28, 2017

Accounting Policies [Abstract]

Summary of Significant Accounting Policies

Summary of Significant Accounting Policies

Newly Adopted Accounting Standards

Effective December 29, 2016, we adopted Accounting Standards Update (“ASU”) 2016-09, “Compensation - Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting”. The new guidance simplifies several aspects of the accounting for share-based payment transactions, including the recognition of excess tax benefits and deficiencies, the classification of those excess tax benefits on the statement of cash flows, an accounting policy election for forfeitures, the amount an employer can withhold to cover income taxes and still qualify for equity classification and the classification of those taxes paid on the statement of cash flows.

As required by the guidance, excess tax benefits recognized on share-based compensation expense are reflected on a prospective basis in our condensed consolidated statements of income as a component of the provision for income taxes rather than paid-in capital. The cumulative-effect adjustment to retained earnings from previously unrecognized excess tax benefits resulted in an $8.8 million increase in deferred tax assets and a decrease to opening deficit.

In addition, we have elected to account for forfeitures as they occur. The cumulative-effect adjustment to retained earnings from previously estimated forfeitures resulted in a $0.4 million increase to opening deficit, a $0.2 million increase in deferred tax assets and a $0.6 million increase to additional paid-in capital. As allowed by the update, on a retrospective basis, cash flows related to excess tax benefits recognized on stock-based compensation expense are classified as operating activities in the condensed consolidated statements of cash flows. There was no material impact on the prior periods retrospectively adjusted. Cash paid on employees’ behalf related to shares withheld for tax purposes continues to be classified as financing activites.

In January 2017, the Financial Accounting Standards Board (“FASB”) issued ASU 2017-04, “Intangibles—Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment”. The new guidance simplifies the subsequent measurement of goodwill by eliminating the second step of the two-step impairment test. Impairment is measured based on the excess of a reporting unit's carrying amount over its fair value. A qualitative assessment may still be completed first for an entity to determine if a quantitative impairment test is necessary. We early adopted ASU 2017-04 as of March 29, 2017 on a prospective basis. The adoption of this guidance did not have any impact on our consolidated financial statements.

Accounting Standards to be Adopted

In May 2014, the FASB issued ASU 2014-09, “Revenue from Contracts with Customers (Topic 606)”. The new guidanceclarifies the principles used to recognize revenue for all entities and requires companies to recognize revenue when it transfers goods or service to a customer in an amount that reflects the consideration to which a company expects to be entitled. The FASB has subsequently amended this guidance by issuing additional ASUs that provide clarification and further guidance around areas identified as potential implementation issues, including principal versus agent considerations, licensing and identifying performance obligations, assessing collectability, presentation of sales taxes received from customers, noncash consideration, contract modification and clarification of using the full retrospective approach upon adoption. All of the standards are effective for annual and interim periods beginning after December 15, 2017 (our fiscal 2018). The guidance allows for either a retrospective or cumulative effect transition method with early application permitted.

The guidance is not expected to impact the recognition of company restaurant sales or royalties from franchised restaurants. Upon adoption, initial franchise fees, which are currently recognized upon the opening of a franchise restaurant, are expected to be deferred and recognized over the term of the underlying franchise agreement. The effect of the required deferral of initial franchise fees received in a given year will be mitigated by the recognition of revenue from fees retrospectively deferred from prior years. We are currently reviewing our franchise agreements to obtain the data necessary to implement the guidance and cannot quantify the impact at this time.

We also believe the new guidance will impact our advertising arrangements with franchisees. Currently we record advertising expense net of contributions from franchisees to our advertising programs, including local co-operatives. Under the new guidance, we would include franchisee contributions to and expenditures from our advertising programs on a gross basis within the consolidated statements of income. While this change will materially impact the gross amount of reported franchise and license revenue and costs of franchise and license revenue, the impact would be an offsetting increase to both revenue and expense such that there will not be a significant, if any, impact on operating income and net income.

We are currently evaluating the impact this guidance will have on the recognition of other transactions on our consolidated financial statements, including gift card breakage and the effect it will have on our disclosures. We have not yet selected a transition method.

In January 2016, the FASB issued ASU 2016-01, “Financial Instruments—Overall (Subtopic 825-10): Recognition and Measurement of Financial Assets and Financial Liabilities”. The new guidance requires equity investments (except those accounted for under the equity method of accounting, or those that result in consolidation of the investee) to be measured at fair value with changes in fair value recognized in net income, requires public business entities to use the exit price notion when measuring the fair value of financial instruments for disclosure purposes, requires separate presentation of financial assets and financial liabilities by measurement category and form of financial asset, and eliminates the requirement for public business entities to disclose the method(s) and significant assumptions used to estimate the fair value that is required to be disclosed for financial instruments measured at amortized cost. ASU 2016-01 is effective for annual and interim periods beginning after December 15, 2017 (our fiscal 2018) with early adoption permitted. We are currently evaluating the impact the adoption of this guidance will have on our consolidated financial statements.

In June 2016, the FASB issued ASU 2016-13, “Financial Instruments—Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments”. The new guidance replaces the incurred loss impairment methodology in current GAAP with a methodology that reflects expected credit losses and requires consideration of a broader range of reasonable and supportable information to inform financial statement users of credit loss estimates. ASU 2016-13 is effective for annual and interim periods beginning after December 15, 2019 (our fiscal 2020) with early adoption permitted for annual and interim periods beginning after December 15, 2018 (our fiscal 2019). We do not expect the adoption of this guidance to have a material impact on our consolidated financial statements.

In February 2016, the FASB issued ASU 2016-02, “Leases (Topic 842)”,which provides guidance for accounting for leases. The new guidance requires companies to recognize the assets and liabilities for the rights and obligations created by leased assets. The accounting guidance for lessors is largely unchanged. ASU 2016-02 is effective for annual and interim periods beginning after December 15, 2018 (our fiscal 2019) with early adoption permitted. The guidance will be adopted using a modified retrospective approach. Based on a preliminary assessment, we expect the adoption will result in a significant increase in the assets and liabilities on our consolidated balance sheets, as most of our operating lease commitments will be recognized as operating lease liabilities and right-of-use assets. We are continuing our evaluation, which may identify additional impacts this standard will have on our consolidated financial statements and related disclosures.

In August 2016, the FASB issued ASU 2016-15, “Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments (a consensus of the Emerging Issues Task Force)”. The new guidance addresses eight specific cash flow issues with the objective of reducing the existing diversity in practice. ASU 2016-15 is effective for annual and interim periods beginning after December 15, 2017 (our fiscal 2018) with early adoption permitted. The guidance is to be applied using a retrospective transition method to each period presented. We do not expect the adoption of this guidance to have a material impact on our consolidated financial statements.

In January 2017, the FASB issued ASU 2017-01, “Business Combinations (Topic 805): Clarifying the Definition of a Business”. The new guidance clarifies the definition of a business. ASU 2017-01 is effective for annual and interim periods beginning after December 15, 2017 (our fiscal 2018) with early adoption permitted. The guidance is to be applied prospectively. We do not expect the adoption of this guidance to have a material impact on our consolidated financial statements.

In March 2017, the FASB issued ASU 2017-07, “Compensation—Retirement Benefits (Topic 715): Improving the Presentation of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Cost”. The new guidance requires an entity to report the service cost component in the same line on the income statement as other compensation costs arising from services rendered by the pertinent employees during the period. The other components of net benefit cost are required to be presented in the income statement separately from the service cost component and outside the subtotal of income from operations, if one is presented. If a separate line item is not used, the line item used in the income statement must be disclosed. ASU 2017-07 is effective for annual and interim periods beginning after December 15, 2017 (our fiscal 2018) with early adoption permitted. The guidance is to be applied prospectively. We do not expect the adoption of this guidance to have a material impact on our consolidated financial statements.

In May 2017, the FASB issued ASU 2017-09, “Compensation—Stock Compensation (Topic 718): Scope of Modification Accounting”. The new update provides guidance about which changes to the terms or conditions of a share-based payment award require an entity to apply modification accounting. ASU 2017-09 is effective for annual and interim periods beginning after December 15, 2017 (our fiscal 2018) with early adoption permitted. The guidance is to be applied prospectively. We do not expect the adoption of this guidance to have a material impact on our consolidated financial statements.

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.

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Receivables

6 Months Ended

Jun. 28, 2017

Receivables [Abstract]

Receivables

Receivables

Receivables were comprised of the following:

	June 28, 2017			December 28, 2016
	(In thousands)
Current assets:
Receivables:
Trade accounts receivable from franchisees	$	10,088		$	10,513
Financing receivables from franchisees	3,397			2,804
Vendor receivables	1,844			3,865
Credit card receivables	1,379			1,678
Other	314			1,261
Allowance for doubtful accounts	(280		)	(280		)
Total current receivables, net	$	16,742		$	19,841
Noncurrent assets (included as a component of other noncurrent assets):
Financing receivables from franchisees	$	480		$	732

During the two quarters ended June 28, 2017, we wrote-off $0.2 million of financing receivables from a franchisee.

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Goodwill and Other Intangible Assets

6 Months Ended

Jun. 28, 2017

Goodwill and Intangible Assets Disclosure [Abstract]

Goodwill and Other Intangible Assets

Goodwill and Other Intangible Assets

The following table reflects the changes in carrying amounts of goodwill.

	(In thousands)
Balance, December 28, 2016	$	35,233
Additions related to acquisition	1,060
Adjustments related to the sale of restaurants	15
Balance, June 28, 2017	$	36,308

Other intangible assets were comprised of the following:

	June 28, 2017				December 28, 2016
	Gross Carrying Amount		Accumulated Amortization		Gross Carrying Amount		Accumulated Amortization
	(In thousands)
Intangible assets with indefinite lives:
Trade names	$	44,077	$	—	$	44,076	$	—
Liquor licenses	166		—		166		—
Intangible assets with definite lives:
Franchise and license agreements	—		—		190		186
Reacquired franchise rights	14,175		2,027		11,498		1,251
Intangible assets	$	58,418	$	2,027	$	55,930	$	1,437

During the two quarters ended June 28, 2017, we acquired six franchised restaurants for $4.5 million, of which $2.7 million was allocated to reacquired franchise rights, $0.8 million to property and $1.1 million to goodwill. In addition, we recorded $1.2 million of capital leases in connection with the acquired franchised restaurants. We account for the acquisition of franchised restaurants using the acquisition method of accounting for business combinations. The purchase price allocations were based on Level 3 fair value estimates.

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Other Current Liabilities

6 Months Ended

Jun. 28, 2017

Other Liabilities, Current [Abstract]

Other Liabilities Disclosure [Text Block]

Other Current Liabilities

Other current liabilities consisted of the following:

	June 28, 2017		December 28, 2016
	(In thousands)
Accrued salaries and vacation	$	17,693	$	27,056
Accrued insurance, primarily current portion of liability for insurance claims	6,528		6,651
Accrued taxes	7,683		7,407
Accrued advertising	8,759		8,051
Gift cards	4,602		5,474
Other	11,256		10,157
Other current liabilities	$	56,521	$	64,796

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Operating (Gains), Losses and Other Charges, Net

6 Months Ended

Jun. 28, 2017

Other Income and Expenses [Abstract]

Operating (Gains), Losses and Other Charges, Net

Operating (Gains), Losses and Other Charges, Net

Operating (gains), losses and other charges, netare comprised of the following:

	Quarter Ended					Two Quarters Ended
	June 28, 2017		June 29, 2016			June 28, 2017			June 29, 2016
	(In thousands)
Pension settlement loss	$	—	$	24,297		$	—		$	24,297
Software implementation costs	1,544		—			3,668			—
Losses (gains) on sales of assets and other, net	205		(43		)	(1,235		)	(687		)
Restructuring charges and exit costs	297		(13		)	396			506
Operating (gains), losses and other charges, net	$	2,046	$	24,241		$	2,829		$	24,116

Software implementation costs of $3.7 million for the two quarters ended June 28, 2017 were the result of our investment in a new cloud-based Enterprise Resource Planning system. Gains on sales of assets and other, net of $1.2 million for the two quarters ended June 28, 2017 primarily related to real estate sold to a franchisee. The pre-tax pension settlement loss of $24.3 million related to the completion of the liquidation of the Advantica Pension Plan (the "Pension Plan") during the two quarters ended June 29, 2016. Gains on sales of assets and other, net of $0.7 million for the two quarters ended June 29, 2016 primarily related to restaurants sold to franchisees.

Restructuring charges and exit costs were comprised of the following: 

	Quarter Ended					Two Quarters Ended
	June 28, 2017		June 29, 2016			June 28, 2017		June 29, 2016
	(In thousands)
Exit costs	$	295	$	(36	)	$	326	$	115
Severance and other restructuring charges	2		23			70		391
Total restructuring charges and exit costs	$	297	$	(13	)	$	396	$	506

The components of the change in accrued exit cost liabilities are as follows:

	(In thousands)
Balance, December 28, 2016	$	1,896
Exit costs (1)	326
Payments, net of sublease receipts	(928		)
Interest accretion	49
Balance, June 28, 2017	1,343
Less current portion included in other current liabilities	319
Long-term portion included in other noncurrent liabilities	$	1,024

(1) Included as a component of operating (gains), losses and other charges, net.

As of June 28, 2017 and December 28, 2016, we had accrued severance and other restructuring charges of $0.2 million and $0.4 million, respectively. The balance as of June 28, 2017 is expected to be paid during the next 12 months.

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Fair Value of Financial Instruments

6 Months Ended

Jun. 28, 2017

Fair Value Disclosures [Abstract]

Fair Value Disclosures

Fair Value of Financial Instruments

Fair Value of Assets and Liabilities Measured on a Recurring and Nonrecurring Basis

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)		Valuation Technique
	(In thousands)
Fair value measurements as of June 28, 2017:
Deferred compensation plan investments (1)	$	11,818		$	11,818	$	—		$	—	market approach
Interest rate swaps, net (2)	(4,305		)	—		(4,305		)	—		income approach
Total	$	7,513		$	11,818	$	(4,305	)	$	—
Fair value measurements as of December 28, 2016:
Deferred compensation plan investments (1)	$	11,248		$	11,248	$	—		$	—	market approach
Interest rate swaps (2)	(756		)	—		(756		)	—		income approach
Total	$	10,492		$	11,248	$	(756	)	$	—

(1) The fair values of our deferred compensation plan investments are based on the closing market prices of the elected investments.

(2) The fair values of our interest rate swaps are based upon Level 2 inputs, which include valuation models as reported by our counterparties. The key inputs for the valuation models are quoted market prices, interest rates and forward yield curves. See Note 8 for details on the interest rate swaps.

Those assets and liabilities measured at fair value on a nonrecurring basis are summarized below:

	Significant Other Observable Inputs (Level 2)		Impairment Charges		Valuation Technique
	(In thousands)
Fair value measurements as of June 28, 2017:
Assets held for sale (1)	$	732	$	—	market approach
Fair value measurements as of December 28, 2016:
Assets held for sale (1)	$	1,020	$	1,098	market approach

(1) As of June 28, 2017 and December 28, 2016, assets were classified as assets held for sale and, if necessary, were written down to their fair value. The fair value of assets held for sale is based upon Level 2 inputs, which include sales agreements.

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Long-Term Debt

6 Months Ended

Jun. 28, 2017

Debt Disclosure [Abstract]

Long-Term Debt

Long-Term Debt

Denny's Corporation and certain of its subsidiaries have a credit facility consisting of a five-year $325 million senior secured revolver (with a $30 million letter of credit sublimit). As of June 28, 2017, we had outstanding revolver loans of $235.0 million and outstanding letters of credit under the senior secured revolver of $21.7 million. These balances resulted in availability of $68.3 million under the revolving facility. Prior to considering the impact of our interest rate swaps, described below, the weighted-average interest rate on outstanding revolver loans was 3.13% and 2.45% as of June 28, 2017 and December 28, 2016, respectively. Taking into consideration our interest rate swaps, the weighted-average interest rate of outstanding revolver loans was 3.17% and 2.74% as of June 28, 2017 and December 28, 2016, respectively.

A commitment fee is paid on the unused portion of the revolving credit facility and was 0.30% as of June 28, 2017. Borrowings under the credit facility bear a tiered interest rate, which is based on the Company’s consolidated leverage ratio and was set at LIBOR plus 200 basis points as of June 28, 2017. The maturity date for the credit facility is March 30, 2020.

The credit facility is available for working capital, capital expenditures and other general corporate purposes. The credit facility is guaranteed by the Company and its material subsidiaries and is secured by assets of the Company and its subsidiaries, including the stock of the Company's subsidiaries. It includes negative covenants that are usual for facilities and transactions of this type. The 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 June 28, 2017.

Interest Rate Hedges

We have interest rate swaps to hedge a portion of the cash flows of our floating rate debt. We designated the interest rate swaps as cash flow hedges of our exposure to variability in future cash flows attributable to payments of LIBOR due on specific notional debt obligations.

Based on the interest rate as determined by our consolidated leverage ratio in effect as of June 28, 2017, under the terms of the swaps, we will pay the following fixed rates on the notional amounts noted:

Period Covered	Notional Amount		Fixed Rate
	(In thousands)
March 31, 2015 - March 29, 2018	$	120,000	3.13	%
March 29, 2018 - March 31, 2025	170,000		4.44	%
April 1, 2025 - March 31, 2026	50,000		4.46	%

As of June 28, 2017, the fair value of the interest rate swaps was a net liability of $4.3 million, which is comprised of assets of $0.1 million recorded as a component of other noncurrent assets and liabilities of $4.4 million recorded as a component of other noncurrent liabilities in our Condensed Consolidated Balance Sheets. See Note 14 for the amounts recorded in accumulated other comprehensive loss related to the interest rate swaps.

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Defined Benefit Plans

6 Months Ended

Jun. 28, 2017

Retirement Benefits [Abstract]

Defined Benefit Plans

Defined Benefit Plans

During the second quarter of 2016, we completed the liquidation of the Advantica Pension Plan (the “Pension Plan”). Accordingly, we made a final contribution of $9.5 million to the Pension Plan. The resulting $67.7 million in Pension Plan assets were used to make lump sum payments and purchase annuity contracts, which are administered by a third-party provider. In addition, during the quarter, we recognized a pre-tax settlement loss of $24.3 million related to the liquidation, reflecting the recognition of unamortized actuarial losses that were recorded in accumulated other comprehensive income.

The components of net periodic benefit cost were as follows:

	Quarter Ended				Two Quarters Ended
	June 28, 2017		June 29, 2016		June 28, 2017		June 29, 2016
	(In thousands)
Pension Plan:
Service cost	$	—	$	—	$	—	$	105
Net periodic benefit cost	$	—	$	—	$	—	$	105
Other Defined Benefit Plans:
Interest cost	$	21	$	23	$	42	$	46
Amortization of net loss	23		22		46		43
Net periodic benefit cost	$	44	$	45	$	88	$	89

We made contributions of $0.2 million and $0.1 million to our other defined benefit plans during the two quarters ended June 28, 2017 and June 29, 2016, respectively. We expect to contribute $0.1 million to our other defined benefit plans over the remainder of fiscal 2017.

Additional minimum pension liability, net of tax, of $0.9 million related to our other defined benefit plans is reported as a component of accumulated other comprehensive loss in our Condensed Consolidated Statement of Shareholders’ Equity as of both June 28, 2017 and December 28, 2016, respectively.

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Share-Based Compensation

6 Months Ended

Jun. 28, 2017

Disclosure of Compensation Related Costs, Share-based Payments [Abstract]

Share-Based Compensation

Share-Based Compensation

Refer to Note 2 for the impact of the adoption of ASU 2016-09. Total share-based compensation cost included as a component of net income was as follows:

	Quarter Ended				Two Quarters Ended
	June 28, 2017		June 29, 2016		June 28, 2017		June 29, 2016
	(In thousands)
Performance share awards	$	1,904	$	1,688	$	3,844	$	3,422
Restricted stock units for board members	176		214		209		428
Total share-based compensation	$	2,080	$	1,902	$	4,053	$	3,850

Performance Share Awards

During the two quarters ended June 28, 2017, we granted certain employees approximately 0.3 million performance shares that vest based on the total shareholder return (“TSR”) of our common stock compared to the TSRs of a group of peer companies and 0.3 million performance shares that vest based on our Adjusted EBITDA growth rate, as defined under the terms of the award. As the TSR based performance shares contain a market condition, a Monte Carlo valuation was used to determine the grant date fair value of $13.05 per share. The performance shares based on the Adjusted EBITDA growth rate have a grant date fair value of $12.17 per share, the market value of our common stock on the date of grant. The awards granted to our named executive officers also contain a performance condition based on the attainment of an operating measure for the fiscal year ended December 27, 2017. The performance period for these performance shares is the three year fiscal period beginning December 29, 2016 and ending December 25, 2019. They will vest and be earned (from 0% to 150% of the target award for each such increment) at the end of the performance period.

During the two quarters ended June 28, 2017, we made payments of $3.9 million in cash and issued 0.4 million shares of common stock related to performance share awards.

As of June 28, 2017, we had approximately $11.4 million of unrecognized compensation cost related to all unvested performance share awards outstanding, which is expected to be recognized over a weighted average of 1.9 years.

Restricted Stock Units for Board Members

During the two quarters ended June 28, 2017, we granted approximately 0.1 million deferred stock units (which are equity classified) with a weighted average grant date fair value of $12.04 per unit to non-employee members of our Board of Directors. The deferred 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) or upon termination as a member of our Board of Directors. Also during the two quarters ended June 28, 2017, we made cash payments of $0.5 million related to the replacement cash awards issued in 2016 related to the canceled deferred stock units awards. As of June 28, 2017, we had approximately $1.0 million of unrecognized compensation cost related to all unvested restricted stock unit awards outstanding, which is expected to be recognized over a weighted average of 1.1 years.

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Income Taxes

6 Months Ended

Jun. 28, 2017

Income Tax Disclosure [Abstract]

Income Taxes

Income Taxes

The effective income tax rate was 36.0% for the quarter ended June 28, 2017 and 36.1% for the two quarters ended June 28, 2017 compared to (49.5)% and 120.7%, respectively, for the prior year periods. Refer to Note 2 for the impact of the adoption of ASU 2016-09. The 2016 period benefited by 3.2 percentage points from state jobs tax credits claimed for prior years' hiring activity. In addition, the 2016 rates were impacted by the recognition of a $2.1 million tax benefit related to the $24.3 million pre-tax settlement loss on the Pension Plan liquidation. This benefit was at a rate lower than the effective tax rate due to the previous recognition of an approximate $7.2 million tax benefit recognized with the reversal of our valuation allowance in 2011. Excluding the impact of the Pension Plan liquidation, our effective income tax rate would have been 35.8% for the two quarters ended June 29, 2016.

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Net Income Per Share

6 Months Ended

Jun. 28, 2017

Earnings Per Share [Abstract]

Net Income Per Share

Net Income Per Share

The amounts used for the basic and diluted net income per share calculations are summarized below:

	Quarter Ended					Two Quarters Ended
	June 28, 2017		June 29, 2016			June 28, 2017		June 29, 2016
						(In thousands, except for per share amounts)
Net income (loss)	$	8,749	$	(11,552	)	$	17,122	$	(1,598	)
Weighted average shares outstanding - basic	69,407		76,730			70,205		76,895
Effect of dilutive share-based compensation awards	2,254		—			2,254		—
Weighted average shares outstanding - diluted	71,661		76,730			72,459		76,895
Basic net income (loss) per share	$	0.13	$	(0.15	)	$	0.24	$	(0.02	)
Diluted net income (loss) per share	$	0.12	$	(0.15	)	$	0.24	$	(0.02	)
Anti-dilutive share-based compensation awards	606		2,636			606		2,636

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Supplemental Cash Flow Information

6 Months Ended

Jun. 28, 2017

Supplemental Cash Flow Information [Abstract]

Supplemental Cash Flow Information

Supplemental Cash Flow Information

	Two Quarters Ended
	June 28, 2017		June 29, 2016
	(In thousands)
Income taxes paid, net	$	2,668	$	938
Interest paid	$	6,718	$	5,215
Noncash investing and financing activities:
Property acquisition payable	$	—	$	2,973
Issuance of common stock, pursuant to share-based compensation plans	$	4,961	$	3,597
Execution of capital leases	$	4,225	$	4,623
Treasury stock payable	$	1,394	$	147
Notes received in connection with disposition of property	$	1,750	$	—

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Shareholders' Equity

6 Months Ended

Jun. 28, 2017

Stockholders' Equity Attributable to Parent [Abstract]

Shareholders' equity

Shareholders' Equity

Share Repurchase

Our credit facility permits the purchase of Denny’s stock and the payment of cash dividends subject to certain limitations. In May 2016, our Board of Directors approved a share repurchase program authorizing us to repurchase up to $100 million of our common stock (in addition to prior authorizations). Under this program, 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.

In November 2016, as part of our previously authorized share repurchase programs, we entered into a variable term, capped accelerated share repurchase (the “ASR”) agreement with MUFG Securities EMEA plc (“MUFG”), to repurchase an aggregate of $25 million of our common stock. Pursuant to the terms of the ASR agreement, we paid $25 million in cash and received approximately 1.5 million shares of our common stock (which represents the minimum shares to be delivered based on the cap price) and recorded $18.1 million of treasury stock related to these shares. The remaining balance of $6.9 million was recorded as additional paid-in capital in shareholders' equity as of December 28, 2016 as an equity forward contract.

During the two quarters ended June 28, 2017, we settled the ASR agreement with MUFG. As a result, we received final delivery of an additional 0.5 million shares of our common stock, bringing the total number of shares repurchased pursuant to the ASR agreement to 2.0 million. The total number of shares repurchased was based on a combined discounted volume-weighted average price (“VWAP”) of $12.36 per share, which was determined based on the average of the daily VWAP of our common stock, less a fixed discount, over the term of the ASR agreement. As a result of settling the ASR agreement, we recorded $6.9 million of treasury stock related to the settlement of the equity forward contract related to the ASR agreement.

In addition to the settlement of the ASR agreement, during the two quarters ended June 28, 2017, we repurchased 3.0 million shares of our common stock for approximately $36.7 million. This brings the total amount repurchased under the May 2016 repurchase program to 4.7 million shares of our common stock for approximately $57.5 million, leaving approximately $42.5 million of our common stock that can be repurchased under this program as of June 28, 2017.

Repurchased shares are included as treasury stock in our Condensed Consolidated Balance Sheets and our Condensed Consolidated Statement of Shareholders' Equity.

Accumulated Other Comprehensive Loss

The components of the change in accumulated other comprehensive loss were as follows:

	Pensions			Derivatives			Accumulated Other Comprehensive Loss
	(In thousands)
Balance as of December 28, 2016	$	(945	)	$	(462	)	$	(1,407	)
Amortization of net loss (1)	46			—			46
Net change in fair value of derivatives	—			(3,403		)	(3,403		)
Reclassification of derivatives to interest expense (2)	—			(146		)	(146		)
Income tax (expense) benefit related to items of other comprehensive loss	(18		)	1,382			1,364
Balance as of June 28, 2017	$	(917	)	$	(2,629	)	$	(3,546	)

(1) Before-tax amount related to our Other Defined Benefit Plans that was reclassified from accumulated other comprehensive loss and included as a component of pension expense within general and administrative expenses in our Condensed Consolidated Statements of Income during the two quarters ended June 28, 2017. See Note 9 for additional details.

(2) Amounts reclassified from accumulated other comprehensive loss into income, represent payments made to the counterparty for the effective portions of the interest rate swaps. These amounts are included as a component of interest expense in our Condensed Consolidated Statements of Income. We expect to reclassify approximately $0.7 million from accumulated other comprehensive loss related to our interest rate swaps during the next twelve months. See Note 8 for additional details.

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Commitments and Contingencies

6 Months Ended

Jun. 28, 2017

Commitments and Contingencies Disclosure [Abstract]

Commitments and Contingencies

Commitments and Contingencies

We have guarantees related to certain franchisee loans. Payments under these guarantees would result from the inability of a franchisee to fund required payments when due. Through June 28, 2017, no events had occurred that caused us to make payments under these guarantees. There were $6.4 million and $7.9 million of loans outstanding under these programs as of June 28, 2017 and December 28, 2016, respectively. As of June 28, 2017, the maximum amounts payable under the loan guarantees was $1.2 million. As a result of these guarantees, we have recorded liabilities of less than $0.1 million as of both June 28, 2017 and December 28, 2016, which are included as a component of other noncurrent liabilities in our Condensed Consolidated Balance Sheets and other nonoperating expense in our Condensed Consolidated Statements of Income.

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 the Company's consolidated results of operations or financial position.

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Subsequent Events

6 Months Ended

Jun. 28, 2017

Subsequent Events [Abstract]

Subsequent Events

Subsequent Events

Subsequent to the quarter ended June 28, 2017, through July 31, 2017, we repurchased 1.0 million shares of our common stock for approximately $11.7 million. This brings the total amount repurchased under the May 2016 repurchase program to 5.7 million shares of our common stock for approximately $69.2 million, leaving approximately $30.8 million of our common stock that can be repurchased under this program as of July 31, 2017.

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Summary of Significant Accounting Policies (Policies)

6 Months Ended

Jun. 28, 2017

Accounting Policies [Abstract]

Newly adopted accounting standards and accounting standards to be adopted

Newly Adopted Accounting Standards

Effective December 29, 2016, we adopted Accounting Standards Update (“ASU”) 2016-09, “Compensation - Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting”. The new guidance simplifies several aspects of the accounting for share-based payment transactions, including the recognition of excess tax benefits and deficiencies, the classification of those excess tax benefits on the statement of cash flows, an accounting policy election for forfeitures, the amount an employer can withhold to cover income taxes and still qualify for equity classification and the classification of those taxes paid on the statement of cash flows.

As required by the guidance, excess tax benefits recognized on share-based compensation expense are reflected on a prospective basis in our condensed consolidated statements of income as a component of the provision for income taxes rather than paid-in capital. The cumulative-effect adjustment to retained earnings from previously unrecognized excess tax benefits resulted in an $8.8 million increase in deferred tax assets and a decrease to opening deficit.

In addition, we have elected to account for forfeitures as they occur. The cumulative-effect adjustment to retained earnings from previously estimated forfeitures resulted in a $0.4 million increase to opening deficit, a $0.2 million increase in deferred tax assets and a $0.6 million increase to additional paid-in capital. As allowed by the update, on a retrospective basis, cash flows related to excess tax benefits recognized on stock-based compensation expense are classified as operating activities in the condensed consolidated statements of cash flows. There was no material impact on the prior periods retrospectively adjusted. Cash paid on employees’ behalf related to shares withheld for tax purposes continues to be classified as financing activites.

In January 2017, the Financial Accounting Standards Board (“FASB”) issued ASU 2017-04, “Intangibles—Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment”. The new guidance simplifies the subsequent measurement of goodwill by eliminating the second step of the two-step impairment test. Impairment is measured based on the excess of a reporting unit's carrying amount over its fair value. A qualitative assessment may still be completed first for an entity to determine if a quantitative impairment test is necessary. We early adopted ASU 2017-04 as of March 29, 2017 on a prospective basis. The adoption of this guidance did not have any impact on our consolidated financial statements.

Accounting Standards to be Adopted

In May 2014, the FASB issued ASU 2014-09, “Revenue from Contracts with Customers (Topic 606)”. The new guidanceclarifies the principles used to recognize revenue for all entities and requires companies to recognize revenue when it transfers goods or service to a customer in an amount that reflects the consideration to which a company expects to be entitled. The FASB has subsequently amended this guidance by issuing additional ASUs that provide clarification and further guidance around areas identified as potential implementation issues, including principal versus agent considerations, licensing and identifying performance obligations, assessing collectability, presentation of sales taxes received from customers, noncash consideration, contract modification and clarification of using the full retrospective approach upon adoption. All of the standards are effective for annual and interim periods beginning after December 15, 2017 (our fiscal 2018). The guidance allows for either a retrospective or cumulative effect transition method with early application permitted.

The guidance is not expected to impact the recognition of company restaurant sales or royalties from franchised restaurants. Upon adoption, initial franchise fees, which are currently recognized upon the opening of a franchise restaurant, are expected to be deferred and recognized over the term of the underlying franchise agreement. The effect of the required deferral of initial franchise fees received in a given year will be mitigated by the recognition of revenue from fees retrospectively deferred from prior years. We are currently reviewing our franchise agreements to obtain the data necessary to implement the guidance and cannot quantify the impact at this time.

We also believe the new guidance will impact our advertising arrangements with franchisees. Currently we record advertising expense net of contributions from franchisees to our advertising programs, including local co-operatives. Under the new guidance, we would include franchisee contributions to and expenditures from our advertising programs on a gross basis within the consolidated statements of income. While this change will materially impact the gross amount of reported franchise and license revenue and costs of franchise and license revenue, the impact would be an offsetting increase to both revenue and expense such that there will not be a significant, if any, impact on operating income and net income.

We are currently evaluating the impact this guidance will have on the recognition of other transactions on our consolidated financial statements, including gift card breakage and the effect it will have on our disclosures. We have not yet selected a transition method.

In January 2016, the FASB issued ASU 2016-01, “Financial Instruments—Overall (Subtopic 825-10): Recognition and Measurement of Financial Assets and Financial Liabilities”. The new guidance requires equity investments (except those accounted for under the equity method of accounting, or those that result in consolidation of the investee) to be measured at fair value with changes in fair value recognized in net income, requires public business entities to use the exit price notion when measuring the fair value of financial instruments for disclosure purposes, requires separate presentation of financial assets and financial liabilities by measurement category and form of financial asset, and eliminates the requirement for public business entities to disclose the method(s) and significant assumptions used to estimate the fair value that is required to be disclosed for financial instruments measured at amortized cost. ASU 2016-01 is effective for annual and interim periods beginning after December 15, 2017 (our fiscal 2018) with early adoption permitted. We are currently evaluating the impact the adoption of this guidance will have on our consolidated financial statements.

In June 2016, the FASB issued ASU 2016-13, “Financial Instruments—Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments”. The new guidance replaces the incurred loss impairment methodology in current GAAP with a methodology that reflects expected credit losses and requires consideration of a broader range of reasonable and supportable information to inform financial statement users of credit loss estimates. ASU 2016-13 is effective for annual and interim periods beginning after December 15, 2019 (our fiscal 2020) with early adoption permitted for annual and interim periods beginning after December 15, 2018 (our fiscal 2019). We do not expect the adoption of this guidance to have a material impact on our consolidated financial statements.

In February 2016, the FASB issued ASU 2016-02, “Leases (Topic 842)”,which provides guidance for accounting for leases. The new guidance requires companies to recognize the assets and liabilities for the rights and obligations created by leased assets. The accounting guidance for lessors is largely unchanged. ASU 2016-02 is effective for annual and interim periods beginning after December 15, 2018 (our fiscal 2019) with early adoption permitted. The guidance will be adopted using a modified retrospective approach. Based on a preliminary assessment, we expect the adoption will result in a significant increase in the assets and liabilities on our consolidated balance sheets, as most of our operating lease commitments will be recognized as operating lease liabilities and right-of-use assets. We are continuing our evaluation, which may identify additional impacts this standard will have on our consolidated financial statements and related disclosures.

In August 2016, the FASB issued ASU 2016-15, “Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments (a consensus of the Emerging Issues Task Force)”. The new guidance addresses eight specific cash flow issues with the objective of reducing the existing diversity in practice. ASU 2016-15 is effective for annual and interim periods beginning after December 15, 2017 (our fiscal 2018) with early adoption permitted. The guidance is to be applied using a retrospective transition method to each period presented. We do not expect the adoption of this guidance to have a material impact on our consolidated financial statements.

In January 2017, the FASB issued ASU 2017-01, “Business Combinations (Topic 805): Clarifying the Definition of a Business”. The new guidance clarifies the definition of a business. ASU 2017-01 is effective for annual and interim periods beginning after December 15, 2017 (our fiscal 2018) with early adoption permitted. The guidance is to be applied prospectively. We do not expect the adoption of this guidance to have a material impact on our consolidated financial statements.

In March 2017, the FASB issued ASU 2017-07, “Compensation—Retirement Benefits (Topic 715): Improving the Presentation of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Cost”. The new guidance requires an entity to report the service cost component in the same line on the income statement as other compensation costs arising from services rendered by the pertinent employees during the period. The other components of net benefit cost are required to be presented in the income statement separately from the service cost component and outside the subtotal of income from operations, if one is presented. If a separate line item is not used, the line item used in the income statement must be disclosed. ASU 2017-07 is effective for annual and interim periods beginning after December 15, 2017 (our fiscal 2018) with early adoption permitted. The guidance is to be applied prospectively. We do not expect the adoption of this guidance to have a material impact on our consolidated financial statements.

In May 2017, the FASB issued ASU 2017-09, “Compensation—Stock Compensation (Topic 718): Scope of Modification Accounting”. The new update provides guidance about which changes to the terms or conditions of a share-based payment award require an entity to apply modification accounting. ASU 2017-09 is effective for annual and interim periods beginning after December 15, 2017 (our fiscal 2018) with early adoption permitted. The guidance is to be applied prospectively. We do not expect the adoption of this guidance to have a material impact on our consolidated financial statements.

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.

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Receivables (Tables)

6 Months Ended

Jun. 28, 2017

Receivables [Abstract]

Receivables, net

Receivables were comprised of the following:

	June 28, 2017			December 28, 2016
	(In thousands)
Current assets:
Receivables:
Trade accounts receivable from franchisees	$	10,088		$	10,513
Financing receivables from franchisees	3,397			2,804
Vendor receivables	1,844			3,865
Credit card receivables	1,379			1,678
Other	314			1,261
Allowance for doubtful accounts	(280		)	(280		)
Total current receivables, net	$	16,742		$	19,841
Noncurrent assets (included as a component of other noncurrent assets):
Financing receivables from franchisees	$	480		$	732

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Goodwill and Other Intangible Assets (Tables)

6 Months Ended

Jun. 28, 2017

Goodwill and Intangible Assets Disclosure [Abstract]

Goodwill

The following table reflects the changes in carrying amounts of goodwill.

	(In thousands)
Balance, December 28, 2016	$	35,233
Additions related to acquisition	1,060
Adjustments related to the sale of restaurants	15
Balance, June 28, 2017	$	36,308

Indefinite-Lived Intangible Assets

Other intangible assets were comprised of the following:

	June 28, 2017				December 28, 2016
	Gross Carrying Amount		Accumulated Amortization		Gross Carrying Amount		Accumulated Amortization
	(In thousands)
Intangible assets with indefinite lives:
Trade names	$	44,077	$	—	$	44,076	$	—
Liquor licenses	166		—		166		—
Intangible assets with definite lives:
Franchise and license agreements	—		—		190		186
Reacquired franchise rights	14,175		2,027		11,498		1,251
Intangible assets	$	58,418	$	2,027	$	55,930	$	1,437

Finite-Lived Intangible Assets

Other intangible assets were comprised of the following:

	June 28, 2017				December 28, 2016
	Gross Carrying Amount		Accumulated Amortization		Gross Carrying Amount		Accumulated Amortization
	(In thousands)
Intangible assets with indefinite lives:
Trade names	$	44,077	$	—	$	44,076	$	—
Liquor licenses	166		—		166		—
Intangible assets with definite lives:
Franchise and license agreements	—		—		190		186
Reacquired franchise rights	14,175		2,027		11,498		1,251
Intangible assets	$	58,418	$	2,027	$	55,930	$	1,437

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Other Current Liabilities (Tables)

6 Months Ended

Jun. 28, 2017

Other Liabilities, Current [Abstract]

Schedule of Other Current Liabilities

Other current liabilities consisted of the following:

	June 28, 2017		December 28, 2016
	(In thousands)
Accrued salaries and vacation	$	17,693	$	27,056
Accrued insurance, primarily current portion of liability for insurance claims	6,528		6,651
Accrued taxes	7,683		7,407
Accrued advertising	8,759		8,051
Gift cards	4,602		5,474
Other	11,256		10,157
Other current liabilities	$	56,521	$	64,796

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Operating (Gains), Losses and Other Charges, Net (Tables)

6 Months Ended

Jun. 28, 2017

Other Income and Expenses [Abstract]

Operating gains losses and other charges net

Operating (gains), losses and other charges, netare comprised of the following:

	Quarter Ended					Two Quarters Ended
	June 28, 2017		June 29, 2016			June 28, 2017			June 29, 2016
	(In thousands)
Pension settlement loss	$	—	$	24,297		$	—		$	24,297
Software implementation costs	1,544		—			3,668			—
Losses (gains) on sales of assets and other, net	205		(43		)	(1,235		)	(687		)
Restructuring charges and exit costs	297		(13		)	396			506
Operating (gains), losses and other charges, net	$	2,046	$	24,241		$	2,829		$	24,116

Restructuring charges and exit costs

Restructuring charges and exit costs were comprised of the following: 

	Quarter Ended					Two Quarters Ended
	June 28, 2017		June 29, 2016			June 28, 2017		June 29, 2016
	(In thousands)
Exit costs	$	295	$	(36	)	$	326	$	115
Severance and other restructuring charges	2		23			70		391
Total restructuring charges and exit costs	$	297	$	(13	)	$	396	$	506

Components of change in accrued exit cost liabilities

The components of the change in accrued exit cost liabilities are as follows:

	(In thousands)
Balance, December 28, 2016	$	1,896
Exit costs (1)	326
Payments, net of sublease receipts	(928		)
Interest accretion	49
Balance, June 28, 2017	1,343
Less current portion included in other current liabilities	319
Long-term portion included in other noncurrent liabilities	$	1,024

(1) Included as a component of operating (gains), losses and other charges, net.

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Fair Value of Financial Instruments (Tables)

6 Months Ended

Jun. 28, 2017

Fair Value Disclosures [Abstract]

Financial assets and liabilities measured at fair value on a recurring basis

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)		Valuation Technique
	(In thousands)
Fair value measurements as of June 28, 2017:
Deferred compensation plan investments (1)	$	11,818		$	11,818	$	—		$	—	market approach
Interest rate swaps, net (2)	(4,305		)	—		(4,305		)	—		income approach
Total	$	7,513		$	11,818	$	(4,305	)	$	—
Fair value measurements as of December 28, 2016:
Deferred compensation plan investments (1)	$	11,248		$	11,248	$	—		$	—	market approach
Interest rate swaps (2)	(756		)	—		(756		)	—		income approach
Total	$	10,492		$	11,248	$	(756	)	$	—

(1) The fair values of our deferred compensation plan investments are based on the closing market prices of the elected investments.

(2) The fair values of our interest rate swaps are based upon Level 2 inputs, which include valuation models as reported by our counterparties. The key inputs for the valuation models are quoted market prices, interest rates and forward yield curves. See Note 8 for details on the interest rate swaps.

Assets and liabilities measured at fair value on a nonrecurring basis

Those assets and liabilities measured at fair value on a nonrecurring basis are summarized below:

	Significant Other Observable Inputs (Level 2)		Impairment Charges		Valuation Technique
	(In thousands)
Fair value measurements as of June 28, 2017:
Assets held for sale (1)	$	732	$	—	market approach
Fair value measurements as of December 28, 2016:
Assets held for sale (1)	$	1,020	$	1,098	market approach

(1) As of June 28, 2017 and December 28, 2016, assets were classified as assets held for sale and, if necessary, were written down to their fair value. The fair value of assets held for sale is based upon Level 2 inputs, which include sales agreements.

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Long-Term Debt (Tables)

6 Months Ended

Jun. 28, 2017

Derivative Instruments and Hedging Activities Disclosure [Abstract]

Derivative instruments

Based on the interest rate as determined by our consolidated leverage ratio in effect as of June 28, 2017, under the terms of the swaps, we will pay the following fixed rates on the notional amounts noted:

Period Covered	Notional Amount		Fixed Rate
	(In thousands)
March 31, 2015 - March 29, 2018	$	120,000	3.13	%
March 29, 2018 - March 31, 2025	170,000		4.44	%
April 1, 2025 - March 31, 2026	50,000		4.46	%

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Defined Benefit Plans (Tables)

6 Months Ended

Jun. 28, 2017

Retirement Benefits [Abstract]

Components of net periodic benefit cost

	Quarter Ended				Two Quarters Ended
	June 28, 2017		June 29, 2016		June 28, 2017		June 29, 2016
	(In thousands)
Pension Plan:
Service cost	$	—	$	—	$	—	$	105
Net periodic benefit cost	$	—	$	—	$	—	$	105
Other Defined Benefit Plans:
Interest cost	$	21	$	23	$	42	$	46
Amortization of net loss	23		22		46		43
Net periodic benefit cost	$	44	$	45	$	88	$	89

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Share-Based Compensation (Tables)

6 Months Ended

Jun. 28, 2017

Disclosure of Compensation Related Costs, Share-based Payments [Abstract]

Total share-based compensation

Total share-based compensation cost included as a component of net income was as follows:

	Quarter Ended				Two Quarters Ended
	June 28, 2017		June 29, 2016		June 28, 2017		June 29, 2016
	(In thousands)
Performance share awards	$	1,904	$	1,688	$	3,844	$	3,422
Restricted stock units for board members	176		214		209		428
Total share-based compensation	$	2,080	$	1,902	$	4,053	$	3,850

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Net Income Per Share (Tables)

6 Months Ended

Jun. 28, 2017

Earnings Per Share [Abstract]

Net Income Per Share

The amounts used for the basic and diluted net income per share calculations are summarized below:

	Quarter Ended					Two Quarters Ended
	June 28, 2017		June 29, 2016			June 28, 2017		June 29, 2016
						(In thousands, except for per share amounts)
Net income (loss)	$	8,749	$	(11,552	)	$	17,122	$	(1,598	)
Weighted average shares outstanding - basic	69,407		76,730			70,205		76,895
Effect of dilutive share-based compensation awards	2,254		—			2,254		—
Weighted average shares outstanding - diluted	71,661		76,730			72,459		76,895
Basic net income (loss) per share	$	0.13	$	(0.15	)	$	0.24	$	(0.02	)
Diluted net income (loss) per share	$	0.12	$	(0.15	)	$	0.24	$	(0.02	)
Anti-dilutive share-based compensation awards	606		2,636			606		2,636

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Supplemental Cash Flow Information (Tables)

6 Months Ended

Jun. 28, 2017

Supplemental Cash Flow Information [Abstract]

Supplemental Cash Flow Information

	Two Quarters Ended
	June 28, 2017		June 29, 2016
	(In thousands)
Income taxes paid, net	$	2,668	$	938
Interest paid	$	6,718	$	5,215
Noncash investing and financing activities:
Property acquisition payable	$	—	$	2,973
Issuance of common stock, pursuant to share-based compensation plans	$	4,961	$	3,597
Execution of capital leases	$	4,225	$	4,623
Treasury stock payable	$	1,394	$	147
Notes received in connection with disposition of property	$	1,750	$	—

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Shareholders' Equity (Tables)

6 Months Ended

Jun. 28, 2017

Statement of Comprehensive Income [Abstract]

Components of accumulated other comprehensive loss

The components of the change in accumulated other comprehensive loss were as follows:

	Pensions			Derivatives			Accumulated Other Comprehensive Loss
	(In thousands)
Balance as of December 28, 2016	$	(945	)	$	(462	)	$	(1,407	)
Amortization of net loss (1)	46			—			46
Net change in fair value of derivatives	—			(3,403		)	(3,403		)
Reclassification of derivatives to interest expense (2)	—			(146		)	(146		)
Income tax (expense) benefit related to items of other comprehensive loss	(18		)	1,382			1,364
Balance as of June 28, 2017	$	(917	)	$	(2,629	)	$	(3,546	)

(1) Before-tax amount related to our Other Defined Benefit Plans that was reclassified from accumulated other comprehensive loss and included as a component of pension expense within general and administrative expenses in our Condensed Consolidated Statements of Income during the two quarters ended June 28, 2017. See Note 9 for additional details.

(2) Amounts reclassified from accumulated other comprehensive loss into income, represent payments made to the counterparty for the effective portions of the interest rate swaps. These amounts are included as a component of interest expense in our Condensed Consolidated Statements of Income. We expect to reclassify approximately $0.7 million from accumulated other comprehensive loss related to our interest rate swaps during the next twelve months. See Note 8 for additional details.

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Introduction and Basis of Presentation (Details)	Jun. 28, 2017 restaurant
Franchisor Disclosure [Line Items]
Number of restaurants	1,724
Franchised/licensed restaurants [Member]
Franchisor Disclosure [Line Items]
Number of restaurants	1,552
Company restaurants [Member]
Franchisor Disclosure [Line Items]
Number of restaurants	172

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Summary of Significant Accounting Policies Summary of Significant Accounting Policies (Details) $ in Thousands	Dec. 28, 2016 USD ($)
New Accounting Pronouncements or Change in Accounting Principle [Line Items]
Cumulative effect adjustment	$ (8,971)
Other Noncurrent Assets [Member]
New Accounting Pronouncements or Change in Accounting Principle [Line Items]
Cumulative effect adjustment	(200)
Paid-in Capital [Member]
New Accounting Pronouncements or Change in Accounting Principle [Line Items]
Cumulative effect adjustment	(600)
Excess Tax Benefits [Member] | (Deficit) [Member]
New Accounting Pronouncements or Change in Accounting Principle [Line Items]
Cumulative effect adjustment	(8,800)
Estimated Forfeitures [Member] | (Deficit) [Member]
New Accounting Pronouncements or Change in Accounting Principle [Line Items]
Cumulative effect adjustment	$ 400

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Receivables (Details) - USD ($) $ in Thousands	6 Months Ended
	Jun. 28, 2017	Dec. 28, 2016
Receivables [Abstract]
Trade accounts receivable from franchisees, gross, current	$ 10,088	$ 10,513
Financing receivables from franchisees, gross, current	3,397	2,804
Allowance for doubtful accounts	(280)	(280)
Total current receivables, net	16,742	19,841
Noncurrent assets (included as a component of other noncurrent assets):
Financing receivables from franchisees, noncurrent	480	732
Write-off of financing receivables from a franchisee	200
Vendor receivables [Member]
Receivables [Abstract]
Other receivables, gross, current	1,844	3,865
Credit card receivables [Member]
Receivables [Abstract]
Other receivables, gross, current	1,379	1,678
Other [Member]
Receivables [Abstract]
Other receivables, gross, current	$ 314	$ 1,261

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Goodwill and Other Intangible Assets (Details) $ in Thousands	6 Months Ended
	Jun. 28, 2017 USD ($) restaurants	Dec. 28, 2016 USD ($)
Goodwill [Roll Forward]
Balance, December 28, 2016	$ 35,233
Additions related to acquisition	1,060
Adjustments related to the sale of restaurants	15
Balance, June 28, 2017	36,308
Intangible Assets [Line Items]
Gross carrying amount - Trade names	44,077	$ 44,076
Gross carrying amount - Liquor licenses	166	166
Accumulated amortization - Intangible assets with definite lives	2,027	1,437
Intangible assets	$ 58,418	55,930
Restaurants reacquired from franchisees | restaurants	6
Purchase price to reacquire franchised restaurants	$ 4,500
Purchase price allocation of property	800
Purchase price allocation of goodwill	1,060
Capital leases recorded related to acquired franchise restaurants	1,200
Other Intangible Assets [Member]
Intangible Assets [Line Items]
Gross carrying amount - Intangible assets with definite lives	0	190
Accumulated amortization - Intangible assets with definite lives	0	186
Franchise Rights [Member]
Intangible Assets [Line Items]
Gross carrying amount - Intangible assets with definite lives	14,175	11,498
Accumulated amortization - Intangible assets with definite lives	2,027	$ 1,251
Purchase price allocation of reacquired franchise rights	$ 2,700

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Other Current Liabilities (Details) - USD ($) $ in Thousands	Jun. 28, 2017	Dec. 28, 2016
Other Liabilities, Current [Abstract]
Accrued salaries and vacation	$ 17,693	$ 27,056
Accrued insurance, primarily current portion of liability for insurance claims	6,528	6,651
Accrued taxes	7,683	7,407
Accrued advertising	8,759	8,051
Gift cards	4,602	5,474
Other	11,256	10,157
Other current liabilities	$ 56,521	$ 64,796

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Operating (Gains), Losses and Other Charges, Net (Details) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 28, 2017	Jun. 29, 2016	Jun. 28, 2017		Jun. 29, 2016	Dec. 28, 2016
Other Income and Expenses [Abstract]
Pension settlement loss	$ 0	$ 24,297	$ 0		$ 24,297
Software implementation costs	1,544	0	3,668		0
Losses (gains) on sales of assets and other, net	205	(43)	(1,235)		(687)
Restructuring charges and exit costs	297	(13)	396		506
Operating (gains), losses and other charges, net	2,046	24,241	2,829		24,116
Restructuring Charges [Abstract]
Exit costs	295	(36)	326	[1]	115
Severance and other restructuring charges	2	23	70		391
Total restructuring charges and exit costs	297	(13)	396		506
Restructuring Reserve [Roll Forward]
Balance, December 28, 2016			1,896
Exit costs	295	$ (36)	326	[1]	$ 115
Payments, net of sublease receipts			(928)
Interest accretion			49
Balance, June 28, 2017	1,343		1,343
Less current portion included in other current liabilities	319		319
Long-term portion included in other noncurrent liabilities	1,024		1,024
Accrued severance and other restructuring charges	$ 200		$ 200			$ 400

[1] Included as a component of operating (gains), losses and other charges, net.

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Fair Value of Financial Instruments (Details) - USD ($) $ in Thousands		6 Months Ended	12 Months Ended
		Jun. 28, 2017	Dec. 28, 2016
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Interest rate swaps, net		$ (4,300)
Interest rate swaps		(4,400)
Recurring [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Total, assets		7,513	$ 10,492
Recurring [Member] | Quoted Prices in Active Markets for Identical Assets/Liabilities (Level 1) [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Total, assets		11,818	11,248
Recurring [Member] | Significant Other Observable Inputs (Level 2) [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Total, liabilities		(4,305)	(756)
Recurring [Member] | Significant Unobservable Inputs (Level 3) [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Total, assets		0	0
Recurring [Member] | Deferred Compensation Plan Investments [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Deferred compensation plan investments	[1]	$ 11,818	$ 11,248
Valuation technique		market approach	market approach
Recurring [Member] | Deferred Compensation Plan Investments [Member] | Quoted Prices in Active Markets for Identical Assets/Liabilities (Level 1) [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Deferred compensation plan investments	[1]	$ 11,818	$ 11,248
Recurring [Member] | Deferred Compensation Plan Investments [Member] | Significant Other Observable Inputs (Level 2) [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Deferred compensation plan investments	[1]	0	0
Recurring [Member] | Deferred Compensation Plan Investments [Member] | Significant Unobservable Inputs (Level 3) [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Deferred compensation plan investments	[1]	0	0
Recurring [Member] | Interest Rate Swap [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Interest rate swaps, net	[2]	$ (4,305)
Interest rate swaps	[2]		$ (756)
Valuation technique		income approach	income approach
Recurring [Member] | Interest Rate Swap [Member] | Quoted Prices in Active Markets for Identical Assets/Liabilities (Level 1) [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Interest rate swaps, net	[2]	$ 0
Interest rate swaps	[2]		$ 0
Recurring [Member] | Interest Rate Swap [Member] | Significant Other Observable Inputs (Level 2) [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Interest rate swaps, net	[2]	(4,305)
Interest rate swaps	[2]		(756)
Recurring [Member] | Interest Rate Swap [Member] | Significant Unobservable Inputs (Level 3) [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Interest rate swaps, net	[2]	$ 0
Interest rate swaps	[2]		$ 0
Nonrecurring [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Valuation technique		market approach	market approach
Impairment of assets identified as assets held for sale		$ 0	$ 1,098
Nonrecurring [Member] | Significant Other Observable Inputs (Level 2) [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Assets held for sale	[3]	$ 732	$ 1,020

[1] The fair values of our deferred compensation plan investments are based on the closing market prices of the elected investments.

[2] The fair values of our interest rate swaps are based upon Level 2 inputs, which include valuation models as reported by our counterparties. The key inputs for the valuation models are quoted market prices, interest rates and forward yield curves. See Note 8 for details on the interest rate swaps.

[3] As of June 28, 2017 and December 28, 2016, assets were classified as assets held for sale and, if necessary, were written down to their fair value. The fair value of assets held for sale is based upon Level 2 inputs, which include sales agreements.

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Long-Term Debt (Narrative) (Details) - USD ($) $ in Thousands	6 Months Ended
	Jun. 28, 2017	Dec. 28, 2016
Line of Credit Facility [Line Items]
Interest rate swaps, net liability	$ 4,300
Interest rate swaps, asset	100
Interest rate swaps, liability	4,400
Interest Rate Swaps 2015-2018 [Member]
Line of Credit Facility [Line Items]
Derivative, notional amount	$ 120,000
Average fixed interest rate on interest rate swaps	3.13%
Interest Rate Swaps 2018-2025 [Member]
Line of Credit Facility [Line Items]
Derivative, notional amount	$ 170,000
Average fixed interest rate on interest rate swaps	4.44%
Interest Rate Swaps 2018-2026 [Member]
Line of Credit Facility [Line Items]
Derivative, notional amount	$ 50,000
Average fixed interest rate on interest rate swaps	4.46%
Senior secured revolver [Member]
Line of Credit Facility [Line Items]
Line of credit facility, current borrowing capacity	$ 325,000
Outstanding amount under credit facility	235,000
Availability under the revolving facility	$ 68,300
Weighted-average interest rate (in hundredths)	3.13%	2.45%
Commitment fee for unused portion of revolving credit facility (in hundredths)	0.30%
Basis spread on variable rate debt	2.00%
Maturity date	Mar. 30, 2020
Senior secured revolver [Member] | Interest Rate Swap [Member]
Line of Credit Facility [Line Items]
Weighted-average interest rate (in hundredths)	3.17%	2.74%
Letter of Credit [Member]
Line of Credit Facility [Line Items]
Line of credit facility, current borrowing capacity	$ 30,000
Outstanding amount of letters of credit	$ 21,700

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Defined Benefit Plans (Details) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 28, 2017	Jun. 29, 2016	Jun. 28, 2017	Jun. 29, 2016	Dec. 28, 2016
Components of net periodic benefit cost [Abstract]
Pension settlement loss	$ 0	$ 24,297	$ 0	$ 24,297
Additional minimum pension liability	900		900		$ 945
Pension Plan [Member]
Components of net periodic benefit cost [Abstract]
Service cost	0	0	0	105
Net periodic benefit cost	0	0	0	105
Employer contributions		9,500
Assets used for settlements		67,700
Pension settlement loss		24,300
Other Defined Benefit Plans [Member]
Components of net periodic benefit cost [Abstract]
Interest cost	21	23	42	46
Amortization of net loss	23	22	46	43
Net periodic benefit cost	44	$ 45	88	89
Employer contributions			200	$ 100
Estimated employer contributions remainder of current fiscal year	$ 100		$ 100

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Share-Based Compensation (Details) - USD ($) $ / shares in Units, $ in Thousands, shares in Millions	3 Months Ended		6 Months Ended
	Jun. 28, 2017	Jun. 29, 2016	Jun. 28, 2017	Jun. 29, 2016
Total share-based compensation [Abstract]
Total share-based compensation	$ 2,080	$ 1,902	$ 4,053	$ 3,850
Performance shares [Member]
Total share-based compensation [Abstract]
Total share-based compensation	1,904	1,688	$ 3,844	3,422
Restricted Stock Units [Abstract]
Performance period, equity award			3 years
Cash payments			$ 3,900
Maximum common stock shares issued (in shares)			0.4
Unrecognized compensation cost [Abstract]
Unrecognized compensation cost related to unvested share awards outstanding	11,400		$ 11,400
Unrecognized compensation cost, expected weighted average period			1 year 11 months 8 days
Performance shares [Member] | Minimum [Member]
Restricted Stock Units [Abstract]
Percentage of target awards to be earned (in hundredths)			0.00%
Performance shares [Member] | Maximum [Member]
Restricted Stock Units [Abstract]
Percentage of target awards to be earned (in hundredths)			150.00%
Performance shares [Member] | Performance shares that vest based on TSR [Member]
Restricted Stock Units [Abstract]
Equity awards granted (in shares)			0.3
Equity awards, grant date fair value (in dollars per share)			$ 13.05
Performance shares [Member] | Performance shares that vest based on EBITDA growth [Member]
Restricted Stock Units [Abstract]
Equity awards granted (in shares)			0.3
Equity awards, grant date fair value (in dollars per share)			$ 12.17
Restricted stock units for board members [Member]
Total share-based compensation [Abstract]
Total share-based compensation	176	$ 214	$ 209	$ 428
Restricted Stock Units [Abstract]
Equity awards granted (in shares)		0.1
Equity awards, grant date fair value (in dollars per share)		$ 12.04
Performance period, equity award			1 year
Cash payments related to replacement cash awards	500		$ 500
Unrecognized compensation cost [Abstract]
Unrecognized compensation cost related to unvested share awards outstanding	$ 1,000		$ 1,000
Unrecognized compensation cost, expected weighted average period			1 year 1 month 2 days

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Income Taxes (Details) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended		12 Months Ended
	Jun. 28, 2017	Jun. 29, 2016	Jun. 28, 2017	Jun. 29, 2016	Dec. 28, 2011
Income Tax Disclosure [Abstract]
Effective tax rate, percent	36.00%	(49.50%)	36.10%	120.70%
State jobs tax credits, percent		3.20%
Effective tax rate benefit, Pension Plan liquidation, amount				$ 2,100
Pension settlement loss	$ 0	$ (24,297)	$ 0	$ (24,297)
Tax benefit recognized with reversal of the valuation allowance					$ 7,200
Effective tax rate excluding the pension settlement, percent				35.80%

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Net Income Per Share (Details) - USD ($) $ / shares in Units, shares in Thousands, $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 28, 2017	Jun. 29, 2016	Jun. 28, 2017	Jun. 29, 2016
Earnings Per Share [Abstract]
Net income (loss)	$ 8,749	$ (11,552)	$ 17,122	$ (1,598)
Weighted average shares outstanding - basic (in shares)	69,407	76,730	70,205	76,895
Effect of dilutive share-based compensation awards	2,254	0	2,254	0
Weighted average shares outstanding - diluted (in shares)	71,661	76,730	72,459	76,895
Basic net income (loss) per share	$ 0.13	$ (0.15)	$ 0.24	$ (0.02)
Diluted net income (loss) per share	$ 0.12	$ (0.15)	$ 0.24	$ (0.02)
Antidilutive share-based compensation awards (in shares)	606	2,636	606	2,636

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Supplemental Cash Flow Information (Details) - USD ($) $ in Thousands	6 Months Ended
	Jun. 28, 2017	Jun. 29, 2016
Supplemental Cash Flow Information [Abstract]
Income taxes paid, net	$ 2,668	$ 938
Interest paid	6,718	5,215
Noncash investing and financing activities:
Property acquisition payable	0	2,973
Issuance of common stock, pursuant to share-based compensation plans	4,961	3,597
Execution of capital leases	4,225	4,623
Treasury stock payable	1,394	147
Notes received in connection with disposition of property	$ 1,750	$ 0

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Shareholders' Equity (Share Repurchase) (Details) - USD ($) $ / shares in Units, shares in Thousands, $ in Thousands	3 Months Ended		6 Months Ended	12 Months Ended
	Jun. 28, 2017	Feb. 06, 2017	Jun. 28, 2017	Dec. 28, 2016
Equity, Class of Treasury Stock [Line Items]
Purchase of treasury stock			$ 36,710
Number of accumulated shares repurchased (in shares)	39,357		39,357	35,757
November 2016 Accelerated Share Repurchase [Member]
Equity, Class of Treasury Stock [Line Items]
Share repurchase, authorized amount (in dollars)				$ 25,000
Purchase of treasury stock (in shares)	500	2,000		1,500
Purchase of treasury stock	$ 6,900			$ 18,100
Remaining shares to be repurchased (in dollars)				$ 6,900
Volume-weighted average price of treasury stock repurchased		$ 12.36
Share Repurchase Program 2016 [Member]
Equity, Class of Treasury Stock [Line Items]
Share repurchase, authorized amount (in dollars)	100,000		$ 100,000
Purchase of treasury stock (in shares)			3,000
Purchase of treasury stock			$ 36,700
Remaining shares to be repurchased (in dollars)	$ 42,500		$ 42,500
Number of accumulated shares repurchased (in shares)	4,700		4,700
Value of shares repurchased	$ 57,500		$ 57,500

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Shareholders' Equity (Components of Accumulated Other Comprehensive Loss) (Details) $ in Thousands	6 Months Ended
	Jun. 28, 2017 USD ($)
AOCI Attributable to Parent, Net of Tax [Roll Forward]
Balance as of December 28, 2016	$ (1,407)
Amortization of net loss	46	[1]
Net change in fair value of derivatives	(3,403)
Reclassification of derivatives to interest expense	(146)	[2]
Income tax (expense) benefit related to items of other comprehensive loss	1,364
Balance as of June 28, 2017	(3,546)
Estimated reclassification from accumulated other comprehensive income to interest expense related to the interest rate swaps over the next 12 months	700
Pensions [Member]
AOCI Attributable to Parent, Net of Tax [Roll Forward]
Balance as of December 28, 2016	(945)
Amortization of net loss	46	[1]
Income tax (expense) benefit related to items of other comprehensive loss	(18)
Balance as of June 28, 2017	(917)
Derivatives [Member]
AOCI Attributable to Parent, Net of Tax [Roll Forward]
Balance as of December 28, 2016	(462)
Net change in fair value of derivatives	(3,403)
Reclassification of derivatives to interest expense	(146)	[2]
Income tax (expense) benefit related to items of other comprehensive loss	1,382
Balance as of June 28, 2017	$ (2,629)

[1] Before-tax amount related to our Other Defined Benefit Plans that was reclassified from accumulated other comprehensive loss and included as a component of pension expense within general and administrative expenses in our Condensed Consolidated Statements of Income during the two quarters ended June 28, 2017. See Note 9 for additional details.

[2] Amounts reclassified from accumulated other comprehensive loss into income, represent payments made to the counterparty for the effective portions of the interest rate swaps. These amounts are included as a component of interest expense in our Condensed Consolidated Statements of Income. We expect to reclassify approximately $0.7 million from accumulated other comprehensive loss related to our interest rate swaps during the next twelve months. See Note 8 for additional details.

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Commitments and Contingencies (Details) - USD ($) $ in Millions	Jun. 28, 2017	Dec. 28, 2016
Commitments and Contingencies Disclosure [Abstract]
Loan amounts outstanding under the loan pools	$ 6.4	$ 7.9
Maximum payments guaranteed	1.2
Guarantee liabilities included as a component of other noncurrent liabilities	$ 0.1	$ 0.1

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Subsequent Events Subsequent Events (Details) - USD ($) shares in Thousands, $ in Thousands	1 Months Ended	6 Months Ended
	Jul. 31, 2017	Jun. 28, 2017	Dec. 28, 2016
Subsequent Event [Line Items]
Purchase of treasury stock		$ 36,710
Number of accumulated shares repurchased (in shares)		39,357	35,757
Share Repurchase Program 2016 [Member]
Subsequent Event [Line Items]
Purchase of treasury stock (in shares)		3,000
Purchase of treasury stock		$ 36,700
Number of accumulated shares repurchased (in shares)		4,700
Value of shares repurchased		$ 57,500
Remaining shares to be repurchased (in dollars)		$ 42,500
Share Repurchase Program 2016 [Member] | Subsequent Event [Member]
Subsequent Event [Line Items]
Purchase of treasury stock (in shares)	1,000
Purchase of treasury stock	$ 11,700
Number of accumulated shares repurchased (in shares)	5,700
Value of shares repurchased	$ 69,200
Remaining shares to be repurchased (in dollars)	$ 30,800