Denny's Corporation (DENN)

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Denny's Corporation (DENN)

Q1 2009 Earnings Call

May 5, 2009 5:00 pm ET


Alex Lewis - Vice President of Investor Relations and Treasurer

Nelson Marchioli - President and CEO

Mark Wolfinger - Chief Financial Officer


Reza Vahabzadeh - Barclays Capital

Michael Gallo - C.L. King & Associates, Inc.

Brian Hunt - Wachovia Capital

Mark Smith - Feltl & Company

Tony Brenner - Roth Capital Partners

Stephen Anderson - MKM Partners LLC

Nicole Pecoulas - Babson Capital Management, LLC



Good afternoon. My name is [PK] and I will be your conference operator today. At this time I would like to welcome everyone to the Denny's first quarter 2009 earnings release conference call. (Operator Instructions)

I would now like to turn the call over to Alex Lewis, Vice President at Denny's Corporation.

Alex Lewis

Thank you, PK. Good afternoon and thank you for joining us for Denny's first quarter 2009 investor conference call.

This call is being broadcast simultaneously over the Internet and will be available for replay on our Investor Relations website, IR.Denny', later tonight.

You may have noticed a change in the contact names for the Investor Relations on this afternoon's press release. I am transitioning roles here at Denny's and my duties related to Investor Relations are being picked up by Enrique Mayor-Mora. Enrique has been responsible for Denny's financial planning and analysis for several years and is well versed in the Denny's story. I will be available tonight, tomorrow, the rest of the week to answer questions regarding our first quarter results. Over the next few weeks we'll begin to transition the return of incoming analyst and investor calls. After this week I would ask that when you call in with questions you use the IR contact line as shown on each of our press releases. That number is 877-784-7167. If we are not available at that time one of us will be sure to get back to you as soon as possible.

Moving on, with me today from management are Nelson Marchioli, Denny's President and Chief Executive Officer, and Mark Wolfinger, Denny's Executive Vice President, Chief Administrative Officer, and Chief Financial Officer. Nelson will lead off today's prepared remarks with an overview of our operational and marketing efforts in the first quarter. Mark will follow Nelson with a financial review of our first quarter results. After our prepared remarks management will be available to answer questions.

Before we begin let me remind you that in accordance with the safe harbor provisions of the Private Securities Litigation Reform Act of 1995 the company notes that certain matters to be discussed by members of management during this call may constitute forward-looking statements.

Management urges caution in concerning its current trends and any outlook on earnings provided on this call. Such statements are subject to risks, uncertainties and other factors that may cause the actual performance of Denny's to be materially different from the performance indicated or implied by such statements. Such risk factors are set forth in the company's annual report on Form 10-K for the year ended December 31, 2008 and in any subsequent quarterly reports on Form 10-Q. In regard to SEC filings, we intend to file our 10-Q for the first quarter this evening, so you will have that available for review as well.

With that I'll now turn the call over to Nelson Marchioli, Denny's President and CEO.

Nelson Marchioli

Thank you, Alex. Hello, everyone.

Let me start by saying I'm pleased with our results in the first quarter as we made significant progress on our primary goal of improving our sales and guest traffic trends. Our Super Bowl promotional event was an overwhelming success and allowed us to reconnect with lapsed and light users. Serving more than 1.9 million customers a free Grand Slam Breakfast has served as a catalyst for our marketing efforts in 2009.

Our objective was to create a disruptive, high trial event to attract customers to experience the new Denny's, resulting in ongoing increased frequency of visitation. Along that line, our first quarter guest comp performance reflected an encouraging improvement in trend relative to the last six months of 2008. We believe that the tremendous response we received to the Super Bowl event speaks to the power of our brand and how strongly it is embedded in the American culture.

Here are some highlights that exemplify this point: 50 million hits on our webpage, media coverage on almost every major TV and cable network, more than 500 newspapers covered the story with more than 2,300 TV airings in local affiliates, number three on Google's Hot Trend List, prominent on Facebook, YouTube and Twitter. All this led to the equivalent of over $50 million of public relations coverage. In addition, exit polling suggests that approximately 60% of the participants were in our target group of light and lapsed users and well over 97% of respondents said they were extremely or very satisfied with their experience and 95% said they would either definitely or probably come back within three months.

As one of our guests told us, Denny's gave America a big hug at the time it needed it. This kind of overwhelming goodwill and emotional connection is a testament to the strength of Denny's brand.

From a financial perspective, the total cost of the promotion was around $5 million. This includes advertising costs, which were around $3 million for the Super Bowl and follow up advertising. Those costs were part of the Denny's advertising fund, to which both company and franchise restaurants contribute, so there was no incremental spend but a reallocation of the 2009 marketing budget. We, Denny's corporate, also incurred approximately $2 million in additional costs for the program.

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