Denny's Corporation (DENN)

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Denny's Corporation (DENN)

Q2 2010 Earnings Call

August 3, 2010 05:00 am ET


Enrique Mayor-Mora - VP of IR

Debra Smithart-Oglesby - Interim CEO

Mark Wolfinger - EVP, ADO and CFO


Michael Gallo - CLK

Sam Yake - BGB Securities

Mark Smith - Feltl & Company

Tony Brenner - Roth Capital Partners

Brain Hunt - Wells Fargo Securities



Good afternoon, my name is Patrick and I will be your conference operator today. At this time, I would like to welcome everyone to the Second Quarter 2010 Earnings Release Conference Call. (Operator Instructions). I would now like to turn the call over to Vice President of Investor Relations, Mr. Enrique Mayor-Mora you may begin your conference, Sir.

Enrique Mayor-Mora

Thank you, Patrick. Good afternoon and thank you for joining us for Denny’s second quarter 2010 investor conference call. This call is being broadcast simultaneously over the internet.

With me today from management are Debra Smithart-Oglesby, Denny's Interim Chief Executive Officer and Board Chair; and Mark Wolfinger, Denny’s Executive Vice President, Chief Administrative Officer and Chief Financial Officer. Debra will begin today's call with an overview of our business and our strategic initiative. After that Mark will provide a financial review of our second quarter results. I will conclude the call with the review of Denny’s full year guidance. As a reminder, the 10-Q will be filed today.

Before we begin, let me remind you that in accordance with the Safe Harbor provision of the Private Securities Litigation Reform Act of 1995, the company knows that certain matters to be discussed by members of management during this call may constitute forward-looking statements. Management urges caution in considering its current trends as any outlook on their 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 risks and factors are set forth in the company’s annual report on Form 10-K for the year ended December 30, 2009 and in any subsequent quarterly reports on Form 10-Q.

With that, I will now turn the call over to Debra Smithart-Oglesby, Denny’s Interim CEO and Board Chair.

Debra Smithart-Oglesby

Thank you, Enrique and good afternoon, everyone. I will be talking to you today about my primary areas of focus as the Interim CEO and the progress we are making against those priorities. Specifically, these include building a world class leadership team, a commitment to driving guest count growth and ultimately sales to solid execution of the Flying J conversion, our re-initiation of a full review of our cost structure, and I will touch in our recent roll out of the facilities refresh program and then lastly we do continue to refranchise company units and pay down our debts.

We are making solid progress building the Denny’s leadership team. Following the departure of our previous CEO we immediately put in place a steering committee to provide leadership to the organization, this mainly consisted of myself, Mark Wolfinger, our Chief Financial and Administrative Officer; and two of our Denny’s franchisees. Each of these franchisees has over 30 years of experience in the restaurant industry and a combined 30 years of direct experience with the Denny’s brand. The contributions of these two large franchisees Bob Langford and Bill Cox have supported our ability to quickly and efficiently execute on our initiative while giving us the continued opportunity to build strong relationships throughout our franchisee community.

Late in July, we hired our new Chief Marketing Officer, Francis Allen. Francis is a marketing and food industry veteran and brings nearly 25 years of restaurant and retail experience to Denny’s, including leadership position that she held with Duncan Brand, Pepsi Cola, Sony Ericsson and Frito Lay. Francis will be responsible for leading brand development, executing marketing strategies and campaigns, advertising new programs and products across the Denny’s brand to drive sales, profitability and value. The Denny’s board of directors also recently announced that Gregg Dedrick had been appointed to our board.

Gregg has held senior executive positions at KFC, Yum brand, Pepsi Cola and Pizza Hut and he brings nearly 30 years of experience and operations and organizational resource planning in franchise based restaurant system. So we’re glad to have him as an addition to our board as well. We remain active in our search for Chief Operating Officer and Chief Executive Officer. We have engaged an international executive search from Spencer Stewart to assist us in completing the CEO's search.

Across the company, we are all committed to driving sales and guest count growth. In the second quarter with the strong support of our franchisee, we launched nationally, the $2 $4 $6 $8 Value Menu and our Skillet limited time offers with attractive value price point starting at $399, $499 and $599. These are our current key offerings to support our everyday affordability value platform. And we’ve been pleased with the results so far. Similar to the results of the $2 $4 $6 $8 cast earlier this year. We are seeing that the national roll out bills gets traffic overtime.

In fact, our guest count performance has improved every month since the national rollout of the program began. From April through June debt counts have improved sequentially from a negative 5.6 to negative 3.5 to negative 2.9 and in July we continued this improving trend with company unit guest counts at a positive 1.8 and sales down 1.7. Now importantly, we’ve seen this improving trend in our key markets across the country including California, Texas and Florida.

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