Denny's to charge 5% Obamacare surcharge and cut Hours

There's shitty food right there in the numbers?

What is it with these right wingers?  Papa Johns, Dennys and Chikflia.  They got the market cornered on crappy food.

The reason for their struggles are-

Declining sales..check the Income Statement, their sales have been flat to down for years..and cost of sales has stayed near the same while sales are down, thus lower margins and lower profits.

They have a high ammt of debt vs cash..so they have pretty high carrying costs on their debt which interest expense is higher than it should be relative to gross sales.

So combine higher debt with declining sales and higher food costs and you have your answer.

Also, their SGA costs are WAY too high relative to sales..near 25% of sales..and nearly as much as cost of sales.

Its a good thing they pay slave wages because with SGA so high, debt service high, lower sales and higher food costs..its amazing they are still in business.

Is Denny's gonna reduce their menu prices for costs which have gone down?

Many food costs, labor, fuel, and interest rates are lower now than before.

Food prices have gone  up

fuel costs have doubled from four years ago  and is passed down from the distributor

Interest rates have gone down, but it doesn't matter since Dodd Frank was passed, nobody can get any money from the banks. 

I'll give you Denny's, but Papa Johns has the best 'Chain' pizza around. I used to work at Pizza Hut out of High School.

Chick fil a serves up some right tasty viddles too.

I apololgize if I misinterpreted, but I think your analysis here and in other posts is very off base, at least if you are going to refer to the Company's financial statements and operations. 

Facts:

9 months ended 9/30/12 - Cost of restaurant sales - 85.1%

9 months ended 9/30/11 - Cost of  restaurant sales - 86.8%

Hardly declining, and hardly the high margins you made it seem to be.

Franchise and license revenue cost of sales are lower, but that makes up a much smaller % of revenue.  Blended cost of sales rates are 72.5% and 74.8% for the same periods, again, not declining margins, and hardly that high margins when you consider the franchising revenue factored in.

G&A Expenses - Not even remotely close to 25%. In reality, 12.1% and 10.2% for the same periods respectively.

Operating margins - 12.0% compared to 9.6% for the same periods.  Once again, not sure where the "declining" margins are.

I will give you the fact that debt is a little on the high side, but they've slowly been paying it down, including about $20-25 million  (or about 10-12% of the outstanding debt) year-to-date.

Also, not sure I see "struggles."  Stock is up 20% YTD,  32% over the last 2 years, compared to 6.5% (let's call it 8.5% with dividends) and 15.41% (call it 20% with dividends) for the S&P 500 over the same periods.

Maybe I misinterpreted, but I'm assuming you pulled your numbers from Yahoo Finance, and never checked the actual financial statements?  If that was the case, something should have been amiss as there is over $150 million of expenses each year to allow you total down to the operating income showed on Yahoo Finance.

 

 

Wake,

I am not sure where you get your information I guess..lol

Here are the facts as I presented them..which are based on much longer than a 9 month comparison.

Look at a 2-3 yr horizon and then draw a better conclusion than comparing just the most recent reporting period vs the previous year.

https://finance.yahoo.com/q/is?s=DENN+Income+Statement&annual

Review what I said..none of what I said is inaccurate.

Since 2009 on an annual basis sales are down roughly 11-12%, that is what I call "declining sales".

Since 2009 cost of sales are up while sales are down..a very negative financial combination.

2009 cost of sales= 31.14%
2010 cost of sales=  32.16%
2011 cost of sales=  32.23%

I also said SG&A are high relative to sales and have actually increased while sales have decreased..a negative financial stat

I then said that their debt to cash levels are high, their interest expense is thus high for their sales. Even though their interest cost is dropping (for obvious reasons..rates have dropped since 2009) still in 2011 their interest expense to sales is 3.7%..now while that might not seem high, their operating margin is in the mid to low 11% range..so their interest expense is about a third of their operating margin..do you understand how negative that is?

I got the info from the income statement section on an annual basis..not really interested in a 9 month year over year comparison, rather comparing annual numbers over a three year period.

Your comment about the stock being up in an up environment is also funny..its a 4 dollar stock. So hurray that is beating the S&P by a minimal ammt, but the stock is still a 4 dollar stock with a market cap of less than 450 million on sales of over 500 million.

I do not consider Denny's a well run organization, there are plenty of ways they could improve operations let alone pay better wages and offer healthcare to employees..which was the original topic at hand if you forgot.

Wall,

     Not trying to bust your balls over this, you are using incorrect data though.  Yahoo finance is extremely unreliable.  My information comes from www.sec.gov (i.e., the financial statements themselves).  As an investor, I am sure you are familiar with it, if not, I'm happy that I'm able to introduce you to it.  Take the extra 5 minutes to pull the real financial statements. 

      Without even looking at sec.gov, it was easy to see Yahoo finance had incorrect information.  Per your site:

2011 Sales:  $538 million

2011 Cost of Revenue: $173 million

2011 SG&A: $118 million

2011 Other Op Exp: $28 million

2011 Op Income: Should have equaled $219 million based on what was shown, but according to Yahoo was $51 million.  Where is the other $168 million of expenses?

2010 and 2009 are the same.  The data is not accurate.

I pulled my information directly from the source, i.e., the most recent 10-Q.  I pulled the most recent 10-Q because, it was most recent.  I didn't think pulling the most recent 10-K (with 3 years history) would paint a tremendously different picture.  I did just go look at it though, and the cost of sales are actually:

2009: 75.7%

2010: 75.3%

2011: 74.7%

Not arguing with the declining sales, although, reading the financial statements, you'll see that had a little more to do with a shift in business model (Franchise Growth Initiative; i.e., they sold more restuarants to franchisees which will obviously reduce revenues), than with true declining operations.

Also, debt is high, but Company has been reducing it over the last couple of years.  They paid down $40 million in 2011, and another about $20 million in 2012 so far.  A total of about $60-$65 millon reduction on what was $235 million. In two years. That is a huge step in the right direction.

And you have to know a $4 stock price is meaningless.  Let's say the company does a 1:10 reverse stock split.  Share price is now $40.  Is it any better of a Company? 

Also, market cap is about annual revenues.  Not that unusual. Wendy's and Papa Johns are both priced at a lower % of sales, and they were just the first two comps I happened to pull up.  I stopped there.

Also, not sure what you are investing in, but I'm happy to own a stock that has more than doubled the market in 2012, and is 1.5 times the market over the last 2 years.  You have a portfolio full of better performing stocks than that, please share

 

I dont consider Denny's the kind of stock I am interested in..a mature, low growth, low margin company stuck in the mud for the last decade.

Not saying you cant make money on a stock like this, I just dont think it is well run, the debt to cash is too high and I dont see a growth driver to do more than range trade it.

You are correct about the info from yahoo finance so you make a good point, but the underlying conclusions I drew were accurate..sales have been declining and your cost of sales numbers are wrong.

Cost of sales means COGS..cost of goods sold..not gross margin. You are saying 75%, which is actually gross margin, not cost of sales. Cost of sales is the cost of generating sales relative to revenue..so if you are saying Cost of Sales is 75% then there is NO way the operating margins are 11%..

Just another reason not to eat at there.

Worked for a big 4 public accounting firm for over 8 year, I know the difference between Gross margin and COGS (or COS). The numbers I presented were cost of sales (per the Company's financial statements). 

Your conclusions were also inaccurate:

1) Sales declined, and you attributed that as a negative.  Reading the financial statements, it is a shift in business model.  They have sold a significant number of stores to franchisees.  That is why it looks like revenues are going down. Kind of goes hand in hand with deleveraging a bit

2) G&A expenses were nowhere near the 25% you indicated.  As a percentage of revenues, they were 10.3%, 10.1% and 9.4% in 2011, 2010, and 2009 respectively.  A slight increase %-wise, without drilling down, I think that has a little more to do with a shift in the business model, either way, not a tremendous increase, and was offset by the decrease in cost of sales as a % of sales

3) You made a point about the Company having high debt, and disproportionate interest expense compared to operating income.  Seems like management agrees.  They have made paying down debt a top priority.  Debt has been reduced by about 25% in 2 years. Further evidence of strong management.

4) And you painted a picture of a struggling Company.  Then you downplayed the fact the stock is up 32% in 2 years. I just don't think that is an accurate description.  The Company has been very well run over the past years, and the increase in stock price is the result.

Now, I know this thread started more healthcare/paying better wages, but you just had a lot of financial analysis that I didn't think was accurate.  Not going to get in the argument healthcare-wise, just wanted to point out your info was wrong.

Wake,

I think you all are missing the point that this is a FRANCHISEE.  Not Denny's corporate that has to offer these benefits.  It matters ZERO what Denny's is trading at.  Denny's gets their % of sales no matter what the bottom line of any franchise looks like.  I don't know all the specifics, but they could be running into what Burger King has/is.

Many franchisees are now going bankrupt.  Rising costs of doing business, no help from the parent company, deteriorating buildings, deteriorating equipment, etc.  Throw any additional burden on them and the margins aren't there. 

Wall,

       I was not trying to slam you at all. You were just trying to use incorrect information to prove a point. If you use yahoo finance information to make investment decisions, maybe I showed you something new you can use going forward. 

       The closest thing to "slamming you" would be the statement that I'm going to make now.  For someone who understands the industry, you just really don't understand the accounting, or the moves they are making. 

        Cost of sales (based on industry reporting metrics that also line up with US GAAP), are the %'s I quoted.  Now, within those amounts are more than the cost of food.  It is server salaries, and other expenses directly tied to the revenue stream.  G&A expenses are also a line right on the face of the financial statements.  My %'s are correct, your 25% was completely off base.

       Also, margins have improved over the last 3 years (your own time period), and in this economic climate, that is not small feat.  Alot of that has to do with the shift in business model (i.e., reduced revenues, higher margin franchising.), but again, you can't slam management for "lack of margin improvement" when the statement itself is false. 

      In terms of the stock returns, what time period do you think is suitable to look at?  Ok, 3 years, (which I'll be honest is before I bought) they have returned 100%.  If I was "slanting data" I would have quoted that as 100% in 3 years is much better than 32% in 2.  If you are going to refer to 2008 and 2009, yes the stock did not do well.  They however weathered the storm, and have a higher share price now than before.  That is really all you could ask for in that environment. 

      I just don't understand why because I disagree with you, you think it is personal.  It is not at all.  I was an auditor for 8 years, consider it mild OCD, whatever, but when I see someone posting inaccurate finanical information (portraying it as actual) and incorrect financial analysis (not understanding the business model shift as a reason for declining sales), I respond. 

     Post after post, you keep continously hammering incorrect points, I am just correcting you.  The story is told in the financial statements.  There is more to understanding a Company than looking a few incorrect numbers on Yahoo Finance.

     Now, going back to the health care issue, I don't feel like touching that one.  Personally, I think it is a bad business move to get your name in the press on either side of the issue.  I'll watch to see how much attention it gets.  But, in terms of running the Company, reducing debt, improving results, I'm actually quite happy with the current management.

     Don't want this to be a personal issue.  If you felt like my posts were a direct attack on you, I apologize

Wake,

We will have to just disagree because I have a difference of opinion on some of your conclusions and comments..but I do not go into detail about my personal experience or background. I can say our educational path is probably similar but out of college you went one direction and I went another. Lets say I know this specific industry VERY well, more than an Big 8 auditor would..so I draw on my industry experience and background to draw conclusions in a different way than you do. It would be like the inside experience you have being an auditor that someone who wasnt an auditor would not understand.

So I do not need to worry about the variance between the actual SEC filings (which obviously I know how to access and use) versus yahoo finance because I draw conclusions not based ONLY on financials or management comments because I look at their operations from a different perspective based on my background and experience.

I dont claim to know many industries from the inside, but this is one that I do know and I could easily step into the role of an owner and be successful at doing so..thus I evaluate this industry on much more than massaged income statements and management commentary.

I do disagree with your calculation of Cost of Sales..you include more items than I do but it does not really matter if we get to the same ending in a different way. I base Cost of Sales on direct product input costs relative to sales..so yes to me the Cost of Sales is what I listed..in that 30% range, that is the cost of sales, subtract cost of sales from gross sales and you have the gross profit and margin. It is obvious your calculations are different and I dont really care, my calculations are fine for me and yours are fine for you. To get to a 75% cost of sales you are including much more of operational costs than I am and to me that strays from the purpose of Cost of Sales but again our paths are different and I am ok with that.

I am also not interested in what management says because I can look at what they are DOING and the operational performance to draw my conclusions here..I really rarely read management discussion of earnings when I evaluate an investment unless I know nothing of the industry and need to understand what they are doing and why. To me having them switch from a corporate owned unit structure to a franchise structure doesnt mean that much because in some aspects it is a sign of weakness that they feel the need to sell company units and it also potentially lowers profit potential.

The likely reality is that the corporation is not doing a sufficient job at operating the company owned locations in a profitable fashion, which to me is a sign of weakness from an operations standpoint..the fact that they are willing to forgo the profit potential of operating the locations and are "giving up" on doing so is quite telling. But again that is my background and experience in the industry that gives me that information..it wouldnt be found in management commentary because they want to spin it in a positive way when to someone who understands would see it for what it is.

As for stock returns, I already said why it was of no interest to me..I am not interested in mature, low margin, low growth companies. It can work and be successful for some and I might occasionally invest that way, but this is not a company I see as one I would want to be involved in.

First of all this is some NUTJOB who owns 40 Denny's and employs mostly illegal cubans,haitians, and mexicans.. He's trying to puff out his proud american chest against the BLACK guy in office,, he's mad and he's not gonna take it anymore LOLOLOL  douchebag should be shot in the head and left for aligator feed.

Another thing.. YOU could get 70 refills and still not pay for your Coca-Cola fountain drink buddy.. DRINK UP

Wall,

        Good read, thanks for posting.  I understand where you are coming from better.  For what it is worth, I still think you should be careful using (and posting) inaccurate financial information in the context of investment decisions.  Your industry experience is obviously a huge advantage when choosing to invest, but anytime you use financial data, slight differences (huge differences in this case), can really skew things from a valuation/modeling standpoint.

          Definitely a difference of opinion here.  I look at the decision to sell the units more as a way to generate cash and reduce debt/de-leverage a bit in what has become a pretty uncertain economic environment over the last few years.  I can see your point though and it is definitely a more skeptical (potentially more accurate, who knows) point of view.

            Either way, I just don't see the Company being the complete stinker you made it out to be.  Understandibly, this type of company (more mature, low growth, etc.) is not your bread and butter from an investment standpoint, but companies like this that may not be overly exciting, and aren't going to be a 10-bagger or anything, but have strong positive cash flow generation and low price/earnings multiples and can serve a purpose in a portfolio (at least in mine).

Wake,

I dont appreciate your continual commentary about me posting inaccurate financial information, you are using one source of information (SEC filings) while I use another, yahoo finance.

Just because the SEC filings itemize things differently does not mean that the information listed on yahoo finance is inaccurate or misleading to people.

Did you research why they categorized certain costs in a different way or exactly HOW say Cost of Revenue was calculated or did you just compare the two and assume the SEC filing was correct and the other not?

I looked at the SEC filing this afternoon and I have to say I disagree with the way the company lumps certain costs into the Operations category that could easily be separated out based on specific purpose..for example, to me with my experience the only things that are part of Cost of Sales are DIRECT product costs..what it costs you to make the product period..nothing else is included.

I see on the SEC filing that the difference is about 60k or so for the 2011 annual report for Cost of Sales..but in the SEC Income Statement breakdown they lump all of payroll and "other" operating expenses into the group category and occupancy as well. Occupancy is not a direct product cost...you have it irregardless of how much revenue is generated, and the total payroll being tossed into the category is also quite irresponsible and not how I personally categorize "Cost of Sales".

So I guess I will stand by the numbers I presented since you have no way of disproving the numbers, OR proving the SEC numbers are more accurate..in fact the more I look at the SEC filing, the more it looks inaccurate.

Be careful in drawing conclusions and making accusations when you have not fully researched all sides of the discussion, there is absolutely no way you could disprove what is listed in yahoo finance, especially since the BOTTOM LINE numbers are identical.. Revenue numbers are identical, Net Income is identical..the variance between what you used and what I used is subjective and definitely not inaccurate.

Also for fun, compare the IS for Dennys with some other similar restaurants and see how they are different. Say for example Red Robin or I Hop..it is quite interesting how one company breaks down an Income Statement relative to another..

 

Thank you.

Who the hell eats this corporate cardboard garbage?   You have local small businesses around every corner that can make it faster, fresher and much tastier.

Why would you even think of patronizing those corporate shitholes?

Wall,

        This will be my last post in this thread.  If you respond again, I'm not going to reply, but it doesn't mean I agree with you.  I'm just tired of feeling like I am banging my head against the wall responding to you

        I pointed out (what is actually a very commonly known fact), that information that is pulled into sites like Yahoo, can be, and often times is, inaccurate and very misleading.  In fact, if you want to learn a little more about those problems, and what the industry is doing about it, do a little research on the concept of XBRL.  Theoretically, a few years down the road, you should be more able to rely on sites like Yahoo Finance when they attempt to data mine financial information.  We just are not there yet.

        The fact that you are implying that Yahoo finance numbers may be more accurate than the financial information filed with the SEC is beyond laughable to anyone that knows anything about public companies.  One is a set of financial statements that is certified by the CEO and CFO of the Company (under threat of criminal liability if they are knowingly, or willingly false) and are signed off on by a big 4 audit firm as being compliant with US GAAP and PCAOB standards.  The other is a collection of data points posted to Yahoo Finance that doesn't even mathematically add up. 

           Case in point, since you obviously missed it in my earlier post.  Per Yahoo Finance:

2011 Revenues - $538 million

2011 Cost of Sales - $173 million

2011 Gross Profit - $365 million

2011 Operating Expenses - $146 million

2011 Operating Income - $51 million

Where is the other $168 million of expenses that would allow you to total down to $51 million of operating income?  It is the same sort of incorrect information in 2010 and 2009. 

There is obviously some sort of formula, program, data retrieving tool, whatever you want to call it, that inaccurately pulled the data for this Company into yahoo finance  

Wake,

It is obvious that you are stuck on the concept of how IS formats can be done differently from company to company. Did you view the statements from the other companies that I referenced? I dont think so or you would not continue to post the same inaccurate things as you are.

Calculations of Cost of Sales is obviously subjective..Denny's lumps all sorts of stuff in their SEC filing that I think do not belong, but to them the calculation works because that is the format THEY use.

The bottom line is as I mentioned above.. the Revenue numbers are identical from both sources, the bottom line Net Income numbers are identical.

The rest of the line items and categorizations are subjective..Denny's groups certain costs according to what works for them, other companies do not categorize that way, I disagree with how they categorize certain costs as they are vague and not transparent.

It is obvious that you are more interested in forcing a debate point down my throat than understanding that the "art" of finance is fluid, Income Statements can and are different from companies to companies..and for you to say that I was posting wrong information is 100% wrong in itself..I proved that point and gave you some examples of how what you were saying was wrong.

Dont get stuck in your auditor mindset and ignore what you know regarding accounting..that there is nothing set in stone regarding how costs can be categorized in this industry..just go look at the examples I gave and understand that Denny's IS format is not the only way an IS can be formatted and ISNT the only way.