10-Q 1 denn-20240925.htm 10-Q denn-20240925
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-Q
(Mark One)
☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 25, 2024
or
☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from _______________ to ________________

Commission File Number 0-18051

Dennys.gif

DENNY’S CORPORATION
(Exact name of registrant as specified in its charter)
Delaware 13-3487402
(State or other jurisdiction of incorporation or organization) (I.R.S. Employer Identification No.)
203 East Main Street
Spartanburg, South Carolina29319-0001
(Address of principal executive offices)(Zip Code)
(864) 597-8000
(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:
Title of each classTrading Symbol(s) Name of each exchange on which registered
$.01 Par Value, Common StockDENN The Nasdaq Stock Market LLC
 
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  ý No  ☐
 
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted 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 such files). Yes  ý  No  ☐
 
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a 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☐Accelerated FilerýNon-Accelerated Filer☐Smaller Reporting Company☐Emerging Growth 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  ý

As of October 24, 2024, 51,329,094 shares of the registrant’s common stock, par value $0.01 per share, were outstanding.


TABLE OF CONTENTS
 
2

PART I - FINANCIAL INFORMATION

Item 1.     Financial Statements
 
Denny’s Corporation and Subsidiaries
Consolidated Balance Sheets
(Unaudited)
 September 25, 2024December 27, 2023
 (In thousands, except per share amounts)
Assets  
Current assets:  
Cash and cash equivalents$1,466 $4,893 
Investments2,902 1,281 
Receivables, net17,038 21,391 
Inventories1,835 2,175 
Assets held for sale— 1,455 
Prepaid and other current assets10,610 12,855 
Total current assets33,851 44,050 
Property, net of accumulated depreciation of $160,221 and $159,879, respectively
101,532 93,494 
Finance lease right-of-use assets, net of accumulated amortization of $7,563 and $8,220, respectively
6,411 6,098 
Operating lease right-of-use assets, net121,169 116,795 
Goodwill66,357 65,908 
Intangible assets, net92,112 93,428 
Deferred financing costs, net1,225 1,702 
Other noncurrent assets38,966 43,343 
Total assets$461,623 $464,818 
Liabilities  
Current liabilities:  
Current finance lease liabilities$1,457 $1,383 
Current operating lease liabilities15,076 14,779 
Accounts payable14,685 24,070 
Other current liabilities56,474 63,068 
Total current liabilities87,692 103,300 
Long-term liabilities:  
Long-term debt261,000 255,500 
Noncurrent finance lease liabilities9,540 9,150 
Noncurrent operating lease liabilities117,390 114,451 
Liability for insurance claims, less current portion7,160 6,929 
Deferred income taxes, net4,619 6,582 
Other noncurrent liabilities28,705 31,592 
Total long-term liabilities428,414 424,204 
Total liabilities516,106 527,504 
Shareholders' deficit  
Common stock $0.01 par value; 135,000 shares authorized; September 25, 2024: 53,342 shares issued and 51,326 outstanding; December 27, 2023: 52,906 shares issued and 52,239 shares outstanding
$533 $529 
Paid-in capital13,129 6,688 
Deficit(7,009)(21,784)
Accumulated other comprehensive loss, net(43,445)(41,659)
Treasury stock, at cost, 2,016 and 667 shares, respectively
(17,691)(6,460)
Total shareholders' deficit(54,483)(62,686)
Total liabilities and shareholders' deficit$461,623 $464,818 

See accompanying notes
3

Denny’s Corporation and Subsidiaries
Consolidated Statements of Income
(Unaudited)
 Quarter EndedThree Quarters Ended
 September 25, 2024September 27, 2023September 25, 2024September 27, 2023
 (In thousands, except per share amounts)
Revenue:   
Company restaurant sales$52,701 $53,153 $159,391 $161,486 
Franchise and license revenue59,058 61,030 178,269 187,083 
Total operating revenue111,759 114,183 337,660 348,569 
Costs of company restaurant sales, excluding depreciation and amortization:
    
Product costs13,611 13,587 40,554 41,796 
Payroll and benefits19,838 19,754 60,805 60,482 
Occupancy4,443 4,085 13,687 12,259 
Other operating expenses8,928 8,467 27,470 24,416 
Total costs of company restaurant sales, excluding depreciation and amortization46,820 45,893 142,516 138,953 
Costs of franchise and license revenue, excluding depreciation and amortization28,999 29,810 89,801 92,657 
General and administrative expenses19,831 18,237 61,539 58,515 
Depreciation and amortization3,622 3,605 10,938 10,878 
Goodwill impairment charges— — 20 — 
Operating (gains), losses and other charges, net
746 2,620 1,984 2,467 
Total operating costs and expenses, net
100,018 100,165 306,798 303,470 
Operating income11,741 14,018 30,862 45,099 
Interest expense, net4,571 4,381 13,564 13,288 
Other nonoperating (income) expense, net(824)43 (1,685)9,470 
Income before income taxes7,994 9,594 18,983 22,341 
Provision for income taxes1,478 1,686 4,208 5,298 
Net income$6,516 $7,908 $14,775 $17,043 
Net income per share - basic$0.12 $0.14 $0.28 $0.30 
Net income per share - diluted$0.12 $0.14 $0.28 $0.30 
Basic weighted average shares outstanding
52,148 55,869 52,635 56,764 
Diluted weighted average shares outstanding
52,207 56,082 52,739 56,973 
 
See accompanying notes
4

Denny’s Corporation and Subsidiaries
Consolidated Statements of Comprehensive Income (Loss)
(Unaudited)
 Quarter EndedThree Quarters Ended
 September 25, 2024September 27, 2023September 25, 2024September 27, 2023
 (In thousands)
Net income$6,516 $7,908 $14,775 $17,043 
Other comprehensive income (loss), net of tax:
Minimum pension liability adjustment, net of tax of $4, $4, $23 and $30, respectively
12 9 63 86 
Changes in the fair value of cash flow hedges, net of tax of $(2,687), $4,597, $416 and $5,893, respectively
(7,958)13,516 1,234 17,328 
Reclassification of cash flow hedges to interest expense, net of tax of $(400), $(352), $(1,168) and $(901), respectively
(1,182)(1,034)(3,458)(2,650)
Amortization of unrealized losses related to interest rate swaps to interest expense, net of tax of $49, $24, $127 and $59, respectively
144 70 375 173 
Other comprehensive income (loss)(8,984)12,561 (1,786)14,937 
Total comprehensive income (loss)$(2,468)$20,469 $12,989 $31,980 

See accompanying notes
5

Denny’s Corporation and Subsidiaries
Consolidated Statements of Shareholders’ Deficit
For the Quarters Ended September 25, 2024 and September 27, 2023
(Unaudited)
 Common StockTreasury StockPaid-in CapitalDeficitAccumulated
Other
Comprehensive Loss, Net		Total
Shareholders’
Deficit
 SharesAmountSharesAmount
 (In thousands)
Balance, June 26, 202453,339 $533 (1,770)$(15,925)$10,135 $(13,525)$(34,461)$(53,243)
Net income— — — — — 6,516 — 6,516 
Other comprehensive loss— — — — — — (8,984)(8,984)
Share-based compensation on equity classified awards, net of withholding tax— — — — 2,994 — — 2,994 
Purchase of treasury stock, including excise tax— — (246)(1,766)— — — (1,766)
Issuance of common stock for share-based compensation3 — — — — — — — 
Balance, September 25, 2024
53,342 $533 (2,016)$(17,691)$13,129 $(7,009)$(43,445)$(54,483)

 Common StockTreasury StockPaid-in CapitalDeficitAccumulated
Other
Comprehensive Loss, Net		Total
Shareholders’
Deficit
 SharesAmountSharesAmount
 (In thousands)
Balance, June 28, 202365,708 $657 (10,000)$(114,866)$144,506 $(32,594)$(40,321)$(42,618)
Net income— — — — — 7,908 — 7,908 
Other comprehensive income— — — — — — 12,561 12,561 
Share-based compensation on equity classified awards, net of withholding tax— — — — 2,887 — — 2,887 
Purchase of treasury stock, including excise tax— — (1,680)(16,536)— — — (16,536)
Issuance of common stock for share-based compensation3 — — — — — — — 
Balance, September 27, 202365,711 $657 (11,680)$(131,402)$147,393 $(24,686)$(27,760)$(35,798)

See accompanying notes





6

Denny’s Corporation and Subsidiaries
Consolidated Statements of Shareholders’ Deficit
For the Three Quarters Ended September 25, 2024 and September 27, 2023
(Unaudited)

 Common StockTreasury StockPaid-in CapitalDeficitAccumulated
Other
Comprehensive Loss, Net		Total
Shareholders’
Deficit
 SharesAmountSharesAmount
 (In thousands)
Balance, December 27, 202352,906 $529 (667)$(6,460)$6,688 $(21,784)$(41,659)$(62,686)
Net income— — — — — 14,775 — 14,775 
Other comprehensive loss— — — — — — (1,786)(1,786)
Share-based compensation on equity classified awards, net of withholding tax
— — — — 6,445 — — 6,445 
Purchase of treasury stock, including excise tax— — (1,349)(11,231)— — — (11,231)
Issuance of common stock for share-based compensation436 4 — — (4)— — — 
Balance, September 25, 2024
53,342 $533 (2,016)$(17,691)$13,129 $(7,009)$(43,445)$(54,483)

 Common StockTreasury StockPaid-in CapitalDeficitAccumulated
Other
Comprehensive Loss, Net		Total
Shareholders’
Deficit
 SharesAmountSharesAmount
 (In thousands)
Balance, December 28, 202264,998 $650 (8,270)$(95,476)$142,136 $(41,729)$(42,697)$(37,116)
Net income— — — — — 17,043 — 17,043 
Other comprehensive income— — — — — — 14,937 14,937 
Share-based compensation on equity classified awards, net of withholding tax
— — — — 5,264 — — 5,264 
Purchase of treasury stock, including excise tax— — (3,410)(35,926)— — — (35,926)
Issuance of common stock for share-based compensation713 7 — — (7)— — — 
Balance, September 27, 2023
65,711 $657 (11,680)$(131,402)$147,393 $(24,686)$(27,760)$(35,798)

See accompanying notes





7

Denny’s Corporation and Subsidiaries
Consolidated Statements of Cash Flows
(Unaudited)
 Three Quarters Ended
 September 25, 2024September 27, 2023
 (In thousands)
Cash flows from operating activities:  
Net income$14,775 $17,043 
Adjustments to reconcile net income to cash flows provided by operating activities:  
Depreciation and amortization10,938 10,878 
Goodwill impairment charges20 — 
Operating (gains), losses and other charges, net1,984 2,467 
Losses and amortization on interest rate swaps, net502 10,838 
Amortization of deferred financing costs477 476 
Gains on investments(121)(59)
Gains on early termination of debt and leases(42)— 
Deferred income tax (benefit) expense(1,672)369 
Increase of tax valuation allowance333 — 
Share-based compensation expense8,406 8,477 
Changes in assets and liabilities, excluding acquisitions and dispositions:  
Receivables4,119 8,235 
Inventories341 3,184 
Prepaids and other current assets2,245 712 
Other noncurrent assets669 (902)
   Operating lease assets and liabilities(725)(479)
Accounts payable(11,087)(7,079)
Other accrued liabilities(7,824)(1,319)
Other noncurrent liabilities(2,391)(2,073)
Net cash flows provided by operating activities20,947 50,768 
Cash flows from investing activities:  
Capital expenditures(17,710)(5,499)
Acquisition of restaurant and real estate— (1,227)
Initial operating lease direct costs— (400)
Proceeds from sales of real estate, restaurants and other assets1,360 3,161 
Investment purchases(1,500)(1,300)
Proceeds from sale of investments— 1,850 
Collections on notes receivable489 391 
Issuance of notes receivable(255)— 
Net cash flows used in investing activities(17,616)(3,024)
Cash flows from financing activities:  
Revolver borrowings91,900 100,300 
Revolver payments(86,400)(113,700)
Repayments of finance leases(1,056)(1,359)
Tax withholding on share-based payments(1,881)(3,007)
Purchase of treasury stock(11,266)(35,415)
Net bank overdrafts1,945 2,936 
Net cash flows used in financing activities(6,758)(50,245)
Decrease in cash and cash equivalents(3,427)(2,501)
Cash and cash equivalents at beginning of period4,893 3,523 
Cash and cash equivalents at end of period$1,466 $1,022 

See accompanying notes
8

Denny’s Corporation and Subsidiaries
Notes to Consolidated Financial Statements
(Unaudited)

Note 1.     Introduction and Basis of Presentation

Introduction

Denny’s Corporation, or the Company, is one of America’s largest full-service restaurant chains based on number of restaurants. As of September 25, 2024, the Company consisted of 1,586 restaurants, 1,514 of which were franchised/licensed restaurants and 72 of which were company operated.

The Company consists of the Denny’s brand ("Denny's") and the Keke’s Breakfast Café brand (“Keke’s”). As of September 25, 2024, the Denny's brand consisted of 1,525 restaurants, 1,464 of which were franchised/licensed restaurants and 61 of which were company operated. As of September 25, 2024, the Keke's brand consisted of 61 restaurants, 50 of which were franchised restaurants and 11 of which were company operated.

Basis of Presentation

Our unaudited consolidated financial statements have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission for interim financial information. Therefore, certain information and notes normally included in financial statements prepared in accordance with U.S. generally accepted accounting principles (“GAAP”) have been 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 are reasonable.

These interim consolidated financial statements should be read in conjunction with our consolidated financial statements and notes thereto as of and for the fiscal year ended December 27, 2023 which are contained in our audited Annual Report on Form 10-K for the fiscal year ended December 27, 2023. The results of operations for the interim periods presented are not necessarily indicative of the results for the entire fiscal year ending December 25, 2024. Our significant interim accounting policies include the recognition of advertising and marketing costs, generally in proportion to revenue, and the recognition of income taxes using an estimated annual effective rate.

Change in Presentation

Certain reclassifications have been made in the 2023 interim consolidated financial statements to conform to the 2024 presentation. These reclassifications did not affect total revenues or net income.

Note 2.     Summary of Significant Accounting Policies
 
Newly Adopted Accounting Standards

In March 2020, the FASB issued ASU 2020-04, “Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting”, which was later clarified in January 2021 by ASU 2021-01, “Reference Rate Reform (Topic 848): Scope”. Additionally, in December 2022, the FASB issued ASU 2022-06, “Reference Rate Reform (Topic 848): Deferral of the Sunset Date of Topic 848”, which allows ASU 2020-04 to be adopted and applied prospectively to contract modifications made on or before December 31, 2024. The guidance provides optional guidance, for a limited time, to ease the potential burden in accounting for or recognizing the effects of reference rate reform on financial reporting. The Company adopted ASU 2020-04 on March 12, 2020. The adoption of and future elections under this new guidance did not and are not expected to have a material impact on the Company’s consolidated financial position or results of operations. The guidance is effective through December 31, 2024.







9

Accounting Standards to be Adopted

In November 2023, the FASB issued ASU 2023-07, “Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures”. The new guidance requires enhanced reportable segment disclosures to include significant segment expenses. ASU 2023-07 is effective for annual periods beginning after December 15, 2023 (our fiscal 2024) and interim periods beginning after December 15, 2024 (our fiscal 2025). We are currently evaluating the impact that the adoption of this new guidance will have on our consolidated financial statements and will add necessary disclosures upon adoption.

In December 2023, the FASB issued ASU 2023-09, “Income Taxes (Topic 740): Improvements to Income Tax Disclosures”. The new guidance requires enhanced effective tax rate reconciliation and income taxes paid disclosures. ASU 2023-09 is effective for annual periods beginning after December 15, 2024 (our fiscal 2025). We are currently evaluating the impact that the adoption of this new guidance will have on our consolidated financial statements and will add necessary disclosures upon adoption.

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 consisted of the following:
 September 25, 2024December 27, 2023
 (In thousands)
Receivables, net:  
Trade accounts receivable from franchisees$12,363 $14,092 
Notes and loan receivables from franchisees235 584 
Vendor receivables1,941 4,059 
Credit card receivables657 995 
Other2,402 1,862 
Allowance for credit losses(560)(201)
Total receivables, net$17,038 $21,391 


Note 4.    Goodwill and Intangible Assets

September 25, 2024
(In thousands)
Balance, beginning of year$65,908 
Reclassifications from Keke's assets held for sale469 
Impairment charges related to Denny's(20)
Balance, end of period$66,357 
Goodwill by segment consisted of the following:
September 25, 2024December 27, 2023
(In thousands)
Denny’s$37,507 $37,527 
Other28,850 28,381 
Total goodwill$66,357 $65,908 






10

Intangible assets consisted of the following:
 September 25, 2024December 27, 2023
 Gross Carrying AmountAccumulated AmortizationGross Carrying AmountAccumulated Amortization
 (In thousands)
Intangible assets with indefinite lives:
    
Trade names$79,687 $— $79,687 $— 
Liquor licenses120 — 120 — 
Intangible assets with definite lives:
    
Reacquired franchise rights9,135 5,990 9,470 5,614 
Franchise agreements10,603 1,443 10,700 935 
Intangible assets, net$99,545 $7,433 $99,977 $6,549 

Amortization expense for intangible assets with definite lives totaled $0.4 million and $1.1 million for the quarter and year-to-date period ended September 25, 2024, respectively. Amortization expense for intangible assets with definite lives totaled $0.4 million and $1.2 million for the quarter and year-to-date period ended September 27, 2023, respectively.

Note 5.     Other Current Liabilities
 
Other current liabilities consisted of the following:
 September 25, 2024December 27, 2023
 (In thousands)
Accrued payroll$14,896 $16,400 
Current portion of liability for insurance claims
3,732 3,758 
Accrued taxes6,027 4,699 
Accrued advertising10,474 10,664 
Gift cards5,932 7,838 
Accrued legal settlements4,367 7,488 
Accrued interest4,826 4,530 
Other6,220 7,691 
Other current liabilities$56,474 $63,068 

11

Note 6.     Fair Value of Financial Instruments

Financial assets and liabilities measured at fair value on a recurring basis are summarized below: 
 TotalQuoted Prices in Active Markets for Identical Assets/Liabilities
(Level 1)		Significant Other Observable Inputs
(Level 2)		Significant Unobservable Inputs
(Level 3)
 
(In thousands)
Fair value measurements as of September 25, 2024:
Deferred compensation plan investments (1)
$11,063 $11,063 $— $— 
Interest rate swaps (2)
5,912 — 5,912 — 
Investments (3)
2,902 — 2,902 — 
Total$19,877 $11,063 $8,814 $— 
Fair value measurements as of December 27, 2023:
Deferred compensation plan investments (1)
$12,225 $12,225 $— $— 
Interest rate swaps (2)
8,888 — 8,888 — 
Investments (3)
1,281 — 1,281 — 
Total$22,394 $12,225 $10,169 $— 

(1)    The fair values of our deferred compensation plan investments are based on the closing market prices of the elected investments and are included in other noncurrent assets in our Consolidated Balance Sheets.
(2)    The fair values of our interest rate swaps are based upon Level 2 inputs, which include valuation models. The key inputs for the valuation models are quoted market prices, interest rates, forward yield curves and credit risk adjustments that are necessary to reflect the probability of default by the counterparty or us. For disclosures about the fair value measurements of our derivative instruments, see Note 7.
(3)    The fair values of our investments are valued using a readily determinable net asset value per share based on the fair value of the underlying securities. There are no significant redemption restrictions associated with these investments.

Those assets and liabilities measured at fair value on a non-recurring basis are summarized below:
Significant Unobservable Inputs
(Level 3)

 Impairment Charges
(In thousands)
Fair value measurements as of September 25, 2024:
Assets held and used (1)
$— $78 
(1)As of September 25, 2024, impaired assets were written down to their fair value. To determine fair value, we used the income approach, which assumes that the future cash flows reflect current market expectations. These fair value measurements require significant judgment using Level 3 inputs, such as discounted cash flows from operations, which are not observable from the market, directly or indirectly. There is uncertainty in the projected future cash flows used in the Company's impairment analysis, which requires the use of estimates and assumptions. If actual performance does not achieve the projections, or if the assumptions used change in the future, the Company may be required to recognize impairment charges in future periods.

Assets that are measured at fair value on a non-recurring basis include property, operating lease right-of-use assets, finance lease right-of-use assets, goodwill and intangible assets. During the quarter and year-to-date period ended September 25, 2024, we recognized impairment charges of $0.1 million and $0.8 million, respectively, related to certain of these assets. See Note 4 and Note 9.

The carrying amounts of cash and cash equivalents, accounts receivable, accounts payable and accrued expenses are deemed to approximate fair value due to the immediate or short-term maturity of these instruments. The fair value of notes receivable approximates the carrying value after consideration of recorded allowances and related risk-based interest rates. The liabilities under our credit facility are carried at historical cost, which approximates fair value. The fair value of our senior secured revolver approximates its carrying value since it is a variable rate facility (Level 2).

12

Note 7.     Long-Term Debt

The Company and certain of its subsidiaries have a credit facility consisting of a five-year $400 million senior secured revolver (with a $25 million letter of credit sublimit). The credit facility includes an accordion feature that would allow us to increase the size of the facility to $450 million. Borrowings bear a tiered interest rate, which is based on the Company's consolidated leverage ratio. The maturity date for the credit facility is August 26, 2026.

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 its subsidiaries (other than its insurance captive subsidiary). 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 September 25, 2024.

As of September 25, 2024, we had outstanding revolver loans of $261.0 million and outstanding letters of credit under the credit facility of $16.1 million. These balances resulted in unused commitments of $122.9 million as of September 25, 2024 under the credit facility.

As of September 25, 2024, borrowings under the credit facility bore interest at a rate of Adjusted Daily Simple SOFR plus 2.25%. Letters of credit under the credit facility bore interest at a rate of 2.38%. The commitment fee, paid on the unused portion of the credit facility, was set to 0.35%.

Prior to considering the impact of our interest rate swaps, described below, the weighted-average interest rate on outstanding revolver loans was 7.68% and 7.41% as of September 25, 2024 and December 27, 2023, respectively. Taking into consideration our interest rate swaps that are designated as cash flow hedges, the weighted-average interest rate of outstanding revolver loans was 5.14% and 5.04% as of September 25, 2024 and December 27, 2023, respectively.

Interest Rate Hedges
We have receive-variable, pay-fixed interest rate swaps to hedge the forecasted cash flows of our floating rate debt. A summary of our interest rate swaps as of September 25, 2024 is as follows:
Trade DateEffective DateMaturity DateNotional AmountFair ValueFixed Rate
(In thousands)
Swaps designated as cash flow hedges
March 20, 2015March 29, 2018March 31, 2025$120,000 $1,159 2.34 %
October 1, 2015March 29, 2018March 31, 2026$50,000 $811 2.37 %
February 15, 2018March 31, 2020December 31, 2033$60,000 (1)$3,942 3.09 %
Total$230,000 $5,912 

(1)     The notional amounts of the swaps entered into on February 15, 2018 increase periodically until they reach the maximum notional amount of $335 million on August 31, 2033.

Termination and Designation of Certain Interest Rate Swaps

During the quarter ended March 29, 2023, we terminated a portion of our hedging relationship entered into in 2018 (“2018 Swaps”), reducing the previous maximum notional amount of $425 million on August 31, 2033 to $335 million. We received $1.5 million of cash as a result of the termination, which is recorded as a component of operating activities in our Consolidated Statement of Cash Flows for the year-to-date period ended September 27, 2023.

In addition, during the quarter ended March 29, 2023, we designated the remaining 2018 Swaps as cash flow hedges of our exposure to variability in future cash flows attributable to variable rate interest payments due on forecasted notional amounts.





13

Changes in Fair Value of Interest Rate Swaps

To the extent the swaps are highly effective in offsetting the variability of the hedged cash flows, changes in the fair value of the swaps are not included in the Consolidated Statements of Income but are reported as a component of other comprehensive income (loss). Our interest rate swaps are designated as cash flow hedges with unrealized gains and losses recorded as a component of accumulated other comprehensive loss, net.

As of September 25, 2024, the fair value of the swaps designated as cash flow hedges was an asset of $5.9 million, recorded as a component of other noncurrent assets. The designated swaps have an offsetting amount (before taxes) recorded as a component of accumulated other comprehensive loss, net in our Consolidated Balance Sheets. See Note 13 for amounts recorded in accumulated other comprehensive loss related to interest rate swaps. During the year-to-date period ended September 25, 2024, we reclassified $4.6 million from accumulated other comprehensive loss, net as a reduction to interest expense, net. We expect to reclassify $6.6 million from accumulated other comprehensive loss, net as a reduction to interest expense, net in our Consolidated Statements of Income related to swaps designated as cash flow hedges during the next 12 months.

For the periods prior to their designation as cash flow hedges, changes in the fair value of the 2018 Swaps were recorded as a component of other nonoperating (income) expense, net in our Consolidated Statements of Income. For the year-to-date period ended September 27, 2023, we recorded expense of $10.6 million as a component of other nonoperating (income) expense, net related to the 2018 Swaps resulting from changes in fair value.

Amortization of Certain Amounts Included in Accumulated Other Comprehensive Loss, Net

At September 25, 2024, we had a total of $63.7 million (before taxes) included in accumulated other comprehensive loss, net related to (i) the discontinuance of hedge accounting treatment related to certain cash flow hedges in prior years and (ii) the fair value of certain swaps at the date of designation as cash flow hedges that are being amortized into our Consolidated Statements of Income as a component of interest expense, net over the remaining term of the related swap.

For the quarter and year-to-date period ended September 25, 2024, we recorded unrealized losses of $0.2 million and $0.5 million, respectively, to interest expense, net. For the quarter and year-to-date period ended September 27, 2023, we recorded unrealized losses of $0.1 million and $0.2 million, respectively, to interest expense, net. We expect to amortize $2.3 million from accumulated other comprehensive loss, net to interest expense, net in our Consolidated Statements of Income related to dedesignated interest rate swaps during the next 12 months.

Note 8.     Revenues

The following table disaggregates our revenue by sales channel and type of good or service:
 Quarter EndedThree Quarters Ended
 September 25, 2024September 27, 2023September 25, 2024September 27, 2023
 (In thousands)
Company restaurant sales$52,701 $53,153 $159,391 $161,486 
Franchise and license revenue:
Royalties29,101 29,703 88,421 90,106 
Advertising revenue20,172 19,297 59,098 58,818 
Initial and other fees1,639 3,388 5,903 10,994 
Occupancy revenue 8,146 8,642 24,847 27,165 
Franchise and license revenue 
59,058 61,030 178,269 187,083 
Total operating revenue$111,759 $114,183 $337,660 $348,569 

14

Franchise occupancy revenue consisted of the following:
 Quarter EndedThree Quarters Ended
 September 25, 2024September 27, 2023September 25, 2024September 27, 2023
 (In thousands)
Operating lease revenue$6,063 $6,461 $18,262 $20,015 
Variable lease revenue
2,083 2,181 6,585 7,150 
Total occupancy revenue
$8,146 $8,642 $24,847 $27,165 

Balances related to contracts with customers consist of receivables, contract assets, deferred franchise revenue and deferred gift card revenue. See Note 3 for details on our receivables.
Deferred franchise revenue consists primarily of the unamortized portion of initial franchise fees that are currently being amortized into revenue and amounts related to development agreements and unopened restaurants that will begin amortizing into revenue when the related restaurants are opened. Deferred franchise revenue represents our remaining performance obligations to our franchisees, excluding amounts of variable consideration related to sales-based royalties and advertising.
The components of the change in deferred franchise revenue are as follows:
 (In thousands)
Balance, December 27, 2023$19,150 
Fees received from franchisees522 
Revenue recognized (1)
(2,345)
Balance, September 25, 202417,327 
Less current portion included in other current liabilities1,946 
Deferred franchise revenue included in other noncurrent liabilities$15,381 
(1)    Of this amount $2.1 million was included in the deferred franchise revenue balance as of December 27, 2023.

We record contract assets related to incentives and subsidies provided to franchisees related to new unit openings and/or equipment upgrades. These amounts will be recognized as a component of franchise and license revenue over the remaining term of the related franchise agreements.

The components of the change in contract assets are as follows:
 (In thousands)
Balance, December 27, 2023$6,608 
Franchisee deferred costs293 
Contract asset amortization(980)
Balance, September 25, 20245,921 
Less current portion included in other current assets941 
Contract assets included in other noncurrent assets$4,980 

The Company purchases equipment related to various programs for franchise restaurants, including kitchen and point-of-sale system equipment. We bill our franchisees and recognize revenue when the related equipment is installed, less amounts contributed from the Company, which have been deferred as contract assets in the table above. We recognized $0.1 million and $0.6 million of revenue, recorded as a component of initial and other fees, related to the sale of equipment to franchisees during the quarter and year-to-date period ended September 25, 2024, respectively. We recognized $1.7 million and $4.6 million of revenue, recorded as a component of initial and other fees, related to the sale of equipment to franchisees during the quarter and year-to-date period ended September 27, 2023, respectively. As of September 25, 2024, we had $0.3 million in inventory and $0.2 million in receivables related to the purchased equipment. As of December 27, 2023, we had $0.6 million in inventory and $0.3 million in receivables related to the purchased equipment.





15

As of September 25, 2024, deferred franchise revenue, net of contract asset amortization, expected to be recognized in the future is as follows:
(In thousands)
Remainder of 2024$306 
20251,123 
20261,121 
20271,091 
2028966 
Thereafter6,799 
Deferred franchise revenue, net$11,406 
Deferred gift card liabilities consist of the unredeemed portion of gift cards sold in company restaurants and at third party locations. The balance of deferred gift card liabilities represents our remaining performance obligations to our customers. The balance of deferred gift card liabilities as of September 25, 2024 and December 27, 2023 was $5.9 million and $7.8 million, respectively. During the year-to-date period ended September 25, 2024, we recognized revenue of $0.4 million from gift card redemptions at company restaurants.

Note 9.     Operating (Gains), Losses and Other Charges, Net

Operating (gains), losses and other charges, net consisted of the following:
 Quarter EndedThree Quarters Ended
 September 25, 2024September 27, 2023September 25, 2024September 27, 2023
 (In thousands)
Losses (gains) on sales of assets and other, net$6 $(88)$(88)$(2,132)
Impairment charges (1)
78 1,711 792 1,840 
Restructuring charges and exit costs
662 997 1,280 2,759 
Operating (gains), losses and other charges, net
$746 $2,620 $1,984 $2,467 

(1) Impairment charges include impairments related to property, operating right-of-use assets, finance right-of-use assets, franchise agreements, and reacquired franchise rights.
 
During the quarter and year-to-date period ended September 25, 2024, losses (gains) on sales of assets and other, net were primarily related to the sales of restaurants and real estate. During the quarter and year-to-date period ended September 27, 2023, losses (gains) on sales of assets and other, net were primarily related to the sales of real estate.

As of September 25, 2024, we had no recorded assets held for sale. As of December 27, 2023, we had recorded assets held for sale at their carrying amount of $1.5 million (consisting of property of $0.9 million, goodwill of $0.5 million and other assets of $0.1 million) related to one parcel of real estate and three Keke's restaurants.

We recorded impairment charges of $0.1 million and $0.8 million for the quarter and year-to-date period ended September 25, 2024, respectively, primarily related to assets held for sale and resulting from our assessments of underperforming units and closed units. The $0.1 million for the quarter was related to a franchise agreement. The $0.8 million for the year-to-date period included $0.6 million related to property, $0.1 million related to reacquired franchise rights, and $0.1 million related to a franchise agreement.

16

Restructuring charges and exit costs consisted of the following:
 Quarter EndedThree Quarters Ended
 September 25, 2024September 27, 2023September 25, 2024September 27, 2023
 (In thousands)
Exit costs$231 $12 $322 $64 
Severance and other restructuring charges
431 985 958 2,695 
Total restructuring charges and exit costs
$662 $997 $1,280 $2,759 

Exit costs primarily consist of costs related to closed restaurants. Exit cost liabilities related to lease costs are included as a component of operating lease liabilities in our Consolidated Balance Sheets.

As of September 25, 2024 and December 27, 2023, we had accrued severance and other restructuring charges of $0.7 million and $1.4 million, respectively. The balance as of September 25, 2024 is expected to be paid during the next 12 months.

Note 10.     Share-Based Compensation

Total share-based compensation included as a component of general and administrative expenses was as follows:
 Quarter EndedThree Quarters Ended
 September 25, 2024September 27, 2023September 25, 2024September 27, 2023
 (In thousands)
Employee share awards$2,773 $2,659 $7,753 $7,793 
Restricted stock units for board members
233 205 653 684 
Total share-based compensation
$3,006 $2,864 $8,406 $8,477 

Employee Share Awards

During the year-to-date period ended September 25, 2024, we granted certain employees 0.6 million performance share units ("PSUs") with a weighted average grant date fair value of $15.48 per share that vest based on the total shareholder return (“TSR”) of our common stock compared to the TSRs of a group of peer companies. As the TSR based PSUs contain a market condition, a Monte Carlo valuation was used to determine the grant date fair value. The performance period for these PSUs is the three-year fiscal period beginning December 28, 2023 and ending December 30, 2026. The PSUs will vest and be earned at the end of the performance period at which point the relative TSR achievement percentages will be applied to the vested units (from 0% to 200% of the target award).

During the year-to-date period ended September 25, 2024, we also granted certain employees 0.7 million restricted stock units ("RSUs") with a weighted average grant date fair value of $10.63 per share. These RSUs generally vest evenly over the three-year fiscal period beginning December 28, 2023 and ending December 30, 2026. We recognize compensation cost associated with these RSU awards on a straight-line basis over the entire performance period of the award.

During the year-to-date period ended September 25, 2024, we issued 0.4 million shares of common stock related to vested PSUs and RSUs. In addition, 0.2 million shares of common stock were withheld in lieu of taxes related to vested PSUs and RSUs.
 
As of September 25, 2024, we had $16.6 million of unrecognized compensation cost related to unvested PSU awards and RSU awards outstanding, which have a weighted average remaining contractual term of 1.9 years.

Restricted Stock Units for Board Members

During the year-to-date period ended September 25, 2024, we granted 0.1 million RSUs (which are equity classified) with a weighted average grant date fair value of $8.09 per unit to non-employee members of our Board of Directors. The RSUs vest after a one-year service period. A director may elect to convert these awards to shares of common stock either on a specific date in the future (while still serving as a member of our Board of Directors), upon termination as a member of our Board of Directors, or in three equal annual installments commencing after termination of service as a member of our Board of Directors.

During the year-to-date period ended September 25, 2024, fewer than 0.1 million RSUs were converted into shares of common stock.
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As of September 25, 2024, we had $0.6 million of unrecognized compensation cost related to unvested RSU awards outstanding, which have a weighted average remaining contractual term of 0.6 years.

Note 11.     Income Taxes

The effective income tax rate was 18.5% for the quarter and 22.2% for the year-to-date period ended September 25, 2024, compared to 17.6% and 23.7% for the prior year periods, respectively. The effective income tax rate for the year-to-date period ended September 25, 2024 included discrete items relating to share-based compensation of 0.1%. The effective income tax rate for the quarter and year-to-date period ended September 27, 2023 included discrete items relating to share-based compensation of (2.5)% and 0.4%, respectively.

Note 12.     Net Income Per Share
 
The amounts used for the basic and diluted net income per share calculations are summarized below:
 Quarter EndedThree Quarters Ended
 September 25, 2024September 27, 2023September 25, 2024September 27, 2023
 (In thousands, except per share amounts)
Net income$6,516 $7,908 $14,775 $17,043 
Weighted average shares outstanding - basic
52,148 55,869 52,635 56,764 
Effect of dilutive share-based compensation awards59 213 104 209 
Weighted average shares outstanding - diluted
52,207 56,082 52,739 56,973 
Net income per share - basic$0.12 $0.14 $0.28 $0.30 
Net income per share - diluted$0.12 $0.14 $0.28 $0.30 
Anti-dilutive share-based compensation awards618 735 758 788 

Note 13.     Shareholders' Deficit

Share Repurchases

Our credit facility permits the repurchase of the Company's stock and the payment of cash dividends subject to certain limitations. Our Board of Directors approves share repurchases of our common stock. Under these authorizations, 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. Currently, we are operating under a $250 million share repurchase authorization approved by the Board of Directors in December 2019.

During the year-to-date period ended September 25, 2024, we repurchased a total of 1.3 million shares of our common stock for $11.2 million, including excise taxes. This brings the total amount repurchased under the current authorization to $160.8 million, leaving $89.2 million that can be used to repurchase our common stock under this authorization as of September 25, 2024. Repurchased shares are included as treasury stock in our Consolidated Balance Sheets and our Consolidated Statements of Shareholders' Deficit.

In the fourth quarter of fiscal 2023, the Board approved the retirement of 12.8 million shares of treasury stock at a weighted average share price of $11.02, including excise taxes. As of September 25, 2024, 2.0 million shares were held in treasury stock.

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Accumulated Other Comprehensive Loss, Net

The components of the change in accumulated other comprehensive loss, net were as follows:
Defined Benefit PlansDerivativesAccumulated Other Comprehensive Loss, Net
(In thousands)
Balance as of December 27, 2023$(337)$(41,322)$(41,659)
Amortization of net loss (1)
60 — 60 
Settlement loss recognized26 — 26 
Changes in the fair value of cash flow hedges— 1,650 1,650 
Reclassification of cash flow hedges to interest expense, net (2)
— (4,626)(4,626)
Amortization of unrealized losses related to interest rate swaps to interest expense, net— 502 502 
Income tax expense related to items of other comprehensive income (loss)(23)625 602 
Balance as of September 25, 2024$(274)$(43,171)$(43,445)

(1)    Before-tax amount related to our defined benefit plans that was reclassified from accumulated other comprehensive loss, net and included as a component of pension expense within general and administrative expenses in our Consolidated Statements of Income during the year-to-date period ended September 25, 2024.
(2)    Amounts reclassified from accumulated other comprehensive loss, net into interest expense, net in our Consolidated Statements of Income represent payments either (received from) or made to the counterparty for the interest rate hedges. See Note 7 for additional details.

Note 14.     Commitments and Contingencies

Legal Proceedings

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 our consolidated results of operations or financial position. 

Note 15.     Supplemental Cash Flow Information
 Three Quarters Ended
 September 25, 2024September 27, 2023
 (In thousands)
Income taxes paid, net$4,344 $6,531 
Interest paid$12,469 $9,346 
Noncash investing and financing activities:  
Accrued purchase of property$513 $102 
Issuance of common stock, pursuant to share-based compensation plans$3,815 $5,638 
Execution of finance leases$1,514 $593 
Treasury stock payable, including excise taxes$528 $1,053 
 










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Note 16. Segment Information

We manage our business by brand and as a result have identified two operating segments, Denny’s and Keke’s. In addition, we have identified Denny’s as a reportable segment. The Denny’s reportable segment includes the results of all company and franchised and licensed Denny’s restaurants. Our Keke’s operating segment, which includes the results of all company and franchised Keke's restaurants, is included in Other.

The primary sources of revenues for all operating segments are the sale of food and beverages at our company restaurants and the collection of royalties, advertising revenue, initial and other fees, including occupancy revenue, from restaurants operated by our franchisees. We do not rely on any major customer as a source of sales and the customers and assets of all operating segments are located predominantly in the United States. There are no material transactions between segments.
Management’s measure of segment income is restaurant-level operating margin. The Company defines restaurant-level operating margin as operating income excluding the following four items: general and administrative expenses, depreciation and amortization, goodwill impairment charges and operating (gains), losses and other charges, net. The Company excludes general and administrative expenses, which include primarily non restaurant-level costs associated with the support of company and franchised restaurants and other activities at their corporate office. The Company excludes depreciation and amortization expense, substantially all of which is related to company restaurant-level assets, because such expenses represent historical sunk costs which do not reflect current cash outlays for the restaurants. The Company excludes operating (gains), losses and other charges, net, to provide a clearer perspective of its ongoing operating performance. Restaurant-level operating margin is used by our chief operating decision maker (“CODM”) to evaluate restaurant-level operating efficiency and performance.

The following tables present revenues by segment and a reconciliation of restaurant-level operating margin to net income:
Quarter EndedThree Quarters Ended
September 25, 2024September 27, 2023September 25, 2024September 27, 2023
Revenues by operating segment:(In thousands)
Denny’s$105,365 $109,136 $318,728 $332,952 
Other6,394 5,047 18,932 15,617 
Total operating revenue$111,759 $114,183 $337,660 $348,569 
Segment income:
Denny’s$35,015 $36,944 $102,750 $111,525 
Other925 1,536 2,593 5,434 
Total restaurant-level operating margin$35,940 $38,480 $105,343 $116,959 
General and administrative expenses$19,831 $18,237 $61,539 $58,515 
Depreciation and amortization3,622 3,605 10,938 10,878 
Goodwill impairment charges— — 20 — 
Operating (gains), losses and other charges, net746 2,620 1,984 2,467 
Total other operating expenses24,199 24,462 74,481 71,860 
Operating income11,741 14,018 30,862 45,099 
Interest expense, net4,571 4,381 13,564 13,288 
Other nonoperating (income) expense, net(824)43 (1,685)9,470 
Income before income taxes7,994 9,594 18,983 22,341 
Provision for income taxes1,478 1,686 4,208 5,298 
Net income$6,516 $7,908 $14,775 $17,043 

September 25, 2024December 27, 2023
Segment assets:(In thousands)
Denny’s$320,642 $340,136 
Other140,981 124,682 
Total assets$461,623 $464,818 
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Item 2.     Management’s Discussion and Analysis of Financial Condition and Results of Operations

The following Management’s Discussion and Analysis of Financial Condition and Results of Operations ("MD&A") should be read in conjunction with our consolidated financial statements and the notes thereto that appear elsewhere in this report and the MD&A contained in our Annual Report on Form 10-K for the fiscal year ended December 27, 2023.

Forward-Looking Statements

This report includes forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, as codified in Section 27A of the Securities Act of 1933, as amended and Section 21E of the Securities Exchange Act of 1934, as amended (the "Exchange Act"). The Company urges caution in considering its current trends and any outlook on its operations and financial results disclosed in this report. In addition, certain matters discussed in this report may constitute forward-looking statements. These forward-looking statements, which reflect management's best judgment based on factors currently known, are intended to speak only as of the date such statements are made and involve risks, uncertainties, and other factors that may cause the actual performance of Denny’s Corporation, its subsidiaries, and underlying restaurants to be materially different from the performance indicated or implied by such statements. Words such as “expect”, “anticipate”, “believe”, “intend”, “plan”, “hope”, "will" and variations of such words and similar expressions are intended to identify such forward-looking statements. Except as may be required by law, the Company expressly disclaims any obligation to update these forward-looking statements to reflect events or circumstances after the date of this report or to reflect the occurrence of unanticipated events. Factors that could cause actual performance to differ materially from the performance indicated by these forward-looking statements include, among others: economic, public health and political conditions that impact consumer confidence and spending; commodity and labor inflation; the ability to effectively staff restaurants and support personnel; our ability to maintain adequate levels of liquidity for our cash needs, including debt obligations, payment of dividends, planned share repurchases and capital expenditures as well as the ability of our customers, suppliers, franchisees and lenders to access sources of liquidity to provide for their own cash needs; competitive pressures from within the restaurant industry; our ability to integrate and derive the expected benefits from our acquisition of Keke's; the level of success of our operating initiatives and advertising and promotional efforts; adverse publicity; health concerns arising from food-related pandemics, outbreaks of flu viruses, or other diseases; changes in business strategy or development plans; terms and availability of capital; regional weather conditions; overall changes in the general economy (including with regard to energy costs), particularly at the retail level; political environment and geopolitical events (including acts of war and terrorism); and other factors from time to time set forth in the Company’s SEC reports and other filings, including but not limited to the discussion in Management’s Discussion and Analysis and the risks identified in Item 1A. Risk Factors contained in the Company’s Annual Report on Form 10-K for the fiscal year ended December 27, 2023 and in the Company's subsequent quarterly reports on Form 10-Q.

Overview

We manage our business by brand and as a result have identified two operating segments, Denny’s and Keke’s. As of September 25, 2024, the Denny's brand consisted of 1,525 restaurants, 1,464 of which were franchised/licensed restaurants and 61 of which were company operated. At September 25, 2024, the Keke's brand consisted of 61 restaurants, 50 of which were franchised restaurants and 11 of which were company operated.

In addition, we have identified Denny’s as a reportable segment. The Denny’s reportable segment includes the results of all company and franchised and licensed Denny’s restaurants. Total revenues at Keke’s for the quarter and year-to-date period ended September 25, 2024 represented less than 10% of total consolidated revenues, therefore, the Keke’s operating segment is included in Other for segment reporting purposes.

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Statements of Income
 
The following table contains information derived from our Consolidated Statements of Income expressed as a percentage of total operating revenue, except as noted below. Percentages may not add due to rounding.
 Quarter EndedThree Quarters Ended
 September 25, 2024September 27, 2023September 25, 2024September 27, 2023
 (In thousands)
Revenue:        
Company restaurant sales$52,701 47.2 %$53,153 46.6 %$159,391 47.2 %$161,486 46.3 %
Franchise and license revenue59,058 52.8 %61,030 53.4 %178,269 52.8 %187,083 53.7 %
Total operating revenue111,759 100.0 %114,183 100.0 %337,660 100.0 %348,569 100.0 %
Costs of company restaurant sales, excluding depreciation and amortization (a):
    
Product costs13,611 25.8 %13,587 25.6 %40,554 25.4 %41,796 25.9 %
Payroll and benefits19,838 37.6 %19,754 37.2 %60,805 38.1 %60,482 37.5 %
Occupancy4,443 8.4 %4,085 7.7 %13,687 8.6 %12,259 7.6 %
Other operating expenses8,928 16.9 %8,467 15.9 %27,470 17.2 %24,416 15.1 %
Total costs of company restaurant sales, excluding depreciation and amortization46,820 88.8 %45,893 86.3 %142,516 89.4 %138,953 86.0 %
Costs of franchise and license revenue, excluding depreciation and amortization (a)28,999 49.1 %29,810 48.8 %89,801 50.4 %92,657 49.5 %
General and administrative expenses19,831 17.7 %18,237 16.0 %61,539 18.2 %58,515 16.8 %
Depreciation and amortization3,622 3.2 %3,605 3.2 %10,938 3.2