Dine Brands Global, Inc. Reports Second Quarter 2020 Results

July 29, 2020 at 8:00 AM EDT

Liquidity and Cash Position Remain Strong

95% of Domestic Restaurants Open

GLENDALE, Calif.--(BUSINESS WIRE)--Jul. 29, 2020-- Dine Brands Global, Inc. (NYSE: DIN), the parent company of Applebee's Neighborhood Grill + Bar® and IHOP® restaurants, today announced financial results for the second quarter of 2020.

“As we continue to navigate through the challenges currently facing our industry, we have remained resolute in our focus to return to growth. Throughout the second quarter, weekly comparable sales and traffic at both Applebee’s and IHOP improved as state and local governments began to ease restrictions on dining room operations. This, coupled with the significant growth of our brands’ off-premise business, contributed to the progress made during the quarter,” said Steve Joyce, chief executive officer of Dine Brands Global, Inc.

Mr. Joyce added, “I’m confident in our long-term strategy and ability to quickly adapt to the ever-changing industry landscape. We have strong liquidity with approximately $342 million of cash, of which $279 million is unrestricted cash. We’ve been through challenging times before, and I believe we are well-positioned to emerge from the pandemic and restore our momentum.”

Domestic System-Wide Comparable Same-Restaurant Sales Performance

Domestic Same-Restaurant Sales

Preliminary

Q2 2020

Q3 QTD through WE 7/26

Applebee's

(49.4%)

(18.4%)

 
IHOP

(59.1%)

(37.6%)

 
Domestic Same-Restaurant Sales (Week Ending)

 

 

WE 4/5

WE 4/12

WE 4/19

WE 4/26

WE 5/3

WE 5/10

WE 5/17

WE 5/24

WE 5/31

WE 6/7

WE 6/14

WE 6/21

WE 6/28

Applebee's

 

(77.0%)

(77.3%)

(64.2%)

(64.4%)

(60.8%)

(54.3%)

(52.8%)

(49.5%)

(42.7%)

(37.0%)

(30.3%)

(18.4%)

(17.8%)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

IHOP

 

(81.5%)

(79.4%)

(76.3%)

(75.4%)

(72.6%)

(65.4%)

(61.5%)

(58.3%)

(52.1%)

(46.2%)

(42.9%)

(33.3%)

(34.4%)

Domestic Same-Restaurant Sales (Week Ending)

July Sales Are Preliminary

WE 7/5

WE 7/12

WE 7/19

WE 7/26

Applebee's

(22.3%)

(17.0%)

(18.8%)

(15.6%)

 
IHOP

(40.4%)

(35.7%)

(39.1%)

(35.0%)

Second Quarter of 2020

  • Applebee’s comparable same-restaurant sales improved 11 out of 13 weeks through the week ended June 28, 2020 from a decrease of 77.0% to a decrease of 17.8%, representing an increase of 59.2 percentage points during this period.
  • IHOP’s comparable same-restaurant sales improved sequentially for 12 consecutive weeks out of 13 through the week ended June 28, 2020 from a decrease of 81.5% to a decrease of 34.4%, representing an increase of 47.1 percentage points during this period.
  • Comparable same-restaurant sales for the second quarter of 2020 declined at both Applebee’s and IHOP primarily due to the impact of COVID-19 and related governmental restrictions on restaurant operations at the federal, state and local levels, which resulted in a meaningful decline in traffic for the second quarter of 2020.
  • As of June 30, 2020, 3,154 of our domestic restaurants, or 95%, were open for either dine-in service or off-premise service comprised of take-out and delivery.

Off-Premise Sales Growth Comparison

  • Off-premise sales at both Applebee’s and IHOP increased significantly primarily as a result of governmental mandates, which placed restrictions on dine-in service as well as the favorable impact of the Company’s digital initiatives.
  • Applebee’s off-premise sales accounted for 60.5% of sales mix for the second quarter of 2020, as compared to 16.3% of sales mix for the first quarter of 2020 and 13.0% of sales mix for the fourth quarter of 2019.
  • Applebee’s delivery sales accounted for 16.8% of sales mix and take-out sales accounted for 43.8% of sales mix for the second quarter of 2020.
  • Applebee’s online sales as a percentage of total sales increased by 17.8 percentage points in the second quarter of 2020 to 22.9%. This compares to 5.1% of total sales for the first quarter of 2020.
  • IHOP’s off-premise sales accounted for 53.6% of sales mix for the second quarter of 2020, as compared to 12.8% of sales mix for the first quarter of 2020 and 10.1% of sales mix for the fourth quarter of 2019.
  • IHOP’s delivery sales accounted for 23.4% of sales mix and take-out sales accounted for 33.5% of sales mix for the second quarter of 2020.
  • IHOP’s online sales as a percentage of total sales increased by 27.8 percentage points in the second quarter of 2020 to 34.7%. This compares to 6.9% of total sales for the first quarter of 2020.

Second Quarter of 2020 Summary

  • GAAP net loss per diluted share of $8.04 for the second quarter of 2020 compared to earnings per diluted share of $1.18 for the second quarter of 2019.

    This variance was primarily due to non-cash impairment charges totaling $106.5 million related to the write-downs of Applebee’s goodwill and other intangible assets as a result of the impact of COVID-19 on the Company’s operations. These items were partially offset by a deferred tax benefit of $3.4 million attributable to the other intangible assets charge.

    Additionally, gross profit decreased primarily due to a significant decline in customer traffic as a result of governmental measures to stem the spread of the coronavirus and related changes in consumer behavior.
  • Adjusted net loss per diluted share of $0.87 for the second quarter of 2020 compared to adjusted earnings per diluted share of $1.71 for the second quarter of 2019. (See “Non-GAAP Financial Measures” and reconciliation of GAAP earnings per diluted share to adjusted earnings per diluted share.)
  • General and administrative expenses for the second quarter of 2020 declined 21.6% year-over-year to $30.9 million. The improvement was mainly due to lower compensation expenses.
  • Net loss of $134.8 million for the second quarter of 2020 compared to net income of $21.4 million the second quarter of 2019.
  • Consolidated adjusted EBITDA for the second quarter of 2020 was $12.1 million. This compares to $68.0 million for the second quarter of 2019. (See “Non-GAAP Financial Measures” and reconciliation of GAAP net income to consolidated adjusted EBITDA.)
  • Cash used in operating activities for the first six months of 2020 was $10.5 million. This compares to cash flows from operating activities of $69.3 million for the first six months of 2019. The decrease mainly was due a significant decline in customer traffic at our restaurants that adversely impacted our segment operations as well as payment deferrals we offered to our franchisees primarily for the months of March 2020 and April 2020.
  • The Company had negative adjusted free cash flow of $12.4 million for the first six months of 2020. This compares to adjusted free cash flow of $66.0 million for the first six months of 2019. (See “Non-GAAP Financial Measures” and reconciliation of the Company’s cash provided by operating activities to adjusted free cash flow.)
  • GAAP net loss available to common stockholders was $130.0 million, or net loss per diluted share of $8.04, for the second quarter of 2020. This compares to net income available to common stockholders of $20.7 million, or earnings per diluted share of $1.18, for the second quarter of 2019. The decrease in net income was primarily due to the impairment charges and decline in gross profit discussed above. These items were partially offset by a decline in general and administrative expenses.
  • Adjusted net loss available to common stockholders was $14.0 million, or adjusted net loss per diluted share of $0.87, for the second quarter of 2020. This compares to adjusted net income available to common stockholders of $30.0 million, or adjusted earnings per diluted share of $1.71, for the second quarter of 2019. The decrease in adjusted net income was primarily due to lower gross profit for the reasons described above. This item was partially offset by fewer weighted average diluted shares outstanding and lower general and administrative expenses. (See “Non-GAAP Financial Measures” below.)

Cash Position

Dine Brands has taken precautionary measures to increase the Company’s financial flexibility due to the conditions caused by COVID-19. As previously disclosed on March 19, 2020, the Company borrowed $220 million from its revolving financing facility, all of which remains drawn as of June 30, 2020. As of June 30, 2020, $2.8 million was pledged against the revolving financing facility for outstanding letters of credit.

As of June 30, 2020, the Company had $342.5 million of total cash, including restricted cash of $64.0 million. The Company believes that its asset-light business model and cash position will continue to provide strong liquidity during the pandemic.

The Company makes $16.4 million of quarterly interest payments on its Series 2019-1 Class A-2-I, Fixed Rate Senior Secured Notes and Series 2019-1 Class A-2-II, Fixed Rate Senior Secured Notes (the “Class A-2-I Notes”, together with the “Class A-2-II Notes”, the “Class A-2 Notes”). In addition, the Company anticipates making a principal payment of $3.25 million in the fourth quarter of 2020. The quarterly principal payments under the Class A-2 Notes may be voluntarily suspended when the leverage ratio for the Company and its subsidiaries is less than or equal to 5.25x. As of June 30, 2020, the Company’s leverage ratio was 6.30x.

The Company voluntarily doubled its interest reserve on its Class A-2 Notes during the second quarter of 2020 to $32.8 million to enhance its securitization structure. This increased restricted cash by $16.4 million.

GAAP Effective Tax Rate

Our effective tax rate for the second quarter of 2020 was an 8.2% tax benefit compared to a 26.4% expense for the second quarter of 2019. The variance is primarily due to the non-deductibility of the Applebee’s goodwill impairment discussed earlier.

Financial Performance Guidance for 2020 Withdrawn

The Company disclosed on March 19, 2020 that it believes its consolidated financial results for 2020 could be materially impacted by the global impact from COVID-19. As a result, the Company withdrew its 2020 financial performance guidance issued on February 24, 2020. The Company assumes no obligation to update or supplement its financial performance guidance issued on February 24, 2020.

Applebee’s Reopening Update

Applebee’s restaurants began reopening their dining rooms on April 27, 2020. As of June 30, 2020, out of 1,639 domestic Applebee’s franchise restaurants, 1,523 were open for in-restaurant dining, 70 were open for only off-premise sales, comprised of take-out and delivery, and 46 were temporarily closed.

IHOP Reopening Update

IHOP restaurants began reopening their dining rooms on April 21, 2020. As of June 30, 2020, out of 1,695 domestic IHOP franchise and area license restaurants, 1,485 were open for in-restaurant dining, 76 were open only for off-premise sales, comprised of take-out and delivery, and 134 were temporarily closed.

Second Quarter of 2020 Earnings Conference Call Details

Dine Brands will host a conference call to discuss its results on July 29, 2020 at 9:00 a.m. Pacific Time. To participate on the call, please dial (833) 528-0602 and enter the conference identification number 4180997. International callers, please dial (830) 221-9708 and enter the conference identification number 4180997.

A live webcast of the call will be available on www.dinebrands.com and may be accessed by visiting Events and Presentations under the site’s Investors section. Participants should allow approximately ten minutes prior to the call’s start time to visit the site and download any streaming media software needed to listen to the webcast. A telephonic replay of the call may be accessed from 12:00 p.m. Pacific Time on July 29, 2020 through 12:00 p.m. Pacific Time on August 5, 2020 by dialing (855) 859-2056 and entering the conference identification number 4180997. International callers, please dial (404) 537-3406 and enter the conference identification number 4180997. An online archive of the webcast will also be available on Events and Presentations under the Investors section of the Company’s website.

About Dine Brands Global, Inc.

Based in Glendale, California, Dine Brands Global, Inc. (NYSE: DIN), through its subsidiaries, franchises restaurants under both the Applebee's Neighborhood Grill + Bar and IHOP brands. With approximately 3,600 restaurants combined in 17 countries and approximately 370 franchisees, Dine Brands is one of the largest full-service restaurant companies in the world. For more information on Dine Brands, visit the Company’s website located at www.dinebrands.com.

Forward-Looking Statements

Statements contained in this press release may constitute forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. You can identify these forward-looking statements by words such as “may,” “will,” “would,” “should,” “could,” “expect,” “anticipate,” “believe,” “estimate,” “intend,” “plan,” “goal” and other similar expressions. These statements involve known and unknown risks, uncertainties and other factors, which may cause actual results to be materially different from those expressed or implied in such statements. These factors include, but are not limited to: uncertainty regarding the duration and severity of the ongoing COVID-19 pandemic and its ultimate impact on the Company; the effectiveness of related containment measures; general economic conditions; our level of indebtedness; compliance with the terms of our securitized debt; our ability to refinance our current indebtedness or obtain additional financing; our dependence on information technology; potential cyber incidents; the implementation of restaurant development plans; our dependence on our franchisees; the concentration of our Applebee’s franchised restaurants in a limited number of franchisees; the financial health of our franchisees; our franchisees’ and other licensees’ compliance with our quality standards and trademark usage; general risks associated with the restaurant industry; potential harm to our brands’ reputation; possible future impairment charges; the effects of tax reform; trading volatility and fluctuations in the price of our stock; our ability to achieve the financial guidance we provide to investors; successful implementation of our business strategy; the availability of suitable locations for new restaurants; shortages or interruptions in the supply or delivery of products from third parties or availability of utilities; the management and forecasting of appropriate inventory levels; development and implementation of innovative marketing and use of social media; changing health or dietary preference of consumers; risks associated with doing

business in international markets; the results of litigation and other legal proceedings; third-party claims with respect to intellectual property assets; our ability to attract and retain management and other key employees; compliance with federal, state and local governmental regulations; risks associated with our self-insurance; natural disasters, pandemics, epidemics, or other serious incidents; our success with development initiatives outside of our core business; the adequacy of our internal controls over financial reporting and future changes in accounting standards; and other factors discussed from time to time in the Corporation’s Annual and Quarterly Reports on Forms 10-K and 10-Q and in the Corporation’s other filings with the Securities and Exchange Commission. The forward-looking statements contained in this press release are made as of the date hereof and the Corporation does not intend to, nor does it assume any obligation to, update or supplement any forward-looking statements after the date hereof to reflect actual results or future events or circumstances.

Non-GAAP Financial Measures

This press release includes references to the Company's non-GAAP financial measure “adjusted net income available to common stockholders”, “adjusted earnings per diluted share (Adjusted EPS)”, “Adjusted EBITDA” and “Adjusted free cash flow.” Adjusted EPS is computed for a given period by deducting from net income or loss available to common stockholders for such period the effect of any closure and impairment charges, any gain or loss related to debt extinguishment, any intangible asset amortization, any non-cash interest expense, any gain or loss related to the disposition of assets, and other items deemed not reflective of current operations. This is presented on an aggregate basis and a per share (diluted) basis. Adjusted EBITDA is computed for a given period by deducting from net income or loss for such period the effect of any closure and impairment charges, any interest charges, any income tax provision or benefit, any non-cash stock-based compensation, any depreciation and amortization, any gain or loss related to the disposition of assets and other items deemed not reflective of current operations. “Adjusted free cash flow” for a given period is defined as cash provided by operating activities, plus receipts from notes and equipment contracts receivable, less capital expenditures. Management may use certain of these non-GAAP financial measures along with the corresponding U.S. GAAP measures to evaluate the performance of the business and to make certain business decisions. Management uses adjusted free cash flow in its periodic assessments of, among other things, the amount of cash dividends per share of common stock and repurchases of common stock and we believe it is important for investors to have the same measure used by management for that purpose. Adjusted free cash flow does not represent residual cash flow available for discretionary purposes. Additionally, adjusted EPS is one of the metrics used in determining payouts under the Company’s annual cash incentive plan. Management believes that these non-GAAP financial measures provide additional meaningful information that should be considered when assessing the business and the Company’s performance compared to prior periods and the marketplace. Adjusted EPS and adjusted free cash flow are supplemental non-GAAP financial measures and should not be considered in isolation or as a substitute for measures of performance prepared in accordance with U.S. GAAP.

Dine Brands Global, Inc. and Subsidiaries

Consolidated Statements of Comprehensive (Loss) Income

(In thousands, except per share amounts)

(Unaudited)

 

 

 

Three Months Ended

 

Six Months Ended

 

 

June 30,

 

June 30,

 

 

2020

 

2019

 

2020

 

2019

Revenues:

 

 

 

 

 

 

 

 

Franchise revenues:

 

 

 

 

 

 

 

 

Royalties, franchise fees and other

 

$

38,781

 

 

$

90,930

 

 

$

122,095

 

 

$

187,226

 

Advertising revenues

 

29,095

 

 

71,738

 

 

90,818

 

 

144,368

 

Total franchise revenues

 

67,876

 

 

162,668

 

 

212,913

 

 

331,594

 

Company restaurant sales

 

16,774

 

 

33,751

 

 

48,074

 

 

69,486

 

Rental revenues

 

23,707

 

 

29,878

 

 

52,716

 

 

60,589

 

Financing revenues

 

1,355

 

 

1,783

 

 

2,893

 

 

3,593

 

Total revenues

 

109,712

 

 

228,080

 

 

316,596

 

 

465,262

 

Cost of revenues:

 

 

 

 

 

 

 

 

Franchise expenses:

 

 

 

 

 

 

 

 

Advertising expenses

 

29,095

 

 

71,738

 

 

90,818

 

 

144,368

 

Bad debt expense (credit)

 

5,053

 

 

(126)

 

 

5,571

 

 

(593)

 

Other franchise expenses

 

2,932

 

 

7,295

 

 

10,141

 

 

15,435

 

Total franchise expenses

 

37,080

 

 

78,907

 

 

106,530

 

 

159,210

 

Company restaurant expenses

 

21,139

 

 

31,232

 

 

51,471

 

 

62,770

 

Rental expenses:

 

 

 

 

 

 

 

 

Interest expense from finance leases

 

1,137

 

 

1,445

 

 

2,347

 

 

2,974

 

Other rental expenses

 

20,106

 

 

21,495

 

 

41,429

 

 

42,590

 

Total rental expenses

 

21,243

 

 

22,940

 

 

43,776

 

 

45,564

 

Financing expenses

 

128

 

 

146

 

 

270

 

 

292

 

Total cost of revenues

 

79,590

 

 

133,225

 

 

202,047

 

 

267,836

 

Gross profit

 

30,122

 

 

94,855

 

 

114,549

 

 

197,426

 

General and administrative expenses

 

30,870

 

 

39,364

 

 

68,478

 

 

82,183

 

Interest expense, net

 

17,127

 

 

14,602

 

 

32,299

 

 

29,995

 

Impairment and closure charges

 

124,365

 

 

289

 

 

124,353

 

 

483

 

Amortization of intangible assets

 

2,755

 

 

2,925

 

 

5,581

 

 

5,849

 

Loss on extinguishment of debt

 

 

 

8,276

 

 

 

 

8,276

 

Loss on disposition of assets

 

1,776

 

 

332

 

 

1,543

 

 

441

 

(Loss) income before income tax provision

 

(146,771)

 

 

29,067

 

 

(117,705)

 

 

70,199

 

Income tax benefit (provision)

 

11,992

 

 

(7,677)

 

 

5,254

 

 

(17,166)

 

Net (loss) income

 

$

(134,779)

 

 

$

21,390

 

 

$

(112,451)

 

 

$

53,033

 

Net (loss) income available to common stockholders:

 

 

 

 

 

 

 

 

Net (loss) income

 

$

(134,779)

 

 

$

21,390

 

 

$

(112,451)

 

 

$

53,033

 

Less: Net loss (income) allocated to unvested participating restricted stock

 

4,763

 

 

(719)

 

 

3,961

 

 

(1,827)

 

Net (loss) income available to common stockholders

 

$

(130,016)

 

 

$

20,671

 

 

$

(108,490)

 

 

$

51,206

 

Net (loss) income available to common stockholders per share:

 

 

 

 

 

 

 

 

Basic

 

$

(8.04)

 

 

$

1.20

 

 

$

(6.69)

 

 

$

2.97

 

Diluted

 

$

(8.04)

 

 

$

1.18

 

 

$

(6.69)

 

 

$

2.91

 

Weighted average shares outstanding:

 

 

 

 

 

 

 

 

Basic

 

16,177

 

 

17,181

 

 

16,215

 

 

17,262

 

Diluted

 

16,177

 

 

17,563

 

 

16,215

 

 

17,626

 

 

 

 

 

 

 

 

 

 

Dividends declared per common share

 

 

$0.69

 

$0.76

 

$1.38

Dividends paid per common share

 

$0.76

 

$0.69

 

$1.45

 

$1.32

Dine Brands Global, Inc. and Subsidiaries

Consolidated Balance Sheets

(In thousands, except share and per share amounts)

 

 

 

June 30, 2020

 

December 31, 2019

Assets

 

(Unaudited)

 

 

Current assets:

 

 

 

 

Cash and cash equivalents

 

$

278,507

 

 

$

116,043

 

Receivables, net of allowance of $11,709 (2020) and $3,138 (2019)

 

124,619

 

 

136,869

 

Restricted cash

 

31,184

 

 

40,732

 

Prepaid gift card costs

 

27,370

 

 

36,077

 

Prepaid income taxes

 

17,880

 

 

13,290

 

Other current assets

 

6,410

 

 

3,906

 

Total current assets

 

485,970

 

 

346,917

 

Other intangible assets, net

 

555,495

 

 

575,103

 

Operating lease right-of-use assets

 

349,103

 

 

366,931

 

Goodwill

 

251,628

 

 

343,862

 

Property and equipment, net

 

203,540

 

 

216,420

 

Long-term receivables, net of allowance of $7,981 (2020) and $8,155 (2019)

 

74,015

 

 

85,999

 

Deferred rent receivable

 

65,126

 

 

70,308

 

Non-current restricted cash

 

32,800

 

 

15,700

 

Other non-current assets, net

 

25,590

 

 

28,271

 

Total assets

 

$

2,043,267

 

 

$

2,049,511

 

Liabilities and Stockholders’ Deficit

 

 

 

 

Current liabilities:

 

 

 

 

Current maturities of long-term debt

 

$

9,750

 

 

$

 

Accounts payable

 

19,181

 

 

40,925

 

Gift card liability

 

121,994

 

 

159,019

 

Current maturities of operating lease obligations

 

71,837

 

 

72,815

 

Current maturities of finance lease and financing obligations

 

13,307

 

 

13,669

 

Accrued employee compensation and benefits

 

10,568

 

 

23,904

 

Dividends payable

 

 

 

11,702

 

Deferred franchise revenue, short-term

 

8,921

 

 

10,086

 

Accrued advertising expenses

 

21,772

 

 

8,760

 

Other accrued expenses

 

23,376

 

 

17,032

 

Total current liabilities

 

300,706

 

 

357,912

 

Long-term debt

 

1,497,116

 

 

1,288,248

 

Operating lease obligations, less current maturities

 

350,418

 

 

359,025

 

Finance lease obligations, less current maturities

 

74,051

 

 

77,393

 

Financing obligations, less current maturities

 

34,682

 

 

37,682

 

Deferred income taxes, net

 

86,221

 

 

98,499

 

Deferred franchise revenue, long-term

 

53,269

 

 

56,944

 

Other non-current liabilities

 

15,375

 

 

15,582

 

Total liabilities

 

2,411,838

 

 

2,291,285

 

Commitments and contingencies

 

 

 

 

Stockholders’ deficit:

 

 

 

 

Preferred stock, $1 par value, 10,000,000 shares authorized, no shares issued or outstanding

 

 

 

 

Common stock, $0.01 par value; shares: 40,000,000 authorized; June 30, 2020 - 24,900,436 issued, 16,417,618 outstanding; December 31, 2019 - 24,925,447 issued, 16,521,921 outstanding

 

249

 

 

249

 

Additional paid-in-capital

 

254,429

 

 

246,192

 

(Accumulated deficit) retained earnings

 

(64,010)

 

 

61,653

 

Accumulated other comprehensive loss

 

(58)

 

 

(58)

 

Treasury stock, at cost; shares: June 30, 2020 - 8,482,818; December 31, 2019 - 8,403,526

 

(559,181)

 

 

(549,810)

 

Total stockholders’ deficit

 

(368,571)

 

 

(241,774)

 

Total liabilities and stockholders’ deficit

 

$

2,043,267

 

 

$

2,049,511

 

Dine Brands Global, Inc. and Subsidiaries

Consolidated Statements of Cash Flows

(In thousands)

(Unaudited)

 

 

 

Six Months Ended

 

 

June 30,

 

 

2020

 

2019

 

 

 

 

 

Cash flows from operating activities:

 

 

 

 

Net (loss) income

 

$

(112,451)

 

 

$

53,033

 

Adjustments to reconcile net (loss) income to cash flows (used in) provided by operating activities:

 

 

 

 

Depreciation and amortization

 

21,345

 

 

20,800

 

Non-cash stock-based compensation expense

 

6,670

 

 

5,894

 

Non-cash interest expense

 

1,318

 

 

2,083

 

Loss on extinguishment of debt

 

 

 

8,276

 

Impairment and closure charges

 

124,343

 

 

483

 

Deferred income taxes

 

(10,793)

 

 

(3,186)

 

Deferred revenue

 

(4,840)

 

 

(4,179)

 

Loss on disposition of assets

 

1,543

 

 

441

 

Other

 

(252)

 

 

(3,499)

 

Changes in operating assets and liabilities:

 

 

 

 

Accounts receivable, net

 

(31,039)

 

 

(1,976)

 

Current income tax receivables and payables

 

(5,456)

 

 

9,442

 

Gift card receivables and payables

 

2,293

 

 

(7,444)

 

Other current assets

 

(2,503)

 

 

(3,607)

 

Accounts payable

 

(903)

 

 

8,995

 

Accrued employee compensation and benefits

 

(13,336)

 

 

(9,872)

 

Other current liabilities

 

13,544

 

 

(6,355)

 

Cash flows (used in) provided by operating activities

 

(10,517)

 

 

69,329

 

Cash flows from investing activities:

 

 

 

 

Principal receipts from notes, equipment contracts and other long-term receivables

 

10,772

 

 

11,386

 

Net additions to property and equipment

 

(7,380)

 

 

(9,175)

 

Proceeds from sale of property and equipment

 

456

 

 

400

 

Additions to long-term receivables

 

(1,475)

 

 

(1,555)

 

Other

 

(276)

 

 

(186)

 

Cash flows provided by investing activities

 

2,097

 

 

870

 

Cash flows from financing activities:

 

 

 

 

Proceeds from issuance of long-term debt

 

 

 

1,300,000

 

Repayment of long-term debt

 

 

 

(1,283,750)

 

Borrowing from revolving credit facilities

 

220,000

 

 

 

Repayment of revolving credit facilities

 

 

 

(25,000)

 

Payment of debt issuance costs

 

 

 

(12,189)

 

Dividends paid on common stock

 

(23,934)

 

 

(23,346)

 

Repurchase of common stock

 

(29,853)

 

 

(46,383)

 

Principal payments on finance lease obligations

 

(5,993)

 

 

(6,964)

 

Proceeds from stock options exercised

 

20,523

 

 

6,938

 

Tax payments for restricted stock upon vesting

 

(2,129)

 

 

(2,242)

 

Other

 

(178)

 

 

 

Cash flows provided by (used in) financing activities

 

178,436

 

 

(92,936)

 

Net change in cash, cash equivalents and restricted cash

 

170,016

 

 

(22,737)

 

Cash, cash equivalents and restricted cash at beginning of period

 

172,475

 

 

200,379

 

Cash, cash equivalents and restricted cash at end of period

 

$

342,491

 

 

$

177,642

 

Dine Brands Global, Inc. and Subsidiaries

Non-GAAP Financial Measures

(In thousands, except per share amounts)

(Unaudited)

 

Reconciliation of net income available to common stockholders to net income available to common stockholders, as adjusted for the following items: Impairment and closure charges; amortization of intangible assets; non-cash interest expense; debt; nonrecurring restaurant costs; gain or loss on disposition of assets; and the combined tax effect of the preceding adjustments, as well as related per share data:

 

 

 

Three Months Ended

 

Six Months Ended

 

 

June 30,

 

June 30,

 

 

June 30, 2020

 

June 30, 2019

 

2020

 

2019

 

 

 

 

 

 

 

 

 

Net (loss) income available to common stockholders, as reported

 

$

(130,016)

 

 

$

20,671

 

 

$

(108,490)

 

 

$

51,206

 

Impairment and closure charges

 

124,365

 

 

289

 

 

124,353

 

 

483

 

Amortization of intangible assets

 

2,755

 

 

2,925

 

 

5,581

 

 

5,849

 

Loss on extinguishment of debt

 

 

 

8,276

 

 

 

 

8,276

 

Non-cash interest expense

 

663

 

 

965

 

 

1,318

 

 

2,083

 

Nonrecurring restaurant costs

 

 

 

269

 

 

 

 

329

 

Loss on disposition of assets

 

1,776

 

 

332

 

 

1,543

 

 

441

 

Net income tax provision for above adjustments

 

(9,331)

 

 

(3,395)

 

 

(10,140)

 

 

(4,540)

 

Net income allocated to unvested participating restricted stock

 

(4,249)

 

 

(340)

 

 

(4,293)

 

 

(458)

 

Net (loss) income available to common stockholders, as adjusted

 

$

(14,037)

 

 

$

29,992

 

 

$

9,872

 

 

$

63,669

 

 

 

 

 

 

 

 

 

 

Diluted net (loss) income available to common stockholders per share:

 

 

 

 

 

 

 

 

Net (loss) income available to common stockholders, as reported

 

$

(8.04)

 

 

$

1.18

 

 

$

(6.69)

 

 

$

2.91

 

Impairment and closure charges

 

7.19

 

 

0.01

 

 

7.14

 

 

0.02

 

Amortization of intangible assets

 

0.13

 

 

0.12

 

 

0.26

 

 

0.25

 

Loss on extinguishment of debt

 

 

 

0.35

 

 

 

 

0.35

 

Non-cash interest expense

 

0.03

 

 

0.04

 

 

0.06

 

 

0.09

 

Nonrecurring restaurant costs

 

 

 

0.01

 

 

 

 

0.01

 

Loss on disposition of assets

 

0.08

 

 

0.01

 

 

0.07

 

 

0.02

 

Net income allocated to unvested participating restricted stock

 

(0.26)

 

 

(0.02)

 

 

(0.25)

 

 

(0.03)

 

Rounding

 

 

 

0.01

 

 

0.02

 

 

(0.01)

 

Diluted net (loss) income available to common stockholders per share, as adjusted

 

$

(0.87)

 

 

$

1.71

 

 

$

0.61

 

 

$

3.61

 

 

 

 

 

 

 

 

 

 

Numerator for basic EPS-(loss) income available to common stockholders, as adjusted

 

$

(14,037)

 

 

$

29,992

 

 

$

9,872

 

 

$

63,669

 

Effect of unvested participating restricted stock using the two-class method

 

1

 

 

14

 

 

 

 

30

 

Numerator for diluted EPS-(loss) income available to common stockholders, as adjusted

 

$

(14,036)

 

 

$

30,006

 

 

$

9,872

 

 

$

63,699

 

 

 

 

 

 

 

 

 

 

Denominator for basic EPS-weighted-average shares

 

16,177

 

 

17,181

 

 

16,215

 

 

17,262

 

Dilutive effect of stock options

 

 

 

382

 

 

101

 

 

364

 

Denominator for diluted EPS-weighted-average shares

 

16,177

 

 

17,563

 

 

16,316

 

 

17,626

 

Dine Brands Global, Inc. and Subsidiaries

Non-GAAP Financial Measures

(Unaudited)

 

Reconciliation of the Company's cash provided by operating activities to “adjusted free cash flow” (cash provided by operating activities, plus receipts from notes and equipment contracts receivable, less additions to property and equipment). Management uses this liquidity measure in its periodic assessments of, among other things, the amount of cash dividends per share of common stock and repurchases of common stock. We believe it is important for investors to have the same measure used by management for that purpose. Adjusted free cash flow does not represent residual cash flow available for discretionary purposes.

 

 

 

Six Months Ended

 

 

June 30,

 

 

2020

 

2019

 

 

(In millions)

Cash flows (used in) provided by operating activities

 

$

(10.5)

 

 

$

69.3

 

Receipts from notes and equipment contracts receivable

 

5.5

 

 

5.9

 

Additions to property and equipment

 

(7.4)

 

 

(9.2)

 

Adjusted free cash flow

 

(12.4)

 

 

66.0

 

Dividends paid on common stock

 

(23.9)

 

 

(23.3)

 

Repurchase of Dine Brands Global common stock

 

(29.9)

 

 

(46.4)

 

 

 

$

(66.2)

 

 

$

(3.7)

 

Dine Brands Global, Inc. and Subsidiaries

Non-GAAP Financial Measures

(in thousands)

(Unaudited)

 

Reconciliation of the Company's net income to “adjusted EBITDA.” The Company defines adjusted EBITDA as net income, adjusted for the effect of impairment and closure charges, interest charges, income tax provision or benefit, depreciation and amortization, non-cash stock-based compensation, gain or loss on disposition of assets, other non-income based taxes and other items deemed not reflective of current operations. Management may use certain non-GAAP measures along with the corresponding U. S. GAAP measures to evaluate the performance of the company and to make certain business decisions.

 

 

Three Months Ended

Six Months Ended

 

June 30,

June 30,

 

2020

 

2019

 

2020

 

2019

 

 

 

 

 

Net (loss) income, as reported

$

(134,779)

$

21,390

$

(112,451)

$

53,033

Impairment and closure charges

124,365

289

124,353

483

Interest charges on finance leases

1,646

1,970

3,369

4,053

All other interest charges

17,657

15,390

33,899

32,087

Income tax (benefit) provision

(11,992)

7,677

(5,254)

17,166

Depreciation and amortization

10,695

10,620

21,345

20,800

Non-cash stock-based compensation

2,632

1,787

6,670

5,893

Loss on extinguishment of debt

8,276

8,276

Loss on disposition of assets

1,776

332

1,543

441

Other taxes

86

237

304

439

Adjusted EBITDA

$

12,086

$

67,968

$

73,778

$

142,671

Dine Brands Global, Inc. and Subsidiaries

Restaurant Data

(Unaudited)

 

The following table sets forth, for the three and six months ended June 30, 2020 and 2019, the number of “Effective Restaurants” in the Applebee’s and IHOP systems and information regarding the percentage change in sales at those restaurants compared to the same periods in the prior year and, as such, the percentage change in sales at Effective Restaurants is based on non-GAAP sales data. Sales at restaurants that are owned by franchisees and area licensees are not attributable to the Company. However, we believe that presentation of this information is useful in analyzing our revenues because franchisees and area licensees pay us royalties and advertising fees that are generally based on a percentage of their sales, and, where applicable, rental payments under leases that partially may be based on a percentage of their sales. Management also uses this information to make decisions about future plans for the development of additional restaurants as well as evaluation of current operations.

 

 

 

Three Months Ended

 

Six Months Ended

 

 

June 30,

 

June 30,

 

 

2020

 

2019

 

2020

 

2019

 

 

 

Applebee's

 

 

 

 

 

 

 

 

Effective Restaurants(a)

 

 

 

 

 

 

 

 

Franchise

 

1,527

 

 

1,753

 

 

1,612

 

 

1,758

 

Company

 

67

 

 

69

 

 

68

 

 

69

 

Total

 

1,594

 

 

1,822

 

 

1,680

 

 

1,827

 

 

 

 

 

 

 

 

 

 

System-wide(b)

 

 

 

 

 

 

 

 

Domestic sales percentage change(c)

 

(53.5)

%

 

(3.0)

%

 

(32.5)

%

 

(2.2)

%

Domestic same-restaurant sales percentage change(d)

 

(49.4)

%

 

(0.5)

%

 

(29.1)

%

 

0.6

%

 

 

 

 

 

 

 

 

 

Franchise(b)

 

 

 

 

 

 

 

 

Domestic sales percentage change(c) (e)

 

(53.6)

%

 

(6.1)

%

 

(32.5)

%

 

(5.4)

%

Domestic same-restaurant sales percentage change(d)

 

(49.4)

%

 

(0.6)

%

 

(29.0)

%

 

0.5

%

Average weekly domestic unit sales (in thousands)

 

$

25.0

 

 

$

48.4

 

 

$

35.2

 

 

$

49.0

 

IHOP

 

 

 

 

 

 

 

 

 

Effective Restaurants(a)

 

 

 

 

 

 

 

 

 

Franchise

 

1,375

 

 

1,656

 

 

1,510

 

 

1,656

 

 

Area license

 

144

 

 

155

 

 

153

 

 

156

 

 

Total

 

1,519

 

 

1,811

 

 

1,663

 

 

1,812

 

 

 

 

 

 

 

 

 

 

 

 

System-wide(b)

 

 

 

 

 

 

 

 

 

Sales percentage change(c)

 

(64.3)

%

 

3.2

%

 

(39.1)

%

 

2.8

%

 

Domestic same-restaurant sales percentage change, including area license restaurants(d)

 

(59.1)

%

 

2.0

%

 

(35.6)

%

 

1.7

%

 

 

 

 

 

 

 

 

 

 

 

Franchise(b)

 

 

 

 

 

 

 

 

 

Sales percentage change(c)

 

(64.4)

%

 

3.3

%

 

(39.2)

%

 

2.8

%

 

Domestic same-restaurant sales percentage change(d)

 

(58.9)

%

 

1.9

%

 

(35.4)

%

 

1.5

%

 

Average weekly unit sales (in thousands)

 

$

15.8

 

 

$

36.8

 

 

$

24.6

 

 

$

36.9

 

 

 

 

 

 

 

 

 

 

 

 

Area License (b)

 

 

 

 

 

 

 

 

 

Sales percentage change(c)

 

(63.3)

%

 

2.0

%

 

(38.1)

%

 

2.3

%

 

Dine Brands Global, Inc. and Subsidiaries

Restaurant Data

(Unaudited)

 

(a)

“Effective Restaurants” are the weighted average number of restaurants open in a given fiscal period, adjusted to account for restaurants open for only a portion of the period. Information is presented for all Effective Restaurants in the Applebee’s and IHOP systems, which includes restaurants owned by franchisees and area licensees as well as those owned by the Company.

 

(b)

“System-wide” sales are retail sales at domestic Applebee’s restaurants operated by franchisees and IHOP restaurants operated by franchisees and area licensees, as reported to the Company, in addition to retail sales at company-operated restaurants. Sales at restaurants that are owned by franchisees and area licensees are not attributable to the Company. An increase or decrease in franchisees' reported sales will result in a corresponding increase or decrease in our royalty revenue. Unaudited reported sales for Applebee's domestic franchise restaurants, IHOP franchise restaurants and IHOP area license restaurants for the three and six months ended June 30, 2020 and 2019 and sales by company-operated restaurants were as follows:

 

Three Months Ended

 

Six Months Ended

 

June 30,

 

June 30,

 

2020

 

2019

 

2020

 

2019

 

(In millions)

Reported sales

 

 

 

 

 

 

 

Applebee's domestic franchise restaurant sales

$

472.0

 

 

$

1,016.5

 

 

$

1,390.2

 

 

$

2,060.7

 

Applebee's company-operated restaurants

16.8

 

 

33.7

 

 

48.1

 

 

69.5

 

IHOP franchise restaurant sales

282.1

 

 

791.6

 

 

966.9

 

 

1,590.4

 

IHOP area license restaurant sales

26.4

 

 

71.8

 

 

90.4

 

 

146.1

 

Total

$

797.3

 

 

$

1,913.6

 

 

$

2,495.6

 

 

$

3,866.7

 

(c)

“Sales percentage change” reflects, for each category of restaurants, the percentage change in sales in any given fiscal period compared to the prior fiscal period for all restaurants in that category.

 

(d)

“Domestic same-restaurant sales percentage change” reflects the percentage change in sales, in any given fiscal period, compared to the same weeks in the prior year for domestic restaurants that have been operated throughout both fiscal periods that are being compared and have been open for at least 18 months. Because of new unit openings and restaurant closures, the domestic restaurants open throughout both fiscal periods being compared may be different from period to period.

 

(e)

The franchise sales percentage change for 2019 was impacted by the acquisition of 69 franchise restaurants in December 2018 now reported as company-operated.

Dine Brands Global, Inc. and Subsidiaries

Restaurant Data

(Unaudited)

 

The following table summarizes our restaurant development activity:

 

 

Three Months Ended

 

Six Months Ended

 

June 30,

 

June 30,

 

2020

 

2019

 

2020

 

2019

Applebee's Restaurant Development Activity

 

 

 

 

 

Summary - beginning of period:

 

 

 

 

 

 

 

Franchise

1,706

 

 

1,761

 

 

1,718

 

 

1,768

 

Company restaurants

69

 

 

69

 

 

69

 

 

69

 

Total Applebee's restaurants, beginning of period

1,775

 

 

1,830

 

 

1,787

 

 

1,837

 

Franchise restaurants opened

 

 

 

 

 

 

 

Domestic

 

 

 

 

 

 

 

International

 

 

1

 

 

 

 

1

 

Total franchise restaurants opened

 

 

1

 

 

 

 

1

 

Franchise restaurants permanently closed:

 

 

 

 

 

 

 

Domestic

(24)

 

 

(13)

 

 

(32)

 

 

(17)

 

International

(2)

 

 

(3)

 

 

(6)

 

 

(6)

 

Total franchise restaurants permanently closed

(26)

 

 

(16)

 

 

(38)

 

 

(23)

 

Net franchise restaurant reduction

(26)

 

 

(15)

 

 

(38)

 

 

(22)

 

Summary - end of period:

 

 

 

 

 

 

 

Franchise

1,680

 

 

1,746

 

 

1,680

 

 

1,746

 

Company

69

 

 

69

 

 

69

 

 

69

 

Total Applebee's restaurants, end of period

1,749

 

 

1,815

 

 

1,749

 

 

1,815

 

Domestic

1,633

 

 

1,676

 

 

1,633

 

 

1,676

 

International

116

 

 

139

 

 

116

 

 

139

 

IHOP Restaurant Development Activity

 

 

 

 

 

 

 

Summary - beginning of period:

 

 

 

 

 

 

 

Franchise

1,680

 

 

1,663

 

 

1,680

 

 

1,669

 

Area license

160

 

 

159

 

 

161

 

 

162

 

Total IHOP restaurants, beginning of period

1,840

 

 

1,822

 

 

1,841

 

 

1,831

 

Franchise/area license restaurants opened:

 

 

 

 

 

 

 

Domestic franchise

1

 

 

9

 

 

7

 

 

15

 

Domestic area license

 

 

2

 

 

1

 

 

2

 

International franchise

 

 

2

 

 

2

 

 

2

 

Total franchise/area license restaurants opened

1

 

 

13

 

 

10

 

 

19

 

Franchise/area license restaurants permanently closed:

 

 

 

 

 

 

 

Domestic franchise

(13)

 

 

(1)

 

 

(19)

 

 

(12)

 

Domestic area license

(1)

 

 

(2)

 

 

(3)

 

 

(5)

 

International franchise

(2)

 

 

(4)

 

 

(4)

 

 

(5)

 

International area license

(2)

 

 

 

 

(2)

 

 

 

Total franchise/area license restaurants permanently closed

(18)

 

 

(7)

 

 

(28)

 

 

(22)

 

Net franchise/area license restaurant reduction

(17)

 

 

6

 

 

(18)

 

 

(3)

 

Summary - end of period

 

 

 

 

 

 

 

Franchise

1,666

 

 

1,669

 

 

1,666

 

 

1,669

 

Area license

157

 

 

159

 

 

157

 

 

159

 

Total IHOP restaurants, end of period

1,823

 

 

1,828

 

 

1,823

 

 

1,828

 

Domestic

1,696

 

 

1,705

 

 

1,696

 

 

1,705

 

International

127

 

 

123

 

 

127

 

 

123

 

 

Investor Contact
Ken Diptee
Executive Director, Investor Relations
Dine Brands Global, Inc.
818-637-3632

Media Contact
Susan Nelson
Vice President, Global Communications
and Public Affairs
Dine Brands Global, Inc.
818-637-4726

Source: Dine Brands Global, Inc.