Dine Brands Global, Inc. Reports Third Quarter 2018 Results

October 31, 2018 at 6:15 AM EDT
Applebee's Same-Restaurant Sales Increase of 7.7% Sets 14-Year Record
Domestic Quarterly Reported System-Wide Sales Increase 5.1%
IHOP Same-Restaurant Sales Increase 1.2%
Quarterly Reported System-Wide Sales Increase 3.9%

GLENDALE, Calif., Oct. 31, 2018 /PRNewswire/ -- Dine Brands Global, Inc. (NYSE: DIN), the parent company of Applebee's Neighborhood Grill & Bar® and IHOP® restaurants, today announced financial results for the third quarter of fiscal 2018. 

(PRNewsfoto/DineEquity, Inc.)

"Dine Brands continues to make strong progress in its transition to a growth company.  We are very pleased with our third quarter performance, as we achieved double-digit growth across key metrics and margin expansion.  Applebee's and IHOP continued to build on their positive sales momentum, outperforming their respective categories.  Both brands made considerable strides in their off-premise platforms with the launch of nationwide delivery programs with DoorDash, which we believe will drive sustainable positive sales and traffic," said Steve Joyce, Chief Executive Officer of Dine Brands Global, Inc.  

Mr. Joyce continued, "To remain the leaders in our categories, we are executing on a data-driven enhanced guest-centric strategy.  We remain focused on investing in our brands, providing our guests with traffic-driving culinary innovation and exploiting new opportunities to increase market share."  

Third Quarter of Fiscal 2018 Financial Highlights           

  • GAAP net income available to common stockholders was $22.8 million, or earnings per diluted share of $1.29, for the third quarter of 2018. This compares to a net loss available to common stockholders of $441.9 million, or a net loss per diluted share of $24.91, for the third quarter of fiscal 2017. The increase in net income was primarily due to non-cash impairment charges totaling $531.6 million in the third quarter of fiscal 2017 related to the write-downs of Applebee's goodwill and other intangible assets. There was no impairment of goodwill and intangible assets in the third quarter of fiscal 2018.
  • Adjusted net income available to common stockholders was $27.2 million, or adjusted earnings per diluted share of $1.53, for the third quarter of fiscal 2018. This compares to adjusted net income available to common stockholders of $17.5 million, or adjusted earnings per diluted share of $0.98, for the third quarter of fiscal 2017. The increase in adjusted net income was mainly due to higher segment profit as the result of a 7.7% increase in Applebee's domestic system-wide comparable same-restaurant sales and a decline in income taxes due to a lower corporate tax rate. These items were partially offset by an increase in general and administrative expenses. (See "Non-GAAP Financial Measures" below.)
  • General and administrative expenses were $40.8 million for the third quarter of fiscal 2018 compared to $38.0 million for the third quarter of fiscal 2017. The increase was primarily due to higher personnel-related costs, partially offset by a decline in relocation and recruiting expenses. 

First Nine Months of Fiscal 2018 Financial Highlights

  • GAAP net income available to common stockholders was $51.6 million, or earnings per diluted share of $2.90, for the first nine months of fiscal 2018. This compares to a net loss available to common stockholders of $405.8 million, or a net loss per diluted share of $22.90, for the first nine months of fiscal 2017. The increase in net income was primarily due to non-cash impairment charges totaling $531.6 million in the first nine months of fiscal 2017 related to the write-downs of Applebee's goodwill and other intangible assets. There was no impairment of goodwill and intangible assets in the first nine months of fiscal 2018.
  • Adjusted net income available to common stockholders was $65.2 million, or adjusted earnings per diluted share of $3.66, for the first nine months of fiscal 2018. This compares to adjusted net income available to common stockholders of $64.0 million, or adjusted earnings per diluted share of $3.61, for the first nine months of fiscal 2017. The increase in adjusted net income was mainly due to lower income taxes, partially offset by a decline in segment profit primarily as the result of $30.0 million in franchisor contributions to the Applebee's national advertising fund in the first nine months of 2018 compared to a franchisor contribution of $4.0 million in the same period of 2017. (See "Non-GAAP Financial Measures" below.)
  • General and administrative expenses were $121.4 million for the first nine months of fiscal 2018 compared to $125.7 million for the same period of fiscal 2017. The decrease was primarily due to lower costs for professional services, partially offset by higher personnel-related costs. General and administrative expenses for the first nine months of fiscal 2017 were inclusive of approximately $9 million of non-recurring cash severance and equity compensation charges and approximately $8 million of costs associated with Applebee's stabilization initiatives that did not recur in the first nine months of fiscal 2018.
  • Cash flows from operating activities were approximately $61.6 million for the first nine months of fiscal 2018 compared to approximately $31.0 million for the first nine months of fiscal 2017. Adjusted free cash flow was $62.6 million for the first nine months of fiscal 2018.  This compares to $29.4 million for the first nine months of fiscal 2017.  (See "Non-GAAP Financial Measures" below.)

Same-Restaurant Sales Performance

Third Quarter of Fiscal 2018

  • Applebee's domestic system-wide comparable same-restaurant sales increased 7.7% for the third quarter of 2018.
  • IHOP's domestic system-wide comparable same-restaurant sales increased 1.2% for the third quarter of 2018.

First Nine Months of Fiscal 2018

  • Applebee's domestic system-wide comparable same-restaurant sales increased 5.5% for the first nine months of 2018.
  • IHOP's domestic system-wide comparable same-restaurant sales increased 1.0% for the first nine months of 2018.

GAAP Effective Tax Rate

Our effective tax rates for the three and nine months ended September 30, 2018 were 24.5% and 32.1%, respectively.  The effective tax rates were impacted by the Tax Cuts and Jobs Act (the "Tax Act") enacted in December 2017, which lowered the federal statutory corporate tax rate from 35% to 21%, beginning in 2018.

During the nine months ended September 30, 2018, we increased our tax provision by $5.7 million related to adjustments resulting from IRS audits for tax years 2011 through 2013. This adjustment increased our effective tax rate for the nine months ended September 30, 2018, offsetting the lower federal statutory corporate tax rate resulting from the Tax Act.  Completion of the IRS audits for tax years 2011 through 2013 will allow us to accelerate the collection of certain tax benefits recognized in prior years.  As a result, we expect to receive a cash refund of approximately $12 million within the next 12 months. 

Financial Performance Guidance for Fiscal 2018

Dine Brands reiterates its financial performance guidance for fiscal 2018 contained in the press release issued on October 31, 2018 and the Form 8-K filed on the same day, except for the revisions noted below.

  • Revised expectations for Applebee's domestic system-wide comparable same-restaurant sales performance to range between positive 4.5% and positive 5.25%. This compares to previous expectations of between positive 3.5% and positive 4.5%.
  • Revised expectations for IHOP's domestic system-wide comparable same-restaurant sales performance to range between positive 0.5% and positive 1.5%.  This compares to previous expectations of between positive 0.5% and positive 2.0%. 
  • Revised expectations for Applebee's franchisees to develop between 5 and 10 new restaurants globally, the majority of which are expected to be international openings.  This compares to previous expectations of between 10 and 15 new restaurants developed globally.
  • Reiterates expectations for the closure of approximately 80 to 90 domestic Applebee's restaurants. The expected closures will be based on several criteria, including meeting our brand and image standards as well as operational results.
  • Revised expectations for the closure of approximately 20 international Applebee's restaurants. This compares to previous expectations of approximately 10 international Applebee's restaurants.  
  • Revised expectations for IHOP franchisees and its area licensee to develop between 75 and 85 restaurants globally, the majority of which are expected to be domestic openings.  This compares to previous expectations between 85 and 100 restaurants developed globally.  We expect the closure of approximately 30 to 40 restaurants, or on a full-year net development basis, a range of 35 to 55 incremental restaurants. 
  • Revised expectations for Franchise segment profit to be between approximately $304 million and $310 million.  Included in this amount is a one-time $30 million franchise expense that was contributed to the Applebee's national advertising fund in the first half of 2018.  This is in addition to the 2017 contribution of $9.5 million.  This compares to previous expectations for segment profit to range between approximately $289 million and $307 million.
  • Reiterates expectations for Rental and Financing segments to generate approximately $37 million in combined profit
  • Revised expectations for general and administrative expenses to range between $158 million and $162 million, including non-cash stock-based compensation expense and depreciation of approximately $21 million.  This compares to previous expectations of between $147 million and $156 million.  The upwardly revised projection for general and administrative expenses is primarily due to higher performance-driven personnel-related costs and an increase in litigation expenses
  • Revised expectations for interest expense to be approximately $62 million. Approximately $4 million is projected to be non-cash interest expense.  This compares to previous expectations for interest expense of approximately $61 million, of which approximately $3 million was projected to be non-cash
  • Reiterates expectations for weighted average diluted shares outstanding to be approximately 18 million shares.
  • Reiterates expectations for the income tax rate to be approximately 26%.    
  • Revised expectations for cash flows provided by operating activities to range between $105 million and $120 million.  This compares to previous expectations of between $100 million and $120 million.      
  • Revised expectations for capital expenditures to be approximately $14 million.  This compares to previous expectations of approximately $16 million.
  • Revised expectations for adjusted free cash flow (See "Non-GAAP Financial Measures" below) to range between $106 million and $121 million.  This compares to previous expectations for adjusted free cash flow to range between $99 million and $119 million
  • Revised expectations for GAAP earnings per diluted share to range between $4.08 and $4.23.  This compares to previous expectations of between $4.31 and $4.61
  • Revised expectations for adjusted earnings per diluted share (See "Non-GAAP Financial Measures" below) to range from $5.10 to $5.25.  This compares to previous expectations of between $4.95 and $5.25.

 

2018 Adjusted earnings per diluted share (Non-GAAP) Guidance Table





GAAP earnings per diluted share

$4.08 – $4.23


Closure and impairment charges

0.11


Amortization of intangible assets

0.56


Non-cash interest expense

0.22


Gain on disposition of assets

(0.09)


Debt refinancing costs

0.14


Income tax provision for above adjustments at 26%

(0.24)


Income tax adjustments

0.32


Adjusted earnings per diluted share (Non-GAAP)

$5.10 $5.25





2018 Adjusted Free Cash Flow (Non-GAAP) Guidance Table




(In millions)


Cash flows from operations

$105 – $120


Approximate net receipts from notes and equipment contracts receivable

15


Approximate capital expenditures

(14)


Adjusted free cash flow (Non-GAAP)

$106 $121


 

Third Quarter Fiscal 2018 Results Conference Call Today

The Company will host a conference call to discuss its results on the same day at 6:00 a.m. Pacific Time/9:00 a.m. Eastern Time.  To participate on the call, please dial (888) 771-4371 and reference passcode 47647097. International callers, please dial (847) 585-4405 and reference passcode 47647097.

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 8:30 a.m. Pacific Time/11:30 a.m. Eastern Time on October 31, 2018 through 8:59 p.m. Pacific Time/11:59 p.m.

Eastern Time on November 7, 2018 by dialing (888) 843-7419 and referencing passcode 47647097#.  International callers, please dial (630) 652-3042 and reference passcode 47647097#.  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 3,700 restaurants combined in 18 countries and approximately 380 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: 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 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 or other series 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 Company's Annual and Quarterly Reports on Forms 10-K and 10-Q and in the Company's other filings with the Securities and Exchange Commission. The forward-looking statements contained in this release are made as of the date hereof and the Company 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)" 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 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 Income (Loss)

(In thousands, except per share amounts)

(Unaudited)




Three Months Ended


Nine Months Ended



September 30,


September 30,



2018


2017


2018


2017

Revenues:




(as adjusted)




(as adjusted)

  Franchise revenues


$

162,078



$

142,579



$

469,332



$

450,367


  Rental revenues


30,127



30,263



91,292



90,852


  Financing revenues


1,894



2,061



6,109



6,280


  Company restaurant sales








7,518


    Total revenues


194,099



174,903



566,733



555,017


Cost of revenues:









  Franchise expenses


78,341



70,033



243,157



209,721


  Rental expenses


22,982



22,318



68,411



67,665


  Financing expenses


150



449



449



449


  Company restaurant expenses




17





7,807


    Total cost of revenues


101,473



92,817



312,017



285,642


  Gross profit


92,626



82,086



254,716



269,375


General and administrative expenses


40,753



38,030



121,423



125,701


Interest expense


15,430



15,353



46,110



46,496


Amortization of intangible assets


2,505



2,507



7,513



7,507


Debt refinancing costs


2,532





2,532




Closure and other impairment charges


217



888



119



3,806


Impairment of goodwill and intangible assets




531,634





531,634


Gain on disposition of assets


(58)



(35)



(1,535)



(6,387)


Income (loss) before income tax (provision) benefit


31,247



(506,291)



78,554



(439,382)


Income tax (provision) benefit


(7,660)



55,939



(25,181)



26,732


Net income (loss)


$

23,587



$

(450,352)



$

53,373



$

(412,650)


Net income (loss) available to common stockholders:









Net income (loss)


$

23,587



$

(450,352)



$

53,373



$

(412,650)


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


(799)



8,469



(1,793)



6,863


Net income (loss) available to common stockholders


$

22,788



$

(441,883)



$

51,580



$

(405,787)


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









  Basic


$

1.31



$

(24.91)



$

2.94



$

(22.90)


  Diluted


$

1.29



$

(24.91)



$

2.90



$

(22.90)


Weighted average shares outstanding:









  Basic


17,439



17,742



17,562



17,718


  Diluted


17,738



17,742



17,797



17,718











Dividends declared per common share


$0.63


$0.97


$1.89


$2.91

Dividends paid per common share


$0.63


$0.97


$2.23


$2.91

 

Dine Brands Global, Inc. and Subsidiaries

Consolidated Balance Sheets

(In thousands, except share and per share amounts)




September 30, 2018


December 31, 2017



(Unaudited)


(as adjusted)

Assets





Current assets:





Cash and cash equivalents


$

102,667



$

117,010


Receivables, net


94,296



140,188


Restricted cash


41,866



31,436


Prepaid gift card costs


30,186



40,725


Prepaid income taxes


42,398



45,981


Other current assets


3,361



12,615


Total current assets


314,774



387,955


Long-term receivables, net


120,541



126,570


Other intangible assets, net


576,789



582,787


Goodwill


339,236



339,236


Property and equipment, net


195,693



199,585


Deferred rent receivable


78,937



82,971


Non-current restricted cash


14,700



14,700


Other non-current assets, net


9,012



4,135


    Total Assets


$

1,649,682



$

1,737,939







Liabilities and Stockholders' Deficit





Current liabilities:





Current maturities of long-term debt


$

23,241



$

12,965


Accounts payable


34,877



55,028


Gift card liability


99,769



164,441


Dividends payable


11,398



17,748


Current maturities of capital lease and financing obligations


13,477



14,193


Accrued employee compensation and benefits


19,308



13,547


Deferred franchise revenue, short-term


10,641



11,001


Other accrued expenses


19,540



16,001


Total current liabilities


232,251



304,924


Long-term debt, less current maturities


1,273,287



1,269,849


Capital lease obligations, less current maturities


54,605



61,895


Financing obligations, less current maturities


38,653



39,200


Deferred income taxes, net


113,320



119,996


Deferred franchise revenue, long-term


65,920



70,432


Deferred rent payable


64,579



69,112


Other non-current liabilities


20,461



18,071


Total liabilities


1,863,076



1,953,479


Commitments and contingencies





Stockholders' deficit:





Common stock, $0.01 par value; shares: 40,000,000 authorized; September 30, 2018 - 24,990,268 issued, 17,742,654 outstanding; December 31, 2017 -  25,022,312 issued, 17,993,124 outstanding


250



250


Additional paid-in-capital


246,625



276,408


Accumulated deficit


(16,567)



(69,940)


Accumulated other comprehensive loss


(61)



(105)


Treasury stock, at cost; shares: September 30, 2018 - 7,247,614; December 31, 2017 - 7,029,188


(443,641)



(422,153)


Total stockholders' deficit


(213,394)



(215,540)


Total liabilities and stockholders' deficit


$

1,649,682



$

1,737,939


 

Dine Brands Global, Inc. and Subsidiaries

Consolidated Statements of Cash Flows

(In thousands)

(Unaudited)




Nine Months Ended



September 30,



2018


2017





(as adjusted)

Cash flows from operating activities:





Net income (loss)


$

53,373



$

(412,650)


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





Depreciation and amortization


23,730



23,053


Non-cash stock-based compensation expense


8,016



8,826


Non-cash interest expense


2,689



2,509


Debt refinancing costs


875




Closure and other impairment charges


61



3,672


Deferred income taxes


(4,706)



(75,849)


Gain on disposition of assets


(1,535)



(6,422)


Impairment of goodwill and intangible assets




531,634


Other


(6,105)



(7,683)


Changes in operating assets and liabilities:





Accounts receivable, net


(7,222)



(1,385)


Current income tax receivables and payables


4,088



(1,699)


Gift card receivables and payables


(22,797)



(26,387)


Other current assets


9,254



(1,336)


Accounts payable


(5,764)



(7,530)


Accrued employee compensation and benefits


5,761



(1,146)


Other current liabilities


1,908



3,393


Cash flows provided by operating activities


61,626



31,000


Cash flows from investing activities:





Additions to property and equipment


(11,018)



(9,608)


Proceeds from sale of property and equipment


655



1,100


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


20,029



15,283


Additions to long-term receivables


(6,030)




Other


(236)



(356)


Cash flows provided by investing activities


3,400



6,419


Cash flows from financing activities:





Borrowings under Variable Funding Notes


50,000




Repayments of Variable Funding Notes


(30,000)




Repayment of long-term debt


(9,750)




Payment of debt issuance costs


(3,118)




Dividends paid on common stock


(39,973)



(52,326)


Repurchase of common stock


(27,880)



(10,003)


Principal payments on capital lease and financing obligations


(10,374)



(10,621)


Tax payments for restricted stock upon vesting


(1,731)



(2,345)


Proceeds from stock options exercised


3,887



2,635


Cash flows used in financing activities


(68,939)



(72,660)


Net change in cash, cash equivalents and restricted cash


(3,913)



(35,241)


Cash, cash equivalents and restricted cash at beginning of period


163,146



185,491


Cash, cash equivalents and restricted cash at end of period


$

159,233



$

150,250


 

Dine Brands Global, Inc. and Subsidiaries

Non-GAAP Financial Measures

(In thousands, except per share amounts)

(Unaudited)


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




Three Months Ended


Nine Months Ended



September 30,


September 30,



2018


2017


2018


2017





(as adjusted)




(as adjusted)

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


$

22,788



$

(441,883)



$

51,580



$

(405,787)


Closure and other impairment charges


217



532,522



119



535,440


Executive separation costs








8,782


Amortization of intangible assets


2,505



2,507



7,513



7,507


Non-cash interest expense


945



846



2,689



2,509


Gain on disposition of assets


(58)



(35)



(1,535)



(6,387)


Debt refinancing charges


2,532





2,532




Income tax (provision) benefit


(1,597)



(67,490)



(2,943)



(72,054)


Income tax adjustments (1)






5,744



2,219


Net income (loss) allocated to unvested participating restricted stock


(156)



(9,013)



(482)



(8,211)


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


$

27,176



$

17,454



$

65,217



$

64,018











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









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


$

1.29



$

(24.91)



$

2.90



$

(22.90)


Closure and other impairment charges


0.01



26.28



0.00



26.40


Executive separation costs








0.31


Amortization of intangible assets


0.10



0.09



0.31



0.26


Non-cash interest expense


0.04



0.03



0.11



0.09


Loss (gain) on disposition of assets


(0.00)



(0.00)



(0.06)



(0.22)


Debt refinancing charges


0.11





0.11




Income tax adjustments (1)






0.32



0.13


Net income (loss) allocated to unvested participating restricted stock


(0.01)



(0.51)



(0.02)



(0.46)


Rounding


(0.01)





(0.01)




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


$

1.53



$

0.98



$

3.66



$

3.61











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


$

27,176



$

17,454



$

65,217



$

64,018


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


3





7



(4)


Numerator for diluted EPS-income available to common stockholders after assumed conversions, as adjusted


$

27,179



$

17,454



$

65,224



$

64,014











Denominator for basic EPS-weighted-average shares


17,439



17,742



17,562



17,718


Dilutive effect of stock options


299



1



235



11


Denominator for diluted EPS-weighted-average shares and assumed conversions


17,738



17,743



17,797



17,729




(1) 

2018:Charges related to adjustments resulting from IRS audits for tax years 2011 through 2013; 2017: unrecognized tax  benefits related to domestic manufacturing deduction taken in years prior to 2017.

 

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 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.




Nine Months Ended



September 30,



2018


2017



(In millions)

Cash flows provided by operating activities


$

61.6



$

31.0


Receipts from notes and equipment contracts receivable


12.0



8.0


Additions to property and equipment


(11.0)



(9.6)


Adjusted free cash flow


62.6



29.4


Dividends paid on common stock


(40.0)



(52.3)


Repurchase of Dine Brands common stock


(27.9)



(10.0)




$

(5.3)



$

(32.9)


 

Dine Brands Global, Inc. and Subsidiaries

Restaurant Data


The following table sets forth, for the three and nine months ended September 30, 2018 and 2017, 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


Nine Months Ended



September 30,


September 30,



2018


2017


2018


2017



(Unaudited)

Applebee's Restaurant Data









Effective Restaurants(a)









Franchise


1,875



1,953



1,899



1,981











System-wide(b)









Sales percentage change(c)


5.1

%


(9.7)

%


3.0

%


(8.6)

%

Domestic same-restaurant sales percentage change(d)


7.7

%


(7.7)

%


5.5

%


(7.3)

%

Average weekly domestic unit sales (in thousands)


$

44.8



$

40.9



$

46.7



$

43.5



















IHOP Restaurant Data









Effective Restaurants(a)









Franchise


1,640



1,586



1,628



1,568


Area license


162



162



163



165


Company








6


Total


1,802



1,748



1,791



1,739











System-wide(b)









Sales percentage change(c)


3.9

%


(0.7)

%


3.6

%


(0.1)

%

Domestic same-restaurant sales percentage change(d)


1.2

%


(3.2)

%


1.0

%


(2.5)

%










Franchise(b)









Sales percentage change(c)


3.9

%


0.3

%


4.2

%


0.5

%

Domestic same-restaurant sales percentage change(d)


1.2

%


(3.2)

%


1.0

%


(2.5)

%

Average weekly unit sales (in thousands)


$

35.9



$

35.7



$

36.4



$

36.3











Area License (b)









Sales percentage change(c)


3.7

%


(5.7)

%


1.7

%


(3.6)

%


















 

Dine Brands Global, Inc. and Subsidiaries

Restaurant Data


(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 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 in franchisees' reported sales will result in a corresponding increase in our royalty revenue, while a decrease in franchisees' reported sales will result in a corresponding 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 nine months ended September 30, 2018 and 2017 were as follows:



Three Months Ended


Nine Months Ended


September 30,


September 30,


2018


2017


2018


2017


(In millions)

Reported sales (unaudited)








Applebee's domestic franchise restaurant sales

$

1,005.0



$

956.5



$

3,183.5



$

3,092.3


IHOP franchise restaurant sales

765.6



$

736.9



2,312.8



$

2,220.3


IHOP area license restaurant sales

69.4



$

67.0



212.2



$

208.7


Total

$

1,840.0



$

1,760.4



$

5,708.5



$

5,521.3



(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. Same-restaurant sales percentage change does not include data on IHOP area license restaurants located in Florida.

 

Dine Brands Global, Inc. and Subsidiaries

Restaurant Data

 (unaudited)


The following table summarizes our restaurant development activity:



Three Months Ended


Nine Months Ended


September 30,


September 30,


2018


2017


2018


2017

Applebee's Restaurant Development Activity






Beginning of period:

1,883



1,968



1,936



2,016


Franchise restaurants opened:








     Domestic

1



2



2



7


     International



2



3



6


Total franchise restaurants opened

1



4



5



13


Franchise restaurants closed:








     Domestic

(25)



(22)



(77)



(74)


     International

(3)



(5)



(8)



(10)


Total franchise restaurants closed

(28)



(27)



(85)



(84)


Net franchise restaurant reduction

(27)



(23)



(80)



(71)


Total Applebee's restaurants, end of period

1,856



1,945



1,856



1,945


Domestic

1,707



1,791



1,707



1,791


International

149



154



149



154


IHOP Restaurant Development Activity








Summary - beginning of period:








Franchise

1,640



1,586



1,622



1,556


Area license

165



166



164



167


Company





10


        Total IHOP restaurants, beginning of period

1,791



1,752



1,786



1,733


Franchise/area license restaurants opened:








Domestic franchise

10



11



32



31


Domestic area license

1



1



3



1


International franchise

6



6



14



18


Total franchise/area license restaurants opened

17



18



49



50


Franchise/area license restaurants closed:








Domestic franchise

(4)



(2)



(10)



(11)


Domestic area license

(4)



(1)



(5)



(2)


International franchise



(5)



(6)



(7)


International area license



(1)





(1)


Total franchise/area license restaurants closed

(8)



(9)



(21)



(21)


Net franchise/area license restaurant development

9



9



28



29


Refranchised from Company restaurants





1



9


Franchise restaurants reacquired by the Company





(1)




Net franchise/area license restaurant additions

9



9



28



38


Summary - end of period








Franchise

1,652



1,596



1,652



1,596


Area license

162



165



162



165


Company






Total IHOP restaurants, end of period

1,814



1,761



1,814



1,761


Domestic

1,691



1,655



1,691



1,655


International

123



106



123



106


 

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SOURCE Dine Brands Global, Inc.

Investor Contact: Ken Diptee, Executive Director, Investor Relations, Dine Brands Global, Inc., 818-637-3632; or Media Contact: Thien Ho, Executive Director, Communications, Dine Brands Global, Inc., 818-549-4238