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8-K

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

 

FORM 8-K

 

 

CURRENT REPORT

Pursuant to Section 13 or 15(d) of the

Securities Exchange Act of 1934

Date of report (Date of earliest event reported): October 31, 2018

 

 

Dine Brands Global, Inc.

(Exact Name of Registrant as Specified in Charter)

 

 

 

Delaware   001-15283   95-3038279
(State or other jurisdiction
of incorporation or organization)
  (Commission File No.)   (I.R.S. Employer
Identification No.)
450 North Brand Boulevard, Glendale, California   91203-2306
(Address of principal executive offices)   (Zip Code)

(818) 240-6055

(Registrant’s telephone number, including area code)

 

 

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the Registrant under any of the following provisions (see General Instruction A.2. below):

 

Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

 

Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

 

Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

 

Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b of this chapter).

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. ☐

 

 

 


Item 2.02 Results of Operations and Financial Condition.

On October 31, 2018, Dine Brands Global, Inc., a Delaware corporation (the “Corporation”), issued a press release announcing its third quarter 2018 financial results. A copy of the press release is attached hereto as Exhibit 99.1 and is incorporated herein by reference.

The information contained in this Item 2.02, including the related information set forth in the press release attached hereto as Exhibit 99.1 and incorporated by reference herein, is being “furnished” and shall not be deemed “filed” for the purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), or otherwise. The information in this Item 2.02 shall not be incorporated by reference into any registration statement or other document pursuant to the Securities Act of 1933, as amended, or into any filing or other document pursuant to the Exchange Act, except as otherwise expressly stated in any such filing.

Item 7.01 Regulation FD.

The press release referenced in Item 2.02 of this Current Report on Form 8-K also includes information concerning the Corporation’s 2018 financial outlook. A copy of the press release is attached hereto as Exhibit 99.1 and is incorporated herein by reference.

The information contained in this Item 7.01, including the related information set forth in the press release attached hereto as Exhibit 99.1 and incorporated by reference herein, is being “furnished” and shall not be deemed “filed” for the purposes of Section 18 of the Exchange Act or otherwise. The information in this Item 7.01 shall not be incorporated by reference into any registration statement or other document pursuant to the Securities Act of 1933, as amended, or into any filing or other document pursuant to the Exchange Act, except as otherwise expressly stated in any such filing.

Item 9.01. Financial Statements and Exhibits.

(d)    Exhibits.

 

Exhibit
Number

  

Description

99.1    Press Release Regarding Third Quarter 2018 Financial Results issued by the Corporation on October 31, 2018.


SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

 

Date: October 31, 2018     DINE BRANDS GLOBAL, INC.
    By:       /s/ Thomas H. Song                                             
     

    Thomas H. Song

    Chief Financial Officer

EX-99.1

Exhibit 99.1

 

LOGO

 

 

News Release

Investor Contact

Ken Diptee

Executive Director, Investor Relations

Dine Brands Global, Inc.

818-637-3632

Media Contact

Thien Ho

Executive Director, Communications

Dine Brands Global, Inc.

818-549-4238

Dine Brands Global, Inc. Reports Third Quarter 2018 Results

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., October 31, 2018 – 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.

“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


 

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  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


 

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  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%.


 

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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.


 

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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.


 

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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


 

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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.


 

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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
         (as adjusted)         (as adjusted)  

Revenues:

        

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  
  

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 


 

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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

     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  
  

 

 

 

 

 

 

 


 

Page 10 of 15

 

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  
  

 

 

 

 

 

 

 


 

Page 11 of 15

 

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.


 

Page 12 of 15

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
 

 

 

 

 

 

 

 


 

Page 13 of 15

 

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 )% 


 

Page 14 of 15

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.


 

Page 15 of 15

 

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