View:
8-K
false 0000049754 0000049754 2019-10-30 2019-10-30

 

 

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 30, 2019

 

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))

Securities registered pursuant to Section 12(b) of the Act:

Title of each class

 

Trading symbol(s)

 

Name of each exchange on which registered

     

Common Stock, $.01 Par Value

 

DIN

 

New York Stock Exchange

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 30, 2019, Dine Brands Global, Inc., a Delaware corporation (the “Corporation”), issued a press release announcing its third quarter 2019 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 2019 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 issued by the Corporation on October 30, 2019.

     

104

 

Cover Page Interactive Data File (embedded within the Inline XBRL document).


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 30, 2019

 

 

DINE BRANDS GLOBAL, INC.

             

 

 

By:

 

/s/ Thomas H. Song

 

 

 

Thomas H. Song

Chief Financial Officer

3

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 2019 Results

Earnings Per Diluted Share (GAAP) Increased 5.4%

Adjusted Earnings Per Diluted Share (Non-GAAP) Increased 1.3%

Total Revenues, Excluding Advertising Revenues, Increased 21.8%

GLENDALE, Calif., October 30, 2019 – 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 2019.

“We are pleased with our overall performance. Our business model continues to deliver robust margin expansion and generate significant adjusted free cash flow. IHOP achieved its seventh consecutive quarter of positive sales growth. While Applebee’s faced a difficult comparison against very strong same-restaurant sales in the third quarter of 2018, we are confident in the brand’s strategy that’s in place,” said Steve Joyce, Chief Executive Officer of Dine Brands Global, Inc.

Mr. Joyce added, “We are seeing significant unit growth opportunities as demonstrated by the largest multi-unit franchise agreement signed in IHOP’s history.”                

Key Highlights

 

   

IHOP signs largest multi-unit franchise agreement in the brand’s history with TravelCenters of America to develop nearly 100 restaurants.

 

   

Total revenues for the third quarter of 2019, excluding advertising revenues and including Company restaurant sales, increased 22% year-over-year to $149.9 million.

 

   

IHOP’s reported system-wide sales for the third quarter of 2019 increased 1.2% year-over-year to $845 million.

 

   

General and administrative expenses for the third quarter of 2019 declined 4.5% year-over-year to $38.9 million.


 

Page 2 of 15

 

   

GAAP earnings per diluted share for the third quarter of 2019 increased 5.4% year-over-year to $1.36.

 

   

Adjusted earnings per diluted share for the third quarter of 2019 increased 1.3% year-over-year to $1.55. (See “Non-GAAP Financial Measures” and reconciliation of GAAP earnings per diluted share to adjusted earnings per diluted share.)

 

   

Net income for the third quarter of 2019 increased 1.4% year-over-year to $23.9 million.

 

   

Consolidated adjusted EBITDA for the third quarter increased 2.0% to $63.4 million compared to $62.2 million for the third quarter of 2018. (See “Non-GAAP Financial Measures” and reconciliation of GAAP net income to consolidated adjusted EBITDA.)

 

   

During the third quarter of 2019, the Company repurchased 523,898 shares of its common stock for a total cost of $42.7 million and paid quarterly cash dividends totaling $11.9 million.

 

   

Cash flows from operating activities for the first nine months of 2019 increased 71.4% to $105.6 million compared to $61.6 million for the same period of 2018.

 

   

Adjusted free cash flow for the first nine months of 2019 increased 61.0% to $100.8 million compared to $62.6 million for the same period of 2018. (See “Non-GAAP Financial Measures” and reconciliation of the Company’s cash provided by operating activities to adjusted free cash flow.)

Financial Summary

($ in 000’s, except per share amounts)   

Third Quarter

         First Nine Months
      2019    2018    % Change         2019    2018    % Change

Total revenues, excluding advertising revenues

   $149,891    $123,083    22%       $470,785    $373,176    26%

Total revenues, excluding Company restaurant sales

   $186,857    $194,099    -4%       $582,633    $566,733    3%

Net income available to common stockholders per share

   $1.36    $1.29    5%       $4.27    $2.90    47%

Diluted net income available to common stockholders per share, as adjusted(1)

   $1.55    $1.53    1%       $5.17    $3.66    41%

Net income

   $23,917    $23,587    1%       $76,950    $53,373    44%

Consolidated adjusted EBITDA(1)(2)

   $63,394    $62,154    2%         $206,065    $165,581    24%

(1) See “Non-GAAP Financial Measures” and reconciliation of the Non-GAAP financial measure to the respective GAAP financial measure.

(2) Does not conform to the definition of Covenant Adjusted EBITDA as found in the Base Indenture.

Domestic System-Wide Comparable Same-Restaurant Sales Performance

Third Quarter of 2019

 

   

Applebee’s comparable same-restaurant sales decreased 1.6% for the third quarter of 2019.

 

   

IHOP’s comparable same-restaurant sales were slightly positive, 0.03%, for the third quarter of 2019, marking the seventh consecutive quarter of sales growth.

First Nine Months of 2019

 

   

Applebee’s comparable same-restaurant sales decreased 0.1% for the nine months of 2019.

 

   

IHOP’s comparable same-restaurant sales increased 1.1% for the first nine months of 2019.


 

Page 3 of 15

 

Third Quarter of 2019 Financial Highlights    

 

   

GAAP net income available to common stockholders was $23.1 million, or earnings per diluted share of $1.36, for the third quarter of 2019. This compared to net income available to common stockholders of $22.8 million, or earnings per diluted share of $1.29, for the third quarter of 2018. The increase in net income was primarily due to debt modification costs incurred in the third quarter of 2018 that did not recur in the third quarter of 2019 and a decrease in general and administrative expenses. These items were partially offset by a decline in gross profit.

 

   

Adjusted net income available to common stockholders was $26.4 million, or adjusted earnings per diluted share of $1.55, for the third quarter of 2019. This compares to adjusted net income available to common stockholders of $27.2 million, or adjusted earnings per diluted share of $1.53, for the third quarter of 2018. The decrease in adjusted net income was primarily due to lower gross profit. The increase in adjusted earnings per diluted share was due to a decrease in weighted average diluted shares outstanding. (See “Non-GAAP Financial Measures” below.)

 

   

General and administrative expenses were $38.9 million for the third quarter of 2019 compared to $40.8 million for the third quarter of 2018. The decrease was primarily due to lower personnel-related costs.

First Nine Months of 2019 Financial Highlights

 

   

GAAP net income available to common stockholders was $74.3 million, or earnings per diluted share of $4.27, for the first nine months of 2019. This compared to net income available to common stockholders of $51.6 million, or earnings per diluted share of $2.90, for the first nine months of 2018. The increase in net income was primarily due to higher gross profit as the result of $30.0 million in franchisor contributions to the Applebee’s national advertising fund made in the first nine months of 2018 that did not recur in 2019. This was partially offset by approximately $8.3 million in debt extinguishment costs related to the refinancing of our long-term debt, which was completed on June 5, 2019.

 

   

Adjusted net income available to common stockholders was $90.0 million, or adjusted earnings per diluted share of $5.17, for the first nine months of 2019. This compares to adjusted net income available to common stockholders of $65.2 million, or adjusted earnings per diluted share of $3.66, for the first nine months of 2018. The increase in adjusted net income was primarily due to higher gross profit as the result of $30.0 million in franchisor contributions to the Applebee’s national advertising fund made in the first nine months of 2018 that did not recur in 2019. (See “Non-GAAP Financial Measures” below.)

 

   

General and administrative expenses were approximately $121.1 million for the first nine months of 2019 compared to $121.4 million for the same period of 2018.

GAAP Effective Tax Rate

Our effective tax rate of 24.6% for the third quarter of 2019 was similar to the effective tax rate of 24.5% for the comparable period of 2018.

Financial Performance Guidance for 2019

Dine Brands revises certain components of its financial performance guidance for 2019 contained in the press release issued on July 31, 2019 and the Form 8-K filed on the same day, as follows.

The projections are as of this date and do not take into consideration any transactions the Company may enter into after such date that may impact this guidance. The Company assumes no obligation to update or supplement these estimates.

 

   

Revised expectations for Applebee’s domestic system-wide comparable same-restaurant sales performance to range between 0.0% and negative 1.0%. This compares to previous expectations of between 0.0% and positive 1.5%.


 

Page 4 of 15

 

   

Revised expectations for IHOP’s domestic system-wide comparable same-restaurant sales performance to range between positive 1.0% and positive 2.0%. This compares to previous expectations of between positive 1.0% and positive 3.0%.

 

   

Revised development activity by Applebee’s franchisees, which is expected to result in net closures between 30 and 40 restaurants globally, the majority of which are expected to be domestic closures. This compares to previous expectations of between 20 and 30 net closures globally.

 

   

Revised expectations for development activity by IHOP franchisees and area licensees, which is now expected to result in between 10 and 20 net new restaurants globally, the majority of which are expected to be domestic openings. This compares to previous expectations of between 20 and 30 net new restaurants globally.

 

   

Reiterated expectations for total segment profit, excluding the company restaurants segment, which is expected to be between approximately $370 million and $380 million.

 

   

Reiterated expectations for general and administrative expenses, which are expected to range between approximately $163 million and approximately $166 million, including non-cash stock-based compensation expense and depreciation totaling approximately $40 million. This projection includes approximately $6 million of general and administrative expenses related to the company restaurants segment.

 

   

Reiterated expectations for GAAP net income, which is expected to range between approximately $97 million and approximately $106 million.

 

   

Reiterated consolidated adjusted EBITDA, which is expected to range between approximately $268 million and approximately $277 million. This projection includes company restaurants segment EBITDA, which is expected to be between approximately $9 million and approximately $11 million. (See “Non-GAAP Financial Measures” and reconciliation of GAAP net income to consolidated adjusted EBITDA.)

 

   

Revised expectations for GAAP earnings per diluted share, which are now expected to range from $5.70 to $5.95. This compares to previous expectations of between $5.75 to $6.00.

 

   

Revised expectations for adjusted earnings per diluted share, which are now expected to range from $6.75 to $7.00. This compares to previous expectations of between $6.80 to $7.05. (See “Non-GAAP Financial Measures” and reconciliation of GAAP earnings per diluted share to adjusted earnings per diluted share.)

2019 Diluted Net Income Available to Common Stockholders Per Share(1), As Adjusted

Reconciliation Guidance Table

 

Net income available to common stockholders per diluted share    $5.70 – $5.95
Closure and impairment charges    0.04
Amortization of intangible assets    0.68
Loss on extinguishment of debt    0.48
Loss (gain) on disposition of assets    0.03
Non-cash interest expense    0.19
Income tax provision for above adjustments at 25%    (0.37)
  

 

Diluted net income available to common stockholders per share, as adjusted    $6.75 – $7.00
  

 

(1) The adjustments to net income available to common stockholders per diluted share are midpoint estimates.


 

Page 5 of 15

 

2019 Net Income to Consolidated Adjusted EBITDA Reconciliation Guidance Table(1)

($ in millions)

 

Net income

   $97 – $106

Interest charges

   72

Income tax provision

   35

Depreciation and amortization

   42

Non-cash stock-based compensation

   12

Loss on extinguishment of debt

   8

Impairment and closure charges

   2
  

 

Consolidated adjusted EBITDA (Non-GAAP)

       $268 – 277    
  

 

(1) The adjustments to net income are midpoint estimates.

Third Quarter of 2019 Results Conference Call Details

Dine Brands will host a conference call to discuss its results on October 30, 2019 at 9:00 a.m. Pacific Time/12:00 p.m. Eastern Time. To participate on the call, please dial (888) 771-4371 and reference passcode 49091078. International callers, please dial (847) 585-4405 and reference passcode 49091078.

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 11:30 a.m. Pacific Time on October 30, 2019 through 11:59 p.m. Pacific Time on November 6, 2019 by dialing (888) 843-7419 and referencing passcode 49091078#. International callers, please dial (630) 652-3042 and reference passcode 49091078#. 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 3,640 restaurants combined in 18 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.


 

Page 6 of 15

 

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)”, “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.


 

Page 7 of 15

 

Dine Brands Global, Inc. and Subsidiaries

Consolidated Statements of Comprehensive Income

(In thousands, except per share amounts)

(Unaudited)

 

     Three Months Ended     Nine Months Ended  
     September 30,     September 30,  
     2019     2018     2019     2018  

Revenues:

        

Franchise revenues:

        

Royalties, franchise fees and other

   $           88,686     $           91,062     $         275,912     $         275,775  

Advertising revenue

     67,514       71,016       211,882       193,557  
  

 

 

   

 

 

   

 

 

   

 

 

 

Total franchise revenues

     156,200       162,078       487,794       469,332  

Company restaurant sales

     30,548             100,034        

Rental revenues

     28,970       30,127       89,559       91,292  

Financing revenues

     1,687       1,894       5,280       6,109  
  

 

 

   

 

 

   

 

 

   

 

 

 

Total revenues

     217,405       194,099       682,667       566,733  
  

 

 

   

 

 

   

 

 

   

 

 

 

Cost of revenues:

        

Franchise expenses:

        

Advertising expenses

     67,514       71,016       211,882       193,557  

Other franchise expenses

     7,063       7,325       21,905       49,600  
  

 

 

   

 

 

   

 

 

   

 

 

 

Total franchise expenses

     74,577       78,341       233,787       243,157  

Company restaurant expenses

     30,361             93,131        

Rental expenses:

        

Interest expense from finance leases

     1,351       1,668       4,325       5,315  

Other rental expenses

     21,251       21,314       63,841       63,096  
  

 

 

   

 

 

   

 

 

   

 

 

 

Total rental expenses

     22,602       22,982       68,166       68,411  

Financing expenses

     145       150       437       449  
  

 

 

   

 

 

   

 

 

   

 

 

 

Total cost of revenues

     127,685       101,473       395,521       312,017  
  

 

 

   

 

 

   

 

 

   

 

 

 

Gross profit

     89,720       92,626       287,146       254,716  

General and administrative expenses

     38,922       40,753       121,105       121,423  

Interest expense, net

     15,238       15,430       45,233       46,110  

Amortization of intangible assets

     2,925       2,505       8,774       7,513  

Closure and impairment charges

     157       217       640       119  

Loss on extinguishment of debt

                 8,276        

Debt refinancing costs

           2,532             2,532  

Loss (gain) on disposition of assets

     746       (58     1,187       (1,535
  

 

 

   

 

 

   

 

 

   

 

 

 

Income before income tax provision

     31,732       31,247       101,931       78,554  

Income tax provision

     (7,815     (7,660     (24,981     (25,181
  

 

 

   

 

 

   

 

 

   

 

 

 

Net income

   $ 23,917     $ 23,587     $ 76,950     $ 53,373  
  

 

 

   

 

 

   

 

 

   

 

 

 

Net income available to common stockholders:

        

Net income

   $ 23,917     $ 23,587     $ 76,950     $ 53,373  

Less: Net income allocated to unvested participating restricted stock

     (795     (799     (2,621     (1,793
  

 

 

   

 

 

   

 

 

   

 

 

 

Net income available to common stockholders

   $ 23,122     $ 22,788     $ 74,329     $ 51,580  
  

 

 

   

 

 

   

 

 

   

 

 

 

Net income available to common stockholders per share:

        

Basic

   $ 1.38     $ 1.31     $ 4.35     $ 2.94  
  

 

 

   

 

 

   

 

 

   

 

 

 

Diluted

   $ 1.36     $ 1.29     $ 4.27     $ 2.90  
  

 

 

   

 

 

   

 

 

   

 

 

 

Weighted average shares outstanding:

        

Basic

     16,762       17,439       17,095       17,562  
  

 

 

   

 

 

   

 

 

   

 

 

 

Diluted

     17,055       17,738       17,432       17,797  
  

 

 

   

 

 

   

 

 

   

 

 

 

Dividends declared per common share

   $ 0.69     $ 0.63     $ 2.07     $ 1.89  
  

 

 

   

 

 

   

 

 

   

 

 

 

Dividends paid per common share

   $ 0.69     $ 0.63     $ 2.01     $ 2.23  
  

 

 

   

 

 

   

 

 

   

 

 

 


 

Page 8 of 15

 

Dine Brands Global, Inc. and Subsidiaries

Consolidated Balance Sheets

(In thousands, except share and per share amounts

 

     September 30, 2019     December 31, 2018  
Assets    (Unaudited)        

Current assets:

    

Cash and cash equivalents

   $ 100,518     $ 137,164  

Receivables, net

     91,426       137,504  

Restricted cash

     36,694       48,515  

Prepaid gift card costs

     29,090       38,195  

Prepaid income taxes

     11,349       17,402  

Other current assets

     6,928       3,410  
  

 

 

   

 

 

 

Total current assets

     276,005       382,190  

Other intangible assets, net

     577,357       585,889  

Operating lease right-of-use asset

     370,500        

Goodwill

     343,862       345,314  

Property and equipment, net

     220,744       240,264  

Long-term receivables, net

     93,262       103,102  

Deferred rent receivable

     72,366       77,069  

Non-current restricted cash

     15,700       14,700  

Other non-current assets, net

     27,712       26,152  
  

 

 

   

 

 

 

Total assets

   $ 1,997,508     $ 1,774,680  
  

 

 

   

 

 

 

Liabilities and Stockholders’ Deficit

    

Current liabilities:

    

Current maturities of long-term debt

   $     $ 25,000  

Accounts payable

     33,689       43,468  

Gift card liability

     103,756       160,438  

Current maturities of operating lease obligations

     67,815        

Current maturities of finance lease and financing obligations

     13,219       14,031  

Accrued employee compensation and benefits

     21,410       27,479  

Dividends payable

     11,831       11,389  

Deferred franchise revenue, short-term

     10,328       10,138  

Other accrued expenses

     28,686       24,243  
  

 

 

   

 

 

 

Total current liabilities

     290,734       316,186  

Long-term debt, less current maturities

     1,287,738       1,274,087  

Operating lease obligations, less current maturities

     369,164        

Finance lease obligations, less current maturities

     81,317       87,762  

Financing obligations, less current maturities

     37,939       38,482  

Deferred income taxes, net

     100,455       105,816  

Deferred franchise revenue, long-term

     57,997       64,557  

Other non-current liabilities

     11,946       90,063  
  

 

 

   

 

 

 

Total liabilities

     2,237,290       1,976,953  
  

 

 

   

 

 

 

Commitments and contingencies

    

Stockholders’ deficit:

    

Common stock, $0.01 par value; shares: 40,000,000 authorized; September 30, 2019 - 24,934,363 issued, 16,786,860 outstanding; December 31, 2018 - 24,984,898 issued, 17,644,267 outstanding

     249       250  

Additional paid-in-capital

     243,358       237,726  

Retained earnings

     45,939       10,414  

Accumulated other comprehensive loss

     (60     (60

Treasury stock, at cost; shares: September 30, 2019 - 8,147,503; December 31, 2018 - 7,340,631

     (529,268     (450,603
  

 

 

   

 

 

 

Total stockholders’ deficit

     (239,782     (202,273
  

 

 

   

 

 

 

Total liabilities and stockholders’ deficit

   $ 1,997,508     $ 1,774,680  
  

 

 

   

 

 

 


 

Page 9 of 15

 

Dine Brands Global, Inc. and Subsidiaries

Consolidated Statements of Cash Flows

(In thousands)

(Unaudited)

 

     Nine Months Ended  
     September 30,  
     2019     2018  

Cash flows from operating activities:

    

Net income

   $ 76,950     $ 53,373  

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

    

Depreciation and amortization

     31,515       23,730  

Non-cash stock-based compensation expense

     8,220       8,016  

Non-cash interest expense

     2,722       2,689  

Loss on extinguishment of debt

     8,276        

Debt refinancing costs

           875  

Closure and impairment charges

     640       61  

Deferred income taxes

     (2,890     (4,706

Deferred revenue

     (6,590     (4,017

Gain (loss) on disposition of assets

     1,187       (1,535

Other

     (4,584     (2,088

Changes in operating assets and liabilities:

    

Accounts receivable, net

     4,233       (7,222

Current income tax receivables and payables

     7,101       4,088  

Gift card receivables and payables

     (15,868     (22,797

Other current assets

     (3,519     9,254  

Accounts payable

     359       (5,764

Accrued employee compensation and benefits

     (6,069     5,761  

Other current liabilities

     3,916       1,908  
  

 

 

   

 

 

 

Cash flows provided by operating activities

     105,599       61,626  
  

 

 

   

 

 

 

Cash flows from investing activities:

    

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

     16,156       20,029  

Additions to property and equipment

     (13,360     (11,018

Proceeds from sale of property and equipment

     400       655  

Additions to long-term receivables

     (6,955     (6,030

Other

     (258     (236
  

 

 

   

 

 

 

Cash flows (used in) provided by investing activities

     (4,017     3,400  
  

 

 

   

 

 

 

Cash flows from financing activities:

    

Proceeds from issuance of long-term debt

     1,300,000        

Repayment of long-term debt

     (1,283,750     (9,750

Borrowing from revolving credit facility

           50,000  

Repayment of revolving credit facilities

     (25,000     (30,000

Dividends paid on common stock

     (35,273     (39,973

Repurchase of common stock

     (90,073     (27,880

Principal payments on finance lease obligations

     (10,329     (10,374

Payment of debt issuance costs

     (12,707     (3,118

Proceeds from stock options exercised

     10,672       3,887  

Tax payments for restricted stock upon vesting

     (2,589     (1,731
  

 

 

   

 

 

 

Cash flows used in financing activities

     (149,049     (68,939
  

 

 

   

 

 

 

Net change in cash, cash equivalents and restricted cash

     (47,467     (3,913

Cash, cash equivalents and restricted cash at beginning of period

     200,379       163,146  
  

 

 

   

 

 

 

Cash, cash equivalents and restricted cash at end of period

   $             152,912     $             159,233  
  

 

 

   

 

 

 


 

Page 10 of 15

 

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: amortization of intangible assets; closure and impairment charges; non-cash interest expense; gain or loss on disposition of assets; loss on extinguishment of debt; debt refinancing costs; nonrecurring restaurant costs; the combined tax effect of the preceding adjustments; and discrete tax adjustments, as well as related per share data:

 

     Three Months Ended
September 30,
    Nine Months Ended
September 30,
 
     2019     2018     2019     2018  

Net income available to common stockholders, as reported

   $ 23,122     $ 22,788     $ 74,329     $ 51,580  

Amortization of intangible assets

     2,925       2,505       8,774       7,513  

Closure and impairment charges

     157       217       640       119  

Non-cash interest expense

     639       945       2,722       2,689  

Loss (gain) on disposition of assets

     746       (58     1,187       (1,535

Loss on extinguishment of debt

                 8,276        

Debt refinancing costs

           2,532             2,532  

Nonrecurring restaurant costs

     54             383        

Income tax provision

     (1,175     (1,597     (5,715     (2,943

Income tax adjustments (1)

                       5,744  

Net income allocated to unvested participating restricted stock

     (113     (156     (567     (482
  

 

 

   

 

 

   

 

 

   

 

 

 

Net income available to common stockholders, as adjusted

   $ 26,355     $ 27,176     $ 90,029     $ 65,217  
  

 

 

   

 

 

   

 

 

   

 

 

 

Diluted net income available to common stockholders per share:

        

Net income available to common stockholders, as reported

   $ 1.36     $ 1.29     $ 4.27     $ 2.90  

Amortization of intangible assets

     0.13       0.10       0.37       0.31  

Closure and impairment charges

     0.01       0.01       0.03       0.00  

Non-cash interest expense

     0.03       0.04       0.12       0.11  

Loss (gain) on disposition of assets

     0.03       (0.00     0.05       (0.06

Loss on extinguishment of debt

                 0.35        

Debt refinancing costs

           0.11             0.11  

Nonrecurring restaurant costs

     0.00             0.02        

Income tax adjustments (1)

                       0.32  

Net income allocated to unvested participating restricted stock

     (0.01     (0.01     (0.03     (0.02

Rounding

           (0.01     (0.01     (0.01
  

 

 

   

 

 

   

 

 

   

 

 

 

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

   $ 1.55     $ 1.53     $ 5.17     $ 3.66  
  

 

 

   

 

 

   

 

 

   

 

 

 

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

   $ 26,355     $ 27,176     $ 90,029     $ 65,217  

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

     8       3       39       7  
  

 

 

   

 

 

   

 

 

   

 

 

 

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

   $         26,363     $         27,179     $         90,068     $         65,224  
  

 

 

   

 

 

   

 

 

   

 

 

 

Denominator for basic EPS-weighted-average shares

     16,762       17,439       17,095       17,562  

Dilutive effect of stock options

     293       299       337       235  
  

 

 

   

 

 

   

 

 

   

 

 

 

Denominator for diluted EPS-weighted-average shares

     17,055       17,738       17,432       17,797  
  

 

 

   

 

 

   

 

 

   

 

 

 

(1) Charges related to adjustments resulting from IRS audits for tax years 2011 through 2013


 

Page 11 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. 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,  
     2019     2018  
     (In millions)  

Cash flows provided by operating activities

   $             105.6     $               61.6  

Receipts from notes and equipment contracts receivable

     8.6       12.0  

Additions to property and equipment

     (13.4     (11.0
  

 

 

   

 

 

 

Adjusted free cash flow

     100.8       62.6  

Dividends paid on common stock

     (35.3     (40.0

Repurchase of Dine Brands Global common stock

     (90.1     (27.9
  

 

 

   

 

 

 
   $ (24.6   $ (5.3
  

 

 

   

 

 

 


 

Page 12 of 15

 

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 any interest charges, any income tax provision or benefit, any depreciation and amortization, any non-cash stock-based compensation, any closure and impairment charges, debt refinancing costs, any gain or loss related to the extinguishment of debt and 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
September 30,
    Nine Months Ended
September 30,
 
     2019      2018     2019      2018  

Net income, as reported

   $ 23,917      $ 23,587     $ 76,950      $ 53,373  

Interest charges on finance leases

     1,866        1,668       5,919        5,315  

All other interest charges

     15,794        16,161       47,880        48,312  

Income tax provision

     7,815        7,660       24,981        25,181  

Depreciation and amortization

     10,715        7,888       31,515        23,730  

Non-cash stock-based compensation

     2,326        2,375       8,220        8,016  

Closure and impairment charges

     157        217       640        119  

Debt refinancing costs

            2,532              2,532  

Loss on extinguishment of debt

                  8,276         

Loss (gain) on disposition of assets

     746        (58     1,187        (1,535

Other taxes

     58        124       497        538  
  

 

 

    

 

 

   

 

 

    

 

 

 

Adjusted EBITDA

   $     63,394      $     62,154     $     206,065      $     165,581  
  

 

 

    

 

 

   

 

 

    

 

 

 


 

Page 13 of 15

 

Dine Brands Global, Inc. and Subsidiaries

Restaurant Data

(Unaudited)

The following table sets forth, for the three and nine months ended September 30, 2019 and 2018, 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
September 30,
     Nine Months Ended
September 30,
 
     2019      2018      2019      2018  

Applebee’s

           

Effective Restaurants(a)

           

Franchise

     1,741             1,875           1,752             1,899     

Company

     69             —           69             —     
  

 

 

    

 

 

    

 

 

    

 

 

 

Total

     1,810             1,875           1,821             1,899     
  

 

 

    

 

 

    

 

 

    

 

 

 

System-wide(b)

           

Domestic sales percentage change(c)

     (3.8)%        5.1%        (2.7)%        3.0%  

Domestic same-restaurant sales percentage change(d)

     (1.6)%        7.7%        (0.1)%        5.5%  

Franchise(b)

           

Domestic sales percentage change(c)

     (6.8)%        5.1%        (5.9)%        3.0%  

Domestic same-restaurant sales percentage change(d)

     (1.7)%        7.7%        (0.2)%        5.5%  

Average weekly domestic unit sales (in thousands)

   $ 45.0           $ 44.8         $ 47.7           $ 46.7     

IHOP

           

Effective Restaurants(a)

           

Franchise

     1,667             1,640           1,660             1,628     

Area license

     158             162           156             163     
  

 

 

    

 

 

    

 

 

    

 

 

 

Total

     1,825             1,802           1,816             1,791     
  

 

 

    

 

 

    

 

 

    

 

 

 

System-wide(b)

           

Sales percentage change(c)

     1.2%         3.9%        2.2%         3.6%  

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

     0.03%         1.4%        1.1%         1.1%  

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

     0.03%         1.2%        1.0%         1.0%  

Franchise(b)

           

Sales percentage change(c)

     1.1%         3.9%        2.2%         4.2%  

Domestic same-restaurant sales percentage change(d)

     0.03%         1.2%        1.0%         1.0%  

Average weekly unit sales (in thousands)

   $         35.7           $         35.9         $         36.5           $         36.4     

Area License (b)

           

Sales percentage change(c)

     2.4%         3.7%        2.4%         1.7%  


 

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 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 nine months ended September 30, 2019 and 2018 and sales by company-operated restaurants were as follows:

 

     Three Months Ended      Nine Months Ended  
     September 30,      September 30,  
     2019      2018      2019      2018  
     (In millions)  

Reported sales

           

Applebee’s domestic franchise restaurant sales

   $ 936.5      $ 1,005.0      $ 2,997.2      $ 3,183.5  

Applebee’s company-operated restaurants

     30.5               100.0         

IHOP franchise restaurant sales

     773.9        765.6        2,364.4        2,312.8  

IHOP area license restaurant sales

     71.1        69.4        217.2        212.2  
  

 

 

    

 

 

    

 

 

    

 

 

 

Total

   $         1,812.0      $         1,840.0      $         5,678.8      $         5,708.5  
  

 

 

    

 

 

    

 

 

    

 

 

 

 

(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.


 

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,  
     2019     2018     2019     2018  

Applebee’s Restaurant Development Activity

      

Summary - beginning of period:

        

Franchise

             1,746               1,883               1,768               1,936  

Company restaurants

     69             69        
  

 

 

   

 

 

   

 

 

   

 

 

 

Beginning of period

     1,815       1,912       1,837       1,936  
  

 

 

   

 

 

   

 

 

   

 

 

 

Franchise restaurants opened:

        

Domestic

           1             2  

International

                 1       3  
  

 

 

   

 

 

   

 

 

   

 

 

 

Total franchise restaurants opened

           1       1       5  
  

 

 

   

 

 

   

 

 

   

 

 

 

Franchise restaurants closed:

        

Domestic

     (9     (25     (26     (77

International

     (2     (3     (8     (8
  

 

 

   

 

 

   

 

 

   

 

 

 

Total franchise restaurants closed

     (11     (28     (34     (85
  

 

 

   

 

 

   

 

 

   

 

 

 

Net franchise restaurant reduction

     (11     (27     (33     (80
  

 

 

   

 

 

   

 

 

   

 

 

 

Summary - end of period:

        

Franchise

     1,735       1,856       1,735       1,856  

Company

     69             69        
  

 

 

   

 

 

   

 

 

   

 

 

 

Total Applebee’s restaurants, end of period

     1,804       1,856       1,804       1,856  
  

 

 

   

 

 

   

 

 

   

 

 

 

Domestic

     1,667       1,707       1,667       1,707  

International

     137       149       137       149  

IHOP Restaurant Development Activity

        

Summary - beginning of period:

        

Franchise

     1,669       1,640       1,669       1,622  

Area license

     159       165       162       164  
  

 

 

   

 

 

   

 

 

   

 

 

 

Total IHOP restaurants, beginning of period

     1,828       1,805       1,831       1,786  
  

 

 

   

 

 

   

 

 

   

 

 

 

Franchise/area license restaurants opened:

        

Domestic franchise

     8       10       23       32  

Domestic area license

     3       1       5       3  

International franchise

     7       6       9       14  
  

 

 

   

 

 

   

 

 

   

 

 

 

Total franchise/area license restaurants opened

     18       17       37       49  
  

 

 

   

 

 

   

 

 

   

 

 

 

Franchise/area license restaurants closed:

        

Domestic franchise

     (7     (4     (19     (10

Domestic area license

     (1     (4     (6     (5

International franchise

     (2           (7     (6
  

 

 

   

 

 

   

 

 

   

 

 

 

Total franchise/area license restaurants closed

     (10     (8     (32     (21
  

 

 

   

 

 

   

 

 

   

 

 

 

Net franchise/area license restaurant development

     8       9       5       28  
  

 

 

   

 

 

   

 

 

   

 

 

 

Refranchised by the Company

                       1  

Franchise restaurants reacquired by the Company

                       (1
  

 

 

   

 

 

   

 

 

   

 

 

 

Net franchise/area license restaurant additions

     8       9       5       28  
  

 

 

   

 

 

   

 

 

   

 

 

 

Summary - end of period

        

Franchise

     1,675       1,652       1,675       1,652  

Area license

     161       162       161       162  
  

 

 

   

 

 

   

 

 

   

 

 

 

Total IHOP restaurants, end of period

     1,836       1,814       1,836       1,814  
  

 

 

   

 

 

   

 

 

   

 

 

 

Domestic

     1,708       1,691       1,708       1,691  

International

     128       123       128       123