View:
8-K
false 0000049754 0000049754 2020-07-29 2020-07-29

 

 

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): July 29, 2020

 

 

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)

 

 

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

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 July 29, 2020, Dine Brands Global, Inc., a Delaware corporation (the “Corporation”), issued a press release announcing its second quarter 2020 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 2020 financial results and 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 July 29, 2020.
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: July 29, 2020     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

Susan Nelson

Vice President, Global Communications

and Public Affairs

Dine Brands Global, Inc.

818-637-4726

Dine Brands Global, Inc. Reports Second Quarter 2020 Results

Liquidity and Cash Position Remain Strong

95% of Domestic Restaurants Open

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

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

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


Domestic System-Wide Comparable Same-Restaurant Sales Performance

 

Domestic Same-Restaurant Sales

    Preliminary  
     Q2 2020     Q3 QTD through WE 7/26  

Applebee’s

     (49.4 %)      (18.4 %) 

IHOP

     (59.1 %)      (37.6 %) 

Domestic Same-Restaurant Sales (Week Ending)

 

    WE 4/5     WE 4/12     WE 4/19     WE 4/26     WE 5/3     WE 5/10     WE 5/17     WE 5/24     WE 5/31     WE 6/7     WE 6/14     WE 6/21     WE 6/28  

Applebee’s

    (77.0 %)      (77.3 %)      (64.2 %)      (64.4 %)      (60.8 %)      (54.3 %)      (52.8 %)      (49.5 %)      (42.7 %)      (37.0 %)      (30.3 %)      (18.4 %)      (17.8 %) 

IHOP

    (81.5 %)      (79.4 %)      (76.3 %)      (75.4 %)      (72.6 %)      (65.4 %)      (61.5 %)      (58.3 %)      (52.1 %)      (46.2 %)      (42.9 %)      (33.3 %)      (34.4 %) 

Domestic Same-Restaurant Sales (Week Ending)

 

     July Sales Are Preliminary  
     WE 7/5     WE 7/12     WE 7/19     WE 7/26  

Applebee’s

     (22.3 %)      (17.0 %)      (18.8 %)      (15.6 %) 

IHOP

     (40.4 %)      (35.7 %)      (39.1 %)      (35.0 %) 

Second Quarter of 2020

 

   

Applebee’s comparable same-restaurant sales improved 11 out of 13 weeks through the week ended June 28, 2020 from a decrease of 77.0% to a decrease of 17.8%, representing an increase of 59.2 percentage points during this period.

 

   

IHOP’s comparable same-restaurant sales improved sequentially for 12 consecutive weeks out of 13 through the week ended June 28, 2020 from a decrease of 81.5% to a decrease of 34.4%, representing an increase of 47.1 percentage points during this period.

 

   

Comparable same-restaurant sales for the second quarter of 2020 declined at both Applebee’s and IHOP primarily due to the impact of COVID-19 and related governmental restrictions on restaurant operations at the federal, state and local levels, which resulted in a meaningful decline in traffic for the second quarter of 2020.

 

   

As of June 30, 2020, 3,154 of our domestic restaurants, or 95%, were open for either dine-in service or off-premise service comprised of take-out and delivery.

Off-Premise Sales Growth Comparison

 

   

Off-premise sales at both Applebee’s and IHOP increased significantly primarily as a result of governmental mandates, which placed restrictions on dine-in service as well as the favorable impact of the Company’s digital initiatives.


   

Applebee’s off-premise sales accounted for 60.5% of sales mix for the second quarter of 2020, as compared to 16.3% of sales mix for the first quarter of 2020 and 13.0% of sales mix for the fourth quarter of 2019.

 

   

Applebee’s delivery sales accounted for 16.8% of sales mix and take-out sales accounted for 43.8% of sales mix for the second quarter of 2020.

 

   

Applebee’s online sales as a percentage of total sales increased by 17.8 percentage points in the second quarter of 2020 to 22.9%. This compares to 5.1% of total sales for the first quarter of 2020.

 

   

IHOP’s off-premise sales accounted for 53.6% of sales mix for the second quarter of 2020, as compared to 12.8% of sales mix for the first quarter of 2020 and 10.1% of sales mix for the fourth quarter of 2019.

 

   

IHOP’s delivery sales accounted for 23.4% of sales mix and take-out sales accounted for 33.5% of sales mix for the second quarter of 2020.

 

   

IHOP’s online sales as a percentage of total sales increased by 27.8 percentage points in the second quarter of 2020 to 34.7%. This compares to 6.9% of total sales for the first quarter of 2020.

Second Quarter of 2020 Summary

 

   

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

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

Additionally, gross profit decreased primarily due to a significant decline in customer traffic as a result of governmental measures to stem the spread of the coronavirus and related changes in consumer behavior.

 

   

Adjusted net loss per diluted share of $0.87 for the second quarter of 2020 compared to adjusted earnings per diluted share of $1.71 for the second quarter of 2019. (See “Non-GAAP Financial Measures” and reconciliation of GAAP earnings per diluted share to adjusted earnings per diluted share.)

 

   

General and administrative expenses for the second quarter of 2020 declined 21.6% year-over-year to $30.9 million. The improvement was mainly due to lower compensation expenses.

 

   

Net loss of $134.8 million for the second quarter of 2020 compared to net income of $21.4 million the second quarter of 2019.


   

Consolidated adjusted EBITDA for the second quarter of 2020 was $12.1 million. This compares to $68.0 million for the second quarter of 2019. (See “Non-GAAP Financial Measures” and reconciliation of GAAP net income to consolidated adjusted EBITDA.)

 

   

Cash used in operating activities for the first six months of 2020 was $10.5 million. This compares to cash flows from operating activities of $69.3 million for the first six months of 2019. The decrease mainly was due a significant decline in customer traffic at our restaurants that adversely impacted our segment operations as well as payment deferrals we offered to our franchisees primarily for the months of March 2020 and April 2020.

 

   

The Company had negative adjusted free cash flow of $12.4 million for the first six months of 2020. This compares to adjusted free cash flow of $66.0 million for the first six months of 2019. (See “Non-GAAP Financial Measures” and reconciliation of the Company’s cash provided by operating activities to adjusted free cash flow.)

 

   

GAAP net loss available to common stockholders was $130.0 million, or net loss per diluted share of $8.04, for the second quarter of 2020. This compares to net income available to common stockholders of $20.7 million, or earnings per diluted share of $1.18, for the second quarter of 2019. The decrease in net income was primarily due to the impairment charges and decline in gross profit discussed above. These items were partially offset by a decline in general and administrative expenses.

 

   

Adjusted net loss available to common stockholders was $14.0 million, or adjusted net loss per diluted share of $0.87, for the second quarter of 2020. This compares to adjusted net income available to common stockholders of $30.0 million, or adjusted earnings per diluted share of $1.71, for the second quarter of 2019. The decrease in adjusted net income was primarily due to lower gross profit for the reasons described above. This item was partially offset by fewer weighted average diluted shares outstanding and lower general and administrative expenses. (See “Non-GAAP Financial Measures” below.)

Cash Position    

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

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

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


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

GAAP Effective Tax Rate

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

Financial Performance Guidance for 2020 Withdrawn

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

Applebee’s Reopening Update

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

IHOP Reopening Update

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

Second Quarter of 2020 Earnings Conference Call Details

Dine Brands will host a conference call to discuss its results on July 29, 2020 at 9:00 a.m. Pacific Time.

To participate on the call, please dial (833) 528-0602 and enter the conference identification number 4180997. International callers, please dial (830) 221-9708 and enter the conference identification number 4180997.

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


About Dine Brands Global, Inc.

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

Forward-Looking Statements

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

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

Non-GAAP Financial Measures

This press release includes references to the Company’s non-GAAP financial measure “adjusted net income available to common stockholders”, “adjusted earnings per diluted share (Adjusted EPS)”,


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


Dine Brands Global, Inc. and Subsidiaries

Consolidated Statements of Comprehensive (Loss) Income

(In thousands, except per share amounts)

(Unaudited)

 

     Three Months Ended     Six Months Ended  
     June 30,     June 30,  
     2020     2019     2020     2019  

Revenues:

        

Franchise revenues:

        

Royalties, franchise fees and other

   $ 38,781   $ 90,930   $ 122,095   $ 187,226

Advertising revenues

     29,095     71,738     90,818     144,368
  

 

 

   

 

 

   

 

 

   

 

 

 

Total franchise revenues

     67,876     162,668     212,913     331,594

Company restaurant sales

     16,774     33,751     48,074     69,486

Rental revenues

     23,707     29,878     52,716     60,589

Financing revenues

     1,355     1,783     2,893     3,593
  

 

 

   

 

 

   

 

 

   

 

 

 

Total revenues

     109,712     228,080     316,596     465,262
  

 

 

   

 

 

   

 

 

   

 

 

 

Cost of revenues:

        

Franchise expenses:

        

Advertising expenses

     29,095     71,738     90,818     144,368

Bad debt expense (credit)

     5,053     (126     5,571     (593

Other franchise expenses

     2,932     7,295     10,141     15,435
  

 

 

   

 

 

   

 

 

   

 

 

 

Total franchise expenses

     37,080     78,907     106,530     159,210

Company restaurant expenses

     21,139     31,232     51,471     62,770

Rental expenses:

        

Interest expense from finance leases

     1,137     1,445     2,347     2,974

Other rental expenses

     20,106     21,495     41,429     42,590
  

 

 

   

 

 

   

 

 

   

 

 

 

Total rental expenses

     21,243     22,940     43,776     45,564

Financing expenses

     128     146     270     292
  

 

 

   

 

 

   

 

 

   

 

 

 

Total cost of revenues

     79,590     133,225     202,047     267,836
  

 

 

   

 

 

   

 

 

   

 

 

 

Gross profit

     30,122     94,855     114,549     197,426

General and administrative expenses

     30,870     39,364     68,478     82,183

Interest expense, net

     17,127     14,602     32,299     29,995

Impairment and closure charges

     124,365     289     124,353     483

Amortization of intangible assets

     2,755     2,925     5,581     5,849

Loss on extinguishment of debt

     —         8,276     —         8,276

Loss on disposition of assets

     1,776     332     1,543     441
  

 

 

   

 

 

   

 

 

   

 

 

 

(Loss) income before income tax provision

     (146,771     29,067     (117,705     70,199

Income tax benefit (provision)

     11,992     (7,677     5,254     (17,166
  

 

 

   

 

 

   

 

 

   

 

 

 

Net (loss) income

   $ (134,779   $ 21,390   $ (112,451   $ 53,033
  

 

 

   

 

 

   

 

 

   

 

 

 

Net (loss) income available to common stockholders:

        

Net (loss) income

   $ (134,779   $ 21,390   $ (112,451   $ 53,033

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

     4,763     (719     3,961     (1,827
  

 

 

   

 

 

   

 

 

   

 

 

 

Net (loss) income available to common stockholders

   $ (130,016   $ 20,671   $ (108,490   $ 51,206
  

 

 

   

 

 

   

 

 

   

 

 

 

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

        

Basic

   $ (8.04   $ 1.20   $ (6.69   $ 2.97
  

 

 

   

 

 

   

 

 

   

 

 

 

Diluted

   $ (8.04   $ 1.18   $ (6.69   $ 2.91
  

 

 

   

 

 

   

 

 

   

 

 

 

Weighted average shares outstanding:

        

Basic

     16,177     17,181     16,215     17,262
  

 

 

   

 

 

   

 

 

   

 

 

 

Diluted

     16,177     17,563     16,215     17,626
  

 

 

   

 

 

   

 

 

   

 

 

 

Dividends declared per common share

     —       $ 0.69     $ 0.76     $ 1.38  
  

 

 

   

 

 

   

 

 

   

 

 

 

Dividends paid per common share

   $ 0.76     $ 0.69     $ 1.45     $ 1.32  
  

 

 

   

 

 

   

 

 

   

 

 

 


Dine Brands Global, Inc. and Subsidiaries

Consolidated Balance Sheets

(In thousands, except share and per share amounts)

 

     June 30, 2020     December 31, 2019  
     (Unaudited)        
Assets     

Current assets:

    

Cash and cash equivalents

   $ 278,507   $ 116,043

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

     124,619     136,869

Restricted cash

     31,184     40,732

Prepaid gift card costs

     27,370     36,077

Prepaid income taxes

     17,880     13,290

Other current assets

     6,410     3,906
  

 

 

   

 

 

 

Total current assets

     485,970     346,917

Other intangible assets, net

     555,495     575,103

Operating lease right-of-use assets

     349,103     366,931

Goodwill

     251,628     343,862

Property and equipment, net

     203,540     216,420

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

     74,015     85,999

Deferred rent receivable

     65,126     70,308

Non-current restricted cash

     32,800     15,700

Other non-current assets, net

     25,590     28,271
  

 

 

   

 

 

 

Total assets

   $ 2,043,267   $ 2,049,511
  

 

 

   

 

 

 
Liabilities and Stockholders’ Deficit     

Current liabilities:

    

Current maturities of long-term debt

   $ 9,750   $ —  

Accounts payable

     19,181     40,925

Gift card liability

     121,994     159,019

Current maturities of operating lease obligations

     71,837     72,815

Current maturities of finance lease and financing obligations

     13,307     13,669

Accrued employee compensation and benefits

     10,568     23,904

Dividends payable

     —         11,702

Deferred franchise revenue, short-term

     8,921     10,086

Accrued advertising expenses

     21,772     8,760

Other accrued expenses

     23,376     17,032
  

 

 

   

 

 

 

Total current liabilities

     300,706     357,912

Long-term debt

     1,497,116     1,288,248

Operating lease obligations, less current maturities

     350,418     359,025

Finance lease obligations, less current maturities

     74,051     77,393

Financing obligations, less current maturities

     34,682     37,682

Deferred income taxes, net

     86,221     98,499

Deferred franchise revenue, long-term

     53,269     56,944

Other non-current liabilities

     15,375     15,582
  

 

 

   

 

 

 

Total liabilities

     2,411,838     2,291,285
  

 

 

   

 

 

 

Commitments and contingencies

    

Stockholders’ deficit:

    

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

     —         —    

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

     249     249

Additional paid-in-capital

     254,429     246,192

(Accumulated deficit) retained earnings

     (64,010     61,653

Accumulated other comprehensive loss

     (58     (58

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

     (559,181     (549,810
  

 

 

   

 

 

 

Total stockholders’ deficit

     (368,571     (241,774
  

 

 

   

 

 

 

Total liabilities and stockholders’ deficit

   $ 2,043,267   $ 2,049,511
  

 

 

   

 

 

 


Dine Brands Global, Inc. and Subsidiaries

Consolidated Statements of Cash Flows

(In thousands)

(Unaudited)

 

     Six Months Ended  
     June 30,  
     2020     2019  

Cash flows from operating activities:

    

Net (loss) income

   $ (112,451   $ 53,033

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

    

Depreciation and amortization

     21,345     20,800

Non-cash stock-based compensation expense

     6,670     5,894

Non-cash interest expense

     1,318     2,083

Loss on extinguishment of debt

     —         8,276

Impairment and closure charges

     124,343     483

Deferred income taxes

     (10,793     (3,186

Deferred revenue

     (4,840     (4,179

Loss on disposition of assets

     1,543     441

Other

     (252     (3,499

Changes in operating assets and liabilities:

    

Accounts receivable, net

     (31,039     (1,976

Current income tax receivables and payables

     (5,456     9,442

Gift card receivables and payables

     2,293     (7,444

Other current assets

     (2,503     (3,607

Accounts payable

     (903     8,995

Accrued employee compensation and benefits

     (13,336     (9,872

Other current liabilities

     13,544     (6,355
  

 

 

   

 

 

 

Cash flows (used in) provided by operating activities

     (10,517     69,329
  

 

 

   

 

 

 

Cash flows from investing activities:

    

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

     10,772     11,386

Net additions to property and equipment

     (7,380     (9,175

Proceeds from sale of property and equipment

     456     400

Additions to long-term receivables

     (1,475     (1,555

Other

     (276     (186
  

 

 

   

 

 

 

Cash flows provided by investing activities

     2,097     870
  

 

 

   

 

 

 

Cash flows from financing activities:

    

Proceeds from issuance of long-term debt

     —         1,300,000

Repayment of long-term debt

     —         (1,283,750

Borrowing from revolving credit facilities

     220,000     —    

Repayment of revolving credit facilities

     —         (25,000

Payment of debt issuance costs

     —         (12,189

Dividends paid on common stock

     (23,934     (23,346

Repurchase of common stock

     (29,853     (46,383

Principal payments on finance lease obligations

     (5,993     (6,964

Proceeds from stock options exercised

     20,523     6,938

Tax payments for restricted stock upon vesting

     (2,129     (2,242

Other

     (178     —    
  

 

 

   

 

 

 

Cash flows provided by (used in) financing activities

     178,436     (92,936
  

 

 

   

 

 

 

Net change in cash, cash equivalents and restricted cash

     170,016     (22,737

Cash, cash equivalents and restricted cash at beginning of period

     172,475     200,379
  

 

 

   

 

 

 

Cash, cash equivalents and restricted cash at end of period

   $ 342,491   $ 177,642
  

 

 

   

 

 

 


Dine Brands Global, Inc. and Subsidiaries

Non-GAAP Financial Measures

(In thousands, except per share amounts)

(Unaudited)

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

 

     Three Months Ended      Six Months Ended  
     June 30,      June 30,  
     2020      2019      2020      2019  

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

   $ (130,016    $ 20,671    $ (108,490    $ 51,206

Impairment and closure charges

     124,365      289      124,353      483

Amortization of intangible assets

     2,755      2,925      5,581      5,849

Loss on extinguishment of debt

     —          8,276      —          8,276

Non-cash interest expense

     663      965      1,318      2,083

Nonrecurring restaurant costs

     —          269      —          329

Loss on disposition of assets

     1,776      332      1,543      441

Net income tax provision for above adjustments

     (9,331      (3,395      (10,140      (4,540

Net income allocated to unvested participating restricted stock

     (4,249      (340      (4,293      (458
  

 

 

    

 

 

    

 

 

    

 

 

 

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

   $ (14,037    $ 29,992    $ 9,872    $ 63,669
  

 

 

    

 

 

    

 

 

    

 

 

 

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

           

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

   $ (8.04    $ 1.18    $ (6.69    $ 2.91

Impairment and closure charges

     7.19      0.01      7.14      0.02

Amortization of intangible assets

     0.13      0.12      0.26      0.25

Loss on extinguishment of debt

     —          0.35      —          0.35

Non-cash interest expense

     0.03      0.04      0.06      0.09

Nonrecurring restaurant costs

     —          0.01      —          0.01

Loss on disposition of assets

     0.08      0.01      0.07      0.02

Net income allocated to unvested participating restricted stock

     (0.26      (0.02      (0.25      (0.03

Rounding

     —          0.01      0.02      (0.01
  

 

 

    

 

 

    

 

 

    

 

 

 

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

   $ (0.87    $ 1.71    $ 0.61    $ 3.61
  

 

 

    

 

 

    

 

 

    

 

 

 

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

   $ (14,037    $ 29,992    $ 9,872    $ 63,669

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

     1      14      —          30
  

 

 

    

 

 

    

 

 

    

 

 

 

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

   $ (14,036    $ 30,006    $ 9,872    $ 63,699
  

 

 

    

 

 

    

 

 

    

 

 

 

Denominator for basic EPS-weighted-average shares

     16,177      17,181      16,215      17,262

Dilutive effect of stock options

     —          382      101      364
  

 

 

    

 

 

    

 

 

    

 

 

 

Denominator for diluted EPS-weighted-average shares

     16,177      17,563      16,316      17,626
  

 

 

    

 

 

    

 

 

    

 

 

 


Dine Brands Global, Inc. and Subsidiaries

Non-GAAP Financial Measures

(Unaudited)

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

 

     Six Months Ended  
     June 30,  
     2020      2019  
     (In millions)  

Cash flows (used in) provided by operating activities

   $ (10.5    $ 69.3

Receipts from notes and equipment contracts receivable

     5.5      5.9

Additions to property and equipment

     (7.4      (9.2
  

 

 

    

 

 

 

Adjusted free cash flow

     (12.4      66.0

Dividends paid on common stock

     (23.9      (23.3

Repurchase of Dine Brands Global common stock

     (29.9      (46.4
  

 

 

    

 

 

 
   $ (66.2    $ (3.7
  

 

 

    

 

 

 


Dine Brands Global, Inc. and Subsidiaries

Non-GAAP Financial Measures

(in thousands)

(Unaudited)

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

 

     Three Months Ended      Six Months Ended  
     June 30,      June 30,  
     2020      2019      2020      2019  

Net (loss) income, as reported

   $ (134,779    $ 21,390    $ (112,451    $ 53,033

Impairment and closure charges

     124,365      289      124,353      483

Interest charges on finance leases

     1,646      1,970      3,369      4,053

All other interest charges

     17,657      15,390      33,899      32,087

Income tax (benefit) provision

     (11,992      7,677      (5,254      17,166

Depreciation and amortization

     10,695      10,620      21,345      20,800

Non-cash stock-based compensation

     2,632      1,787      6,670      5,893

Loss on extinguishment of debt

     —          8,276      —          8,276

Loss on disposition of assets

     1,776      332      1,543      441

Other taxes

     86      237      304      439
  

 

 

    

 

 

    

 

 

    

 

 

 

Adjusted EBITDA

   $ 12,086    $ 67,968    $ 73,778    $ 142,671
  

 

 

    

 

 

    

 

 

    

 

 

 


Dine Brands Global, Inc. and Subsidiaries

Restaurant Data

(Unaudited)

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

 

     Three Months Ended     Six Months Ended  
     June 30,     June 30,  
     2020     2019     2020     2019  
        

Applebee’s

        

Effective Restaurants(a)

        

Franchise

     1,527       1,753       1,612       1,758  

Company

     67       69       68       69  
  

 

 

   

 

 

   

 

 

   

 

 

 

Total

     1,594       1,822       1,680       1,827  
  

 

 

   

 

 

   

 

 

   

 

 

 

System-wide(b)

        

Domestic sales percentage change(c)

     (53.5 )%      (3.0 )%      (32.5 )%      (2.2 )% 

Domestic same-restaurant sales percentage change(d)

     (49.4 )%      (0.5 )%      (29.1 )%      0.6

Franchise(b)

        

Domestic sales percentage change(c) (e)

     (53.6 )%      (6.1 )%      (32.5 )%      (5.4 )% 

Domestic same-restaurant sales percentage change(d)

     (49.4 )%      (0.6 )%      (29.0 )%      0.5

Average weekly domestic unit sales (in thousands)

   $ 25.0     $ 48.4     $ 35.2     $ 49.0  

IHOP

        

Effective Restaurants(a)

        

Franchise

     1,375       1,656     1,510       1,656

Area license

     144       155     153       156
  

 

 

   

 

 

   

 

 

   

 

 

 

Total

     1,519       1,811     1,663       1,812
  

 

 

   

 

 

   

 

 

   

 

 

 

System-wide(b)

    

Sales percentage change(c)

     (64.3 )%      3.2     (39.1 )%      2.8

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

     (59.1 )%      2.0     (35.6 )%      1.7

Franchise(b)

    

Sales percentage change(c)

     (64.4 )%      3.3     (39.2 )%      2.8

Domestic same-restaurant sales percentage change(d)

     (58.9 )%      1.9     (35.4 )%      1.5

Average weekly unit sales (in thousands)

   $ 15.8     $ 36.8     $ 24.6   $ 36.9

Area License (b)

    

Sales percentage change(c)

     (63.3 )%      2.0     (38.1 )%      2.3


Dine Brands Global, Inc. and Subsidiaries

Restaurant Data

(Unaudited)

 

(a)

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

(b)

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

 

     Three Months Ended      Six Months Ended  
     June 30,      June 30,  
     2020      2019      2020      2019  
     (In millions)  

Reported sales

           

Applebee’s domestic franchise restaurant sales

   $ 472.0    $ 1,016.5    $ 1,390.2    $ 2,060.7

Applebee’s company-operated restaurants

     16.8      33.7      48.1      69.5

IHOP franchise restaurant sales

     282.1      791.6      966.9      1,590.4

IHOP area license restaurant sales

     26.4      71.8      90.4      146.1
  

 

 

    

 

 

    

 

 

    

 

 

 

Total

   $ 797.3    $ 1,913.6    $ 2,495.6    $ 3,866.7
  

 

 

    

 

 

    

 

 

    

 

 

 

 

(c)

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

(d)

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

(e)

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


Dine Brands Global, Inc. and Subsidiaries

Restaurant Data

(Unaudited)

The following table summarizes our restaurant development activity:

 

     Three Months Ended      Six Months Ended  
     June 30,      June 30,  
     2020      2019      2020      2019  

Applebee’s Restaurant Development Activity

        

Summary - beginning of period:

           

Franchise

     1,706      1,761      1,718      1,768

Company restaurants

     69      69      69      69
  

 

 

    

 

 

    

 

 

    

 

 

 

Total Applebee’s restaurants, beginning of period

     1,775      1,830      1,787      1,837
  

 

 

    

 

 

    

 

 

    

 

 

 

Franchise restaurants opened

           

Domestic

     —          —          —          —    

International

     —          1      —          1
  

 

 

    

 

 

    

 

 

    

 

 

 

Total franchise restaurants opened

     —          1      —          1
  

 

 

    

 

 

    

 

 

    

 

 

 

Franchise restaurants permanently closed:

           

Domestic

     (24      (13      (32      (17

International

     (2      (3      (6      (6
  

 

 

    

 

 

    

 

 

    

 

 

 

Total franchise restaurants permanently closed

     (26      (16      (38      (23
  

 

 

    

 

 

    

 

 

    

 

 

 

Net franchise restaurant reduction

     (26      (15      (38      (22
  

 

 

    

 

 

    

 

 

    

 

 

 

Summary - end of period:

           

Franchise

     1,680      1,746      1,680      1,746

Company

     69      69      69      69
  

 

 

    

 

 

    

 

 

    

 

 

 

Total Applebee’s restaurants, end of period

     1,749      1,815      1,749      1,815
  

 

 

    

 

 

    

 

 

    

 

 

 

Domestic

     1,633      1,676      1,633      1,676

International

     116      139      116      139

IHOP Restaurant Development Activity

           

Summary - beginning of period:

           

Franchise

     1,680      1,663      1,680      1,669

Area license

     160      159      161      162
  

 

 

    

 

 

    

 

 

    

 

 

 

Total IHOP restaurants, beginning of period

     1,840      1,822      1,841      1,831
  

 

 

    

 

 

    

 

 

    

 

 

 

Franchise/area license restaurants opened:

           

Domestic franchise

     1      9      7      15

Domestic area license

     —          2      1      2

International franchise

     —          2      2      2
  

 

 

    

 

 

    

 

 

    

 

 

 

Total franchise/area license restaurants opened

     1      13      10      19
  

 

 

    

 

 

    

 

 

    

 

 

 

Franchise/area license restaurants permanently closed:

           

Domestic franchise

     (13      (1      (19      (12

Domestic area license

     (1      (2      (3      (5

International franchise

     (2      (4      (4      (5

International area license

     (2      —          (2      —    
  

 

 

    

 

 

    

 

 

    

 

 

 

Total franchise/area license restaurants permanently closed

     (18      (7      (28      (22
  

 

 

    

 

 

    

 

 

    

 

 

 

Net franchise/area license restaurant reduction

     (17      6      (18      (3
  

 

 

    

 

 

    

 

 

    

 

 

 

Summary - end of period

           

Franchise

     1,666      1,669      1,666      1,669

Area license

     157      159      157      159
  

 

 

    

 

 

    

 

 

    

 

 

 

Total IHOP restaurants, end of period

     1,823      1,828      1,823      1,828
  

 

 

    

 

 

    

 

 

    

 

 

 

Domestic

     1,696      1,705      1,696      1,705

International

     127      123      127      123