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Table of Contents


UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
__________________________________________________ 
FORM 10-Q
 (Mark One)
      QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 For the quarterly period ended June 30, 2020
 OR
      TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 For the transition period from                  to                
 
Commission File Number 001-15283
https://cdn.kscope.io/2930e34435a666ebc683fb607b8a95b4-din-20200630_g1.jpg Dine Brands Global, Inc. https://cdn.kscope.io/2930e34435a666ebc683fb607b8a95b4-din-20200630_g2.jpg
(Exact name of registrant as specified in its charter)
Delaware95-3038279
(State or other jurisdiction of incorporation or organization) (I.R.S. Employer Identification No.)
450 North Brand Boulevard, 91203-1903
Glendale,CA
(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, $0.01 par valueDINNew York Stock Exchange
 
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes   No 
 Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).  Yes   No 
 Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company or an emerging growth company. See definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer
 Accelerated filer
Non-accelerated filer
 Smaller reporting company 
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 
 
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes 
  No  
 
As of July 22, 2020, the Registrant had 16,419,070 shares of Common Stock outstanding.


Table of Contents


Dine Brands Global, Inc. and Subsidiaries
Index
  Page
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cautionary Statement Regarding Forward-Looking Statements
 
Statements contained in this Quarterly Report on Form 10-Q 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. 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. 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. You should consider our forward-looking statements in light of the risks discussed under the heading “Risk Factors,” as well as our consolidated financial statements, related notes, and the other financial information appearing elsewhere in this report and our other filings with the United States Securities and Exchange Commission. The forward-looking statements contained in this report are made as of the date hereof and Dine Brands Global, Inc. does not intend to, nor does it assume any obligation to, update or supplement any forward-looking statements after the date of this report to reflect actual results or future events or circumstances.

Factors that could cause actual results to differ materially from the projections, forecasts, estimates and expectations discussed in this Quarterly Report on Form 10-Q include, among other things: uncertainty regarding the duration and severity of the ongoing COVID-19 pandemic and its ultimate impact on our business; 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, including any insolvency or bankruptcy; credit risks from our IHOP franchisees operating under our previous IHOP business model in which we built and equipped IHOP restaurants and then franchised them to franchisees; insufficient insurance coverage to cover potential risks associated with the ownership and operation of restaurants; 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; risks of food-borne illness or food tampering; possible future impairment charges; 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
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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; delivery initiatives and use of third-party delivery vendors; our allocation of human capital and 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 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 matters in the “Risk Factors” section of our Annual Report on Form 10-K for the fiscal year ended December 31, 2019 and in our Quarterly Report on Form 10-Q for the quarterly period ended March 31, 2020, many of which are beyond our control.


Fiscal Quarter End

The Company’s fiscal quarters end on the Sunday closest to the last day of each calendar quarter. For convenience, the fiscal quarters of each year are referred to as ending on March 31, June 30, September 30 and December 31. The first fiscal quarter of 2020 began on December 30, 2019 and ended on March 29, 2020; the second fiscal quarter of 2020 ended on June 28, 2020. The first fiscal quarter of 2019 began on December 31, 2018 and ended on March 31, 2019; the second fiscal quarter of 2019 ended on June 30, 2019.





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PART I. FINANCIAL INFORMATION

Item 1.  Financial Statements.
Dine Brands Global, Inc. and Subsidiaries
Consolidated Balance Sheets
(In thousands, except share and per share amounts)

Assets
June 30, 2020December 31, 2019
 (Unaudited)
Current assets:  
Cash and cash equivalents
$278,507  $116,043  
Receivables, net of allowance of $11,709 (2020) and $3,138 (2019)
124,619  136,869  
Restricted cash
31,184  40,732  
Prepaid gift card costs
27,370  36,077  
Prepaid income taxes
17,880  13,290  
Other current assets
6,410  3,906  
Total current assets
485,970  346,917  
Other intangible assets, net555,495  575,103  
Operating lease right-of-use assets349,103  366,931  
Goodwill251,628  343,862  
Property and equipment, net203,540  216,420  
Long-term receivables, net of allowance of $7,981 (2020) and $8,155 (2019)
74,015  85,999  
Deferred rent receivable65,126  70,308  
Non-current restricted cash32,800  15,700  
Other non-current assets, net25,590  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 debt1,497,116  1,288,248  
Operating lease obligations, less current maturities350,418  359,025  
Finance lease obligations, less current maturities74,051  77,393  
Financing obligations, less current maturities34,682  37,682  
Deferred income taxes, net86,221  98,499  
Deferred franchise revenue, long-term53,269  56,944  
Other non-current liabilities15,375  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  
 See the accompanying Notes to Consolidated Financial Statements.
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Dine Brands Global, Inc. and Subsidiaries
Consolidated Statements of Comprehensive (Loss) Income
(In thousands, except per share amounts)
(Unaudited)
 Three Months EndedSix Months Ended
June 30, 2020June 30, 2020
 2020201920202019
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 revenues67,876  162,668  212,913  331,594  
Company restaurant sales16,774  33,751  48,074  69,486  
Rental revenues23,707  29,878  52,716  60,589  
Financing revenues1,355  1,783  2,893  3,593  
Total revenues109,712  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 expenses37,080  78,907  106,530  159,210  
Company restaurant expenses21,139  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 expenses21,243  22,940  43,776  45,564  
Financing expenses128  146  270  292  
Total cost of revenues79,590  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  
Other comprehensive income net of tax:
Foreign currency translation adjustment  2    1  
Total comprehensive (loss) income
$(134,779) $21,392  $(112,451) $53,034  
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:
  
Basic16,177  17,181  16,215  17,262  
Diluted16,177  17,563  16,215  17,626  
 
See the accompanying Notes to Consolidated Financial Statements.
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Dine Brands Global, Inc. and Subsidiaries
Consolidated Statements of Stockholders' Deficit
(In thousands)
(Unaudited)


Three Months ended June 30, 2020
 Common Stock  Accumulated
Other
Comprehensive
Loss
Treasury Stock 
 Shares
Outstanding
AmountAdditional
Paid-in
Capital
(Accumulated Deficit) Retained EarningsSharesCostTotal
Balance at March 31, 202016,421  $249  $252,443  $70,769  $(58) 8,496  $(559,780) $(236,377) 
Net loss—  —  —  (134,779) —  —  —  (134,779) 
Reissuance of treasury stock14    (600) —  —  (13) 599  (1) 
Net issuance of shares for stock plans(14) —  —  —  —  —  —  —  
Repurchase of restricted shares for taxes(3) —  (129) —  —  —  —  (129) 
Stock-based compensation—  —  2,632  —  —  —  —  2,632  
Dividends on common stock—  —  261  —  —  —  —  261  
Other—  —  (178) —  —  —  —  (178) 
Balance at June 30, 202016,418  $249  $254,429  $(64,010) $(58) 8,483  $(559,181) $(368,571) 


Six Months ended June 30, 2020
 Common Stock  Accumulated
Other
Comprehensive
Loss
Treasury Stock 
 Shares
Outstanding
AmountAdditional
Paid-in
Capital
(Accumulated Deficit) Retained EarningsSharesCostTotal
Balance at December 31, 201916,522  $249  $246,192  $61,653  $(58) 8,404  $(549,810) $(241,774) 
Adoption of credit loss accounting guidance (Note 3)—  —  —  (497) —  —  —  (497) 
Net loss—  —  —  (112,451) —  —  —  (112,451) 
Purchase of Company common stock(460) —  —  —  —  460  (26,527) (26,527) 
Reissuance of treasury stock381    3,367  —  —  (381) 17,156  20,523  
Net issuance of shares for stock plans4  —  —  —  —  —  —  —  
Repurchase of restricted shares for taxes(29) —  (2,129) —  —  —  —  (2,129) 
Stock-based compensation—  —  6,670  —  —  —  —  6,670  
Dividends on common stock—  —  507  (12,715) —  —  —  (12,208) 
Other—  —  (178) —  —  —  —  (178) 
Balance at June 30, 202016,418  $249  $254,429  $(64,010) $(58) 8,483  $(559,181) $(368,571) 


See the accompanying Notes to Consolidated Financial Statements.



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Dine Brands Global, Inc. and Subsidiaries
Consolidated Statements of Stockholders' Deficit
(In thousands)
(Unaudited)
Three Months ended June 30, 2019
Common StockAccumulated
Other
Comprehensive
Loss
Treasury Stock
Shares
Outstanding
AmountAdditional
Paid-in
Capital
Retained EarningsSharesCostTotal
Balance at March 31, 201917,651  $250  $239,585  $24,588  $(61) 7,324  $(455,183) $(190,821) 
Net income—  —  —  21,390  —  —  —  21,390  
Other comprehensive gain—  —  —  —  2  —  —  2  
Purchase of Company common stock(392) —  —  —  —  392  (35,341) (35,341) 
Reissuance of treasury stock19  (1) (651) —  —  (19) 822  170  
Net issuance of shares for stock plans(21) —  —  —  —  —  —  —  
Repurchase of restricted shares for taxes(5) —  (425) —  —  —  —  (425) 
Stock-based compensation—  —  1,787  —  —  —  —  1,787  
Dividends on common stock—  —  259  (12,146) —  —  —  (11,887) 
Balance at June 30, 201917,252  $249  $240,555  $33,832  $(59) 7,697  $(489,702) $(215,125) 


Six Months ended June 30, 2019
Common StockAccumulated
Other
Comprehensive
Loss
Treasury Stock
Shares
Outstanding
Amount