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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 September 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/d83b72e9c54a1c356ec2952a5156682c-din-20200930_g1.jpg Dine Brands Global, Inc. https://cdn.kscope.io/d83b72e9c54a1c356ec2952a5156682c-din-20200930_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 October 21, 2020, the Registrant had 16,418,749 shares of Common Stock outstanding.


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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 and third fiscal quarters of 2020 ended on June 28, 2020 and September 27, 2020, respectively. The first fiscal quarter of 2019 began on December 31, 2018 and ended on March 31, 2019; the second and third fiscal quarters of 2019 ended on June 30, 2019 and September 29, 2019, respectively.





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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
September 30, 2020December 31, 2019
 (Unaudited)
Current assets:  
Cash and cash equivalents
$309,278 $116,043 
Receivables, net of allowance of $12,221 (2020) and $3,138 (2019)
122,148 136,869 
Restricted cash
47,511 40,732 
Prepaid gift card costs
25,690 36,077 
Prepaid income taxes
13,831 13,290 
Other current assets
5,942 3,906 
Total current assets
524,400 346,917 
Other intangible assets, net552,943 575,103 
Operating lease right-of-use assets355,766 366,931 
Goodwill251,628 343,862 
Property and equipment, net195,105 216,420 
Long-term receivables, net of allowance of $9,854 (2020) and $8,155 (2019)
69,898 85,999 
Deferred rent receivable62,458 70,308 
Non-current restricted cash32,800 15,700 
Other non-current assets, net25,918 28,271 
Total assets
$2,070,916 $2,049,511 
Liabilities and Stockholders’ Deficit
  
Current liabilities:  
Current maturities of long-term debt
$13,000 $ 
Accounts payable
28,930 40,925 
Gift card liability
114,495 159,019 
Current maturities of operating lease obligations
75,470 72,815 
Current maturities of finance lease and financing obligations
13,116 13,669 
Accrued employee compensation and benefits
17,498 23,904 
Dividends payable
 11,702 
Deferred franchise revenue, short-term
7,862 10,086 
Accrued advertising expenses
28,338 8,760 
Other accrued expenses
22,402 17,032 
Total current liabilities
321,111 357,912 
Long-term debt1,494,538 1,288,248 
Operating lease obligations, less current maturities351,927 359,025 
Finance lease obligations, less current maturities72,349 77,393 
Financing obligations, less current maturities34,488 37,682 
Deferred income taxes, net83,502 98,499 
Deferred franchise revenue, long-term54,101 56,944 
Other non-current liabilities15,264 15,582 
Total liabilities
2,427,280 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; September 30, 2020 - 24,883,124 issued, 16,416,695 outstanding; December 31, 2019 - 24,925,447 issued, 16,521,921 outstanding
249 249 
 Additional paid-in-capital
255,907 246,192 
(Accumulated deficit) retained earnings
(53,992)61,653 
 Accumulated other comprehensive loss
(56)(58)
Treasury stock, at cost; shares: September 30, 2020 - 8,466,429; December 31, 2019 - 8,403,526
(558,472)(549,810)
Total stockholders’ deficit
(356,364)(241,774)
Total liabilities and stockholders’ deficit
$2,070,916 $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 Income (Loss)
(In thousands, except per share amounts)
(Unaudited)
 Three Months EndedNine Months Ended
September 30, 2020September 30, 2020
 2020201920202019
Revenues:
 
Franchise revenues:
Royalties, franchise fees and other
$69,820 $88,686 $191,915 $275,912 
Advertising revenues
51,932 67,514 142,750 211,882 
Total franchise revenues121,752 156,200 334,665 487,794 
Company restaurant sales27,353 30,548 75,427 100,034 
Rental revenues26,194 28,970 78,910 89,559 
Financing revenues1,344 1,687 4,237 5,280 
Total revenues176,643 217,405 493,239 682,667 
Cost of revenues:
  
Franchise expenses:
Advertising expenses
51,932 67,514 142,750 211,882 
Bad debt expense (credit)
2,845 (662)8,416 (1,254)
Other franchise expenses
5,858 7,724 15,999 23,159 
Total franchise expenses60,635 74,577 167,165 233,787 
Company restaurant expenses28,303 30,361 79,774 93,131 
Rental expenses:
Interest expense from finance leases
1,106 1,351 3,453 4,325 
Other rental expenses
19,692 21,251 61,121 63,841 
Total rental expenses20,798 22,602 64,574 68,166 
Financing expenses123 145 393 437 
Total cost of revenues109,859 127,685 311,906 395,521 
Gross profit
66,784 89,720 181,333 287,146 
General and administrative expenses
36,873 38,922 105,351 121,105 
Interest expense, net
16,844 15,238 49,143 45,233 
Impairment and closure charges
168 157 124,521 640 
Amortization of intangible assets
2,659 2,925 8,240 8,774 
Loss on extinguishment of debt
   8,276 
Loss on disposition of assets1,087 746 2,630 1,187 
Income (loss) before income taxes9,153 31,732 (108,552)101,931 
Income tax benefit (provision)865 (7,815)6,119 (24,981)
Net income (loss)10,018 23,917 (102,433)76,950 
Other comprehensive income (loss) net of tax:
Foreign currency translation adjustment2 (1)2  
Total comprehensive income (loss)$10,020 $23,916 $(102,431)$76,950 
Net income (loss) available to common stockholders:  
Net income (loss)$10,018 $23,917 $(102,433)$76,950 
Less: Net income allocated to unvested participating restricted stock(329)(795)(420)(2,621)
Net income (loss) available to common stockholders$9,689 $23,122 $(102,853)$74,329 
Net income (loss) available to common stockholders per share:  
Basic$0.60 $1.38 $(6.34)$4.35 
Diluted$0.60 $1.36 $(6.34)$4.27 
Weighted average shares outstanding:
  
Basic16,221 16,762 16,229 17,095 
Diluted16,283 17,055 16,229 17,432 
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 September 30, 2020
 Common Stock  Accumulated
Other
Comprehensive
Loss
Treasury Stock 
 Shares
Outstanding
AmountAdditional
Paid-in
Capital
Accumulated DeficitSharesCostTotal
Balance at June 30, 202016,418 $249 $254,429 $(64,010)$(58)8,483 $(559,181)$(368,571)
Net income— — — 10,018 — — — 10,018 
Other comprehensive income— — — — 2 — — 2 
Reissuance of treasury stock16 — (709)— — (16)709  
Net issuance of shares for stock plans(11)— — — — — — — 
Repurchase of restricted shares for taxes(6)— (309)— — — — (309)
Stock-based compensation— — 2,523 — — — — 2,523 
Other— — (27)— — — — (27)
Balance at September 30, 202016,417 $249 $255,907 $(53,992)$(56)8,467 $(558,472)$(356,364)


Nine Months ended September 30, 2020
 Common Stock  Accumulated
Other
Comprehensive
Loss
Treasury Stock 
 Shares
Outstanding
AmountAdditional
Paid-in
Capital
Retained Earnings (Accumulated Deficit)SharesCostTotal
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— — — (102,433)— — — (102,433)
Other comprehensive income— — — — — — 2 
Purchase of Company common stock(460)— — — — 460 (26,527)(26,527)
Reissuance of treasury stock397 — 2,658 — — (397)17,865 20,523 
Net issuance of shares for stock plans(7)— — — — — — — 
Repurchase of restricted shares for taxes(35)— (2,438)— — — — (2,438)
Stock-based compensation— — 9,193 — — — — 9,193 
Dividends on common stock— — 507 (12,715)— — — (12,208)
Other— — (205)— — — — (205)
Balance at September 30, 202016,417 $249 $255,907 $(53,992)$(56)8,467 $(558,472)$(356,364)


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 September 30, 2019
Common StockAccumulated
Other
Comprehensive
Loss
Treasury Stock
Shares
Outstanding
AmountAdditional
Paid-in
Capital
Retained EarningsSharesCostTotal
Balance at June 30, 201917,252 $249 $240,555 $33,832 $(59)7,697 $(489,702)$(215,125)
Net income— — — 23,917 — — — 23,917 
Other comprehensive loss— — — — (1)— — (1)
Purchase of Company common stock(524)— — — — 524 (42,717)(42,717)
Reissuance of treasury stock73 — 582 — — (73)3,151 3,733 
Net issuance of shares for stock plans(11)— — — — — — — 
Repurchase of restricted shares for taxes(4)— (347)— — — — (347)
Stock-based compensation— — 2,326 — — — — 2,326 
Dividends on common stock— — 242 (11,810)— — — (11,568)
Balance at September 30, 201916,786 $249 $243,358 $45,939 $(60)8,148 $(529,268)$(239,782)


Nine Months ended September 30, 2019
Common StockAccumulated
Other
Comprehensive
Loss
Treasury Stock
Shares
Outstanding
AmountAdditional
Paid-in
Capital
Retained EarningsSharesCostTotal
Balance at December 31, 201817,644 $250 $237,726 $10,414 $(60)7,341 $(450,603)$(202,273)
Adoption of new lease accounting guidance— — — (5,030)— — — (5,030)
Net income— — — 76,950 — — — 76,950 
Other comprehensive income— — — — — — —  
Purchase of Company common stock(1,067)— — — — 1,067 (90,073)(90,073)
Reissuance of treasury stock260 (1)(736)— — (260)11,408 10,671 
Net issuance of shares for stock plans(23)— — — — — — — 
Repurchase of restricted shares for taxes(28)— (2,589)— — — — (2,589)
Stock-based compensation— — 8,220 — — — — 8,220 
Dividends on common stock— — 737 (36,395)— — — (35,658)
Balance at September 30, 201916,786 $249 $243,358 $45,939 $(60)8,148 $(529,268)$(239,782)


See the accompanying Notes to Consolidated Financial Statements.

6

Table of Contents


Dine Brands Global, Inc. and Subsidiaries
Consolidated Statements of Cash Flows
(In thousands)
(Unaudited)
Nine Months Ended
 September 30,
 20202019
Cash flows from operating activities: 
Net (loss) income$(102,433)$76,950 
Adjustments to reconcile net (loss) income to cash flows provided by operating activities: 
Impairment and closure charges124,469 640 
Depreciation and amortization32,053 31,515 
Non-cash stock-based compensation expense9,193 8,220 
Non-cash interest expense1,990 2,722 
Deferred income taxes24,172 (2,890)
Deferred revenue(5,067)(6,590)
Loss on extinguishment of debt 8,276 
Loss on disposition of assets2,630 1,187 
Other1,173 (4,584)
Changes in operating assets and liabilities: 
Accounts receivable, net(27,849)4,233 
Current income tax receivables and payables(41,426)7,101 
Gift card receivables and payables(1,980)(15,868)
Other current assets(2,034)(3,519)
Accounts payable6,777 359 
Accrued employee compensation and benefits(6,406)(6,069)
Accrued advertising19,579 (1,366)
Other current liabilities1,887 5,282 
Cash flows provided by operating activities36,728 105,599 
Cash flows from investing activities: