Dine Brands Global, Inc. Reports Strong Second Quarter 2019 Results
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Dine Brands Global, Inc. Reports Strong Second Quarter 2019 Results

Earnings Per Diluted Share (GAAP) Increased 71%

Adjusted Earnings Per Diluted Share (Non-GAAP) Increased 66%

Net Income Increased 68%

GLENDALE, Calif. - (BUSINESS WIRE) - Jul. 31, 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 second quarter of 2019.

“Our strategy continues to drive significant improvements across key metrics. We have made important decisions over the last two years that have improved our fundamentals and enhanced our ability to deliver sustainable growth. We successfully completed a $1.3 billion refinancing of our securitized debt, replacing our 2014 fixed rate senior secured notes. We are also pleased to announce that Applebee’s franchisees agreed to extend the increase in the advertising contribution rate to 4.25% through the end of next year,” said Steve Joyce, Chief Executive Officer of Dine Brands Global, Inc.

Mr. Joyce continued, “Our performance reflects the strength and stability of our highly franchised business model. While comparable same-restaurant sales at Applebee’s were lower than expected, these results are not indicative of a shift in Applebee’s fundamentals or brand relevance, both of which remain intact. As we enter the back half of the year, we are executing against our plan with a sharpened focus on operating fundamentals, which will help us continue to grow and create shareholder value.”

Key Highlights

  • IHOP’s reported system-wide sales for the second quarter of 2019 increased 3.2% year-over-year to $863.4 million.
  • The refinancing of fixed rate senior secured notes and variable funding senior notes was completed on June 5th.
    • Series 2019-1 Class A-2-I, Fixed Rate Senior Secured Notes in an initial principal amount of $700 million; bear interest at a fixed coupon rate of 4.194% per annum and have an expected term of five years.
    • Series 2019-1 Class A-2-II, Fixed Rate Senior Secured Notes in an initial principal amount of $600 million; bear interest at a fixed coupon rate of 4.723% per annum and have an expected term of seven years.
    • $225 million of Class A-1 Variable Funding Senior Notes.
  • In July, Applebee’s franchisees agreed to extend the increase in the advertising contribution rate to 4.25% through December 31, 2020.
  • Total revenues for the second quarter of 2019, excluding advertising revenues, increased 24.3% year-over-year to $156.3 million.
  • Gross profit for the second quarter of 2019 increased 20.7% year-over-year to $94.9 million.
  • The Company restaurants segment contributed approximately $2.5 million of gross profit in the second quarter of 2019.
  • GAAP earnings per diluted share for the second quarter of 2019 increased 71.0% year-over-year to $1.18.
  • Adjusted earnings per diluted share for the second quarter of 2019 increased 66.0% year-over-year to $1.71. (See “Non-GAAP Financial Measures” below.)
  • Net income for the second quarter of 2019 increased 68.3% year-over-year to $21.4 million.
  • Consolidated adjusted EBITDA for the second quarter increased 35.3% to $68.0 millioncompared to $50.2 million for the second quarter of 2018. (See “Non-GAAP Financial Measures” and reconciliation of GAAP net income to consolidated adjusted EBITDA.)
  • During the second quarter of 2019, the Company repurchased 392,132 shares of its common stock for a total cost of approximately $35.3 million and paid quarterly cash dividends totaling approximately $12.2 million.
  • Cash flows from operating activities for the first six months of 2019 increased 168.8% to ­$69.3 million compared to $25.8 million for the same period of 2018.
  • Adjusted free cash flow for the first six months of 2019 increased 134.9% to approximately $66.0 million compared to approximately $28.1 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

 

Second Quarter

 

First Six Months

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

2019

2018

% Change

 

2019

2018

% Change

Total revenues, excluding Company restaurant sales

$

194,329

$

184,471

5

%

 

$

395,776

$

372,634

6

%

Net income available to common stockholders per share

$

1.18

$

0.69

71

%

 

$

2.91

$

1.61

81

%

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

$

1.71

$

1.03

66

%

 

$

3.61

$

2.13

69

%

Net income

$

21,390

$

12,713

68

%

 

$

53,033

$

29,786

78

%

Consolidated adjusted EBITDA(1)(2)

$

67,968

$

50,249

35

%

 

$

142,671

$

103,427

38

%

(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

Second Quarter of 2019

  • Applebee’s comparable same-restaurant sales decreased 0.5% for the second quarter of 2019.
  • IHOP’s comparable same-restaurant sales increased 2.0% for the second quarter of 2019, achieving the sixth consecutive quarter of sales growth.

First Six Months of 2019

  • Applebee’s comparable same-restaurant sales increased 0.6% for the six months of 2019.
  • IHOP’s comparable same-restaurant sales increased 1.7% for the first six months of 2019.

Second Quarter of 2019 Financial Highlights

  • GAAP net income available to common stockholders was $20.7million, or earnings per diluted share of $1.18, for the second quarter of 2019. This compared to net income available to common stockholders of $12.3 million, or earnings per diluted share of $0.69, for the second quarter of 2018. The increase in net income was primarily due to higher gross profit as the result of $16.5 million in franchisor contributions to the Applebee’s national advertising fund made in the second quarter of 2018 that did not recur in 2019. Additionally, our effective tax rate of 26.4% for the second quarter of 2019 was lower than the effective tax rate of 48.3% for the comparable period of 2018 due to tax adjustments taken in 2018 that were not taken in 2019. These items were partially offset by a loss on extinguishment of debt of approximately $8.3 million related to the refinancing of our long-term debt, which was completed on June 5, 2019. This loss represented the remaining unamortized issuance costs associated with our previous outstanding long-term debt issued in 2014.
  • Adjusted net income available to common stockholders was $30.0 million, or adjusted earnings per diluted share of $1.71, for the second quarter of 2019. This compares to adjusted net income available to common stockholders of $18.3 million, or adjusted earnings per diluted share of $1.03, for the second quarter of 2018. (See “Non-GAAP Financial Measures” below.)
  • General and administrative expenses were $39.4 million for the second quarter of 2019 compared to $38.8 million for the second quarter of 2018. The increase was primarily due to higher personnel-related costs.

First Six Months of 2019 Financial Highlights

  • GAAP net income available to common stockholders was $51.2million, or earnings per diluted share of $2.91, for the first six months of 2019. This compared to net income available to common stockholders of $28.8 million, or earnings per diluted share of $1.61, for the first six 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 six 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 $63.7 million, or adjusted earnings per diluted share of $3.61, for the first six months of 2019. This compares to adjusted net income available to common stockholders of $38.0 million, or adjusted earnings per diluted share of $2.13, for the first six months of 2018. (See “Non-GAAP Financial Measures” below.)
  • General and administrative expenses were $82.2 million for the first six months of 2019 compared to $80.7 million for the same period of 2018. The increase was primarily due to higher personnel-related costs.

GAAP Effective Tax Rate

Our effective tax rate of 26.4% for the second quarter of 2019 was lower than the effective tax rate of 48.3% for the comparable period of 2018. During the three months ended June 30, 2018, we increased our tax provision by $5.7 million related to adjustments resulting from IRS audits for tax years 2011 through 2013. These adjustments increased our effective tax rate for the three months ended June 30, 2018. During the three months ended June 30, 2019, the IRS audits for tax years 2011 through 2013 concluded and allowed us to accelerate the collection of certain tax benefits recognized in prior years. As a result, the Company received a refund of $13.3 million, inclusive of interest income of $0.9 million.

Financial Performance Guidance for 2019

Dine Brands revises its financial performance guidance for 2019 contained in the press release issued on February 21, 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 torange between 0.0% and positive 1.5%. This compares to previous expectations of between positive 2.0% and positive 4.0%.
  • Revised expectations for IHOP’s domestic system-wide comparable same-restaurant sales performance to range between positive 1.0% and positive 3.0%. This compares to previous expectations of positive 2.0% and positive 4.0%.
  • Reiterates development activity by Applebee’s franchisees, which is expected to result in net closures between 20 and 30 restaurants globally, the majority of which are expected to be domestic closures.
  • Revised expectations for development activity by IHOP franchisees and area licensees, which is now expected to result in between 20 and 30 net new restaurants globally, the majority of which are expected to be domestic openings. This compares to previous expectations for the net development of between 35 and 55 restaurants globally.
  • Revised expectations for total segment profit, excluding the company restaurants segment, which is now expected to be between approximately $370 million and $380 million. This compares to previous expectations for total segment profit to range between $373 million and $394 million.
  • Revised expectations for general and administrative expenses, which are now 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. This compares to previous expectations for general and administrative expenses to range between approximately $165 million and $170 million.
  • Revised expectations for GAAP net income, which is now to range between approximately $97 million and approximately $106 million. This compares to previous expectations for GAAP net income to range between approximately $104 million and approximately $113 million.
  • Reiterates 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 $5.75 to $6.00. This compares to previous expectations for GAAP earnings per diluted share to range from $6.15 to $6.45.
  • Revised expectations for adjusted earnings per diluted share, which are now expected to range from $6.80 to $7.05. This compares to previous expectations for adjusted earnings per diluted share to range from $6.90 to $7.20. (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

$5.75 – $6.00

Closure and impairment charges

0.03

Amortization of intangible assets

0.67

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%

(0.35)

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

$6.80 – $7.05

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

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

Net income

$97 – $106

Interest charges

76

Income tax provision

35

Depreciation and amortization

36

Non-cash stock-based compensation

14

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.

Second Quarter of 2019 Results Conference Call Details

Dine Brands will host a conference call to discuss its results on July 31, 2019 at 9:00 a.m. Pacific Time/12:00 p.m. Eastern Time. please dial (888) 771-4371 and reference passcode 48827895. International callers, please dial (847) 585-4405 and reference passcode 48827895.

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 July 31, 2019 through 8:59 p.m. Pacific Time on August 7, 2019 by dialing (888) 843-7419 and referencing passcode 48827895#. International callers, please dial (630) 652-3042 and reference passcode 48827895#. 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 3,650 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.

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.

Dine Brands Global, Inc. and Subsidiaries

Consolidated Statements of Comprehensive Income

(In thousands, except per share amounts)

(Unaudited)

 

 

Three Months Ended

 

Six Months Ended

 

 

June 30,

 

June 30,

 

 

2019

 

2018

 

2019

 

2018

Revenues:

 

 

 

 

 

 

 

 

Franchise revenues:

 

 

 

 

 

 

 

 

Royalties, franchise fees and other

 

$

90,930

 

 

$

93,236

 

 

$

187,226

 

 

$

184,713

 

Advertising revenue

 

71,738

 

 

58,705

 

 

144,368

 

 

122,541

 

Total franchise revenues

 

162,668

 

 

151,941

 

 

331,594

 

 

307,254

 

Company restaurant sales

 

33,751

 

 

 

 

69,486

 

 

 

Rental revenues

 

29,878

 

 

30,324

 

 

60,589

 

 

61,165

 

Financing revenues

 

1,783

 

 

2,206

 

 

3,593

 

 

4,215

 

Total revenues

 

228,080

 

 

184,471

 

 

465,262

 

 

372,634

 

Cost of revenues:

 

 

 

 

 

 

 

 

Franchise expenses:

 

 

 

 

 

 

 

 

Advertising expenses

 

71,738

 

 

58,705

 

 

144,368

 

 

122,541

 

Other franchise expenses

 

7,169

 

 

24,239

 

 

14,842

 

 

42,275

 

Total franchise expenses

 

78,907

 

 

82,944

 

 

159,210

 

 

164,816

 

Company restaurant expenses

 

31,232

 

 

 

 

62,770

 

 

 

Rental expenses:

 

 

 

 

 

 

 

 

Interest expense from finance leases

 

1,445

 

 

1,770

 

 

2,974

 

 

3,647

 

Other rental expenses

 

21,495

 

 

21,018

 

 

42,590

 

 

41,782

 

Total rental expenses

 

22,940

 

 

22,788

 

 

45,564

 

 

45,429

 

Financing expenses

 

146

 

 

149

 

 

292

 

 

299

 

Total cost of revenues

 

133,225

 

 

105,881

 

 

267,836

 

 

210,544

 

Gross profit

 

94,855

 

 

78,590

 

 

197,426

 

 

162,090

 

General and administrative expenses

 

39,364

 

 

38,759

 

 

82,183

 

 

80,670

 

Interest expense, net

 

14,602

 

 

15,481

 

 

29,995

 

 

30,680

 

Amortization of intangible assets

 

2,925

 

 

2,506

 

 

5,849

 

 

5,008

 

Closure and impairment charges (credits)

 

289

 

 

(2,702

)

 

483

 

 

(98

)

Loss on extinguishment of debt

 

8,276

 

 

 

 

8,276

 

 

 

Loss (gain) on disposition of assets

 

332

 

 

(50

)

 

441

 

 

(1,477

)

Income before income tax provision

 

29,067

 

 

24,596

 

 

70,199

 

 

47,307

 

Income tax provision

 

(7,677

)

 

(11,883

)

 

(17,166

)

 

(17,521

)

Net income

 

$

21,390

 

 

$

12,713

 

 

$

53,033

 

 

$

29,786

 

Net income available to common stockholders:

 

 

 

 

 

 

 

 

Net income

 

$

21,390

 

 

$

12,713

 

 

$

53,033

 

 

$

29,786

 

Less: Net income allocated to unvested participating restricted stock

 

(719

)

 

(428

)

 

(1,827

)

 

(1,000

)

Net income available to common stockholders

 

$

20,671

 

 

$

12,285

 

 

$

51,206

 

 

$

28,786

 

Net income available to common stockholders per share:

 

 

 

 

 

 

 

 

Basic

 

$

1.20

 

 

$

0.70

 

 

$

2.97

 

 

$

1.63

 

Diluted

 

$

1.18

 

 

$

0.69

 

 

$

2.91

 

 

$

1.61

 

Weighted average shares outstanding:

 

 

 

 

 

 

 

 

Basic

 

17,181

 

 

17,544

 

 

17,262

 

 

17,623

 

Diluted

 

17,563

 

 

17,803

 

 

17,626

 

 

17,827

 

 

 

 

 

 

 

 

 

 

Dividends declared per common share

 

$0.69

 

$0.63

 

$1.38

 

$1.26

Dividends paid per common share

 

$0.69

 

$0.63

 

$1.32

 

$1.60

 

Dine Brands Global, Inc. and Subsidiaries

Consolidated Balance Sheets

(In thousands, except share and per share amounts)

 

 

June 30, 
2019

 

December 31, 
2018

Assets

 

(Unaudited)

 

 

Current assets:

 

 

 

 

Cash and cash equivalents

 

$

127,555

 

 

$

137,164

 

Receivables, net

 

98,786

 

 

137,504

 

Restricted cash

 

34,387

 

 

48,515

 

Prepaid gift card costs

 

29,411

 

 

38,195

 

Prepaid income taxes

 

7,123

 

 

17,402

 

Other current assets

 

7,016

 

 

3,410

 

Total current assets

 

304,278

 

 

382,190

 

Other intangible assets, net

 

580,197

 

 

585,889

 

Operating lease right-of-use asset

 

378,520

 

 

 

Goodwill

 

343,862

 

 

345,314

 

Property and equipment, net

 

222,818

 

 

240,264

 

Long-term receivables, net

 

93,607

 

 

103,102

 

Deferred rent receivable

 

74,075

 

 

77,069

 

Non-current restricted cash

 

15,700

 

 

14,700

 

Other non-current assets, net

 

27,601

 

 

26,152

 

Total assets

 

$

2,040,658

 

 

$

1,774,680

 

 

 

 

 

 

Liabilities and Stockholders’ Deficit

 

 

 

 

Current liabilities:

 

 

 

 

Current maturities of long-term debt

 

$

 

 

$

25,000

 

Accounts payable

 

43,982

 

 

43,468

 

Gift card liability

 

111,281

 

 

160,438

 

Current maturities of operating lease obligations

 

67,724

 

 

 

Current maturities of finance lease and financing obligations

 

13,563

 

 

14,031

 

Accrued employee compensation and benefits

 

17,607

 

 

27,479

 

Dividends payable

 

12,176

 

 

11,389

 

Deferred franchise revenue, short-term

 

10,244

 

 

10,138

 

Other accrued expenses

 

19,824

 

 

24,243

 

Total current liabilities

 

296,401

 

 

316,186

 

Long-term debt, less current maturities

 

1,287,227

 

 

1,274,087

 

Operating lease obligations, less current maturities

 

379,123

 

 

 

Finance lease obligations, less current maturities

 

84,344

 

 

87,762

 

Financing obligations, less current maturities

 

38,125

 

 

38,482

 

Deferred income taxes, net

 

98,294

 

 

105,816

 

Deferred franchise revenue, long-term

 

60,302

 

 

64,557

 

Other non-current liabilities

 

11,967

 

 

90,063

 

Total liabilities

 

2,255,783

 

 

1,976,953

 

Commitments and contingencies

 

 

 

 

Stockholders’ deficit:

 

 

 

 

Common stock, $0.01 par value; shares: 40,000,000 authorized; June 30, 2019 - 24,949,103 issued, 17,252,391 outstanding; December 31, 2018 - 24,984,898 issued, 17,644,267 outstanding

 

249

 

 

250

 

Additional paid-in-capital

 

240,555

 

 

237,726

 

Retained earnings

 

33,832

 

 

10,414

 

Accumulated other comprehensive loss

 

(59

)

 

(60

)

Treasury stock, at cost; shares: June 30, 2019 - 7,696,712; December 31, 2018 - 7,340,631

 

(489,702

)

 

(450,603

)

Total stockholders’ deficit

 

(215,125

)

 

(202,273

)

Total liabilities and stockholders’ deficit

 

$

2,040,658

 

 

$

1,774,680

 

 

 

Dine Brands Global, Inc. and Subsidiaries

Consolidated Statements of Cash Flows

(In thousands)

(Unaudited)

 

 

Six Months Ended

 

 

June 30,

 

 

2019

 

2018

 

 

 

 

 

Cash flows from operating activities:

 

 

 

 

Net income

 

$

53,033

 

 

$

29,786

 

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

 

 

 

 

Depreciation and amortization

 

20,800

 

 

15,842

 

Non-cash stock-based compensation expense

 

5,894

 

 

5,641

 

Non-cash interest expense

 

2,083

 

 

1,744

 

Closure and impairment charges

 

483

 

 

(114

)

Loss on extinguishment of debt

 

8,276

 

 

 

Deferred income taxes

 

(3,186

)

 

(3,606

)

Gain (loss) on disposition of assets

 

441

 

 

(1,477

)

Other

 

(7,678

)

 

(8,438

)

Changes in operating assets and liabilities:

 

 

 

 

Accounts receivable, net

 

(1,976

)

 

(10,924

)

Current income tax receivables and payables

 

9,442

 

 

2,776

 

Gift card receivables and payables

 

(7,444

)

 

(10,334

)

Other current assets

 

(3,607

)

 

5,851

 

Accounts payable

 

8,995

 

 

3,816

 

Accrued employee compensation and benefits

 

(9,872

)

 

(1,411

)

Other current liabilities

 

(6,355

)

 

(3,360

)

Cash flows provided by operating activities

 

69,329

 

 

25,792

 

Cash flows from investing activities:

 

 

 

 

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

 

11,386

 

 

14,923

 

Additions to property and equipment

 

(9,175

)

 

(7,339

)

Proceeds from sale of property and equipment

 

400

 

 

655

 

Additions to long-term receivables

 

(1,555

)

 

(3,030

)

Other

 

(186

)

 

(246

)

Cash flows provided by investing activities

 

870

 

 

4,963

 

Cash flows from financing activities:

 

 

 

 

Borrowings from revolving credit facilities

 

 

 

20,000

 

Repayment of Variable Funding Notes

 

(25,000

)

 

 

Proceeds from issuance of long-term debt

 

1,300,000

 

 

 

Repayment of long-term debt

 

(1,283,750

)

 

(6,500

)

Dividends paid on common stock

 

(23,346

)

 

(28,757

)

Repurchase of common stock

 

(46,383

)

 

(20,003

)

Principal payments on finance lease obligations

 

(6,964

)

 

(8,013

)

Payment of debt issuance costs

 

(12,189

)

 

 

Proceeds from stock options exercised

 

6,938

 

 

620

 

Tax payments for restricted stock upon vesting

 

(2,242

)

 

(1,400

)

Cash flows used in financing activities

 

(92,936

)

 

(44,053

)

Net change in cash, cash equivalents and restricted cash

 

(22,737

)

 

(13,298

)

Cash, cash equivalents and restricted cash at beginning of period

 

200,379

 

 

163,146

 

Cash, cash equivalents and restricted cash at end of period

 

$

177,642

 

 

$

149,848

 

 

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: closure and impairment charges; amortization of intangible assets; non-cash interest expense; gain or loss on disposition of assets; loss on extinguishment of debt; nonrecurring restaurant costs; 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,

 

 

2019

 

2018

 

2019

 

2018

 

 

 

 

 

 

 

 

 

Net income available to common stockholders, as reported

 

$

20,671

 

 

$

12,285

 

 

$

51,206

 

 

$

28,786

 

Closure and impairment charges (credits)

 

289

 

 

(2,702

)

 

483

 

 

(98

)

Amortization of intangible assets

 

2,925

 

 

2,506

 

 

5,849

 

 

5,008

 

Non-cash interest expense

 

965

 

 

880

 

 

2,083

 

 

1,744

 

Loss (gain) on disposition of assets

 

332

 

 

(50

)

 

441

 

 

(1,477

)

Loss on extinguishment of debt

 

8,276

 

 

 

 

8,276

 

 

 

Nonrecurring restaurant costs

 

269

 

 

 

 

329

 

 

 

Income tax provision

 

(3,395

)

 

(165

)

 

(4,540

)

 

(1,346

)

Income tax adjustments (1)

 

 

 

5,744

 

 

 

 

5,744

 

Net income allocated to unvested participating restricted stock

 

(340

)

 

(216

)

 

(458

)

 

(324

)

Net income available to common stockholders, as adjusted

 

$

29,992

 

 

$

18,282

 

 

$

63,669

 

 

$

38,037

 

 

 

 

 

 

 

 

 

 

Diluted net income available to common stockholders per share:

 

 

 

 

 

 

 

 

Net income available to common stockholders, as reported

 

$

1.18

 

 

$

0.69

 

 

$

2.91

 

 

$

1.61

 

Closure and impairment charges

 

0.01

 

 

(0.11

)

 

0.02

 

 

(0.00

)

Amortization of intangible assets

 

0.12

 

 

0.10

 

 

0.25

 

 

0.21

 

Non-cash interest expense

 

0.04

 

 

0.04

 

 

0.09

 

 

0.07

 

Loss on extinguishment of debt

 

0.35

 

 

 

 

0.35

 

 

 

Loss (gain) on disposition of assets

 

0.01

 

 

(0.00

)

 

0.02

 

 

(0.06

)

Nonrecurring restaurant costs

 

0.01

 

 

 

 

0.01

 

 

 

Income tax adjustments (1)

 

 

 

0.32

 

 

 

 

0.32

 

Net income allocated to unvested participating restricted stock

 

(0.02

)

 

(0.01

)

 

(0.03

)

 

(0.01

)

Rounding

 

0.01

 

 

 

 

(0.01

)

 

(0.01

)

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

 

$

1.71

 

 

$

1.03

 

 

$

3.61

 

 

$

2.13

 

 

 

 

 

 

 

 

 

 

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

 

$

29,992

 

 

$

18,282

 

 

$

63,669

 

 

$

38,037

 

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

 

14

 

 

4

 

 

30

 

 

4

 

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

 

$

30,006

 

 

$

18,286

 

 

$

63,699

 

 

$

38,041

 

 

 

 

 

 

 

 

 

 

Denominator for basic EPS-weighted-average shares

 

17,181

 

 

17,544

 

 

17,262

 

 

17,623

 

Dilutive effect of stock options

 

382

 

 

259

 

 

364

 

 

204

 

Denominator for diluted EPS-weighted-average shares and assumed conversions

 

17,563

 

 

17,803

 

 

17,626

 

 

17,827

 

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

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,

 

 

2019

 

2018

 

 

(In millions)

Cash flows provided by operating activities

 

$

69.3

 

 

$

25.8

 

Receipts from notes and equipment contracts receivable

 

5.9

 

 

9.6

 

Additions to property and equipment

 

(9.2

)

 

(7.3

)

Adjusted free cash flow

 

66.0

 

 

28.1

 

Dividends paid on common stock

 

(23.3

)

 

(28.8

)

Repurchase of Dine Brands Global common stock

 

(46.4

)

 

(20.0

)

 

 

$

(3.7

)

 

$

(20.7

)

 

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 any interest charges, any income tax provision or benefit, any depreciation and amortization, any non-cash stock-based compensation, any closure and impairment charges or credits, 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

 

Six Months Ended

 

 

June 30,

 

June 30,

 

 

2019

 

2018

 

2019

 

2018

 

 

 

 

 

 

 

 

 

Net income, as reported

 

$

21,390

 

 

$

12,713

 

 

$

53,033

 

 

$

29,786

 

Interest charges on finance leases

 

1,970

 

 

1,770

 

 

4,053

 

 

3,647

 

All other interest charges

 

15,390

 

 

16,187

 

 

32,087

 

 

32,151

 

Income tax provision

 

7,677

 

 

11,883

 

 

17,166

 

 

17,521

 

Depreciation and amortization

 

10,620

 

 

7,902

 

 

20,800

 

 

15,842

 

Non-cash stock-based compensation

 

1,787

 

 

2,272

 

 

5,893

 

 

5,641

 

Closure and impairment charges (credits)

 

290

 

 

(2,702

)

 

483

 

 

(98

)

Loss on extinguishment of debt

 

8,276

 

 

 

 

8,276

 

 

 

Loss (gain) on disposition of assets

 

333

 

 

(50

)

 

441

 

 

(1,477

)

Other taxes

 

235

 

 

274

 

 

439

 

 

414

 

Adjusted EBITDA

 

$

67,968

 

 

$

50,249

 

 

$

142,671

 

 

$

103,427

 

 

Dine Brands Global, Inc. and Subsidiaries 
Restaurant Data 
(Unaudited)

The following table sets forth, for the three and six months ended June 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

 

Six Months Ended

 

 

June 30,

 

June 30,

 

 

2019

 

2018

 

2019

 

2018

 

 

 

Applebee's

 

 

 

 

 

 

 

 

Effective Restaurants(a)

 

 

 

 

 

 

 

 

Franchise

 

1,753

 

 

1,900

 

 

1,758

 

 

1,912

 

Company

 

69

 

 

 

69

 

 

Total

 

1,822

 

 

1,900

 

 

1,827

 

 

1,912

 

 

 

 

 

 

 

 

 

 

System-wide(b)

 

 

 

 

 

 

 

 

Domestic sales percentage change(c)

 

(3.0

)%

 

3.2

%

 

(2.2

)%

 

2.0

%

Domestic same-restaurant sales percentage change(d)

 

(0.5

)%

 

5.7

%

 

0.6

%

 

4.5

%

 

 

 

 

 

 

 

 

 

Franchise(b)

 

 

 

 

 

 

 

 

Domestic sales percentage change(c)

 

(6.1

)%

 

3.2

%

 

(5.4

)%

 

2.0

%

Domestic same-restaurant sales percentage change(d)

 

(0.6

)%

 

5.7

%

 

0.5

%

 

4.5

%

Average weekly domestic unit sales (in thousands)

 

$

48.4

 

 

$

47.6

 

 

$

49.0

 

 

$

47.6

 

                                 

IHOP

 

 

 

 

 

 

 

 

Effective Restaurants(a)

 

 

 

 

 

 

 

 

Franchise

 

1,656

 

 

1,627

 

 

1,656

 

 

1,623

 

Area license

 

155

 

 

163

 

 

156

 

 

163

 

Total

 

1,811

 

 

1,790

 

 

1,812

 

 

1,786

 

 

 

 

 

 

 

 

 

 

System-wide(b)

 

 

 

 

 

 

 

 

Sales percentage change(c)

 

3.2

%

 

3.1

%

 

2.8

%

 

3.5

%

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

 

2.0

%

 

0.7

%

 

1.7

%

 

0.8

%

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

 

1.9

%

 

0.7

%

 

1.5

%

 

0.9

%

 

 

 

 

 

 

 

 

 

Franchise(b)

 

 

 

 

 

 

 

 

Sales percentage change(c)

 

3.3

%

 

3.7

%

 

2.8

%

 

4.3

%

Domestic same-restaurant sales percentage change(d)

 

1.9

%

 

0.7

%

 

1.5

%

 

0.9

%

Average weekly unit sales (in thousands)

 

$

36.8

 

 

$

36.2

 

 

$

36.9

 

 

$

36.7

 

 

 

 

 

 

 

 

 

 

Area License (b)

 

 

 

 

 

 

 

 

Sales percentage change(c)

 

2.0

%

 

1.8

%

 

2.3

%

 

0.8

%

                                 

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

 

Three Months Ended

 

Six Months Ended

 

June 30,

 

June 30,

 

2019

 

2018

 

2019

 

2018

 

(In millions)

Reported sales

 

 

 

 

 

 

 

Applebee's domestic franchise restaurant sales

$

1,016.5

 

 

$

1,082.9

 

 

$

2,060.7

 

 

$

2,178.5

 

Applebee's company-operated restaurants

33.7

 

 

 

 

69.5

 

 

 

IHOP franchise restaurant sales

791.6

 

 

766.6

 

 

1,590.4

 

 

1,547.2

 

IHOP area license restaurant sales

71.8

 

 

70.4

 

 

146.1

 

 

142.8

 

Total

$

1,913.6

 

 

$

1,919.9

 

 

$

3,866.7

 

 

$

3,868.5

 

(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.

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,

 

2019

 

2018

 

2019

 

2018

Applebee's Restaurant Development Activity

 

 

 

 

 

Summary - beginning of period:

 

 

 

 

 

 

 

Franchise

1,761

 

 

1,912

 

 

1,768

 

 

1,936

 

Company restaurants

69

 

 

 

69

 

 

 

Beginning of period

1,830

 

 

1,912

 

 

1,837

 

 

1,936

 

Franchise restaurants opened:

 

 

 

 

 

 

 

Domestic

 

 

1

 

 

 

 

1

 

International

1

 

 

1

 

 

1

 

 

3

 

Total franchise restaurants opened

1

 

 

2

 

 

1

 

 

4

 

Franchise restaurants closed:

 

 

 

 

 

 

 

Domestic

(13

)

 

(30

)

 

(17

)

 

(52

)

International

(3

)

 

(1

)

 

(6

)

 

(5

)

Total franchise restaurants closed

(16

)

 

(31

)

 

(23

)

 

(57

)

Net franchise restaurant reduction

(15

)

 

(29

)

 

(22

)

 

(53

)

Summary - end of period:

 

 

 

 

 

 

 

Franchise

1,746

 

 

1,883

 

 

1,746

 

 

1,883

 

Company

69

 

 

 

 

69

 

 

 

Total Applebee's restaurants, end of period

1,815

 

 

1,883

 

 

1,815

 

 

1,883

 

Domestic

1,676

 

 

1,731

 

 

1,676

 

 

1,731

 

International

139

 

 

152

 

 

139

 

 

152

 

IHOP Restaurant Development Activity

 

 

 

 

 

 

 

Summary - beginning of period:

 

 

 

 

 

 

 

Franchise

1,663

 

 

1,627

 

 

1,669

 

 

1,622

 

Area license

159

 

 

164

 

 

162

 

 

164

 

Total IHOP restaurants, beginning of period

1,822

 

 

1,791

 

 

1,831

 

 

1,786

 

Franchise/area license restaurants opened:

 

 

 

 

 

 

 

Domestic franchise

9

 

 

9

 

 

15

 

 

22

 

Domestic area license

2

 

 

2

 

 

2

 

 

2

 

International franchise

2

 

 

5

 

 

2

 

 

8

 

Total franchise/area license restaurants opened

13

 

 

16

 

 

19

 

 

32

 

Franchise/area license restaurants closed:

 

 

 

 

 

 

 

Domestic franchise

(1

)

 

(1

)

 

(12

)

 

(6

)

Domestic area license

(2

)

 

(1

)

 

(5

)

 

(1

)

International franchise

(4

)

 

 

 

(5

)

 

(6

)

Total franchise/area license restaurants closed

(7

)

 

(2

)

 

(22

)

 

(13

)

Net franchise/area license restaurant (reduction) development

6

 

 

14

 

 

(3

)

 

19

 

Refranchised from Company restaurants

 

 

 

 

 

 

1

 

Franchise restaurants reacquired by the Company

 

 

 

 

 

 

(1

)

Net franchise/area license restaurant (reductions) additions

6

 

 

14

 

 

(3

)

 

19

 

Summary - end of period

 

 

 

 

 

 

 

Franchise

1,669

 

 

1,640

 

 

1,669

 

 

1,640

 

Area license

159

 

 

165

 

 

159

 

 

165

 

Total IHOP restaurants, end of period

1,828

 

 

1,805

 

 

1,828

 

 

1,805

 

Domestic

1,705

 

 

1,688

 

 

1,705

 

 

1,688

 

International

123

 

 

117

 

 

123

 

 

117

 

Media Contact:

Thien Ho
Executive Director, Communications
Dine Brands Global, Inc.
818-549-4238

View source version on businesswire.com: https://www.businesswire.com/news/home/20190731005296/en/

Source: Dine Brands Global, Inc.

###

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In Loving Memory Of Timothy Gardner (1987-2014)

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