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8-K

 

 

 

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 31, 2019

 

 

Dine Brands Global, Inc.

(Exact Name of Registrant as Specified in Charter)

 

 

 

Delaware   001-15283   95-3038279                

(State or other jurisdiction
of incorporation or organization)

  (Commission File
No.)
  (I.R.S. Employer                 Identification No.)                
                450 North Brand Boulevard, Glendale, California     91203-2306                            

                     (Address of principal executive offices)

    (Zip Code)                            

(818) 240-6055

(Registrant’s telephone number, including area code)

 

 

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the Registrant under any of the following provisions (see General Instruction A.2. below):

 

☐    

Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

 

☐    

Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

 

☐    

Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

 

☐    

Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

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

 

Title of each class

 

Trading symbol(s)

 

Name of each exchange on which registered

Common Stock, $.01 Par Value   DIN   New York Stock Exchange

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b of this chapter).

Emerging growth company ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

 

 

 


Item 2.02 Results of Operations and Financial Condition

On July 31, 2019, Dine Brands Global, Inc., a Delaware corporation (the “Corporation”), issued a press release announcing its second quarter 2019 financial results. A copy of the press release is attached hereto as Exhibit 99.1, and is incorporated herein by reference.

The information contained in this Item 2.02, including the related information set forth in the press release attached hereto as Exhibit 99.1 and incorporated by reference herein, is being “furnished” and shall not be deemed “filed” for the purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), or otherwise. The information in this Item 2.02 shall not be incorporated by reference into any registration statement or other document pursuant to the Securities Act of 1933, as amended, or into any filing or other document pursuant to the Exchange Act, except as otherwise expressly stated in any such filing.

Item 7.01 Regulation FD.

The press release referenced in Item 2.02 of this Current Report on Form 8-K also includes information concerning the Corporation’s 2019 financial outlook. A copy of the press release is attached hereto as Exhibit 99.1 and is incorporated herein by reference.

The information contained in this Item 7.01, including the related information set forth in the press release attached hereto as Exhibit 99.1 and incorporated by reference herein, is being “furnished” and shall not be deemed “filed” for the purposes of Section 18 of the Exchange Act or otherwise. The information in this Item 7.01 shall not be incorporated by reference into any registration statement or other document pursuant to the Securities Act of 1933, as amended, or into any filing or other document pursuant to the Exchange Act, except as otherwise expressly stated in any such filing.

Item 9.01. Financial Statements and Exhibits.

(d) Exhibits.

 

Exhibit
Number        

  

Description

99.1

   Press Release issued by the Corporation on July 31, 2019.

 

2


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 31, 2019     DINE BRANDS GLOBAL, INC.
    By:      

/s/ Thomas H. Song                                                         

     

Thomas H. Song

      Chief Financial Officer

 

3

EX-99.1

Exhibit 99.1

 

LOGO

 

 

   News Release

Investor Contact

Ken Diptee

Executive Director, Investor Relations

Dine Brands Global, Inc.

818-637-3632

Media Contact

Thien Ho

Executive Director, Communications

Dine Brands Global, Inc.

818-549-4238

Dine Brands Global, Inc. Reports 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., July 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.


Page 2 of 16

 

 

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 million compared 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

 

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

Second Quarter

           

First Six Months

 
      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.


Page 3 of 16

 

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 $20.7 million, 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 $51.2 million, 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.)


Page 4 of 16

 

   

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 to range 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.


Page 5 of 16

 

   

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.


Page 6 of 16

 

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


Page 7 of 16

 

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


Page 8 of 16

 

Dine Brands Global, Inc. and Subsidiaries

Consolidated Statements of Comprehensive Income

(In thousands, except per share amounts)

(Unaudited)

 

             Three Months Ended        
June 30,
             Six Months Ended        
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   
  

 

 

    

 

 

    

 

 

    

 

 

 


Page 9 of 16

 

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   
  

 

 

   

 

 

 


Page 10 of 16

 

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   
  

 

 

    

 

 

 


Page 11 of 16

 

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
June 30,
     Six Months Ended
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                30          
  

 

 

    

 

 

    

 

 

    

 

 

 

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


Page 12 of 16

 

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)  
  

 

 

   

 

 

 


Page 13 of 16

 

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
June 30,
     Six Months Ended
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   
  

 

 

    

 

 

    

 

 

    

 

 

 


Page 14 of 16

 

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


Page 15 of 16

 

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.


Page 16 of 16

 

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