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8-K
false 0000049754 0000049754 2020-04-29 2020-04-29

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 8-K

CURRENT REPORT

Pursuant to Section 13 or 15(d) of the

Securities Exchange Act of 1934

Date of report (Date of earliest event reported): April 29, 2020

 

Dine Brands Global, Inc.

(Exact Name of Registrant as Specified in Charter)

 

Delaware

 

001-15283

 

95-3038279

(State or other jurisdiction

of incorporation or

organization)

 

(Commission File

No.)

 

(I.R.S. Employer

Identification No.)

450 North Brand Boulevard , Glendale ,

California

 

91203-2306

(Address of principal executive offices)

 

(Zip Code)

(818) 240-6055

(Registrant’s telephone number, including area code)

 

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 April 29, 2020, Dine Brands Global, Inc., a Delaware corporation (the “Corporation”), issued a press release announcing its first quarter 2020 financial results. A copy of the press release is attached hereto as Exhibit 99.1, and is incorporated herein by reference

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

Item 7.01 Regulation FD

The press release referenced in Item 2.02 of this Current Report on Form  8-K  also includes information concerning the Corporation’s 2020 financial 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 April 29, 2020.

         
 

104

   

Cover Page Interactive Data File (embedded within the Inline XBRL document).

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: April 29, 2020

     

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

Susan Nelson

Vice President, Global Communications

and Public Affairs

Dine Brands Global, Inc.

818-637-4726

Dine Brands Global, Inc. Reports First Quarter 2020 Results

Comments on Strong Liquidity and Cash Position

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

“As we continue to face new challenges posed by the COVID-19 pandemic, I’d like to extend a heartfelt thank you to our family of team members and franchisees for their tireless dedication and resilience. Despite the tremendous adversity we’ve seen, and will continue to see, I could not be prouder of how our teams, franchisees and brands have come together to support one another and their communities. As we work to navigate this situation together, protecting our team members and our guests has remained our number one priority and guides every decision. We have enhanced procedures throughout our system to improve upon restaurant health and safety amid this pandemic, leveraging information from the experts, the Centers for Disease Control and Prevention and state and local governments, as well as our own guidelines to protect our people and the communities we serve as best as we can,” said Steve Joyce, chief executive officer of Dine Brands Global, Inc.

Mr. Joyce added, “The physical distancing measures, shelter-in-place orders and government mandates requiring restaurants to close dining rooms, while critical to flatten the curve, have made a significant impact on the operations of our business and that of the entire industry. As you’ll see, our operating results in the first quarter were affected by the meaningful decline in traffic in March. It’s clear that we are operating in a time of great uncertainty and we expect this trend to continue for the near term. Looking to the future, we are uniquely positioned with two of the industry’s most iconic brands, IHOP and Applebee’s, highly experienced franchisees and dedicated team members. In addition, we have very strong liquidity with approximately $395 million of cash, of which $345 million is unrestricted cash. Our ability to swiftly pivot to an off-premise business model, our responsive approach to our franchisees and our ability to adapt and serve our guests in these ever-changing times will continue to serve us well in this adverse environment. Over their storied histories, IHOP and Applebee’s have been steadfast partners to their communities and neighbors around the world and that will undoubtedly continue. We know no other way.”


Page 2 of 15

 

Cash Position    

Dine Brands has taken precautionary measures to increase the Company’s financial flexibility due to the unprecedented conditions caused by COVID-19. As previously disclosed on March 19, 2020, the Company has drawn down a total of $220 million from its revolving financing facility.

As of March 31, 2020, the Company had $395.1 million of cash, including restricted cash of $34.2 million and non-current restricted cash of $16.4 million. The Company believes that its asset-light business model and cash position will provide strong liquidity during the crisis.

The Company estimates its cash general and administrative expenses to be approximately $35 million per quarter. The Company has $16.4 million of quarterly interest payments on its Series 2019-1 Class A-2-I, Fixed Rate Senior Secured Notes and Series 2019-1 Class A-2-II, Fixed Rate Senior Secured Notes. These projections exclude gross lease exposure of approximately $1.3 million per quarter on franchised restaurants that are currently closed and being evaluated by the Company.

The Company has temporarily suspended its quarterly cash dividend due to the COVID-19 crisis. On April 16, 2020, the Company announced that it had terminated all outstanding orders for repurchases of its common stock in the open market.

Domestic System-Wide Comparable Same-Restaurant Sales Performance

First Quarter of 2020

 

   

Despite 10 consecutive weeks of positive comparable same-restaurant sales and 9 consecutive weeks of positive comparable traffic since the beginning of 2020, Applebee’s comparable same-restaurant sales decreased 10.6% for the first quarter of 2020.

 

   

IHOP’s comparable same-restaurant sales decreased 14.7% for the first quarter of 2020.

 

   

The decline in sales for both brands was primarily due to the impact of COVID-19 and mandated restrictions on restaurant operations at the Federal, state and local levels, which resulted in a meaningful decline in traffic.

Domestic Same-Restaurant Sales

 

     QTD through March 8, 2020   Q1 2020

Applebee’s

   3.2%   (10.6%)

IHOP

   (0.6%)   (14.7%)

 

Domestic Same-Restaurant Sales (Week Ending)       April Sales Are Preliminary
     WE 3/8   WE 3/15   WE 3/22   WE 3/29   WE 4/5   WE 4/12   WE 4/19   WE 4/26

Applebee’s

   1.9%   (15.8%)   (76.0%)   (80.6%)   (76.2%)   (76.5%)   (64.9%)   (64.4%)

IHOP

   (3.9%)   (25.4%)   (75.3%)   (84.6%)   (81.5%)   (79.4%)   (76.3%)   (75.4%)

Off-Premise Sales Growth Comparison

 

   

Off-premise sales at both Applebee’s and IHOP increased significantly as a result of local and state government mandates, which placed restrictions on dine-in service.


Page 3 of 15

 

Domestic Same-Restaurant Off-Premise Sales Growth

 

     Q1 2020   Q2 2020 QTD WE 4/26

Applebee’s

   12.5%   121.6%

IHOP

   15.7%   131.7%

Operating Update of Domestic Applebee’s and IHOP Restaurants

Applebee’s

As of March 31, 2020, 1,406 out of 1,657 domestic Applebee’s franchise restaurants were open, virtually all of which were open for only off-premise sales, comprised of take-out and delivery. Temporary closures accounted for 251 Applebee’s restaurants.

Off-premise sales accounted for 16.3% of sales mix for the first quarter of 2020, as compared to 13.0% of sales mix for the fourth quarter of 2019 and 13.0% of sales mix for the first quarter of 2019.

Delivery sales accounted for 4.8% of sales mix and take-out sales accounted for 11.5% of sales mix for the first quarter of 2020.

IHOP

As of March 31, 2020, 1,362 out of 1,709 domestic IHOP franchise and area license restaurants were open, of which approximately 1,158 were open only for off-premise sales, comprised of take-out and delivery. Temporary closures accounted for 347 IHOP restaurants.

Off-premise sales comprised 12.8% of sales mix in the first quarter of 2020, as compared to 10.1% of sales mix for the fourth quarter of 2019 and 9.5% of sales mix for the first quarter of 2019.

Delivery sales accounted for 3.7% of sales mix and take-out sales accounted for 5.9% of sales mix for the first quarter of 2020.

First Quarter of 2020 Summary

 

   

GAAP earnings per diluted share for the first quarter of 2020 were $1.31 compared to $1.73 for the first quarter of 2019.

 

   

Adjusted earnings per diluted share for first quarter of 2020 were $1.45 compared to $1.90 for the first quarter of 2019. (See “Non-GAAP Financial Measures” and reconciliation of GAAP earnings per diluted share to adjusted earnings per diluted share.)

 

   

IHOP’s reported system-wide sales for the first quarter of 2020 were $748.8 million compared to $873.1 million for the first quarter of 2019.

 

   

IHOP’s franchisees completed 28 remodels in the first quarter of 2020, bringing the total number of domestic restaurants remodeled to over 1,100 since the inception of the current program.

 

   

General and administrative expenses for the first quarter of 2020 declined 12.2% year-over-year to $37.6 million.

 

   

Net income for the first quarter of 2020 was $22.3 million compared to $31.6 million the first quarter of 2019.

 

   

Consolidated adjusted EBITDA for the first quarter of 2020 was $61.7 million. This compares to $74.7 million the first quarter of 2019. (See “Non-GAAP Financial Measures” and reconciliation of GAAP net income to consolidated adjusted EBITDA.)


Page 4 of 15

 

   

Cash flows from operating activities for the first quarter of 2020 were $29.6 million compared to $28.9 million for the first quarter of 2019.

 

   

Adjusted free cash flow for the first quarter of 2020 was $27.5 million, similar to the $27.7 million for the comparable period for 2019. (See “Non-GAAP Financial Measures” and reconciliation of the Company’s cash provided by operating activities to adjusted free cash flow.)

 

   

During the first quarter of 2020, the Company repurchased 459,899 shares of its common stock for a total cost of $26.5 million and paid quarterly cash dividends totaling $11.5 million.

 

   

GAAP net income available to common stockholders was $21.6 million, or earnings per diluted share of $1.31, for the first quarter of 2020. This compares to net income available to common stockholders of $30.5 million, or earnings per diluted share of $1.73, for the first quarter of 2019. The decrease in net income was primarily due to a decline in gross profit. This was partially offset by the continued decline in general and administrative expenses. The decrease in gross profit was primarily due to a significant decrease in guest traffic resulting from government measures undertaken to stem the spread of COVID-19.

 

   

Adjusted net income available to common stockholders was $23.9 million, or adjusted earnings per diluted share of $1.45, for the first quarter of 2020. This compares to adjusted net income available to common stockholders of $33.7 million, or adjusted earnings per diluted share of $1.90, for the first quarter of 2019. The decrease in adjusted net income was primarily due to lower gross profit for the reasons described above. These items were partially offset by fewer weighted average diluted shares outstanding and lower general and administrative expenses. (See “Non-GAAP Financial Measures” below.)

 

   

General and administrative expenses were $37.6 million for the first quarter of 2020 compared to $42.8 million for the first quarter of 2019. The improvement was mainly due to lower compensation expenses.

GAAP Effective Tax Rate

Our effective tax rate for the first quarter of 2020 was 23.2%, essentially flat compared to the effective tax rate of 23.1% for the first quarter of 2019.

Financial Performance Guidance for 2020 Withdrawn

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

First Quarter of 2020 Earnings Conference Call Details

Dine Brands will host a conference call to discuss its results on April 29, 2020 at 9:00 a.m. Pacific Time. To participate on the call, please dial (833) 528-0602 and enter the conference identification number 5548019. International callers, please dial (830) 221-9708 and enter the conference identification number 5548019.

A live webcast of the call will be available on the Company’s website, www.dinebrands.com , and may be accessed by visiting Events and Presentations under the site’s Investors section. Participants should allow approximately ten minutes prior to the call’s start time to visit the site and download any streaming media software needed to listen to the webcast. A telephonic replay of the call may be accessed from 12:00 p.m. Pacific Time on April 29, 2020 through 12:00 p.m. Pacific Time on May 6, 2020 by dialing (855) 859-2056 and entering the conference identification number 5548019. International callers, please dial (404) 537-3406 and enter the conference identification number 5548019. An online archive of the webcast also will be available on Events and Presentations under the Investors section of the Company’s website.


Page 5 of 15

 

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 over 3,600 restaurants combined in 17 countries and approximately 370 franchisees, Dine Brands is one of the largest full-service restaurant companies in the world. For more information on Dine Brands, visit the Company’s website located at www.dinebrands.com.

Forward-Looking Statements

Statements contained in this press release may constitute forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. You can identify these forward-looking statements by words such as “may,” “will,” “would,” “should,” “could,” “expect,” “anticipate,” “believe,” “estimate,” “intend,” “plan,” “goal” and other similar expressions. These statements involve known and unknown risks, uncertainties and other factors, which may cause actual results to be materially different from those expressed or implied in such statements. These factors include, but are not limited to: uncertainty regarding the duration and severity of the ongoing COVID-19 pandemic and its ultimate impact on the Company; the effectiveness of related containment measures; general economic conditions; our level of indebtedness; compliance with the terms of our securitized debt; our ability to refinance our current indebtedness or obtain additional financing; our dependence on information technology; potential cyber incidents; the implementation of restaurant development plans; our dependence on our franchisees; the concentration of our Applebee’s franchised restaurants in a limited number of franchisees; the financial health of our franchisees; our franchisees’ and other licensees’ compliance with our quality standards and trademark usage; general risks associated with the restaurant industry; potential harm to our brands’ reputation; possible future impairment charges; the effects of tax reform; trading volatility and fluctuations in the price of our stock; our ability to achieve the financial guidance we provide to investors; successful implementation of our business strategy; the availability of suitable locations for new restaurants; shortages or interruptions in the supply or delivery of products from third parties or availability of utilities; the management and forecasting of appropriate inventory levels; development and implementation of innovative marketing and use of social media; changing health or dietary preference of consumers; risks associated with doing business in international markets; the results of litigation and other legal proceedings; third-party claims with respect to intellectual property assets; our ability to attract and retain management and other key employees; compliance with federal, state and local governmental regulations; risks associated with our self-insurance; natural disasters, pandemics, epidemics, or other serious incidents; our success with development initiatives outside of our core business; the adequacy of our internal controls over financial reporting and future changes in accounting standards; and other factors discussed from time to time in the Corporation’s Annual and Quarterly Reports on Forms 10-K and 10-Q and in the Corporation’s other filings with the Securities and Exchange Commission. The forward-looking statements contained in this press release are made as of the date hereof and the Corporation does not intend to, nor does it assume any obligation to, update or supplement any forward-looking statements after the date hereof to reflect actual results or future events or circumstances.

Non-GAAP Financial Measures

This press release includes references to the Company’s non-GAAP financial measure “adjusted net income available to common stockholders”, “adjusted earnings per diluted share (Adjusted EPS)”, “Adjusted EBITDA” and “Adjusted free cash flow.” Adjusted EPS is computed for a given period by deducting from net income or loss available to common stockholders for such period the effect of any closure and impairment charges, any gain or loss related to debt extinguishment, any intangible asset amortization, any non-cash interest expense, any gain or loss related to the disposition of assets, and other items deemed not reflective of current operations. This is presented on an aggregate basis and a per share (diluted) basis. Adjusted EBITDA is computed for a given period by deducting from net income


Page 6 of 15

 

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.


Page 7 of 15

 

Dine Brands Global, Inc. and Subsidiaries

Consolidated Statements of Comprehensive Income

(In thousands, except per share amounts)

(Unaudited)

 

     Three Months Ended
     March 31,
     2020   2019

Revenues:

    

Franchise revenues:

    

Royalties, franchise fees and other

   $ 83,314     $ 96,296  

Advertising revenue

     61,723       72,630  
  

 

 

 

 

 

 

 

Total franchise revenues

     145,037       168,926  

Company restaurant sales

     31,300       35,735  

Rental revenues

     29,009       30,711  

Financing revenues

     1,538       1,810  
  

 

 

 

 

 

 

 

Total revenues

     206,884       237,182  
  

 

 

 

 

 

 

 

Cost of revenues:

    

Franchise expenses:

    

Advertising expenses

     61,723       72,630  

Bad debt expense (credit)

     518       (467

Other franchise expenses

     7,209       8,140  
  

 

 

 

 

 

 

 

Total franchise expenses

     69,450       80,303  

Company restaurant expenses

     30,332       31,538  

Rental expenses:

    

Interest expense from finance leases

     1,210       1,529  

Other rental expenses

     21,323       21,095  
  

 

 

 

 

 

 

 

Total rental expenses

     22,533       22,624  

Financing expenses

     142       146  
  

 

 

 

 

 

 

 

Total cost of revenues

             122,457               134,611  
  

 

 

 

 

 

 

 

Gross profit

     84,427       102,571  

General and administrative expenses

     37,608       42,819  

Interest expense, net

     15,172       15,393  

Amortization of intangible assets

     2,826       2,924  

Closure and impairment (credit) charges

     (12     194  

(Gain) loss on disposition of assets

     (233     109  
  

 

 

 

 

 

 

 

Income before income tax provision

     29,066       41,132  

Income tax provision

     (6,738     (9,489
  

 

 

 

 

 

 

 

Net income

   $ 22,328     $ 31,643  
  

 

 

 

 

 

 

 

Net income available to common stockholders:

    

Net income

   $ 22,328     $ 31,643  

Less: Net income allocated to unvested participating restricted stock

     (748     (1,111
  

 

 

 

 

 

 

 

Net income available to common stockholders

   $ 21,580     $ 30,532  
  

 

 

 

 

 

 

 

Net income available to common stockholders per share:

    

Basic

   $ 1.33     $ 1.76  
  

 

 

 

 

 

 

 

Diluted

   $ 1.31     $ 1.73  
  

 

 

 

 

 

 

 

Weighted average shares outstanding:

    

Basic

     16,263       17,343  
  

 

 

 

 

 

 

 

Diluted

     16,470       17,690  
  

 

 

 

 

 

 

 

Dividends declared per common share

   $ 0.76     $ 0.69  
  

 

 

 

 

 

 

 

Dividends paid per common share

   $ 0.69     $ 0.63  
  

 

 

 

 

 

 

 


Page 8 of 15

 

Dine Brands Global, Inc. and Subsidiaries

Consolidated Balance Sheets

(In thousands, except share and per share amounts)

 

     March 31, 2020   December 31, 2019
Assets      (Unaudited)    

Current assets:

    

Cash and cash equivalents

   $ 344,560     $ 116,043  

Receivables, gross

     85,321       140,007  

Less: allowance for credit losses

     (4,906     (3,138
  

 

 

 

 

 

 

 

Receivables, net

     80,415       136,869  

Restricted cash

     34,159       40,732  

Prepaid gift card costs

     27,563       36,077  

Prepaid income taxes

     7,039       13,290  

Other current assets

     6,254       3,906  
  

 

 

 

 

 

 

 

Total current assets

     499,990       346,917  

Other intangible assets, net

     572,449       575,103  

Operating lease right-of-use asset

     364,875       366,931  

Goodwill

     343,862       343,862  

Property and equipment, net

     211,835       216,420  

Long-term receivables, gross

     90,123       94,154  

Less: allowance for credit losses

     (8,375     (8,155
  

 

 

 

 

 

 

 

Long-term receivables, net

     81,748       85,999  

Deferred rent receivable

     68,759       70,308  

Non-current restricted cash

     16,400       15,700  

Other non-current assets, net

     25,552       28,271  
  

 

 

 

 

 

 

 

Total assets

   $ 2,185,470     $ 2,049,511  
  

 

 

 

 

 

 

 

Liabilities and Stockholders’ Deficit

    

Current liabilities:

    

Accounts payable

     25,389       40,925  

Gift card liability

     120,187       159,019  

Current maturities of operating lease obligations

     72,508       72,815  

Current maturities of finance lease and financing obligations

     13,502       13,669  

Accrued employee compensation and benefits

     11,714       23,904  

Dividends payable

     12,739       11,702  

Deferred franchise revenue, short-term

     9,567       10,086  

Other accrued expenses

     24,972       25,792  
  

 

 

 

 

 

 

 

Total current liabilities

     290,578       357,912  

Long-term debt

     1,506,203       1,288,248  

Operating lease obligations, less current maturities

     355,160       359,025  

Finance lease obligations, less current maturities

     74,498       77,393  

Financing obligations, less current maturities

     35,944       37,682  

Deferred income taxes, net

     87,851       98,499  

Deferred franchise revenue, long-term

     56,046       56,944  

Other non-current liabilities

     15,567       15,582  
  

 

 

 

 

 

 

 

Total liabilities

     2,421,847       2,291,285  
  

 

 

 

 

 

 

 

Commitments and contingencies

    

Stockholders’ deficit:

    

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

            

Common stock, $0.01 par value; shares: 40,000,000 authorized; March 31, 2020 - 24,917,498 issued, 16,421,273 outstanding; December 31, 2019 - 24,925,447 issued, 16,521,921 outstanding

     249       249  

Additional paid-in-capital

                     252,443                       246,192  

Retained earnings

     70,769       61,653  

Accumulated other comprehensive loss

     (58     (58

Treasury stock, at cost; shares: March 31, 2020 - 8,496,225; December 31, 2019 - 8,403,526

     (559,780     (549,810
  

 

 

 

 

 

 

 

Total stockholders’ deficit

     (236,377     (241,774
  

 

 

 

 

 

 

 

Total liabilities and stockholders’ deficit

   $ 2,185,470     $ 2,049,511  
  

 

 

 

 

 

 

 


Page 9 of 15

 

Dine Brands Global, Inc. and Subsidiaries

Consolidated Statements of Cash Flows

(In thousands)

 

     Three Months Ended
     March 31,
     2020   2019

Cash flows from operating activities:

    

Net income

   $ 22,328     $ 31,643  

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

    

Depreciation and amortization

                 10,641                   10,179  

Non-cash stock-based compensation expense

     4,038       4,107  

Non-cash interest expense

     655       1,118  

Closure and impairment (credit) charges

     (12     194  

Deferred income taxes

     (10,491     (1,149

Deferred revenue

     (1,417     (1,877

(Gain) loss on disposition of assets

     (227     109  

Other

     (1,293     (2,099

Changes in operating assets and liabilities:

    

Accounts receivable, net

     12,077       (3,210

Current income tax receivables and payables

     6,443       (1,399

Gift card receivables and payables

     11,693       (890

Other current assets

     (2,347     (2,570

Accounts payable

     (12,748     1,826  

Accrued employee compensation and benefits

     (12,190     (12,141

Other current liabilities

     2,495       5,088  
  

 

 

 

 

 

 

 

Cash flows provided by operating activities

     29,645       28,929  
  

 

 

 

 

 

 

 

Cash flows from investing activities:

    

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

     5,544       5,260  

Net additions to property and equipment

     (5,084     (4,717

Proceeds from sale of property and equipment

     6       400  

Additions to long-term receivables

     (1,511     (395

Other

     (195     (100
  

 

 

 

 

 

 

 

Cash flows (used in) provided by investing activities

     (1,240     448  
  

 

 

 

 

 

 

 

Cash flows from financing activities:

    

Borrowing from revolving credit facility

     220,000        

Repayment of revolving credit facilities

           (25,000

Dividends paid on common stock

     (11,451     (11,153

Repurchase of common stock

     (29,853     (10,802

Principal payments on finance lease obligations

     (2,981     (3,466

Proceeds from stock options exercised

     20,524       6,768  

Tax payments for restricted stock upon vesting

     (2,000     (1,817
  

 

 

 

 

 

 

 

Cash flows provided by (used in) financing activities

     194,239       (45,470
  

 

 

 

 

 

 

 

Net change in cash, cash equivalents and restricted cash

     222,644       (16,093

Cash, cash equivalents and restricted cash at beginning of period

     172,475       200,379  
  

 

 

 

 

 

 

 

Cash, cash equivalents and restricted cash at end of period

   $ 395,119     $ 184,286  
  

 

 

 

 

 

 

 


Page 10 of 15

 

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: Amortization of intangible assets; non-cash interest expense; closure and impairment charges; debt; nonrecurring restaurant costs; gain or loss on disposition of assets; and the combined tax effect of the preceding adjustments, as well as related per share data:

 

     Three Months Ended
     March 31,
     2020   2019

Net income available to common stockholders, as reported

   $ 21,580     $ 30,532  

Amortization of intangible assets

     2,826       2,924  

Non-cash interest expense

     655       1,118  

Closure and impairment (credit) charges

     (12     194  

Nonrecurring restaurant costs

           61  

(Gain) loss on disposition of assets

     (233     109  

Net income tax provision for above adjustments

     (809     (1,146

Net income allocated to unvested participating restricted stock

     (83     (112
  

 

 

 

 

 

 

 

Net income available to common stockholders, as adjusted

   $ 23,924     $ 33,680  
  

 

 

 

 

 

 

 

Diluted net income available to common stockholders per share:

    

Net income available to common stockholders, as reported

   $ 1.31     $ 1.73  

Amortization of intangible assets

     0.13       0.12  

Non-cash interest expense

     0.03       0.05  

Closure and impairment (credit) charges

     (0.00     0.01  

Nonrecurring restaurant costs

           0.00  

(Gain) loss on disposition of assets

     (0.01      

Net income allocated to unvested participating restricted stock

     (0.01     (0.01

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

   $ 1.45     $ 1.90  
  

 

 

 

 

 

 

 

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

   $         23,924     $         33,680  

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

     5       15  
  

 

 

 

 

 

 

 

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

   $ 23,929     $ 33,695  
  

 

 

 

 

 

 

 

Denominator for basic EPS-weighted-average shares

     16,263       17,343  

Dilutive effect of stock options

     207       347  
  

 

 

 

 

 

 

 

Denominator for diluted EPS-weighted-average shares

     16,470       17,690  
  

 

 

 

 

 

 

 


Page 11 of 15

 

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.

 

     Three Months Ended
     March 31,
     2020   2019
     (In millions)

Cash flows provided by operating activities

   $             29.6     $             28.9  

Receipts from notes and equipment contracts receivable

     3.0       3.5  

Additions to property and equipment

     (5.1     (4.7
  

 

 

 

 

 

 

 

Adjusted free cash flow

     27.5       27.7  

Dividends paid on common stock

     (11.5     (11.2

Repurchase of Dine Brands Global common stock

     (29.9     (10.8
  

 

 

 

 

 

 

 

   $ (13.9   $ 5.7  
  

 

 

 

 

 

 

 


Page 12 of 15

 

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 interest charges, income tax provision or benefit, depreciation and amortization, non-cash stock-based compensation, closure and impairment charges, gain or loss on disposition of assets, other non-income based taxes and other items deemed not reflective of current operations. Management may use certain non-GAAP measures along with the corresponding U. S. GAAP measures to evaluate the performance of the company and to make certain business decisions.

 

     Three Months Ended  
     March 31,  
     2020      2019  

Net income, as reported

   $ 22,328       $ 31,643   

Interest charges on finance leases

     1,723         2,083   

All other interest charges

           16,242               16,642   

Income tax provision

     6,738         9,489   

Depreciation and amortization

     10,641         10,179   

Non-cash stock-based compensation

     4,037         4,107   

Closure and impairment (credit) charges

     (12)        194   

(Gain) loss on disposition of assets

     (233)        109   

Other taxes

     219         203   
  

 

 

    

 

 

 

Adjusted EBITDA

   $ 61,683       $ 74,649   
  

 

 

    

 

 

 


Page 13 of 15

 

Dine Brands Global, Inc. and Subsidiaries

Restaurant Data

(Unaudited)

The following table sets forth, for the three months ended March 31, 2020 and 2019, the number of “Effective Restaurants” in the Applebee’s and IHOP systems and information regarding the percentage change in sales at those restaurants compared to the same periods in the prior year and, as such, the percentage change in sales at Effective Restaurants is based on non-GAAP sales data. Sales at restaurants that are owned by franchisees and area licensees are not attributable to the Company. However, we believe that presentation of this information is useful in analyzing our revenues because franchisees and area licensees pay us royalties and advertising fees that are generally based on a percentage of their sales, and, where applicable, rental payments under leases that partially may be based on a percentage of their sales. Management also uses this information to make decisions about future plans for the development of additional restaurants as well as evaluation of current operations.

 

     Three Months Ended
     March 31,
     2020   2019

Applebee’s

    
Effective Restaurants (a)         

Franchise

             1,697               1,762  

Company

     69       69  
  

 

 

 

 

 

 

 

Total

     1,766       1,831  
  

 

 

 

 

 

 

 

System-wide (b)

    

Domestic sales percentage change (c)

     (12.1 )%      (1.4)%  

Domestic same-restaurant sales percentage change (d)

     (10.6 )%      1.8 %  

Franchise (b)

    

Domestic sales percentage change (c) (e)

     (12.1 )%      (4.7)%  

Domestic same-restaurant sales percentage change (d)

     (10.6 )%      1.6 %  

Average weekly domestic unit sales (in thousands)

   $ 44.6     $ 49.6  
IHOP         
Effective Restaurants (a)         

Franchise

     1,660       1,657  

Area license

     161       156  
  

 

 

 

 

 

 

 

Total

     1,821       1,813  
  

 

 

 

 

 

 

 

System-wide (b)

    

Sales percentage change (c)

     (14.2 )%      2.4 

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

     (14.7 )%      1.2 

Franchise (b)

    

Sales percentage change (c)

     (14.3 )%      2.3 

Domestic same-restaurant sales percentage change (d)

     (14.7 )%      1.1 

Average weekly unit sales (in thousands)

   $ 31.7     $ 37.1  

Area License (b)

    

Sales percentage change (c)

     (13.8 )%      2.7 


Page 14 of 15

 

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 months ended March 31, 2020 and 2019 and sales by company-operated restaurants were as follows:

 

     Three Months Ended  
     March 31,  
     2020      2019  
     (In millions)  

  Reported sales

     

Applebee’s domestic franchise restaurant sales

   $         918.2       $         1,044.2   

Applebee’s company-operated restaurants

     31.3         35.7   

IHOP franchise restaurant sales

     684.8         798.8   

IHOP area license restaurant sales

     64.0         74.3   
  

 

 

    

 

 

 

Total

   $ 1,698.3       $ 1,953.0   
  

 

 

    

 

 

 

 

(c)

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

 

(d)

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

 

(e)

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


Page 15 of 15

 

Dine Brands Global, Inc. and Subsidiaries

Restaurant Data

(Unaudited)

The following table summarizes our restaurant development activity:

 

     Three Months Ended
     March 31,
     2020   2019

Applebee’s Restaurant Development Activity

    

Summary - beginning of period:

    

Franchise

                 1,718                   1,768  

Company restaurants

     69       69  
  

 

 

 

 

 

 

 

Total Applebee’s restaurants, beginning of period

     1,787       1,837  
  

 

 

 

 

 

 

 

Total franchise restaurants opened

            
  

 

 

 

 

 

 

 

Franchise restaurants permanently closed:

    

Domestic

     (8     (4

International

     (4     (3
  

 

 

 

 

 

 

 

Total franchise restaurants permanently closed

     (12     (7
  

 

 

 

 

 

 

 

Net franchise restaurant reduction

     (12     (7
  

 

 

 

 

 

 

 

Summary - end of period:

    

Franchise

     1,706       1,761  

Company

     69       69  
  

 

 

 

 

 

 

 

Total Applebee’s restaurants, end of period

     1,775       1,830  
  

 

 

 

 

 

 

 

Domestic

     1,657       1,689  

International

     118       141  
IHOP Restaurant Development Activity         
Summary - beginning of period:         

Franchise

     1,680       1,669  

Area license

     161       162  
  

 

 

 

 

 

 

 

Total IHOP restaurants, beginning of period

     1,841       1,831  
  

 

 

 

 

 

 

 

Franchise/area license restaurants opened:

    

Domestic franchise

     6       6  

Domestic area license

     1        

International franchise

     2        
  

 

 

 

 

 

 

 

Total franchise/area license restaurants opened

     9       6  
  

 

 

 

 

 

 

 

Franchise/area license restaurants permanently closed:

    

Domestic franchise

     (6     (11

Domestic area license

     (2     (3

International franchise

     (2     (1
  

 

 

 

 

 

 

 

Total franchise/area license restaurants permanently closed

     (10     (15
  

 

 

 

 

 

 

 

Net franchise/area license restaurant reduction

     (1     (9
  

 

 

 

 

 

 

 

Summary - end of period

    

Franchise

     1,680       1,663  

Area license

     160       159  
  

 

 

 

 

 

 

 

Total IHOP restaurants, end of period

     1,840       1,822  
  

 

 

 

 

 

 

 

Domestic

     1,709       1,697  

International

     131       125