Dine Brands Global, Inc. Reports Third Quarter 2020 Results

October 28, 2020 at 8:00 AM EDT

Improving Sales Trends and Off-Premise Growth Continue

Liquidity and Cash Position Remain Strong

97% of Domestic Restaurants Open

GLENDALE, Calif.--(BUSINESS WIRE)--Oct. 28, 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 third quarter of 2020.

“We continue to execute on our strategy to stabilize our business and restore growth, which resulted in both brands delivering continued improvements during this challenging time for our industry. I want to thank our franchisees and team members who have been working tirelessly this year. They have adapted to the significant challenges of 2020 with remarkable agility, bringing our delicious, affordable food to guests in a low-contact and safe manner,” said Steve Joyce, Chief Executive Officer of Dine Brands Global, Inc.

Mr. Joyce added, “We believe that both Applebee’s and IHOP are well-positioned to build on the impressive expansion of our off-premise growth, return restaurant sales to pre-pandemic levels and resume our solid history of growth. As state and local governments began to ease restrictions on dining room service, our off-premise business at each brand still drove robust sales. While consumer behavior has shifted due to the pandemic, we are committed to providing our guests with a safe environment to dine and look forward to welcoming them back.”

Domestic System-Wide Comparable Same-Restaurant Sales Performance

 
Domestic Same-Restaurant Sales Preliminary Sales
Q3 2020 Q4 QTD through WE 10/25
Applebee's

(13.3%)

(1.9%)

 
IHOP

(30.2%)

(24.0%)

 
Domestic Same-Restaurant Sales (Week Ending)
WE 7/5 WE 7/12 WE 7/19 WE 7/26 WE 8/2 WE 8/9 WE 8/16 WE 8/23 WE 8/30 WE 9/6 WE 9/13 WE 9/20 WE 9/27
Applebee's

(22.3%)

(17.0%)

(18.9%)

(15.6%)

(17.2%)

(15.2%)

(14.7%)

(13.4%)

(10.7%)

(10.6%)

(9.3%)

(6.9%)

0.4%

 
IHOP

(40.4%)

(35.7%)

(39.1%)

(35.0%)

(33.0%)

(31.1%)

(29.9%)

(29.0%)

(28.5%)

(27.0%)

(12.2%)

(23.9%)

(23.5%)

 
 
 
Domestic Same-Restaurant Sales (Week Ending)
October Sales Are Preliminary
WE 10/4 WE 10/11 WE 10/18 WE 10/25
Applebee's

(1.6%)

(1.4%)

(1.9%)

(2.5%)

 
IHOP

(24.3%)

(26.3%)

(23.7%)

(21.7%)

Third Quarter of 2020

  • Applebee’s comparable same-restaurant sales improved 10 out of 13 weeks through the week ended September 27, 2020 from a decline of 22.3% to an increase of 0.4%, representing a net increase of 22.7 percentage points during this period.
  • IHOP’s comparable same-restaurant sales improved 10 out of 13 weeks through the week ended September 27, 2020 from a decline of 40.4% to a decline of 23.5%, representing an increase of 16.9 percentage points during this period.
  • Comparable same-restaurant sales for the third quarter of 2020 declined at both Applebee’s and IHOP primarily due to the impact of COVID-19 and related governmental restrictions on in-restaurant dining operations at the federal, state and local levels, which resulted in a meaningful decline in traffic for the third quarter of 2020.
  • As of September 30, 2020, 3,191 of our domestic restaurants, or 97%, were open for either dine-in service or off-premise service comprised of take-out and delivery. This compares to 95% as of June 30, 2020.

Off-Premise and Dine-In Sales Growth Comparison

  • Off-premise sales at both Applebee’s and IHOP increased significantly primarily as a result of COVID-19 and related governmental mandates, which placed restrictions on dine-in service, and a shift in consumer behavior.
  • Applebee’s off-premise sales accounted for 34.6% of sales mix for the third quarter of 2020, as compared to 60.5% of sales mix for the second quarter of 2020.
  • Applebee’s delivery sales accounted for 11.5% of sales mix and take-out sales accounted for 23.1% of sales mix for the third quarter of 2020.
  • Applebee’s online sales accounted for 12.2% of total sales for the third quarter of 2020. This compares to 22.9% of total sales for the second quarter of 2020.
  • IHOP’s off-premise sales accounted for 32.4% of sales mix for the third quarter of 2020, as compared to 53.6% of sales mix for the second quarter of 2020.
  • IHOP’s delivery sales accounted for 15.7% of sales mix and take-out sales accounted for 18.3% of sales mix for the third quarter of 2020.
  • IHOP’s online sales accounted for 22.0% of total sales for the third quarter of 2020. This compares to 34.7% of total sales for the second quarter of 2020.

Third Quarter of 2020 Summary

  • GAAP earnings per diluted share of $0.60 for the third quarter of 2020 compared to earnings per diluted share of $1.36 for the third quarter of 2019. This variance was primarily due to a decline in gross profit as result of a significant decrease in customer traffic due to governmental measures to stem the spread of the coronavirus and related changes in consumer behavior.
  • Adjusted earnings per diluted share of $0.80 for the third quarter of 2020 compared to adjusted earnings per diluted share of $1.55 for the third quarter of 2019. (See “Non-GAAP Financial Measures” and reconciliation of GAAP earnings per diluted share to adjusted earnings per diluted share.)
  • General and administrative expenses for the third quarter of 2020 declined 5.3% year-over-year to $36.9 million from $38.9 million for the third quarter of 2019. The improvement was mainly due to a reduction in travel expenses.
  • Net income of $10.0 million for the third quarter of 2020 compared to net income of $23.9 million for the third quarter of 2019.
  • Consolidated adjusted EBITDA for the third quarter of 2020 was $42.7 million. This compares to $63.4 million for the third quarter of 2019. (See “Non-GAAP Financial Measures” and reconciliation of GAAP net income to consolidated adjusted EBITDA.)
  • Cash flows from operating activities for the first nine months of 2020 was $36.7 million. This compares to cash flows from operating activities of $105.6 million for the first nine months of 2019. The decrease mainly was due to a decline in gross profit discussed above and payment deferrals we offered to our franchisees primarily for the months of March 2020 and April 2020.
  • The Company had adjusted free cash flow of $35.6 million for the first nine months of 2020. This compares to adjusted free cash flow of $100.8 million for the first nine months of 2019.(See “Non-GAAP Financial Measures” and reconciliation of the Company’s cash provided by operating activities to adjusted free cash flow.)
  • GAAP net income available to common stockholders was $9.7 million, or earnings per diluted share of $0.60, for the third quarter of 2020. This compares to net income available to common stockholders of $23.1 million, or earnings per diluted share of $1.36, for the third quarter of 2019. The decrease in net income was primarily due to the decline in gross profit discussed above. This item was partially offset by a decline in general and administrative expenses.
  • Adjusted net income available to common stockholders was $13.0 million, or adjusted earnings per diluted share of $0.80, for the third quarter of 2020. This compares to adjusted net income available to common stockholders of $26.4 million, or adjusted earnings per diluted share of $1.55, for the third quarter of 2019. The decrease in adjusted net income was primarily due to lower gross profit for the reason described above. This item was partially offset by fewer weighted average diluted shares outstanding and lower general and administrative expenses. (See “Non-GAAP Financial Measures” below.)

Cash Position

Dine Brands has taken precautionary measures to increase the Company’s financial flexibility due to the conditions caused by COVID-19. As previously disclosed on March 19, 2020, the Company drew $220 million from its revolving financing facility, all of which remains drawn as of September 30, 2020. As of September 30, 2020, $2.8 million was pledged against the revolving financing facility for outstanding letters of credit.

As of September 30, 2020, the Company had $389.6 million of total cash, including restricted cash of $80.3 million. When excluding the $220 million the Company drew from its revolving financing facility, the Company had total cash of $169.6 million as of September 30, 2020, slightly below total cash of $172.5 million as of December 31, 2019. The Company believes that its asset-light business model and cash position will continue to provide strong liquidity during the pandemic.

The Company makes $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 (the “Class A-2-I Notes”, together with the “Class A-2-II Notes”, the “Class A-2 Notes”). In addition, the Company anticipates making a principal payment of $3.25 million on its Class A-2 Notes beginning in the fourth quarter of 2020. The quarterly principal payments under the Class A-2 Notes may be voluntarily suspended when the leverage ratio for the Company and its subsidiaries is less than or equal to 5.25x. As of September 30, 2020, the Company’s leverage ratio was 6.67x.

The Company voluntarily doubled its interest reserve on its Class A-2 Notes during the second quarter of 2020 to $32.8 million to enhance its securitization structure. This increased restricted cash by $16.4 million.

GAAP Effective Tax Rate

Our effective tax rate for the third quarter of 2020 was a 9.5% tax benefit compared to a 24.6% expense for the third quarter of 2019. The variance is primarily due to the release of unrecognized tax benefits incurred in the third quarter of 2020.

Financial Performance Guidance for the Fourth Quarter of 2020

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. While significant uncertainty remains, the Company is providing the following guidance for the fourth quarter of 2020 and assumes no obligation to update or supplement this information.

  • Barring any unforeseen circumstances, the Company expects the trajectory for domestic system-wide comparable same-restaurant sales for both Applebee’s and IHOP to gradually improve.
  • Domestic development activity by Applebee’s franchisees is expected to result in net closures of approximately 15 restaurants in the fourth quarter of 2020.
  • Given the impact of the pandemic on individual restaurant-level economics, the Company is evaluating the viability of greatly underperforming domestic IHOP restaurants. Based on the Company’s current assessment, it expects the evaluation could result in the net closure of less than 100 restaurants over the next 6 months.
  • General and administrative expenses for the fourth quarter of 2020 are expected to be approximately $45 million, including non-cash stock-based compensation expense and depreciation totaling approximately $7 million. This projection includes approximately $1 million of general and administrative expenses related to the company restaurants.

Applebee’s Reopening Update

As of September 30, 2020, out of 1,614 domestic Applebee’s franchise and company-operated restaurants, 1,595 were open for in-restaurant dining, three were open for only off-premise sales, comprised of take-out and delivery, and 16 were temporarily closed.

IHOP Reopening Update

As of September 30, 2020, out of 1,683 domestic IHOP franchise and area license restaurants, 1,425 were open for in-restaurant dining, 167 were open only for off-premise sales, comprised of take-out and delivery, and 91 were temporarily closed.

Third Quarter of 2020 Earnings Conference Call Details

Dine Brands will host a conference call to discuss its results on October 28, 2020 at 9:00 a.m. Pacific Time.

To participate on the call, please dial (833) 528-0602 and enter the conference identification number 9698674. International callers, please dial (830) 221-9708 and enter the conference identification number 9698674.

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 12:00 p.m. Pacific Time on October 28, 2020 through 11:00 a.m. Pacific Time on November 4, 2020 by dialing (855) 859-2056 and entering the conference identification number 9698674. International callers, please dial (404) 537-3406 and enter the conference identification number 9698674. An online archive of the webcast will also be available on Events and Presentations under the Investors section of the Company’s website.

About Dine Brands Global, Inc.

Based in Glendale, California, Dine Brands Global, Inc. (NYSE: DIN), through its subsidiaries, franchises restaurants under both the Applebee's Neighborhood Grill + Bar and IHOP brands. With approximately 3,600 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 or loss for such period the effect of any closure and impairment charges, any interest charges, any income tax provision or benefit, any non-cash stock-based compensation, any depreciation and amortization, any gain or loss related to the disposition of assets and other items deemed not reflective of current operations. “Adjusted free cash flow” for a given period is defined as cash provided by operating activities, plus receipts from notes and equipment contracts receivable, less capital expenditures. Management may use certain of these non-GAAP financial measures along with the corresponding U.S. GAAP measures to evaluate the performance of the business and to make certain business decisions. Management uses adjusted free cash flow in its periodic assessments of, among other things, the amount of cash dividends per share of common stock and repurchases of common stock and we believe it is important for investors to have the same measure used by management for that purpose. Adjusted free cash flow does not represent residual cash flow available for discretionary purposes. Additionally, adjusted EPS is one of the metrics used in determining payouts under the Company’s annual cash incentive plan. Management believes that these non-GAAP financial measures provide additional meaningful information that should be considered when assessing the business and the Company’s performance compared to prior periods and the marketplace. Adjusted EPS and adjusted free cash flow are supplemental non-GAAP financial measures and should not be considered in isolation or as a substitute for measures of performance prepared in accordance with U.S. GAAP.

 

Dine Brands Global, Inc. and Subsidiaries

Consolidated Statements of Comprehensive Income (Loss)

(In thousands, except per share amounts)

(Unaudited)

 

 

 

Three Months Ended

 

Nine Months Ended

 

 

September 30,

 

September 30,

 

 

2020

 

2019

 

2020

 

2019

Revenues:

 

 

 

 

 

 

 

 

Franchise revenues:

 

 

 

 

 

 

 

 

Royalties, franchise fees and other

 

$

69,820

 

 

 

$

88,686

 

 

 

$

191,915

 

 

 

$

275,912

 

 

Advertising revenues

 

51,932

 

 

 

67,514

 

 

 

142,750

 

 

 

211,882

 

 

Total franchise revenues

 

121,752

 

 

 

156,200

 

 

 

334,665

 

 

 

487,794

 

 

Company restaurant sales

 

27,353

 

 

 

30,548

 

 

 

75,427

 

 

 

100,034

 

 

Rental revenues

 

26,194

 

 

 

28,970

 

 

 

78,910

 

 

 

89,559

 

 

Financing revenues

 

1,344

 

 

 

1,687

 

 

 

4,237

 

 

 

5,280

 

 

Total revenues

 

176,643

 

 

 

217,405

 

 

 

493,239

 

 

 

682,667

 

 

Cost of revenues:

 

 

 

 

 

 

 

 

Franchise expenses:

 

 

 

 

 

 

 

 

Advertising expenses

 

51,932

 

 

 

67,514

 

 

 

142,750

 

 

 

211,882

 

 

Bad debt expense (credit)

 

2,845

 

 

 

(662

)

 

 

8,416

 

 

 

(1,254

)

 

Other franchise expenses

 

5,858

 

 

 

7,724

 

 

 

15,999

 

 

 

23,159

 

 

Total franchise expenses

 

60,635

 

 

 

74,577

 

 

 

167,165

 

 

 

233,787

 

 

Company restaurant expenses

 

28,303

 

 

 

30,361

 

 

 

79,774

 

 

 

93,131

 

 

Rental expenses:

 

 

 

 

 

 

 

 

Interest expense from finance leases

 

1,106

 

 

 

1,351

 

 

 

3,453

 

 

 

4,325

 

 

Other rental expenses

 

19,692

 

 

 

21,251

 

 

 

61,121

 

 

 

63,841

 

 

Total rental expenses

 

20,798

 

 

 

22,602

 

 

 

64,574

 

 

 

68,166

 

 

Financing expenses

 

123

 

 

 

145

 

 

 

393

 

 

 

437

 

 

Total cost of revenues

 

109,859

 

 

 

127,685

 

 

 

311,906

 

 

 

395,521

 

 

Gross profit

 

66,784

 

 

 

89,720

 

 

 

181,333

 

 

 

287,146

 

 

General and administrative expenses

 

36,873

 

 

 

38,922

 

 

 

105,351

 

 

 

121,105

 

 

Interest expense, net

 

16,844

 

 

 

15,238

 

 

 

49,143

 

 

 

45,233

 

 

Impairment and closure charges

 

168

 

 

 

157

 

 

 

124,521

 

 

 

640

 

 

Amortization of intangible assets

 

2,659

 

 

 

2,925

 

 

 

8,240

 

 

 

8,774

 

 

Loss on extinguishment of debt

 

 

 

 

 

 

 

 

 

 

8,276

 

 

Loss on disposition of assets

 

1,087

 

 

 

746

 

 

 

2,630

 

 

 

1,187

 

 

Income (loss) before income taxes

 

9,153

 

 

 

31,732

 

 

 

(108,552

)

 

 

101,931

 

 

Income tax benefit (provision)

 

865

 

 

 

(7,815

)

 

 

6,119

 

 

 

(24,981

)

 

Net income (loss)

 

$

10,018

 

 

 

$

23,917

 

 

 

$

(102,433

)

 

 

$

76,950

 

 

Net income (loss) available to common stockholders:

 

 

 

 

 

 

 

 

Net income (loss)

 

$

10,018

 

 

 

$

23,917

 

 

 

$

(102,433

)

 

 

$

76,950

 

 

Less: Net income allocated to unvested participating restricted stock

 

(329

)

 

 

(795

)

 

 

(420

)

 

 

(2,621

)

 

Net income (loss) available to common stockholders

 

$

9,689

 

 

 

$

23,122

 

 

 

$

(102,853

)

 

 

$

74,329

 

 

Net income (loss) available to common stockholders per share:

 

 

 

 

 

 

 

 

Basic

 

$

0.60

 

 

 

$

1.38

 

 

 

$

(6.34

)

 

 

$

4.35

 

 

Diluted

 

$

0.60

 

 

 

$

1.36

 

 

 

$

(6.34

)

 

 

$

4.27

 

 

Weighted average shares outstanding:

 

 

 

 

 

 

 

 

Basic

 

16,221

 

 

 

16,762

 

 

 

16,229

 

 

 

17,095

 

 

Diluted

 

16,283

 

 

 

17,055

 

 

 

16,229

 

 

 

17,432

 

 

 

 

 

 

 

 

 

 

 

Dividends declared per common share

 

 

$0.69

 

 

$0.76

 

 

$2.07

 

Dividends paid per common share

 

$0.00

 

 

$0.69

 

 

$1.45

 

 

$2.01

 

Dine Brands Global, Inc. and Subsidiaries

Consolidated Balance Sheets

(In thousands, except share and per share amounts)

 

 

 

September 30, 2020

 

December 31, 2019

Assets

 

(Unaudited)

 

 

Current assets:

 

 

 

 

Cash and cash equivalents

 

$

309,278

 

 

 

$

116,043

 

 

Receivables, net of allowance of $12,221 (2020) and $3,138 (2019)

 

122,148

 

 

 

136,869

 

 

Restricted cash

 

47,511

 

 

 

40,732

 

 

Prepaid gift card costs

 

25,690

 

 

 

36,077

 

 

Prepaid income taxes

 

13,831

 

 

 

13,290

 

 

Other current assets

 

5,942

 

 

 

3,906

 

 

Total current assets

 

524,400

 

 

 

346,917

 

 

Other intangible assets, net

 

552,943

 

 

 

575,103

 

 

Operating lease right-of-use assets

 

355,766

 

 

 

366,931

 

 

Goodwill

 

251,628

 

 

 

343,862

 

 

Property and equipment, net

 

195,105

 

 

 

216,420

 

 

Long-term receivables, net of allowance of $9,854 (2020) and $8,155 (2019)

 

69,898

 

 

 

85,999

 

 

Deferred rent receivable

 

62,458

 

 

 

70,308

 

 

Non-current restricted cash

 

32,800

 

 

 

15,700

 

 

Other non-current assets, net

 

25,918

 

 

 

28,271

 

 

Total assets

 

$

2,070,916

 

 

 

$

2,049,511

 

 

Liabilities and Stockholders’ Deficit

 

 

 

 

Current liabilities:

 

 

 

 

Current maturities of long-term debt

 

$

13,000

 

 

 

$

 

 

Accounts payable

 

28,930

 

 

 

40,925

 

 

Gift card liability

 

114,495

 

 

 

159,019

 

 

Current maturities of operating lease obligations

 

75,470

 

 

 

72,815

 

 

Current maturities of finance lease and financing obligations

 

13,116

 

 

 

13,669

 

 

Accrued employee compensation and benefits

 

17,498

 

 

 

23,904

 

 

Dividends payable

 

 

 

 

11,702

 

 

Deferred franchise revenue, short-term

 

7,862

 

 

 

10,086

 

 

Accrued advertising expenses

 

28,338

 

 

 

8,760

 

 

Other accrued expenses

 

22,402

 

 

 

17,032

 

 

Total current liabilities

 

321,111

 

 

 

357,912

 

 

Long-term debt

 

1,494,538

 

 

 

1,288,248

 

 

Operating lease obligations, less current maturities

 

351,927

 

 

 

359,025

 

 

Finance lease obligations, less current maturities

 

72,349

 

 

 

77,393

 

 

Financing obligations, less current maturities

 

34,488

 

 

 

37,682

 

 

Deferred income taxes, net

 

83,502

 

 

 

98,499

 

 

Deferred franchise revenue, long-term

 

54,101

 

 

 

56,944

 

 

Other non-current liabilities

 

15,264

 

 

 

15,582

 

 

Total liabilities

 

2,427,280

 

 

 

2,291,285

 

 

Commitments and contingencies

 

 

 

 

Stockholders’ deficit:

 

 

 

 

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

 

 

 

 

 

 

Common stock, $0.01 par value; shares: 40,000,000 authorized; September 30, 2020 - 24,883,124 issued, 16,416,695 outstanding; December 31, 2019 - 24,925,447 issued, 16,521,921 outstanding

 

249

 

 

 

249

 

 

Additional paid-in-capital

 

255,907

 

 

 

246,192

 

 

(Accumulated deficit) retained earnings

 

(53,992

)

 

 

61,653

 

 

Accumulated other comprehensive loss

 

(56

)

 

 

(58

)

 

Treasury stock, at cost; shares: September 30, 2020 - 8,466,429; December 31, 2019 - 8,403,526

 

(558,472

)

 

 

(549,810

)

 

Total stockholders’ deficit

 

(356,364

)

 

 

(241,774

)

 

Total liabilities and stockholders’ deficit

 

$

2,070,916

 

 

 

$

2,049,511

 

 

Dine Brands Global, Inc. and Subsidiaries

Consolidated Statements of Cash Flows

(In thousands)

(Unaudited)

 

 

 

Nine Months Ended

 

 

September 30,

 

 

2020

 

2019

 

 

 

 

 

Cash flows from operating activities:

 

 

 

 

Net (loss) income

 

$

(102,433

)

 

 

$

76,950

 

 

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

 

 

 

 

Impairment and closure charges

 

124,469

 

 

 

640

 

 

Depreciation and amortization

 

32,053

 

 

 

31,515

 

 

Non-cash stock-based compensation expense

 

9,193

 

 

 

8,220

 

 

Non-cash interest expense

 

1,990

 

 

 

2,722

 

 

Deferred income taxes

 

24,172

 

 

 

(2,890

)

 

Deferred revenue

 

(5,067

)

 

 

(6,590

)

 

Loss on extinguishment of debt

 

 

 

 

8,276

 

 

Loss on disposition of assets

 

2,630

 

 

 

1,187

 

 

Other

 

1,173

 

 

 

(4,584

)

 

Changes in operating assets and liabilities:

 

 

 

 

Accounts receivable, net

 

(27,849

)

 

 

4,233

 

 

Current income tax receivables and payables

 

(41,426

)

 

 

7,101

 

 

Gift card receivables and payables

 

(1,980

)

 

 

(15,868

)

 

Other current assets

 

(2,034

)

 

 

(3,519

)

 

Accounts payable

 

6,777

 

 

 

359

 

 

Accrued employee compensation and benefits

 

(6,406

)

 

 

(6,069

)

 

Accrued advertising

 

19,579

 

 

 

(1,366

)

 

Other current liabilities

 

1,887

 

 

 

5,282

 

 

Cash flows provided by operating activities

 

36,728

 

 

 

105,599

 

 

Cash flows from investing activities:

 

 

 

 

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

 

15,731

 

 

 

16,156

 

 

Net additions to property and equipment

 

(9,088

)

 

 

(13,360

)

 

Proceeds from sale of property and equipment

 

517

 

 

 

400

 

 

Additions to long-term receivables

 

(1,475

)

 

 

(6,955

)

 

Other

 

(358

)

 

 

(258

)

 

Cash flows provided by (used in) investing activities

 

5,327

 

 

 

(4,017

)

 

Cash flows from financing activities:

 

 

 

 

Proceeds from issuance of long-term debt

 

 

 

 

1,300,000

 

 

Repayment of long-term debt

 

 

 

 

(1,283,750

)

 

Borrowing from revolving credit facility

 

220,000

 

 

 

 

 

Repayment of revolving credit facility

 

 

 

 

(25,000

)

 

Payment of debt issuance costs

 

 

 

 

(12,707

)

 

Dividends paid on common stock

 

(23,934

)

 

 

(35,273

)

 

Repurchase of common stock

 

(29,853

)

 

 

(90,073

)

 

Principal payments on finance lease obligations

 

(9,034

)

 

 

(10,329

)

 

Proceeds from stock options exercised

 

20,523

 

 

 

10,672

 

 

Tax payments for restricted stock upon vesting

 

(2,438

)

 

 

(2,589

)

 

Other

 

(205

)

 

 

 

 

Cash flows provided by (used in) financing activities

 

175,059

 

 

 

(149,049

)

 

Net change in cash, cash equivalents and restricted cash

 

217,114

 

 

 

(47,467

)

 

Cash, cash equivalents and restricted cash at beginning of period

 

172,475

 

 

 

200,379

 

 

Cash, cash equivalents and restricted cash at end of period

 

$

389,589

 

 

 

$

152,912

 

 

 

Dine Brands Global, Inc. and Subsidiaries
Non-GAAP Financial Measures
(In thousands, except per share amounts)
(Unaudited)

Reconciliation of net income (loss) available to common stockholders to net income available to common stockholders, as adjusted for the following items: Impairment and closure charges; amortization of intangible assets; non-cash interest expense; 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

 

Nine Months Ended

 

 

September 30,

 

September 30,

 

 

2020

 

2019

 

2020

 

2019

 

 

 

 

 

 

 

 

 

Net income (loss) available to common stockholders, as reported

 

$

9,689

 

 

 

$

23,122

 

 

 

$

(102,853

)

 

 

$

74,329

 

 

Impairment and closure charges

 

168

 

 

 

157

 

 

 

124,521

 

 

 

640

 

 

Amortization of intangible assets

 

2,659

 

 

 

2,925

 

 

 

8,240

 

 

 

8,774

 

 

Loss on extinguishment of debt

 

 

 

 

 

 

 

 

 

 

8,276

 

 

Non-cash interest expense

 

672

 

 

 

639

 

 

 

1,990

 

 

 

2,722

 

 

Nonrecurring restaurant costs

 

 

 

 

54

 

 

 

 

 

 

383

 

 

Loss on disposition of assets

 

1,087

 

 

 

746

 

 

 

2,630

 

 

 

1,187

 

 

Net income tax provision for above adjustments

 

(1,146

)

 

 

(1,175

)

 

 

(11,287

)

 

 

(5,715

)

 

Net income allocated to unvested participating restricted stock

 

(112

)

 

 

(113

)

 

 

(367

)

 

 

(567

)

 

Net income available to common stockholders, as adjusted

 

$

13,017

 

 

 

$

26,355

 

 

 

$

22,874

 

 

 

$

90,029

 

 

 

 

 

 

 

 

 

 

 

Diluted net income available to common stockholders per share:

 

 

 

 

 

 

 

 

Net income (loss) available to common stockholders, as reported

 

$

0.60

 

 

 

$

1.36

 

 

 

$

(6.34

)

 

 

$

4.27

 

 

Impairment and closure charges

 

0.01

 

 

 

0.01

 

 

 

7.15

 

 

 

0.03

 

 

Amortization of intangible assets

 

0.12

 

 

 

0.13

 

 

 

0.38

 

 

 

0.37

 

 

Loss on extinguishment of debt

 

 

 

 

 

 

 

 

 

 

0.35

 

 

Non-cash interest expense

 

0.03

 

 

 

0.03

 

 

 

0.09

 

 

 

0.12

 

 

Nonrecurring restaurant costs

 

 

 

 

0.00

 

 

 

 

 

 

0.02

 

 

Loss on disposition of assets

 

0.05

 

 

 

0.03

 

 

 

0.12

 

 

 

0.05

 

 

Net income allocated to unvested participating restricted stock

 

(0.01

)

 

 

(0.01

)

 

 

(0.02

)

 

 

(0.03

)

 

Rounding

 

 

 

 

 

 

 

0.02

 

 

 

(0.01

)

 

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

 

$

0.80

 

 

 

$

1.55

 

 

 

$

1.40

 

 

 

$

5.17

 

 

 

 

 

 

 

 

 

 

 

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

 

$

13,017

 

 

 

$

26,355

 

 

 

$

22,874

 

 

 

$

90,029

 

 

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

 

1

 

 

 

8

 

 

 

2

 

 

 

39

 

 

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

 

$

13,018

 

 

 

$

26,363

 

 

 

$

22,876

 

 

 

$

90,068

 

 

 

 

 

 

 

 

 

 

 

Denominator for basic EPS - weighted-average shares

 

16,221

 

 

 

16,762

 

 

 

16,229

 

 

 

17,095

 

 

Dilutive effect of stock options

 

62

 

 

 

293

 

 

 

86

 

 

 

337

 

 

Denominator for diluted EPS - weighted-average shares

 

16,283

 

 

 

17,055

 

 

 

16,315

 

 

 

17,432

 

 

 

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.

 

 

Nine Months Ended

 

 

September 30,

 

 

2020

 

2019

 

 

(In millions)

Cash flows provided by operating activities

 

$

36.7

 

 

 

$

105.6

 

 

Receipts from notes and equipment contracts receivable

 

8.0

 

 

 

8.6

 

 

Additions to property and equipment

 

(9.1

)

 

 

(13.4

)

 

Adjusted free cash flow

 

35.6

 

 

 

100.8

 

 

Dividends paid on common stock

 

(23.9

)

 

 

(35.3

)

 

Repurchase of Dine Brands Global common stock

 

(29.9

)

 

 

(90.1

)

 

 

 

$

(18.2

)

 

 

$

(24.6

)

 

 

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 (loss), adjusted for the effect of impairment and closure charges, interest charges, income tax provision or benefit, depreciation and amortization, non-cash stock-based compensation, 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

 

Nine Months Ended

 

 

 

September 30,

 

September 30,

 

 

 

2020

 

2019

 

2020

 

2019

 

 

 

 

 

 

 

 

 

 

 

Net income (loss), as reported

 

$

10,018

 

 

 

$

23,917

 

 

$

(102,433

)

 

 

$

76,950

 

 

Impairment and closure charges

 

168

 

 

 

157

 

 

124,521

 

 

 

640

 

 

Interest charges on finance leases

 

1,605

 

 

 

1,866

 

 

4,974

 

 

 

5,919

 

 

All other interest charges

 

17,437

 

 

 

15,794

 

 

51,336

 

 

 

47,880

 

 

Income tax (benefit) provision

 

(865

)

 

 

7,815

 

 

(6,119

)

 

 

24,981

 

 

Depreciation and amortization

 

10,685

 

 

 

10,715

 

 

32,030

 

 

 

31,515

 

 

Non-cash stock-based compensation

 

2,524

 

 

 

2,326

 

 

9,194

 

 

 

8,220

 

 

Loss on extinguishment of debt

 

 

 

 

 

 

 

 

 

8,276

 

 

Loss on disposition of assets

 

1,087

 

 

 

746

 

 

2,630

 

 

 

1,187

 

 

Other taxes

 

67

 

 

 

58

 

 

372

 

 

 

497

 

 

Adjusted EBITDA

 

$

42,726

 

 

 

$

63,394

 

 

$

116,505

 

 

 

$

206,065

 

 

 

 

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

The following table sets forth, for the three and nine months ended September 30, 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

 

Nine Months Ended

 

 

 

September 30,

 

September 30,

 

 

 

2020

 

2019

 

2020

 

2019

 

 

 

 

 

Applebee's

 

 

 

 

 

 

 

 

 

Effective Restaurants(a)

 

 

 

 

 

 

 

 

 

Franchise

 

1,636

 

 

 

1,741

 

 

 

1,620

 

 

 

1,752

 

 

 

Company

 

69

 

 

 

69

 

 

 

68

 

 

 

69

 

 

 

Total

 

1,705

 

 

 

1,810

 

 

 

1,688

 

 

 

1,821

 

 

 

 

 

 

 

 

 

 

 

 

 

System-wide(b)

 

 

 

 

 

 

 

 

 

Domestic sales percentage change(c)

 

(16.7

)

%

 

(3.8

)

%

 

(27.6

)

%

 

(2.7

)

%

 

Domestic same-restaurant sales percentage change(d)

 

(13.3

)

%

 

(1.6

)

%

 

(24.1

)

%

 

(0.1

)

%

 

 

 

 

 

 

 

 

 

 

 

Franchise(b)

 

 

 

 

 

 

 

 

 

Domestic sales percentage change(c) (e)

 

(16.9

)

%

 

(6.8

)

%

 

(27.7

)

%

 

(5.9

)

%

 

Domestic same-restaurant sales percentage change(d)

 

(13.4

)

%

 

(1.7

)

%

 

(24.1

)

%

 

(0.2

)

%

 

Average weekly domestic unit sales (in thousands)

 

$

39.2

 

 

 

$

45.0

 

 

 

$

36.6

 

 

 

$

47.7

 

 

 

 IHOP

 

 

 

 

 

 

 

 

 

Effective Restaurants(a)

 

 

 

 

 

 

 

 

 

Franchise

 

1,530

 

 

 

1,667

 

 

 

1,517

 

 

 

1,660

 

 

 

Area license

 

157

 

 

 

158

 

 

 

153

 

 

 

156

 

 

 

Total

 

1,687

 

 

 

1,825

 

 

 

1,670

 

 

 

1,816

 

 

 

 

 

 

 

 

 

 

 

 

 

System-wide(b)

 

 

 

 

 

 

 

 

 

Sales percentage change(c)

 

(34.4

)

%

 

1.2

 

%

 

(37.6

)

%

 

2.2

 

%

 

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

 

(30.2

)

%

 

0.03

 

%

 

(33.8

)

%

 

1.1

 

%

 

 

 

 

 

 

 

 

 

 

 

Franchise(b)

 

 

 

 

 

 

 

 

 

Sales percentage change(c)

 

(34.3

)

%

 

1.1

 

%

 

(37.6

)

%

 

2.2

 

%

 

Domestic same-restaurant sales percentage change(d)

 

(29.9

)

%

 

0.03

 

%

 

(33.6

)

%

 

1.0

 

%

 

Average weekly unit sales (in thousands)

 

$

25.6

 

 

 

$

35.7

 

 

 

$

24.9

 

 

 

$

36.5

 

 

 

 

 

 

 

 

 

 

 

 

 

Area License (b)

 

 

 

 

 

 

 

 

 

Sales percentage change(c)

 

(35.0

)

%

 

2.4

 

%

 

(37.1

)

%

 

2.4

 

%

 

 

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

(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 nine months ended September 30, 2020 and 2019 and sales by company-operated restaurants were as follows:

 

 

Three Months Ended

 

Nine Months Ended

 

 

September 30,

 

September 30,

 

 

2020

 

2019

 

2020

 

2019

 

 

(In millions)

Reported sales

 

 

 

 

 

 

 

 

Applebee's domestic franchise restaurant sales

 

$

778.2

 

 

$

936.5

 

 

$

2,168.4

 

 

$

2,997.2

 

Applebee's company-operated restaurants

 

27.3

 

 

30.5

 

 

75.4

 

 

100.0

 

IHOP franchise restaurant sales

 

508.3

 

 

773.9

 

 

1,475.2

 

 

2,364.4

 

IHOP area license restaurant sales

 

46.2

 

 

71.1

 

 

136.6

 

 

217.2

 

Total

 

$

1,360.0

 

 

$

1,812.0

 

 

$

3,855.6

 

 

$

5,678.8

 

(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.

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

 

 

 

Three Months Ended

 

 

Nine Months Ended

 

 

 

September 30,

 

 

September 30,

 

 

 

2020

 

2019

 

 

2020

 

2019

 

Applebee's Restaurant Development Activity

 

 

 

 

 

 

 

 

Summary - beginning of period:

 

 

 

 

 

 

 

 

 

 

Franchise

 

1,680

 

 

1,746

 

 

1,718

 

 

1,768

 

 

Company restaurants

 

69

 

 

69

 

 

69

 

 

69

 

 

Total Applebee's restaurants, beginning of period

 

1,749

 

 

1,815

 

 

1,787

 

 

1,837

 

 

Franchise restaurants opened

 

 

 

 

 

 

 

 

 

 

Domestic

 

1

 

 

 

 

1

 

 

 

 

International

 

3

 

 

 

 

3

 

 

1

 

 

Total franchise restaurants opened

 

4

 

 

 

 

4

 

 

1

 

 

Franchise restaurants permanently closed:

 

 

 

 

 

 

 

 

 

 

Domestic

 

(20

)

 

(9)

 

 

(52

)

 

(26

)

 

International

 

(5

)

 

(2)

 

 

(11

)

 

(8

)

 

Total franchise restaurants permanently closed

 

(25

)

 

(11)

 

 

(63

)

 

(34

)

 

Net franchise restaurant reduction

 

(21

)

 

(11)

 

 

(59

)

 

(33

)

 

Summary - end of period:

 

 

 

 

 

 

 

 

 

 

Franchise

 

1,659

 

 

1,735

 

 

1,659

 

 

1,735

 

 

Company

 

69

 

 

69

 

 

69

 

 

69

 

 

Total Applebee's restaurants, end of period

 

1,728

 

 

1,804

 

 

1,728

 

 

1,804

 

 

Domestic

 

1,614

 

 

1,667

 

 

1,614

 

 

1,667

 

 

International

 

114

 

 

137

 

 

114

 

 

137

 

 

IHOP Restaurant Development Activity

   

 

 

 

   

 

 

Summary - beginning of period:

   

 

 

 

   

 

 

Franchise

 

1,666

 

1,669

 

 

 

1,680

 

 

 

1,669

 

 

Area license

 

157

 

159

 

 

 

161

 

 

 

162

 

 

Total IHOP restaurants, beginning of period

 

1,823

 

1,828

 

 

 

1,841

 

 

 

1,831

 

 

Franchise/area license restaurants opened:

   

 

 

 

   

 

 

Domestic franchise

 

1

 

8

 

 

 

8

 

 

 

23

 

 

Domestic area license

 

2

 

3

 

 

 

3

 

 

 

5

 

 

International franchise

 

3

 

7

 

 

 

5

 

 

 

9

 

 

Total franchise/area license restaurants opened

 

6

 

18

 

 

 

16

 

 

 

37

 

 

Franchise/area license restaurants permanently closed:

 

 

 

 

 

 

   

 

 

Domestic franchise

 

(16

)  

(7

 

)

 

(35

)

 

 

(19

)

 

Domestic area license

 

 

(1

 

)

 

(3

)

 

 

(6

)

 

International franchise

 

(6

)  

(2

 

)

 

(10

)

 

 

(7

)

 

International area license

 

 

 

 

 

(2

)

 

 

 

 

Total franchise/area license restaurants permanently closed

 

(22

)  

(10

 

)

 

(50

)

 

 

(32

)

 

Net franchise/area license restaurant (reduction) addition

 

(16

)  

8

 

 

 

(34

)

 

 

5

 

 

Summary - end of period

 

 

 

 

 

 

   

 

 

Franchise

 

1,648

 

1,675

 

 

 

1,648

 

 

 

1,675

 

 

Area license

 

159

 

161

 

 

 

159

 

 

 

161

 

 

Total IHOP restaurants, end of period

 

1,807

 

1,836

 

 

 

1,807

 

 

 

1,836

 

 

Domestic

 

1,683

 

1,708

 

 

 

1,683

 

 

 

1,708

 

 

International

 

124

 

128

 

 

 

124

 

 

 

128

 

 

 

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

Source: Dine Brands Global, Inc.