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8-K
false 0000049754 0000049754 2022-11-02 2022-11-02

 

 

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): November 2, 2022

 

 

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 November 2, 2022, Dine Brands Global, Inc., a Delaware corporation (the “Corporation”), issued a press release announcing its third quarter 2022 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 2022 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 November 2, 2022.
104    Cover Page Interactive Data File (embedded within the Inline XBRL document).


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: November 2, 2022   DINE BRANDS GLOBAL, INC.
    By:  

/s/ Vance Y. Chang

      Vance Y. Chang
      Chief Financial Officer
EX-99.1

Exhibit 99.1

 

LOGO

 

 

News Release

Investor Contact

Brett Levy

Vice President, Investor Relations

Dine Brands Global, Inc.

(818) 637-3632

Brett.Levy@dinebrands.com

Media Contact

Susan Nelson

Sr. Vice President, Global Communications

Dine Brands Global, Inc.

Susan.Nelson@dinebrands.com

Dine Brands Global, Inc. Reports Third Quarter 2022 Results

Applebee’s and IHOP Post Seventh & Sixth Consecutive Positive Comparable

Restaurants Sales Quarters, Respectively

GLENDALE, Calif., November 2, 2022 – 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 fiscal 2022.

“The third quarter reflected Dine’s collective strength and resiliency. Despite persistent economic headwinds, our performance demonstrated outstanding execution of our plan and our deep commitment to deliver on our strategy and create shareholder value,” said John Peyton, chief executive officer of Dine Brands Global, Inc.

Vance Chang, chief financial officer, added, “Our results continued to display the strength of our asset-light business model. With less than one quarter remaining in 2022, we have narrowed our EBITDA and G&A guidance to better incorporate our year-to-date progress and our prospects for the remainder of the year.”

Domestic Restaurant Sales for the Third Quarter of 2022

 

   

Applebee’s year-over-year comparable same-restaurant sales increased 3.8% for the third quarter of 2022. Off-premise sales accounted for 24.2% of sales mix, representing per restaurant average weekly sales of approximately $12,800.


   

IHOP’s year-over-year comparable same-restaurant sales increased 1.9% for the third quarter of 2022. Off-premise sales accounted for 20.4% of sales mix, representing per restaurant average weekly sales of approximately $7,700.

Third Quarter of 2022 Summary

 

   

Total revenues for the third quarter of 2022 were $233.2 million compared to $228.7 million for the third quarter of 2021. The increase was primarily due to positive comparable same restaurant sales growth at both brands.

 

   

Consolidated adjusted EBITDA for the third quarter of 2022 was $63.6 million, slightly ahead of the $63.3 million for the third quarter of 2021. The increase in revenues was offset by ongoing inflation across our company restaurants and higher franchise-level expenses. (See “Non-GAAP Financial Measures” and reconciliation of GAAP net income to consolidated adjusted EBITDA.)

 

   

General and Administrative (“G&A”) expenses for the third quarter of 2022 were $46.3 million compared to $43.7 million for the third quarter of 2021. The variance was primarily due to continued strategic growth investments and a return to normalized operations, including higher professional services expenses and travel-related costs to support franchisees.

 

   

GAAP earnings per diluted share of $1.32 for the third quarter of 2022 compared to earnings per diluted share of $1.33 for the third quarter of 2021. The variance was primarily due to higher franchise, company restaurant and G&A expenses, offset by increased revenues and lower share count.

 

   

Adjusted earnings per diluted share of $1.66 for the third quarter of 2022 compared to adjusted earnings per diluted share of $1.55 for the third quarter of 2021. The variance was primarily due to lower share count. (See “Non-GAAP Financial Measures” and reconciliation of GAAP earnings per diluted share to adjusted earnings per diluted share.)

 

   

Development activity by Applebee’s and IHOP franchisees for the third quarter of 2022 resulted in the opening of 10 new restaurants and the closure of 11 restaurants.

First Nine Months of 2022 Summary

 

   

Total revenues for the first nine months of 2022 were $701.4 million compared to $666.5 million for the first nine months of 2021. The increase was primarily due to strong comparable same restaurant sales growth at both brands.

 

   

Consolidated adjusted EBITDA for the first nine months of 2022 was $194.9 million. This compares to $193.2 million for the first nine months of 2021. The increase was primarily due to strong comparable same restaurant sales growth at both brands offset by strategic growth investments as well as higher expenses associated with a return to normal operations. (See “Non-GAAP Financial Measures” and reconciliation of GAAP net income to consolidated adjusted EBITDA.)

 

Page 2 of 15


   

G&A expenses for the first nine months of 2022 were $131.9 million compared to $122.9 million for the first nine months of 2021. The variance was primarily due to continued strategic growth investments and a return to normalized operations, including higher travel-related costs and professional services expenses to support franchisees.

 

   

GAAP earnings per diluted share of $4.22 for the first nine months of 2022 compared to earnings per diluted share of $4.52 for the first nine months of 2021. The variance was primarily due to higher income tax expense and an increase in G&A expenses, partially offset by an increase in gross profit and a decrease in closure and impairment charges.

 

   

Adjusted earnings per diluted share of $4.85 for the first nine months of 2022 compared to adjusted earnings per diluted share of $5.22 for the first nine months of 2021. The variance was primarily due to higher income tax expense and an increase in G&A expenses, partially offset by an increase in gross profit and lower share count. (See “Non-GAAP Financial Measures” and reconciliation of GAAP earnings per diluted share to adjusted earnings per diluted share.)

 

   

Cash flows from operating activities for the first nine months of 2022 were $63.5 million. This compares to cash provided from operating activities of $145.6 million for the first nine months of 2021. The decline was primarily due to the change in working capital, resulting from payments related to higher incentive compensation earned in 2021 but paid in the first quarter of 2022, one-time collection of franchisee deferrals in the first nine months of 2021 (that did not recur in 2022) and the timing of marketing disbursements.

 

   

The Company had adjusted free cash flow of $52.4 million for the first nine months of 2022. This compares to adjusted free cash flow of $146.1 million for the first nine months of 2021. (See “Non-GAAP Financial Measures” and reconciliation of the Company’s cash provided by operating activities to adjusted free cash flow.)

 

   

Development activity by Applebee’s and IHOP franchisees for the first nine months of 2022 resulted in the opening of 35 new restaurants and the closure of 30 restaurants.

Key Balance Sheet Metrics (as of September 30, 2022)

 

   

Total cash, cash equivalents and restricted cash of $424.2 million, of which $355.3 million was unrestricted cash.

 

   

Leverage ratio of 3.90x compared to 4.27x as of June 30, 2022.

 

   

Debt service coverage ratio was 4.15x compared to 4.31x as of June 30, 2022.

 

   

Capacity under the revolving credit facility of $221.6 million available, with a $100 million draw down in August 2022 and $3.4 million pledged.

 

Page 3 of 15


GAAP Effective Tax Rate

The Company’s effective tax rate was 26.9% for the nine months ended September 30, 2022, as compared to 16.4% for the nine months ended September 30, 2021. The effective tax rate for the nine months ended September 30, 2022 was higher than the rate of the prior comparable period primarily due to the recognition of excess tax benefits on stock-based compensation related to the departure of the Company’s previous chief executive officer in the first quarter of 2021.

Capital Return to Shareholders

The Company repurchased 140,997 shares of its common stock in the third quarter of 2022 for a total of approximately $9.5 million, with $113.6 million repurchased through the first nine months of 2022.

On September 9, 2022, the Company announced that its Board of Directors declared and approved a quarterly cash dividend of $0.51 per share of common stock. The dividend was paid on September 30, 2022, to the Company’s stockholders of record at the close of business on September 20, 2022.

Financial Performance Guidance for 2022

The Company adjusted a number of its fiscal 2022 guidance items:

 

   

Domestic development activity by Applebee’s franchisees of between 5 and 15 net fewer restaurants is reaffirmed.

 

   

Domestic development activity by IHOP franchisees and area licensees is now expected to be between 35 and 45 net new openings (compared with between 50 and 65 restaurants as was previously guided). The change is primarily due to new openings being moved to 2023 as a result of permitting delays and supply chain issues.

 

   

Consolidated adjusted EBITDA range is narrowed to between approximately $243 million and $248 million, versus the previous $235 million and $250 million range. This new guidance reflects our third quarter performance and our planned strategic investments in the fourth quarter, along with the impact from refranchising our company-owned restaurants.

 

   

G&A expenses are now expected to be reduced to a range of between approximately $185 million and $190 million versus the $188 million and $198 million range provided earlier in the year. This total includes non-cash stock-based compensation expense and depreciation of approximately $30 million. This range reflects incremental investments in technology and operational initiatives as well as unit development and is inclusive of G&A expenses related to the company restaurants segment.

 

   

Capital expenditures is left unchanged in a range between $33 million and $38 million, reflecting incremental investments in the business to support sustainable growth.

 

Page 4 of 15


Third Quarter of 2022 Earnings Conference Call Details

Dine Brands will host a conference call to discuss its results on November 2, 2022 at 9:00 a.m. Eastern time. To access the call, please click this conference call registration link, and you will be provided with dial in details. A live webcast of the call, along with a replay will be available for a limited time at https://investors.dinebrands.com/investor-overview.

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. 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 Applebee’s Neighborhood Grill + Bar® and IHOP® brands. With over 3,400 restaurants combined in 16 countries and 338 franchisees as of December 31, 2021, 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, including the impact of inflation; 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

 

Page 5 of 15


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.

 

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Dine Brands Global, Inc. and Subsidiaries

Consolidated Statements of Comprehensive Income

(In thousands, except per share amounts)

(Unaudited)

 

     Three Months Ended     Nine Months Ended  
     September 30,     September 30,  
     2022     2021     2022     2021  

Revenues:

        

Franchise revenues:

        

Royalties, franchise fees and other

   $  93,215     $  90,417     $  277,712     $  265,138  

Advertising revenues

     71,692       70,709       216,686       203,918  
  

 

 

   

 

 

   

 

 

   

 

 

 

Total franchise revenues

     164,907       161,126       494,398       469,056  

Company restaurant sales

     38,248       35,275       117,175       109,418  

Rental revenues

     29,207       31,273       87,080       84,797  

Financing revenues

     858       1,045       2,784       3,266  
  

 

 

   

 

 

   

 

 

   

 

 

 

Total revenues

     233,220       228,719       701,437       666,537  
  

 

 

   

 

 

   

 

 

   

 

 

 

Cost of revenues:

        

Franchise expenses:

        

Advertising expenses

     71,692       70,709       216,686       203,918  

Bad debt credit

     (77     (1,962     (523     (4,246

Other franchise expenses

     8,649       6,922       24,402       20,197  
  

 

 

   

 

 

   

 

 

   

 

 

 

Total franchise expenses

     80,264       75,669       240,565       219,869  

Company restaurant expenses

     36,513       33,867       111,802       101,510  

Rental expenses:

        

Interest expense from finance leases

     740       822       2,254       2,677  

Other rental expenses

     21,268       23,645       63,720       63,359  
  

 

 

   

 

 

   

 

 

   

 

 

 

Total rental expenses

     22,008       24,467       65,974       66,036  

Financing expenses

     104       113       317       356  
  

 

 

   

 

 

   

 

 

   

 

 

 

Total cost of revenues

     138,889       134,116       418,658       387,771  
  

 

 

   

 

 

   

 

 

   

 

 

 

Gross profit

     94,331       94,603       282,779       278,766  

General and administrative expenses

     46,335       43,704       131,946       122,891  

Interest expense, net

     15,300       15,712       46,192       47,956  

Closure and impairment charges

     1,636       443       3,093       5,024  

Amortization of intangible assets

     2,664       2,664       7,994       8,015  

Loss on extinguishment of debt

     1,161       9       1,161       34  

(Gain) loss on disposition of assets

     (1,502     1,299       (3,032     1,436  
  

 

 

   

 

 

   

 

 

   

 

 

 

Income before income taxes

     28,737       30,772       95,425       93,444  

Income tax provision

     (7,789     (7,661     (25,665     (15,368
  

 

 

   

 

 

   

 

 

   

 

 

 

Net income

   $ 20,948     $ 23,111     $ 69,760     $ 78,076  
  

 

 

   

 

 

   

 

 

   

 

 

 

Net income available to common stockholders:

        

Net income

   $ 20,948     $ 23,111     $ 69,760     $ 78,076  

Less: Net income allocated to unvested participating restricted stock

     (575     (502     (1,852     (1,920
  

 

 

   

 

 

   

 

 

   

 

 

 

Net income available to common stockholders

   $ 20,373     $ 22,609     $ 67,908     $ 76,156  
  

 

 

   

 

 

   

 

 

   

 

 

 

Net income available to common stockholders per share:

        

Basic

   $ 1.32     $ 1.34     $ 4.23     $ 4.55  
  

 

 

   

 

 

   

 

 

   

 

 

 

Diluted

   $ 1.32     $ 1.33     $ 4.22     $ 4.52  
  

 

 

   

 

 

   

 

 

   

 

 

 

Weighted average shares outstanding:

        

Basic

     15,377       16,911       16,049       16,752  
  

 

 

   

 

 

   

 

 

   

 

 

 

Diluted

     15,403       16,971       16,079       16,858  
  

 

 

   

 

 

   

 

 

   

 

 

 

Dividends declared per common share

   $ 0.51     $ —       $ 1.48     $ —    
  

 

 

   

 

 

   

 

 

   

 

 

 

Dividends paid per common share

   $ 1.02     $ —       $ 1.88     $ —    
  

 

 

   

 

 

   

 

 

   

 

 

 

 

Page 7 of 15


Dine Brands Global, Inc. and Subsidiaries

Consolidated Balance Sheets

(In thousands, except share and per share amounts)

 

     September 30, 2022     December 31, 2021  
     (Unaudited)        
Assets     

Current assets:

    

Cash and cash equivalents

   $ 355,288     $ 361,412  

Receivables, net of allowance of $4,205 (2022) and $4,959 (2021)

     89,529       119,968  

Restricted cash

     52,517       47,541  

Prepaid gift card costs

     24,595       28,175  

Prepaid income taxes

     3,502       10,529  

Other current assets

     11,075       6,728  

Assets held for sale

     109,280       —    
  

 

 

   

 

 

 

Total current assets

     645,786       574,353  

Other intangible assets, net

     526,989       539,390  

Operating lease right-of-use assets

     298,102       335,428  

Goodwill

     247,002       251,628  

Property and equipment, net

     135,368       179,411  

Deferred rent receivable

     44,306       50,257  

Long-term receivables, net of allowance of $5,498 (2022) and $6,897 (2021)

     43,245       42,493  

Non-current restricted cash

     16,400       16,400  

Other non-current assets, net

     14,823       10,006  
  

 

 

   

 

 

 

Total assets

   $ 1,972,021     $  1,999,366  
  

 

 

   

 

 

 
Liabilities and Stockholders’ Deficit     

Current liabilities:

    

Current maturities of long-term debt

   $ 100,000     $ —    

Accounts payable

     40,781       55,956  

Gift card liability

     126,161       165,530  

Current maturities of operating lease obligations

     65,174       72,079  

Current maturities of finance lease and financing obligations

     8,402       10,693  

Accrued employee compensation and benefits

     20,786       40,785  

Accrued advertising

     38,804       33,752  

Dividends payable

     —         6,919  

Other accrued expenses

     22,975       25,016  

Liabilities held for sale

     96,023       —    
  

 

 

   

 

 

 

Total current liabilities

     519,106       410,730  

Long-term debt, net, less current maturities

     1,281,318       1,279,623  

Operating lease obligations, less current maturities

     279,620       320,848  

Finance lease obligations, less current maturities

     31,439       59,625  

Financing obligations, less current maturities

     28,572       31,967  

Deferred income taxes, net

     74,681       76,228  

Deferred franchise revenue, long-term

     42,616       46,100  

Other non-current liabilities

     16,263       17,052  
  

 

 

   

 

 

 

Total liabilities

     2,273,615       2,242,173  
  

 

 

   

 

 

 

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, 2022—24,966,452 issued, 15,682,061 outstanding; December 31, 2021—24,992,275 issued, 17,163,946 outstanding

     250       250  

Additional paid-in-capital

     256,508       256,189  

Retained earnings

     81,179       35,415  

Accumulated other comprehensive loss

     (68     (59

Treasury stock, at cost; shares: September 30, 2022—9,284,391; December 31, 2021—7,828,329

     (639,463     (534,602
  

 

 

   

 

 

 

Total stockholders’ deficit

     (301,594     (242,807
  

 

 

   

 

 

 

Total liabilities and stockholders’ deficit

   $ 1,972,021     $ 1,999,366  
  

 

 

   

 

 

 

 

Page 8 of 15


Dine Brands Global, Inc. and Subsidiaries

Consolidated Statements of Cash Flows

(In thousands)

(Unaudited)

 

     Nine Months Ended  
     September 30,  
     2022     2021  

Cash flows from operating activities:

    

Net income

   $ 69,760     $ 78,076  

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

    

Depreciation and amortization

     28,870       29,995  

Non-cash stock-based compensation expense

     12,128       8,572  

Non-cash closure and impairment charges

     2,975       4,949  

Non-cash interest expense

     2,210       2,146  

Deferred income taxes

     (1,376     (9,156

Deferred revenue

     (3,773     (5,808

Loss on extinguishment of debt

     1,161       34  

(Gain) loss on disposition of assets

     (3,032     1,436  

Other

     (3,816     947  

Changes in operating assets and liabilities:

    

Accounts receivable, net

     (734     8,398  

Deferred rent receivable

     5,951       4,629  

Current income tax receivables and payables

     7,361       4,544  

Gift card receivables and payables

     (16,752     (9,215

Other current assets

     (5,948     (2,645

Accounts payable

     (6,855     9,678  

Operating lease assets and liabilities

     (8,286     (13,994

Accrued employee compensation and benefits

     (18,738     9,569  

Accrued advertising expenses

     5,052       32,232  

Other current liabilities

     (2,668     (8,791
  

 

 

   

 

 

 

Cash flows provided by operating activities

     63,490       145,562  
  

 

 

   

 

 

 

Cash flows from investing activities:

    

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

     13,502       14,795  

Net additions to property and equipment

     (19,495     (7,923

Proceeds from sale of property and equipment

     3,908       946  

Additions to long-term receivables

     (1,069     —    

Other

     (255     (357
  

 

 

   

 

 

 

Cash flows (used in) provided by investing activities

     (3,409     7,461  
  

 

 

   

 

 

 

Cash flows from financing activities:

    

Repayment of long-term debt

     —         (9,750

Borrowing from revolving credit facility

     100,000       —    

Repayment of revolving credit facility

     —         (220,000

Payment of debt issuance costs

     (6,286     —    

Dividends paid on common stock

     (30,765     —    

Repurchase of common stock

     (113,862     —    

Principal payments on finance lease obligations

     (7,001     (7,772

Proceeds from stock options exercised

     241       25,016  

Repurchase of restricted stock for tax payments upon vesting

     (2,601     (1,543

Tax payments for share settlement of restricted stock units

     (955     (9,783
  

 

 

   

 

 

 

Cash flows used in financing activities

     (61,229     (223,832
  

 

 

   

 

 

 

Net change in cash, cash equivalents and restricted cash

     (1,148     (70,809

Cash, cash equivalents and restricted cash at beginning of period

     425,353       456,053  
  

 

 

   

 

 

 

Cash, cash equivalents and restricted cash at end of period

   $ 424,205     $ 385,244  
  

 

 

   

 

 

 

 

Page 9 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: Closure and impairment charges; amortization of intangible assets; non-cash interest expense; gain or loss on disposition of assets; other EBITDA adjustments; 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,  
     2022     2021     2022     2021  

Net income available to common stockholders

   $ 20,373     $ 22,609     $ 67,908     $ 76,156  

Closure and impairment charges

     1,636       443       3,093       5,024  

Amortization of intangible assets

     2,664       2,664       7,994       8,015  

Non-cash interest expense

     774       719       2,210       2,146  

(Gain) loss on disposition of assets

     (1,502     1,299       (3,032     1,436  

Loss on extinguishment of debt

     1,161       9       1,161       34  

Other EBITDA adjustments

     2,488       —         2,488       —    

Net income tax provision for above adjustments

     (1,878     (1,384     (3,618     (4,488

Net income allocated to unvested participating restricted stock

     (149     (81     (272     (298
  

 

 

   

 

 

   

 

 

   

 

 

 

Net income available to common stockholders, as adjusted

   $ 25,567     $ 26,269     $ 77,932     $ 87,991  
  

 

 

   

 

 

   

 

 

   

 

 

 

Diluted net income available to common stockholders per share:

        

Net income available to common stockholders per share:

   $ 1.32     $ 1.33     $ 4.22     $ 4.52  

Closure and impairment charges

     0.08       0.02       0.14       0.22  

Amortization of intangible assets

     0.13       0.11       0.37       0.35  

Non-cash interest expense

     0.04       0.03       0.10       0.09  

(Gain) loss on disposition of assets

     (0.07     0.06       (0.14     0.06  

Loss on extinguishment of debt

     0.06       —         0.05       —    

Other EBITDA adjustments

     0.12       —         0.11       —    

Net income allocated to unvested participating restricted stock

     (0.01     0.00       (0.02     (0.02

Rounding

     (0.01     —         0.02       —    
  

 

 

   

 

 

   

 

 

   

 

 

 

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

   $ 1.66     $ 1.55     $ 4.85     $ 5.22  
  

 

 

   

 

 

   

 

 

   

 

 

 

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

   $ 25,567     $ 26,269     $ 77,932     $ 87,991  

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

     1       2       4       15  
  

 

 

   

 

 

   

 

 

   

 

 

 

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

   $  25,568     $  26,271     $  77,936     $  88,006  
  

 

 

   

 

 

   

 

 

   

 

 

 

Denominator for basic EPS—weighted-average shares

     15,377       16,911       16,049       16,752  

Dilutive effect of stock options

     26       60       30       106  
  

 

 

   

 

 

   

 

 

   

 

 

 

Denominator for diluted EPS—weighted-average shares

     15,403       16,971       16,079       16,858  
  

 

 

   

 

 

   

 

 

   

 

 

 

 

Page 10 of 15


Dine Brands Global, Inc. and Subsidiaries

Non-GAAP Financial Measures

(Unaudited)

Reconciliation of the Company’s cash flows provided by operating activities to “adjusted free cash flow” (cash flows 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,  
     2022     2021  
     (In millions)  

Cash flows provided by operating activities

   $ 63.5     $ 145.6  

Receipts from notes and equipment contracts receivable

     8.4       8.4  

Net additions to property and equipment

     (19.5     (7.9
  

 

 

   

 

 

 

Adjusted free cash flow

     52.4       146.1  

Dividends paid on common stock

     (30.8     —    

Repurchase of common stock

     (113.9     —    
  

 

 

   

 

 

 
   $ (92.3   $ 146.1  
  

 

 

   

 

 

 

 

Page 11 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 or loss, adjusted for the effect of closure and impairment 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,  
     2022     2021      2022     2021  

Net income, as reported

   $ 20,948     $ 23,111      $ 69,760     $ 78,076  

Closure and impairment charges

     1,636       443        3,093       5,024  

Interest charges on finance leases

     1,202       1,304        3,670       4,151  

All other interest charges

     17,184       16,410        49,900       50,075  

Income tax provision

     7,789       7,661        25,665       15,368  

Depreciation and amortization

     8,893       10,010        28,845       29,969  

Non-cash stock-based compensation

     3,801       2,961        12,128       8,574  

Loss on extinguishment of debt

     1,161       9        1,161       34  

(Gain) loss on disposition of assets

     (1,502     1,299        (3,032     1,436  

Other

     2,488       98        3,682       454  
  

 

 

   

 

 

    

 

 

   

 

 

 

Adjusted EBITDA

   $ 63,600     $ 63,306      $ 194,872     $ 193,161  
  

 

 

   

 

 

    

 

 

   

 

 

 

 

Page 12 of 15


Dine Brands Global, Inc. and Subsidiaries

Restaurant Data

(Unaudited)

The following table sets forth, for the three and nine months ended September 30, 2022 and 2021, 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,  
     2022     2021     2022     2021  

Applebee’s

        

Global Effective Restaurants(a)

        

Franchise

     1,601       1,619       1,604       1,623  

Company

     69       69       69       69  
  

 

 

   

 

 

   

 

 

   

 

 

 

Total

     1,670       1,688       1,673       1,692  
  

 

 

   

 

 

   

 

 

   

 

 

 

System-wide(b)

        

Domestic sales percentage change(c)

     3.2     30.2     5.9     38.6

Domestic same-restaurant sales percentage change(d)

     3.8     27.7     6.3     39.5

Franchise(b)

        

Domestic sales percentage change(c)

     3.1     30.2     5.8     38.4

Domestic same-restaurant sales percentage change(d)

     3.6     27.8     6.3     39.3

Average weekly domestic unit sales (in thousands)

   $ 53.5     $ 51.4     $ 54.2     $ 50.6  

IHOP

        

Global Effective Restaurants(a)

        

Franchise

     1,602       1,573       1,594       1,568  

Area license

     157       156       156       156  
  

 

 

   

 

 

   

 

 

   

 

 

 

Total

     1,759       1,729       1,750       1,724  
  

 

 

   

 

 

   

 

 

   

 

 

 

System-wide(b)

        

Sales percentage change(c)

     3.7     46.1     9.1     41.6

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

     1.9     40.1     7.2     40.5

Franchise(b)

        

Sales percentage change(c)

     3.6     45.7     9.2     40.9

Domestic same-restaurant sales percentage change(d)

     1.6     39.4     7.3     39.4

Average weekly unit sales (in thousands)

   $ 36.8     $ 36.2     $ 36.5     $ 34.0  

Area License (b)

        

Sales percentage change(c)

     5.2     50.9     8.4     48.1

 

Page 13 of 15


Dine Brands Global, Inc. and Subsidiaries

Restaurant Data

(Unaudited)

 

(a)

“Global 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. Effective Restaurants do not include units operated as ghost kitchens (small kitchens with no store-front presence, used to fill off-premise orders).

 

(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. System-wide sales do not include retail sales of ghost kitchens. 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, Applebee’s company-operated restaurants, IHOP franchise restaurants and IHOP area license restaurants for the three and nine months ended September 30, 2022 and 2021 were as follows:

 

     Three Months Ended      Nine Months Ended  
     September 30,      September 30,  
     2022      2021      2022      2021  
     (In millions)  

Reported sales

           

Applebee’s domestic franchise restaurant sales

   $ 1,044.5      $ 1,013.3      $ 3,176.2      $ 3,000.8  

Applebee’s company-operated restaurants

     38.2        35.2        117.2        109.4  

IHOP franchise restaurant sales

     766.8        740.4        2,270.3        2,079.2  

IHOP area license restaurant sales

     73.5        69.8        219.3        202.4  
  

 

 

    

 

 

    

 

 

    

 

 

 

Total

   $ 1,923.0      $ 1,858.7      $ 5,783.0      $ 5,391.8  
  

 

 

    

 

 

    

 

 

    

 

 

 

 

(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 during 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 during both fiscal periods being compared may be different from period to period.

 

Page 14 of 15


Dine Brands Global, Inc. and Subsidiaries

Restaurant Data

(Unaudited)

 

     Three Months Ended
September 30,
    Nine Months Ended
September 30,
 
     2022     2021     2022     2021  

Applebee’s Restaurant Development Activity

      

Summary - beginning of period:

        

Franchise

     1,604       1,627       1,611       1,640  

Company

     69       69       69       69  
  

 

 

   

 

 

   

 

 

   

 

 

 

Total Applebee’s restaurants, beginning of period

     1,673       1,696       1,680       1,709  
  

 

 

   

 

 

   

 

 

   

 

 

 

Franchise restaurants opened:

        

Domestic

     —         2       2       4  

International

     1       —         1       1  
  

 

 

   

 

 

   

 

 

   

 

 

 

Total franchise restaurants opened

     1       2       3       5  
  

 

 

   

 

 

   

 

 

   

 

 

 

Franchise restaurants closed:

        

Domestic

     (3     (5     (9     (15

International

     (1     (4     (4     (10
  

 

 

   

 

 

   

 

 

   

 

 

 

Total franchise restaurants closed

     (4     (9     (13     (25
  

 

 

   

 

 

   

 

 

   

 

 

 

Net franchise restaurant reduction

     (3     (7     (10     (20
  

 

 

   

 

 

   

 

 

   

 

 

 

Summary - end of period:

        

Franchise

     1,601       1,620       1,601       1,620  

Company

     69       69       69       69  
  

 

 

   

 

 

   

 

 

   

 

 

 

Total Applebee’s restaurants, end of period

     1,670       1,689       1,670       1,689  
  

 

 

   

 

 

   

 

 

   

 

 

 

Domestic

     1,571       1,587       1,571       1,587  

International

     99       102       99       102  

IHOP Restaurant Development Activity

        

Summary - beginning of period:

        

Franchise

     1,608       1,588       1,595       1,611  

Area license

     156       156       156       158  

Company

     —         3       —         3  
  

 

 

   

 

 

   

 

 

   

 

 

 

Total IHOP restaurants, beginning of period

     1,764       1,747       1,751       1,772  
  

 

 

   

 

 

   

 

 

   

 

 

 

Franchise/area license restaurants opened:

        

Domestic franchise

     5       7       20       22  

Domestic area license

     1       1       2       2  

International franchise

     3       1       10       2  
  

 

 

   

 

 

   

 

 

   

 

 

 

Total franchise/area license restaurants opened

     9       9       32       26  
  

 

 

   

 

 

   

 

 

   

 

 

 

Franchise/area license restaurants closed:

        

Domestic franchise

     (5     (5     (12     (35

Domestic area license

     (1     (1     (2     (3

International franchise

     (1     —         (3     (9

International area license

     —         —         —         (1
  

 

 

   

 

 

   

 

 

   

 

 

 

Total franchise/area license restaurants closed

     (7     (6     (17     (48
  

 

 

   

 

 

   

 

 

   

 

 

 

Net franchise/area license restaurant additions (reductions)

     2       3       15       (22

Refranchised from Company restaurants

     —         —         —         1  

Franchise restaurants reacquired by the Company

     —         —         —         (1
  

 

 

   

 

 

   

 

 

   

 

 

 

Net franchise/area license restaurant increase (decrease)

     2       3       15       (22
  

 

 

   

 

 

   

 

 

   

 

 

 

Summary - end of period

        

Franchise

     1,610       1,591       1,610       1,591  

Area license

     156       156       156       156  

Company

     —         3       —         3  
  

 

 

   

 

 

   

 

 

   

 

 

 

Total IHOP restaurants, end of period

     1,766       1,750       1,766       1,750  
  

 

 

   

 

 

   

 

 

   

 

 

 

Domestic

     1,665       1,656       1,665       1,656  

International

     101       94       101       94  

The restaurant counts and activity presented above do not include three domestic Applebee’s ghost kitchens (small kitchens with no store-front presence, used to fill off-premise orders), 13 international Applebee’s ghost kitchens and 39 international IHOP ghost kitchens as of September 30, 2022. There were two domestic and one international Applebee’s ghost kitchens and six international IHOP ghost kitchens as of September 30, 2021.

 

Page 15 of 15