UNITED STATES
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Washington, D.C. 20549
FORM
CURRENT REPORT
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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 | ||||||
Exhibit 99.1
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.) |
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| • | 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. |
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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.
Page 6 of 15
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 | ||||||||||||
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|
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|
|||||||||
| 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 | ||||||||||||
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| Total revenues |
233,220 | 228,719 | 701,437 | 666,537 | ||||||||||||
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| Cost of revenues: |
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| Franchise expenses: |
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| 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 | ||||||||||||
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| 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 | ||||||||||||
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| Total rental expenses |
22,008 | 24,467 | 65,974 | 66,036 | ||||||||||||
| Financing expenses |
104 | 113 | 317 | 356 | ||||||||||||
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| Total cost of revenues |
138,889 | 134,116 | 418,658 | 387,771 | ||||||||||||
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| 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 | ||||||||||
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| Income before income taxes |
28,737 | 30,772 | 95,425 | 93,444 | ||||||||||||
| Income tax provision |
(7,789 | ) | (7,661 | ) | (25,665 | ) | (15,368 | ) | ||||||||
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| Net income |
$ | 20,948 | $ | 23,111 | $ | 69,760 | $ | 78,076 | ||||||||
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| 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 | ) | ||||||||
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| Net income available to common stockholders |
$ | 20,373 | $ | 22,609 | $ | 67,908 | $ | 76,156 | ||||||||
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| Net income available to common stockholders per share: |
||||||||||||||||
| Basic |
$ | 1.32 | $ | 1.34 | $ | 4.23 | $ | 4.55 | ||||||||
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| Diluted |
$ | 1.32 | $ | 1.33 | $ | 4.22 | $ | 4.52 | ||||||||
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| Weighted average shares outstanding: |
||||||||||||||||
| Basic |
15,377 | 16,911 | 16,049 | 16,752 | ||||||||||||
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| Diluted |
15,403 | 16,971 | 16,079 | 16,858 | ||||||||||||
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| Dividends declared per common share |
$ | 0.51 | $ | — | $ | 1.48 | $ | — | ||||||||
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| Dividends paid per common share |
$ | 1.02 | $ | — | $ | 1.88 | $ | — | ||||||||
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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 | — | ||||||
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|
|||||
| 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 | ||||||
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|||||
| Total assets |
$ | 1,972,021 | $ | 1,999,366 | ||||
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| 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 | — | ||||||
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|||||
| 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 | ||||||
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| Total liabilities |
2,273,615 | 2,242,173 | ||||||
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| 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.
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