Dine Brands Global, Inc. Reports First Quarter 2020 Results

Comments on Strong Liquidity and Cash Position

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

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

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

Cash Position

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

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

The Company estimates its cash general and administrative expenses to be approximately $35 million per quarter. The Company has $16.4 million of quarterly interest payments on its Series 2019-1 Class A-2-I, Fixed Rate Senior Secured Notes and Series 2019-1 Class A-2-II, Fixed Rate Senior Secured Notes.

These projections exclude gross lease exposure of approximately $1.3 million per quarter on franchised restaurants that are currently closed and being evaluated by the Company.

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

Domestic System-Wide Comparable Same-Restaurant Sales Performance

First Quarter of 2020

  • Despite 10 consecutive weeks of positive comparable same-restaurant sales and 9 consecutive weeks of positive comparable traffic since the beginning of 2020, Applebee’s comparable same-restaurant sales decreased 10.6% for the first quarter of 2020.
  • IHOP’s comparable same-restaurant sales decreased 14.7% for the first quarter of 2020.
  • The decline in sales for both brands was primarily due to the impact of COVID-19 and mandated restrictions on restaurant operations at the Federal, state and local levels, which resulted in a meaningful decline in traffic.
Domestic Same-Restaurant Sales

QTD through March 8, 2020

 

Q1 2020

Applebee’s

3.2%

 

(10.6%)

 

 

 

 

 

IHOP

(0.6%)

 

(14.7%)

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

1.9%

(15.8%)

(76.0%)

(80.6%)

(76.2%)

(76.5%)

(64.9%)

(64.4%)

 

 

 

 

 

 

 

 

IHOP

(3.9%)

(25.4%)

(75.3%)

(84.6%)

(81.5%)

(79.4%)

(76.3%)

(75.4%)

 

Off-Premise Sales Growth Comparison

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

Q1 2020

Q2 2020 QTD WE 4/26

Applebee’s

12.5%

121.6%

 
IHOP

15.7%

131.7%

 

Operating Update of Domestic Applebee’s and IHOP Restaurants

Applebee’s

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

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

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

IHOP

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

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

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

First Quarter of 2020 Summary

  • GAAP earnings per diluted share for the first quarter of 2020 were $1.31 compared to $1.73 for the first quarter of 2019.
  • Adjusted earnings per diluted share for first quarter of 2020 were $1.45 compared to $1.90 for the first quarter of 2019. (See “Non-GAAP Financial Measures” and reconciliation of GAAP earnings per diluted share to adjusted earnings per diluted share.)
  • IHOP’s reported system-wide sales for the first quarter of 2020 were $748.8 million compared to $873.1 million for the first quarter of 2019.
  • IHOP’s franchisees completed 28 remodels in the first quarter of 2020, bringing the total number of domestic restaurants remodeled to over 1,100 since the inception of the current program.
  • General and administrative expenses for the first quarter of 2020 declined 12.2% year-over-year to $37.6 million.
  • Net income for the first quarter of 2020 was $22.3 million compared to $31.6 million the first quarter of 2019.
  • Consolidated adjusted EBITDA for the first quarter of 2020 was $61.7 million. This compares to $74.7 million the first quarter of 2019. (See “Non-GAAP Financial Measures” and reconciliation of GAAP net income to consolidated adjusted EBITDA.)
  • Cash flows from operating activities for the first quarter of 2020 were $29.6 million compared to $28.9 million for the first quarter of 2019.
  • Adjusted free cash flow for the first quarter of 2020 was $27.5 million, similar to the $27.7 million for the comparable period for 2019. (See “Non-GAAP Financial Measures” and reconciliation of the Company’s cash provided by operating activities to adjusted free cash flow.)
  • During the first quarter of 2020, the Company repurchased 459,899 shares of its common stock for a total cost of $26.5 million and paid quarterly cash dividends totaling $11.5 million.
  • GAAP net income available to common stockholders was $21.6 million, or earnings per diluted share of $1.31, for the first quarter of 2020. This compares to net income available to common stockholders of $30.5 million, or earnings per diluted share of $1.73, for the first quarter of 2019. The decrease in net income was primarily due to a decline in gross profit. This was partially offset by the continued decline in general and administrative expenses. The decrease in gross profit was primarily due to a significant decrease in guest traffic resulting from government measures undertaken to stem the spread of COVID-19.
  • Adjusted net income available to common stockholders was $23.9 million, or adjusted earnings per diluted share of $1.45, for the first quarter of 2020. This compares to adjusted net income available to common stockholders of $33.7 million, or adjusted earnings per diluted share of $1.90, for the first quarter of 2019. The decrease in adjusted net income was primarily due to lower gross profit for the reasons described above. These items were partially offset by fewer weighted average diluted shares outstanding and lower general and administrative expenses. (See “Non-GAAP Financial Measures” below.)
  • General and administrative expenses were $37.6 million for the first quarter of 2020 compared to $42.8 million for the first quarter of 2019. The improvement was mainly due to lower compensation expenses.

GAAP Effective Tax Rate

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

Financial Performance Guidance for 2020 Withdrawn

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

First Quarter of 2020 Earnings Conference Call Details

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

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

About Dine Brands Global, Inc.

Based in Glendale, California, Dine Brands Global, Inc. (NYSE: DIN), through its subsidiaries, franchises restaurants under both the Applebee’s Neighborhood Grill + Bar and IHOP brands. With over 3,600 restaurants combined in 17 countries and approximately 370 franchisees, Dine Brands is one of the largest full-service restaurant companies in the world. For more information on Dine Brands, visit the Company’s website located at www.dinebrands.com.

Forward-Looking Statements

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

Non-GAAP Financial Measures

This press release includes references to the Company’s non-GAAP financial measure “adjusted net income available to common stockholders”, “adjusted earnings per diluted share (Adjusted EPS)”, “Adjusted EBITDA” and “Adjusted free cash flow.” Adjusted EPS is computed for a given period by deducting from net income or loss available to common stockholders for such period the effect of any closure and impairment charges, any gain or loss related to debt extinguishment, any intangible asset amortization, any non-cash interest expense, any gain or loss related to the disposition of assets, and other items deemed not reflective of current operations. This is presented on an aggregate basis and a per share (diluted) basis. Adjusted EBITDA is computed for a given period by deducting from net income or loss for such period the effect of any closure and impairment charges, any interest charges, any income tax provision or benefit, any non-cash stock-based compensation, any depreciation and amortization, any gain or loss related to the disposition of assets and other items deemed not reflective of current operations. “Adjusted free cash flow” for a given period is defined as cash provided by operating activities, plus receipts from notes and equipment contracts receivable, less capital expenditures. Management may use certain of these non-GAAP financial measures along with the corresponding U.S. GAAP measures to evaluate the performance of the business and to make certain business decisions. Management uses adjusted free cash flow in its periodic assessments of, among other things, the amount of cash dividends per share of common stock and repurchases of common stock and we believe it is important for investors to have the same measure used by management for that purpose. Adjusted free cash flow does not represent residual cash flow available for discretionary purposes. Additionally, adjusted EPS is one of the metrics used in determining payouts under the Company’s annual cash incentive plan. Management believes that these non-GAAP financial measures provide additional meaningful information that should be considered when assessing the business and the Company’s performance compared to prior periods and the marketplace. Adjusted EPS and adjusted free cash flow are supplemental non-GAAP financial measures and should not be considered in isolation or as a substitute for measures of performance prepared in accordance with U.S. GAAP.

Dine Brands Global, Inc. and Subsidiaries

Consolidated Statements of Comprehensive Income

(In thousands, except per share amounts)

(Unaudited)

 

 

Three Months Ended

 

 

March 31,

 

 

2020

 

2019

 

 

 

 

 

Revenues:

 

 

 

 

Franchise revenues:

 

 

 

 

Royalties, franchise fees and other

 

$

83,314

 

 

$

96,296

 

Advertising revenue

 

61,723

 

 

72,630

 

Total franchise revenues

 

145,037

 

 

168,926

 

Company restaurant sales

 

31,300

 

 

35,735

 

Rental revenues

 

29,009

 

 

30,711

 

Financing revenues

 

1,538

 

 

1,810

 

Total revenues

 

206,884

 

 

237,182

 

Cost of revenues:

 

 

 

 

Franchise expenses:

 

 

 

 

Advertising expenses

 

61,723

 

 

72,630

 

Bad debt expense (credit)

 

518

 

 

(467

)

Other franchise expenses

 

7,209

 

 

8,140

 

Total franchise expenses

 

69,450

 

 

80,303

 

Company restaurant expenses

 

30,332

 

 

31,538

 

Rental expenses:

 

 

 

 

Interest expense from finance leases

 

1,210

 

 

1,529

 

Other rental expenses

 

21,323

 

 

21,095

 

Total rental expenses

 

22,533

 

 

22,624

 

Financing expenses

 

142

 

 

146

 

Total cost of revenues

 

122,457

 

 

134,611

 

Gross profit

 

84,427

 

 

102,571

 

General and administrative expenses

 

37,608

 

 

42,819

 

Interest expense, net

 

15,172

 

 

15,393

 

Amortization of intangible assets

 

2,826

 

 

2,924

 

Closure and impairment (credit) charges

 

(12

)

 

194

 

(Gain) loss on disposition of assets

 

(233

)

 

109

 

Income before income tax provision

 

29,066

 

 

41,132

 

Income tax provision

 

(6,738

)

 

(9,489

)

Net income

 

$

22,328

 

 

$

31,643

 

Net income available to common stockholders:

 

 

 

 

Net income

 

$

22,328

 

 

$

31,643

 

Less: Net income allocated to unvested participating restricted stock

 

(748

)

 

(1,111

)

Net income available to common stockholders

 

$

21,580

 

 

$

30,532

 

Net income available to common stockholders per share:

 

 

 

 

Basic

 

$

1.33

 

 

$

1.76

 

Diluted

 

$

1.31

 

 

$

1.73

 

Weighted average shares outstanding:

 

 

 

 

Basic

 

16,263

 

 

17,343

 

Diluted

 

16,470

 

 

17,690

 

 

 

 

 

 

Dividends declared per common share

 

$0.76

 

$0.69

Dividends paid per common share

 

$0.69

 

 

$0.63

Dine Brands Global, Inc. and Subsidiaries

Consolidated Balance Sheets

(In thousands, except share and per share amounts)

 

 

March 31, 2020

 

December 31, 2019

Assets

 

(Unaudited)

 

 

Current assets:

 

 

 

 

Cash and cash equivalents

 

$

344,560

 

 

$

116,043

 

Receivables, gross

 

85,321

 

 

140,007

 

Less: allowance for credit losses

 

(4,906

)

 

(3,138

)

Receivables, net

 

80,415

 

 

136,869

 

Restricted cash

 

34,159

 

 

40,732

 

Prepaid gift card costs

 

27,563

 

 

36,077

 

Prepaid income taxes

 

7,039

 

 

13,290

 

Other current assets

 

6,254

 

 

3,906

 

Total current assets.

 

499,990

 

 

346,917

 

Other intangible assets, net

 

572,449

 

 

575,103

 

Operating lease right-of-use asset

 

364,875

 

 

366,931

 

Goodwill

 

343,862

 

 

343,862

 

Property and equipment, net

 

211,835

 

 

216,420

 

Long-term receivables, gross

 

90,123

 

 

94,154

 

Less: allowance for credit losses

 

(8,375

)

 

(8,155

)

Long-term receivables, net

 

81,748

 

 

85,999

 

Deferred rent receivable

 

68,759

 

 

70,308

 

Non-current restricted cash

 

16,400

 

 

15,700

 

Other non-current assets, net

 

25,552

 

 

28,271

 

Total assets

 

$

2,185,470

 

 

$

2,049,511

 

Liabilities and Stockholders’ Deficit

 

 

 

 

Current liabilities:

 

 

 

 

Accounts payable

 

25,389

 

 

40,925

 

Gift card liability

 

120,187

 

 

159,019

 

Current maturities of operating lease obligations

 

72,508

 

 

72,815

 

Current maturities of finance lease and financing obligations

 

13,502

 

 

13,669

 

Accrued employee compensation and benefits

 

11,714

 

 

23,904

 

Dividends payable

 

12,739

 

 

11,702

 

Deferred franchise revenue, short-term

 

9,567

 

 

10,086

 

Other accrued expenses

 

24,972

 

 

25,792

 

Total current liabilities

 

290,578

 

 

357,912

 

Long-term debt

 

1,506,203

 

 

1,288,248

 

Operating lease obligations, less current maturities

 

355,160

 

 

359,025

 

Finance lease obligations, less current maturities

 

74,498

 

 

77,393

 

Financing obligations, less current maturities

 

35,944

 

 

37,682

 

Deferred income taxes, net

 

87,851

 

 

98,499

 

Deferred franchise revenue, long-term

 

56,046

 

 

56,944

 

Other non-current liabilities

 

15,567

 

 

15,582

 

Total liabilities

 

2,421,847

 

 

2,291,285

 

Commitments and contingencies

 

 

 

 

Stockholders’ deficit:

 

 

 

 

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

 

 

 

 

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

 

249

 

 

249

 

Additional paid-in-capital

 

252,443

 

 

246,192

 

Retained earnings

 

70,769

 

 

61,653

 

Accumulated other comprehensive loss

 

(58

)

 

(58

)

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

 

(559,780

)

 

(549,810

)

Total stockholders’ deficit

 

(236,377

)

 

(241,774

)

Total liabilities and stockholders’ deficit

 

$

2,185,470

 

 

$

2,049,511

 

 

Dine Brands Global, Inc. and Subsidiaries

Consolidated Statements of Cash Flows

(In thousands)

 

 

Three Months Ended

 

 

March 31,

 

 

2020

 

2019

 

 

 

 

 

Cash flows from operating activities:

 

 

 

 

Net income.

 

$

22,328

 

 

$

31,643

 

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

 

 

 

 

Depreciation and amortization

 

10,641

 

 

10,179

 

Non-cash stock-based compensation expense

 

4,038

 

 

4,107

 

Non-cash interest expense

 

655

 

 

1,118

 

Closure and impairment (credit) charges

 

(12

)

 

194

 

Deferred income taxes

 

(10,491

)

 

(1,149

)

Deferred revenue

 

(1,417

)

 

(1,877

)

(Gain) loss on disposition of assets

 

(227

)

 

109

 

Other

 

(1,293

)

 

(2,099

)

Changes in operating assets and liabilities:

 

 

 

 

Accounts receivable, net

 

12,077

 

 

(3,210

)

Current income tax receivables and payables

 

6,443

 

 

(1,399

)

Gift card receivables and payables

 

11,693

 

 

(890

)

Other current assets

 

(2,347

)

 

(2,570

)

Accounts payable

 

(12,748

)

 

1,826

 

Accrued employee compensation and benefits

 

(12,190

)

 

(12,141

)

Other current liabilities

 

2,495

 

 

5,088

 

Cash flows provided by operating activities

 

29,645

 

 

28,929

 

Cash flows from investing activities:

 

 

 

 

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

 

5,544

 

 

5,260

 

Net additions to property and equipment

 

(5,084

)

 

(4,717

)

Proceeds from sale of property and equipment

 

6

 

 

400

 

Additions to long-term receivables

 

(1,511

)

 

(395

)

Other

 

(195

)

 

(100

)

Cash flows (used in) provided by investing activities

 

(1,240

)

 

448

 

Cash flows from financing activities:

 

 

 

 

Borrowing from revolving credit facility

 

220,000

 

 

 

Repayment of revolving credit facilities

 

 

 

(25,000

)

Dividends paid on common stock

 

(11,451

)

 

(11,153

)

Repurchase of common stock

 

(29,853

)

 

(10,802

)

Principal payments on finance lease obligations

 

(2,981

)

 

(3,466

)

Proceeds from stock options exercised

 

20,524

 

 

6,768

 

Tax payments for restricted stock upon vesting

 

(2,000

)

 

(1,817

)

Cash flows provided by (used in) financing activities

 

194,239

 

 

(45,470

)

Net change in cash, cash equivalents and restricted cash

 

222,644

 

 

(16,093

)

Cash, cash equivalents and restricted cash at beginning of period

 

172,475

 

 

200,379

 

Cash, cash equivalents and restricted cash at end of period

 

$

395,119

 

 

$

184,286

 

Contacts

Investor Contact
Ken Diptee

Executive Director, Investor Relations

Dine Brands Global, Inc.

818-637-3632

Media Contact
Susan Nelson

Vice President, Global Communications

and Public Affairs

Dine Brands Global, Inc.

818-637-4726

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