EX-99.1 3 d709303dex991.htm EX-99.1 EX-99.1

Exhibit 99.1

 

LOGO

 

 

News Release                

Investor Contact

Ken Diptee

Executive Director, Investor Relations

Dine Brands Global, Inc.

818-637-3632

Media Contact

Thien Ho

Executive Director, Communications

Dine Brands Global, Inc.

818-549-4238

Dine Brands Global, Inc. Reports Strong Fourth Quarter and Fiscal 2018 Results

Applebee’s Fourth Quarter Same-Restaurant Sales Increase 3.5%

IHOP Fourth Quarter Same-Restaurant Sales Increase 3.0%

Company Declares and Raises First Quarter 2019 Dividend

New Share Repurchase Authorization of $200 Million

GLENDALE, Calif., February 21, 2019 – Dine Brands Global, Inc. (NYSE: DIN), the parent company of Applebee’s Neighborhood Grill + Bar® and IHOP® restaurants, today announced financial results for the fourth quarter and fiscal 2018.

“Dine Brand’s strong performance in the fourth quarter and throughout 2018 is the result of a clear strategic vision and unwavering commitment to sustainable growth. Both Applebee’s and IHOP have outperformed their respective categories by delivering on comprehensive efforts to drive their businesses and delight guests. The momentum we are seeing is bolstered by meaningful improvements in the in-restaurant experience, ongoing investment in guest-facing technologies, breakthrough marketing and further extending our off-premise platforms for both brands. I am very proud of the Dine teams, our franchisees and their operators and team members for their contributions, hard work and commitment to a multi-pronged strategy and our collective success,” said Steve Joyce, Chief Executive Officer of Dine Brands Global, Inc.

Mr. Joyce continued, “As we head into 2019, we are very encouraged by our outlook and growth opportunities. We have the right strategies in place to drive long-term momentum and create additional value for our shareholders.”

Key Highlights

 

   

Applebee’s comparable same-restaurant sales increased 3.5% for the fourth quarter of fiscal 2018, achieving the fifth consecutive quarter of sales growth.

 

   

IHOP’s comparable same-restaurant sales increased 3.0% for the fourth quarter of fiscal 2018, achieving the fourth consecutive quarter of sales growth.


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IHOP’s reported system-wide sales for the fourth quarter of fiscal 2018 increased 4.5% year-over-year to $863.7 million.

 

   

Gross profit for the fourth quarter of fiscal 2018 increased 41.9% year-over-year to $98.4 million.

 

   

GAAP earnings per diluted share of $1.47 for the fourth quarter of fiscal 2018 compares to $3.82 for the fourth quarter of fiscal 2017. The decline was primarily due to a tax benefit of $58.8 million in the fourth quarter of fiscal 2017, partially offset by a $29.0 million increase in gross profit.

 

   

Adjusted earnings per diluted share increased to $1.70 for the fourth quarter of fiscal 2018 compared to $0.48 in the fourth quarter of fiscal 2017. (See “Non-GAAP Financial Measures” below.)

 

   

GAAP net income for the fourth quarter of fiscal 2018 was $27.0 million.

 

   

Consolidated adjusted EBITDA for the fourth quarter of fiscal 2018 increased 66.7% year-over-year to $65.0 million. (See “Non-GAAP Financial Measures” and reconciliation of GAAP net income to consolidated adjusted EBITDA.)

 

   

IHOP franchisees and area licensees developed 34 net new domestic restaurants in fiscal 2018, marking at least a decade of consecutive net domestic development.

 

   

For the twelve-month period ended December 31, 2018, the Company repurchased 478,839 shares of its common stock for a total cost of approximately $34.9 million and paid quarterly cash dividends totaling approximately $51.1 million.

Fourth Quarter of Fiscal 2018 Financial Highlights

 

   

GAAP net income available to common stockholders was $26.1 million, or earnings per diluted share of $1.47, for the fourth quarter of fiscal 2018. This compares to net income available to common stockholders of $67.8 million, or earnings per diluted share of $3.82, for the fourth quarter of fiscal 2017. The decrease in net income was primarily due to a tax benefit of $58.8 million in the fourth quarter of fiscal 2017. The tax benefit was mainly a result of the revaluation of our deferred tax assets and liabilities due to a future reduction in our corporate tax rate following the enactment of the Tax Cuts and Jobs Act tax legislation in December 2017. There was no similar tax benefit from the revaluation of our deferred tax assets and liabilities in the fourth quarter of fiscal 2018. This item was partially offset by an increase in gross profit of $29.0 million, which was due to lower bad debt expense and cash collections of previously unrecognized royalty revenues, a lower advertising fund deficit, increases in Applebee’s and IHOP domestic system-wide comparable same-restaurant sales and IHOP restaurant development.

 

   

Adjusted net income available to common stockholders was $30.3 million, or adjusted earnings per diluted share of $1.70, for the fourth quarter of fiscal 2018. This compares to adjusted net income available to common stockholders of $8.6 million, or adjusted earnings per diluted share of $0.48, for the fourth quarter of fiscal 2017. The increase in adjusted net income was mainly due to higher franchise segment profit as the result of increases in Applebee’s and IHOP domestic system-wide comparable same-restaurant sales, lower bad debt expense and cash collections of previously unrecognized royalty revenues. These items were partially offset by an increase in general and administrative expenses. (See “Non-GAAP Financial Measures” below.)

 

   

General and administrative expenses were $45.3 million for the fourth quarter of fiscal 2018 compared to $40.0 million for the fourth quarter of fiscal 2017. The increase was primarily due to

 


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higher personnel-related costs and business acquisition costs related to 69 Applebee’s restaurants acquired by the Company in December 2018. These items were partially offset by a decline in costs related to conferences and professional services.                

Fiscal 2018 Financial Highlights

 

   

GAAP net income available to common stockholders was $77.6 million, or earnings per diluted share of $4.37, for fiscal 2018. This compares to a net loss available to common stockholders of $336.0 million, or a net loss per diluted share of $18.96, for fiscal 2017. The increase in net income was primarily due to non-cash impairment charges totaling $531.6 million in fiscal 2017 related to the write-downs of Applebee’s goodwill and other intangible assets as well as higher gross profit. The non-cash impairment charges were partially offset by a tax benefit of $85.6 million in 2017 primarily because of a fourth-quarter revaluation of our deferred tax assets and liabilities due to a future reduction in our corporate tax rate.

 

   

Consolidated adjusted EBITDA for fiscal 2018 was $230.6 million. This compares to adjusted EBITDA for fiscal 2017 of $221.3 million. (See “Non-GAAP Financial Measures” and reconciliation of GAAP net income to consolidated adjusted EBITDA.)

 

   

Adjusted net income available to common stockholders was $95.5 million, or adjusted earnings per diluted share of $5.37, for fiscal 2018. This compares to adjusted net income available to common stockholders of $72.5 million, or adjusted earnings per diluted share of $4.09, for fiscal 2017. The increase in adjusted net income was mainly due to lower income tax expense, as well as higher franchise segment profit, driven by increases in Applebee’s and IHOP domestic system-wide comparable same-restaurant sales, lower bad debt expense and cash collections of previously unrecognized royalty revenues. These items were partially offset by an increase in general and administrative expenses. (See “Non-GAAP Financial Measures” below.)

 

   

General and administrative expenses were $166.7 million for fiscal 2018 compared to $165.7 million for fiscal 2017. The increase was due to higher costs of stock-based and other incentive compensation, partially offset by a decline in professional services costs.

 

   

Cash flows from operating activities were $140.3 million for fiscal 2018 compared to $65.7 million for fiscal 2017. Adjusted free cash flow was $140.9 million for fiscal 2018 compared to $63.0 million for fiscal 2017. (See “Non-GAAP Financial Measures” below.)

Fiscal 2018 Same-Restaurant Sales Performance

 

   

Applebee’s domestic system-wide comparable same-restaurant sales increased 5.0% for fiscal 2018.

 

   

IHOP’s domestic system-wide comparable same-restaurant sales increased 1.5% for fiscal 2018.

GAAP Effective Tax Rate

Our effective tax rates for the fourth quarter and fiscal 2018 were 15.8% and 27.4%, respectively. The fourth quarter effective tax rate was 15.8% primarily due to the revaluation of state deferred taxes due to the December 2018 acquisition of Applebee’s 69 restaurants in North Carolina and South Carolina and state legislative changes enacted in 2018. The effective tax rates were impacted by the Tax Cuts and Jobs Act (the “Tax Act”) enacted in December 2017, which lowered the federal statutory corporate tax rate from 35% to 21%, beginning in 2018.

During fiscal, 2018, we increased our tax provision by $5.1 million related to adjustments resulting from IRS audits for tax years 2011 through 2013. This increased our effective tax rate from what would have been an estimated combined federal and state rate of 25% (reflecting the reduction in the federal tax rate from the Tax Act) to approximately 27.4% for fiscal 2018. Completion of the IRS audits for tax years 2011 through 2013 will allow us to accelerate the collection of certain tax benefits recognized in prior years. As a result, we expect to receive a cash refund of approximately $12.5 million within the next 12 months.

 


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Capital Allocation

The Company’s board of directors approved a 10% increase in its quarterly cash dividend to $0.69 per share of common stock. The dividend for the first quarter of fiscal 2019 will be payable on April 5, 2019 to the Company’s stockholders of record at the close of business on March 20, 2019.

The board of directors also approved replacing the Company’s existing share repurchase authorization for its common stock, effective immediately, with an authorization of up to $200 million.    

Financial Performance Guidance for Fiscal 2019

The following financial performance guidance for fiscal 2019 is based on management’s expectations as of February 21, 2019. The projections are as of this date, and the Company assumes no obligation to update or supplement these estimates.

 

   

Applebee’s domestic system-wide comparable same-restaurant sales performance is expected to range between positive 2.0% and positive 4.0%.

 

   

IHOP’s domestic system-wide comparable same-restaurant sales performance is expected to range between positive 2.0% and positive 4.0%.

 

   

Development activity by Applebee’s franchisees is expected to result in net closures between 20 and 30 restaurants globally, the majority of which are expected to be domestic closures.

 

   

IHOP franchisees and area licensees are expected to develop between 35 and 55 net new restaurants globally, the majority of which are expected to be domestic openings.

 

   

Total segment profit, excluding the company restaurants segment, is expected to be between approximately $373 million and $394 million.

 

   

General and administrative expenses are expected to range between approximately $165 million and approximately $170 million, including non-cash stock-based compensation expense and depreciation totaling approximately $40 million. This projection includes approximately $6 million of general and administrative expenses related to the company restaurants segment.

 

   

GAAP net income is expected to range between approximately $104 million and approximately $113 million.

 

   

Consolidated adjusted EBITDA is expected to range between approximately $268 million and approximately $277 million. This projection includes company restaurants segment EBITDA, which is expected to be between approximately $9 million and approximately $11 million. (See “Non-GAAP Financial Measures” and reconciliation of GAAP net income to consolidated adjusted EBITDA.)

 

   

GAAP earnings per diluted share is expected to range from $6.15 to $6.45.

 

   

Adjusted earnings per diluted share is expected to range from $6.90 to $7.20. (See “Non-GAAP Financial Measures” and reconciliation of GAAP earnings per diluted share to adjusted earnings per diluted share.)

 


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2019 Diluted Net Income Available to Common Stockholders Per Share(1), As Adjusted

Reconciliation Guidance Table

 

Net income available to common stockholders per diluted share

     $6.15 – $6.45  

Closure and impairment charges

     0.14  

Amortization of intangible assets

     0.61  

Non-cash interest expense

     0.27  

Income tax provision for above adjustments at 26%

     (0.27)  
  

 

 

 

Diluted net income available to common stockholders per

share, as adjusted

     $6.90 – $7.20  
  

 

 

 
(1) The adjustments to net income available to common stockholders per diluted share are midpoint estimates.   

2019 Net Income to Consolidated Adjusted EBITDA Reconciliation Guidance Table(1) ($ in millions)

 

Net income

     $104 – $113  

Interest charges

     74  

Income tax provision

     38  

Depreciation and amortization

     36  

Non-cash stock-based compensation

     14  

Impairment and closure charges

     2  
  

 

 

 

Consolidated adjusted EBITDA (Non-GAAP)

     $268 – 277  
  

 

 

 
(1) The adjustments to net income are midpoint estimates.   

Fourth Quarter and Fiscal 2018 Conference Call Details

Dine Brands will host a conference call to discuss its results on February 21, 2019 at 6:00 a.m. Pacific Time/9:00 a.m. Eastern Time. To participate on the call, please dial (888) 771-4371 and reference passcode 48199137. International callers, please dial (847) 585-4405 and reference passcode 48199137.

A live webcast of the call will be available on www.dinebrands.com and may be accessed by visiting Events and Presentations under the site’s Investors section. Participants should allow approximately ten minutes prior to the call’s start time to visit the site and download any streaming media software needed to listen to the webcast. A telephonic replay of the call may be accessed from 8:30 a.m. Pacific Time/11:30 a.m. Eastern Time on February 21, 2019 through 8:59 p.m. Pacific Time/11:59 p.m. Eastern Time on February 28, 2019 by dialing (888) 843-7419 and referencing passcode 48199137#. International callers, please dial (630) 652-3042 and reference passcode 48199137#. An online archive of the webcast will also be available on Events and Presentations under the Investors section of the Company’s website.

About Dine Brands Global, Inc.

Based in Glendale, California, Dine Brands Global, Inc. (NYSE: DIN), through its subsidiaries, franchises restaurants under both the Applebee’s Neighborhood Grill & Bar and IHOP brands. With approximately 3,700 restaurants combined in 18 countries and approximately 380 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.

 


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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: 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 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 or other series 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 Company’s Annual and Quarterly Reports on Forms 10-K and 10-Q and in the Company’s other filings with the Securities and Exchange Commission. The forward-looking statements contained in this release are made as of the date hereof and the Company 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

 


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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 (Loss)

(In thousands, except per share amounts)

 

     Three Months Ended      Twelve Months Ended  
     December 31,      December 31,  
     (unaudited)     

 

 
     2018      2017      2018      2017  
            (as adjusted)             (as adjusted)  

Revenues:

           

Franchise revenues:

           

Royalties, franchise fees and other

   $ 99,865       $ 88,266       $ 375,640       $ 360,253   

Advertising revenue

     74,737         55,785         268,294         234,165   
  

 

 

    

 

 

    

 

 

    

 

 

 

Total Franchise revenues

     174,602         144,051         643,934         594,418   

Rental revenues

     30,642         30,585         121,934         121,437   

Financing revenues

     1,870         2,072         7,979         8,352   

Company restaurant sales

     7,084         —         7,084         7,518   
  

 

 

    

 

 

    

 

 

    

 

 

 

Total revenues

     214,198         176,708         780,931         731,725   
  

 

 

    

 

 

    

 

 

    

 

 

 

Cost of revenues:

           

Franchise expenses:

           

Advertising expenses

     76,033         64,716         269,590         243,096   

Other franchise expenses

     11,429         19,549         61,029         50,890   
  

 

 

    

 

 

    

 

 

    

 

 

 

Total Franchise expenses

     87,462         84,265         330,619         293,986   

Rental expenses

     22,345         22,927         90,756         90,592   

Financing expenses

     148         149         597         598   

Company restaurant expenses

     5,872         31         5,872         7,838   
  

 

 

    

 

 

    

 

 

    

 

 

 

Total cost of revenues

     115,827         107,372         427,844         393,014   
  

 

 

    

 

 

    

 

 

    

 

 

 

Gross profit

     98,371         69,336         353,087         338,711   

Impairment of goodwill and intangible assets

     —         —         —         531,634   

General and administrative expenses

     45,260         39,978         166,683         165,679   

Interest expense

     15,576         15,483         61,686         61,979   

Amortization of intangible assets

     2,592         2,502         10,105         10,009   

Closure and other impairment charges

     1,988         162         2,107         3,968   

Debt refinancing costs

     (9)        —         2,523         —   

Loss (gain) on disposition of assets

     910         138         (625)        (6,249)  
  

 

 

    

 

 

    

 

 

    

 

 

 

Income (loss) before income tax (provision) benefit

     32,054         11,073         110,608         (428,309)  

Income tax (provision) benefit

     (5,073)        58,827         (30,254)        85,559   
  

 

 

    

 

 

    

 

 

    

 

 

 

Net income (loss)

   $ 26,981       $ 69,900       $ 80,354       $ (342,750)  
  

 

 

    

 

 

    

 

 

    

 

 

 

Net income (loss) available to common stockholders:

           

Net income (loss)

   $ 26,981       $ 69,900       $ 80,354       $ (342,750)  

Less: Net (income) loss allocated to unvested participating restricted stock

     (917)        (2,095)        (2,711)        6,768   
  

 

 

    

 

 

    

 

 

    

 

 

 

Net income (loss) available to common stockholders

   $ 26,064       $ 67,805       $ 77,643       $ (335,982)  
  

 

 

    

 

 

    

 

 

    

 

 

 

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

           

Basic

   $ 1.49       $ 3.82       $ 4.43       $ (18.96)  
  

 

 

    

 

 

    

 

 

    

 

 

 

Diluted

   $ 1.47       $ 3.82       $ 4.37       $ (18.96)  
  

 

 

    

 

 

    

 

 

    

 

 

 

Weighted average shares outstanding:

           

Basic

     17,446                 17,745         17,533         17,725   
  

 

 

    

 

 

    

 

 

    

 

 

 

Diluted

             17,785         17,764                 17,789                 17,740   
  

 

 

    

 

 

    

 

 

    

 

 

 

Dividends declared per common share

     $0.63         $0.97         $2.52         $3.88   
  

 

 

    

 

 

    

 

 

    

 

 

 

Dividends paid per common share

     $0.63         $0.97         $2.86         $3.88   
  

 

 

    

 

 

    

 

 

    

 

 

 

 


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Dine Brands Global, Inc. and Subsidiaries

Consolidated Balance Sheets

(In thousands, except share and per share amounts)

 

     December 31, 2018     December 31, 2017  
           (as adjusted)  

Assets

    

Current assets:

    

Cash and cash equivalents

   $ 137,164      $ 117,010   

Receivables, net

     137,504        140,188   

Restricted cash

     48,515        31,436   

Prepaid gift card costs

     38,195        40,725   

Prepaid income taxes

     17,402        43,654   

Other current assets

     3,410        12,615   
  

 

 

   

 

 

 

Total current assets

     382,190       385,628   

Long-term receivables, net

     103,102        126,570   

Other intangible assets, net

     585,889        582,787   

Goodwill

     345,314        339,236   

Property and equipment, net

     240,264        199,585   

Deferred rent receivable

     77,069        82,971   

Non-current restricted cash

     14,700        14,700   

Other non-current assets, net

     26,152        4,135   
  

 

 

   

 

 

 

Total assets

   $ 1,774,680      $ 1,735,612   
  

 

 

   

 

 

 

Liabilities and Stockholders’ Deficit

    

Current liabilities:

    

Current maturities of long-term debt

   $ 25,000      $ 12,965   

Accounts payable

     43,468        55,028   

Gift card liability

     160,438        164,441   

Dividends payable

     11,389        17,748   

Current maturities of capital lease and financing obligations

     14,031        14,193   

Accrued employee compensation and benefits

     27,479        13,547   

Deferred franchise revenue, short-term

     10,138        11,001   

Other accrued expenses

     24,243        16,001   
  

 

 

   

 

 

 

Total current liabilities

     316,186        304,924   

Long-term debt, less current maturities

     1,274,087        1,269,849   

Capital lease obligations, less current maturities

     87,762        61,895   

Financing obligations, less current maturities

     38,482        39,200   

Deferred income taxes, net

     105,816        117,669   

Deferred franchise revenue, long-term

     64,557        70,432   

Deferred rent payable

     62,744        69,112   

Other non-current liabilities

     27,319        18,071   
  

 

 

   

 

 

 

Total liabilities

     1,976,953        1,951,152   
  

 

 

   

 

 

 

Commitments and contingencies

    

Stockholders’ deficit:

    

Common stock, $0.01 par value; shares: 40,000,000 authorized; December 31, 2018 - 24,984,898 issued, 17,644,267 outstanding; December 31, 2017 - 25,022,312 issued, 17,993,124 outstanding

     250        250   

Additional paid-in-capital

     237,726        276,408   

Retained earnings (accumulated deficit)

     10,414        (69,940)  

Accumulated other comprehensive loss

     (60)       (105)  

Treasury stock, at cost; shares: December 31, 2018 - 7,340,631; December 31, 2017 - 7,029,188

     (450,603)       (422,153)  
  

 

 

   

 

 

 

Total stockholders’ deficit

     (202,273)       (215,540)  
  

 

 

   

 

 

 

Total liabilities and stockholders’ deficit

   $         1,774,680      $         1,735,612   
  

 

 

   

 

 

 

 


Page 10 of 16

 

Dine Brands Global, Inc. and Subsidiaries

Consolidated Statements of Cash Flows

(In thousands)

 

     Twelve Months Ended  
     December 31,  
     2018      2017  
            (as adjusted)  

Cash flows from operating activities:

     

Net income (loss)

   $ 80,354       $ (342,750)  

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

     

Impairment of goodwill and intangible assets

     —         531,634   

Deferred income taxes

     (11,847)        (136,127)  

Depreciation and amortization

     32,175         30,648   

Non-cash interest expense

     3,792         3,364   

Closure and other impairment charges

     2,038         3,834   

Non-cash stock-based compensation expense

     10,546         10,752   

Gain on disposition of assets

     (623)        (6,285)  

Other

     (6,526)        (10,980)  

Changes in operating assets and liabilities:

     

Accounts receivable, net

     3,149         (8,430)  

Current income tax receivables and payables

     8,119         (8,490)  

Gift card receivables and payables

     (1,488)        (3,322)  

Other current assets

     10,425         (8,247)  

Accounts payable

     (9,940)        7,208   

Accrued employee compensation and benefits

     13,183         (1,126)  

Other current liabilities

     6,989         4,050   
  

 

 

    

 

 

 

Cash flows provided by operating activities

     140,346         65,733   
  

 

 

    

 

 

 

Cash flows from investing activities:

     

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

     25,771         20,486   

Proceeds from sale of property and equipment

     655         1,100   

Acquisition of business

     (20,155)        —   

Additions to property and equipment

     (14,279)        (13,370)  

Additions to long-term receivables

     (6,500)        —   

Other

     (293)        (541)  
  

 

 

    

 

 

 

Cash flows (used in) provided by investing activities

     (14,801)        7,675   
  

 

 

    

 

 

 

Cash flows from financing activities:

     

Borrowings from revolving credit facilities

     75,000         —   

Repayments of revolving credit facilities

     (50,000)        —   

Repayment of long-term debt

     (13,000)        (3,250)  

Dividends paid on common stock

     (51,125)        (69,790)  

Repurchase of Dine Brands Global common stock

     (33,603)        (10,003)  

Principal payments on capital lease and financing obligations

     (13,907)        (12,949)  

Payment of debt issuance costs

     (3,633)        —   

Proceeds from stock options exercised

     3,928         2,635   

Tax payments for restricted stock upon vesting

     (1,972)        (2,396)  
  

 

 

    

 

 

 

Cash flows used in financing activities

     (88,312)        (95,753)  
  

 

 

    

 

 

 

Net change in cash, cash equivalents and restricted cash

     37,233         (22,345)  

Cash, cash equivalents and restricted cash at beginning of period

     163,146         185,491   
  

 

 

    

 

 

 

Cash, cash equivalents and restricted cash at end of period

   $             200,379       $             163,146   
  

 

 

    

 

 

 

 


Page 11 of 16

 

Dine Brands Global, Inc. and Subsidiaries

Non-GAAP Financial Measures

(In thousands, except per share amounts)

(Unaudited)

Reconciliation of net income (loss) available to common stockholders to net income (loss) available to common stockholders, as adjusted for the following items: closure and other impairment charges; executive separation costs; amortization of intangible assets; non-cash interest expense; gain or loss on disposition of assets; debt financing costs; business acquisition costs; the combined tax effect of the preceding adjustments; and other tax-related adjustments, as well as related per share data:

 

     Three Months Ended     Twelve Months Ended  
     December 31,     December 31,  
     2018     2017     2018     2017  
           (as adjusted)           (as adjusted)  

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

   $ 26,064      $ 67,805      $ 77,643      $ (335,982)  

Impairment of goodwill and intangible assets

     —        —        —        531,634   

Closure and other impairment charges

     1,988        162        2,107        3,968   

Executive separation costs

     —        —        —        8,782   

Amortization of intangible assets

     2,592        2,502        10,105        10,009   

Non-cash interest expense

     1,103        855        3,792        3,364   

Loss (gain) on disposition of assets

     910        138        (625)       (6,249)  

Debt refinancing costs

     (9)       —        2,523        —   

Business acquisition costs

     1,114        —        1,114        —   

Income tax provision

     (2,001)       (1,390)       (4,944)       (73,444)  

Deferred tax impact of tax rate change

     —        (66,519)       —        (66,519)  

Income tax adjustments (1)

     (1,310)       3,207        4,434        5,426   

Net (income) loss allocated to unvested participating restricted stock

     (154)       1,828        (631)       (8,508)  
  

 

 

   

 

 

   

 

 

   

 

 

 

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

   $ 30,297      $ 8,588      $ 95,518      $ 72,481   
  

 

 

   

 

 

   

 

 

   

 

 

 

Diluted net income (loss) available to common stockholders per share:

        

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

   $ 1.47      $ 3.82      $ 4.37      $ (18.96)  

Impairment of goodwill and intangible assets

     —        —        —        26.25   

Closure and other impairment charges

     0.08        0.01        0.09        0.14   

Executive separation costs

     —        —        —        0.31   

Amortization of intangible assets

     0.11        0.09        0.42        0.35   

Non-cash interest expense

     0.05        0.03        0.16        0.12   

Loss (gain) on disposition of assets

     0.04        0.00        (0.03)       (0.22)  

Debt refinancing costs

     (0.00)       —        0.10        —   

Business acquisition costs

     0.05        —        0.05        —   

Deferred tax impact of tax rate change

     —        (3.74)       —        (3.75)  

Income tax adjustments (1)

     (0.07)       0.18        0.25        0.31   
Net (income) loss allocated to unvested participating restricted stock      (0.01)       0.10        (0.04)       (0.48)  

Rounding

     (0.02)       (0.01)       —        0.02   
  

 

 

   

 

 

   

 

 

   

 

 

 
Diluted net income (loss) available to common stockholders per share, as adjusted    $ 1.70      $ 0.48      $ 5.37      $ 4.09   
  

 

 

   

 

 

   

 

 

   

 

 

 
Numerator for basic EPS-income available to common stockholders, as adjusted    $ 30,297      $ 8,588      $ 95,518      $ 72,481   

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

     12        —        25        —   
  

 

 

   

 

 

   

 

 

   

 

 

 

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

   $         30,309      $ 8,588      $             95,543      $ 72,481   
  

 

 

   

 

 

   

 

 

   

 

 

 

Denominator for basic EPS-weighted-average shares

     17,446        17,745        17,533                17,725   

Dilutive effect of stock options

     339        19        256        15   
  

 

 

   

 

 

   

 

 

   

 

 

 
Denominator for diluted EPS-weighted-average shares and assumed conversions      17,785                17,764        17,789        17,740   
  

 

 

   

 

 

   

 

 

   

 

 

 

 

(1)

2018: Charges related to adjustments resulting from IRS audits for tax years 2011 through 2013; 2017: Unrecognized tax benefits related to domestic manufacturing deduction taken in years prior to 2017.

 


Page 12 of 16

 

Dine Brands Global, Inc. and Subsidiaries

Non-GAAP Financial Measures

(Unaudited)

Reconciliation of the Company’s cash provided by operating activities to “adjusted free cash flow” (cash provided by operating activities, plus receipts from notes and equipment contracts receivable, less additions to property and equipment). Management uses this liquidity measure in its periodic assessments of, among other things, the amount of cash dividends per share of common stock and repurchases of common stock. We believe it is important for investors to have the same measure used by management for that purpose. Adjusted free cash flow does not represent residual cash flow available for discretionary purposes.

 

     Twelve Months Ended
December 31,
 
     2018     2017  
     (In millions)  

Cash flows provided by operating activities

   $               140.3      $               65.7   

Receipts from notes and equipment contracts receivable

     14.9        10.6   

Additions to property and equipment

     (14.3)       (13.3)  
  

 

 

   

 

 

 

Adjusted free cash flow

     140.9        63.0   

Dividends paid on common stock

     (51.1)       (69.8)  

Repurchase of Dine Brands Global common stock

     (33.6)       (10.0)  
  

 

 

   

 

 

 
   $               56.2      $               (16.8)  
  

 

 

   

 

 

 

 


Page 13 of 16

 

Dine Brands Global, Inc. and Subsidiaries

Non-GAAP Financial Measures

(Unaudited)

Reconciliation of the Company’s net income (loss) to “adjusted EBITDA.” The Company defines adjusted EBITDA as net income (loss), adjusted for 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, 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 evaluation the performance of the company and to make certain business decisions.

 

     Three Months Ended
December 31,
     Twelve Months Ended
December 31,
 
     2018      2017      2018      2017  
            (as adjusted)             (as adjusted)  

Net income (loss), as reported

   $ 26,981       $ 69,900       $ 80,354       $ (342,750)  

Interest charges

     17,929         17,906         71,537         72,281   

Income tax provision (benefit)

     5,073         (58,827)        30,254         (85,559)  

Depreciation and amortization

     8,445         7,595         32,175         30,648   

Non-cash stock-based compensation

     2,530         1,926         10,546         10,752   

Impairment of goodwill and intangible assets

     —         —         —         531,634   

Closure and other impairment charges

     1,988         162         2,107         3,968   

Loss (gain) on disposition of assets

     910         138         (625)        (6,249)  

Cash executive separation costs

     —         —         —         5,901   

Debt refinancing costs

     —         —         2,523         —   

Business acquisition costs

     1,114         —         1,114         —   

Other taxes

     57         218         605         677   
  

 

 

    

 

 

    

 

 

    

 

 

 

Adjusted EBITDA

   $         65,027       $         39,018       $         230,590       $         221,303   
  

 

 

    

 

 

    

 

 

    

 

 

 

 


Page 14 of 16

 

Dine Brands Global, Inc. and Subsidiaries

Restaurant Data

(Unaudited)

The following table sets forth, for the three and twelve months ended December 31, 2018 and 2017, 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
December 31,
     Twelve Months Ended
December 31,
 
     2018      2017      2018      2017  

Applebee’s

           

Effective Restaurants(a)

           

Franchise

     1,835            1,936           1,883            1,970      

Company

     11            —           3            —      
  

 

 

    

 

 

    

 

 

    

 

 

 

Total

     1,846            1,936           1,886            1,970      
  

 

 

    

 

 

    

 

 

    

 

 

 

System-wide(b)

           

Domestic sales percentage change(c)

     0.3 %        (1.1)%        2.3 %        (6.8)%  

Domestic same-restaurant sales percentage change(d)

     3.5 %        1.3 %        5.0 %        (5.3)%  

Franchise(b)

           

Domestic sales percentage change(c)

     (0.4)%        (1.1)%        2.1 %        (6.8)%  

Domestic same-restaurant sales percentage change(d)

     3.4 %        1.3 %        4.9 %        (5.3)%  

Average weekly domestic unit sales (in thousands)

   $ 46.5          $ 44.2          $ 46.7          $ 43.6      

IHOP

           

Effective Restaurants(a)

           

Franchise

     1,649            1,598           1,633            1,576      

Area license

     159            164           162            164      

Company

     —            —           —            5      
  

 

 

    

 

 

    

 

 

    

 

 

 

Total

             1,808                    1,762                   1,795                    1,745      
  

 

 

    

 

 

    

 

 

    

 

 

 

System-wide(b)

           

Sales percentage change(c)

     4.5 %        3.1%         3.9%         0.7%   

Domestic same-restaurant sales percentage change(d)

     3.0 %        (0.4)%        1.5 %        (1.9)%  

Franchise(b)

           

Sales percentage change(c)

     5.2 %        3.1 %        4.4 %        1.2 %  

Domestic same-restaurant sales percentage change(d)

     3.0 %        (0.4)%        1.5 %        (1.9)%  

Average weekly unit sales (in thousands)

   $ 37.0          $ 36.3          $ 36.6          $ 36.3      

Area License (b)

           

Sales percentage change(c)

     (3.1)%        9.0 %        0.5 %        (0.7)%  

 


Page 15 of 16

 

Dine Brands Global, Inc. and Subsidiaries

Restaurant Data

 

(a)

“Effective Restaurants” are the weighted average number of restaurants open in a given fiscal period, adjusted to account for restaurants open for only a portion of the period. Information is presented for all Effective Restaurants in the Applebee’s and IHOP systems, which includes restaurants owned by franchisees and area licensees as well as those owned by the Company.

 

(b)

“System-wide” sales are retail sales at domestic Applebee’s restaurants operated by franchisees and IHOP restaurants operated by franchisees and area licensees, as reported to the Company, in addition to retail sales at company-operated restaurants. Sales at restaurants that are owned by franchisees and area licensees are not attributable to the Company. An increase or decrease in franchisees’ reported sales will result in a corresponding increase or decrease in our royalty revenue. Unaudited reported sales for Applebee’s domestic franchise restaurants, IHOP franchise restaurants and IHOP area license restaurants for the three and twelve months ended December 31, 2018 and 2017 and sales by company-operated restaurants were as follows:

 

     Three Months Ended
December 31,
     Twelve Months Ended
December 31,
 
     2018      2017      2018      2017  
     (In millions)  

Reported sales

           

  Applebee’s domestic franchise restaurant sales

   $ 1,020.6       $ 1,024.8       $ 4,204.1       $ 4,117.1   

  Applebee’s company-operated restaurants

     7.1         —         7.1         —   

  IHOP franchise restaurant sales

     793.9         754.3         3,106.7         2,974.6   

  IHOP area license restaurant sales

     69.8         72.0         282.0         280.6   

  IHOP company-operated restaurants

     —         —         —         7.5   
  

 

 

    

 

 

    

 

 

    

 

 

 

Total

   $       1,891.4       $       1,851.1       $       7,599.9       $       7,379.8   
  

 

 

    

 

 

    

 

 

    

 

 

 

 

(c)

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

 

(d)

“Domestic same-restaurant sales percentage change” reflects the percentage change in sales, in any given fiscal period, compared to the same weeks in the prior year for domestic restaurants that have been operated throughout both fiscal periods that are being compared and have been open for at least 18 months. Because of new unit openings and restaurant closures, the domestic restaurants open throughout both fiscal periods being compared may be different from period to period. Same-restaurant sales percentage change does not include data on IHOP area license restaurants located in Florida.

 


Page 16 of 16

 

Dine Brands Global, Inc. and Subsidiaries

Restaurant Data

(Unaudited)

The following table summarizes our restaurant development activity:

 

     Three Months Ended
December 31,
     Twelve Months Ended
December 31,
 
     2018      2017      2018      2017  
Applebee’s Restaurant Development Activity                     

Summary - beginning of period:

     1,856         1,945         1,936         2,016   
  

 

 

    

 

 

    

 

 

    

 

 

 

Franchise restaurants opened:

           

Domestic

     —                       10   

International

                           
  

 

 

    

 

 

    

 

 

    

 

 

 

Total franchise restaurants opened

                          19   
  

 

 

    

 

 

    

 

 

    

 

 

 

Franchise restaurants closed:

           

Domestic

     (14)        (12)        (91)        (86)  

International

     (7)        (3)        (15)        (13)  
  

 

 

    

 

 

    

 

 

    

 

 

 

Total franchise restaurants closed

     (21)        (15)        (106)        (99)  
  

 

 

    

 

 

    

 

 

    

 

 

 

Net franchise restaurant reduction

     (19)        (9)        (99)        (80)  

Refranchised from Company restaurants

     (69)        —         (69)        —   
  

 

 

    

 

 

    

 

 

    

 

 

 

Net franchise restaurant decrease

     (88)        (9)        (168)        (80)  
  

 

 

    

 

 

    

 

 

    

 

 

 

Summary - end of period:

           

Franchise

     1,768         1,936         1,768         1,936   

Company

     69         —         69         —   
  

 

 

    

 

 

    

 

 

    

 

 

 

Total Applebee’s restaurants, end of period

     1,837         1,936         1,837         1,936   
  

 

 

    

 

 

    

 

 

    

 

 

 

 Domestic

     1,693         1,782         1,693         1,782   

 International

     144         154         144         154   
IHOP Restaurant Development Activity                     

Summary - beginning of period:

           

Franchise

     1,652         1,596         1,622         1,556   

Area license

     162         165         164         167   

Company

     —         —         —         10   
  

 

 

    

 

 

    

 

 

    

 

 

 

Total IHOP restaurants, beginning of period

     1,814         1,761         1,786         1,733   
  

 

 

    

 

 

    

 

 

    

 

 

 

Franchise/area license restaurants opened:

                 

Domestic franchise

     19         17         51         48   

Domestic area license

     —         —                 

International franchise

            10         17         28   
  

 

 

    

 

 

    

 

 

    

 

 

 

Total franchise/area license restaurants opened

     22         27         71         77   
  

 

 

    

 

 

    

 

 

    

 

 

 

Franchise/area license restaurants closed:

           

Domestic franchise

     (5)        —         (15)        (11)  

Domestic area license

     —         (1)        (5)        (3)  

International franchise

     —         (1)        (6)        (8)  

International area license

     —         —         —         (1)  
  

 

 

    

 

 

    

 

 

    

 

 

 

Total franchise/area license restaurants closed

     (5)        (2)        (26)        (23)  
  

 

 

    

 

 

    

 

 

    

 

 

 

Net franchise/area license restaurant development

     17         25         45         54   
  

 

 

    

 

 

    

 

 

    

 

 

 

Refranchised from Company restaurants

     —         —                 

Franchise restaurants reacquired by the Company

     —         —         (1)        —   
  

 

 

    

 

 

    

 

 

    

 

 

 

Net franchise/area license restaurant additions

     17         25         45         63   
  

 

 

    

 

 

    

 

 

    

 

 

 

Summary - end of period

                 

Franchise

     1,669         1,622         1,669         1,622   

Area license

     162         164         162         164   

Company

     —         —         —         —   
  

 

 

    

 

 

    

 

 

    

 

 

 

Total IHOP restaurants, end of period

     1,831         1,786         1,831         1,786   
  

 

 

    

 

 

    

 

 

    

 

 

 

Domestic

                   1,705                       1,671                       1,705                       1,671   

International

     126         115         126         115