Dine Brands Global Results

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%

Applebee's

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.
  • 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 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.

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.)

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.
   

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.

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
Revenues:           (as adjusted)       (as adjusted)
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  
                                     

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

 
                     

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

 
                     

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.
     

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

)

                     

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   Twelve Months Ended
        December 31,   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

 
                                   

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   Twelve Months Ended
        December 31,   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

)%

                                     

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   Twelve Months Ended
        December 31,   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.
     

Dine Brands Global, Inc. and Subsidiaries

Restaurant Data

(Unaudited)

 

The following table summarizes our restaurant development activity:

                     

 

      Three Months Ended   Twelve Months Ended
        December 31,   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           3    

2

    10  
International       2     3     5     9  
Total franchise restaurants opened       2     6     7     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

     

   

   

3

   

1

 

International franchise

     

3

   

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

     

   

   

1

   

9

 

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

 



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