Dine Brands Results

Dine Brands Global, Inc. Reports First Quarter 2018 Results

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 first quarter of fiscal 2018. 

"We are leveraging the benefit of our asset-lite business model to invest in the growth of our brands and build on recent momentum.  Both Applebee's and IHOP achieved positive same-restaurant sales for the first quarter and outperformed their respective categories.  This marks the second consecutive quarter of sales improvement for each brand.  We are very pleased with the results and encouraged that the first-quarter trends for both brands continued through April," said Steve Joyce, Chief Executive Officer of Dine Brands Global, Inc. 

Mr. Joyce continued, "Looking ahead, we are acting on several strategic initiatives, such as enhancing our data and analytics capabilities, to drive sustainable positive sales performance and create significant value for our shareholders and franchisees.  Supported by a performance-based culture and the addition of significant leadership talent, we have established clear goals for our brands, which will drive long-term success."     

First Quarter of Fiscal 2018 Financial Highlights

  • GAAP net income available to common stockholders increased approximately 8% to $16.5 million, or earnings per diluted share of $0.92 for the first quarter of 2018. This compares to net income available to common stockholders of $15.3 million (as adjusted for the adoption of new accounting revenue guidance titled Accounting Standards Codification 606 "Revenues from Contracts with Customers"), or earnings per diluted share of $0.86, for the first quarter of fiscal 2017. The increase in net income was primarily due to a decline in general and administrative expenses and a reduction in our effective corporate tax rate following the enactment of the Tax Cuts and Jobs Act tax legislation in December 2017. These items were substantially offset by lower segment profit primarily due to an increase of $13.5 million in franchisor contributions to the Applebee's national advertising fund in the first quarter of 2018.
  • Adjusted net income available to common stockholders was $19.8 million, or adjusted earnings per diluted share of $1.11, for the first quarter of fiscal 2018. This compares to adjusted net income available to common stockholders of $22.8 million (as adjusted for the adoption of Accounting Standards Codification 606), or adjusted earnings per diluted share of $1.28, for the first quarter of fiscal 2017. The decrease in adjusted net income was mainly due to lower gross profit resulting from an increase of $13.5 million in franchisor contributions to the Applebee's national advertising fund, partially offset by our lower federal tax rate and positive same-restaurant sales for both brands. (See "Non-GAAP Financial Measures" below.)
  • General and administrative expenses declined to approximately $41.9 million for the first quarter of fiscal 2018 compared to $50.3 million for the first quarter of fiscal 2017. The decrease was primarily due to lower personnel costs due to non-recurring executive separation costs in the first quarter of 2017.
  • Cash flows from operating activities were approximately $16.5 million for the first quarter of fiscal 2018 compared to approximately $19.5 million for the first quarter of fiscal 2017. The decline was primarily due to slightly lower net income and changes in working capital. Adjusted free cash flow was $15.3 million for the first quarter of fiscal 2018. This compares to $19.2 million for the first quarter of fiscal 2017. (See "Non-GAAP Financial Measures" below.)

Same-Restaurant Sales Performance

First Quarter of Fiscal 2018

  • Applebee's domestic system-wide comparable same-restaurant sales increased 3.3% for the first quarter of 2018. 
  • IHOP's domestic system-wide comparable same-restaurant sales increased 1.0% for the first quarter of 2018. 

Financial Performance Guidance for Fiscal 2018

Dine Brands reiterates its financial performance guidance for fiscal 2018 contained in the press release issued on February 20, 2018 and the Form 8-K filed on the same day.   

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 more than 3,700 restaurants combined in 19 countries and over 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 Income

(In thousands, except per share amounts)

(Unaudited)

Three Months Ended

March 31,

2018

2017

Revenues:

(as adjusted)

Franchise revenues

$

155,313

$

154,725

Rental revenues

30,841

30,465

Financing revenues

2,009

2,131

Company restaurant sales

4,140

Total revenues

188,163

191,461

Cost of revenues:

Franchise and restaurant expenses

81,872

70,167

Rental expenses

22,641

22,666

Financing expenses

150

Company restaurant expenses

4,343

Total cost of revenues

104,663

97,176

Gross profit

83,500

94,285

General and administrative expenses

41,911

50,305

Interest expense

15,199

15,363

Closure and impairment charges

2,604

217

Amortization of intangible assets

2,502

2,500

Gain on disposition of assets

(1,427)

(109)

Income before income tax provision

22,711

26,009

Income tax provision

(5,638)

(10,414)

Net income

$

17,073

$

15,595

Net income available to common stockholders:

Net income

$

17,073

$

15,595

Less: Net income allocated to unvested participating restricted stock

(568)

(283)

Net income available to common stockholders

$

16,505

$

15,312

Net income available to common stockholders per share:

Basic

$

0.93

$

0.87

Diluted

$

0.92

$

0.86

Weighted average shares outstanding:

Basic

17,703

17,694

Diluted

17,845

17,737

Dividends declared per common share

$

0.63

$

0.97

Dividends paid per common share

$

0.97

$

0.97

Dine Brands Global, Inc. and Subsidiaries

Consolidated Balance Sheets

(In thousands, except share and per share amounts)

March 31, 2018

December 31, 2017

(Unaudited)

(as adjusted)

Assets

Current assets:

Cash and cash equivalents

$

96,399

$

117,010

Receivables, net

105,834

140,188

Restricted cash

32,391

31,436

Prepaid gift card costs

31,174

40,725

Prepaid income taxes

36,078

45,981

Other current assets

6,906

12,615

     Total current assets

308,782

387,955

Long-term receivables, net

122,362

126,570

Property and equipment, net

198,624

199,585

Goodwill

339,236

339,236

Other intangible assets, net

581,639

582,787

Deferred rent receivable

81,720

82,971

Non-current restricted cash

14,700

14,700

Other non-current assets, net

3,983

4,135

Total assets

$

1,651,046

$

1,737,939

Liabilities and Stockholders' Deficit

Current liabilities:

Current maturities of long-term debt

$

12,965

$

12,965

Accounts payable

45,236

55,028

Gift card liability

117,266

164,441

Dividends payable

11,520

17,748

Current maturities of capital lease and financing obligations

12,986

14,193

Accrued employee compensation and benefits

10,098

13,547

Deferred franchise revenue, short-term

10,851

11,001

Other accrued expenses

15,047

16,001

     Total current liabilities

235,969

304,924

Long-term debt, less current maturities

1,267,468

1,269,849

Capital lease obligations, less current maturities

60,268

61,895

Financing obligations, less current maturities

38,981

39,200

Deferred income taxes, net

114,522

119,996

Deferred rent payable

62,371

69,112

Deferred franchise revenue, long-term

68,581

70,432

Other non-current liabilities

19,772

18,071

     Total liabilities

1,867,932

1,953,479

Commitments and contingencies

Stockholders' deficit:

Common stock, $0.01 par value, shares: 40,000,000 authorized; March 31, 2018 - 25,013,067 issued, 17,922,137 outstanding; December 31, 2017 - 25,022,312 issued, 17,993,124 outstanding

250

250

Additional paid-in-capital

264,994

276,408

Accumulated deficit

(52,867)

(69,940)

Accumulated other comprehensive loss

(58)

(105)

Treasury stock, at cost; shares: March 31, 2018 - 7,090,930; December 31, 2017 - 7,029,188

(429,205)

(422,153)

Total stockholders' deficit

(216,886)

(215,540)

     Total liabilities and stockholders' deficit

$

1,651,046

$

1,737,939

 

 

Dine Brands Global, Inc. and Subsidiaries

Consolidated Statements of Cash Flows

(In thousands)

(Unaudited)

Three Months Ended

March 31,

2018

2017

(as adjusted)

Cash flows from operating activities:

Net income

$

17,073

$

15,595

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

Closure and impairment charges

2,594

209

Depreciation and amortization

7,940

7,706

Non-cash interest expense

864

827

Deferred income taxes

(1,182)

(2,714)

Non-cash stock-based compensation expense

3,368

6,165

Gain on disposition of assets

(1,421)

(109)

Other

(6,199)

(2,932)

Changes in operating assets and liabilities:

Accounts receivable, net

(8,804)

(818)

Current income tax receivables and payables

5,529

7,176

Gift card receivables and payables

(2,269)

(7,855)

Other current assets

5,709

(736)

Accounts payable

65

1,745

Accrued employee compensation and benefits

(3,448)

(2,162)

Other current liabilities

(3,351)

(2,554)

Cash flows provided by operating activities

16,468

19,543

Cash flows from investing activities:

Additions to property and equipment

(3,488)

(2,997)

Proceeds from sale of property and equipment

655

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

4,930

5,002

Additions to long-term receivables

(2,325)

Other

(27)

(188)

Cash flows (used in) provided by investing activities

(255)

1,817

Cash flows from financing activities:

Repayment of long-term debt

(3,250)

Dividends paid on common stock

(17,453)

(17,432)

Repurchase of common stock

(10,003)

(10,003)

Principal payments on capital lease and financing obligations

(4,536)

(3,608)

Tax payments for restricted stock upon vesting

(1,083)

(2,022)

Proceeds from stock options exercised

456

1,474

Cash flows used in financing activities

(35,869)

(31,591)

Net change in cash, cash equivalents and restricted cash

(19,656)

(10,231)

Cash, cash equivalents and restricted cash at beginning of period

163,146

185,491

Cash, cash equivalents and restricted cash at end of period

$

143,490

$

175,260

Dine Brands Global, Inc. and Subsidiaries

Non-GAAP Financial Measures

(In thousands, except per share amounts)

(Unaudited)

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

Three Months Ended

March 31,

2018

2017

Net income available to common stockholders, as reported

$

16,505

$

15,312

Closure and impairment charges

2,604

217

Executive separation costs

8,782

Amortization of intangible assets

2,502

2,500

Non-cash interest expense

864

827

Gain on disposition of assets

(1,427)

(109)

Income tax provision

(1,181)

(4,642)

Net income allocated to unvested participating restricted stock

(111)

(117)

Net income available to common stockholders, as adjusted

$

19,756

$

22,770

Diluted net income available to common stockholders per share:

Net income available to common stockholders, as reported

$

0.92

$

0.86

Closure and impairment charges

0.11

0.01

Executive separation costs

0.31

Amortization of intangible assets

0.10

0.09

Non-cash interest expense

0.04

0.03

Gain on disposition of assets

(0.06)

(0.00)

Net income allocated to unvested participating restricted stock

(0.00)

(0.01)

Rounding

(0.01)

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

$

1.11

$

1.28

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

$

19,756

$

22,770

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

1

3

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

$

19,757

$

22,773

Denominator for basic EPS-weighted-average shares

17,703

17,694

Dilutive effect of stock options

142

43

Denominator for diluted EPS-weighted-average shares and assumed conversions

17,845

17,737

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 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.

Three Months Ended

March 31,

2018

2017

(In millions)

Cash flows provided by operating activities

$

16.5

$

19.5

Receipts from notes and equipment contracts receivable

2.3

2.7

Additions to property and equipment

(3.5)

(3.0)

Adjusted free cash flow

15.3

19.2

Dividends paid on common stock

(17.5)

(17.4)

Repurchase of Dine Brands common stock

(10.0)

(10.0)

$

(12.2)

$

(8.2)

Dine Brands Global, Inc. and Subsidiaries

Restaurant Data

The following table sets forth, for the three months ended March 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

March 31,

2018

2017

(Unaudited)

Applebee's Restaurant Data

Effective Restaurants(a)

Franchise

1,923

2,007

System-wide(b)

Sales percentage change(c)

0.9

%

(8.6)

%

Domestic same-restaurant sales percentage change(d)

3.3

%

(7.9)

%

Franchise(b)

Domestic sales percentage change(c)

0.9

%

(8.6)

%

Domestic same-restaurant sales percentage change(d)

3.3

%

(7.9)

%

Average weekly domestic unit sales (in thousands)

$        47.6

$             45.2

IHOP Restaurant Data

Effective Restaurants(a)

Franchise

1,619

1,552

Area license

164

166

Company

10

Total

1,783

1,728

System-wide(b)

Sales percentage change(c)

3.9

%

0.2

%

Domestic same-restaurant sales percentage change(d)

1.0

%

(1.7)

%

Franchise(b)

Sales percentage change(c)

4.9

%

0.7

%

Domestic same-restaurant sales percentage change(d)

1.0

%

(1.7)

%

Average weekly domestic unit sales (in thousands)

$          37.1

$           36.9

Area License (b)

Sales percentage change(c)

(0.2)

%

(3.7)

%

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 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 in franchisees' reported sales will result in a corresponding increase in our royalty revenue, while a decrease in franchisees' reported sales will result in a corresponding 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 months ended March 31, 2018 and 2017 were as follows:

Three Months Ended

March 31,

2018

2017

(In millions)

Reported sales (unaudited)

Applebee's domestic franchise restaurant sales

$

1,095.6

$

1,086.2

IHOP franchise restaurant sales

780.6

$

744.2

IHOP area license restaurant sales

75.3

$

72.5

Total

$

1,951.5

$

1,902.9

(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

March 31,

2018

2017

Applebee's Restaurant Development Activity

Beginning of period:

1,936

2,016

Franchise restaurants opened:

Domestic

1

International

2

Total franchise restaurants opened

2

1

Franchise restaurants closed:

Domestic

(22)

(19)

International

(4)

Total franchise restaurants closed

(26)

(19)

Net franchise restaurant reduction

(24)

(18)

Total Applebee's restaurants, end of period

1,912

1,998

Domestic

1,760

1,843

International

152

155

IHOP Restaurant Development Activity

Summary - beginning of period:

Franchise

1,622

1,556

Area license

164

167

Company

10

Total IHOP restaurants, beginning of period

1,786

1,733

Franchise/area license restaurants opened:

Domestic franchise

13

11

International franchise

3

4

Total franchise/area license restaurants opened

16

15

Franchise/area license restaurants closed:

Domestic franchise

(5)

(7)

International franchise

(6)

Total franchise/area license restaurants closed

(11)

(7)

Net franchise/area license restaurant development

5

8

Summary - end of period

Franchise

1,627

1,564

Area license

164

167

Company

10

Total IHOP restaurants, end of period

1,791

1,741

Domestic

1,679

1,641

International

112

100

 



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