Dine Brands Global, Inc. Reports Strong First Quarter 2019 Results

Earnings Per Diluted Share (GAAP) Increased 88%

Adjusted Earnings Per Diluted Share (Non-GAAP) Increased 71.2%

Net Income Increased 85.3%; Adjusted EBITDA (Non-GAAP) Increased 40.4%

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

“Dine Brands delivered another impressive quarter. Our performance and
momentum reflect the continued improvement in our core business. We
delivered double-digit growth in several key metrics. The implementation
of multi-pronged strategies at Applebee’s and IHOP have produced
positive results. Both brands reported positive comparable sales growth
for the first quarter, lapping over positive sales results for the first
quarter of 2018,” said Steve Joyce, Chief Executive Officer of Dine
Brands Global, Inc.

Mr. Joyce continued, “We are taking a long-term approach to managing the
business and focusing on platforms that will deliver sustainable
positive results. This includes expanding our off-premise business at
both brands and investing in guest-facing technology, where we have made
foundational changes to further enhance the guest experience. With the
great work being done across the organization, I am enthusiastic about
the road ahead.”

                     
($ in 000’s, except per share amounts)       First Quarter
        2019     2018     % Change
Total revenues, excluding Company restaurant sales       $ 201,447     $ 188,163     7.1 %
Net income available to common stockholders per diluted share       $ 1.73     $ 0.92     88.0 %
Diluted net income available to common stockholders per share, as
adjusted(1)
      $ 1.90     $ 1.11     71.2 %
Net income       $ 31,643     $ 17,073     85.3 %
Adjusted EBITDA(1)(2)       $ 74,649     $ 53,169     40.4 %
                           
(1)   See “Non-GAAP Financial Measures” and reconciliation of the Non-GAAP
financial measure to the respective GAAP financial measure.
(2) Does not conform to the definition of Covenant Adjusted EBITDA as
found in the Base Indenture.
 

Key Highlights

  • Total revenues, excluding Company restaurant sales, increased 7.1% to
    $201.4 million for the first quarter of 2019 compared to $188.2
    million for the same period last year.
  • IHOP business segment revenues, inclusive of Rental and Financing
    revenues, accounted for approximately 66% of total revenues, excluding
    advertising revenues and Company restaurant sales, during the first
    quarter of 2019.
  • IHOP’s reported system-wide sales for the first quarter of 2019
    increased 2.4% to $873.1 million compared to $852.9 million for the
    first quarter of 2018.
  • Gross profit for the first quarter of 2019 increased 22.8% to $102.6
    million compared to $83.5 million for the first quarter of 2018. The
    increase in gross profit was mainly due to a $13.5 million franchisor
    contribution to the Applebee’s national advertising fund in the first
    quarter 2018 that did not recur in the first quarter of 2019. IHOP
    restaurant development and increased IHOP and Applebee’s royalties
    contributed to the increase in gross profit.
  • The Company restaurant segment contributed approximately $4.2 million
    of gross profit during their first full quarter of ownership.
  • GAAP earnings per diluted share increased 88.0% to $1.73 for the first
    quarter of 2019 compared to $0.92 for the first quarter of 2018.
  • Adjusted earnings per diluted share increased 71.2% to $1.90 for the
    first quarter of 2019 compared to $1.11 for the first quarter of 2018.
    (See “Non-GAAP Financial Measures” below.)
  • GAAP net income for the first quarter of 2019 increased 85.3% to $31.6
    million compared to $17.1 million for the first quarter of 2018.
  • Consolidated adjusted EBITDA the first quarter of 2019 increased 40.4%
    to $74.6 million compared to $53.2 million for the first quarter of
    2018. (See “Non-GAAP Financial Measures” and reconciliation of GAAP
    net income to consolidated adjusted EBITDA.)
  • For the three-month period ended March 31, 2019, the Company
    repurchased 151,316 shares of its common stock for a total cost of
    approximately $12.0 million and paid quarterly cash dividends totaling
    approximately $11.2 million.
  • Cash flows from operating activities were approximately $28.9 million
    for the first quarter of 2019 compared to approximately $16.5 million
    for the first quarter of 2018. Adjusted free cash flow was
    approximately $27.7 million for the first quarter of 2019. This
    compares to approximately $15.3 million for the first quarter of 2018.
    (See “Non-GAAP Financial Measures” and reconciliation of the Company’s
    cash provided by operating activities to adjusted free cash flow.)
  • Over 1,100 IHOP restaurants, or approximately 65% of the domestic
    system, have the new Rise ‘N Shine remodel image (including new
    restaurant openings).
  • Growth in off-premise sales at both brands during the first quarter of
    2019 was primarily driven by online channels.

Domestic System Same-Restaurant Sales Performance

  • Applebee’s comparable same-restaurant sales increased 1.8% for the
    first quarter of 2019, achieving the sixth consecutive quarter of
    sales growth.
  • IHOP’s comparable same-restaurant sales increased 1.2% for the first
    quarter of 2019, achieving the fifth consecutive quarter of sales
    growth.

GAAP Effective Tax Rate

Our effective tax rate of 23.1% for the first quarter of 2019 was lower
than the effective tax rate of 24.8% for the comparable period of 2018
due to the recognition of excess tax benefits on stock-based
compensation during the first quarter of 2019.

New Lease Accounting Standards ASC 842

Effective January 1, 2019, we adopted the lease accounting guidance
codified in ASC 842. Upon adoption, we recognized operating lease
obligations of approximately $453.0 million, discounted using the
Company’s incremental borrowing rate and an adjustment to retained
earnings upon adoption of $5.0 million, net of tax of $1.7 million. We
reclassified $43.3 million of accrued rent payments and $7.4 million of
previously established lease-related reserves. In offsetting these
amounts, we recognized operating lease right-of-use assets of
approximately $395.6 million.

Adoption of ASC 842 had no significant impact on our cash flows from
operations or its results of operations.

Financial Performance Guidance for Fiscal 2019

Dine Brands reiterates its financial performance guidance for 2019
contained in the press release issued on February 21, 2019 and the Form
8-K filed on the same day. The projections are as of this date and do
not take into consideration any transactions the Company may enter into
after such date that may impact this guidance. The Company assumes no
obligation to update or supplement these estimates.

First Quarter of 2019 Results Conference Call Details

Dine Brands will host a conference call to discuss its results on May 1,
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 48515883.
International callers, please dial (847) 585-4405 and reference passcode
48515883.

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 May 1, 2019 through 8:59 p.m. Pacific Time/11:59
p.m. Eastern Time on May 8, 2019 by dialing (888) 843-7419 and
referencing passcode 48515883#. International callers, please dial (630)
652-3042 and reference passcode 48515883#. 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.

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 meaningful information
that should be considered when assessing the business and the Company’s
performance compared to prior periods and the marketplace. Adjusted EPS
and adjusted free cash flow are supplemental non-GAAP financial measures
and should not be considered in isolation or as a substitute for
measures of performance prepared in accordance with U.S. GAAP.

 
Dine Brands Global, Inc. and Subsidiaries
Consolidated Statements of Comprehensive Income
(In thousands, except per share amounts)
(Unaudited)
       
Three Months Ended

March 31,

2019 2018
Revenues:
Franchise revenues:
Royalties, franchise fees and other

$

96,296

$

91,477

Advertising revenue   72,630     63,836  
Total franchise revenues 168,926 155,313
Company restaurant sales 35,735
Rental revenues 30,711 30,841
Financing revenues   1,810     2,009  
Total revenues   237,182     188,163  
Cost of revenues:
Franchise expenses:
Advertising expenses 72,630 63,836
Other franchise expenses   7,673     18,036  
Total franchise expenses 80,303 81,872
Company restaurant expenses 31,538
Rental expenses:
Interest expense from finance leases 1,529 1,877
Other rental expenses   21,095     20,764  
Total rental expenses 22,624 22,641
Financing expenses   146     150  
Total cost of revenues   134,611     104,663  
Gross profit 102,571 83,500
General and administrative expenses 42,819 41,911
Interest expense, net 15,393 15,199
Amortization of intangible assets 2,924 2,502
Closure and impairment charges 194 2,604
Loss (gain) on disposition of assets   109    

(1,427

)

Income before income tax provision 41,132 22,711
Income tax provision  

(9,489

)

 

(5,638

)

Net income

$

31,643

 

$

17,073

 
Net income available to common stockholders:
Net income

$

31,643

$

17,073

Less: Net income allocated to unvested participating restricted stock  

(1,111

)

 

(568

)

Net income available to common stockholders

$

30,532

 

$

16,505

 
Net income available to common stockholders per share:
Basic

$

1.76

 

$

0.93

 
Diluted

$

1.73

 

$

0.92

 
Weighted average shares outstanding:
Basic   17,343    

17,703

 
Diluted   17,690     17,845  
 
Dividends declared per common share $ 0.69   $ 0.63  
Dividends paid per common share $ 0.63   $ 0.97  
 
Dine Brands Global, Inc. and Subsidiaries
Consolidated Balance Sheets

(In thousands, except share and per share amounts)

       
March 31, 2019 December 31, 2018
Assets (Unaudited)
Current assets:
Cash and cash equivalents

$

132,932

$

137,164

Receivables, net 97,786 137,504
Restricted cash 36,654 48,515
Prepaid gift card costs 30,045 38,195
Prepaid income taxes 19,370 17,402
Other current assets   5,980     3,410  
Total current assets 322,767 382,190
Other intangible assets, net 583,040 585,889
Operating lease right-of-use assets 383,962
Goodwill 343,862 345,314
Property and equipment, net 225,396 240,264
Long-term receivables, net 99,582 103,102
Deferred rent receivable 75,569 77,069
Non-current restricted cash 14,700 14,700
Other non-current assets, net   27,239     26,152  
Total assets

$

2,076,117

 

$

1,774,680

 
 
Liabilities and Stockholders’ Deficit
Current liabilities:
Current maturities of long-term debt

$

$

25,000

Accounts payable 37,726 43,468
Gift card liability 115,974 160,438
Current maturities of operating lease obligations 67,340
Current maturities of finance lease and financing obligations 13,708 14,031
Accrued employee compensation and benefits 15,338 27,479
Dividends payable 12,461 11,389
Deferred franchise revenue, short-term 10,376 10,138
Other accrued expenses   30,167     24,243  
Total current liabilities 303,090 316,186
Long-term debt, less current maturities 1,274,916 1,274,087
Operating lease obligations, less current maturities 386,364
Finance lease obligations, less current maturities 87,624 87,762
Financing obligations, less current maturities 38,306 38,482
Deferred income taxes, net 102,074 105,816
Deferred franchise revenue, long-term 62,472 64,557
Other non-current liabilities   12,092     90,063  
Total liabilities   2,266,938     1,976,953  
Commitments and contingencies
Stockholders’ deficit:
Common stock, $0.01 par value; shares: 40,000,000 authorized; March
31, 2019 – 24,974,665 issued, 17,650,765 outstanding; December 31,
2018 – 24,984,898 issued, 17,644,267 outstanding
250 250
Additional paid-in-capital 239,585 237,726
Retained earnings 24,588 10,414
Accumulated other comprehensive loss

(61

)

(60

)

Treasury stock, at cost; shares: March 31, 2019 – 7,323,900;
December 31, 2018 – 7,340,631
 

(455,183

)

 

(450,603

)

Total stockholders’ deficit

 

(190,821

)

 

(202,273

)

Total liabilities and stockholders’ deficit

$

2,076,117

 

$

1,774,680

 
 
Dine Brands Global, Inc. and Subsidiaries
Consolidated Statements of Cash Flows
(In thousands)
(Unaudited)
       
Three Months Ended
March 31,
2019 2018
 
Cash flows from operating activities:
Net income

$

31,643

$

17,073

Adjustments to reconcile net income to cash flows provided by
operating activities:
Depreciation and amortization 10,179 7,940
Non-cash stock-based compensation expense 4,107 3,368
Non-cash interest expense 1,118 864
Closure and impairment charges 194 2,594
Deferred income taxes

(1,149

)

(1,182

)

(Loss) gain on disposition of assets 109

(1,421

)

Other

(3,976

)

(6,199

)

Changes in operating assets and liabilities:
Accounts receivable, net

(3,210

)

(8,804

)

Current income tax receivables and payables

(1,399

)

5,529
Gift card receivables and payables

(890

)

(2,269

)

Other current assets

(2,570

)

5,709
Accounts payable 1,826 65
Accrued employee compensation and benefits

(12,141

)

(3,448

)

Other current liabilities   5,088    

(3,351

)

Cash flows provided by operating activities   28,929     16,468  
Cash flows from investing activities:
Principal receipts from notes, equipment contracts and other
long-term receivables
5,260 4,930
Additions to property and equipment

(4,717

)

(3,488

)

Proceeds from sale of property and equipment 400 655
Additions to long-term receivables

(395

)

(2,325

)

Other  

(100

)

 

(27

)

Cash flows provided by (used in) investing activities   448    

(255

)

Cash flows from financing activities:
Repayment of Variable Funding Notes

(25,000

)

Repayment of long-term debt

(3,250

)

Dividends paid on common stock

(11,153

)

(17,453

)

Repurchase of common stock

(10,802

)

(10,003

)

Principal payments on finance lease obligations

(3,466

)

(4,536

)

Proceeds from stock options exercised 6,768 456
Tax payments for restricted stock upon vesting  

(1,817

)

 

(1,083

)

Cash flows used in financing activities  

(45,470

)

 

(35,869

)

Net change in cash, cash equivalents and restricted cash

(16,093

)

(19,656

)

Cash, cash equivalents and restricted cash at beginning of period   200,379     163,146  
Cash, cash equivalents and restricted cash at end of period

$

184,286

 

$

143,490

 
 

Dine Brands Global, Inc. and Subsidiaries

Non-GAAP Financial Measures

(In thousands, except per share amounts)

(Unaudited)

 

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

       

 

Three Months Ended
March 31,
2019 2018
 
Net income available to common stockholders, as reported

$

30,532

$

16,505

Closure and impairment charges 194 2,604
Amortization of intangible assets 2,924 2,502
Non-cash interest expense 1,118 864
Loss (gain) on disposition of assets 109

(1,427

)

Nonrecurring restaurant costs 61

Income tax provision

(1,146

)

(1,181

)

Net income allocated to unvested participating restricted stock  

(112

)

 

(111

)

Net income available to common stockholders, as adjusted

$

33,680

 

$

19,756

 
 
Diluted net income available to common stockholders per share:
Net income available to common stockholders, as reported

$

1.73

$

0.92

Closure and impairment charges 0.01 0.11
Amortization of intangible assets 0.12 0.10
Non-cash interest expense 0.05 0.04
Loss (gain) on disposition of assets 0.00

(0.06

)

Nonrecurring restaurant costs 0.00
Net income allocated to unvested participating restricted stock

(0.01

)

(0.00

)

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

$

1.90

 

$

1.11

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

$

33,680

$

19,756

Effect of unvested participating restricted stock using the
two-class method
  15     1  
Numerator for diluted EPS-income available to common stockholders
after assumed conversions, as adjusted

$

33,695

 

$

19,757

 
 
Denominator for basic EPS-weighted-average shares 17,343 17,703
Dilutive effect of stock options   347     142  
Denominator for diluted EPS-weighted-average shares and assumed
conversions
  17,690     17,845  
 
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.

 
Three Months Ended
March 31,
2019 2018
(In millions)
Cash flows provided by operating activities

$

28.9

$

16.5

Receipts from notes and equipment contracts receivable 3.5 2.3
Additions to property and equipment  

(4.7

)

 

(3.5

)

Adjusted free cash flow 27.7 15.3
Dividends paid on common stock

(11.2

)

(17.5

)

Repurchase of Dine Brands Global common stock  

(10.8

)

 

(10.0

)

$

5.7

 

$

(12.2

)

 
Dine Brands Global, Inc. and Subsidiaries
Non-GAAP Financial Measures
(Unaudited)
       

Reconciliation of the Company’s net income to “adjusted EBITDA.”
The Company defines adjusted EBITDA as net income, 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
March 31,
2019 2018
 
Net income, as reported

$

31,643

$

17,073

Interest charges on finance leases 2,083 1,877
All other interest charges 16,642 15,950
Income tax provision 9,489 5,638
Depreciation and amortization 10,179 7,940
Non-cash stock-based compensation 4,107 3,369
Closure and impairment charges 194 2,604
Loss (gain) on disposition of assets 109

(1,427

)

Other taxes   203   145  
Adjusted EBITDA

$

74,649

$

53,169

 
 

Contacts

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

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