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Dine Brands Global, Inc. Reports Third Quarter 2023 Results

Dine Brands Global, Inc. (NYSE: DIN), the parent company of Applebee’s Neighborhood Grill & Bar®, IHOP® and Fuzzy’s Taco Shop® restaurants, today announced financial results for the third quarter of fiscal 2023.

“Dine Brands maintained its course in the third quarter, leaning into our brands’ abundant value proposition and demonstrating solid performance as we continued to advance our strategic growth agenda,” said John Peyton, chief executive officer, Dine Brands Global. “Despite the ongoing volatile macroeconomic environment, we are leveraging our strengths in technology, menu innovation and marketing and are well positioned to create long term shareholder value.”

Vance Chang, chief financial officer, Dine Brands Global added, “Our third quarter results underscore the resiliency of our business model and our ability to generate cash flow. As we look towards the end of the year, we have adjusted our EBITDA guidance to show our progress year-to-date and provide a better understanding of where we expect to see our business at the close of fourth quarter.”

Domestic Restaurant Sales for the Third Quarter of 2023

  • Applebee’s year-over-year comparable same-restaurant sales declined 2.4% for the third quarter of 2023. Off-premise sales accounted for 21.5% of sales mix, representing per restaurant average weekly sales of approximately $11,200.
  • IHOP’s year-over-year domestic comparable same-restaurant sales increased 2.0% for the third quarter of 2023. Off-premise sales accounted for 19.5% of sales mix, representing per restaurant average weekly sales of approximately $7,400.

Third Quarter of 2023 Summary

  • Total revenues for the third quarter of 2023 were $202.6 million compared to $233.2 million for the third quarter of 2022. The decline was primarily due to the refranchising of the 69 company-operated Applebee’s units in October 2022 and the negative comparable same-restaurant sales growth at Applebee’s, offset by the positive comparable same-restaurants sales growth at IHOP. Total revenues excluding the refranchised Applebee’s restaurants for the third quarter of 2023 were $200.9 million compared to $195.0 million for the third quarter of 2022.
  • General and Administrative (“G&A”) expenses for the third quarter of 2023 were $48.6 million compared to $46.3 million for the third quarter of 2022. The variance was primarily attributable to higher compensation-related expenses offset by a decrease in occupancy costs.
  • Net income for the third quarter of 2023 was $18.5 million compared to $20.9 million for the third quarter of 2022. The decrease was primarily due to higher interest and G&A expenses offset by an increase in segment profit.
  • GAAP net income available to common stockholders was $18.0 million, or earnings per diluted share of $1.19, for the third quarter of 2023 compared to net income available to common stockholders of $20.4 million, or earnings per diluted share of $1.32 for the third quarter of 2022. The decrease was primarily due to an increase in interest expense and an increase in G&A expenses, offset by an increase in segment profit.
  • Adjusted net income available to common stockholders was $22.3 million, or adjusted earnings per diluted share of $1.46, for the third quarter of 2023 compared to adjusted net income available to common stockholders of $25.6 million, or adjusted earnings per diluted share of $1.66, for the third quarter of 2022. The decrease was primarily due to an increase in G&A expenses and an increase in interest expense, offset by an increase in segment profit and a decrease in income taxes. (See “Non-GAAP Financial Measures” and reconciliation of GAAP net income available to common stockholders to adjusted net income available to common stockholders.)
  • Consolidated adjusted EBITDA for the third quarter of 2023 was $60.6 million compared to $63.6 million for the third quarter of 2022. (See “Non-GAAP Financial Measures” and reconciliation of GAAP net income to consolidated adjusted EBITDA.)
  • Development activity by Applebee’s and IHOP franchisees for the third quarter of 2023 resulted in 14 new restaurant openings and the closure of 19 restaurants.

First Nine Months of 2023 Summary

  • Total revenues for the first nine months of 2023 were $624.8 million compared to $701.4 million for the first nine months of 2022. The decline was primarily due to the refranchising of the 69 company-operated Applebee’s units in October 2022, offset by the positive comparable same-restaurants sales growth at IHOP and Applebee’s. Total revenues excluding the refranchised Applebee’s restaurants for the first nine months of 2023 were $618.4 million compared to $584.3 million for the first nine months of 2022.
  • G&A expenses for the first nine months of 2023 were $147.5 million compared to $131.9 million for the first nine months of 2022. The variance was primarily due to an increase in professional services, an increase in compensation-related expenses, costs resulting from the stopping of the IHOP Flip’d initiative, an increase in software maintenance and an increase in occupancy costs.
  • Net income for the first nine months of 2023 was $64.1 million compared to $69.8 million for the first nine months of 2022. The decrease was primarily due to higher G&A and interest expenses offset by an increase in segment profit.
  • GAAP net income available to common stockholders was $62.6 million, or earnings per diluted share of $4.09, for the first nine months of 2023 compared to net income available to common stockholders of $67.9 million, or earnings per diluted share of $4.22 for the first nine months of 2022. The decrease was primarily due to an increase in G&A expenses and an increase in interest expense, offset by an increase in segment profit.
  • Adjusted net income available to common stockholders was $80.3 million, or adjusted earnings per diluted share of $5.25, for the first nine months of 2023 compared to adjusted net income available to common stockholders of $77.9 million, or adjusted earnings per diluted share of $4.85, for the first nine months of 2022. The increase was primarily due to an increase in segment profit and a decrease in income taxes, offset by an increase in G&A expenses and an increase in interest expense. (See “Non-GAAP Financial Measures” and reconciliation of GAAP net income available to common stockholders to adjusted net income available to common stockholders.)
  • Consolidated adjusted EBITDA for the first nine months of 2023 was $194.2 million compared to $194.9 million for the first nine months of 2022. (See “Non-GAAP Financial Measures” and reconciliation of GAAP net income to consolidated adjusted EBITDA.)
  • Cash flows from operating activities for the first nine months of 2023 were $79.3 million. This compares to cash provided from operating activities of $63.5 million for the first nine months of 2022. The increase was primarily due to a favorable change in working capital and an increase in segment profit.
  • The Company had adjusted free cash flow of $54.0 million for the first nine months of 2023. This compares to adjusted free cash flow of approximately $52.4 million for the first nine months of 2022. (See “Non-GAAP Financial Measures” and reconciliation of the Company’s cash provided by operating activities to adjusted free cash flow.)
  • Development activity by Applebee’s and IHOP franchisees for the first nine months of 2023 resulted in 48 new restaurant openings and the closure of 61 restaurants.

Key Balance Sheet Metrics (as of September 30, 2023)

  • Total cash, cash equivalents and restricted cash of approximately $159.6 million, of which approximately $98.2 million was unrestricted cash.
  • Leverage ratio of approximately 4.6x compared with approximately 4.5x as of June 30, 2023.
  • Available borrowing capacity under the Variable Funding Senior Secured Notes is over $220 million.

GAAP Effective Tax Rate

The Company’s effective tax rate was 25% for the nine months ended September 30, 2023, as compared to 26.9% for the nine months ended September 30, 2022. The effective tax rate for the nine months ended September 30, 2023 was different than the rate of the prior comparable period primarily due to the recognition of higher excess tax benefits from stock-based compensation and lower non-deductible executive compensation.

Capital Returns to Equity Holders

During the quarter ended September 30, 2023, the Company repurchased approximately $6.0 million of its common stock. Through the first nine months of 2023, the Company repurchased approximately $20.0 million of its common stock.

On September 7, 2023, the Company announced that its Board of Directors declared and approved a quarterly cash dividend of $0.51 per share of common stock. The dividend was paid on September 29, 2023, to the Company’s stockholders of record at the close of business on September 19, 2023.

Financial Performance Guidance for 2023

The Company’s fiscal 2023 guidance items:

  • Reiterated: Our domestic development activity target for Applebee’s franchisees is between 25 and 35 net fewer restaurants.
  • Reduced: Domestic development activity by IHOP franchisees and area licensees is expected to be between 20 and 30 net new openings (versus 45 to 60 net new openings previously) due to ongoing permitting and construction delays.
  • Narrowed: Consolidated adjusted EBITDA is expected to be in the range of between approximately $245 million and $255 million (versus between $243 million and $255 million previously).
  • Narrowed: G&A expenses are expected to range between approximately $200 million and $205 million (versus between $200 million and $210 million previously). This total includes non-cash stock-based compensation expense and depreciation of approximately $30 million.
  • Reiterated: Gross capital expenditures are expected to range between $33 million and $38 million.

Dine Brands does not provide forward-looking guidance for GAAP net income because it is unable to predict certain items contained in the GAAP measure without unreasonable efforts. These items may include closure and impairment charges, loss on extinguishment of debt, gain or loss on disposition of assets, other non-income based taxes and other items deemed not reflective of current operations.

Third Quarter of 2023 Earnings Conference Call Details

Dine Brands will host a conference call to discuss its results on November 1, 2023, at 9:00 a.m. Eastern time. To access the call, please click this conference call registration link, and you will be provided with dial in details. A live webcast of the call, along with a replay will be available for a limited time at https://investors.dinebrands.com. 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. 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 Pasadena, California, Dine Brands Global, Inc. (NYSE: DIN), through its subsidiaries and franchisees, supports and operates restaurants under the Applebee's Neighborhood Grill + Bar®, IHOP®, and Fuzzy’s Taco Shop® brands. As of September 30, 2023, these three brands consisted of over 3,500 restaurants across 18 international markets. Dine Brands is one of the largest full-service restaurant companies in the world and in 2022 expanded into the Fast Casual segment. 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, including the impact of inflation, particularly as it may impact our franchisees directly; our level of indebtedness; compliance with the terms of our securitized debt; our ability to refinance our current indebtedness or obtain additional financing; our dependence on information technology; potential cyber incidents; the implementation of restaurant development plans; our dependence on our franchisees; the concentration of our Applebee’s franchised restaurants in a limited number of franchisees; the financial health of our franchisees including any insolvency or bankruptcy; credit risks from our IHOP franchisees operating under our previous IHOP business model in which we built and equipped IHOP restaurants and then franchised them to franchisees; insufficient insurance coverage to cover potential risks associated with the ownership and operation of restaurants; 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; risks of food-borne illness or food tampering; possible future impairment charges; 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; delivery initiatives and use of third-party delivery vendors; our allocation of human capital and our ability to attract and retain management and other key employees; compliance with federal, state and local governmental regulations; risks associated with our self-insurance; natural disasters, pandemics, epidemics, or other serious incidents; our success with development initiatives outside of our core business; the adequacy of our internal controls over financial reporting and future changes in accounting standards; and other factors discussed from time to time in the Corporation’s Annual and Quarterly Reports on Forms 10-K and 10-Q and in the Corporation’s other filings with the Securities and Exchange Commission. The forward-looking statements contained in this press release are made as of the date hereof and the Corporation does not intend to, nor does it assume any obligation to, update or supplement any forward-looking statements after the date hereof to reflect actual results or future events or circumstances.

Non-GAAP Financial Measures

This press release includes references to the Company's non-GAAP financial measure “adjusted net income available to common stockholders”, “adjusted earnings per diluted share (Adjusted EPS)”, “Adjusted EBITDA” and “Adjusted free cash flow.” Adjusted EPS is computed for a given period by deducting from net income or loss available to common stockholders for such period the effect of any closure and impairment charges, any gain or loss related to debt extinguishment, any intangible asset amortization, any non-cash interest expense, any gain or loss related to the disposition of assets, any merger and acquisition costs 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, any merger and acquisition costs 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. Additionally, the Company has provided total revenues excluding the refranchised Applebee’s restaurants for the three and nine months ended September 30, 2023 and for the comparative prior year periods. 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. Total revenues excluding the refranchised Applebee’s restaurants is helpful for Management to evaluate the performance of franchised restaurants over comparative periods. 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.

FBN-R

Dine Brands Global, Inc. and Subsidiaries

Consolidated Statements of Comprehensive Income

(In thousands, except per share amounts)

(Unaudited)

 

 

 

Three Months Ended

 

Nine Months Ended

 

 

September 30,

 

September 30,

 

 

 

2023

 

 

 

2022

 

 

 

2023

 

 

 

2022

 

Revenues:

 

 

 

 

 

 

Franchise revenues:

 

 

 

 

 

 

 

Royalties, franchise fees and other

$

99,135

 

 

$

93,215

 

 

$

303,998

 

 

$

277,712

 

Advertising revenues

 

73,385

 

 

 

71,692

 

 

 

226,401

 

 

 

216,686

 

Total franchise revenues

 

172,520

 

 

 

164,907

 

 

 

530,399

 

 

 

494,398

 

Company restaurant sales

 

308

 

 

 

38,248

 

 

 

1,839

 

 

 

117,175

 

Rental revenues

 

29,128

 

 

 

29,207

 

 

 

90,519

 

 

 

87,080

 

Financing revenues

 

628

 

 

 

858

 

 

 

2,009

 

 

 

2,784

 

Total revenues

 

202,584

 

 

 

233,220

 

 

 

624,766

 

 

 

701,437

 

Cost of revenues:

 

 

 

 

 

 

 

 

Franchise expenses:

 

 

 

 

 

 

 

Advertising expenses

 

73,385

 

 

 

71,692

 

 

 

226,401

 

 

 

216,686

 

Bad debt (credit) expense

 

(51

)

 

 

(77

)

 

 

2,593

 

 

 

(523

)

Other franchise expenses

 

9,804

 

 

 

8,649

 

 

 

29,790

 

 

 

24,402

 

Total franchise expenses

 

83,138

 

 

 

80,264

 

 

 

258,784

 

 

 

240,565

 

Company restaurant expenses

 

323

 

 

 

36,513

 

 

 

1,833

 

 

 

111,802

 

Rental expenses:

 

 

 

 

 

 

 

Interest expense from finance leases

 

668

 

 

 

740

 

 

 

2,072

 

 

 

2,254

 

Other rental expenses

 

21,066

 

 

 

21,268

 

 

 

63,538

 

 

 

63,720

 

Total rental expenses

 

21,734

 

 

 

22,008

 

 

 

65,610

 

 

 

65,974

 

Financing expenses

 

91

 

 

 

104

 

 

 

283

 

 

 

317

 

Total cost of revenues

 

105,286

 

 

 

138,889

 

 

 

326,510

 

 

 

418,658

 

Gross profit

 

97,298

 

 

 

94,331

 

 

 

298,256

 

 

 

282,779

 

General and administrative expenses

 

48,618

 

 

 

46,335

 

 

 

147,545

 

 

 

131,946

 

Interest expense, net

 

19,059

 

 

 

15,300

 

 

 

51,549

 

 

 

46,192

 

Closure and impairment charges

 

1,774

 

 

 

1,636

 

 

 

3,088

 

 

 

3,093

 

Amortization of intangible assets

 

2,709

 

 

 

2,664

 

 

 

8,202

 

 

 

7,994

 

Loss on extinguishment of debt

 

 

 

 

1,161

 

 

 

10

 

 

 

1,161

 

Loss (gain) on disposition of assets

 

191

 

 

 

(1,502

)

 

 

2,309

 

 

 

(3,032

)

Income before income taxes

 

24,947

 

 

 

28,737

 

 

 

85,553

 

 

 

95,425

 

Income tax provision

 

(6,468

)

 

 

(7,789

)

 

 

(21,416

)

 

 

(25,665

)

Net income

 

18,479

 

 

 

20,948

 

 

 

64,137

 

 

 

69,760

 

Other comprehensive income net of tax:

 

 

 

 

 

 

 

 

Foreign currency translation adjustment

 

 

(2

)

 

 

(5

)

 

 

(2

)

 

 

(9

)

Total comprehensive income

 

$

18,477

 

 

$

20,943

 

 

$

64,135

 

 

$

69,751

 

Net income available to common stockholders:

 

 

 

 

 

 

 

 

Net income

 

$

18,479

 

 

$

20,948

 

 

$

64,137

 

 

$

69,760

 

Less: Net income allocated to unvested participating restricted stock

 

 

(431

)

 

 

(575

)

 

 

(1,551

)

 

 

(1,852

)

Net income available to common stockholders

 

$

18,048

 

 

$

20,373

 

 

$

62,586

 

 

$

67,908

 

 

 

 

 

 

 

 

 

 

Net income available to common stockholders per share:

 

 

 

 

 

 

 

 

Basic

$

1.19

 

 

$

1.32

 

 

$

4.10

 

 

$

4.23

 

Diluted

$

1.19

 

 

$

1.32

 

 

$

4.09

 

 

$

4.22

 

Weighted average shares outstanding:

 

 

 

 

 

 

 

 

Basic

 

15,217

 

 

 

15,377

 

 

 

15,275

 

 

 

16,049

 

Diluted

 

15,220

 

 

 

15,403

 

 

 

15,289

 

 

 

16,079

 

 

Dine Brands Global, Inc. and Subsidiaries

Consolidated Balance Sheets

(In thousands, except share and per share amounts)

 

 

 

September 30, 2023

 

December 31, 2022

Assets

 

(Unaudited)

 

 

Current assets:

 

 

 

 

Cash and cash equivalents

 

$

98,197

 

 

$

269,655

 

Receivables, net of allowance

 

 

85,742

 

 

 

119,981

 

Restricted cash

 

 

41,932

 

 

 

38,929

 

Prepaid gift card costs

 

 

23,550

 

 

 

30,235

 

Prepaid income taxes

 

 

3,063

 

 

 

3,063

 

Other current assets

 

 

11,317

 

 

 

17,901

 

Total current assets

 

 

263,801

 

 

 

479,764

 

Non-current restricted cash

 

 

19,500

 

 

 

16,400

 

Property and equipment, net

 

 

162,055

 

 

 

145,277

 

Operating lease right-of-use assets

 

 

283,854

 

 

 

289,123

 

Deferred rent receivable

 

 

35,537

 

 

 

42,329

 

Long-term receivables, net of allowance

 

 

35,678

 

 

 

39,697

 

Goodwill

 

 

254,057

 

 

 

253,956

 

Other intangible assets, net

 

 

588,692

 

 

 

597,028

 

Other non-current assets, net

 

 

16,407

 

 

 

17,917

 

Total assets

 

$

1,659,581

 

 

$

1,881,491

 

Liabilities and Stockholders’ Deficit

 

 

 

 

Current liabilities:

 

 

 

 

Current maturities of long-term debt

 

$

100,000

 

 

$

100,000

 

Accounts payable

 

 

28,880

 

 

 

52,067

 

Gift card liability

 

 

131,490

 

 

 

171,966

 

Current maturities of operating lease obligations

 

 

58,764

 

 

 

59,071

 

Current maturities of finance lease and financing obligations

 

 

6,922

 

 

 

7,542

 

Accrued employee compensation and benefits

 

 

19,970

 

 

 

23,456

 

Accrued advertising expenses

 

 

14,407

 

 

 

24,157

 

Dividends payable

.

 

 

 

 

8,017

 

Other accrued expenses

 

 

23,904

 

 

 

24,446

 

Total current liabilities

 

 

384,337

 

 

 

470,722

 

Long-term debt, net, less current maturities

 

 

1,084,011

 

 

 

1,241,914

 

Operating lease obligations, less current maturities

 

 

276,817

 

 

 

275,120

 

Finance lease obligations, less current maturities

 

 

32,646

 

 

 

30,377

 

Financing obligations, less current maturities

 

 

27,342

 

 

 

28,358

 

Deferred income taxes, net

 

 

70,229

 

 

 

74,651

 

Deferred franchise revenue, long-term

 

 

40,143

 

 

 

42,343

 

Other non-current liabilities

 

 

17,762

 

 

 

19,090

 

Total liabilities

 

 

1,933,287

 

 

 

2,182,575

 

Commitments and contingencies

 

 

 

 

Stockholders’ deficit:

 

 

 

 

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

 

 

 

 

 

 

Common stock, $0.01 par value; shares: 40,000,000 authorized; September 30, 2023 - 24,883,740 issued, 15,484,512 outstanding; December 31, 2022 - 24,959,972 issued, 15,599,239 outstanding

 

 

249

 

 

 

250

 

Additional paid-in-capital

 

 

253,080

 

 

 

259,339

 

Retained earnings

 

 

124,806

 

 

 

84,538

 

Accumulated other comprehensive loss

 

 

(67

)

 

 

(65

)

Treasury stock, at cost; shares: September 30, 2023 - 9,399,228; December 31, 2022 - 9,360,733

 

 

(651,774

)

 

 

(645,146

)

Total stockholders’ deficit

 

 

(273,706

)

 

 

(301,084

)

Total liabilities and stockholders’ deficit

 

$

1,659,581

 

 

$

1,881,491

 

 

Dine Brands Global, Inc. and Subsidiaries

Consolidated Statements of Cash Flows

(In thousands) (Unaudited)

 

 

 

Nine Months Ended

 

 

September 30,

 

 

2023

 

2022

Cash flows from operating activities:

 

 

 

Net income

 

$

64,137

 

 

$

69,760

 

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

 

 

 

 

Depreciation and amortization

 

 

26,221

 

 

 

28,870

 

Non-cash closure and impairment charges

 

 

3,088

 

 

 

2,975

 

Non-cash stock-based compensation expense

 

 

8,167

 

 

 

12,128

 

Non-cash interest expense

 

 

2,714

 

 

 

2,210

 

Loss on extinguishment of debt

 

 

10

 

 

 

1,161

 

Deferred income taxes

 

 

(3,582

)

 

 

(1,376

)

Deferred revenue

 

 

(2,590

)

 

 

(3,773

)

Loss (gain) on disposition of assets

 

 

2,309

 

 

 

(3,032

)

Other

 

 

(1,577

)

 

 

(3,816

)

Changes in operating assets and liabilities:

 

 

 

 

Accounts receivable, net

 

 

6,354

 

 

 

(734

)

Deferred rent receivable

 

 

6,792

 

 

 

5,951

 

Current income tax receivables and payables

 

 

(186

)

 

 

7,361

 

Gift card receivables and payables

 

 

(13,588

)

 

 

(16,752

)

Other current assets

 

 

6,358

 

 

 

(5,948

)

Accounts payable

 

 

(15,527

)

 

 

(6,855

)

Operating lease assets and liabilities

 

 

2,438

 

 

 

(8,286

)

Accrued employee compensation and benefits

 

 

(4,447

)

 

 

(18,738

)

Accrued advertising

 

 

(9,750

)

 

 

5,052

 

Other current liabilities

 

 

1,965

 

 

 

(2,668

)

Cash flows provided by operating activities

 

 

79,306

 

 

 

63,490

 

Cash flows from investing activities:

 

 

 

 

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

 

 

6,686

 

 

 

13,502

 

Net additions to property and equipment

 

 

(31,968

)

 

 

(19,495

)

Proceeds from sale of property and equipment

 

 

 

 

 

3,908

 

Additions to long-term receivables

 

 

(1,237

)

 

 

(1,069

)

Other

 

 

(113

)

 

 

(255

)

Cash flows used in investing activities

 

 

(26,632

)

 

 

(3,409

)

Cash flows from financing activities:

 

 

 

 

Proceeds from issuance of long-term debt

 

 

500,000

 

 

 

 

Repayment of long-term debt

 

 

(651,713

)

 

 

 

Borrowing from revolving credit facility

 

 

30,000

 

 

 

100,000

 

Repayment of revolving credit facility

 

 

(30,000

)

 

 

 

Payment of debt issuance costs

 

 

(8,044

)

 

 

(6,286

)

Dividends paid on common stock

 

 

(31,740

)

 

 

(30,765

)

Repurchase of common stock

 

 

(20,017

)

 

 

(113,862

)

Principal payments on finance lease and financing obligations

 

 

(5,329

)

 

 

(7,001

)

Proceeds from stock options exercised

 

 

3,812

 

 

 

241

 

Repurchase of restricted stock for tax payments upon vesting

 

 

(4,139

)

 

 

(2,601

)

Tax payments for share settlement of restricted stock units

 

 

(859

)

 

 

(955

)

Cash flows used in financing activities

 

 

(218,029

)

 

 

(61,229

)

Net change in cash, cash equivalents and restricted cash

 

 

(165,355

)

 

 

(1,148

)

Cash, cash equivalents and restricted cash at beginning of period

 

 

324,984

 

 

 

425,353

 

Cash, cash equivalents and restricted cash at end of period

 

$

159,629

 

 

$

424,205

 

Supplemental disclosures:

 

 

 

 

Interest paid in cash

 

$

54,032

 

 

$

47,478

 

Income taxes paid in cash

 

$

25,774

 

 

$

20,832

 

Non-cash conversion of accounts receivable to notes receivable

 

$

969

 

 

$

84

 

 
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 expenses; loss on extinguishment of debt; gain or loss on disposition of assets; acquisition costs; IHOP Flip'd initiative; other EBITDA adjustments; and the combined tax effect of the preceding adjustments, as well as related per share data:

 

 

Three Months Ended

September 30,

 

Nine Months Ended

September 30,

 

 

 

2023

 

 

2022

 

 

 

2023

 

 

2022

 

 

 

 

 

 

 

 

Net income available to common stockholders

 

$

18,048

 

$

20,373

 

 

$

62,586

 

$

67,908

 

Closure and impairment charges

 

 

1,774

 

 

1,636

 

 

 

3,088

 

 

3,093

 

Amortization of intangible assets

 

 

2,709

 

 

2,664

 

 

 

8,202

 

 

7,994

 

Non-cash interest expense

 

 

779

 

 

774

 

 

 

2,714

 

 

2,210

 

Loss (gain) on disposition of assets

 

 

191

 

 

(1,502

)

 

 

2,309

 

 

(3,032

)

Loss on extinguishment of debt

 

 

 

 

1,161

 

 

 

10

 

 

1,161

 

IHOP Flip'd initiative

 

 

 

 

 

 

 

5,121

 

 

 

Other EBITDA adjustments

 

 

361

 

 

2,488

 

 

 

3,036

 

 

2,488

 

Net income tax provision for above adjustments

 

 

(1,512

)

 

(1,878

)

 

 

(6,365

)

 

(3,618

)

Net income allocated to unvested participating restricted stock

 

 

(99

)

 

(149

)

 

 

(439

)

 

(272

)

Net income available to common stockholders, as adjusted

 

$

22,251

 

$

25,567

 

 

$

80,262

 

$

77,932

 

 

 

 

 

 

 

 

Diluted net income available to common stockholders per share:

 

 

 

 

 

 

Net income available to common stockholders

 

$

1.19

 

$

1.32

 

 

$

4.09

 

$

4.22

 

Closure and impairment charges

 

 

0.09

 

 

0.08

 

 

 

0.15

 

 

0.14

 

Amortization of intangible assets

 

 

0.13

 

 

0.13

 

 

 

0.40

 

 

0.37

 

Non-cash interest expense

 

 

0.04

 

 

0.04

 

 

 

0.13

 

 

0.10

 

Loss (gain) on disposition of assets

 

 

0.01

 

 

(0.07

)

 

 

0.11

 

 

(0.14

)

Loss on extinguishment of debt

 

 

 

 

0.06

 

 

 

0.00

 

 

0.05

 

IHOP Flip'd initiative

 

 

 

 

 

 

 

0.25

 

 

 

Other EBITDA adjustments

 

 

0.02

 

 

0.12

 

 

 

0.15

 

 

0.11

 

Net income allocated to unvested participating restricted stock

 

 

(0.01

)

 

(0.01

)

 

 

(0.03

)

 

(0.02

)

Rounding

 

 

(0.01

)

 

(0.01

)

 

 

 

 

0.02

 

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

 

$

1.46

 

$

1.66

 

 

$

5.25

 

$

4.85

 

 

 

 

 

 

 

 

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

 

$

22,251

 

$

25,567

 

 

$

80,262

 

$

77,932

 

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

 

 

 

 

1

 

 

 

 

 

4

 

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

 

$

22,251

 

$

25,568

 

 

$

80,262

 

$

77,936

 

 

 

 

 

 

 

 

Denominator for basic EPS - weighted-average shares

 

 

15,217

 

 

15,377

 

 

 

15,275

 

 

16,049

 

Dilutive effect of stock options

 

 

3

 

 

26

 

 

 

14

 

 

30

 

Denominator for diluted EPS - weighted-average shares

 

 

15,220

 

 

15,403

 

 

 

15,289

 

 

16,079

 

 
Dine Brands Global, Inc. and Subsidiaries
Non-GAAP Financial Measures
(In thousands, except per share amounts)
(Unaudited)
 

Reconciliation of the Company's cash flows provided by operating activities to “adjusted free cash flow” (cash flows (used in) 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.

 

Nine Months Ended

September 30,

 

 

2023

 

 

 

2022

 

 

(In millions)

Cash flows provided by operating activities

$

79.3

 

 

$

63.5

 

Principal receipts from notes and equipment contracts

 

6.7

 

 

 

8.4

 

Net additions to property and equipment

 

(32.0

)

 

 

(19.5

)

Adjusted free cash flow

 

54.0

 

 

 

52.4

 

Repayment of long-term debt, net

 

(151.7

)

 

 

 

Dividends paid on common stock

 

(31.7

)

 

 

(30.8

)

Repurchase of common stock

 

(20.0

)

 

 

(113.9

)

 

$

(149.4

)

 

$

(92.3

)

 
Dine Brands Global, Inc. and Subsidiaries
Non-GAAP Financial Measures
(In thousands, except per share amounts)
(Unaudited)
 

Reconciliation of the Company's net income to “adjusted EBITDA.” The Company defines adjusted EBITDA as net income or loss, adjusted for the effect of interest charges, income tax provision or benefit, depreciation and amortization, non-cash stock-based compensation, closure and impairment charges, loss on extinguishment of debt, gain or loss on 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 evaluate the performance of the Company and to make certain business decisions.

 

 

Three Months Ended

Nine Months Ended

 

 

September 30,

September 30,

 

 

 

2023

 

2022

 

2023

 

2022

 

 

 

 

 

 

 

 

Net income, as reported

 

$

18,479

 

$

20,948

 

$

64,137

 

$

69,760

 

Interest charges on finance leases

 

 

668

 

 

1,202

 

 

2,072

 

 

3,670

 

All other interest charges

 

 

21,178

 

 

17,184

 

 

58,672

 

 

49,900

 

Income tax provision

 

 

6,468

 

 

7,789

 

 

21,416

 

 

25,665

 

Depreciation and amortization

 

 

8,587

 

 

8,893

 

 

26,221

 

 

28,845

 

Non-cash stock-based compensation

 

 

2,858

 

 

3,801

 

 

8,167

 

 

12,128

 

Closure and impairment charges

 

 

1,774

 

 

1,636

 

 

3,088

 

 

3,093

 

Loss on extinguishment of debt

 

 

 

 

1,161

 

 

10

 

 

1,161

 

Loss (gain) on disposition of assets

 

 

191

 

 

(1,502

)

 

2,309

 

 

(3,032

)

IHOP Flip'd initiative

 

 

 

 

 

 

5,121

 

 

 

Other

 

 

361

 

 

2,488

 

 

3,036

 

 

3,682

 

Adjusted EBITDA

 

$

60,564

 

$

63,600

 

$

194,249

 

$

194,872

 

 
Dine Brands Global, Inc. and Subsidiaries
Restaurant Data
(Unaudited)
 

The following table sets forth, for the three and nine months ended September 30, 2023, 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

September 30,

 

Nine Months Ended

September 30,

 

 

2023

 

 

 

2022

 

 

 

2023

 

 

 

2022

 

Applebee's Restaurant Data

(Unaudited)

Global Effective Restaurants(a)

 

 

 

 

 

 

 

Franchise

 

1,654

 

 

 

1,601

 

 

 

1,663

 

 

 

1,604

 

Company

 

 

 

 

69

 

 

 

 

 

 

69

 

Total

 

1,654

 

 

 

1,670

 

 

 

1,663

 

 

 

1,673

 

System-wide(b)

 

 

 

 

 

 

 

Domestic sales percentage change(c)

 

(3.2

)%

 

 

3.2

%

 

 

0.3

%

 

 

5.9

%

Domestic same-restaurant sales percentage change(d)

 

(2.4

)%

 

 

3.8

%

 

 

0.9

%

 

 

6.3

%

Franchise(b)

 

 

 

 

 

 

 

Domestic sales percentage change(c)

 

0.4

%

 

 

3.1

%

 

 

4.0

%

 

 

5.8

%

Domestic same-restaurant sales percentage change(d)

 

(2.4

)%

 

 

3.6

%

 

 

0.9

%

 

 

6.3

%

Average weekly domestic unit sales (in thousands)

$

52.1

 

 

$

53.5

 

 

$

54.4

 

 

$

54.2

 

 

 

 

 

 

 

 

 

IHOP Restaurant Data

 

 

 

 

 

 

 

Global Effective Restaurants(a)

 

 

 

 

 

 

 

Franchise

 

1,631

 

 

 

1,602

 

 

 

1,626

 

 

 

1,594

 

Area license

 

156

 

 

 

157

 

 

 

156

 

 

 

156

 

Total

 

1,787

 

 

 

1,759

 

 

 

1,782

 

 

 

1,750

 

System-wide(b)

 

 

 

 

 

 

 

Sales percentage change(c)

 

4.2

%

 

 

3.7

%

 

 

6.6

%

 

 

9.1

%

Domestic same-restaurant sales percentage change, including area license restaurants(d)

 

2.0

%

 

 

1.9

%

 

 

4.2

%

 

 

7.2

%

Franchise(b)

 

 

 

 

 

 

 

Sales percentage change(c)

 

4.5

%

 

 

3.6

%

 

 

6.9

%

 

 

9.2

%

Domestic same-restaurant sales percentage change(d)

 

2.0

%

 

 

1.6

%

 

 

4.2

%

 

 

7.3

%

Average weekly unit sales (in thousands)

$

37.8

 

 

$

36.8

 

 

$

38.3

 

 

$

36.5

 

Area License(b)

 

 

 

 

 

 

 

Sales percentage change(c)

 

1.1

%

 

 

5.2

%

 

 

4.0

%

 

 

8.4

%

_________________________________
 

(a)

“Effective Restaurants” are the weighted average number of restaurants open in each 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 consist of restaurants owned by franchisees and area licensees as well as those owned by the Company. Effective Restaurants do not include units operated as ghost kitchens (small kitchens with no store-front presence, used to fill off-premise orders).

(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 Applebee's restaurants. System-wide sales do not include retail sales of ghost kitchens. 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, Applebee's company-operated restaurants, IHOP franchise restaurants and IHOP area license restaurants were as follows:

 

Three Months Ended

September 30,

Nine Months Ended

September 30,

 

 

2023

 

 

2022

 

2023

 

 

2022

Reported sales (in millions)

(Unaudited)

Applebee's domestic franchise restaurant sales

$

1,048.5

 

$

1,044.5

$

3,303.9

 

$

3,176.2

Applebee's company-operated restaurants

 

 

 

38.2

 

 

 

117.2

IHOP franchise restaurant sales

 

801.0

 

 

766.8

 

2,425.9

 

 

2,270.3

IHOP area license restaurant sales

 

74.3

 

 

73.5

 

228.1

 

 

219.3

Total

$

1,923.8

 

$

1,923.0

$

5,957.9

 

$

5,783.0

(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 fiscal period, for domestic restaurants that have been operated during both fiscal periods that are being compared and have been open for at least 18 months. Because of new restaurant openings and restaurant closures, the domestic restaurants open throughout both fiscal periods being compared may be different from period to period.

Dine Brands Global, Inc. and Subsidiaries

Restaurant Data

(Unaudited)

 

Restaurant Development Activity

Three Months Ended September 30,

Nine Months Ended September 30,

 

2023

 

2022

2023

 

2022

Applebee's

(Unaudited)

Summary - beginning of period:

 

 

 

 

 

 

Franchise

1,661

 

 

1,604

 

1,678

 

 

1,611

 

Company

 

 

69

 

 

 

69

 

Beginning of period

1,661

 

 

1,673

 

1,678

 

 

1,680

 

 

 

 

 

 

 

 

Franchise restaurants opened:

 

 

 

 

 

 

Domestic

2

 

 

 

3

 

 

2

 

International

2

 

 

1

 

5

 

 

1

 

Total franchise restaurants opened

4

 

 

1

 

8

 

 

3

 

Franchise restaurants permanently closed:

 

 

 

 

 

 

Domestic

(12

)

 

(3

)

(28

)

 

(9

)

International

(1

)

 

(1

)

(6

)

 

(4

)

Total franchise restaurants permanently closed

(13

)

 

(4

)

(34

)

 

(13

)

Net franchise restaurant reduction

(9

)

 

(3

)

(26

)

 

(10

)

 

 

 

 

 

 

 

Summary - end of period:

 

 

 

 

 

 

Franchise

1,652

 

 

1,601

 

1,652

 

 

1,601

 

Company

 

 

69

 

 

 

69

 

Total Applebee's restaurants, end of period

1,652

 

 

1,670

 

1,652

 

 

1,670

 

Domestic

1,544

 

 

1,571

 

1,544

 

 

1,571

 

International

108

 

 

99

 

108

 

 

99

 

 

Dine Brands Global, Inc. and Subsidiaries

Restaurant Data

(Unaudited)

 

 

 

 

 

Restaurant Development Activity (continued)

Three Months Ended September 30,

Nine Months Ended September 30,

 

2023

 

2022

2023

2022

 

 

 

 

 

 

IHOP

 

 

 

 

 

Summary - beginning of period:

 

 

 

 

 

Franchise

1,634

 

 

1,608

 

1,625

 

1,595

 

Area license

156

 

 

156

 

156

 

156

 

Company

 

 

 

 

 

Total IHOP restaurants, beginning of period

1,790

 

 

1,764

 

1,781

 

1,751

 

 

 

 

 

 

 

Franchise/area license restaurants opened:

 

 

 

 

 

Domestic franchise

5

 

 

5

 

27

 

20

 

Domestic area license

 

 

1

 

2

 

2

 

International franchise

5

 

 

3

 

11

 

10

 

Total franchise/area license restaurants opened

10

 

 

9

 

40

 

32

 

Franchise/area license restaurants permanently closed:

 

 

 

 

 

Domestic franchise

(5

)

 

(5

)

(23

)

(12

)

Domestic area license

 

 

(1

)

(2

)

(2

)

International franchise

(1

)

 

(1

)

(2

)

(3

)

Total franchise/area license restaurants permanently closed

(6

)

 

(7

)

(27

)

(17

)

Net franchise/area license restaurant additions

4

 

 

2

 

13

 

15

 

Net increase in franchise/area license restaurants

4

 

 

2

 

13

 

15

 

 

 

 

 

 

 

Summary - end of period:

 

 

 

 

 

Franchise

1,638

 

 

1,610

 

1,638

 

1,610

 

Area license

156

 

 

156

 

156

 

156

 

Total IHOP restaurants, end of period

1,794

 

 

1,766

 

1,794

 

1,766

 

Domestic

1,681

 

 

1,665

 

1,681

 

1,665

 

International

113

 

 

101

 

113

 

101

 

As of September 30, 2023, 47 franchise groups operated 137 Fuzzy's restaurants in 18 states within the United States and we had one company-owned restaurant in Texas, totaling 138 restaurants. Fuzzy's average weekly sales for the three and nine months ended September 30, 2023 were $30,628 and $31,575, respectively.

The restaurant counts and activity presented above do not include one domestic Applebee's ghost kitchens (small kitchens with no store-front presence, used to fill off-premise orders), 10 international Applebee's ghost kitchens and 38 international IHOP ghost kitchens.

Contacts

Investor Contact

Brett Levy

Vice President, Investor Relations

Dine Brands Global, Inc.

IR@dinebrands.com

Media Contact

Susan Nelson

Sr. Vice President, Global Communications

Dine Brands Global, Inc.

Susan.Nelson@dinebrands.com

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