February 28, 2024
(press release)
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“Our solid performance in the fourth quarter concluded a year of significant progress for Dine. We delivered another year of positive comp sales growth at IHOP and Applebee’s and generated year-over-year EBITDA growth while fully integrating Fuzzy’s into our system,” said
Domestic Restaurant Sales for the Fourth Quarter of 2023 Fourth Quarter of 2023 Summary 2023 Summary Key Balance Sheet Metrics (as of
GAAP Effective Tax Rate The fiscal year 2023 effective tax rate of 13.0% applied to pretax book income was different than the statutory Federal income tax rate of 21% primarily due to the conclusion of a state income tax audit settlement, resulting in an income tax benefit of
Capital Returns to Equity Holders During the fourth quarter of 2023, the Company repurchased approximately
On
Financial Performance Guidance for 2024 The Company introduced its fiscal 2024 guidance items: 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. Fourth Quarter of 2023 Earnings Conference Call Details Dine Brands will host a conference call to discuss its results on
About
Based in
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
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 intangible asset amortization, any non-cash interest expense, any gain or loss related to the disposition of assets, any gain or loss related to debt extinguishment, any charges related to stopping the IHOP Flip’d initiative, 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 interest charges, any income tax provision or benefit, any depreciation and amortization, any non-cash stock-based compensation, any closure and impairment charges, any gain or loss related to debt extinguishment, 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. Additionally, the Company has provided total revenues excluding the refranchised Applebee’s restaurants for the three and twelve months ended
FBN-R
Consolidated Statements of Comprehensive Income (In thousands, except per share amounts) (Unaudited) Three Months Ended Twelve Months Ended
2023 2022 2023 2022 Revenues: Franchise revenues: Royalties, franchise fees and other $ 101,571 $ 95,398 $ 405,569 $ 373,110 Advertising revenues 74,395 72,642 300,796 289,328 Total franchise revenues 175,966 168,040 706,365 662,438 Company restaurant sales 289 9,694 2,128 126,869 Rental revenues 29,451 29,411 119,970 116,491 Financing revenues 596 820 2,605 3,604 Total revenues 206,302 207,965 831,068 909,402 Cost of revenues: Franchise expenses: Advertising expenses 74,561 70,377 300,962 287,063 Bad debt expense 66 784 2,659 261 Other franchise expenses 10,992 10,182 40,782 34,584 Total franchise expenses 85,619 81,343 344,403 321,908 Company restaurant expenses 303 9,920 2,136 121,722 Rental expenses: Interest expense from finance leases 699 708 2,771 2,962 Other rental expenses 21,167 21,313 84,705 85,033 Total rental expenses 21,866 22,021 87,476 87,995 Financing expenses 86 102 369 419 Total cost of revenues 107,874 113,386 434,384 532,044 Gross profit 98,428 94,579 396,684 377,358 General and administrative expenses 50,512 58,800 198,057 190,746 Interest expense, net 18,498 14,760 70,047 60,952 Closure and impairment charges 506 (31 ) 3,594 3,062 Amortization of intangible assets 2,721 2,565 10,923 10,559 (Gain) loss on extinguishment of debt — (1,371 ) 10 (210 ) Loss (gain) on disposition of assets 41 496 2,350 (2,536 ) Income before income taxes 26,150 19,360 111,703 114,785 Income tax (provision) benefit 6,889 (8,009 ) (14,527 ) (33,674 ) Net income 33,039 11,351 97,176 81,111 Other comprehensive income, net of tax: Foreign currency translation adjustment 3 3 1 (6 ) Total comprehensive income $ 33,042 $ 11,354 $ 97,177 $ 81,105 Net income available to common stockholders: Net income $ 33,039 $ 11,351 $ 97,176 $ 81,111 Less: Net income allocated to unvested participating restricted stock (751 ) (311 ) (2,317 ) (2,174 ) Net income available to common stockholders $ 32,288 $ 11,040 $ 94,859 $ 78,937 Net income available to common stockholders per share: Basic $ 2.14 $ 0.72 $ 6.23 $ 4.97 Diluted $ 2.14 $ 0.72 $ 6.22 $ 4.96 Weighted average shares outstanding: Basic 15,106 15,344 15,233 15,873 Diluted 15,106 15,370 15,242 15,901
Consolidated Balance Sheets (In thousands, except share and per share amounts) (Unaudited)
Assets 2023 2022 (Unaudited) Current assets: Cash and cash equivalents $ 146,034 $ 269,655 Receivables, net of allowance of
127,937 119,981 Restricted cash 35,058 38,929 Prepaid gift card costs 29,545 30,235 Prepaid income taxes 3,445 3,063 Other current assets 15,759 17,901 Total current assets 357,778 479,764 Other intangible assets, net 586,033 597,028 Operating lease right-of-use assets 275,214 289,123
254,062 253,956 Property and equipment, net 161,891 145,277 Long-term receivables, net of allowance of
35,602 39,697 Deferred rent receivable 33,326 42,329 Non-current restricted cash 19,500 16,400 Other non-current assets, net 16,881 17,917 Total assets $ 1,740,287 $ 1,881,491 Liabilities and Stockholders' Deficit Current liabilities: Current maturities of long-term debt $ 100,000 $ 100,000 Accounts payable 36,193 52,067 Gift card liability 175,640 171,966 Current maturities of operating lease obligations 63,498 59,071 Current maturities of finance lease and financing obligations 7,243 7,542 Accrued employee compensation and benefits 23,211 23,456 Accrued advertising expenses 9,446 24,157 Dividends payable 7,827 8,017 Other accrued expenses 37,394 24,446 Total current liabilities 460,452 470,722 Long-term debt, net, less current maturities 1,084,502 1,241,914 Operating lease obligations, less current maturities 269,097 275,120 Finance lease obligations, less current maturities 34,389 30,377 Financing obligations, less current maturities 26,984 28,358 Deferred income taxes, net 60,829 74,651 Deferred franchise revenue, long-term 38,658 42,343 Other non-current liabilities 16,350 19,090 Total liabilities 1,991,261 2,182,575 Commitments and contingencies Stockholders' deficit: Preferred stock,
— — Common stock,
249 250 Additional paid-in-capital 256,542 259,339 Retained earnings 150,008 84,538 Accumulated other comprehensive loss (64 ) (65 )
(657,709 ) (645,146 ) Total stockholders' deficit (250,974 ) (301,084 ) Total liabilities and stockholders' deficit $ 1,740,287 $ 1,881,491
Consolidated Statements of Cash Flows (In thousands) (Unaudited) Twelve Months Ended
2023 2022 Cash flows from operating activities Net income $ 97,176 $ 81,111 Adjustments to reconcile net income to cash flows provided by operating activities: Depreciation and amortization 35,630 37,952 Non-cash stock-based compensation expense 11,990 16,131 Non-cash closure and impairment charges 3,594 2,927 Non-cash interest expense 3,505 3,226 Deferred income taxes (13,822 ) (1,071 ) Deferred revenue (4,224 ) (4,474 ) Loss (gain) on extinguishment of debt 10 (210 ) Loss (gain) on disposition of assets 2,359 (2,536 ) Other (3,552 ) (5,160 ) Changes in operating assets and liabilities: Accounts receivable, net 1,913 (2,574 ) Deferred rent receivable 9,003 7,928 Current income tax receivables and payables 1,160 8,326 Operating lease assets and liabilities 7,256 (11,823 ) Gift card receivables and payables 5,095 2,783 Other current assets 1,911 (12,706 ) Accounts payable (16,027 ) (3,665 ) Accrued employee compensation and benefits (1,748 ) (16,264 ) Accrued advertising expenses (14,711 ) (10,020 ) Other current liabilities 4,622 (545 ) Cash flows provided by operating activities 131,140 89,336 Cash flows from investing activities Principal receipts from notes, equipment contracts and other long-term receivables 9,319 17,057 Net additions to property and equipment (37,172 ) (35,318 ) Proceeds from sale of property and equipment 10 17,028 Additions to long-term receivables (1,069 ) (1,069 ) Acquisition of business, net of cash acquired (101 ) (78,264 ) Other (1,084 ) (338 ) Cash flows used in investing activities (30,097 ) (80,904 ) Cash flows from financing activities Proceeds from issuance of long-term debt, including revolving line of credit 530,000 100,000 Repayment of long-term debt (651,713 ) (38,768 ) Repayments of revolving credit facility (30,000 ) — Payment of debt issuance costs (8,044 ) (6,289 ) Dividends paid on common stock (31,715 ) (30,765 ) Repurchase of common stock (26,130 ) (120,452 ) Principal payments of finance lease and financing obligations (6,431 ) (8,946 ) Proceeds from stock options exercised 3,812 241 Repurchase of restricted stock for tax payments upon vesting (4,355 ) (2,867 ) Tax payments for share settlement of restricted stock units (859 ) (955 ) Cash flows used in financing activities (225,435 ) (108,801 ) Net change in cash, cash equivalents and restricted cash (124,392 ) (100,369 ) Cash, cash equivalents and restricted cash at beginning of year 324,984 425,353 Cash, cash equivalents and restricted cash at end of year $ 200,592 $ 324,984 Supplemental disclosures Interest paid $ 73,976 $ 64,599 Income taxes paid $ 28,409 $ 28,085 Non-cash conversion of accounts receivable to notes receivable $ 1,367 $ 84 Non-cash balance sheet gross-up of receivables and other accrued expenses $ (11,000 ) $ —
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; gain or loss on disposition of assets; gain or loss on extinguishment of debt; acquisition costs; charges related to stopping the IHOP Flip'd initiative; other EBITDA adjustments; the combined tax effect of the preceding adjustments; and income tax adjustments related to the tax impact from a state settlement (2023) and from the Mid-Atlantic sale (2022), as well as related per share data: Three Months Ended
Twelve Months Ended
2023 2022 2023 2022 Net income available to common stockholders, as reported $ 32,288 $ 11,040 $ 94,859 $ 78,937 Closure and impairment charges 506 (31 ) 3,594 3,062 Amortization of intangible assets 2,722 2,565 10,924 10,559 Noncash interest expense 791 1,016 3,505 3,226 Loss (gain) on disposition of assets 41 496 2,350 (2,536 ) (Gain) loss on extinguishment of debt — (1,371 ) 10 (210 ) Acquisition costs — 5,052 804 6,027 IHOP Flip'd initiative — — 5,121 — Other EBITDA adjustments 863 1,755 3,095 3,268 Net income tax provision for above adjustments (1,280 ) (2,465 ) (7,645 ) (6,083 ) Income tax adjustments (15,063 ) 2,833 (15,063 ) 2,833 Net income allocated to unvested participating restricted stock 257 (272 ) (159 ) (538 ) Net income available to common stockholders, as adjusted $ 21,125 $ 20,618 $ 101,395 $ 98,545 Diluted net income available to common stockholders per share: Net income available to common stockholders $ 2.14 $ 0.72 $ 6.22 $ 4.96 Closure and other impairment charges 0.02 (0.00 ) 0.17 0.14 Amortization of intangible assets 0.13 0.12 0.53 0.49 Non-cash interest expense 0.04 0.05 0.17 0.15 Loss (gain) on disposition of assets 0.00 0.02 0.11 (0.12 ) (Gain) loss on extinguishment of debt — (0.07 ) 0.00 (0.01 ) Merger and acquisition costs — 0.24 0.04 0.28 IHOP Flip'd initiative — — 0.25 — Other EBITDA adjustments 0.04 0.08 0.15 0.15 Net income tax provision for above adjustments (1.00 ) 0.18 (0.99 ) 0.18 Net income allocated to unvested participating restricted stock 0.02 (0.02 ) (0.01 ) (0.03 ) Rounding 0.01 0.02 0.01 0.01 Diluted net income available to common stockholders per share, as adjusted $ 1.40 $ 1.34 $ 6.65 $ 6.20 Numerator for basic EPS - net income available to common stockholders, as adjusted $ 21,125 $ 20,618 $ 101,395 $ 98,545 Effect of unvested participating restricted stock using the two-class method 1 — — 1 Numerator for diluted EPS - net income available to common stockholders, as adjusted $ 21,126 $ 20,618 $ 101,395 $ 98,546 Denominator for basic EPS - weighted-average shares 15,106 15,344 15,233 15,873 Dilutive effect of stock options — 26 9 28 Denominator for diluted EPS - weighted-average shares 15,106 15,370 15,242 15,901
Non-GAAP Financial Measures (Unaudited) Reconciliation of the Company's cash flows provided by operating activities to “adjusted free cash flow” (cash flows 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
2023 2022 (In thousands) Cash flows provided by operating activities $ 131,140 $ 89,336 Principal receipts from notes and equipment contracts 9,319 10,615 Net additions to property and equipment (37,172 ) (35,318 ) Adjusted free cash flow 103,287 64,633 (Repayment) issuance of long-term debt, net (151,713 ) 61,232 Dividends paid on common stock (31,715 ) (30,765 ) Repurchase of common stock (26,130 ) (120,452 ) $ (106,271 ) $ (25,352 )
Non-GAAP Financial Measures (in thousands) (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, gain or loss on extinguishment of debt, gain or loss on disposition of assets, and other items deemed not reflective of current operations. Management may use certain non-GAAP measures along with the corresponding
Three Months Ended
Twelve Months Ended
2023 2022 2023 2022 Net income, as reported $ 33,039 $ 11,351 $ 97,176 $ 81,111 Interest charges on finance leases 699 849 2,771 4,519 All other interest charges 20,664 17,813 79,336 67,713 Income tax (benefit) provision (6,889 ) 8,009 14,527 33,674 Depreciation and amortization 9,408 9,073 35,630 37,918 Non-cash stock-based compensation 3,823 4,003 11,990 16,131 Closure and impairment charges 506 (31 ) 3,594 3,062 (Gain) loss on extinguishment of debt — (1,371 ) 10 (210 ) Loss (gain) on disposition of assets 41 496 2,350 (2,536 ) Merger and acquisition costs — 5,052 804 6,027 IHOP Flip'd initiative — — 5,121 — Other 864 1,756 3,095 4,463 Adjusted EBITDA $ 62,155 $ 57,000 $ 256,404 $ 251,872
Restaurant Data (Unaudited) The following table sets forth, for the three and twelve months ended
Three Months Ended
Twelve Months Ended
2023 2022 2023 2022 Applebee's Restaurant Data (Unaudited)
Franchise 1,646 1,657 1,659 1,617 Company — 16 — 56 Total 1,646 1,673 1,659 1,673 System-wide(b) Domestic sales percentage change(c) (1.5 )% 1.0 % (0.1 )% 4.7 % Domestic same-restaurant sales percentage change(d) (0.5 )% 1.7 % 0.6 % 5.1 % Franchise(b) Domestic sales percentage change(c) (0.6 )% 3.7 % 2.9 % 5.3 % Domestic same-restaurant sales percentage change(d) (0.5 )% 1.7 % 0.6 % 5.1 % Average weekly domestic unit sales (in thousands) $ 52.6 $ 52.5 $ 54.0 $ 53.7 IHOP Restaurant Data
Franchise 1,639 1,610 1,629 1,597 Area license 157 156 156 156 Total 1,796 1,766 1,785 1,753 System-wide(b) Sales percentage change(c) 4.2 % 3.9 % 6.0 % 7.7 % Domestic same-restaurant sales percentage change, including area license restaurants(d) 1.6 % 2.0 % 3.5 % 5.8 % Franchise(b) Sales percentage change(c) 4.1 % 3.7 % 6.1 % 7.7 % Domestic same-restaurant sales percentage change(d) 1.7 % 1.6 % 3.6 % 5.7 % Average weekly unit sales (in thousands) $ 39.1 $ 38.2 $ 38.5 $ 37.0 Area License(b) Sales percentage change(c) 5.2 % 6.5 % 4.3 % 7.9 % _________________________________ (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
(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
Twelve Months Ended
2023 2022 2023 2022 Reported sales (in millions) (Unaudited) Applebee's domestic franchise restaurant sales $ 1,052.7 $ 1,059.1 $ 4,356.6 $ 4,235.3 Applebee's company-operated restaurants — 9.5 — 126.7 IHOP franchise restaurant sales 832.4 799.7 3,258.3 3,070.0 IHOP area license restaurant sales 77.2 73.4 305.3 292.7 Total $ 1,962.3 $ 1,941.7 $ 7,920.2 $ 7,724.7 (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.
Restaurant Data (Unaudited) Restaurant Development Activity Three Months Ended
Twelve Months Ended
2023 2022 2023 2022 Applebee's (Unaudited) Summary - beginning of period: Franchise 1,652 1,601 1,678 1,611 Company — 69 — 69 Beginning of period 1,652 1,670 1,678 1,680 Franchise restaurants opened: Domestic — 2 3 4 International 2 11 7 12 Total franchise restaurants opened 2 13 10 16 Franchise restaurants permanently closed: Domestic (8 ) (4 ) (36 ) (13 ) International (4 ) (1 ) (10 ) (5 ) Total franchise restaurants permanently closed (12 ) (5 ) (46 ) (18 ) Net franchise restaurant development (reduction) (10 ) 8 (36 ) (2 ) Refranchised from Company restaurants — 69 — 69 Net franchise restaurant additions (reductions) (10 ) 77 (36 ) 67 Summary - end of period: Franchise 1,642 1,678 1,642 1,678 Company — — — — Total Applebee's restaurants, end of period 1,642 1,678 1,642 1,678 Domestic 1,536 1,569 1,536 1,569 International 106 109 106 109 IHOP Summary - beginning of period: Franchise 1,638 1,610 1,625 1,595 Area license 156 156 156 156 Total IHOP restaurants, beginning of period 1,794 1,766 1,781 1,751 Franchise/area license restaurants opened: Domestic franchise 16 14 43 34 Domestic area license 1 1 3 3 International franchise 5 4 16 14 Total franchise/area license restaurants opened 22 19 62 51 Franchise/area license restaurants permanently closed: Domestic franchise (2 ) (2 ) (25 ) (14 ) Domestic area license — (1 ) (2 ) (3 ) International franchise — (1 ) (2 ) (4 ) Total franchise/area license restaurants permanently closed (2 ) (4 ) (29 ) (21 ) Net franchise/area license restaurant additions 20 15 33 30 Net increase in franchise/area license restaurants 20 15 33 30 Summary - end of period: Franchise 1,657 1,625 1,657 1,625 Area license 157 156 157 156 Total IHOP restaurants, end of period 1,814 1,781 1,814 1,781 Domestic 1,696 1,677 1,696 1,677 International 118 104 118 104 As of
The restaurant counts and activity presented above do not include one domestic Applebee's ghost kitchen (small kitchens with no store-front presence, used to fill off-premise orders), 10 international Applebee's ghost kitchens and 33 international IHOP ghost kitchens at
View source version on businesswire.com: https://www.businesswire.com/news/home/20240228165969/en/ Investor Contact Media Contact Source:
Sr. Vice President, Finance and Investor Relations
IR@dinebrands.com
Sr. Vice President,
Susan.Nelson@dinebrands.com
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