Dine Brands(DIN) - 2024 Q2 - Quarterly Report

PART I. FINANCIAL INFORMATION Item 1. Financial Statements Unaudited consolidated financial statements for Q2 and H1 2024, including Balance Sheets, Income, Stockholders' Deficit, Cash Flows, and detailed notes, are presented Consolidated Balance Sheets Total assets decreased to $1.69 billion, liabilities to $1.93 billion, and stockholders' deficit improved to $(231.7) million by June 30, 2024 Consolidated Balance Sheet Highlights (in thousands) | Account | June 30, 2024 (Unaudited) | December 31, 2023 | | :--- | :--- | :--- | | Total Assets | $1,693,502 | $1,740,287 | | Cash and cash equivalents | $153,534 | $146,034 | | Goodwill | $254,062 | $254,062 | | Total Liabilities | $1,925,204 | $1,991,261 | | Long-term debt, net | $1,085,510 | $1,084,502 | | Total Stockholders' Deficit | $(231,702) | $(250,974) | Consolidated Statements of Comprehensive Income Q2 2024 revenues slightly decreased to $206.3 million while net income rose to $23.2 million; H1 2024 revenues and net income declined Key Income Statement Data (in thousands, except per share data) | Metric | Q2 2024 | Q2 2023 | H1 2024 | H1 2023 | | :--- | :--- | :--- | :--- | :--- | | Total Revenues | $206,267 | $208,415 | $412,502 | $422,182 | | Gross Profit | $99,271 | $97,342 | $196,695 | $200,958 | | Net Income | $23,182 | $18,248 | $40,655 | $45,658 | | Diluted EPS | $1.50 | $1.16 | $2.64 | $2.91 | Consolidated Statements of Stockholders' Deficit Stockholders' deficit improved to $(231.7) million by June 30, 2024, driven by net income, offset by share repurchases and dividends - During the first six months of 2024, the company purchased 269,621 shares of its common stock for $12.0 million[12] - The company paid dividends on common stock totaling $15.7 million during the first six months of 2024[12] Consolidated Statements of Cash Flows Operating cash flow increased to $52.2 million in H1 2024, with total cash, cash equivalents, and restricted cash rising by $17.8 million Cash Flow Summary - Six Months Ended June 30 (in thousands) | Cash Flow Category | 2024 | 2023 | | :--- | :--- | :--- | | Net cash provided by operating activities | $52,179 | $42,684 | | Net cash used in investing activities | $(1,072) | $(16,572) | | Net cash used in financing activities | $(33,308) | $(194,278) | | Net change in cash, cash equivalents and restricted cash | $17,799 | $(168,166) | Notes to Consolidated Financial Statements Detailed notes explain accounting policies and financial figures, covering revenue, debt, equity, segments, and fair value measurements - The company's four reportable segments are: franchise operations, company-operated restaurant operations, rental operations, and financing operations[70] - The company's long-term debt is subject to covenants, including a Debt Service Coverage Ratio (DSCR) of approximately 3.5x as of June 30, 2024, well above the 1.75x trigger[51] - As of June 30, 2024, $133.3 million remained available for repurchases under the $250 million stock repurchase program authorized in February 2022[60] Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations (MD&A) Management discusses H1 2024 financial performance, key business drivers, and liquidity, highlighting mixed brand results, income decline, and improved adjusted free cash flow Overview and Key Financial Results Dine Brands operates nearly 3,600 restaurants globally; H1 2024 income before taxes decreased by $5.3 million due to lower gross profit and higher interest expense - The company is one of the largest full-service restaurant companies in the world with close to 3,600 restaurants under the Applebee's, IHOP, and Fuzzy's Taco Shop brands[87] Change in Income Before Income Taxes - H1 2024 vs H1 2023 (in millions) | Component | Variance | | :--- | :--- | | Decrease in gross profit | $(4.3) | | Increase in G&A expenses | $(0.1) | | Increase in interest expense, net | $(3.4) | | Favorable change in loss on disposition of assets | $2.2 | | Total decrease in income before income taxes | $(5.3) | Key Performance Indicators and Restaurant Data H1 2024 saw negative domestic same-restaurant sales across all brands and net restaurant count reductions, with off-premise sales remaining significant Domestic Same-Restaurant Sales % Change - H1 2024 vs H1 2023 | Brand | H1 2024 % Change | | :--- | :--- | | Applebee's | (3.2)% | | IHOP | (1.5)% | | Fuzzy's | (8.6)% | Net Restaurant Development - H1 2024 | Brand | Net Change | | :--- | :--- | | Applebee's | (17) | | IHOP | (3) | | Fuzzy's | (7) | - For H1 2024, off-premise sales mix was 21.8% for Applebee's, 20.4% for IHOP, and 40.1% for Fuzzy's[96][98][100] Consolidated Results of Operations H1 2024 total revenue decreased to $412.5 million and gross profit to $196.7 million, driven by lower franchise and rental revenues and higher net interest expense Franchise Gross Profit - H1 2024 vs H1 2023 (in millions) | Brand | H1 2024 | H1 2023 | Variance | | :--- | :--- | :--- | :--- | | Applebee's | $86.4 | $87.3 | $(0.9) | | IHOP | $91.0 | $88.2 | $2.8 | | Fuzzy's | $3.5 | $6.8 | $(3.3) | | Total | $180.9 | $182.3 | $(1.4) | - G&A expenses for H1 2024 were $99.0 million, a marginal 0.1% increase from the prior year, primarily due to higher stock-based compensation and severance, offset by the stopping of the IHOP Flip'd initiative[121] - Net interest expense for H1 2024 increased by $3.4 million to $35.9 million, driven by higher interest rates on refinanced securitized notes and the Credit Facility[122] Liquidity and Capital Resources The company maintains liquidity with $223.1 million available on its credit facility, a 4.2x leverage ratio, and improved adjusted free cash flow of $52.9 million in H1 2024 - As of June 30, 2024, the company had $223.1 million available for borrowing under its $325 million Credit Facility[129] - The company's leverage ratio was approximately 4.2x as of June 30, 2024, below the 5.25x threshold for mandatory principal payments on Class A-2 Notes[126] Adjusted Free Cash Flow Reconciliation (in millions) | Component | H1 2024 | H1 2023 | | :--- | :--- | :--- | | Cash flows provided by operating activities | $52.2 | $42.7 | | Principal receipts from notes and equipment contracts | $7.5 | $4.2 | | Additions to property and equipment | $(6.8) | $(22.8) | | Adjusted free cash flow | $52.9 | $24.1 | Item 3. Quantitative and Qualitative Disclosures about Market Risk No material changes occurred in market risk disclosures from the Annual Report on Form 10-K for the fiscal year ended December 31, 2023 - There were no material changes from the market risk information contained in the Company's Annual Report on Form 10-K for the year ended December 31, 2023[143] Item 4. Controls and Procedures Management concluded disclosure controls and procedures were effective as of June 30, 2024, with no material changes to internal control over financial reporting - The CEO and CFO concluded that the Company's disclosure controls and procedures are effective at the reasonable assurance level as of the end of the reporting period[145] - No changes in internal control over financial reporting occurred during the fiscal quarter that have materially affected, or are reasonably likely to materially affect, the Company's internal controls[146] PART II. OTHER INFORMATION Item 1. Legal Proceedings The company is involved in various ordinary course legal proceedings, none of which are expected to have a material adverse impact - The Company is subject to various lawsuits and claims in the ordinary course of business but does not presently believe any will have a material adverse impact[148] Item 1A. Risk Factors No material changes occurred in the risk factors previously disclosed in the Annual Report on Form 10-K for the fiscal year ended December 31, 2023 - There are no material changes from the risk factors set forth in the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 2023[149] Item 2. Unregistered Sales of Equity Securities and Use of Proceeds Details of Q2 2024 stock repurchase activity, with 141,142 shares repurchased and $133.3 million remaining under authorization Share Repurchases - Q2 2024 | Period | Total Shares Purchased (Public Plan) | Average Price Paid | | :--- | :--- | :--- | | Apr 1 - Apr 28, 2024 | 44,519 | $44.89 | | Apr 29 - May 26, 2024 | 45,409 | $44.05 | | May 27 - Jun 30, 2024 | 51,214 | $39.03 | | Total Q2 2024 | 141,142 | - | - As of June 30, 2024, approximately $133,266,000 remained available for future share repurchases under the publicly announced plan[149] Item 5. Other Information No directors or executive officers adopted, modified, or terminated Rule 10b5-1 or other trading plans during Q2 2024 - During the fiscal quarter ended June 30, 2024, no directors or officers adopted, modified, or terminated a Rule 10b5-1 trading plan or a non-Rule 10b5-1 trading arrangement[151] Item 6. Exhibits Exhibits filed with Form 10-Q include CEO and CFO certifications and Inline XBRL documents - Exhibits filed include certifications from the Chief Executive Officer and Chief Financial Officer, as well as Inline XBRL documents[153]