Dine Brands(US:DIN)2023-10-31 16:00PART I. FINANCIAL INFORMATION Financial Statements This section presents Dine Brands Global, Inc.'s unaudited consolidated financial statements as of September 30, 2023, covering balance sheets, income, and cash flows Consolidated Balance Sheets The balance sheet as of September 30, 2023, shows decreased total assets and liabilities, alongside an improved stockholders' deficit Consolidated Balance Sheet Highlights (in thousands) | Account | September 30, 2023 (Unaudited) | December 31, 2022 | | :--- | :--- | :--- | | Total Current Assets | $263,801 | $479,764 | | Total Assets | $1,659,581 | $1,881,491 | | Total Current Liabilities | $384,337 | $470,722 | | Total Liabilities | $1,933,287 | $2,182,575 | | Total Stockholders' Deficit | ($273,706) | ($301,084) | Consolidated Statements of Comprehensive Income Total revenues decreased in Q3 and for the nine months ended September 30, 2023, primarily due to refranchising, impacting net income Q3 2023 vs Q3 2022 Financial Performance (in thousands, except per share data) | Metric | Q3 2023 | Q3 2022 | | :--- | :--- | :--- | | Total Revenues | $202,584 | $233,220 | | Gross Profit | $97,298 | $94,331 | | Net Income | $18,479 | $20,948 | | Diluted EPS | $1.19 | $1.32 | Nine Months 2023 vs 2022 Financial Performance (in thousands, except per share data) | Metric | Nine Months 2023 | Nine Months 2022 | | :--- | :--- | :--- | | Total Revenues | $624,766 | $701,437 | | Gross Profit | $298,256 | $282,779 | | Net Income | $64,137 | $69,760 | | Diluted EPS | $4.09 | $4.22 | Consolidated Statements of Stockholders' Deficit The stockholders' deficit improved for the nine months ended September 30, 2023, driven by net income, despite dividends and share repurchases - For the nine months ended September 30, 2023, the company recorded net income of $64.1 million, repurchased 318,356 shares of common stock for $20.0 million, and paid dividends on common stock amounting to $23.7 million17 Consolidated Statements of Cash Flows Net cash from operating activities increased, but significant debt repayment led to substantial cash usage in financing, reducing the cash balance Cash Flow Summary - Nine Months Ended Sep 30 (in thousands) | Cash Flow Category | 2023 | 2022 | | :--- | :--- | :--- | | Cash flows provided by operating activities | $79,306 | $63,490 | | Cash flows used in investing activities | ($26,632) | ($3,409) | | Cash flows used in financing activities | ($218,029) | ($61,229) | | Net change in cash, cash equivalents and restricted cash | ($165,355) | ($1,148) | Notes to Consolidated Financial Statements These notes detail accounting policies, revenue recognition, long-term debt refinancing, segment reporting, and capital allocation - Franchise revenue for the nine months ended Sep 30, 2023, increased to $530.4 million from $494.4 million in the prior year, driven by royalties and advertising fees39 - In April 2023, the company completed a refinancing, issuing $500 million of 7.824% Fixed Rate Senior Secured Notes to repay the outstanding balance of its 2019 Class A-2-I Notes64 - The company's Debt Service Coverage Ratio (DSCR) was approximately 3.7x as of September 30, 2023, well above the covenant threshold of 1.75x that would trigger a Cash Flow Sweeping Event8385 - The Board of Directors authorized a new share repurchase program of up to $250 million in February 2022. During the nine months ended September 30, 2023, the company repurchased 318,356 shares for $20.0 million9899 Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses performance, highlighting revenue decrease from refranchising, increased gross profit, mixed KPIs, and a healthy liquidity position Key Performance Indicators Q3 2023 performance indicators showed mixed results, with Applebee's sales declining and IHOP's increasing, alongside changes in restaurant count Domestic System-Wide Same-Restaurant Sales % Change (2023 vs. 2022) | Brand | Q3 2023 | Nine Months 2023 | | :--- | :--- | :--- | | Applebee's | (2.4)% | 0.9% | | IHOP | 2.0% | 4.2% | Net Franchise Restaurant Development (Year-to-Date 2023) | Brand | Net Change | | :--- | :--- | | Applebee's | (26) | | IHOP | 13 | - Applebee's off-premise sales represented 21.5% of its sales mix in Q3 2023, down from 24.2% in Q3 2022. IHOP's off-premise sales mix was 19.5% in Q3 2023, down from 20.4% in the prior-year quarter152155 Consolidated Results of Operations Total revenue decreased due to refranchising, but gross profit increased, while G&A and net interest expenses rose Gross Profit by Segment - Nine Months Ended Sep 30 (in millions) | Segment | 2023 | 2022 | Variance | | :--- | :--- | :--- | :--- | | Franchise operations | $271.6 | $253.8 | $17.8 | | Rental operations | $24.9 | $21.1 | $3.8 | | Company restaurant operations | $0.0 | $5.4 | ($5.4) | | Financing operations | $1.7 | $2.5 | ($0.8) | | Total gross profit | $298.3 | $282.8 | $15.4 | - G&A expenses for the nine months ended September 30, 2023 increased by $15.6 million (11.8%) compared to the prior year, partly due to $4.3 million in expenses related to the newly acquired Fuzzy's brand and costs from stopping the IHOP Flip'd initiative185186 - Net interest expense for the nine months ended September 30, 2023 increased to $51.5 million from $46.2 million in the prior year, driven by higher interest rates on refinanced debt and credit facility borrowings188191 Liquidity and Capital Resources The company maintains adequate liquidity with a strong debt service coverage ratio, returning capital via dividends and share repurchases - As of September 30, 2023, the company's leverage ratio was approximately 4.6x, below the 5.25x threshold that would require quarterly principal payments on its Class A-2 Notes199 - The company's DSCR for the reporting period was approximately 3.7x, significantly above the 1.75x level that would trigger a Cash Flow Sweeping Event204205 Adjusted Free Cash Flow - Nine Months Ended Sep 30 (in millions) | Component | 2023 | 2022 | | :--- | :--- | :--- | | 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 | Quantitative and Qualitative Disclosures about Market Risk There were no material changes to the market risk information previously disclosed in the company's 2022 Annual Report on Form 10-K - 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, 2022225 Controls and Procedures Management concluded that disclosure controls and procedures were effective, with no material changes to internal control over financial reporting - Based on an evaluation by management, the CEO and CFO concluded that the Company's disclosure controls and procedures are effective at a reasonable assurance level as of September 30, 2023226 - No changes occurred in the Company's internal control over financial reporting during the third fiscal quarter that have materially affected, or are reasonably likely to materially affect, these controls227 PART II. OTHER INFORMATION Legal Proceedings The company is involved in various lawsuits and claims in the ordinary course of business, none 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 impact229 Risk Factors There have been no material changes from the risk factors previously disclosed in the company's 2022 Annual Report on Form 10-K - 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, 2022230 Unregistered Sales of Equity Securities and Use of Proceeds This section details the company's stock repurchase activity during Q3 2023, with $151.3 million remaining available under the program Q3 2023 Share Repurchase Activity | Period | Shares Purchased (Public Plan) | Average Price Paid (in US dollars) | | :--- | :--- | :--- | | July 3 - July 30, 2023 | 34,553 | $57.92 | | July 31 - Aug 27, 2023 | 34,237 | $58.24 | | Aug 28 - Oct 1, 2023 | 37,074 | $53.94 | | Total | 105,864 | $56.65 | - As of October 1, 2023, approximately $151.3 million remained available for purchase under the company's $250 million share repurchase program authorized in February 2022231 Defaults Upon Senior Securities The company reported no defaults upon senior securities - None232 Mine Safety Disclosures This item is not applicable to the company - Not Applicable233 Other Information No directors or officers adopted, modified, or terminated Rule 10b5-1 trading plans during the third quarter of 2023 - During the fiscal quarter ended September 30, 2023, no directors or officers adopted, modified, or terminated a Rule 10b5-1 trading plan or other non-Rule 10b5-1 trading arrangement234 Exhibits This section lists the exhibits filed with the quarterly report, including CEO and CFO certifications and XBRL data