Dine Brands(DIN) - 2021 Q2 - Quarterly Report

PART I. FINANCIAL INFORMATION Item 1. Financial Statements Presents unaudited consolidated financial statements for Q2 2021, reflecting a significant recovery from a net loss to net income driven by increased revenues Consolidated Balance Sheets Total assets decreased to $1.90 billion and liabilities to $2.18 billion by June 30, 2021, while stockholders' deficit improved Consolidated Balance Sheet Summary (in thousands) | Balance Sheet Item | June 30, 2021 (Unaudited) | December 31, 2020 | | :--- | :--- | :--- | | Total Assets | $1,895,923 | $2,074,945 | | Cash and cash equivalents | $259,461 | $383,369 | | Total Liabilities | $2,178,674 | $2,429,596 | | Long-term debt | $1,278,504 | $1,491,996 | | Total Stockholders' Deficit | $(282,751) | $(354,651) | Consolidated Statements of Comprehensive Income Q2 2021 saw a significant turnaround with $233.6 million in revenues and $29.4 million net income, reversing a prior-year net loss Q2 & YTD 2021 vs 2020 Performance (in thousands, except per share data) | Metric | Three Months Ended June 30, 2021 | Three Months Ended June 30, 2020 | Six Months Ended June 30, 2021 | Six Months Ended June 30, 2020 | | :--- | :--- | :--- | :--- | :--- | | Total Revenues | $233,619 | $109,712 | $437,818 | $316,596 | | Gross Profit | $98,877 | $30,122 | $184,163 | $114,549 | | Net Income (Loss) | $29,362 | $(134,779) | $54,965 | $(112,451) | | Diluted EPS | $1.69 | $(8.33) | $3.19 | $(6.96) | - Q2 2020 net loss was significantly impacted by $124.4 million in impairment and closure charges, versus $2.6 million in Q2 2021[15] Consolidated Statements of Cash Flows Operating activities generated $106.0 million cash in H1 2021, a significant improvement, while financing activities used $220.4 million for debt repayment Cash Flow Summary for Six Months Ended June 30 (in thousands) | Cash Flow Category | 2021 | 2020 | | :--- | :--- | :--- | | Cash flows provided by (used in) operating activities | $106,016 | $(10,517) | | Cash flows provided by investing activities | $6,348 | $2,097 | | Cash flows (used in) provided by financing activities | $(220,419) | $178,436 | | Net change in cash, cash equivalents and restricted cash | $(108,055) | $170,016 | - The $220.0 million repayment of the revolving credit facility was the primary driver for 2021's large cash outflow from financing activities[25] Notes to Consolidated Financial Statements (unaudited) Detailed notes cover accounting policies, revenue recognition, debt covenants, and COVID-19 impacts, including franchisee fee deferrals and debt management - As of June 30, 2021, 98% of domestic Applebee's and IHOP restaurants operated at 100% capacity, a significant improvement from 2020 restrictions[35] - The company collected 98% of Applebee's and 87% of IHOP franchisee deferrals by June 30, 2021, provided during the pandemic[37] Disaggregated Franchise Revenue (in thousands) | Revenue Type | Three Months Ended June 30, 2021 | Three Months Ended June 30, 2020 | | :--- | :--- | :--- | | Royalties | $78,124 | $31,011 | | Advertising fees | $72,324 | $29,095 | | Pancake and waffle dry mix sales and other | $13,525 | $4,037 | | Franchise and development fees | $2,981 | $3,733 | | Total franchise revenue | $166,954 | $67,876 | - Q2 2020 saw significant impairment charges, including $92.2 million for goodwill and $11.0 million for the Applebee's tradename, due to COVID-19 related risk premiums[131] Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses Q2 2021's significant financial recovery driven by eased COVID-19 restrictions, strong same-restaurant sales, and robust liquidity with a 4.6x DSCR - Q2 2021 financial results reflect eased COVID-19 restrictions, with 98% of domestic restaurants at 100% capacity by June 30, 2021, unlike 2020's limitations[146] Key Performance Indicators - Q2 2021 | Metric | Applebee's | IHOP | | :--- | :--- | :--- | | % increase in domestic same-restaurant sales (2021 vs 2020) | 102.2% | 120.1% | | % increase (decrease) in domestic same-restaurant sales (2021 vs 2019) | 10.5% | (3.4)% | - The company repaid $220 million of its revolving credit facility in March 2021, with $221.7 million borrowing capacity remaining as of June 30, 2021[154] - The Debt Service Coverage Ratio (DSCR) was approximately 4.6x for the period ended June 30, 2021, exceeding covenant thresholds[237] Item 3. Quantitative and Qualitative Disclosures about Market Risk The company's interest rate risk exposure was eliminated as of June 30, 2021, due to no outstanding borrowings under its variable-rate Credit Facility - As of June 30, 2021, no outstanding borrowings under the variable-rate Credit Facility eliminated the company's interest rate risk exposure[262] Item 4. Controls and Procedures Management concluded that disclosure controls and procedures were effective, with no material changes to internal control over financial reporting during the quarter - The CEO and CFO concluded that disclosure controls and procedures were effective at a reasonable assurance level as of the reporting period end[263] - No material changes to internal control over financial reporting occurred during the fiscal quarter[264] PART II. OTHER INFORMATION Item 1. Legal Proceedings The company is involved in ordinary course legal proceedings, with management not anticipating any material adverse impact - The company is subject to ordinary course legal proceedings, with no anticipated material adverse impact[266] Item 1A. Risk Factors No material changes to the risk factors previously disclosed in the company's 2020 Annual Report on Form 10-K are reported - No material changes to risk factors from the 2020 Annual Report on Form 10-K are reported[267] Item 2. Unregistered Sales of Equity Securities and Use of Proceeds The company repurchased 1,939 shares for tax withholding, with $70.2 million remaining under the 2019 Repurchase Program - The company repurchased 1,939 shares from employees for tax withholding on vested restricted stock awards, not under the public repurchase program[269] - As of quarter-end, $70.2 million remained authorized for repurchase under the 2019 Repurchase Program[269] Item 3. Defaults Upon Senior Securities No defaults upon senior securities were reported during the period - The company reported no defaults upon senior securities[270] Item 4. Mine Safety Disclosures This item is not applicable to the company's operations - This item is not applicable to the company[272] Item 5. Other Information No other information was reported under this item - The company reported no other information under this item[274] Item 6. Exhibits This section lists exhibits filed with the Form 10-Q, including employment agreements, incentive plans, and officer certifications - Exhibits include CEO and CFO certifications under Sarbanes-Oxley Act and various compensatory plan agreements[276]