Dine Brands (DIN 76.03, +5.00) trades higher today
after the company’s latest quarterly report and news of a refinance of some of
its longer-term debt. Shares advance after being beaten down into the print and
have regained a key technical level today.
Applebee’s and IHOP parent company Dine Brands reported better than expected July quarter earnings of $1.03 per share, down from $1.34 per share a year ago. Dine noted the decrease was mainly due to lower segment profit as the result of $16.5 mln in franchisor contributions to the Applebee's national advertising fund, partially offset by a decline in bad debt expense, IHOP restaurant development over the past twelve months and improvement in Applebee's and IHOP's domestic same-restaurant sales.
All told, total revenue declines of 2.2% to $184.47 mln weren’t up to snuff, though there were some bright spots among the company’s brands. Namely, both Applebee’s and IHOP’s same-restaurant sales performances outperformed Street expectations. Firstly, Applebee's domestic system-wide comparable same-restaurant sales increased 5.7% for Q2. Also, IHOP's domestic system-wide comparable same-restaurant sales increased 0.7%.
Dine also reiterated its fiscal 2018 EPS guidance in the range of $4.95-5.25. Also left unchanged from previous guidance were the company’s capital expenditures for FY18, its income tax rate expectation, and various expense expectations.
Dine did change a few metrics this morning, though, in terms of expectations for FY18: the company now expects Applebee's domestic system-wide comparable same-restaurant sales performance to range between positive 3.5% and positive 4.5%. This compares to previous expectations of between flat and positive 3.0%. Management also revised expectations for IHOP's domestic system-wide comparable same-restaurant sales performance to range between positive 0.5% and positive 2.0%.
This compares to previous expectations of between flat and positive 3.0%. Further, the company now expects to close about 80 to 90 domestic Applebee's restaurants and around 10 international Applebee's restaurants. This compares to previous expectations for the closure of about 60 to 80 restaurants for domestic and international combined. Last, Dine now sees adjusted free cash flow for FY18 in the range of $99-119 mln. This compares to previous expectations for adjusted free cash flow to range between $94-114 mln.
In conjunction with the company’s earnings and guidance this morning Dine management also announced its intention to refinance its Series 2014-1, Class A-2 Fixed Rate Senior Secured Notes and replace its existing Series 2014-1, Class A-1 Variable Funding Senior Notes. As of June 30, 2018, the balances of the Class A-2 Fixed Rate Senior Secured Notes and Class A-1 Variable Funding Senior Notes were about $1.29 bln and $20 mln, respectively. Dine intends to replace the Existing Notes with a new securitized financing facility, expected to be comprised of $1.35 bln of senior term notes and $225 mln of variable funding notes. The net proceeds of the new facility would be used for repayment of the Existing Notes, transaction costs associated with the refinancing and general corporate purposes.
After finishing below its 50-day simple moving average (71.48) yesterday, shares of DIN have all but erased the late June selloff. Impressively, shares are now up about 50% YTD vs. a 5.5% move higher in the S&P 500 thus far in 2018.
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