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Press release from Business Wire

DineEquity, Inc. Reports Strong Third Quarter 2013 Results

<ul> <li class='bwlistitemmargb'> Third quarter 2013 adjusted EPS (Non-GAAP) of $1.10 and GAAP EPS of $0.97 </li> <li class='bwlistitemmargb'> Generated strong free cash flow of $98.6 million in the first nine months of 2013 </li> <li class='bwlistitemmargb'> Third quarter dividend of $0.75 per share of common stock paid and $10.2 million in common stock repurchased </li> <li class='bwlistitemmargb'> Approximately $68 million returned to shareholders in the first nine months of 2013 in the form of cash dividends and share repurchases </li> <li class='bwlistitemmargb'> Fiscal 2013 adjusted earnings per diluted share expected to be between $4.14 and $4.24 </li> <li class='bwlistitemmargb'> IHOP third quarter domestic system-wide same-restaurant sales increased 3.6% </li> <li class='bwlistitemmargb'> Applebee's third quarter domestic system-wide same-restaurant sales decreased 0.4% </li> </ul>

Tuesday, October 29, 2013

DineEquity, Inc. Reports Strong Third Quarter 2013 Results

08:00 EDT Tuesday, October 29, 2013

GLENDALE, Calif. (Business Wire) -- DineEquity, Inc. (NYSE: DIN), the parent company of Applebee's Neighborhood Grill & Bar® and IHOP® restaurants, today announced financial results for the third quarter of 2013.

“I am pleased with our same-restaurant sales performance in a challenging economic environment. We are building momentum and are on the right track with consumers. We are continuing to execute on our strategy to differentiate both brands, driving both innovation and change,” said Julia A. Stewart, Chairman and Chief Executive Officer of DineEquity, Inc. “During the third quarter, we generated substantial free cash flow, which allowed us to return significant cash to stockholders through the combination of a cash dividend payment and share repurchases. I am confident in our strategy for long-term success.”

Third Quarter 2013 Financial Highlights

  • Adjusted net income available to common stockholders was $21.0 million, representing adjusted earnings per diluted share of $1.10 for the third quarter of 2013, which includes approximately $3.8 million in non-recurring termination fees arising from the previously disclosed bankruptcy filing by an Applebee's franchisee. This compares to $18.9 million, or adjusted earnings per diluted share of $1.03, for the third quarter of 2012. The increase in adjusted net income was due to lower cash interest expense and a decline in general and administrative expenses. The increase was partially offset by, as expected, lower segment profit resulting from the refranchise and sale of 137 Applebee's company-operated restaurants during the third and fourth quarters of 2012, and a higher tax rate. (See “Non-GAAP Financial Measures” below.)
  • GAAP net income available to common stockholders was $18.4 million, or earnings per diluted share of $0.97 for the third quarter of 2013, compared to $58.7 million, or earnings per diluted share of $3.14, for the third quarter of 2012. The decrease in net income was primarily due to the impact of 2012 refranchising asset sales and related lower segment profit. These items were partially offset by lower income tax expense, a decline in general and administrative expenses, and lower interest expense.
  • Consolidated general and administrative expenses were $35.3 million for the third quarter of 2013 compared to $48.7 million in the third quarter of 2012. The decrease was primarily due to a non-recurring $9.0 million charge recorded in the third quarter of 2012 related to settlement of litigation that commenced prior to our acquisition of Applebee's and lower personnel costs.

First Nine Months of 2013 Highlights

  • Adjusted net income available to common stockholders was $62.5 million in the first nine months of 2013, representing adjusted earnings per diluted share of $3.26. This compares to $62.6 million, or adjusted earnings per diluted share of $3.44, for the same period in 2012. The decrease was primarily due to lower segment profit as a result of refranchising and a higher tax rate. These items were partially offset by lower cash interest expense and a decline in general and administrative expenses. (See “Non-GAAP Financial Measures” below.)
  • GAAP net income available to common stockholders was $53.0 million in the first nine months of 2013, or earnings per diluted share of $2.76, compared to $104.3 million, or earnings per diluted share of $5.66 for the same period in 2012. The decrease in net income was primarily due to the impact of 2012 refranchising asset sales and related lower segment profit. These items were partially offset by lower income tax expense, a decline in general and administrative expenses, and lower interest expense.
  • Consolidated general and administrative expenses were $105.0 million in the first nine months of 2013 compared to $125.6 million for the same period of 2012. The decrease was primarily due to a decline in compensation costs and a non-recurring $9.0 million charge recorded in the third quarter of 2012 related to settlement of litigation.
  • EBITDA was $211.9 million for the first nine months of 2013. (See “Non-GAAP Financial Measures” below.)
  • For the first nine months of 2013, cash flows from operating activities were $102.8 million, principal receipts from long-term receivables were $10.3 million, capital expenditures were $4.5 million, principal payments on capital lease and financing obligations were $7.5 million, the mandatory 1% repayment on the Term Loan principal balance was $2.4 million, and free cash flow was $98.6 million. (See “Non-GAAP Financial Measures” below.)

Same-Restaurant Sales Performance

Third Quarter 2013

  • Applebee's domestic system-wide same-restaurant sales decreased 0.4% for the third quarter of 2013 compared to the same quarter of 2012. The decrease in same-restaurant sales reflected a decline in traffic, partially offset by an increase in average guest check.
  • IHOP's domestic system-wide same restaurant sales increased 3.6% for the third quarter of 2013 compared to the same quarter of 2012. The increase in same-restaurant sales reflected a higher average guest check, largely due to a favorable shift in product mix. The increase was partially offset by a decline in traffic.

First Nine Months of 2013

  • Applebee's domestic system-wide same-restaurant sales decreased 0.1% for the first nine months of 2013 compared to the same period in 2012. The decrease in same-restaurant sales reflected a decline in traffic, partially offset by an increase in average guest check.
  • IHOP's domestic system-wide same restaurant sales increased 1.7% for the first nine months of 2013 compared to the same period in 2012. The increase in same-restaurant sales reflected a higher average guest check, partially offset by a decline in traffic.

Financial Performance Guidance for Fiscal 2013

  • Revised Applebee's domestic system-wide same-restaurant sales performance to range between negative 0.5% and positive 0.5%. This reflects a narrowing of the range from our previous expectations of between negative 1.5% and positive 1.5%.
  • Revised IHOP's domestic system-wide same-restaurant sales performance to range between positive 2.0% and positive 3.0%. This reflects an increase from previous expectations of between negative 1.5% and positive 1.5%.
  • Revised Applebee's franchisees to develop between 25 and 30 new restaurants, the majority of which are expected to be opened in the U.S. This reflects a reduction from previous expectations of between 40 and 50 new restaurants.
  • Reiterated IHOP franchisees and its area licensee to develop between 50 and 60 new restaurants, the majority of which are expected to be domestic openings.
  • Revised Franchise segment profit to be between $329 million and $331 million. This reflects an increase from previous expectations of between $312 million and $325 million.
  • Revised Company Restaurants segment profit to breakeven. This is net of approximately $2 million of depreciation and amortization. The profit revision reflects a reduction from previous expectations of approximately $1 million on an annualized basis. DineEquity will operate its remaining company-operated restaurants to primarily test new products, operational improvements, technology, and service platforms.
  • Revised Rental and Financing segments are expected to generate approximately $40 million in combined profit. This reflects an increase from previous expectations of between $34 million and $35 million in combined profit.
  • Revised expectations for consolidated general and administrative expenses to between $142 million and $144 million, including non-cash stock-based compensation expense and depreciation of approximately $16 million.
  • Revised expectations for consolidated interest expense to be approximately $101 million. Approximately $6 million is expected to be non-cash interest expense.
  • Reiterated the income tax rate to be approximately 38%.
  • Revised consolidated cash from operations is expected to range between $102 million and $116 million. This reflects an increase from previous expectations of between $88 million and $102 million. The increase is primarily due to improvements in net income and net working capital.
  • Reiterated the structural run-off of the Company's long-term receivables is expected to be approximately $14 million.
  • Reiterated the principal payments on capital leases and financing obligations will be approximately $10 million.
  • Revised consolidated capital expenditures are expected to be approximately $7 million. This reflects a reduction from expectations of capital expenditures between $8 million and $10 million.
  • Reiterated a mandatory annual repayment of 1% on the current outstanding Term Loan principal balance will be $4.7 million.
  • Revised consolidated free cash flow (see "Non-GAAP Measures" below) to range between $93 million and $108 million. This reflects an increase from previous expectations of $77 to $93 million. Consolidated free cash flow is defined as consolidated cash from operations, plus principal receipts from long-term receivables, less principal payments on capital leases and financing obligations, consolidated capital expenditures, and the mandatory annual repayment of 1% on our Term Loan principal balance.
  • Reiterated net income allocated to unvested participating restricted stock is expected to total approximately $1.5 million.
  • Revised weighted average diluted shares outstanding are expected to be approximately 19.1 million. This reflects an increase from the prior year primarily due to the fourth quarter 2012 conversion of the Series B Convertible Preferred Stock into the Company's common stock. No estimate is made in this number for any potential share repurchases.
  • Adjusted earnings per diluted share for fiscal 2013 are expected to be between $4.14 and $4.24.

Investor Conference Call Today

The Company will host an investor conference call on Tuesday, October 29, 2013, at 11:00 a.m. Eastern Time / 8:00 a.m. Pacific Time to discuss its third quarter 2013 results. To participate on the call, please dial (888) 679-8035 and reference pass code 18020176. International callers, please dial (617) 213-4848 and reference pass code 18020176. Participants may also pre-register to obtain a unique pin number to join the live call without operator assistance by visiting the following Web site:

https://www.theconferencingservice.com/prereg/key.process?key=PGV9RUDHQ

A live webcast of the call will be available on DineEquity's Web site at www.dineequity.com, and may be accessed by visiting Calls & Presentations under the site's Investors section. Participants should allow approximately ten minutes prior to the call's start time to visit the site and download any streaming media software needed to listen to the webcast. A telephonic replay of the call may be accessed through 11:59 p.m. Pacific Time on November 5, 2013 by dialing (888) 286-8010 and referencing pass code 85927053. International callers, please dial (617) 801-6888 and reference pass code 85927053. An online archive of the webcast also will be available on the Investors section of DineEquity's Web site.

About DineEquity, Inc.

Based in Glendale, California, DineEquity, Inc., through its subsidiaries, franchises and operates restaurants under the Applebee's Neighborhood Grill & Bar and IHOP brands. With more than 3,600 restaurants combined in 19 countries, over 400 franchisees and approximately 200,000 team members (including franchisee- and company-operated restaurant employees), DineEquity is one of the largest full-service restaurant companies in the world. For more information on DineEquity, visit the Company's Web site located at www.dineequity.com.

Forward-Looking Statements

Statements contained in this press release may constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. You can identify these forward-looking statements by words such as "may," "will," "should," "expect," "anticipate," "believe," "estimate," "intend," "plan" 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: the effect of general economic conditions; the Company's indebtedness; risk of future impairment charges; trading volatility and the price of the Company's common stock; the Company's results in any given period differing from guidance provided to the public; the highly competitive nature of the restaurant business; the Company's business strategy failing to achieve anticipated results; risks associated with the restaurant industry; risks associated with locations of current and future restaurants; rising costs for food commodities and utilities; shortages or interruptions in the supply or delivery of food; ineffective marketing and guest relationship initiatives and use of social media; changing health or dietary preferences; our engagement in business in foreign markets; harm to our brands' reputation; litigation; third-party claims with respect to intellectual property assets; environmental liability; liability relating to employees; failure to comply with applicable laws and regulations; failure to effectively implement restaurant development plans; our dependence upon our franchisees; concentration of Applebee's franchised restaurants in a limited number of franchisees; credit risk from IHOP franchisees operating under our previous business model; termination or non-renewal of franchise agreements; franchisees breaching their franchise agreements; insolvency proceedings involving franchisees; changes in the number and quality of franchisees; inability of franchisees to fund capital expenditures; heavy dependence on information technology; the occurrence of cyber incidents or a deficiency in our cybersecurity; failure to execute on a business continuity plan; inability to attract and retain talented employees; risks associated with retail brand initiatives; failure of our internal controls; and other factors discussed from time to time in the Company's Annual and Quarterly Reports on Forms 10-K and 10-Q and in the Company's other filings with the Securities and Exchange Commission. The forward-looking statements contained in this release are made as of the date hereof and the Company assumes no obligation to update or supplement any forward-looking statements.

Non-GAAP Financial Measures

This news release includes references to the Company's non-GAAP financial measures "adjusted net income available to common stockholders (adjusted EPS)," "EBITDA," "free cash flow," and "segment EBITDA." "Adjusted EPS" is computed for a given period by deducting from net income (loss) available to common stockholders for such period the effect of any closure and impairment charges, any gain or loss related to debt extinguishment, any intangible asset amortization, any non-cash interest expense, any debt modification costs, any one-time litigation settlement charges, any general and administrative restructuring costs, net of savings, any gain or loss related to the disposition of assets, and any state income tax impact of deferred taxes due to refranchising incurred in such period. This is presented on an aggregate basis and a per share (diluted) basis. The Company defines "EBITDA" for a given period as income before income taxes less interest expense, loss on extinguishment of debt, depreciation and amortization, closure and impairment charges, non-cash stock-based compensation, gain/loss on disposition of assets and other charge backs as defined by its credit agreement. "Free cash flow" for a given period is defined as cash provided by operating activities, plus receipts from notes and equipment contracts receivable ("long-term notes receivable"), less principal payments on capital lease and financing obligations, the mandatory 1% of Term Loan principal balance repayment, and capital expenditures. "Segment EBITDA" for a given period is defined as gross segment profit plus depreciation and amortization as well as interest charges related to the segment. Management utilizes EBITDA for debt covenant purposes and free cash flow to determine the amount of cash remaining for general corporate and strategic purposes after the receipts from long-term receivables, and the funding of operating activities, capital expenditures and dividends. Management believes this information is helpful to investors to determine the Company's adherence to debt covenants and the Company's cash available for these purposes. Adjusted EPS, EBITDA, free cash flow and segment EBITDA are supplemental non-GAAP financial measures and should not be considered in isolation or as a substitute for measures of performance prepared in accordance with United States generally accepted accounting principles.

       
DineEquity, Inc. and Subsidiaries
Consolidated Statements of Income
(In thousands, except per share amounts)
(Unaudited)
 
Three Months Ended Nine Months Ended
September 30, September 30,
2013     2012 2013     2012
Segment Revenues:
Franchise and restaurant revenues $ 127,137 $ 182,246 $ 379,619 $ 587,801
Rental revenues 30,990 30,920 92,724 92,096
Financing revenues 3,156   3,152   10,223   11,394  
Total segment revenues 161,283   216,318   482,566   691,291  
Segment Expenses:
Franchise and restaurant expenses 44,091 95,689 130,875 313,424
Rental expenses 24,149 24,237 72,953 73,075
Financing expenses   15   245   1,586  
Total segment expenses 68,240   119,941   204,073   388,085  
Gross segment profit 93,043 96,377 278,493 303,206
General and administrative expenses 35,331 48,737 105,004 125,608
Interest expense 24,979 28,896 75,230 88,767
Amortization of intangible assets 3,072 3,072 9,212 9,222
Closure and impairment charges (392 ) 420 770 1,264
Loss on extinguishment of debt 2,306 36 4,917
Debt modification costs 1,296
Gain on disposition of assets (72 ) (73,650 ) (326 ) (89,642 )
Income before income taxes 30,125 86,596 87,271 163,070
Income tax provision (11,395 ) (26,023 ) (33,365 ) (54,215 )
Net income $ 18,730   $ 60,573   $ 53,906   $ 108,855  
Net income available to common stockholders:
Net income $ 18,730 $ 60,573 $ 53,906 $ 108,855
Less: Net income allocated to unvested participating restricted stock (296 ) (1,187 ) (925 ) (2,477 )
Less: Accretion of Series B Convertible Preferred Stock   (688 )   (2,033 )
Net income available to common stockholders $ 18,434   $ 58,698   $ 52,981   $ 104,345  
Net income available to common stockholders per share:
Basic $ 0.98   $ 3.26   $ 2.80   $ 5.84  
Diluted $ 0.97   $ 3.14   $ 2.76   $ 5.66  
Weighted average shares outstanding:
Basic 18,831   18,006   18,898   17,859  
Diluted 19,085   18,924   19,166   18,801  
 
Dividends declared per common share $ 0.75   $   $ 2.25   $  
Dividends paid per common share $ 0.75   $   $ 2.25   $  
 
           
DineEquity, Inc. and Subsidiaries
Consolidated Balance Sheets
(In thousands, except share and per share amounts)
 

September 30,
2013

December 31,
2012

(Unaudited)
Assets
Current assets:
Cash and cash equivalents $ 95,535 $ 64,537
Receivables, net 87,276 128,610
Prepaid income taxes 3,619 16,080
Prepaid gift cards 42,840 50,242
Deferred income taxes 24,811 21,772
Other current assets 7,683   13,214  
Total current assets 261,764 294,455
Long-term receivables 201,080 212,269
Property and equipment, net 281,432 294,375
Goodwill 697,470 697,470
Other intangible assets, net 797,061 806,093
Other assets, net 108,909   110,738  
Total assets $ 2,347,716   $ 2,415,400  
Liabilities and Stockholders' Equity
Current liabilities:
Current maturities of long-term debt $ 4,720 $ 7,420
Accounts payable 33,339 30,751
Gift card liability 93,198 161,689
Accrued employee compensation and benefits 18,063 22,435
Accrued interest payable 35,825 13,236
Current maturities of capital lease and financing obligations 11,974 10,878
Other accrued expenses 20,201   21,351
Total current liabilities 217,320   267,760
Long-term debt, less current maturities 1,204,998 1,202,063
Capital lease obligations, less current maturities 115,351 124,375
Financing obligations, less current maturities 51,930 52,049
Deferred income taxes 349,202 362,171
Other liabilities 98,919   98,177  
Total liabilities 2,037,720   2,106,595  
Commitments and contingencies
Stockholders' equity:
Common stock, $0.01 par value, shares: 40,000,000 authorized; September 30, 2013 - 25,308,295 issued, 19,029,164 outstanding; December 31, 2012 - 25,362,946 issued, 19,197,899 outstanding 253 254
Additional paid-in-capital 270,799 264,342
Retained earnings 332,740 322,045
Accumulated other comprehensive loss (157 ) (152 )
Treasury stock, at cost; shares: September 30, 2013 - 6,279,131; December 31, 2012 - 6,165,047 (293,639 ) (277,684 )
Total stockholders' equity 309,996   308,805  
Total liabilities and stockholders' equity $ 2,347,716   $ 2,415,400  
 
     
DineEquity, Inc. and Subsidiaries
Consolidated Statements of Cash Flows
(In thousands)
(Unaudited)
 
Nine Months Ended
September 30,
2013       2012
Cash flows from operating activities:
Net income $ 53,906 $ 108,855
Adjustments to reconcile net income to cash flows provided by operating activities:
Depreciation and amortization 26,516 30,756
Non-cash interest expense 4,635 4,547
Loss on extinguishment of debt 36 4,917
Closure and impairment charges 1,166 991
Deferred income taxes (16,007 ) (20,361 )
Non-cash stock-based compensation expense 7,081 8,799
Tax benefit from stock-based compensation 3,001 6,334
Excess tax benefit from share-based compensation (1,985 ) (4,757 )
Gain on disposition of assets (326 ) (89,642 )
Other 791 (1,768 )
Changes in operating assets and liabilities:
Receivables 41,698 41,422
Current income tax receivables and payables 7,232 12,512
Other current assets 16,054 7,414
Accounts payable 2,650 2,080
Accrued employee compensation and benefits (4,372 ) (6,490 )
Gift card liability (68,493 ) (62,841 )
Other accrued expenses 29,231   25,298  
Cash flows provided by operating activities 102,814   68,066  
Cash flows from investing activities:
Additions to property and equipment (4,547 ) (13,477 )
Proceeds from sale of property and equipment and assets held for sale 137,449
Principal receipts from notes, equipment contracts and other long-term receivables 10,254 10,276
Other 282   964  
Cash flows provided by investing activities 5,989   135,212  
Cash flows from financing activities:
Borrowings under revolving credit facilities 50,000
Repayments under revolving credit facilities (50,000 )
Repayment of long-term debt (including premiums) (2,400 ) (184,237 )
Payment of debt modification costs (1,296 )
Principal payments on capital lease and financing obligations (7,515 ) (8,246 )
Repurchase of DineEquity common stock (24,663 )
Dividends paid on common stock (43,170 )
Repurchase of restricted stock (3,209 ) (1,690 )
Proceeds from stock options exercised 5,585 5,443
Excess tax benefit from share-based compensation 1,985 4,757
Change in restricted cash (3,122 ) (8,158 )
Cash flows used in financing activities (77,805 ) (192,131 )
Net change in cash and cash equivalents 30,998 11,147
Cash and cash equivalents at beginning of period 64,537   60,691  
Cash and cash equivalents at end of period $ 95,535   $ 71,838  
 
       

NON-GAAP FINANCIAL MEASURES

(In thousands, except per share amounts)
(Unaudited)
 

Reconciliation of (i) net income available to common stockholders to (ii) net income available to common stockholders excluding closure and impairment charges; loss on extinguishment of debt; amortization of intangible assets; non-cash interest expense; debt modification costs; a one-time litigation settlement; general and administrative ("G&A") restructuring costs, net of savings; gain/loss on disposition of assets; and the state income tax impact of deferred taxes due to refranchising, all items net of taxes (as appropriate), and related per share data:

 
Three Months Ended Nine Months Ended
September 30, September 30,
2013     2012 2013     2012
Net income available to common stockholders, as reported $ 18,434 $ 58,698 $ 52,981 $ 104,345
Closure and impairment charges (392 ) 420 770 1,264
Loss on extinguishment of debt 2,306 36 4,917
Amortization of intangible assets 3,072 3,072 9,212 9,222
Non-cash interest expense 1,581 1,502 4,635 4,547
Debt modification costs 1,296
Litigation settlement 9,047 9,047
G&A restructuring costs, net of savings 1,269 1,269
Gain on disposition of assets (72 ) (73,650 ) (326 ) (89,642 )
Income tax (benefit) provision (1,592 ) 21,652 (5,937 ) 22,943
State income tax impact on deferred taxes due to refranchising (6,258 ) (6,258 )
Net income allocated to unvested participating restricted stock (45 ) 806   (181 ) 990  
Net income available to common stockholders, as adjusted $ 20,986   $ 18,864   $ 62,486   $ 62,644  
 
Diluted net income available to common stockholders per share:
Net income available to common stockholders, as reported $ 0.97 $ 3.14 $ 2.76 $ 5.66
Closure and impairment charges (0.01 ) 0.01 0.02 0.04
Loss on extinguishment of debt 0.07 0.00 0.16
Amortization of intangible assets 0.10 0.10 0.30 0.30
Noncash interest expense 0.05 0.05 0.15 0.15
Debt modification costs 0.04
Litigation settlement 0.29 0.30
G&A restructuring costs, net of savings 0.04 0.04
Gain on disposition of assets (0.00 ) (2.39 ) (0.01 ) (2.93 )
State income tax impact on deferred taxes due to refranchising (0.33 ) (0.33 )
Net income allocated to unvested participating restricted stock (0.00 ) 0.04 (0.01 ) 0.05
Rounding (0.01 ) 0.01   0.01    
Diluted net income available to common stockholders per share, as adjusted $ 1.10   $ 1.03   $ 3.26   $ 3.44  
 
Numerator for basic EPS-income available to common stockholders, as adjusted $ 20,986 $ 18,864 $ 62,486 $ 62,644
Effect of unvested participating restricted stock using the two-class method 1 18 5 73
Effect of dilutive securities:
Convertible Series B preferred stock   688     2,033  
Numerator for diluted EPS-income available to common stockholders after assumed conversions, as adjusted $ 20,987   $ 19,570   $ 62,491   $ 64,750  
 
Denominator for basic EPS-weighted-average shares 18,831 18,006 18,898 17,859
Effect of dilutive securities:
Stock options 254 246 268 270
Convertible Series B preferred stock   672     672  
Denominator for diluted EPS-weighted-average shares and assumed conversions 19,085   18,924   19,166   18,801  
 
           
DineEquity, Inc. and Subsidiaries
Non-GAAP Financial Measures
(In thousands)
(Unaudited)
 

Reconciliation of U.S. GAAP income before income taxes to EBITDA:

 

Nine Months
Ended

Twelve Months
Ended

September 30, 2013
U.S. GAAP income before income taxes $ 87,271 $ 119,124
Interest charges 87,545 117,440
Loss on extinguishment of debt 36 673
Depreciation and amortization 26,516 35,298
Non-cash stock-based compensation 7,081 9,724
Closure and impairment charges 770 3,724
Other 3,017 13,163
Gain on sale of assets (326 ) (13,281 )
EBITDA $ 211,910   $ 285,865  
 

Reconciliation of the Company's cash provided by operating activities to "free cash flow" (cash from operations, plus receipts from notes, equipment contracts and other long-term receivables, less consolidated capital expenditures, principal payments on capital leases and financing obligations and the mandatory annual repayment of 1% of our Term Loan principal balance):

     

 

Nine Months Ended
September 30,
2013       2012
Cash flows provided by operating activities $ 102,814 $ 68,066
Principal receipts from long-term receivables 10,254 10,276
Additions to property and equipment (4,547 ) (13,477 )
Principal payments on capital lease and financing obligations (7,515 ) (8,246 )
Mandatory 1% of Term Loans principal balance repayment (2,400 ) (5,565 )
Free cash flow 98,606 51,054
Dividends paid on common stock (43,170 )
Repurchase of DineEquity common stock (24,663 )  
$ 30,773   $ 51,054  
 
   
DineEquity, Inc. and Subsidiaries
Non-GAAP Financial Measures
(In millions)
(Unaudited)
 

Reconciliation of U.S. GAAP gross segment profit to segment EBITDA:

 
Three months ended September 30, 2013

Franchise -
Applebee's

   

Franchise -
IHOP

   

Company
Restaurants

   

Rental
Operations

   

Financing
Operations

    Total
Revenue $ 50,912 $ 60,806 $ 15,419 $ 30,990 $ 3,156 $ 161,283
Expense 1,619   26,775   15,697   24,149     68,240
Gross segment profit 49,293 34,031 (278 ) 6,841 3,156 93,043
Plus:
Depreciation/amortization 2,671 545 3,339 6,555
Interest charges     92   3,846     3,938
Segment EBITDA $ 51,964   $ 34,031   $ 359   $ 14,026   $ 3,156   $ 103,536
 
   
Three months ended September 30, 2012

Franchise -
Applebee's

   

Franchise -
IHOP

   

Company
Restaurants

   

Rental
Operations

   

Financing
Operations

    Total
Revenue $ 43,771 $ 58,903 $ 79,572 $ 30,920 $ 3,152 $ 216,318
Expense 1,129   26,019   68,541   24,237   15   119,941
Gross segment profit 42,642 32,884 11,031 6,683 3,137 96,377
Plus:
Depreciation/amortization 2,478 1,645 3,362 7,485
Interest charges     93   4,189     4,282
Segment EBITDA $ 45,120   $ 32,884   $ 12,769   $ 14,234   $ 3,137   $ 108,144
 
   
Nine months ended September 30, 2013

Franchise -
Applebee's

   

Franchise -
IHOP

   

Company
Restaurants

   

Rental
Operations

   

Financing
Operations

    Total
Revenue $ 151,868 $ 179,710 $ 48,041 $ 92,724 $ 10,223 $ 482,566
Expense 4,551   78,173   48,151   72,953   245   204,073
Gross segment profit 147,317 101,537 (110 ) 19,771 9,978 278,493
Plus:
Depreciation/amortization 8,142 1,616 10,093 19,851
Interest charges     279   11,958     12,237
Segment EBITDA $ 155,459   $ 101,537   $ 1,785   $ 41,822   $ 9,978   $ 310,581
 
   
Nine months ended September 30, 2012

Franchise -
Applebee's

   

Franchise -
IHOP

   

Company
Restaurants

   

Rental
Operations

   

Financing
Operations

    Total
Revenue $ 137,540 $ 176,002 $ 274,259 $ 92,096 $ 11,394 $ 691,291
Expense 3,075   78,051   232,298   73,075   1,586   388,085
Gross segment profit 134,465 97,951 41,961 19,021 9,808 303,206
Plus:
Depreciation/amortization 7,416 6,354 10,271 24,041
Interest charges     285   12,835     13,120
Segment EBITDA $ 141,881   $ 97,951   $ 48,600   $ 42,127   $ 9,808   $ 340,367
 

Restaurant Data

The following table sets forth, for the three and nine months ended September 30, 2013 and 2012, the number of "Effective Restaurants" in the Applebee's and IHOP systems and information regarding the percentage change in sales at those restaurants compared to the same periods in the prior year. Sales at restaurants that are owned by franchisees and area licensees are not attributable to the Company. However, we believe that presentation of this information is useful in analyzing our revenues because franchisees and area licensees pay us royalties and advertising fees that are generally based on a percentage of their sales, and, where applicable, rental payments under leases that may be partially based on a percentage of their sales. Management also uses this information to make decisions about future plans for the development of additional restaurants as well as evaluation of current operations.

       
Three Months Ended Nine Months Ended

 

September 30, September 30,
2013     2012 2013     2012
(unaudited)
Applebee's Restaurant Data
Effective Restaurants(a)
Franchise 1,986 1,871 1,998 1,861
Company 23   144   23   156  
Total 2,009   2,015   2,021   2,017  
 
System-wide (b)
Sales percentage change(c) 0.0 % 2.4 % 0.6 % 1.7 %
Domestic same-restaurant sales percentage change(d) (0.4 )% 2.0 % (0.1 )% 1.3 %
 
Franchise (b)(e)
Sales percentage change(c) 6.2 % 8.4 % 7.7 % 7.0 %
Domestic same-restaurant sales percentage change(d) (0.4 )% 2.2 % (0.1 )% 1.2 %
Average weekly domestic unit sales (in thousands) $ 44.9 $ 45.1 $ 47.2 $ 47.4
 
       
Three Months Ended Nine Months Ended

 

September 30, September 30,
2013     2012 2013     2012
(unaudited)
IHOP Restaurant Data
Effective Restaurants (a)
Franchise 1,413 1,377 1,410 1,375
Area license 168 165 12 165
Company 12   17   167   15  
Total 1,593   1,559   1,589   1,555  
 
System-wide (b)
Sales percentage change(c) 6.1 % 0.9 % 4.2 % 1.9 %
Domestic same-restaurant sales percentage change(d) 3.6 % (2.0 )% 1.7 % (1.3 )%
 
Franchise (b)
Sales percentage change(c) 6.2 % 0.4 % 4.3 % 1.6 %
Domestic same-restaurant sales percentage change(d) 3.6 % (2.0 )% 1.7 % (1.2 )%
Average weekly domestic unit sales (in thousands) $ 35.0 $ 33.8 $ 34.8 $ 34.2
 
Area License (b)
Sales percentage change(c) 7.9 % 4.0 % 5.6 % 3.5 %
 

(a)

 

Effective Restaurants are the weighted average number of restaurants open in a given fiscal period, adjusted to account for restaurants open for only a portion of the period. Information is presented for all Effective Restaurants in the Applebee's and IHOP systems, which includes restaurants owned by the Company as well as those owned by franchisees and area licensees.

 

(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 restaurants. Sales at restaurants that are owned by franchisees and area licensees are not attributable to the Company. Unaudited reported sales for Applebee's domestic franchise restaurants, IHOP franchise restaurants and IHOP area license restaurants for the three and nine months ended September 30, 2013 and 2012 were as follows:

       
Three Months Ended Nine Months Ended
September 30, September 30,
2013     2012 2013     2012
(In millions)

Reported sales (unaudited)

Applebee's franchise restaurant sales $ 1,073.7 $ 1,011.4 $ 3,409.4 $ 3,165.4
IHOP franchise restaurant sales $ 642.6 $ 604.8 $ 1,912.7 $ 1,834.6
IHOP area license restaurant sales $ 61.8 $ 57.3 $ 188.0 $ 178.1
 

(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 year for domestic restaurants that have been operated throughout both fiscal periods that are being compared and have been open for at least 18 months. Because of new unit openings and restaurant closures, the domestic restaurants open throughout both fiscal periods being compared may be different from period to period. Same-restaurant sales percentage change does not include data on IHOP area license restaurants located in Florida.

 

(e)

The sales percentage change for the three and nine months ended September 30, 2013 and 2012 for Applebee's franchise restaurants was impacted by the refranchising of 154 company-operated restaurants during 2012.

       
DineEquity, Inc. and Subsidiaries
Restaurant Data
 

The following table summarizes our restaurant development activity:

 
Three Months Ended Nine Months Ended
September 30, September 30,
2013     2012 2013     2012
(unaudited)
Applebee's Restaurant Development Activity
Beginning of period 2,012 2,018 2,034 2,019
New openings:
Franchise 4   5   10   14  
Total new openings 4   5   10   14  
Closings:
Franchise (6 ) (7 ) (34 ) (17 )
Total closings (6 ) (7 ) (34 ) (17 )
End of period 2,010   2,016   2,010   2,016  
Summary - end of period
Franchise 1,987 1,954 1,987 1,954
Company 23   62   23   62  
Total 2,010   2,016   2,010   2,016  
 
       
Three Months Ended Nine Months Ended
September 30, September 30,
2013     2012 2013     2012
(unaudited)
IHOP Restaurant Development Activity
Beginning of period 1,593 1,557 1,581 1,550
New openings:
Franchise 13 12 31 27
Area license     4   1  
Total new openings 13   12   35   28  
Closings:
Franchise (4 ) (4 ) (13 ) (11 )
Area license     (1 ) (2 )
Total closings (4 ) (4 ) (14 ) (13 )
End of period 1,602   1,565   1,602   1,565  
Summary - end of period
Franchise 1,421 1,383 1,421 1,383
Area license 168 165 168 165
Company 13   17   13   17  
Total 1,602   1,565   1,602   1,565  
 

Investor Contact
DineEquity, Inc.
Ken Diptee
Executive Director, Investor Relations
818-637-3632
or
Media Contact
Sard Verbinnen & Co.
Lucy Neugart and Samantha Verdile
415-618-8750 and 212-687-8080

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