Attached files

file filename
8-K - 8-K - Dine Brands Global, Inc.a13-22992_18k.htm

Exhibit 99.1

 

GRAPHIC

 

Investor Contact

Ken Diptee

Executive Director, Investor Relations

DineEquity, Inc.

818-637-3632

 

Media Contact

Lucy Neugart and Samantha Verdile

Sard Verbinnen & Co.

415-618-8750 and 212-687-8080

 

DineEquity, Inc. Reports Strong Third Quarter 2013 Results

 

 

Ø           Third quarter 2013 adjusted EPS (Non-GAAP) of $1.10 and GAAP EPS of $0.97

Ø           Generated strong free cash flow of $98.6 million in the first nine months of 2013

Ø           Third quarter dividend of $0.75 per share of common stock paid and $10.2 million in common stock repurchased

Ø           Approximately $68 million returned to shareholders in the first nine months of 2013 in the form of cash dividends and share repurchases

Ø           Fiscal 2013 adjusted earnings per diluted share expected to be between $4.14 and $4.24

Ø           IHOP third quarter domestic system-wide same-restaurant sales increased 3.6%

Ø           Applebee’s third quarter domestic system-wide same-restaurant sales decreased 0.4%

 

 

GLENDALE, Calif., October 29, 2013 — 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.)

 



 

DineEquity, Inc.

Page 2 of 15

 

·                  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.

 



 

DineEquity, Inc.

Page 3 of 15

 

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.

 



 

DineEquity, Inc.

Page 4 of 15

 

·                  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.

 



 

DineEquity, Inc.

Page 5 of 15

 

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

 



 

DineEquity, Inc.

Page 6 of 15

 

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.

Page 7 of 15

 

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.

Page 8 of 15

 

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.

Page 9 of 15

 

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

 

 



 

DineEquity, Inc.

Page 10 of 15

 

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.

Page 11 of 15

 

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.

Page 12 of 15

 

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

 

 



 

DineEquity, Inc.

Page 13 of 15

 

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

%

 



 

DineEquity, Inc.

Page 14 of 15

 


(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.

Page 15 of 15

 

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