DineEquity, Inc. Reports Third Quarter Fiscal 2016 Results

Third Quarter 2016 Summary

  • GAAP EPS of $1.33
  • Adjusted EPS (Non-GAAP) of $1.46
  • Domestic system-wide comparable same-restaurant sales were negative 0.1% for IHOP and negative 5.2% for Applebee's
  • Returned approximately $27 million to shareholders, which includes approximately $17 million in cash dividends and $10 million in share repurchases
  • Quarterly cash dividend raised by 5.4% to $0.97 per share of common stock, effective with the fourth quarter 2016 dividend to be paid on January 6, 2017

First Nine Months of 2016 Summary

  • GAAP EPS of $4.15
  • Adjusted EPS (Non-GAAP) of $4.63
  • Domestic system-wide comparable same-restaurant sales increased 0.5% at IHOP and declined 4.4% at Applebee's
  • Generated cash from operating activities of approximately $62 million and adjusted free cash flow (Non-GAAP) of approximately $66 million
  • Returned approximately $96 million to shareholders, which includes $51 million in cash dividends and $45 million in share repurchases

GLENDALE, Calif. - Nov. 1, 2016 // PRNewswire // - 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 fiscal 2016. 

"Despite challenges facing the industry, DineEquity again posted year-over-year growth in earnings per diluted share and generated substantial adjusted free cash flow.  We reaffirmed our commitment to return significant cash to shareholders by increasing the quarterly dividend by 5.4%, effective with the next dividend paid on January 6, 2017.  Additionally, we completed our restaurant support center consolidation, which enables us to reallocate resources as needed," said Julia A. Stewart, Chairman and Chief Executive Officer of DineEquity, Inc.

Ms. Stewart concluded, "Our top priority is driving the performance of the Applebee's brand.  In addition, we recognize that there is more work to be done to sustain the momentum at IHOP and we're taking action.  I'm pleased to say that we held successful franchise conferences for both Applebee's and IHOP in September and we're collaborating with franchisees to execute our long-term strategy to strengthen the brands."

Third Quarter of Fiscal 2016 Financial Highlights

  • GAAP net income available to common stockholders was $23.9 million for the third quarter of 2016, or earnings per diluted share of $1.33.  This compares to net income available to common stockholders of $23.9 million, or earnings per diluted share of $1.28, for the third quarter of 2015. 
  • GAAP net income for the third quarter of 2016 was essentially flat compared to the same period of 2015 mainly due to gross profit declines being offset by lower general and administrative expenses.  The increase in earnings per diluted share was due to a decrease in weighted average diluted shares outstanding. 
  • Adjusted net income available to common stockholders was $26.4 million, or adjusted earnings per diluted share of $1.46, for the third quarter of 2016.  This compares to $26.7 million, or adjusted earnings per diluted share of $1.43, for the same period of 2015.  The slight decrease in adjusted net income was mainly due to lower gross profit.  The decrease was partially offset by lower income taxes and a decline in general and administrative expenses.  The increase in adjusted earnings per diluted share was due to a decrease in weighted average diluted shares outstanding.  (See "Non-GAAP Financial Measures" below.)
  • General and administrative expenses were $36.0 million for the third quarter of 2016.  This compares to approximately $41.6 million for the same period of 2015.  The decrease was primarily due to lower non-recurring restaurant support center consolidation costs, partially offset by higher costs associated with the timing of franchise conferences.        

First Nine Months of Fiscal 2016 Financial Highlights

  • GAAP net income available to common stockholders was $75.5 million for the first nine months of fiscal 2016, or earnings per diluted share of $4.15.  This compares to net income available to common stockholders of $78.5 million, or earnings per diluted share of $4.16, for the first nine months of fiscal 2015.  The decrease in GAAP net income was primarily due to lower gross profit and a loss on the disposition of assets in the first nine months of 2016 compared to a gain in the same period of 2015. The decrease was partially offset by lower income tax expense.  The decline in earnings per diluted share was less than the decline in net income due to fewer weighted average diluted shares outstanding.
  • Adjusted net income available to common stockholders was $84.3 million, or adjusted earnings per diluted share of $4.63, for the first nine months of fiscal 2016.  This compares to $86.7 million, or adjusted earnings per diluted share of $4.59, for the same period of fiscal 2015.  The decline in adjusted net income was mainly due to lower gross profit and higher general and administrative expenses, partially offset by lower income taxes.  Despite the decrease in adjusted earnings, adjusted earnings per diluted share increased due to fewer weighted average diluted shares outstanding. (See "Non-GAAP Financial Measures" below.)
  • General and administrative expenses were $111.9 million for the first nine months of 2016.  This compares to $110.4 million for the same period of 2015.  The slight increase was primarily due to higher costs associated with the timing of franchise conferences, partially offset by a decrease in personnel and related costs.       
  • In the nine months of fiscal 2016, cash flows from operating activities were $62.1 million compared to $70.6 million in the same period of fiscal 2015.  Adjusted free cash flow was $66.2 million for the first nine months of fiscal 2016, compared to $75.6 million for the first nine months of fiscal 2015.  (See "Non-GAAP Financial Measures" below.)

Same-Restaurant Sales Performance

Third Quarter of Fiscal 2016

  • IHOP's domestic system-wide comparable same restaurant sales were negative 0.1% for the third quarter of 2016. 
  • Applebee's domestic system-wide comparable same-restaurant sales declined 5.2% for the third quarter of 2016.

First Nine Months of Fiscal 2016

  • IHOP's domestic system-wide comparable same restaurant sales increased 0.5% for the first nine months of fiscal 2016. 
  • Applebee's domestic system-wide comparable same-restaurant sales declined 4.4% for the first nine months of fiscal 2016.

Financial Performance Guidance for Fiscal 2016

DineEquity reiterates its financial performance guidance for fiscal 2016 contained in the press release issued on August 3, 2016 and the Form 8-K filed on August 3, 2016, except for the revisions noted below.

  • Revised Applebee's comparable same-restaurant sales performance to range between negative 4.0% and negative 5.0%.  This compares to the previous expectations of between negative 3.0% and negative 4.5%.  The Company expects comparable same-restaurant sales to be near the low end of the guidance range.
  • Reiterated IHOP's comparable same-restaurant sales performance to range between positive 0.5% and positive 2.0%.  The Company expects comparable same-restaurant sales to be near the low end of the guidance range.
  • Reiterated worldwide development expectations for Applebee's franchisees to develop between 25 and 33 new restaurants. IHOP franchisees and its area licensee are expected to develop between 65 and 77 new restaurants. 
  • Revised expectations for Franchise segment profit to be between $340 million and $345 million.  This compares to the previous expectations of between $342 million and $352 million.
  • Reiterated expectations for the Rental and Financing segments to generate roughly $40 million in combined profit.
  • Revised expectations for general and administrative expenses to range between $150 million and $154 million, including non-cash stock-based compensation expense and depreciation of approximately $20 million, reflecting an improvement from previous expectations of between $154 million and $158 million. This amount includes approximately $4 million of non-recurring costs related to our restaurant support center consolidation.   
  • Reiterated expectations for interest expense to be approximately $62 million. Approximately $3 million is projected to be non-cash interest
  • expense.
    Reiterated expectations for weighted average diluted shares outstanding to be approximately 18.2 million shares. 
  • Reiterated expectations for the income tax rate to be approximately 37%.
  • Reiterated expectations for cash flows provided by operating activities to range between $112 million and $120 million. 
  • Reiterated expectations for capital expenditures to be roughly $8 million.
  • Reiterated expectations for adjusted free cash flow (See "Non-GAAP Financial Measures" below) to range between $113 million and $121 million.  Our guidance reflects approximately $9 million in cash payments related to our restaurant support center consolidation and the impact of fiscal 2016 containing 52 weeks compared to 53 weeks in fiscal 2015, taking into account the effect on working capital, including gift card receivables. Additionally, our guidance reflects non-recurring tax payments totaling approximately $7 million related to deferred gains from the repurchase of our debt, primarily in 2008 and 2009.  The total tax payments were made in the third quarter of 2016.  The Company previously estimated non-recurring tax payments totaling approximately $10 million. 

2016 Adjusted Free Cash Flow (Non-GAAP) Guidance Table

 
 

(In millions)

 

Cash flows from operations

$112 - 120

 

Approximate net receipts from notes and equipment contracts receivable

9

 

Approximate capital expenditures

(8)

 

Adjusted free cash flow (Non-GAAP)

$113 - 121


Investor Conference Call Today

DineEquity will host a conference call to discuss its results on the same day at 11:00 a.m. Eastern Time/ 8:00 a.m. Pacific Time.  To participate on the call, please dial (888) 771-4371 and reference passcode 43500950. International callers, please dial (847) 585-4405 and reference passcode 43500950.

A live webcast of the call will be available at www.dineequity.com, and may be accessed by visiting Calls & Presentations on 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 from 10:30 a.m. Pacific Time on November 1, 2016 through 8:59 p.m. Pacific Time on November 8, 2016 by dialing (888) 843-7419 and referencing passcode 43500950#. International callers, please dial (630) 652-3042 and reference passcode 43500950#. An online archive of the webcast will also be available on the Investors section of DineEquity's website.

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 3,700 restaurants combined in 20 countries and U.S. territories and approximately 400 franchisees, 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.

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," "could," "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; fourth-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)" and "adjusted free cash flow."  "Adjusted EPS" is computed for a given period by deducting from net income or 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 gain or loss related to the disposition of assets, and other items deemed not reflective of current operations.  This is presented on an aggregate basis and a per share (diluted) basis.  "Adjusted free cash flow" for a given period is defined as cash provided by operating activities, plus receipts from notes and equipment contracts receivable, less capital expenditures.  Management uses adjusted free cash flow in its periodic assessments of, among other things, the amount of cash dividends per share of common stock and repurchases of common stock and we believe it is important for investors to have the same measure used by management for that purpose.  Adjusted free cash flow does not represent residual cash flow available for discretionary purposes.  Adjusted EPS and adjusted free cash flow 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,

   

2016

 

2015

 

2016

 

2015

Revenues:

               

Franchise and restaurant revenues

 

$

123,259

   

$

128,188

   

$

380,034

   

$

407,774

 

Rental revenues

 

30,507

   

31,221

   

92,746

   

93,755

 

Financing revenues

 

2,251

   

3,028

   

7,019

   

8,271

 

Total revenues

 

156,017

   

162,437

   

479,799

   

509,800

 

Cost of revenues:

               

Franchise and restaurant expenses

 

41,553

   

41,984

   

122,129

   

145,433

 

Rental expenses

 

22,771

   

23,264

   

69,032

   

70,073

 

Financing expenses

 

9

   

504

   

155

   

516

 

Total cost of revenues

 

64,333

   

65,752

   

191,316

   

216,022

 

Gross profit

 

91,684

   

96,685

   

288,483

   

293,778

 

General and administrative expenses

 

36,002

   

41,577

   

111,937

   

110,384

 

Interest expense

 

15,358

   

15,434

   

46,107

   

46,757

 

Amortization of intangible assets

 

2,500

   

2,500

   

7,480

   

7,500

 

Closure and impairment charges, net

 

206

   

(72)

   

3,932

   

2,230

 

Loss (gain) on disposition of assets

 

113

   

(2,351)

   

679

   

(2,294)

 

Income before income tax provision

 

37,505

   

39,597

   

118,348

   

129,201

 

Income tax provision

 

(13,232)

   

(15,340)

   

(41,703)

   

(49,635)

 

Net income

 

$

24,273

   

$

24,257

   

$

76,645

   

$

79,566

 

Net income available to common stockholders:

               

Net income

 

$

24,273

   

$

24,257

   

$

76,645

   

$

79,566

 

Less: Net income allocated to unvested participating restricted stock

 

(338)

   

(316)

   

(1,103)

   

(1,042)

 

Net income available to common stockholders

 

$

23,935

   

$

23,941

   

$

75,542

   

$

78,524

 

Net income available to common stockholders per share:

               

Basic

 

$

1.33

   

$

1.29

   

$

4.17

   

$

4.19

 

Diluted

 

$

1.33

   

$

1.28

   

$

4.15

   

$

4.16

 

Weighted average shares outstanding:

               

Basic

 

17,950

   

18,573

   

18,099

   

18,737

 

Diluted

 

18,041

   

18,706

   

18,201

   

18,874

 
                 

Dividends declared per common share

 

$

0.92

   

$

0.875

   

$

2.76

   

$

2.625

 

Dividends paid per common share

 

$

0.92

   

$

0.875

   

$

2.76

   

$

2.625

 

 

DineEquity, Inc. and Subsidiaries

Consolidated Balance Sheets

(In thousands, except share and per share amounts)

 
   

September 30,

 2016

 

December 31, 2015

   

(Unaudited)

   

Assets

       

Current assets:

       

Cash and cash equivalents

 

$

107,823

   

$

144,785

 

Receivables, net

 

93,935

   

139,206

 

Restricted cash

 

34,958

   

32,528

 

Prepaid gift card costs

 

36,728

   

46,792

 

Prepaid income taxes

 

1,966

   

5,186

 

Other current assets

 

5,036

   

4,212

 

Total current assets

 

280,446

   

372,709

 

Long-term receivables, net

 

145,072

   

160,695

 

Property and equipment, net

 

205,230

   

219,580

 

Goodwill

 

697,470

   

697,470

 

Other intangible assets, net

 

765,773

   

772,949

 

Deferred rent receivable

 

88,034

   

90,030

 

Other non-current assets, net

 

18,396

   

18,417

 

    Total assets

 

$

2,200,421

   

$

2,331,850

 
         

Liabilities and Stockholders' Equity

       

Current liabilities:

       

Accounts payable

 

$

32,625

   

$

55,019

 

Gift card liability

 

104,201

   

167,657

 

Accrued employee compensation and benefits

 

15,792

   

25,085

 

Dividends payable

 

16,675

   

17,082

 

Current maturities of capital lease and financing obligations

 

14,346

   

14,320

 

Accrued advertising

 

11,875

   

8,758

 

Accrued interest payable

 

4,314

   

4,257

 

Other accrued expenses

 

6,565

   

6,251

 

Total current liabilities

 

206,393

   

298,429

 

Long-term debt, net

 

1,281,873

   

1,279,473

 

Capital lease obligations, less current maturities

 

73,603

   

84,781

 

Financing obligations, less current maturities

 

39,518

   

42,395

 

Deferred income taxes, net

 

252,907

   

269,469

 

Deferred rent payable

 

71,574

   

69,397

 

Other non-current liabilities

 

18,027

   

20,683

 

Total liabilities

 

1,943,895

   

2,064,627

 

Commitments and contingencies

       

Stockholders' equity:

       

Common stock, $0.01 par value, shares: 40,000,000 authorized; September 30, 2016 - 25,138,172 issued, 18,092,139 outstanding; December 31, 2015 - 25,186,048 issued, 18,535,027 outstanding

 

251

   

252

 

Additional paid-in-capital

 

290,365

   

286,952

 

Retained earnings

 

378,172

   

351,923

 

Accumulated other comprehensive loss

 

(107)

   

(107)

 

Treasury stock, at cost; shares: September 30, 2016 - 7,046,033; December 31, 2015 - 6,651,021

 

(412,155)

   

(371,797)

 

Total stockholders' equity

 

256,526

   

267,223

 

Total liabilities and stockholders' equity

 

$

2,200,421

   

$

2,331,850

 

 

DineEquity, Inc. and Subsidiaries

Consolidated Statements of Cash Flows

(In thousands)

(Unaudited)

 
   

Nine Months Ended

   

September 30,

   

2016

 

2015

Cash flows from operating activities:

       

Net income

 

$

76,645

   

$

79,566

 

Adjustments to reconcile net income to cash flows provided by operating activities:

       

Depreciation and amortization

 

22,924

   

24,134

 

Non-cash interest expense

 

2,400

   

2,292

 

Deferred income taxes

 

(14,852)

   

(12,512)

 

Non-cash stock-based compensation expense

 

8,215

   

6,312

 

Tax benefit from stock-based compensation

 

1,153

   

4,850

 

Excess tax benefit from stock-based compensation

 

(966)

   

(4,577)

 

Closure and impairment charges

 

1,461

   

2,230

 

Loss (gain) on disposition of assets

 

679

   

(2,294)

 

Other

 

456

   

(1,303)

 

Changes in operating assets and liabilities:

       

Accounts receivable, net

 

4,312

   

(95)

 

Current income tax receivables and payables

 

(1,138)

   

5,703

 

Gift card receivables and payables

 

(30,355)

   

(11,816)

 

Other current assets

 

(824)

   

(3,304)

 

Accounts payable

 

(1,397)

   

2,147

 

Accrued employee compensation and benefits

 

(9,293)

   

(4,915)

 

Accrued interest payable

 

57

   

(10,275)

 

Other current liabilities

 

2,581

   

(5,554)

 

Cash flows provided by operating activities

 

62,058

   

70,589

 

Cash flows from investing activities:

       

Additions to property and equipment

 

(3,543)

   

(5,765)

 

Proceeds from sale of property and equipment

 

   

10,782

 

Principal receipts from notes, equipment contracts and other long-term receivables

 

13,969

   

16,498

 

Other

 

(393)

   

(274)

 

Cash flows provided by investing activities

 

10,033

   

21,241

 

Cash flows from financing activities:

       

Principal payments on capital lease and financing obligations

 

(10,391)

   

(9,711)

 

Dividends paid on common stock

 

(50,790)

   

(49,786)

 

Repurchase of common stock

 

(45,010)

   

(50,010)

 

Tax payments for restricted stock upon vesting

 

(2,680)

   

(3,389)

 

Proceeds from stock options exercised

 

1,282

   

8,426

 

Excess tax benefit from stock-based compensation

 

966

   

4,577

 

Change in restricted cash

 

(2,430)

   

10,036

 

Other

 

   

(91)

 

Cash flows used in financing activities

 

(109,053)

   

(89,948)

 

Net change in cash and cash equivalents

 

(36,962)

   

1,882

 

Cash and cash equivalents at beginning of period

 

144,785

   

104,004

 

Cash and cash equivalents at end of period

 

$

107,823

   

$

105,886

 

 

NON-GAAP FINANCIAL MEASURES

(In thousands, except per share amounts)

(Unaudited)

 

Reconciliation of net income available to common stockholders to net income available to common stockholders, as adjusted for the following items: Kansas City Support Center consolidation costs; amortization of intangible assets; closure and impairment charges; non-cash interest expense; gain or loss on disposition of assets; and the combined tax effect of the preceding adjustments; and deferred tax adjustments considered unrelated to current period operations, as well as related per share data:

 

 

   

Three Months Ended

 

Nine Months Ended

   

September 30,

 

September 30,

   

2016

 

2015

 

2016

 

2015

Net income available to common stockholders, as reported

 

$

23,935

   

$

23,941

   

$

75,542

   

$

78,524

 

Kansas City Support Center consolidation costs(1)

 

306

   

3,595

   

5,338

   

3,595

 

Amortization of intangible assets

 

2,500

   

2,500

   

7,480

   

7,500

 

Closure and impairment charges

 

206

   

(72)

   

1,461

   

2,230

 

Non-cash interest expense

 

809

   

773

   

2,400

   

2,292

 

Loss (gain) on disposition of assets

 

113

   

(2,351)

   

679

   

(2,294)

 

Income tax provision

 

(1,456)

   

(1,689)

   

(6,422)

   

(5,063)

 

Deferred tax adjustments(2)

 

   

   

(2,002)

   

 

Net income allocated to unvested participating restricted stock

 

(34)

   

(37)

   

(130)

   

(109)

 

Net income available to common stockholders, as adjusted

 

$

26,379

   

$

26,660

   

$

84,346

   

$

86,675

 
                 

Diluted net income available to common stockholders per share:

               

Net income available to common stockholders, as reported

 

$

1.33

   

$

1.28

   

$

4.15

   

$

4.16

 

Kansas City Support Center consolidation costs(1)

 

0.01

   

0.12

   

0.18

   

0.12

 

Amortization of intangible assets

 

0.09

   

0.08

   

0.26

   

0.25

 

Closure and impairment charges

 

0.01

   

(0.00)

   

0.05

   

0.07

 

Non-cash interest expense

 

0.03

   

0.03

   

0.08

   

0.08

 

Loss (gain) on disposition of assets

 

0.00

   

(0.08)

   

0.02

   

(0.08)

 

Deferred tax adjustments(2)

 

   

   

(0.11)

   

 

Net income allocated to unvested participating restricted stock

 

(0.00)

   

(0.00)

   

(0.00)

   

(0.00)

 

Rounding

 

(0.01)

   

   

   

(0.01)

 

Diluted net income available to common stockholders per share, as adjusted

 

$

1.46

   

$

1.43

   

$

4.63

   

$

4.59

 
                 

Numerator for basic EPS-income available to common stockholders, as adjusted

 

$

26,379

   

$

26,660

   

$

84,346

   

$

86,675

 

Effect of unvested participating restricted stock using the two-class method

 

1

   

1

   

3

   

4

 

Numerator for diluted EPS-income available to common stockholders after assumed conversions, as adjusted

 

$

26,380

   

$

26,661

   

$

84,349

   

$

86,679

 
                 

Denominator for basic EPS-weighted-average shares

 

17,950

   

18,573

   

18,099

   

18,737

 

Dilutive effect of stock options

 

91

   

133

   

102

   

137

 

Denominator for diluted EPS-weighted-average shares and assumed conversions

 

18,041

   

18,706

   

18,201

   

18,874

 

 

   

(1)

Includes $2,471 of lease termination costs for the nine months ended September 30, 2016 reported in "closure and impairment charges" in the Consolidated Statements of Comprehensive Income

(2)

Adjustments to deferred tax balances primarily due to reduction of effective state tax rate because of Support Center consolidation.

 

DineEquity, Inc. and Subsidiaries

Non-GAAP Financial Measures

(Unaudited)

 

Reconciliation of the Company's cash provided by operating activities to " adjusted free cash flow" (cash provided by operating activities, plus receipts from notes and equipment contracts receivable, less additions to property and equipment). Management uses this liquidity measure in its periodic assessments of, among other things, the amount of cash dividends per share of common stock and repurchases of common stock and we believe it is important for investors to have the same measure used by management for that purpose. Adjusted free cash flow does not represent residual cash flow available for discretionary purposes.

 

 

   

Nine Months Ended

   

September 30,

   

2016

 

2015

   

(In millions)

Cash flows provided by operating activities

 

$

62.1

   

$

70.6

 

Receipts from notes and equipment contracts receivable

 

7.6

   

10.8

 

Additions to property and equipment

 

(3.5)

   

(5.8)

 

Adjusted free cash flow

 

66.2

   

75.6

 

Dividends paid on common stock

 

(50.8)

   

(49.8)

 

Repurchase of DineEquity common stock

 

(45.0)

   

(50.0)

 
   

$

(29.6)

   

$

(24.2)

 

Restaurant Data

The following table sets forth, for the three and nine months ended September 30, 2016 and 2015, 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 and, as such, the percentage change in sales at Effective Restaurants is based on non-GAAP sales data. 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,

   

2016

 

2015

 

2016

 

2015

   

(unaudited)

Applebee's Restaurant Data

               

Effective Restaurants(a)

               

Franchise

 

2,028

   

2,011

   

2,029

   

1,998

 

Company

 

   

5

   

   

17

 

Total

 

2,028

   

2,016

   

2,029

   

2,015

 
                 

System-wide(b)

               

Sales percentage change(c)

 

(5.1)%

   

0.4

%

 

(4.5)%

   

2.1

%

Domestic same-restaurant sales percentage change(d)

 

(5.2)%

   

(0.5)

%

 

(4.4)%

   

1.2

%

                 

Franchise(b)

               

Sales percentage change(c)

 

(4.9)%

   

1.2

%

 

(3.7)%

   

2.3

%

Domestic same-restaurant sales percentage change(d)

 

(5.2)%

   

0.5

%

 

(4.4)%

   

1.2

%

Average weekly domestic unit sales (in thousands)

 

$

43.5

   

$

45.9

   

$

46.2

   

$

48.6

 
                                 

 

   

Three Months Ended

 

Nine Months Ended

   

September 30,

 

September 30,

   

2016

 

2015

 

2016

 

2015

   

(unaudited)

IHOP Restaurant Data

               

Effective Restaurants(a)

               

Franchise

 

1,521

   

1,482

   

1,512

   

1,474

 

Area license

 

167

   

166

   

165

   

167

 

Company

 

10

   

12

   

11

   

13

 

Total

 

1,698

   

1,660

   

1,688

   

1,654

 
                 

System-wide(b)

               

Sales percentage change(c)

 

1.3

%

 

7.0

%

 

2.0

%

 

6.8

%

Domestic same-restaurant sales percentage change(d)

 

(0.1)

%

 

5.8

%

 

0.5

%

 

5.6

%

                 

Franchise(b)

               

Sales percentage change(c)

 

1.4

%

 

6.8

%

 

2.2

%

 

6.5

%

Domestic same-restaurant sales percentage change(d)

 

(0.1)

%

 

5.8

%

 

0.5

%

 

5.6

%

Average weekly domestic unit sales (in thousands)

 

$

37.1

   

$

37.6

   

$

37.5

   

$

37.6

 
                 

Area License (b)

               

Sales percentage change(c)

 

2.4

%

 

8.0

%

 

1.1

%

 

7.6

%

                                 

 

(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 franchisees and area licensees as well as those owned by the Company.

   

(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. An increase in franchisees' reported sales will result in a corresponding increase in our royalty revenue, while a decrease in franchisees' reported sales will result in a corresponding decrease in our royalty revenue. 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, 2016 and 2015 were as follows:

 

 

Three Months Ended

 

Nine Months Ended

 

September 30,

 

September 30,

 

2016

 

2015

 

2016

 

2015

 

(In millions)

Reported sales (unaudited)

             

Applebee's domestic franchise restaurant sales

$

1,058.9

   

$

1,113.2

   

$

3,382.1

   

$

3,513.8

 

IHOP franchise restaurant sales

734.3

   

$

724.5

   

2,208.6

   

$

2,160.9

 

IHOP area license restaurant sales

71.0

   

$

69.4

   

216.5

   

$

214.2

 

Total

$

1,864.2

   

$

1,907.1

   

$

5,807.2

   

$

5,888.9

 

 

   

(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.

 

 
 

DineEquity, Inc. and Subsidiaries

Restaurant Data

 

(unaudited)

 

 

 

 

The following table summarizes our restaurant development activity: 

 

 

       
 

Three Months Ended

 

Nine Months Ended

 

September 30,

 

September 30,

 

2016

 

2015

 

2016

 

2015

Applebee's Restaurant Development Activity

         

Summary - beginning of period:

             

Franchise

2,027

 

1,993

 

2,033

 

1,994

Company restaurants

 

23

 

 

23

Total Applebee's restaurants, beginning of period

2,027

 

2,016

 

2,033

 

2,017

Franchise restaurants opened:

             

Domestic

6

 

7

 

13

 

17

International

3

 

2

 

7

 

6

Total franchise restaurants opened

9

 

9

 

20

 

23

Franchise restaurants closed:

             

Domestic

(8)

 

(6)

 

(20)

 

(14)

International

(1)

 

(1)

 

(6)

 

(8)

Total  franchise restaurants closed

(9)

 

(7)

 

(26)

 

(22)

Net franchise restaurant development (reduction)

 

2

 

(6)

 

1

Refranchised from Company restaurants

 

23

 

 

23

Net franchise restaurant additions (reductions)

 

25

 

(6)

 

24

Summary - end of period:

             

Franchise

2,027

 

2,018

 

2,027

 

2,018

Company restaurants

 

 

 

Total Applebee's restaurants, end of period

2,027

 

2,018

 

2,027

 

2,018

 

IHOP Restaurant Development Activity

             

Summary - beginning of period:

             

Franchise

1,519

 

1,479

 

1,507

 

1,472

Area license

166

 

166

 

165

 

167

Company

10

 

13

 

11

 

11

Total IHOP restaurants, beginning of period

1,695

 

1,658

 

1,683

 

1,650

Franchise/area license restaurants opened:

         

Domestic franchise

7

 

11

 

26

 

24

Domestic area license

1

 

 

3

 

2

International franchise

8

 

2

 

11

 

5

Total franchise/area license restaurants opened

16

 

13

 

40

 

31

Franchise/area license restaurants closed:

             

Domestic franchise

(2)

 

(4)

 

(10)

 

(11)

Domestic area license

 

 

(1)

 

(3)

International franchise

 

 

(3)

 

Total franchise/area license restaurants closed

(2)

 

(4)

 

(14)

 

(14)

Net franchise/area license restaurant development

14

 

9

 

26

 

17

Refranchised from Company restaurants

 

2

 

1

 

3

Franchise restaurants reacquired by the Company

 

 

 

(3)

Net franchise/area license restaurant additions (reductions)

14

 

11

 

27

 

17

Summary - end of period

             

Franchise

1,532

 

1,490

 

1,532

 

1,490

Area license

167

 

166

 

167

 

166

Company

10

 

11

 

10

 

11

Total IHOP restaurants, end of period

1,709

 

1,667

 

1,709

 

1,667

SOURCE DineEquity, Inc.

Contacts:

Ken Diptee
Executive Director
Investor Relations
DineEquity, Inc.
818-637-3632

Patrick Lenow
Media Relations
Vice President, Communications
DineEquity, Inc.
818-637-3122

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Based in Glendale, California, DineEquity, Inc., through its subsidiaries, franchises and operates restaurants under the Applebee's Neighborhood Grill & Bar and IHOP brands.

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