DineEquity, Inc. Reports Third Quarter Fiscal 2017 Results

Dine Brands Global, Inc.
Published: November 9th, 2017

GLENDALE, Calif. - Nov. 9, 2017 // 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 2017.

"I am excited about the road ahead for DineEquity and our two category-leading brands. We have a strong management team, committed franchisees and talented team members working cohesively to achieve our collective goals of strong performance and sustainable growth," said Stephen P. Joyce, Chief Executive Officer of DineEquity, Inc. "We are committed to driving shareholder value and ensuring the success of our franchisees. I look forward to working with my management team to execute against our strategic priorities during this challenging period. We are focused on developing a robust performance-based culture, driving sustainable positive sales at both brands and returning DineEquity to a growth company. Having just completed our global franchise conferences for Applebee's and IHOP, it is clear our franchise groups are confident about our plan to drive the business forward. The initial progress we have made and the positive same-restaurant sales performance of both brands in October are encouraging. I am very optimistic about realizing the company's full potential."

Third Quarter of Fiscal 2017 Financial Highlights

• GAAP net loss available to common stockholders was $443.2 million, or net loss per diluted share of $24.98 for the third quarter of 2017. This compares to net income available to common stockholders of $23.9 million, or earnings per diluted share of $1.33, for the third quarter of fiscal 2016. The net loss was primarily due to non-cash impairment charges totaling $531.6 million related to the write-downs of Applebee's goodwill and other intangible assets, partially offset by a deferred tax benefit of $65.1 million attributable to the other intangible assets charge.
• Adjusted net income available to common stockholders was $16.1 million, or adjusted earnings per diluted share of $0.91, for the third quarter of fiscal 2017. This compares to adjusted net income available to common stockholders of $26.4 million, or adjusted earnings per diluted share of $1.46, for the third quarter of fiscal 2016. The decrease in adjusted net income was mainly due to a decline in gross profit. The decrease in gross profit was due to a 7.7% decline in Applebee's domestic system-wide comparable same-restaurant sales, an increase in bad debt expense, restaurant closures and a reduction in revenue recognized due to the collectability of Applebee's franchisee royalties. (See "Non-GAAP Financial Measures" below.)
• General and administrative expenses were approximately $38.0 million for the third quarter of fiscal 2017. This compares to $36.0 million for the third quarter of fiscal 2016. The modest increase was mainly due to higher personnel-related expenses.

First Nine Months of Fiscal 2017 Financial Highlights

• GAAP net loss available to common stockholders was $409.2 million, or net loss per diluted share of $23.09 for the first nine months of fiscal 2017. This compares to net income available to common stockholders of $75.5 million, or earnings per diluted share of $4.15, for the first nine months of fiscal 2016. The net loss was primarily due to non-cash impairment charges in the third quarter of fiscal 2017 totaling $531.6 million related to the write-downs of Applebee's goodwill and other intangible assets as well as lower gross profit, partially offset by a deferred tax benefit of $65.1 million attributable to the other intangible assets charge.
• Adjusted net income available to common stockholders was $60.7 million, or adjusted earnings per diluted share of $3.42, for the first nine months of fiscal 2017. This compares to adjusted net income available to common stockholders of $84.3 million, or adjusted earnings per diluted share of $4.63, for the first nine months of fiscal 2016. The decrease in adjusted net income was mainly due to lower gross profit and an increase in general and administrative expenses. The decrease in gross profit was due to a 7.3% decline in Applebee's domestic system-wide comparable same-restaurant sales, an increase in bad debt expense as well as restaurant closures and a reduction in revenue recognized due to the collectability of Applebee's franchisee royalties. (See "Non-GAAP Financial Measures" below.)
• General and administrative expenses were $125.7 million for the first nine months of fiscal 2017 compared to $111.9 million for the first nine months of fiscal 2016. The increase was primarily due to approximately $9 million of non-recurring cash severance and equity compensation charges incurred in the first quarter of 2017 related to the separation of our previous chief executive officer and higher costs for professional services associated with investments in Applebee's stabilization initiatives.
• Cash flows from operating activities were $31.0 million for the first nine months of fiscal 2017 compared to $62.1 million for the first nine months of fiscal 2016. The decline was primarily due to a decrease in gross profit from franchise operations and an increase in general and administrative expenses. Adjusted free cash flow was $29.4 million for the first nine months of fiscal 2017, compared to $66.2 million for the first nine months of fiscal 2016. (See "Non-GAAP Financial Measures" below.)

Same-Restaurant Sales Performance

Third Quarter of Fiscal 2017

• IHOP's domestic system-wide comparable same-restaurant sales declined 3.2% for the third quarter of 2017.
• Applebee's domestic system-wide comparable same-restaurant sales declined 7.7% for the third quarter of 2017.

First Nine Months of Fiscal 2017

• IHOP's domestic system-wide comparable same-restaurant sales declined 2.5% for the first nine months of fiscal 2017.
• Applebee's domestic system-wide comparable same-restaurant sales declined 7.3% for the first nine months of fiscal 2017.

Financial Performance Guidance for Fiscal 2017

The following projections for fiscal 2017 are based on management's expectations as of November 9, 2017. DineEquity reiterates its financial performance guidance for fiscal 2017 contained in the press release issued on August 10, 2017 and the Form 8-K filed on the same day, except for the revisions noted below.

• Revised expectations for Applebee's domestic system-wide comparable same-restaurant sales performance to range between negative 5.5% and negative 6.5%. This compares to previous expectations of between negative 6.0% and negative 8.0%.
• Reiterates expectations for IHOP's domestic system-wide comparable same-restaurant sales performance to range between negative 1.0% and negative 3.0%.
• Reiterates expectations for Applebee's franchisees to develop between 20 and 30 new restaurants globally, the majority of which are expected to be international openings.
• Reiterates expectations for Applebee's closures to range between approximately 105 and 135 restaurants.
• Reiterates expectations for IHOP franchisees and its area licensee to develop between 80 and 95 restaurants globally, the majority of which are expected to be domestic openings.
• Revised expectations for IHOP closures to range between 25 and 30 restaurants. This compares to previous expectations of between 20 and 25 restaurants.
• Revised expectations for Franchise segment profit to be between $297 million and $303 million. This compares to previous expectations of between $302 million and $314 million. This downward revision is primarily due to additional expected reserves related to the collectability of Applebee's royalties.
• Reiterates expectations for the Rental and Financing segments to generate approximately $38 million in combined profit.
• Reiterates expectations for general and administrative expenses to range between $166 million and $172 million, including non-cash stock-based compensation expense and depreciation of approximately $22 million.
• Reiterates expectations for interest expense to be approximately $62 million. Approximately $3 million is projected to be non-cash interest expense.
• Reiterates expectations for weighted average diluted shares outstanding to be approximately 18 million shares.
• Reiterates expectation for the income tax rate to be approximately 40%.
• Revised expectations for cash flows provided by operating activities to range between $64 million and $74 million. This compares to previous expectations of between $80 million and $90 million. The decline is primarily due to the timing of fourth quarter 2017 marketing spend and projections for lower Franchise segment profit as discussed above.
• Reiterates expectations for capital expenditures to be approximately $14 million.
• Revised expectations for adjusted free cash flow (See "Non-GAAP Financial Measures" below) to range between $60 million and $70 million. This compares to previous expectations of between $76 million and $86 million.

View Original for Full Data Table

Investor Conference Call Today

DineEquity will host a conference call to discuss its results on the same day at 8:00 a.m. Pacific Time. To participate on the call, please dial (888) 771-4371 and reference passcode 45813583. International callers, please dial (847) 585-4405 and reference passcode 45813583. A live webcast of the call will be available at www.dineequity.com and may be accessed by visiting Events and 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 9, 2017 through 11:59 p.m. Pacific Time on November 16, 2017 by dialing (888) 843-7419 and referencing passcode 45813583#. International callers, please dial (630) 652-3042 and reference passcode 45813583#.

An online archive of the webcast will also be available on Events and Presentations under the Investors section of DineEquity's website.

About DineEquity, Inc.

Based in Glendale, California, DineEquity, Inc. (NYSE: DIN), through its subsidiaries, franchises restaurants under both the Applebee's Neighborhood Grill & Bar and IHOP brands. With more than 3,700 restaurants combined in 19 countries 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 website 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," "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 press release includes references to the Company's non-GAAP financial measure "adjusted net income available to common stockholders, "adjusted earnings per diluted share (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 may use certain of these non-GAAP financial measures along with the corresponding U.S. GAAP measures to evaluate the performance of the business and to make certain business decisions. 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. Additionally, adjusted EPS is one of the metrics used in determining payouts under the Company's annual cash incentive plan. Management believes that these non-GAAP financial measures provide additional meaningful information that should be considered when assessing the business and the Company's performance compared to prior periods and the marketplace. 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 U.S. GAAP.

 

 

 

 

 

 

 

 

Contacts:

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

Craig Hoffman
Media Relations
Director, Corporate Communications
DineEquity, Inc.
818-637-3603

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SOURCE DineEquity, Inc.