DineEquity, Inc. Announces Third Quarter 2011 Financial and Operating Results

GLENDALE, CA--(Marketwire - Nov 3, 2011) - DineEquity, Inc. (NYSE: DIN), the parent company of Applebee's Neighborhood Grill & Bar and IHOP Restaurants, today announced financial results for the third quarter ended September 30, 2011.

"During the quarter, we made good progress in achieving our long-term strategic goals as we continued to generate strong free cash flow, improve our G&A, refranchise company-operated restaurants and create value for our shareholders," said Julia A. Stewart, Chairman and Chief Executive Officer of DineEquity. "While same-restaurant sales were not what we would have liked, we are confident in the plans we have at both brands to achieve our longer-term financial objectives. With about 95% of our restaurants either franchised or soon to be franchised, we are close to completing the planned transformation of the Company into a pure franchisor and creating a platform upon which we will continue generating strong cash flow going forward."

DineEquity's financial performance included the following highlights:

  • Adjusted net income available to common stockholders was $19.1 million for the third quarter 2011, compared to $16.6 million for the same quarter in 2010. The increase in adjusted net income was primarily due to the elimination of the dividend on Series A perpetual preferred stock and lower cash interest expense, partially offset by lower profit due to the refranchising of 149 Applebee's company-operated restaurants. Adjusted EPS was $1.04 per diluted share for the third quarter 2011. (See "Non-GAAP Financial Measures" below.)
  • For the first nine months of 2011, adjusted net income available to common stockholders was $61.7 million, or $3.37 per diluted share, compared to $51.1 million, or $2.92 per diluted share, in the same period in 2010. The increase in adjusted net income was primarily due to the elimination of the dividend on Series A perpetual preferred stock, lower cash interest expense, and a lower tax rate, partially offset by lower segment profit due to refranchising. (See "Non-GAAP Financial Measures" below.)
  • Net income available to common stockholders was $15.5 million, or $0.85 per diluted share, for the third quarter 2011, compared to net income of $7.8 million, or $0.44 per diluted share, for the same quarter in 2010. The increase in net income was due to lower interest expense and the elimination of the dividend on Series A perpetual preferred stock as a result of redeeming this security in the fourth quarter of 2010, partially offset by refranchising a total of 149 restaurants.
  • For the first nine months of 2011, net income available to common stockholders was $43.4 million, or $2.38 per diluted share, compared to $28.0 million, or $1.60 per diluted share in the same period in 2010. The increase was due in part to lower interest expense, the elimination of the dividend on Series A preferred stock, and a gain on the sale of 66 Applebee's company-operated restaurants in the St. Louis and Washington, D.C. areas. These items were partially offset by impairment and closure charges related to the termination of the sublease for the Applebee's restaurant support center in Lenexa, Kansas, lower segment profit largely driven by refranchising, and higher debt extinguishment charges.
  • Under the $45 million share repurchase authorization announced in August 2011, the Company repurchased 534,101 shares of its common stock in the third quarter for a total of $21.2 million.
  • Total debt was reduced by $193.1 million over the first nine months of 2011 as a result of net cash proceeds and financing obligation reductions from the sale of 66 Applebee's company-operated restaurants in the St. Louis and Washington, D.C. areas, cash on hand, and free cash flow. The company has reduced term loan balances by $110.0 million, retired $39.8 million of the 9.5% senior notes and $43.3 million of financing and capital lease obligations for the first nine months of the year.
  • For the first nine months of 2011, cash flows from operating activities were $95.1 million, consolidated capital expenditures were $20.8 million, and free cash flow was $84.2 million. (See "Non-GAAP Financial Measures" below.)
  • Consolidated general and administrative expenses decreased 2.2% to $38.7 million for the third quarter 2011, compared to the third quarter of 2010. For the year-to-date period, consolidated general and administrative expenses decreased 1.6% to $115.2 million versus the same period in 2010.
  • Applebee's company-operated restaurant operating margin was 14.2% in the third quarter 2011, compared to 14.8% for the third quarter 2010. The unfavorable comparison was primarily due to increasing commodity costs and investments in local advertising, partially offset by the refranchising of lower margin restaurants. For the first nine months of 2011, Applebee's company-operated restaurant operating margin was 14.4%, compared to 14.6% for the same period in 2010.
  • IHOP franchisees and its area licensees opened 39 new restaurants worldwide in the first nine months of 2011, in line with our full-year IHOP development outlook.

Same-Restaurant Sales Performance

  • Applebee's domestic system-wide same-restaurant sales decreased 0.3% for the third quarter 2011, which represented the first quarter of negative same-restaurant sales since the second quarter of 2010. The same-restaurant sales performance was driven by a decrease in guest traffic, partially offset by an increase in average guest check. Domestic franchise same-restaurant sales decreased 0.4% and company-operated Applebee's same-restaurant sales increased 0.1% for the third quarter 2011, compared to the same quarter in 2010.
  • IHOP's domestic system-wide same-restaurant sales decreased 1.5% for the third quarter 2011, compared to the same quarter in 2010. Same-restaurant sales reflected declines in traffic and a higher average guest check.

Recent Developments

On August 15, 2011, DineEquity announced the approval by the Company's Board of Directors of the repurchase of up to $45 million of the Company's outstanding common stock. Under the program, DineEquity may repurchase shares on an opportunistic basis from time to time in open market transactions and in privately negotiated transactions, based on business, market, applicable legal requirements and other considerations. The repurchase program does not require the company to repurchase any specific number of shares, and may be terminated at any time.

On October 13, 2011, the Company announced that it entered into an asset purchase agreement with Apple Investors Group, LLC for the sale of 17 Applebee's company-operated restaurants located in Tennessee, Illinois, Mississippi, Missouri, Kentucky and Arkansas. The transaction is expected to result in net proceeds after taxes of approximately $15.9 million and reduce DineEquity's sale-leaseback related financing obligations by $11.3 million. The Company expects to pay approximately $2.4 million related to the settlement of net working capital liabilities and deal costs. Additionally, the sale of these Applebee's company-operated restaurants will result in approximately $0.9 million in annualized consolidated general and administrative expense savings. The Company anticipates closing the transaction in the first quarter of 2012.

On November 2, 2011, DineEquity successfully completed the sale of 62 restaurants from the previously-announced transaction involving 66 company-operated Applebee's restaurants located in New England. The four remaining restaurants are expected to close soon.

2011 Financial Performance Outlook

Given that DineEquity's brands are nearly 95% franchised, the Company is providing an adjusted earnings per share (EPS) outlook as it believes that adjusted EPS, along with cash flow and same-restaurant sales, are key measures by which the Company will be evaluating its success going forward. The strength of the Company's fully franchised business model is that it somewhat mitigates earnings fluctuations based on restaurant sales. The Company expects adjusted earnings per share (EPS) to range between $4.20 and $4.30 per diluted share. (See "Non-GAAP Financial Measures" below.)

Additionally, DineEquity provided the following fiscal 2011 guidance:

  • Revised consolidated cash from operations to range between $117 and $127 million, which reflects a reduction from previous expectations of $125 to $135 million. Revised consolidated free cash flow to range between $104 and $114 million, which reflects a reduction from previous expectations of $112 to $122 million. The $8 million reductions in consolidated cash from operations and consolidated free cash flow relate solely to the net working capital impact of the refranchising of 66 Applebee's company-operated restaurants in New England as previously discussed in our May 31, 2011 press release. (See "Non-GAAP Financial Measures" below.)
  • Reiterated that approximately $13 million is expected to be generated from the structural run-off of the Company's long-term receivables.
  • Reiterated consolidated capital expenditures of approximately $26 million.
  • Revised Applebee's domestic system-wide same-restaurant sales performance to range between 1.5% and 2.0%, a reduction from previous expectations of between 2% and 4%.
  • Revised IHOP's domestic system-wide same-restaurant sales performance to range between negative 2.0% and negative 2.5%, a reduction from previous expectations of between positive 1% and negative 2%.
  • Revised restaurant operating margin at Applebee's company-operated restaurants to range between 14.4% and 14.8%. This reflects a reduction from previous expectations of between 14.8% and 15.2%.
  • Reiterated consolidated general & administrative expense to range between $157 and $160 million, including non-cash stock-based compensation expense and depreciation of approximately $18 million.
  • Reiterated consolidated interest expense to range between $134 and $139 million, of which approximately $7 million is expected to be non-cash interest expense.
  • Reiterated Applebee's franchisees to develop between 24 and 28 new restaurants, approximately half of which are expected to open internationally.
  • Narrowed the range of new restaurants to be developed by IHOP franchisees to between 55 and 60, the majority of which are expected to be opened in the U.S.
  • Reiterated an income tax rate of 36% for 2011.
  • Reiterated full-year weighted average diluted shares outstanding to be approximately 18.3 million shares.

The Company's 2011 financial performance guidance excludes any impact from the future sales of Applebee's company-operated restaurants, the timing of which could be highly variable due to factors including the economy, the availability of buyer financing, acceptable valuations, and the operating wherewithal of the acquiring franchisee. Should additional Applebee's company-operated restaurants be sold this year, DineEquity plans to update its performance guidance accordingly, in conjunction with its regular quarterly reporting schedule, following any transaction announcement.

Investor Conference Call Today

The Company will host an investor conference call today (Thursday, November 3, 2011, at 11:00 a.m. Eastern Time / 8:00 a.m. Pacific Time) to discuss its third quarter 2011 results. To participate on the call, please dial (888) 713-4216 and reference pass code 20830563. 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=P8ARJ6EKX

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 Investor Information 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 November 10, 2011 by dialing (888) 286-8010 and referencing pass code 21428112. An online archive of the webcast also will be available on the Investor Information section of DineEquity's Web site.

About DineEquity, Inc.

Based in Glendale, California, DineEquity, Inc., through its subsidiaries, franchises and operates restaurants under the Applebee's Neighborhood Grill & Bar and IHOP brands. With more than 3,500 restaurants combined, 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 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 substantial indebtedness; risk of future impairment charges; 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; shortages or interruptions in the supply or delivery of food; changing health or dietary preferences; harm to our brands' reputation; litigation; environmental liability; liability relating to employees; failure to comply with applicable laws and regulations; failure to effectively implement restaurant development plans; 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; changes in the number and quality of franchisees; inability of franchisees to fund capital expenditures; third-party claims with respect to intellectual property assets; heavy dependence on information technology; failure to protect the integrity and security of individually identifiable information; 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," and "free cash flow." "Adjusted EPS" is computed for a given period is computed by deducting from net income (loss) available to common stockholders for such period the effect of any impairment and closure charges, any gain or loss related to debt extinguishment, any intangible asset amortization, any non-cash interest expense, any debt modification costs and any gain or loss related to the disposition of assets 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 is defined as income before income taxes less interest expense, loss on retirement of debt and Series A preferred stock, depreciation and amortization, impairment and closure charges, stock-based compensation, gain/loss on sale 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 dividends paid and capital expenditures. 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 notes receivable, and the funding of operating activities, capital expenditures and preferred 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 and 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,
                                   2011       2010       2011       2010
Segment Revenues:
Franchise revenues              $  97,679  $  92,157  $ 300,782  $  280,851
Company restaurant sales          131,618    206,907    420,955     642,216
Rental revenues                    31,163     32,210     95,003      98,329
Financing revenues                  4,021      4,241     16,279      12,319
                                ---------  ---------  ---------  ----------
Total segment revenues            264,481    335,515    833,019   1,033,715
                                ---------  ---------  ---------  ----------
Segment Expenses:
Franchise expenses                 25,006     25,298     78,656      76,163
Company restaurant expenses       113,976    177,253    363,021     551,874
Rental expenses                    24,521     24,628     73,734      74,337
Financing expenses                    425        763      6,001       1,234
                                ---------  ---------  ---------  ----------
Total segment expenses            163,928    227,942    521,412     703,608
                                ---------  ---------  ---------  ----------
Gross segment profit              100,553    107,573    311,607     330,107
General and administrative
 expenses                          38,712     39,594    115,152     116,994
Interest expense                   32,170     42,814    101,343     131,530
Impairment and closure charges        193      1,143     26,947       3,725
Debt modification costs                --         --      4,103          --
Amortization of intangible
 assets                             3,075      3,077      9,225       9,230
Loss (gain) on extinguishment of
 debt                                  --         --      7,885      (4,640)
Loss (gain) on disposition of
 assets                             1,176        745    (21,287)        923
                                ---------  ---------  ---------  ----------
Income before income taxes         25,227     20,200     68,239      72,345
Provision for income taxes         (8,702)    (5,869)   (21,667)    (24,302)
                                ---------  ---------  ---------  ----------
Net income                      $  16,525  $  14,331  $  46,572  $   48,043
                                =========  =========  =========  ==========

Net income available to common
 stockholders
Net income                      $  16,525  $  14,331  $  46,572  $   48,043
Less: Series A preferred stock
 dividends                             --     (5,640)        --     (17,100)
Less: Accretion of Series B
 preferred stock                     (647)      (612)    (1,915)     (1,810)
Less: Net income allocated to
 unvested participating
 restricted stock                    (359)      (307)    (1,212)     (1,113)
                                ---------  ---------  ---------  ----------
Net income available to common
 stockholders                   $  15,519  $   7,772  $  43,445  $   28,020
                                =========  =========  =========  ==========
Net income available to common
 stockholders per share
Basic                           $    0.86  $    0.45  $    2.43  $     1.63
                                =========  =========  =========  ==========
Diluted                         $    0.85  $    0.44  $    2.38  $     1.60
                                =========  =========  =========  ==========
Weighted average shares
 outstanding
Basic                              17,968     17,227     17,912      17,168
                                =========  =========  =========  ==========
Diluted                            18,243     17,568     18,268      17,519
                                =========  =========  =========  ==========



                     DINEEQUITY, INC. AND SUBSIDIARIES
                        CONSOLIDATED BALANCE SHEETS
             (In thousands, except share and per share amounts)

                                            September 30,     December 31,
                                                 2011             2010
                                           ---------------  ---------------
                  Assets                     (Unaudited)
Current assets:
Cash and cash equivalents                  $        53,940  $       102,309
Restricted cash                                      3,221              854
Receivables, net                                    73,071           98,776
Inventories                                         10,695           10,757
Prepaid income taxes                                13,763           34,094
Prepaid gift cards                                  25,048           27,465
Prepaid expenses                                    14,439           14,602
Deferred income taxes                               31,367           24,301
Assets held for sale                                39,972           37,944
                                           ---------------  ---------------
Total current assets                               265,516          351,102
Non-current restricted cash                             --              778
Restricted assets related to captive
 insurance subsidiary                                3,675            3,562
Long-term receivables                              230,588          239,945
Property and equipment, net                        524,947          612,175
Goodwill                                           697,470          697,470
Other intangible assets, net                       825,046          835,879
Other assets, net                                  115,097          115,730
                                           ---------------  ---------------
Total assets                               $     2,662,339  $     2,856,641
                                           ===============  ===============
   Liabilities and Stockholders' Equity
Current liabilities:
Current maturities of long-term debt       $         7,420  $         9,000
Accounts payable                                    29,410           32,724
Accrued employee compensation and benefits          23,748           32,846
Gift card liability                                 68,066          124,972
Accrued interest payable                            31,763           17,482
Current maturities of capital lease and
 financing obligations                              15,015           16,556
Facility closure liability                          20,530               --
Other accrued expenses                              23,359           31,502
                                           ---------------  ---------------
Total current liabilities                          219,311          265,082
Long-term debt, less current maturities          1,480,393        1,631,469
Financing obligations, less current
 maturities                                        203,091          237,826
Capital lease obligations, less current
 maturities                                        136,957          144,016
Deferred income taxes                              384,629          375,697
Other liabilities                                  114,484          118,972
                                           ---------------  ---------------
Total liabilities                                2,538,865        2,773,062
                                           ---------------  ---------------
Commitments and contingencies
Stockholders' equity:
Convertible preferred stock, Series B, at
 accreted value, shares: 10,000,000
 authorized; 35,000 issued; September 30,
 2011 - 34,900 outstanding; December 31,
 2010 - 35,000 outstanding                          43,850           42,055
Common stock, $.01 par value, shares:
 40,000,000 authorized; September 30, 2011
 - 24,669,129 issued, 18,034,083
 outstanding; December 31, 2010 -
 24,382,991 issued, 18,183,083 outstanding             247              243
Additional paid-in-capital                         203,971          192,214
Retained earnings                                  168,907          124,250
Accumulated other comprehensive loss                  (312)            (282)
Treasury stock, at cost (shares: September
 30, 2011 - 6,635,046; December 31, 2010 -
 6,199,908)                                       (293,189)        (274,901)
                                           ---------------  ---------------
Total stockholders' equity                         123,474           83,579
                                           ---------------  ---------------
Total liabilities and stockholders' equity $     2,662,339  $     2,856,641
                                           ===============  ===============



                     DINEEQUITY, INC. AND SUBSIDIARIES
                   CONSOLIDATED STATEMENTS OF CASH FLOWS
                               (In thousands)
                                (Unaudited)
                                                   Nine Months Ended
                                                     September 30,
                                           --------------------------------
                                                 2011             2010
                                           ---------------  ---------------
Cash flows from operating activities
Net income                                 $        46,572  $        48,043
Adjustments to reconcile net income to
 cash flows provided by operating
 activities
Depreciation and amortization                       38,599           47,594
Non-cash interest expense                            4,582           31,203
Loss (gain) on extinguishment of debt                7,885           (4,640)
Impairment and closure charges                      26,729            3,085
Deferred income taxes                                1,866          (10,976)
Non-cash stock-based compensation expense            6,913           11,150
Tax benefit from stock-based compensation            6,085            1,407
Excess tax benefit from stock options
 exercised                                          (5,713)          (2,211)
(Gain) loss on disposition of assets               (21,287)             923
Other                                                 (217)          (1,847)
Changes in operating assets and
 liabilities
Receivables                                         25,360           30,930
Inventories                                         (1,202)             226
Prepaid expenses                                     2,449            2,649
Current income tax receivables and
 payables                                           21,519            7,253
Accounts payable                                    (3,992)          (4,699)
Accrued employee compensation and benefits          (9,099)          (3,460)
Gift card liability                                (56,906)         (49,742)
Other accrued expenses                               4,928           (9,384)
                                           ---------------  ---------------
Cash flows provided by operating
 activities                                         95,071           97,504
                                           ---------------  ---------------
Cash flows from investing activities
Additions to property and equipment                (20,829)         (11,421)
Proceeds from sale of property and
 equipment and assets held for sale                 60,188            1,975
Principal receipts from notes, equipment
 contracts and other long-term receivables           9,922           14,939
Other                                                 (558)           1,842
                                           ---------------  ---------------
Cash flows provided by investing
 activities                                         48,723            7,335
                                           ---------------  ---------------
Cash flows from financing activities
Proceeds from issuance of long-term debt            25,000               --
Repayment of long-term debt                       (178,437)         (80,658)
Principal payments on capital lease and
 financing obligations                             (10,296)         (12,191)
Dividends paid                                          --          (17,100)
Purchase of common stock                           (21,170)              --
Payment of debt modification and issuance
 costs                                             (12,307)          (1,008)
Repurchase of restricted stock                      (4,802)          (1,029)
Proceeds from stock options exercised                6,326            2,487
Excess tax benefit from stock options
 exercised                                           5,713            2,211
Change in restricted cash                           (1,590)          25,377
Other                                                 (600)             (12)
                                           ---------------  ---------------
Cash flows used in financing activities           (192,163)         (81,923)
                                           ---------------  ---------------
Net change in cash and cash equivalents    $       (48,369) $        22,916
Cash and cash equivalents at beginning of
 period                                            102,309           82,314
                                           ---------------  ---------------
Cash and cash equivalents at end of period          53,940          105,230
                                           ===============  ===============
                         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 impairment and closure
charges, loss (gain) on extinguishment of debt, amortization of intangible
assets, non-cash interest expense, debt modification costs and loss (gain)
on disposition of assets, and related per share data:

                                     Three Months Ended   Nine Months Ended
                                        September 30,       September 30,
                                       2011      2010      2011      2010
Net income available to common
 stockholders, as reported           $ 15,519  $  7,772  $ 43,445  $ 28,020
Impairment and closure charges            168       899    26,729     3,085
Loss (gain) on extinguishment of
 debt                                      --        --     7,885    (4,640)
Amortization of intangible assets       3,075     3,077     9,225     9,230
Non-cash interest expense               1,594    10,582     4,582    31,203
Debt modification costs                    --        --     4,103        --
Loss (gain) on disposition of assets    1,176       745   (21,287)      923
Income tax provision                   (2,393)   (6,091)  (12,432)  (15,841)
Net income allocated to unvested
 participating restricted stock           (82)     (351)     (511)     (916)
                                     --------  --------  --------  --------
Net income available to common
 stockholders, as adjusted           $ 19,057  $ 16,633  $ 61,739  $ 51,064
                                     ========  ========  ========  ========
Diluted net income available to
 common stockholders per share:
Net income available to common
 stockholders, as reported           $   0.85  $   0.44  $   2.38  $   1.60
Impairment and closure charges           0.01      0.03      0.85      0.11
Loss (gain) on extinguishment of
 debt                                      --        --      0.25     (0.16)
Amortization of intangible assets        0.10      0.11      0.29      0.32
Non-cash interest expense                0.05      0.36      0.14      1.07
Debt modification costs                    --        --      0.13        --
Loss (gain) on disposition of assets     0.04      0.02     (0.68)     0.03
Net income allocated to unvested
 participating restricted stock            --     (0.02)    (0.03)    (0.05)
Change due to increase in net income    (0.01)     0.01      0.04        --
                                     --------  --------  --------  --------
Diluted net income available to
 common stockholders per share, as
 adjusted                            $   1.04  $   0.95  $   3.37  $   2.92
                                     ========  ========  ========  ========

Numerator for basic EPS-income
 available to common stockholders,
 as adjusted                         $ 19,057  $ 16,633  $ 61,739  $ 51,064
Effect of unvested participating
 restricted stock using the two-
 class method                              21        13        87        40
Effect of dilutive securities:
Stock options                              --        --        --        --
Convertible Series B preferred stock      647        --     1,915        --
                                     --------  --------  --------  --------
Numerator for diluted EPS-income
 available to common stockholders
 after assumed conversions, as
 adjusted                            $ 19,725  $ 16,646  $ 63,741  $ 51,104
                                     ========  ========  ========  ========

Denominator for basic EPS-weighted-
 average shares                        17,968    17,227    17,912    17,168
Effect of dilutive securities:
Stock options                             275       341       356       351
Convertible Series B preferred stock      634        --       634        --
                                     --------  --------  --------  --------
Denominator for diluted EPS-
 weighted-average shares and assumed
 conversions                           18,877    17,568    18,902    17,519
                                     ========  ========  ========  ========



                         NON-GAAP FINANCIAL MEASURES
                               (In thousands)
                                (Unaudited)

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

                                             Nine Months     Twelve Months
                                                Ended            Ended
                                                  September 30, 2011
                                           --------------------------------
U.S. GAAP income (loss) before income
 taxes                                     $        68,239  $       (16,187)
Interest charges                                   115,457          160,206
Loss on retirement of debt and Series A
 Preferred Stock                                     7,885          119,528
Depreciation and amortization                       38,599           52,432
Non-cash stock-based compensation                    6,913            8,848
Impairment and closure charges                      26,726           27,122
Other                                                6,593            6,689
Gain on sale of assets                             (21,287)         (35,782)
                                           ---------------  ---------------
EBITDA                                     $       249,125  $       322,856
                                           ===============  ===============

Reconciliation of the Company's cash provided by operating activities to free cash flow:

                                                   Nine Months Ended
                                                     September 30,
                                                 2011             2010
                                           ---------------  ---------------
Cash flows provided by operating activities$        95,071  $        97,504
Principal receipts from notes, equipment
 contracts and other long-term receivables           9,922           14,939
Dividends paid                                          --          (17,100)
Additions to property and equipment                (20,829)         (11,421)
                                           ---------------  ---------------
Free cash flow                             $        84,164  $        83,922
                                           ===============  ===============

Restaurant Data The following table sets forth, for the three-month and nine-month periods ended September 30, 2011 and 2010, 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. "Effective restaurants" are the number of restaurants in a given period, adjusted to account for restaurants open for only a portion of the period. Information is presented for all effective restaurants in the IHOP and Applebee's systems, which includes restaurants owned by the Company, as well as those owned by franchisees and area licensees. 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, as well as rental payments under leases that are usually 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,
                                 2011        2010       2011        2010
                              ---------   ---------  ---------   ---------
Applebee's Restaurant Data                     (unaudited)
Effective restaurants(a)
Franchise                         1,766       1,607      1,757       1,606
Company                             243         393        253         394
                              ---------   ---------  ---------   ---------
Total                             2,009       2,000      2,010       2,000
                              =========   =========  =========   =========
System-wide(b)
Sales percentage change(c)         (0.1%)       3.4%       2.6%       (0.9)%
Domestic same-restaurant
 sales percentage change(d)        (0.3%)       3.3%       2.3%       (0.5)%
Franchise(b)(e)(g)
Sales percentage change(c)         (1.3%)       4.1%       1.8%       (0.2)%
Domestic same-restaurant
 sales percentage change(d)        (0.4%)       3.8%       2.5%       (0.2)%
Average weekly domestic unit
 sales (in thousands)         $    44.2   $    44.8  $    47.0   $    46.2
Company(f)(g)
Sales percentage change(c)          1.4%        0.4%       1.0%       (3.9)%
Same-restaurant sales
 percentage change(d)               0.1%        1.2%       0.5%       (1.7)%
Average weekly domestic unit
 sales (in thousands)         $    40.2   $    39.7  $    41.3   $    40.9


IHOP Restaurant Data
Effective restaurants(a)
Franchise                         1,347       1,297      1,339       1,289
Company                              10          10         10          11
Area license                        163         164        163         164
                              ---------   ---------  ---------   ---------
Total                             1,520       1,471      1,512       1,464
                              =========   =========  =========   =========
System-wide(b)
Sales percentage change(c)          2.6%        2.9%       1.7%        3.4%
Domestic same-restaurant
 sales percentage change(d)        (1.5)%       0.1%      (2.4)%      (0.4)%
Franchise(b)(e)(g)
Sales percentage change(c)          2.5%        3.0%       1.6%        3.5%
Domestic same-restaurant
 sales percentage change(d)        (1.5)%       0.1%      (2.4)%      (0.4)%
Average weekly domestic unit
 sales (in thousands)         $    34.4   $    34.9  $    34.6   $    35.3

Company(f)(g)                      n.m.        n.m.       n.m.        n.m.

Area License(e)
Sales percentage change(c)          4.4%        2.2%       2.5%        3.3%

(a) "Effective restaurants" are the number of restaurants 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 IHOP and Applebee's 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 IHOP and Applebee's restaurants operated by franchisees and IHOP restaurants operated by 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.

(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 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 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 restaurants located in Florida.

(e)

                                      Three Months Ended  Nine Months Ended
                                        September 30,       September 30,
                                     ------------------- -------------------
                                                  (In millions)
    Reported sales (unaudited)          2011      2010      2011      2010
                                     --------- --------- --------- ---------
    Applebee's franchise restaurant
     sales                           $   932.6 $   852.4 $ 2,957.2 $ 2,639.8
    IHOP franchise restaurant sales  $   602.7 $   588.1 $ 1,805.5 $ 1,777.0
    IHOP area license restaurant
     sales                           $    55.1 $    52.8 $   172.0 $   167.8

(f) Sales percentage change and same-restaurant sales percentage change for IHOP company-operated restaurants are not meaningful ("n.m.") due to the relatively small number and test-market nature of the restaurants, along with the periodic inclusion of restaurants reacquired from franchisees that are temporarily operated by the Company.

(g) The sales percentage change for the three months and nine months ended September 30, 2011 for Applebee's franchise and company-operated restaurants was impacted by the franchising of 149 company-operated restaurants (83 in the fourth quarter of 2010, 65 in the first quarter of 2011 and one in the third quarter of 2011).

                      DINEEQUITY, INC. AND SUBSIDIARIES
                               RESTAURANT DATA

The following table summarizes our restaurant development activity:

                               Three Months Ended       Nine Months Ended
                                  September 30,           September 30,
                             ----------------------  ----------------------
                                2011        2010        2011        2010
                             ----------  ----------  ----------  ----------
                                               (unaudited)
Applebee's Restaurant
 Development Activity
Beginning of period               2,012       2,001       2,010       2,008
New openings
Franchisee-developed                  4           3          12          11
                             ----------  ----------  ----------  ----------
Total new openings                    4           3          12          11
                             ----------  ----------  ----------  ----------
Closings
Company                              --          (1)         --          (7)
Franchise                            (6)         (4)        (12)        (13)
                             ----------  ----------  ----------  ----------
Total closings                       (6)         (5)        (12)        (20)
                             ----------  ----------  ----------  ----------
End of period                     2,010       1,999       2,010       1,999
                             ==========  ==========  ==========  ==========
Summary-end of period
Franchise                         1,767       1,607       1,767       1,607
Company                             243         392         243         392
                             ----------  ----------  ----------  ----------
Total                             2,010       1,999       2,010       1,999
                             ==========  ==========  ==========  ==========



                               Three Months Ended       Nine Months Ended
                                  September 30,           September 30,
                             ----------------------  ----------------------
                                2011        2010        2011        2010
                             ----------  ----------  ----------  ----------
                                               (unaudited)
IHOP Restaurant Development
 Activity
Beginning of period               1,522       1,476       1,504       1,456
New openings
Franchisee-developed                 13           9          36          35
Area license                          1           1           3           3
                             ----------  ----------  ----------  ----------
Total new openings                   14          10          39          38
                             ----------  ----------  ----------  ----------
Closings
Company                              --          --          --          (2)
Franchise                            --          (3)         (7)         (6)
Area license                         (4)         --          (4)         (3)
                             ----------  ----------  ----------  ----------
Total closings                       (4)         (3)        (11)        (11)
                             ----------  ----------  ----------  ----------
End of period                     1,532       1,483       1,532       1,483
                             ==========  ==========  ==========  ==========
Summary-end of period
Franchise                         1,356       1,309       1,356       1,309
Company                              13          10          13          10
Area license                        163         164         163         164
                             ----------  ----------  ----------  ----------
Total                             1,532       1,483       1,532       1,483
                             ==========  ==========  ==========  ==========

###

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