DineEquity, Inc. Reports Third Quarter Results

Completes Applebee’s Refranchising Initiative

Significantly Reduces Total Debt by $167 Million

GLENDALE, Calif. - (BUSINESS WIRE) - Oct. 30, 2012 - 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 2012.

“We are pleased with our results for the third quarter, which was highlighted by the great progress we made against our long-term strategic goals. Earlier this month, we achieved a significant milestone with the completion of our transition to a fully-franchised restaurant system. Our more efficient business model continued to generate strong free cash flow, enabling further debt reduction as we optimize our G&A structure to create additional value for our stockholders,” said Julia A. Stewart, Chairman and Chief Executive Officer of DineEquity, Inc. “Our strategy at Applebee’s yielded solid performance in the third quarter, where our revitalization initiatives continue to fuel momentum. We continued the hard work already underway at IHOP to restore same-restaurant sales growth. Most importantly, we have strong alignment with our IHOP franchisees to execute on our plan for improvement.”

Third Quarter 2012 Financial Highlights

  • Total debt was reduced by $167.2 million in the third quarter of 2012 as a result of net cash proceeds and financing obligation reductions from the refranchise and sale of Applebee’s company-operated restaurants and free cash flow. The Company reduced Term Loan balances by $106.1 million and financing and capital lease obligations by $61.1 million.
  • Adjusted net income available to common stockholders was $18.9 million, representing adjusted earnings per diluted share of $1.03 for the third quarter of 2012. This compares to $19.1 million, or adjusted earnings per diluted share of $1.04, for the same quarter in 2011. The decrease in adjusted earnings was due to, as expected, lower segment profit caused by the execution of our strategy to refranchise Applebee’s company-operated restaurants. This item was partially offset by lower cash interest expense. (See “Non-GAAP Financial Measures” below.)
  • GAAP net income available to common stockholders was $58.7 million, or earnings per diluted share of $3.14 for the third quarter of 2012, compared to $15.5 million, or earnings per diluted share of $0.85, for the same quarter in 2011. The increase was primarily due to a higher gain on the refranchise and sale of Applebee’s company-operated restaurants and lower interest expense. These items were partially offset by higher income taxes, an increase in general and administrative expenses, and, as expected, lower segment profit due to the refranchise and sale of Applebee’s company-operated restaurants.
  • Consolidated general and administrative expenses were $48.7 million for the third quarter of 2012 compared to $38.7 million in the third quarter of 2011. The increase was primarily due to a $9 million non-recurring litigation settlement and net severance charges associated with the Company’s previously announced restructuring initiative to lower general and administrative expenses by approximately $10 million to $12 million on an annualized basis. These items were partially offset by the savings in employee compensation associated with the workforce reduction.
  • Applebee’s company-operated restaurant operating margin was 15.5% for the third quarter of 2012 compared to 14.2% for the same quarter in 2011, an increase of 130 basis points. The increase was primarily due to cessation of depreciation on restaurants held for sale, the refranchising of lower margin company-operated restaurants, and lower advertising expense. These items were partially offset by higher labor expense and commodity inflation.

First Nine Months of 2012 Highlights

  • Total debt was reduced by $255.5 million in the first nine months of 2012 as a result of net cash proceeds and financing obligation reductions from the refranchise and sale of Applebee’s company-operated restaurants and free cash flow. The Company reduced Term Loan balances by $175.2 million, Senior Notes by $3.6 million, and financing and capital lease obligations by $76.7 million.
  • Adjusted net income available to common stockholders was $62.6 million in the first nine months of 2012, representing adjusted earnings per diluted share of $3.44. This compares to $61.7 million, or adjusted earnings per diluted share of $3.37, for the same period in 2011. The increase in adjusted earnings was due to lower cash interest expense, partially offset by, as expected, lower segment profit due to the refranchise and sale of Applebee’s company-operated restaurants and lower income taxes. (See “Non-GAAP Financial Measures” below.)
  • GAAP net income available to common stockholders was $104.3 million in the first nine months of 2012, or earnings per diluted share of $5.66, compared to $43.4 million, or earnings per diluted share of $2.38 for the same period in 2011. The increase was primarily due to a higher gain on the refranchise and sale of Applebee’s company-operated restaurants, lower impairment and closure charges, and lower interest expense. These items were partially offset by higher income tax expense, an increase in general and administrative expenses, and, as expected, lower segment profit due to refranchising.
  • EBITDA was $226.3 million for the first nine months of 2012. (See “Non-GAAP Financial Measures” below.)
  • For the first nine months of 2012, cash flows from operating activities were $68.1 million, capital expenditures were $13.5 million, and free cash flow was $64.9 million. (See “Non-GAAP Financial Measures” below.)
  • Applebee’s company-operated restaurant operating margin was 16.8% for the first nine months of 2012 compared to 14.4% for the same period in 2011. The increase of 240 basis points was primarily due to lower depreciation expense, improved control of waste, and the refranchising of lower margin company-operated restaurants. These items were partially offset by commodity inflation, new menu related expense, and higher labor expense.

Refranchise and Sale of Applebee’s Company-Operated Restaurants

During the third quarter of 2012, DineEquity completed the sale of 33 and 65 Applebee’s company-operated restaurants to American Franchise Capital, LLC and TSFR Apple Venture, respectively. After-tax net proceeds of approximately $87 million were used to retire debt.

On October 3, 2012, DineEquity completed the sale of 39 Applebee's company-operated restaurants located in Virginia to Potomac Family Dining Group, LLC. After-tax net proceeds of approximately $24 million were used to further reduce debt.

DineEquity has now completed its Applebee’s refranchising program and transitioned to a 99% franchised restaurant system and is now considered to be fully franchised. As a result, DineEquity’s business model is less capital intensive with higher operating margins and the Company expects to have cash flow with substantially reduced volatility over time. The Company currently retains 23 Applebee’s company-operated restaurants in the Kansas City area for test market purposes.

Same-Restaurant Sales Performance

Third Quarter 2012

  • Applebee’s domestic system-wide same-restaurant sales increased 2.0% for the third quarter of 2012 compared to the third quarter of 2011. The increase in same-restaurant sales reflected a higher average guest check, partially offset by a decline in traffic compared to the third quarter of 2011.
  • IHOP’s domestic system-wide same restaurant sales decreased 2.0% for the third quarter of 2012 compared to the third quarter of 2011. The decline in same-restaurant sales reflected a decline in traffic, partially offset by a slightly higher average guest check compared to the third quarter of 2011.

First Nine Months of 2012

  • Applebee’s domestic system-wide same-restaurant sales increased 1.3% in the first nine months of 2012 compared to the same period in 2011. The increase in same-restaurant sales was mainly driven by a higher average guest check, partially offset by a decline in traffic compared to the first nine months of 2011.
  • IHOP’s domestic system-wide same-restaurant sales declined 1.3% in the first nine months of 2012 compared to the same period in 2011. The decline in same-restaurant sales reflected a decline in traffic, partially offset by a higher average guest check compared to the first nine months of 2011.

Investor Conference Call Today

The Company will host an investor conference call today (Tuesday, October 30, 2012, at 11:00 a.m. Eastern Time / 8:00 a.m. Pacific Time) to discuss its third quarter results. To participate on the call, please dial (888) 679-8038 and reference pass code 80617185. International callers, please dial (617) 213-4850 and reference pass code 80617185. 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=PXPLWDFMU

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 11:59 p.m. Eastern Time (8:59 p.m. Pacific Time) onNovember 6, 2012 by dialing (888) 286-8010 and referencing pass code 77612832. International callers, please dial (617) 801-6888 and reference pass code 77612832. 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 under the Applebee’s Neighborhood Grill & Bar and IHOP brands. With more than 3,500 restaurants combined in 18 countries, over 400 franchisees and approximately 200,000 team members (including franchisee- and company-operated restaurant employees), DineEquity is one of the largest full-service restaurant companies in the world. For more information onDineEquity, 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; our dependence upon our franchisees; our engagement in business in foreign markets; 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; insolvency proceedings involving franchisees; 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; failure to execute on a business continuity plan; inability to attract and retain talented employees; risks associated with retail brand initiatives; failure of our internal controls; and other factors discussed from time to time in the Company's Annual and Quarterly Reports on Forms 10-K and 10-Q and in the Company's other filings with the Securities and Exchange Commission. The forward-looking statements contained in this release are made as of the date hereof and the Company assumes no obligation to update or supplement any forward-looking statements.

Non-GAAP Financial Measures

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

 

DineEquity, Inc. and Subsidiaries
Consolidated Statements of Income
(In thousands, except per share amounts)
(Unaudited)
         
    Three Months Ended   Nine Months Ended
    September 30,   September 30,
    2012   2011   2012   2011
Segment Revenues:                
Franchise revenues   $  102,674     $  97,679     $  313,542     $  300,782  
Company restaurant sales          79,572      131,618        274,259        420,955  
Rental revenues        30,920        31,163          92,096          95,003  
Financing revenues          3,152          4,021          11,394          16,279  
Total segment revenues      216,318      264,481        691,291        833,019  
Segment Expenses:                
Franchise expenses        27,148        25,006          81,126          78,656  
Company restaurant expenses        68,541      113,976        232,298        363,021  
Rental expenses        24,237        24,521          73,075          73,734  
Financing expenses               15             425            1,586            6,001  
Total segment expenses      119,941      163,928        388,085        521,412  
Gross segment profit        96,377      100,553        303,206        311,607  
General and administrative expenses        48,737        38,733        125,608        115,152  
Interest expense        28,896        32,170          88,767        101,343  
Impairment and closure charges             420             193            1,264          26,947  
Amortization of intangible assets          3,072          3,075            9,222            9,225  
Loss (gain) on disposition of assets      (73,650 )        1,176        (89,642 )      (21,287 )
Loss on extinguishment of debt          2,306          —            4,917            7,885  
Debt modification costs        —             (21 )        —            4,103  
Income before income taxes        86,596        25,227        163,070          68,239  
Provision for income taxes      (26,023 )      (8,702 )      (54,215 )      (21,667 )
Net income   $   60,573     $ 16,525     $ 108,855     $   46,572  
                 
Net income available to common stockholders:                
Net income   $   60,573     $ 16,525     $ 108,855     $   46,572  
Less: Accretion of Series B Convertible Preferred Stock           (688 )         (647 )        (2,033 )        (1,915 )
                         
Less: Net income allocated to unvested participating restricted stock        (1,187 )         (359 )        (2,477 )        (1,212 )
Net income available to common stockholders   $   58,698     $ 15,519     $ 104,345     $   43,445  
Net income available to common stockholders per share:                
Basic   $       3.26     $     0.86     $       5.84     $       2.43  
Diluted   $       3.14     $     0.85     $       5.66     $       2.38  
Weighted average shares outstanding:                
Basic        18,006        17,968          17,859          17,912  
Diluted        18,924        18,243          18,801          18,268  
                         
DineEquity, Inc. and Subsidiaries
Consolidated Balance Sheets
(In thousands, except share and per share amounts)
         
   

September 30,

 

December 31,

   

2012

 

2011

Assets   (Unaudited)    
Current assets:         
Cash and cash equivalents        71,838      $     60,691    
Receivables, net           75,532           115,667  
Prepaid income taxes                312             13,922  
Prepaid gift cards           39,879             45,412  
Deferred income taxes           23,659             20,579  
Assets held for sale           16,372               9,363  
Other current assets           15,311             11,313  
Total current assets         242,903           276,947  
Long-term receivables         214,772           226,526  
Property and equipment, net         345,603           474,154  
Goodwill         697,470           697,470  
Other intangible assets, net         809,217           822,361  
Other assets, net         111,792           116,836  
Total assets   $ 2,421,757     $ 2,614,294  
Liabilities and Stockholders’ Equity        
Current liabilities:        
Current maturities of long-term debt   $        7,420     $        7,420  
Accounts payable           31,959             29,013  
Accrued employee compensation and benefits           19,701             26,191  
Gift card liability           84,115           146,955  
Accrued interest payable           31,452             12,537  
Current maturities of capital lease and financing obligations           12,848             13,480  
Other accrued expenses           25,398             22,048  
Total current liabilities         212,893           257,644  
Long-term debt, less current maturities      1,232,707        1,411,448  
Financing obligations, less current maturities           93,774           162,658  
Capital lease obligations, less current maturities         127,198           134,407  
Deferred income taxes         366,529           383,810  
Other liabilities         105,551           109,107  
Total liabilities      2,138,652        2,459,074  
Commitments and contingencies        
Stockholders’ equity:        
             
Series B Convertible Preferred Stock, at accreted value, shares:10,000,000 authorized; 35,000 issued; September 30, 2012 and December 31, 2011 - 34,900 outstanding           46,541             44,508  
             
Common stock, $0.01 par value, shares: 40,000,000 authorized; September 30, 2012 - 24,694,241 issued, 18,418,903 outstanding; December 31, 2011 - 24,658,985 issued,18,060,206 outstanding                247                  247  
Additional paid-in-capital         214,440           205,663  
Retained earnings         303,691           196,869  
Accumulated other comprehensive loss              (150 )              (294 )
             
Treasury stock, at cost; shares: September 30, 2012 - 6,275,338; December 31, 2011 - 6,598,779       (281,664 )       (291,773 )
Total stockholders’ equity         283,105          155,220  
Total liabilities and stockholders’ equity   2,421,757     2,614,294  
                  
DineEquity, Inc. and Subsidiaries
Consolidated Statements of Cash Flows
(In thousands)
     
    Nine Months Ended
    September 30,
   

2012

 

2011

Cash flows from operating activities:   (Unaudited)
Net income   108,855       46,572  
Adjustments to reconcile net income to cash flows provided by operating activities:        
Depreciation and amortization        30,756          38,599  
Non-cash interest expense          4,547            4,582  
Loss on extinguishment of debt          4,917            7,885  
Impairment and closure charges             991          26,729  
Deferred income taxes      (20,361 )          1,866   
Non-cash stock-based compensation expense          8,799            6,913  
Tax benefit from stock-based compensation          6,334            6,085  
Excess tax benefit from stock options exercised        (4,757 )         (5,713 )
Gain on disposition of assets      (89,642 )       (21,287 )
Other        (1,768 )            (217 )
Changes in operating assets and liabilities:        
Receivables        41,422          25,360  
Prepaid expenses          7,414            1,247  
Current income tax receivables and payables        12,512          21,519  
Accounts payable          2,080           (3,992 )
Accrued employee compensation and benefits        (6,490 )         (9,099 )
Gift card liability      (62,841 )       (56,906 )
Other accrued expenses        25,298             4,928  
Cash flows provided by operating activities       68,066          95,071  
Cash flows from investing activities:        
Additions to property and equipment      (13,477 )       (20,829 )
Proceeds from sale of property and equipment and assets held for sale      137,449           60,188  
Principal receipts from notes, equipment contracts and other long-term receivables        10,276             9,922  
Other             964              (558 )
Cash flows provided by investing activities     135,212          48,723  
Cash flows from financing activities:        
Borrowings under revolving credit facilities        50,000           25,000  
Repayments under revolving credit facilities      (50,000 )       (25,000 )
Repayment of long-term debt (including premiums)    (184,237 )     (153,437 )
Principal payments on capital lease and financing obligations        (8,246 )       (10,296 )
Payment of debt modification and issuance costs         —         (12,307 )
Purchase of DineEquity common stock         —         (21,170 )
Repurchase of restricted stock        (1,690 )         (4,802 )
Proceeds from stock options exercised          5,443             6,326  
Excess tax benefit from share-based compensation          4,757             5,713  
Change in restricted cash        (8,158 )         (1,590 )
Other         —              (600 )
Cash flows used in financing activities   (192,131 )    (192,163 )
Net change in cash and cash equivalents       11,147        (48,369 )
Cash and cash equivalents at beginning of period        60,691         102,309  
Cash and cash equivalents at end of period   $  71,838     $  53,940  
                 

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

 

  Three Months Ended   Nine Months Ended
    September 30,   September 30,
    2012   2011   2012   2011
Net income available to common stockholders, as reported   $   58,698     15,519     104,345     43,445  
Impairment and closure charges           420             189            1,264        26,729  
Loss on extinguishment of debt        2,306          —            4,917          7,885  
Amortization of intangible assets        3,072          3,075            9,222          9,225  
Noncash interest expense        1,502          1,594            4,547          4,582  
Debt modification costs          —             (21 )        —          4,103  
Litigation settlement        9,047          —            9,047          —  
G&A restructuring costs, net of savings        1,269          —            1,269          —  
(Gain)/loss on disposition of assets    (73,650 )        1,176        (89,642 )    (21,287 )
Income tax provision (benefit)      21,652        (2,393 )        22,943      (12,432 )
State income tax impact on deferred taxes due to refranchising      (6,258 )        —          (6,258 )        —  
Net income allocated to unvested participating restricted stock           806             (82 )             990           (511 )
Net income available to common stockholders, as adjusted   $ 18,864     $ 19,057     $   62,644     $ 61,739  
                 
Diluted net income available to common stockholders per share:                
Net income available to common stockholders, as reported   $     3.14     $    0.85     $       5.66     $     2.38  
Impairment and closure charges           0.01            0.01              0.04            0.85  
Loss on extinguishment of debt           0.07          —              0.16            0.25  
Amortization of intangible assets           0.10            0.10              0.30            0.29  
Noncash interest expense           0.05            0.05              0.15            0.14  
Repricing expenses          —            0.00           —            0.13  
Litigation settlement           0.29          —              0.30          —  
G&A restructuring costs, net of savings           0.04          —              0.04          —  
(Gain)/loss on disposition of assets         (2.39 )          0.04            (2.93 )        (0.68 )
State income tax impact on deferred taxes due to refranchising         (0.33 )        —            (0.33 )        —  
Net income allocated to unvested participating restricted stock           0.04            0.00              0.05          (0.03 )
Change due increase in net income           0.01           (0.01 )            0.00            0.04  
Diluted net income available to common stockholders per share, as adjusted   $     1.03     $    1.04     $       3.44     $     3.37  
                 
Numerator for basic EPS-income available to common stockholders, as adjusted   $ 18,864     $ 19,057     $   62,644     $ 61,739  
Effect of unvested participating restricted stock using the two-class method             18               21                 73              87  
Effect of dilutive securities:                
Convertible Series B preferred stock           688             647            2,033          1,915  
Numerator for diluted EPS-income available to common stockholders after assumed conversions, as adjusted   $ 19,570     $ 19,725     $   64,750     $ 63,741  
                 
Denominator for basic EPS-weighted-average shares      18,006        17,968          17,859        17,912  
Effect of dilutive securities:                
Stock options           246             275               270             356  
Convertible Series B preferred stock           672             634               672             634  
Denominator for diluted EPS-weighted-average shares and assumed conversions      18,924        18,877          18,801        18,902  
                         

DineEquity, Inc. and Subsidiaries
Non-GAAP Financial Measures
(In thousands)
(Unaudited)

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

   

Nine Months
Ended

 

Twelve
Months Ended

    September 30, 2012
U.S. GAAP income before income taxes   $  163,070     $  199,829  
Interest charges       101,974         137,849  
Loss on extinguishment of debt           4,917             8,191  
Depreciation and amortization         30,756           42,377  
Non-cash stock-based compensation           8,799           11,379  
Impairment and closure charges           1,264             4,182  
Other           5,158             5,394  
Gain on sale of assets       (89,642 )     (111,609 )
EBITDA   $ 226,296     $ 297,592  
                 

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

    Nine Months Ended
    September 30,
   

2012

 

2011

Cash flows provided by operating activities   $  68,066     $  95,071  
Principal receipts from notes, equipment contracts and other long-term receivables      10,276          9,922  
Additions to property and equipment    (13,477 )    (20,829 )
Free cash flow   $ 64,865     $ 84,164  
                 

DineEquity, Inc. and Subsidiaries

Non-GAAP Financial Measures

(In millions)

(Unaudited)

 

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

     
    Three Months Ended September 30, 2012
   

Franchise -
Applebee's

 

Franchise -
IHOP

 

Company
Restaurants

 

Rental
Operations

 

Financing
Operations

  Total
Revenue   $ 43,771     $ 58,903     $  79,572     $ 30,920     $ 3,152     $ 216,318
Expense        1,129        26,019         68,541        24,237             15        119,941
Gross segment profit      42,642        32,884         11,031          6,683        3,137          96,377
Plus:                        
Depreciation/amortization        2,478          —          1,645          3,362          —            7,485
Interest charges        —          —               93          4,189          —            4,282
Segment EBITDA   $ 45,120     $ 32,884     $ 12,769     $ 14,234     $ 3,137     $ 108,144
     
    Three Months Ended September 30, 2011
   

Franchise -
Applebee's

 

Franchise -
IHOP

 

Company
Restaurants

 

Rental
Operations

 

Financing
Operations

  Total
Revenue   $ 40,128     $ 57,551     $ 131,618     $ 31,163     $ 4,021     $ 264,481
Expense           603        24,403        113,976        24,521           425        163,928
Gross segment profit      39,525        33,148          17,642          6,642        3,596        100,553
Plus:                        
Depreciation/amortization        2,324          —            3,983          3,491          —            9,798
Interest charges         —          —               118          4,432          —            4,550
Segment EBITDA   $ 41,849     $ 33,148     $   21,743     $ 14,565     $ 3,596     $ 114,901
     
    Nine Months Ended September 30, 2012
   

Franchise -
Applebee's

 

Franchise -
IHOP

 

Company
Restaurants

 

Rental
Operations

 

Financing
Operations

  Total
Revenue   $ 137,540     $ 176,002     $ 274,259     $ 92,096     $ 11,394     $ 691,291
Expense          3,075          78,051        232,298        73,075          1,586        388,085
Gross segment profit      134,465          97,951          41,961        19,021          9,808        303,206
Plus:                        
Depreciation/amortization         7,416           —            6,354        10,271          —          24,041
Interest charges         —           —               285        12,835          —          13,120
Segment EBITDA   $ 141,881     $   97,951     $   48,600     $ 42,127     $   9,808     $ 340,367
     
    Nine Months Ended September 30, 2011
   

Franchise -
Applebee's

 

Franchise -
IHOP

 

Company
Restaurants

 

Rental
Operations

 

Financing
Operations

 

Total

Revenue   $ 128,289     $ 172,493     $ 420,955     $ 95,003     $ 16,279     $ 833,019
Expense          2,199          76,457        363,021        73,734          6,001        521,412
Gross segment profit      126,090          96,036          57,934        21,269        10,278        311,607
Plus:                        
Depreciation/amortization          7,401           —          13,471        10,547          —          31,419
Interest charges        —           —               395        13,598          —          13,993
Segment EBITDA   $ 133,491     $   96,036     $   71,800     $ 45,414     $ 10,278     $ 357,019
                                               

Restaurant Data

The following table sets forth, for the three and nine months ended September 30, 2012 and 2011, 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 Applebee’s and IHOP 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,
    2012   2011   2012   2011
Applebee's Restaurant Data   (unaudited)
Effective restaurants(a)                
Franchise    1,871      1,766      1,861      1,757  
Company       144         243         156         253  
Total    2,015      2,009      2,017      2,010  
System-wide(b)                
Sales percentage change(c)        2.4 %      (0.1 )%        1.7 %        2.6 %
Domestic same-restaurant sales percentage change(d)        2.0 %      (0.3 )%        1.3 %        2.3 %
Franchise(b)(f)                
Sales percentage change(c)        8.4 %      (1.3 )%        7.0 %        1.8 %
Domestic same-restaurant sales percentage change(d)        2.2 %      (0.4 )%        1.2 %        2.5 %
Average weekly domestic unit sales (in thousands)   $ 45.1     $ 44.2     $ 47.4     $ 47.0  
Company (f)                
Sales percentage change(c)    (42.2 )%        1.4 %    (36.7 )%        1.0 %
Same-restaurant sales percentage change(d)        0.5 %        0.1 %        2.7 %        0.5 %
Average weekly domestic unit sales (in thousands)   $ 39.3     $ 40.2     $ 42.5     $ 41.3  
                                 
    Three Months Ended   Nine Months Ended
    September 30,   September 30,
    2012   2011   2012   2011
    (unaudited)
IHOP Restaurant Data                
Effective restaurants(a)                
Franchise    1,377      1,347      1,375      1,339  
Area license       165         163         165         163  
Company         17           10           15           10  
Total    1,559      1,520      1,555      1,512  
System-wide(b)                
Sales percentage change(c)        0.9 %        2.6 %       1.9 %        1.7 %
Domestic same-restaurant sales percentage change(d)      (2.0 )%      (1.5 )%      (1.3 )%      (2.4 )%
Franchise(b)                
Sales percentage change(c)        0.4 %        2.5 %        1.6 %        1.6 %
Domestic same-restaurant sales percentage change(d)      (2.0 )%      (1.5 )%      (1.2 )%      (2.4 )%
Average weekly domestic unit sales (in thousands)   $ 33.8     $ 34.4     $ 34.2     $ 34.6  
                 
Company (e)     n/m      n/m      n/m     n/m
                 
Area License(b)                
Sales percentage change(c)       4.0 %       4.4 %       3.5 %        2.5 %
                         
(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 Applebee’s and IHOP systems, which includes restaurants owned by the Company as well as those owned by franchisees and area licensees.
 
(b)   “System-wide” sales are retail sales at Applebee’s restaurants operated by franchisees and IHOP restaurants operated by franchisees and area licensees, as reported to the Company, in addition to retail sales at company-operated restaurants. Sales at restaurants that are owned by franchisees and area licensees are not attributable to the Company. Applebee's domestic franchise restaurant sales, IHOP franchise restaurant sales and IHOP area license restaurant sales for the three and nine months ended September 30, 2012 and 2011 were as follows:
     
    Three Months Ended   Nine Months Ended
    September 30,   September 30,
    2012   2011   2012   2011
    (In millions)

Reported sales (unaudited)

               
Applebee's franchise restaurant sales   $ 1,011.4     $ 932.6     $ 3,165.4     $ 2,957.2
IHOP franchise restaurant sales   $    604.8     $ 602.7     $ 1,834.6     $ 1,805.5
IHOP area license restaurant sales   $      57.3     $   55.1     $    178.1     $    172.0
                               
(c)   “Sales percentage change” reflects, for each category of restaurants, the percentage change in sales in any given fiscal period compared to the prior fiscal period for all restaurants in that category.
 
(d)   “Domestic same-restaurant sales percentage change” reflects the percentage change in sales, in any given fiscal period, compared to the same weeks in the prior year for domestic restaurants that have been operated throughout both fiscal periods that are being compared and have been open for at least 18 months. Because of new unit openings and restaurant closures, the domestic restaurants open throughout both fiscal periods being compared may be different from period to period. Same-restaurant sales percentage change does not include data on IHOP area license restaurants located in Florida.
 
(e)   Sales percentage changes and domestic same-restaurant sales percentage change for IHOP company-operated restaurants are not meaningful (“n/m”) because there are few such restaurants, consisting of a relatively small number of restaurants in a single test market, along with a variable, small number of restaurants that are reacquired from franchisees from time-to-time and temporarily operated by the Company.
 
(f)   The sales percentage change for the three and nine months ended September 30, 2012 and 2011 for Applebee’s franchise and company-operated restaurants was impacted by the refranchising of 115 company-operated restaurants in 2012 and 132 company-operated restaurants during 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,  
    2012   2011   2012   2011
    (unaudited)  
Applebee’s Restaurant Development Activity                
Beginning of period   2,018     2,012     2,019     2,010  
New openings:                
Franchise          5            4          14          12  
Total new openings          5            4          14          12  
Closings:                
Franchise        (7 )        (6 )      (17 )      (12 )
Total closings        (7 )        (6 )      (17 )      (12 )
End of period   2,016     2,010     2,016     2,010  
Summary - end of period:                
Franchise   1,954     1,767     1,954     1,767  
Company        62        243          62        243  
Total   2,016     2,010     2,016     2,010  
             
             
    Three Months Ended     Nine Months Ended  
    September 30,     September 30,  
    2012   2011   2012   2011
   

(unaudited)

 
IHOP Restaurant Development Activity                
Beginning of period   1,557     1,522     1,550     1,504  
New openings:                
Franchise        12         13          27          36  
Area license       —           1           1            3  
Total new openings        12         14         28          39  
Closings:                
Franchise        (4 )        (4 )      (11 )        (7 )
Area license       —         —          (2 )        (4 )
Total closings        (4 )        (4 )      (13 )      (11 )
End of period   1,565     1,532     1,565     1,532  
Summary-end of period:                
Franchise   1,383     1,356     1,383     1,356  
Area license      165        163        165        163  
Company        17          13          17          13  
Total   1,565     1,532     1,565     1,532  

Source: DineEquity, Inc.

Contacts:

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

Media 
Sard Verbinnen & Co.
Lucy Neugart and Samantha Verdile
415-618-8750

###

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