DineEquity, Inc. Reports Significant Progress in Fourth Quarter and Fiscal 2013 Results

Company Provides Financial Guidance for Fiscal 2014

  • Fiscal 2013 adjusted EPS (Non-GAAP) of $4.24 and GAAP EPS of $3.70
  • Fourth quarter 2013 adjusted EPS (Non-GAAP) of $0.98 and GAAP EPS of $0.94
  • Generated strong free cash flow of $120 million in fiscal 2013
  • Returned approximately $87 million to shareholders in fiscal 2013 in share repurchases and quarterly cash dividends totaling $3.00 per share of common stock, representing 73% of free cash flow
  • Full-year domestic system-wide same-restaurant sales decreased 0.3% at Applebee’s and increased 2.4% at IHOP

GLENDALE, Calif. - (BUSINESS WIRE) - Feb. 26, 2014 - DineEquity, Inc. (NYSE: DIN), the parent company of Applebee's Neighborhood Grill & Bar® and IHOP® restaurants, today announced financial results for the fourth quarter and full year of 2013.

“For DineEquity, 2013 marked the first full year as a 99% franchised company and a year of significant progress. IHOP achieved three consecutive quarters of increasingly positive same-restaurant sales and the highest annual increase since 2006. We are extremely proud of the results that the IHOP team and franchisees have achieved and hope to build on this success going forward. Applebee’s continued to outperform its category, but we know that we can do better,” said Julia A. Stewart, Chairman and Chief Executive Officer of DineEquity, Inc. “We continued to demonstrate our commitment to create value for our shareholders by returning approximately $87 million in cash dividends and share repurchases. We have set the bar high in 2013 and look to carry this momentum into 2014.”

Fourth Quarter 2013 Financial Highlights

  • Adjusted net income available to common stockholders was $18.6 million, or adjusted earnings per diluted share of $0.98 for the fourth quarter of 2013, which includes approximately $1.7 million in Applebee’s termination, transfer, and extension fees, primarily in connection with a sale between two existing Applebee’s franchisees. This compares to $15.5 million, or adjusted earnings per diluted share of $0.83 for the same period in 2012. The increase in adjusted net income was due to higher segment profit, a decline in cash interest expense, and lower income taxes resulting from the impact of the Company’s restructuring initiative and refranchising. The increase was partially offset by higher general and administrative expenses. (See “Non-GAAP Financial Measures” below.)
  • GAAP net income available to common stockholders was $17.9 million, or earnings per diluted share of $0.94 for the fourth quarter of 2013, compared to $18.0 million, or earnings per diluted share of $0.97, for the fourth quarter of 2012. The slight decline in net income was primarily due to a modest loss on the disposition of assets compared to a gain in the fourth quarter of 2012 and slightly higher general and administrative expenses. These items were partially offset by lower income tax expense and higher segment profit.
  • General and administrative expenses were $38.6 million for the fourth quarter of 2013 compared to $37.6 million for the same period of 2012.

Fiscal 2013 Financial Highlights

  • Adjusted net income available to common stockholders was $81.2 million for fiscal 2013, or adjusted earnings per diluted share of $4.24, which includes a total of approximately $7.8 million in Applebee’s termination, transfer, and extension fees received in 2013. The Company believes these transactions strengthened the Applebee’s franchisee base. The Company expects that the value of any such transactions will be minimal in 2014.
  • Adjusted net income available to common stockholders was $78.1 million for fiscal 2012, or adjusted earnings per diluted share of $4.28. The decrease year-over-year was primarily due to the expected lower segment profit resulting from the refranchise and sale of 154 Applebee’s company-operated restaurants in 2012. These items were partially offset by lower cash interest expense and a decline in general and administrative expenses. (See “Non-GAAP Financial Measures” below.)
  • GAAP net income available to common stockholders was $70.8 million for fiscal 2013, or earnings per diluted share of $3.70, compared to $122.5 million, or earnings per diluted share of $6.63 for the same period in 2012. The decrease in net income was primarily due to asset disposition gains from refranchising that occurred in 2012 that did not recur in 2013 and the expected lower segment profit resulting from refranchising. These items were partially offset by lower income tax expense, a decline in general and administrative expenses, and lower interest expense.
  • General and administrative expenses were $143.6 million for fiscal 2013 compared to $163.2 million for the same period of 2012. The decrease was due to lower personnel costs as a result of refranchising and the Company’s restructuring initiative. Additionally, there was a non-recurring charge of $9.1 million recorded in fiscal 2012 related to a settlement of litigation.
  • EBITDA was $277.1 million for fiscal 2013. (See “Non-GAAP Financial Measures” below.)
  • For fiscal 2013, cash flows from operating activities were $127.8 million, principal receipts from long-term receivables were $14.0 million, capital expenditures were $7.0 million, principal payments on capital lease and financing obligations were $10.0 million, the mandatory 1% repayment on the Term Loan principal balance was $4.7 million, and free cash flow was $120.1 million. (See “Non-GAAP Financial Measures” below.)

Potential Refinancing of Indebtedness

The Company continually reviews all available options to efficiently manage its debt portfolio in light of, among other things, prevailing interest rates, the economic environment and its overall business strategy. The Company may seek to refinance some or all of its long-term debt prior to expiration or repayment dates.

Same-Restaurant Sales Performance

Fourth Quarter 2013

  • Applebee’s domestic system-wide same-restaurant sales decreased 0.7% for the fourth quarter of 2013 compared to the same quarter of 2012.
  • IHOP’s domestic system-wide same restaurant sales increased 4.5% for the fourth quarter of 2013 compared to the same quarter of 2012.

Fiscal 2013

  • Applebee’s domestic system-wide same-restaurant sales decreased 0.3% for fiscal 2013 compared to the same period in 2012.
  • IHOP’s domestic system-wide same restaurant sales increased 2.4% for fiscal 2013 compared to the same period in 2012.

Financial Performance Guidance for Fiscal 2014

  • Applebee’s domestic system-wide same-restaurant sales performance is expected to range between negative 2.0% and positive 1.0%.
  • IHOP’s domestic system-wide same-restaurant sales performance is expected to range between positive 0.5% and positive 2.0%.
  • Applebee’s franchisees are projected to develop between 40 and 50 new restaurants, the majority of which are expected to be opened in the U.S.
  • IHOP franchisees and its area licensee are projected to develop between 40 and 50 new restaurants, the majority of which are expected to be domestic openings.
  • Franchise segment profit is expected to be between $323 million and $332 million. Franchisee termination, transfer, and extension fees are expected to be minimal compared to 2013.
  • Rental and Financing segments are expected to generate approximately $37 million in combined profit.
  • Expectations for general and administrative expenses to between $144 million and $147 million, including non-cash stock-based compensation expense and depreciation of approximately $18 million.
  • Expectations for interest expense to be approximately $101 million. Approximately $7 million is expected to be non-cash interest expense. No estimate is made in this number for a potential refinancing of the Company’s debt.
  • The income tax rate expected to be approximately 38%.
  • Cash from operations is expected to range between $98 million and $116 million.
  • The structural run-off of the Company’s long-term receivables is expected to be approximately $15 million.
  • Capital expenditures are expected to be approximately $10 million.
  • Principal payments on capital leases and financing obligations are expected to be approximately $12 million.
  • A mandatory annual repayment of 1% on the current outstanding Term Loan principal balance is expected to be approximately $5 million.
  • Free cash flow (See “Non-GAAP Financial Measures” below.) is expected to range between $86 million and $104 million. Free cash flow is defined as cash from operations, plus principal receipts from long-term receivables, less principal payments on capital leases and financing obligations, capital expenditures, and the mandatory annual repayment of 1% on our Term Loan principal balance.
  • Net income allocated to unvested participating restricted stock is expected to total approximately $1.5 million.
  • Weighted average diluted shares outstanding are expected to be approximately 19.0 million.
2014 Financial Performance Guidance Table
        (in millions)
Cash from operations       $98 - 116
Approximate principal receipts from long-term receivables       15
Approximate principal payments on capital leases and financing obligations       (12)
Approximate capital expenditures       (10)
Approximate mandatory annual 1% repayment on Term Loan       (5)
Free cash flow       $86 - 104
         

Investor Conference Call Today

The Company will host an investor conference call on Wednesday, February 26, 2014, at 11:00 a.m. Eastern Time / 8:00 a.m. Pacific Time to discuss its fourth quarter and full year 2013 financial results. To participate on the call, please dial (888) 713-4205 and reference pass code 21990918. International callers, please dial (617) 213-4862 and reference pass code 21990918. 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=P8VAMLHFA

A live webcast of the call will be available on DineEquity's Web site at www.dineequity.com, and may be accessed by visiting Calls & Presentations under the site’s Investors section. Participants should allow approximately ten minutes prior to the call's start time to visit the site and download any streaming media software needed to listen to the webcast. A telephonic replay of the call may be accessed through 11:59 p.m. Pacific Time on March 5, 2014 by dialing (888) 286-8010 and referencing pass code 35972678. International callers, please dial (617) 801-6888 and reference pass code 35972678. An online archive of the webcast also will be available on the Investors 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 3,600 restaurants combined in 19 countries, over 400 franchisees and approximately 200,000 team members (including franchisee- and company-operated restaurant employees), DineEquity is one of the largest full-service restaurant companies in the world. For more information on DineEquity, visit the Company's Web site located at www.dineequity.com.

Forward-Looking Statements

Statements contained in this press release may constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. You can identify these forward-looking statements by words such as "may," "will," "should," "expect," "anticipate," "believe," "estimate," "intend," "plan" and other similar expressions. These statements involve known and unknown risks, uncertainties and other factors, which may cause actual results to be materially different from those expressed or implied in such statements. These factors include, but are not limited to: the effect of general economic conditions; the Company's indebtedness; risk of future impairment charges; trading volatility and the price of the Company’s common stock; the Company's results in any given period differing from guidance provided to the public; the highly competitive nature of the restaurant business; the Company's business strategy failing to achieve anticipated results; risks associated with the restaurant industry; risks associated with locations of current and future restaurants; rising costs for food commodities and utilities; shortages or interruptions in the supply or delivery of food; ineffective marketing and guest relationship initiatives and use of social media; changing health or dietary preferences; our engagement in business in foreign markets; harm to our brands' reputation; litigation; Fourth-party claims with respect to intellectual property assets; environmental liability; liability relating to employees; failure to comply with applicable laws and regulations; failure to effectively implement restaurant development plans; our dependence upon our franchisees; concentration of Applebee's franchised restaurants in a limited number of franchisees; credit risk from IHOP franchisees operating under our previous business model; termination or non-renewal of franchise agreements; franchisees breaching their franchise agreements; insolvency proceedings involving franchisees; changes in the number and quality of franchisees; inability of franchisees to fund capital expenditures; heavy dependence on information technology; the occurrence of cyber incidents or a deficiency in our cybersecurity; failure to execute on a business continuity plan; inability to attract and retain talented employees; risks associated with retail brand initiatives; failure of our internal controls; and other factors discussed from time to time in the Company's Annual and Quarterly Reports on Forms 10-K and 10-Q and in the Company's other filings with the Securities and Exchange Commission. The forward-looking statements contained in this release are made as of the date hereof and the Company assumes no obligation to update or supplement any forward-looking statements.

Non-GAAP Financial Measures

This news release includes references to the Company's non-GAAP financial measures "adjusted net income available to common stockholders (adjusted EPS)," "EBITDA," "free cash flow," and "segment EBITDA." "Adjusted EPS" is computed for a given period by deducting from net income (loss) available to common stockholders for such period the effect of any closure and impairment charges, any gain or loss related to debt extinguishment, any intangible asset amortization, any non-cash interest expense, any debt modification costs, any one-time litigation settlement charges, any general and administrative restructuring costs, net of savings, any gain or loss related to the disposition of assets, and any income tax impact of deferred taxes due to restructuring/refranchising incurred in such period. This is presented on an aggregate basis and a per share (diluted) basis. The Company defines "EBITDA" for a given period as income before income taxes less interest expense, loss on extinguishment of debt, depreciation and amortization, closure and impairment charges, non-cash stock-based compensation, gain/loss on disposition of assets and other charge backs as defined by its credit agreement. "Free cash flow" for a given period is defined as cash provided by operating activities, plus receipts from notes and equipment contracts receivable ("long-term notes receivable"), less principal payments on capital lease and financing obligations, the mandatory 1% of Term Loan principal balance repayment, and capital expenditures. "Segment EBITDA" for a given period is defined as gross segment profit plus depreciation and amortization as well as interest charges related to the segment. Management utilizes EBITDA for debt covenant purposes and free cash flow to determine the amount of cash remaining for general corporate and strategic purposes after the receipts from long-term receivables, and the funding of operating activities, capital expenditures and dividends. Management believes this information is helpful to investors to determine the Company's adherence to debt covenants and the Company's cash available for these purposes. Adjusted EPS, EBITDA, free cash flow and segment EBITDA are supplemental non-GAAP financial measures and should not be considered in isolation or as a substitute for measures of performance prepared in accordance with United States generally accepted accounting principles.

         
DineEquity, Inc. and Subsidiaries
Consolidated Statements of Income
(In thousands, except per share amounts)
(Unaudited)
         
    Three Months Ended   Twelve Months Ended
    December 31,   December 31,
    2013   2012   2013   2012
Segment Revenues:                
Franchise and restaurant revenues   $ 122,967     $ 124,779     $ 502,586     $ 712,580  
Rental revenues   32,045     30,763     124,769     122,859  
Financing revenues   2,889     3,095     13,112     14,489  
Total segment revenues   157,901     158,637     640,467     849,928  
Segment Expenses:                
Franchise and restaurant expenses   42,357     45,772     173,232     359,196  
Rental expenses   24,345     24,090     97,298     97,165  
Financing expenses       37     245     1,623  
Total segment expenses   66,702     69,899     270,775     457,984  
Gross segment profit   91,199     88,738     369,692     391,944  
General and administrative expenses   38,582     37,607     143,586     163,215  
Interest expense   25,034     25,571     100,264     114,338  
Amortization of intangible assets   3,070     3,071     12,282     12,293  
Closure and impairment charges   1,042     2,954     1,812     4,218  
Loss on extinguishment of debt   22     637     58     5,554  
Debt modification costs           1,296      
Loss (gain) on disposition of assets   103     (12,955 )   (223 )   (102,597 )
Income before income taxes   23,346     31,853     110,617     194,923  
Income tax provision   (5,215 )   (13,034 )   (38,580 )   (67,249 )
Net income   $ 18,131     $ 18,819     $ 72,037     $ 127,674  
Net income available to common stockholders:                
Net income   $ 18,131     $ 18,819     $ 72,037     $ 127,674  
Less: Net income allocated to unvested participating restricted stock   (274 )   (318 )   (1,200 )   (2,718 )
Less: Accretion of Series B Convertible Preferred Stock       (464 )       (2,498 )
Net income available to common stockholders   $ 17,857     $ 18,037     $ 70,837     $ 122,458  
Net income available to common stockholders per share:                
Basic   $0.95   $0.98   $ 3.75     $ 6.81  
Diluted   $0.94   $0.97   $ 3.70     $ 6.63  
Weighted average shares outstanding:                
Basic   18,789     18,391     18,871     17,992  
Diluted   19,062     18,637     19,141     18,877  
                 
Dividends declared per common share   $ 0.75     $     $ 3.00     $  
Dividends paid per common share   $ 0.75     $     $ 3.00     $  
                                 
         
DineEquity, Inc. and Subsidiaries
Consolidated Balance Sheets
(In thousands, except share and per share amounts)
         
        December 31,
        2013       2012
        (Unaudited)        
Assets                
Current assets:                
Cash and cash equivalents       $ 106,011         $ 64,537  
Receivables, net       144,137         128,610  
Prepaid gift cards       49,223         50,242  
Prepaid income taxes       4,708         16,080  
Deferred income taxes       23,853         21,772  
Other current assets       3,650         13,214  
Total current assets       331,582         294,455  
Long-term receivables       197,153         212,269  
Property and equipment, net       274,295         294,375  
Goodwill       697,470         697,470  
Other intangible assets, net       794,057         806,093  
Other assets, net       110,085         110,738  
Total assets       $ 2,404,642         $ 2,415,400  
Liabilities and Stockholders’ Equity                
Current liabilities:                
Current maturities of long-term debt       $ 4,720         $ 7,420  
Accounts payable       40,050         30,751  
Gift card liability       171,955         161,689  
Accrued employee compensation and benefits       24,956         22,435  
Accrued interest payable       13,575         13,236  
Current maturities of capital lease and financing obligations       12,247         10,878  
Other accrued expenses       16,770         21,351  
Total current liabilities       284,273         267,760  
Long-term debt, less current maturities       1,203,517         1,202,063  
Capital lease obligations, less current maturities       111,707         124,375  
Financing obligations, less current maturities       48,843         52,049  
Deferred income taxes       341,578         362,171  
Other liabilities       99,545         98,177  
Total liabilities       2,089,463         2,106,595  
Commitments and contingencies                
Stockholders’ equity:                
Common stock, $0.01 par value, shares: 40,000,000 authorized; December 31, 2013 - 25,299,315 issued, 19,040,890 outstanding; December 31, 2012 - 25,362,946 issued, 19,197,899 outstanding       253         254  
Additional paid-in-capital       274,202         264,342  
Retained earnings       336,578         322,045  
Accumulated other comprehensive loss       (164 )       (152 )
Treasury stock, at cost; shares: December 31, 2013 - 6,258,425; December 31, 2012 - 6,165,047       (295,690 )       (277,684 )
Total stockholders’ equity       315,179         308,805  
Total liabilities and stockholders’ equity       $ 2,404,642         $ 2,415,400  
                         
         
DineEquity, Inc. and Subsidiaries
Consolidated Statements of Cash Flows
(In thousands)
         
        Twelve Months Ended
        December 31,
        2013       2012
Cash flows from operating activities:       (Unaudited)        
Net income       $ 72,037         $ 127,674  
Adjustments to reconcile net income to cash flows provided by operating activities:                
Depreciation and amortization       35,355         39,538  
Non-cash interest expense       6,246         5,985  
Loss on extinguishment of debt       58         5,554  
Closure and impairment charges       2,195         3,931  
Deferred income taxes       (22,674 )       (22,832 )
Non-cash stock-based compensation expense       9,364         11,442  
Tax benefit from stock-based compensation       3,690         6,814  
Excess tax benefit from share-based compensation       (2,858 )       (5,669 )
Gain on disposition of assets       (223 )       (102,597 )
Other       (492 )       (8,991 )
Changes in operating assets and liabilities:                
Receivables       (15,226 )       (11,629 )
Current income tax receivables and payables       6,143         1,272  
Other current assets       9,334         (9,119 )
Accounts payable       8,532         1,778  
Accrued employee compensation and benefits       2,521         (3,756 )
Gift card liability       10,266         14,735  
Other accrued expenses       3,547         (1,251 )
Cash flows provided by operating activities       127,815         52,879  
Cash flows from investing activities:                
Additions to property and equipment       (7,037 )       (16,952 )
Proceeds from sale of property and equipment and assets held for sale               168,881  
Principal receipts from notes, equipment contracts and other long-term receivables       13,982         12,250  
Other       58         1,238  
Cash flows provided by investing activities       7,003         165,417  
Cash flows from financing activities:                
Borrowings under revolving credit facilities               50,000  
Repayments under revolving credit facilities               (50,000 )
Repayment of long-term debt (including premiums)       (4,800 )       (216,037 )
Payment of debt modification costs       (1,296 )        
Principal payments on capital lease and financing obligations       (9,968 )       (10,849 )
Dividends paid on common stock       (57,445 )        
Repurchase of DineEquity common stock       (29,698 )        
Repurchase of restricted stock       (3,324 )       (1,740 )
Proceeds from stock options exercised       9,080         9,254  
Excess tax benefit from share-based compensation       2,858         5,669  
Change in restricted cash       1,249         (747 )
Cash flows used in financing activities       (93,344 )       (214,450 )
Net change in cash and cash equivalents       41,474         3,846  
Cash and cash equivalents at beginning of period       64,537         60,691  
Cash and cash equivalents at end of period       $ 106,011         $ 64,537  
                         
                 
DineEquity, Inc. and Subsidiaries
Non-GAAP Financial Measures
(In thousands, except per share amounts)
(Unaudited)
                 

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

                 
        Three Months Ended       Twelve Months Ended
        December 31,       December 31,
        2013     2012       2013     2012
Net income available to common stockholders, as reported       $ 17,857       $ 18,037         $ 70,837       $ 122,458  
Closure and impairment charges       1,042       2,954         1,812       4,218  
Loss on extinguishment of debt       22       637         58       5,554  
Amortization of intangible assets       3,070       3,071         12,282       12,293  
Non-cash interest expense       1,611       1,438         6,245       5,985  
Debt modification costs                     1,296        
Litigation settlement             77               9,124  
G&A restructuring costs, net of savings             495               1,764  
Loss (gain) on disposition of assets       103       (12,955 )       (223 )     (102,597 )
Income tax provision (benefit)       (2,194 )     1,655         (8,052 )     24,599  
Income tax impact of restructuring/refranchising       (2,890 )             (2,890 )     (6,258 )
Net income allocated to unvested participating restricted stock       (14 )     45         (190 )     984  
Net income available to common stockholders, as adjusted       $ 18,607       $ 15,454         $ 81,175       $ 78,124  
                             
Diluted net income available to common stockholders per share:                            
Net income available to common stockholders, as reported       $ 0.94       $ 0.97         $ 3.70       $ 6.63  
Closure and impairment charges       0.03       0.10         0.06       0.13  
Loss on extinguishment of debt       0.00       0.02         0.00       0.18  
Amortization of intangible assets       0.10       0.10         0.40       0.40  
Noncash interest expense       0.05       0.05         0.20       0.20  
Debt modification costs                     0.04        
Litigation settlement             0.00               0.30  
G&A restructuring costs, net of savings             0.02               0.06  
Loss (gain) on disposition of assets       0.01       (0.43 )       (0.01 )     (3.33 )
Income tax impact of restructuring/refranchising       (0.15 )             (0.15 )     (0.33 )
Net income allocated to unvested participating restricted stock       0.00       0.00         (0.01 )     0.05  
Rounding                     0.01       (0.01 )
Diluted net income available to common stockholders per share, as adjusted       $ 0.98       $ 0.83         $ 4.24       $ 4.28  
                             
Numerator for basic EPS-income available to common stockholders, as adjusted       $ 18,607       $ 15,454         $ 81,175       $ 78,124  
Effect of unvested participating restricted stock using the two-class method       2       4         7       81  
Effect of dilutive securities:                            
Convertible Series B preferred stock                           2,498  
Numerator for diluted EPS-income available to common stockholders after assumed conversions, as adjusted       $ 18,609       $ 15,458         $ 81,182       $ 80,703  
                             
Denominator for basic EPS-weighted-average shares       18,789       18,391         18,871       17,992  
Effect of dilutive securities:                            
Stock options       273       246         270       264  
Convertible Series B preferred stock                           621  
Denominator for diluted EPS-weighted-average shares and assumed conversions       19,062       18,637         19,141       18,877  
                                     
         
DineEquity, Inc. and Subsidiaries
Non-GAAP Financial Measures
(In thousands)
(Unaudited)
 
Reconciliation of U.S. GAAP income before income taxes to EBITDA:
         
        Twelve Months Ended
        December 31,
        2013       2012
U.S. GAAP income before income taxes       $ 110,617         $ 194,923  
Interest charges       116,453         131,869  
Loss on extinguishment of debt       58         5,554  
Depreciation and amortization       35,355         39,538  
Non-cash stock-based compensation       9,364         11,442  
Closure and impairment charges       1,812         4,218  
Other       3,652         15,304  
Gain on sale of assets       (223 )       (102,597 )
EBITDA       $ 277,088         $ 300,251  
                         
         

Reconciliation of the Company's cash provided by operating activities to "free cash flow"
(cash from operations, plus receipts from notes, equipment contracts and other long-term
receivables, less capital expenditures, principal payments on capital leases and
financing obligations and the mandatory annual repayment of 1% of our Term Loan principal
balance):

         
        Twelve Months Ended
        December 31,
        2013       2012
Cash flows provided by operating activities       $ 127,815         $ 52,879  
Principal receipts from long-term receivables       13,982         12,250  
Additions to property and equipment       (7,037 )       (16,952 )
Principal payments on capital lease and financing obligations       (9,968 )       (10,849 )
Mandatory 1% of Term Loans principal balance repayment       (4,720 )       (7,420 )
Free cash flow       120,072         29,908  
Dividends paid on common stock       (57,445 )        
Repurchase of DineEquity common stock       (29,698 )        
        $ 32,929         $ 29,908  
                         
       
DineEquity, Inc. and Subsidiaries
Non-GAAP Financial Measures
(In thousands)
(Unaudited)
 

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

       
      Three months ended December 31, 2013
     

Franchise -
Applebee's

   

Franchise -
IHOP

   

Company
Restaurants

   

Rental
Operations

   

Financing
Operations

    Total
Revenue     $ 47,348       $ 60,210       $ 15,409       $ 32,045       $ 2,889       $ 157,901
Expense     1,136       25,773       15,448       24,345             66,702
Gross segment profit     46,212       34,437       (39 )     7,700       2,889       91,199
Plus:                                    
Depreciation/amortization     2,649             575       3,343             6,567
Interest charges                 93       3,758             3,851
Segment EBITDA     $ 48,861       $ 34,437       $ 629       $ 14,801       $ 2,889       $ 101,617
                                                           
       
      Three months ended December 30, 2012
     

Franchise -
Applebee's

   

Franchise -
IHOP

   

Company
Restaurants

   

Rental
Operations

   

Financing
Operations

    Total
Revenue     $ 48,364       $ 59,553       $ 16,862       $ 30,763       $ 3,095       $ 158,637
Expense     2,389       26,385       16,998       24,090       37       69,899
Gross segment profit     45,975       33,168       (136 )     6,673       3,058       88,738
Plus:                                    
Depreciation/amortization     2,351             599       3,383             6,333
Interest charges                 92       4,161             4,253
Segment EBITDA     $ 48,326       $ 33,168       $ 555       $ 14,217       $ 3,058       $ 99,324
                                                           
       
      Twelve months ended December 31, 2013
     

Franchise -
Applebee's

   

Franchise -
IHOP

   

Company
Restaurants

   

Rental
Operations

   

Financing
Operations

    Total
Revenue     $ 199,216       $ 239,920       $ 63,450       $ 124,769       $ 13,112       $ 640,467
Expense     5,687       103,946       63,599       97,298       245       270,775
Gross segment profit     193,529       135,974       (149 )     27,471       12,867       369,692
Plus:                                    
Depreciation/amortization     10,791             2,191       13,436             26,418
Interest charges                 372       15,716             16,088
Segment EBITDA     $ 204,320       $ 135,974       $ 2,414       $ 56,623       $ 12,867       $ 412,198
                                                           
       
      Twelve months ended December 31, 2012
     

Franchise -
Applebee's

   

Franchise -
IHOP

   

Company
Restaurants

 

   

Rental
Operations

   

Financing
Operations

    Total
Revenue     $ 185,904       $ 235,555       $ 291,121       $ 122,859       $ 14,489       $ 849,928
Expense     5,464       104,436       249,296       97,165       1,623       457,984
Gross segment profit     180,440       131,119       41,825       25,694       12,866       391,944
Plus:                                    
Depreciation/amortization     9,762             6,953       13,654             30,369
Interest charges                 377       16,996             17,373
Segment EBITDA     $ 190,202       $ 131,119       $ 49,155       $ 56,344       $ 12,866       $ 439,686
                                                           

Restaurant Data

The following table sets forth, for the three and twelve months ended December 31, 2013 and 2012, the number of "Effective Restaurants" in the Applebee’s and IHOP systems and information regarding the percentage change in sales at those restaurants compared to the same periods in the prior year. Sales at restaurants that are owned by franchisees and area licensees are not attributable to the Company. However, we believe that presentation of this information is useful in analyzing our revenues because franchisees and area licensees pay us royalties and advertising fees that are generally based on a percentage of their sales, and, where applicable, rental payments under leases that may be partially based on a percentage of their sales. Management also uses this information to make decisions about future plans for the development of additional restaurants as well as evaluation of current operations.

                 
        Three Months Ended       Twelve Months Ended
        December 31,       December 31,
        2013     2012       2013     2012
        (unaudited)
Applebee's Restaurant Data                            
Effective Restaurants(a)                            
Franchise       1,991       1,992         1,996       1,894  
Company       23       26         23       123  
Total       2,014       2,018         2,019       2,017  
                             
System-wide(b)                            
Sales percentage change(c)       (0.4 )%     1.5 %       0.3 %     1.7 %
Domestic same-restaurant sales percentage change(d)       (0.7 )%     0.9 %       (0.3 )%     1.2 %
                             
Franchise(b)(e)                            
Sales percentage change(c)       (0.4 )%     11.5 %       5.7 %     8.1 %
Domestic same-restaurant sales percentage change(d)       (0.7 )%     0.9 %       (0.3 )%     1.3 %
Average weekly domestic unit sales (in thousands)       $ 44.5       $ 44.5         $ 46.5       $ 46.6  
                                             
                 
        Three Months Ended       Twelve Months Ended
        December 31,       December 31,
        2013     2012       2013     2012
        (unaudited)
IHOP Restaurant Data                            
Effective Restaurants(a)                            
Franchise       1,422       1,390         1,414       1,379  
Area license       168       165         167       165  
Company       13       16         12       15  
Total       1,603       1,571         1,593       1,559  
                             
System-wide(b)                            
Sales percentage change(c)       6.4 %     0.6 %       4.8 %     1.6 %
Domestic same-restaurant sales percentage change(d)       4.5 %     (2.6 )%       2.4 %     (1.6 )%
                             
Franchise(b)                            
Sales percentage change(c)       6.4 %     0.5 %       4.8 %     1.3 %
Domestic same-restaurant sales percentage change(d)       4.5 %     (2.6 )%       2.4 %     (1.6 )%
Average weekly domestic unit sales (in thousands)       $ 34.7       $ 33.3         $ 34.7       $ 34.0  
                             
Area License (b)                            
Sales percentage change(c)       8.6 %     0.2 %       6.3 %     2.7 %
                                     
     

(a)

 

"Effective Restaurants" are the weighted average number of restaurants open in a given fiscal period, adjusted to account for restaurants open for only a portion of the period. Information is presented for all Effective Restaurants in the Applebee’s and IHOP systems, which includes restaurants owned by the Company as well as those owned by franchisees and area licensees.

     

(b)

 

“System-wide” sales are retail sales at Applebee’s restaurants operated by franchisees and IHOP restaurants operated by franchisees and area licensees, as reported to the Company, in addition to retail sales at company-operated restaurants. Sales at restaurants that are owned by franchisees and area licensees are not attributable to the Company. Unaudited reported sales for Applebee's domestic franchise restaurants, IHOP franchise restaurants and IHOP area license restaurants for the three and twelve months ended December 31, 2013 and 2012 were as follows:

                 
        Three Months Ended       Twelve Months Ended
        December 31,       December 31,
        2013     2012       2013     2012
        (In millions)

Reported sales (unaudited)

                           
Applebee's franchise restaurant sales       $ 1,065.6       $ 1,069.5         $ 4,475.0       $ 4,234.9
IHOP franchise restaurant sales       $ 641.2       $ 602.6         $ 2,553.9       $ 2,437.2
IHOP area license restaurant sales       $ 61.5       $ 56.6         $ 249.5       $ 234.7
                                           

(c)

 

“Sales percentage change” reflects, for each category of restaurants, the percentage change in sales in any given fiscal period compared to the prior fiscal period for all restaurants in that category.

     

(d)

 

“Domestic same-restaurant sales percentage change” reflects the percentage change in sales, in any given fiscal period, compared to the same weeks in the prior year for domestic restaurants that have been operated throughout both fiscal periods that are being compared and have been open for at least 18 months. Because of new unit openings and restaurant closures, the domestic restaurants open throughout both fiscal periods being compared may be different from period to period. Same-restaurant sales percentage change does not include data on IHOP area license restaurants located in Florida.

     

(e)

 

The sales percentage change for the three and twelve months ended December 31, 2013 and 2012 for Applebee’s franchise restaurants was impacted by the refranchising of 154 company-operated restaurants during 2012.

     
                 
DineEquity, Inc. and Subsidiaries
Restaurant Data
 
The following table summarizes our restaurant development activity:
                 
        Three Months Ended       Twelve Months Ended
        December 31,       December 31,
        2013     2012       2013     2012
        (unaudited)
Applebee's Restaurant Development Activity                            
Beginning of period       2,010       2,016         2,034       2,019  
New openings:                            
Franchise       16       20         26       34  
Total new openings       16       20         26       34  
Closings:                            
Franchise       (15 )     (2 )       (49 )     (19 )
Total closings       (15 )     (2 )       (49 )     (19 )
End of period       2,011       2,034         2,011       2,034  
Summary - end of period                            
Franchise       1,988       2,011         1,988       2,011  
Company       23       23         23       23  
Total       2,011       2,034         2,011       2,034  
                                     
                 
        Three Months Ended       Twelve Months Ended
        December 31,       December 31,
        2013     2012       2013     2012
        (unaudited)
IHOP Restaurant Development Activity                            
Beginning of period       1,602       1,565         1,581       1,550  
New openings:                            
Franchise       22       20         54       47  
Area license       1               4       1  
Total new openings       23       20         58       48  
Closings:                            
Company             (1 )             (1 )
Franchise       (4 )     (3 )       (17 )     (14 )
Area license       (1 )             (2 )     (2 )
Total closings       (5 )     (4 )       (19 )     (17 )
End of period       1,620       1,581         1,620       1,581  
Summary - end of period                            
Franchise       1,439       1,404         1,439       1,404  
Area license       168       165         168       165  
Company       13       12         13       12  
Total       1,620       1,581         1,620       1,581  

SOURCE DineEquity, Inc.

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

Media Contact
Sard Verbinnen & Co.
Lucy Neugart
415-618-8750 and Samantha Verdile
212-687-8080

###

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