DineEquity, Inc. Reports Strong Third Quarter 2014 Results

  • Third quarter domestic system-wide same restaurant sales increased 2.4% and 1.7% at IHOP and Applebee's, respectively
    • Domestic system-wide same-restaurant sales guidance for IHOP and Applebee's was revised upward
  • Third quarter 2014 adjusted EPS (Non-GAAP) of $1.14 and GAAP EPS of $0.99
  • Generated strong free cash flow of $45.1 million in the third quarter of 2014
    • Over $95 million of free cash flow generated in the first nine months of 2014
  • Over $14 million returned to shareholders in the form of a third quarter cash dividend of $0.75 per share of common stock
  • Third quarter 2014 results do not include the financial impact of the securitization transaction, which occurred early in the Company's fiscal fourth quarter of 2014

GLENDALE, Calif. - (BUSINESS WIRE) - Oct. 28, 2014 - DineEquity, Inc. (NYSE: DIN), the parent company of Applebee's Neighborhood Grill & Bar® and IHOP® restaurants, today announced financial results for the third quarter of fiscal 2014.

"DineEquity has had several recent notable achievements, including the refinancing of our long-term debt through a $1.4 billion securitization transaction, locking in a significantly lower fixed interest rate for the next seven years," said Julia A. Stewart, Chairman and Chief Executive Officer of DineEquity, Inc. Ms. Stewart added, "In addition to strong same-restaurant sales at both brands in the third quarter, we announced significant increases in both our dividend and share repurchase authorization. Looking ahead, we are better positioned for long-term success and focused on the right goals to build on our momentum."

Third Quarter 2014 Financial Highlights

  • Adjusted net income available to common stockholders was $21.5 million, representing adjusted earnings per diluted share of $1.14 for the third quarter of 2014. This compares to $21.0 million, or adjusted earnings per diluted share of $1.10, for the third quarter of 2013. The increase in adjusted net income was mainly due to lower general and administrative expenses, lower income taxes, and lower cash interest expense. These items were partially offset by lower segment profit due to a significant decline in termination, transfer, and extension fees related to Applebee's franchise restaurants compared to the third quarter of 2013. Third quarter financial results do not reflect the financial impact of the securitization transaction. (See "Non-GAAP Financial Measures" below.)
  • GAAP net income available to common stockholders was $18.6 million for the third quarter of 2014, or earnings per diluted share of $0.99. This compares to $18.4 million, or earnings per diluted share of $0.97, for the third quarter of 2013. The increase in net income was primarily due to a decline in general and administrative expenses, lower income tax expense, and a higher gain on the disposition of assets in the third quarter of 2014 compared to the same period of 2013. These items were partially offset by lower segment profit and an increase in closure and impairment charges.
  • General and administrative expenses were $33.8 million for the third quarter of 2014 compared to $35.3 million for the same period of 2013.

First Nine Months of 2014 Highlights

  • Adjusted net income available to common stockholders was $67.6 million in the first nine months of 2014, representing adjusted earnings per diluted share of $3.57. This compares to $62.5 million, or adjusted earnings per diluted share of $3.26, for the same period in 2013. The increase was primarily due to higher segment profit, a decline in general and administrative expenses, and lower cash interest expense. These items were partially offset by higher income taxes. (See "Non-GAAP Financial Measures" below.)
  • GAAP net income available to common stockholders was $58.0 million in the first nine months of 2014, or earnings per diluted share of $3.06, compared to $53.0 million, or earnings per diluted share of $2.76 for the same period in 2013. The increase was primarily due to higher segment profit, lower general and administrative expenses, and debt modification costs that occurred in the first nine months of 2013 that did not recur in the first nine months of 2014. These items were partially offset by higher income tax expense and a loss on the disposition of assets in the first nine months of 2014 compared to a gain in the same period of 2013.
  • General and administrative expenses were $102.8 million in the first nine months of 2014 compared to $105.0 million for the same period of 2013.
  • For the first nine months of 2014, cash flows from operating activities were $102.4 million and free cash flow was $95.1 million. (See "Non-GAAP Financial Measures" below.)

Same-Restaurant Sales Performance

Third Quarter 2014

  • Applebee's domestic system-wide same-restaurant sales increased 1.7% for the third quarter of 2014 compared to the third quarter of 2013.
  • IHOP's domestic system-wide same restaurant sales increased 2.4% for the third quarter of 2014 compared to the same quarter of 2013.

First Nine Months of 2014 Highlights

  • Applebee's domestic system-wide same-restaurant sales increased 0.6% for the first nine months of 2014 compared to the same period in 2013.
  • IHOP's domestic system-wide same restaurant sales increased 3.2% for the first nine months of 2014 compared to the first nine months of 2013.

DineEquity Raises Financial Performance Outlook for Fiscal 2014

Except for the following revised performance measures, DineEquity reiterates its financial performance guidance for fiscal 2014 contained in the press release issued on February 26, 2014.

  • Applebee's domestic system-wide same-restaurant sales performance is expected to range between 0.0% and positive 1.0%. This reflects an improvement from previous expectations of between negative 2.0% and positive 1.0%.
  • IHOP's domestic system-wide same-restaurant sales performance is expected to range between positive 2.5% and positive 3.5%. This reflects an improvement from previous expectations of between positive 1.0% and positive 2.5%.
  • Franchise segment profit is expected to be between $331 million and $334 million. The revised franchise segment profit reflects an increase from previous expectations of between $323 million and $332 million.
  • Rental and Financing segments are expected to generate approximately $40 million in combined profit, reflecting an increase from previous projections of $37 million.
  • Interest expense is expected to be approximately $97 million for fiscal 2014. This reflects a reduction from previous expectations for interest expense to be approximately $101 million.

    Interest expense in the fourth quarter of 2014 is expected to be approximately $22 million, of which $6.0 million is related to the additional interest paid in October on the outstanding 9.5% senior notes, which are expected to be repaid on or about October 30, 2014. The $6.0 million of additional interest will be excluded from our adjusted earnings per diluted share.
  • Cash from operations is expected to range between $120 million and $130 million. This reflects an increase from previous projections of between $98 million and $116 million.
  • Free cash flow (see "Non-GAAP Measures" below) is projected to range between $109 million and $119 million. This reflects an increase from previous expectations of $86 to $104 million.
  • Regarding the mandatory annual repayment of 1% on the previously outstanding Term Loan principal, the Company is no longer subject to certain mandatory debt reduction requirements related to the annual amortization payment of approximately $5 million associated with its previous senior secured credit facility, which was entirely repaid on September 30, 2014.

    Under the terms of the new securitization, effective on September 30, 2014, the Company would be subject to quarterly scheduled principal payments based on a 1% annual amortization if its leverage ratio exceeds 5.25x as calculated quarterly.
  • IHOP franchisees and its area licensees are projected to develop between 55 and 60 new restaurants, the majority of which are expected to be domestic openings. This reflects an improvement from previous expectations of between 40 and 50 new restaurants, the majority of which were expected to be domestic openings.
  • Applebee's franchisees projected to develop between 33 and 38 new restaurants, the majority of which are expected to be opened in the U.S. This reflects a reduction from previous expectations of between 40 and 50 new restaurants, the majority of which were expected to be domestic openings.
  • Our income tax expense rate of approximately 38% for fiscal 2014 excludes the impact of the fourth quarter 2014 income tax benefit expected on the write-off of costs related to the pay-off of our senior secured credit facility and 9.5% senior notes.

Investor Conference Call Today

The Company will host a conference call to discuss its results on the same day at 11:00 a.m. Eastern Time / 8:00 a.m. Pacific Time. To participate on the call, please dial (800) 708-4539 and reference pass code 38233715. International callers, please dial (847) 619-6396 and reference pass code 38233715.

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 from 10:30 a.m. Pacific Time on October 28, 2014 through 11:59 p.m. Pacific Time on November 3, 2014 by dialing (888) 843-7419 and referencing pass code 38233715#. International callers, please dial (630) 652-3042 and reference pass code 38233715#. An online archive of the webcast will also 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 and risks associated with the timing and our ability to refinance 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 or loss available to common stockholders for such period the effect of any closure and impairment charges, any gain or loss related to debt extinguishment, any intangible asset amortization, any non-cash interest expense, any debt modification costs, and any gain or loss related to the disposition of assets. 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 or 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 and for the return of cash to stockholders pursuant to our capital allocation strategy, after the receipts from long-term receivables, and the funding of operating activities, capital expenditures and debt service. 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,
    2014     2013     2014     2013
Segment Revenues:                        
Franchise and restaurant revenues   $ 129,334     $ 127,137     $ 387,573     $ 379,619  
Rental revenues   30,761     30,990     92,223     92,724  
Financing revenues   2,758     3,156     10,779     10,223  
Total segment revenues   162,853     161,283     490,575     482,566  
Segment Expenses:                        
Franchise and restaurant expenses   47,570     44,091     135,403     130,875  
Rental expenses   23,654     24,149     71,173     72,953  
Financing expenses           825     245  
Total segment expenses   71,224     68,240     207,401     204,073  
Gross segment profit   91,629     93,043     283,174     278,493  
General and administrative expenses   33,835     35,331     102,836     105,004  
Interest expense   24,984     24,979     74,895     75,230  
Amortization of intangible assets   3,071     3,072     9,212     9,212  
Closure and impairment charges, net   192     (392 )   1,029     770  
Loss on extinguishment of debt   1         13     36  
Debt modification costs               1,296  
(Gain) loss on disposition of assets   (205 )   (72 )   592     (326 )
Income before income tax provision   29,751     30,125     94,597     87,271  
Income tax provision   (10,864 )   (11,395 )   (35,719 )   (33,365 )
Net income   $ 18,887     $ 18,730     $ 58,878     $ 53,906  
Net income available to common stockholders:                        
Net income   $ 18,887     $ 18,730     $ 58,878     $ 53,906  
Less: Net income allocated to unvested participating restricted stock   (279 )   (296 )   (927 )   (925 )
Net income available to common stockholders   $ 18,608     $ 18,434     $ 57,951     $ 52,981  
Net income available to common stockholders per share:                        
Basic   $ 0.99     $ 0.98     $ 3.09     $ 2.80  
Diluted   $ 0.99     $ 0.97     $ 3.06     $ 2.76  
Weighted average shares outstanding:                        
Basic   18,703     18,831     18,757     18,898  
Diluted   18,890     19,085     18,964     19,166  
                         
Dividends declared per common share   $ 0.75     $ 0.75     $ 2.25     $ 2.25  
Dividends paid per common share   $ 0.75     $ 0.75     $ 2.25     $ 2.25  
                                 

 

         
DineEquity, Inc. and Subsidiaries
Consolidated Balance Sheets
(In thousands, except share and per share amounts)
         
   

September 30, 2014

  December 31, 2013
    (Unaudited)      
Assets            
Current assets:            
Cash and cash equivalents   $ 132,859     $ 106,011  
Receivables, net   91,292     144,137  
Prepaid gift cards   41,125     49,223  
Prepaid income taxes       4,708  
Deferred income taxes   32,517     23,853  
Other current assets   10,788     3,650  
Total current assets   308,581     331,582  
Long-term receivables, net   186,079     197,153  
Property and equipment, net   252,673     274,295  
Goodwill   697,470     697,470  
Other intangible assets, net   785,078     794,057  
Other assets, net   112,877     110,085  
Total assets   $ 2,342,758     $ 2,404,642  
Liabilities and Stockholders' Equity            
Current liabilities:            
Current maturities of long-term debt   $ 4,720     $ 4,720  
Accounts payable   35,244     40,050  
Gift card liability   100,688     171,955  
Accrued employee compensation and benefits   17,282     24,956  
Accrued interest payable   31,618     13,575  
Income taxes payable   14,829      
Current maturities of capital lease and financing obligations   13,215     12,247  
Other accrued expenses   34,669     16,770  
Total current liabilities   252,265     284,273  
Long-term debt, net (less current maturities)   1,202,759     1,203,517  
Capital lease obligations (less current maturities)   101,832     111,707  
Financing obligations (less current maturities)   42,565     48,843  
Deferred income taxes   328,267     341,578  
Other liabilities   97,695     99,545  
Total liabilities   2,025,383     2,089,463  
Commitments and contingencies            
Stockholders' equity:            
Common stock, $0.01 par value, shares: 40,000,000 authorized; September 30, 2014 - 25,251,933 issued, 18,957,602 outstanding; December 31, 2013 - 25,299,315 issued, 19,040,890 outstanding   253     253  
Additional paid-in-capital   278,213     274,202  
Retained earnings   352,685     336,578  
Accumulated other comprehensive loss   (65 )   (164 )
Treasury stock, at cost; shares: September 30, 2014 - 6,294,331; December 31, 2013 - 6,258,425   (313,711 )   (295,690 )
Total stockholders' equity   317,375     315,179  
Total liabilities and stockholders' equity   $ 2,342,758     $ 2,404,642  
                 

 

     
DineEquity, Inc. and Subsidiaries
Consolidated Statements of Cash Flows
(In thousands)
(Unaudited)
     
    Nine Months Ended
    September 30,
    2014   2013
Cash flows from operating activities:            
Net income   $ 58,878     $ 53,906  
Adjustments to reconcile net income to cash flows provided by operating activities:            
Depreciation and amortization   26,237     26,516  
Non-cash interest expense   5,021     4,635  
Deferred income taxes   (21,947 )   (16,007 )
Non-cash stock-based compensation expense   7,432     7,081  
Tax benefit from stock-based compensation   4,008     3,001  
Excess tax benefit from share-based compensation   (4,635 )   (1,985 )
Loss (gain) on disposition of assets   592     (326 )
Debt modification costs       1,296  
Other   (1,155 )   697  
Changes in operating assets and liabilities:            
Receivables, net   54,237     41,698  
Current income tax receivables and payables   19,975     7,232  
Prepaid expenses and other current assets   5,909     16,054  
Accounts payable   (5,657 )   2,650  
Accrued employee compensation and benefits   (7,674 )   (4,372 )
Gift card liability   (71,268 )   (68,493 )
Other accrued expenses   32,474     29,231  
Cash flows provided by operating activities   102,427     102,814  
Cash flows from investing activities:            
Additions to property and equipment   (5,530 )   (4,547 )
Proceeds from sale of property and equipment   681      
Principal receipts from notes, equipment contracts and other long-term receivables   10,252     10,254  
Other   1     282  
Cash flows provided by investing activities   5,404     5,989  
Cash flows from financing activities:            
Repayment of long-term debt   (3,600 )   (2,400 )
Payment of debt modification costs       (1,296 )
Principal payments on capital lease and financing obligations   (8,484 )   (7,515 )
Repurchase of DineEquity common stock   (30,006 )   (24,663 )
Dividends paid on common stock   (42,733 )   (43,170 )
Repurchase of restricted stock   (2,931 )   (3,209 )
Proceeds from stock options exercised   7,392     5,585  
Excess tax benefit from share-based compensation   4,635     1,985  
Change in restricted cash   (4,948 )   (3,122 )
Other   (308 )    
Cash flows used in financing activities   (80,983 )   (77,805 )
Net change in cash and cash equivalents   26,848     30,998  
Cash and cash equivalents at beginning of period   106,011     64,537  
Cash and cash equivalents at end of period   $ 132,859     $ 95,535  
                 
                 

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; and gain or loss on disposition of assets, all items net of taxes, and related per share data:

    Three Months Ended   Nine Months Ended
    September 30,   September 30,
    2014     2013     2014     2013
Net income available to common stockholders, as reported   $ 18,608     $ 18,434     $ 57,951     $ 52,981  
Closure and impairment charges, net   192     (392 )   1,029     770  
Loss on extinguishment of debt   1         13     36  
Amortization of intangible assets   3,071     3,072     9,212     9,212  
Non-cash interest expense   1,706     1,581     5,021     4,635  
Debt modification costs               1,296  
(Gain) loss on disposition of assets   (205 )   (72 )   592     (326 )
Income tax provision   (1,810 )   (1,592 )   (6,029 )   (5,937 )
Net income allocated to unvested participating restricted stock   (47 )   (45 )   (162 )   (181 )
Net income available to common stockholders, as adjusted   $ 21,516     $ 20,986     $ 67,627     $ 62,486  
                         
Diluted net income available to common stockholders per share:                        
Net income available to common stockholders, as reported   $ 0.99     $ 0.97     $ 3.06     $ 2.76  
Closure and impairment charges, net   0.01     (0.01 )   0.03     0.02  
Loss on extinguishment of debt   0.00     0.00     0.00     0.00  
Amortization of intangible assets   0.10     0.10     0.30     0.30  
Non-cash interest expense   0.06     0.05     0.16     0.15  
Debt modification costs               0.04  
(Gain) loss on disposition of assets   (0.01 )   0.00     0.02     (0.01 )
Net income allocated to unvested participating restricted stock   0.00     0.00     (0.01 )   (0.01 )
Rounding   (0.01 )   (0.01 )   0.01     0.01  
Diluted net income available to common stockholders per share, as adjusted   $ 1.14     $ 1.10     $ 3.57     $ 3.26  
                         
Numerator for basic EPS-income available to common stockholders, as adjusted   $ 21,516     $ 20,986     $ 67,627     $ 62,486  
Effect of unvested participating restricted stock using the two-class method   2     1     5     5  
Numerator for diluted EPS-income available to common stockholders after assumed conversions, as adjusted   $ 21,518     $ 20,987     $ 67,632     $ 62,491  
                         
Denominator for basic EPS-weighted-average shares   18,703     18,831     18,757     18,898  
Dilutive effect of stock options   187     254     207     268  
Denominator for diluted EPS-weighted-average shares and assumed conversions   18,890     19,085     18,964     19,166  
                         
                         

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

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 consolidated capital expenditures, principal payments on capital leases and financing obligations and the mandatory annual repayment of 1% of our Term Loan principal balance):

    Nine Months Ended
    September 30,
    2014   2013
Cash flows provided by operating activities   $ 102,427     $ 102,814  
Principal receipts from long-term receivables   10,252     10,254  
Additions to property and equipment   (5,530 )   (4,547 )
Free cash flow before debt service   107,149     108,521  
Principal payments on capital lease and financing obligations   (8,484 )   (7,530 )
Mandatory 1% of Term Loans principal balance repayment   (3,540 )   (3,540 )
Free cash flow   95,125     97,451  
Dividends paid on common stock   (42,733 )   (43,170 )
Repurchase of DineEquity common stock   (30,006 )   (24,663 )
    $ 22,386     $ 29,618  
                 
                 

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, 2014
    Franchise - Applebee's   Franchise - IHOP   Company Restaurants   Rental Operations   Financing Operations   Total
Revenue   $ 47,780     $ 66,522     $ 15,032     $ 30,761     $ 2,758     $ 162,853
Expense   1,105     31,120     15,345     23,654         71,224
Gross segment profit   46,675     35,402     (313 )   7,107     2,758     91,629
Plus:                                  
Depreciation/amortization   2,587         536     3,281         6,404
Interest charges           97     3,607         3,704
Segment EBITDA   $ 49,262     $ 35,402     $ 320     $ 13,995     $ 2,758     $ 101,737

 

    Three months ended September 30, 2013
    Franchise - Applebee's   Franchise - IHOP   Company Restaurants   Rental Operations   Financing Operations   Total
Revenue   $ 50,912     $ 60,806     $ 15,419     $ 30,990     $ 3,156     $ 161,283
Expense   1,619     26,775     15,697     24,149         68,240
Gross segment profit   49,293     34,031     (278 )   6,841     3,156     93,043
Plus:                                  
Depreciation/amortization   2,671         545     3,339         6,555
Interest charges           92     3,846         3,938
Segment EBITDA   $ 51,964     $ 34,031     $ 359     $ 14,026     $ 3,156     $ 103,536

 

    Nine months ended September 30, 2014
    Franchise - Applebee's   Franchise - IHOP   Company Restaurants   Rental Operations   Financing Operations   Total
Revenue   $ 148,572     $ 191,994     $ 47,007     $ 92,223     $ 10,779     $ 490,575
Expense   3,799     84,424     47,180     71,173     825     207,401
Gross segment profit   144,773     107,570     (173 )   21,050     9,954     283,174
Plus:                                  
Depreciation/amortization   7,823         1,555     9,939         19,317
Interest charges           296     11,188         11,484
Segment EBITDA   $ 152,596     $ 107,570     $ 1,678     $ 42,177     $ 9,954     $ 313,975

 

    Nine months ended September 30, 2013
    Franchise - Applebee's   Franchise - IHOP   Company Restaurants   Rental Operations   Financing Operations   Total
Revenue   $ 151,868     $ 179,710     $ 48,041     $ 92,724     $ 10,223     $ 482,566
Expense   4,551     78,173     48,151     72,953     245     204,073
Gross segment profit   147,317     101,537     (110 )   19,771     9,978     278,493
Plus:                                  
Depreciation/amortization   8,142         1,616     10,093         19,851
Interest charges           279     11,958         12,237
Segment EBITDA   $ 155,459     $ 101,537     $ 1,785     $ 41,822     $ 9,978     $ 310,581
                                               

Restaurant Data

The following table sets forth, for the three and nine months ended September 30, 2014 and 2013, 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   Nine Months Ended
      September 30,   September 30,
      2014   2013   2014   2013
      (unaudited)
Applebee's Restaurant Data                        
Effective Restaurants(a)                        
Franchise   1,985     1,986     1,985     1,998  
Company   23     23     23     23  
Total   2,008     2,009     2,008     2,021  
                           
System-wide(b)                        
Sales percentage change(c)   2.5 %   0.0 %   0.7 %   0.6 %
Domestic same-restaurant sales percentage change(d)   1.7 %   (0.4 )%   0.6 %   (0.1

)%

                           
Franchise(b)(e)                        
Sales percentage change(c)   2.5 %   6.2 %   0.7 %   7.7 %
Domestic same-restaurant sales percentage change(d)   1.7 %   (0.4 )%   0.6 %   (0.1 )%
Average weekly domestic unit sales (in thousands)   $ 46.0     $ 44.9     $ 47.9     $ 47.2  
                                 

 

      Three Months Ended   Nine Months Ended
      September 30,   September 30,
      2014   2013   2014   2013
      (unaudited)
IHOP Restaurant Data                        
Effective Restaurants(a)                        
Franchise   1,459     1,413     1,449     1,410  
Area license   168     168     167     167  
Company   10     12     10     12  
Total   1,637     1,593     1,626     1,589  
                           
System-wide(b)                        
Sales percentage change(c)   5.3 %   6.1 %   5.9 %   4.2 %
Domestic same-restaurant sales percentage change(d)   2.4 %   3.6 %   3.2 %   1.7 %
                           
Franchise(b)                        
Sales percentage change(c)   5.6 %   6.2 %   6.0 %   4.3 %
Domestic same-restaurant sales percentage change(d)   2.4 %   3.6 %   3.2 %   1.7 %
Average weekly domestic unit sales (in thousands)   $ 35.8     $ 35.0     $ 35.9     $ 34.8  
                           
Area License (b)                        
Sales percentage change(c)   4.0 %   7.9 %   5.9 %   5.6 %
                         

(a) "Effective Restaurants" are the weighted average number of restaurants open in a given fiscal period, adjusted to account for restaurants open for only a portion of the period. Information is presented for all Effective Restaurants in the Applebee's and IHOP systems, which includes restaurants owned by 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 nine months ended September 30, 2014 and 2013 were as follows:

    Three Months Ended   Nine Months Ended
    September 30,   September 30,
    2014   2013   2014   2013
    (In millions)
Reported sales (unaudited)                      
Applebee's franchise restaurant sales   $ 1,100.3     $ 1,073.7     $ 3,434.1     $ 3,409.4
IHOP franchise restaurant sales   $ 678.3     $ 642.6     $ 2,028.1     $ 1,912.7
IHOP area license restaurant sales   $ 64.3     $ 61.8     $ 199.2     $ 188.0
                               

(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) The sales percentage change for the three and nine months ended September 30, 2013 for Applebee's franchise restaurants was impacted by the refranchising of 154 company-operated restaurants during 2012.

DineEquity, Inc. and Subsidiaries
Restaurant Data (unaudited)

The following table summarizes our restaurant development activity:

    Three Months Ended   Nine Months Ended
    September 30,   September 30,
    2014   2013   2014   2013

Applebee's Restaurant Development Activity

               
Summary - beginning of period:                        
Franchise   1,986     1,989     1,988     2,011  
Company restaurants   23     23     23     23  
Total Applebee's restaurants, beginning of period   2,009     2,012     2,011     2,034  
Franchise restaurants opened:                        
Domestic   7     1     20     6  
International   3     3     4     4  
Total franchise restaurants opened   10     4     24     10  
Franchise restaurants closed:                        
Domestic   (7 )   (6 )   (17 )   (31 )
International   (3 )       (9 )   (3 )
Total franchise restaurants closed   (10 )   (6 )   (26 )   (34 )
Net franchise restaurant (reduction) development       (2 )   (2 )   (24 )
Summary - end of period:                        
Franchise   1,986     1,987     1,986     1,987  
Company restaurants   23     23     23     23  
Total Applebee's restaurants, end of period   2,009     2,010     2,009     2,010  
                         

IHOP Restaurant Development Activity

                       
Summary - beginning of period:                        
Franchise   1,455     1,414     1,439     1,404  
Area license   167     168     168     165  
Company   10     11     13     12  
Total IHOP restaurants, beginning of period   1,632     1,593     1,620     1,581  
Franchise/area license restaurants opened:                
Domestic franchise   11     10     27     25  
Domestic area license   1         3     3  
International franchise   6     3     15     6  
International area license               1  
Total franchise/area license restaurants opened   18     13     45     35  
Franchise/area license restaurants closed:                        
Domestic franchise   (5 )   (4 )   (16 )   (13 )
Domestic area license           (2 )   (1 )
International franchise   (1 )       (2 )    
International area license           (1 )    
Total franchise/area license restaurants closed   (6 )   (4 )   (21 )   (14 )
Net franchise/area license restaurant development   12     9     24     21  
Refranchised from Company restaurants           4     1  
Franchise restaurants reacquired by the Company       (2 )   (1 )   (2 )
Net franchise/area license restaurant additions   12     7     27     20  
Summary - end of period                        
Franchise   1,466     1,421     1,466     1,421  
Area license   168     168     168     168  
Company   10     13     10     13  
Total IHOP restaurants, end of period

SOURCE DineEquity, Inc.

Contacts:

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

Dan Goldstein
Media Relations
Sard Verbinnen & Co.
310-201-2040

Paul Kranhold
Media Relations
Sard Verbinnen & Co.
415-618-8750

###

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