DineEquity, Inc. Reports Successful Fourth Quarter and Fiscal 2014 Results

Company Provides Financial Guidance for Fiscal 2015

Fourth Quarter 2014 Highlights

-- Fourth quarter 2014 adjusted EPS (Non-GAAP) of $1.16 and GAAP net loss per share of $1.18 due to one-time items related to the securitization refinancing
-- Fourth quarter domestic system wide same-restaurant sales increased 6.1% at IHOP and 2.8% at Applebee's

Fiscal 2014 Highlights

-- Fiscal 2014 adjusted EPS (Non-GAAP) of $4.73 and GAAP EPS of $1.90
-- Full-year domestic system wide same-restaurant sales increased 3.9% at IHOP and 1.1% at Applebee's
-- Generated strong free cash flow of $113 million
-- Returned approximately $75 million to shareholders in share repurchases and quarterly cash dividends in fiscal 2014. This excludes the approximately $17 million in cash dividends paid on January 9, 2015.

GLENDALE, Calif. - Feb. 25, 2015 // PRNewswire // - 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 fiscal 2014.

"DineEquity delivered successful results for fiscal 2014. We achieved several significant goals this year, aimed at driving additional shareholder value. We saw meaningful progress in accelerating same-restaurant sales at both Applebee's and IHOP, as each brand finished the year with great momentum," said Julia A. Stewart, Chairman and Chief Executive Officer of DineEquity, Inc. Ms. Stewart continued, "We further positioned the Company for long-term success by completing a securitization refinancing to obtain a significantly lower fixed interest rate for the long-term. The increased financial flexibility paved the way for our new capital allocation strategy, highlighting our commitment to return substantial cash to shareholders. As we begin 2015, we are executing on our key strategic priorities to sustain strong financial performance and build even stronger brands."

Fourth Quarter 2014 Financial Highlights

  • Adjusted net income available to common stockholders was $21.9 million, representing adjusted earnings per diluted share of $1.16, for the fourth quarter of 2014.  This compares to $18.6 million, or adjusted earnings per diluted share of $0.98, for the fourth quarter of 2013, an increase of 18%.  The increase in adjusted net income was mainly due to a decline in cash interest expense and higher segment profit.  These items were partially offset by an increase in general and administrative expenses in the fourth quarter of 2014 compared to the same period of 2013 and higher income taxes.  The fourth quarter financial results reflect the financial impact of the securitization refinancing transaction.  (See "Non-GAAP Financial Measures" below.)
  • GAAP net loss was $22.1 million for the fourth quarter of 2014, or net loss per share of $1.18.  This compares to net income available to common stockholders of $17.9 million, or earnings per diluted share of $0.94, for the fourth quarter of 2013.  The net loss was driven by a loss on the extinguishment of debt and higher general and administrative expenses.  These items were partially offset by lower income tax expense, a decline in interest expense, and higher segment profit. 
    Income tax expense was lower in the fourth quarter of 2014 compared to the fourth quarter of 2013 due to the write-off of costs associated with our refinancing transaction and the adoption of certain production activity deductions and research credits.
  • General and administrative expenses were $43.1 million for the fourth quarter of 2014 compared to $38.6 million for the same period of 2013.  The increase was mainly due to the timing of franchise conference expenses and personnel costs year-over-year.  For fiscal 2014, the increase in general and administrative expenses was $2.3 million, or 1.6%.           

Fiscal 2014 Highlights

  • Adjusted net income available to common stockholders was $89.6 million in fiscal 2014, representing adjusted earnings per diluted share of $4.73.  This compares to $81.2 million, or adjusted earnings per diluted share of $4.24, for fiscal 2013, an increase of 12%.  The increase was primarily due to lower cash interest expense and higher segment profit.  These items were partially offset by higher income taxes.  (See "Non-GAAP Financial Measures" below.)
  • GAAP net income available to common stockholders was $35.9 million in fiscal 2014, or earnings per diluted share of $1.90, compared to $70.8 million, or earnings per diluted share of $3.70 for fiscal 2013.  The decrease was primarily due to a loss on the extinguishment of debt in fiscal 2014 compared to fiscal 2013.  This item was partially offset by lower income tax expense, higher segment profit, and a decline in interest expense.
  • For fiscal 2014, cash flows from operating activities were $118.5 million and free cash flow was $112.5 million.  (See "Non-GAAP Financial Measures" below.)

Same-Restaurant Sales Performance

Fourth Quarter 2014

  • IHOP's domestic system-wide same restaurant sales increased 6.1% for the fourth quarter of 2014 compared to the same quarter of 2013.  This is the highest quarterly sales increase since the first quarter of 2004.   
  • Applebee's domestic system-wide same-restaurant sales increased 2.8% for the fourth quarter of 2014 compared to the fourth quarter of 2013, representing the strongest quarterly sales increase since the second quarter of 2011.   

Fiscal 2014 Highlights

  • IHOP's domestic system-wide same restaurant sales increased 3.9% for fiscal 2014 compared to fiscal 2013, representing the strongest full-year sales increase since fiscal 2004.
  • Applebee's domestic system-wide same-restaurant sales increased 1.1% for fiscal 2014 compared to fiscal 2013. 

Financial Performance Guidance for Fiscal 2015

The Company's financial performance guidance reflects the impact of a 53rd operating week in fiscal 2015, in which the last month of the fiscal fourth quarter contains six weeks.

  • Applebee's domestic system-wide same-restaurant sales performance is expected to range between positive 1.0% and positive 4.0%. 
  • IHOP's domestic system-wide same-restaurant sales performance is expected to range between positive 2.0% and positive 5.0%. 
  • Applebee's franchisees are projected to develop between 30 and 40 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 50 and 60 new restaurants, the majority of which are expected to be domestic openings.
  • Franchise segment profit is expected to be between $345 million and $358 million.   
  • Rental and Financing segments are expected to generate roughly $39 million in combined profit.   
  • General and administrative expenses are expected to range between $149 million and $153 million, including non-cash stock-based compensation expense and depreciation of approximately $18 million.
  • Interest expense is expected to be roughly $63 million.  Approximately $3 million is projected to be non-cash interest expense. 
  • The income tax rate is expected to be approximately 38%.
  • Capital expenditures are projected to be about $9 million.  
  • Free cash flow (See "Non-GAAP Financial Measures" below.) is expected to range between $114 million and $124 million.  For fiscal 2015, "Free cash flow" for a given period is defined as cash provided by operating activities, plus receipts from notes and equipment contracts receivable, less capital expenditures. 
  • Weighted average diluted shares outstanding are expected to be approximately 19 million. 

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) 708-4540 and reference pass code 38800553. International callers, please dial (847) 619-6397 and reference pass code 38800553.

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 February 25, 2015 through 11:59 p.m. Pacific Time on March 2, 2015 by dialing (888) 843-7419 and referencing pass code 38800553#. International callers, please dial (630) 652-3042 and reference pass code 38800553#. 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 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 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 incremental Senior Note interest, any debt modification costs and refinancing expenses not capitalized, any income tax adjustment considered unrelated to the respective current period 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. For fiscal 2014, "Free cash flow" for a given period was 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. For fiscal 2015, "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 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

 

Twelve Months Ended

   

December 31,

 

December 31,

   

2014

    

2013

    

2014

    

2013

Segment Revenues:

                       

Franchise and restaurant revenues

 

$

131,006

   

$

122,967

   

$

518,579

   

$

502,586

 

Rental revenues

 

30,709

   

32,045

   

122,932

   

124,769

 

Financing revenues

 

2,698

   

2,889

   

13,477

   

13,112

 

Total segment revenues

 

164,413

   

157,901

   

654,988

   

640,467

 

Segment Expenses:

                       

Franchise and restaurant expenses

 

49,008

   

42,357

   

184,411

   

173,232

 

Rental expenses

 

23,464

   

24,345

   

94,637

   

97,298

 

Financing expenses

 

   

   

825

   

245

 

Total segment expenses

 

72,472

   

66,702

   

279,873

   

270,775

 

Gross segment profit

 

91,941

   

91,199

   

375,115

   

369,692

 

General and administrative expenses

 

43,074

   

38,582

   

145,910

   

143,586

 

Interest expense

 

21,742

   

25,034

   

96,637

   

100,264

 

Amortization of intangible assets

 

2,851

   

3,070

   

12,063

   

12,282

 

Closure and impairment charges

 

2,692

   

1,042

   

3,721

   

1,812

 

Loss on extinguishment of debt

 

64,846

   

22

   

64,859

   

58

 

Debt modification costs

 

   

   

   

1,296

 

(Gain) loss on disposition of assets

 

(263)

   

103

   

329

   

(223)

 

(Loss) income before income taxes

 

(43,001)

   

23,346

   

51,596

   

110,617

 

Income tax benefit (provision)

 

20,576

   

(5,215)

   

(15,143)

   

(38,580)

 

Net (loss) income

 

$

(22,425)

   

$

18,131

   

$

36,453

   

$

72,037

 

Net (loss) income available to common stockholders:

                       

Net (loss) income

 

$

(22,425)

   

$

18,131

   

$

36,453

   

$

72,037

 

Less: Net loss (income) allocated to unvested 
  participating restricted stock

 

318

   

(274)

   

(521)

   

(1,200)

 

Net (loss) income available to common stockholders

 

$

(22,107)

   

$

17,857

   

$

35,932

   

$

70,837

 

Net (loss) income available to common stockholders 
    per share:

                       

Basic

 

$

(1.18)

   

$

0.95

   

$

1.92

   

$

3.75

 

Diluted

 

$

(1.18)

   

$

0.94

   

$

1.90

   

$

3.70

 

Weighted average shares outstanding:

                       

Basic

 

18,741

   

18,789

   

18,753

   

18,871

 

Diluted

 

18,741

   

19,062

   

18,956

   

19,141

 
                         

Dividends declared per common share

 

$

0.875

   

$

0.75

   

$

3.125

   

$

3.00

 

Dividends paid per common share

 

$

   

$

0.75

   

$

2.25

   

$

3.00

 

 

DineEquity, Inc. and Subsidiaries

Consolidated Balance Sheets

(In thousands, except share and per share amounts)

 
   

December 31,

   

2014

     

2013

   

(Unaudited)

     

Assets

           

Current assets:

           

Cash and cash equivalents

 

$

104,004

   

$

106,011

 

Receivables, net

 

153,498

   

144,137

 

Restricted cash

 

52,262

   

664

 

Prepaid gift cards

 

51,268

   

49,223

 

Prepaid income taxes

 

11,753

   

4,708

 

Deferred income taxes

 

30,860

   

23,853

 

Other current assets

 

9,239

   

2,986

 

Total current assets

 

412,884

   

331,582

 

Long-term receivables

 

180,856

   

197,153

 

Property and equipment, net

 

241,229

   

274,295

 

Goodwill

 

697,470

   

697,470

 

Other intangible assets, net

 

782,336

   

794,057

 

Deferred rent receivable

 

91,117

   

91,423

 

Other non-current assets, net

 

42,216

   

18,662

 

Total assets

 

$

2,448,108

   

$

2,404,642

 

Liabilities and Stockholders' Equity

           

Current liabilities:

           

Current maturities of long-term debt

 

$

   

$

4,720

 

Accounts payable

 

41,771

   

40,050

 

Gift card liability

 

179,760

   

171,955

 

Accrued employee compensation and benefits

 

25,722

   

24,956

 

Dividends payable

 

16,635

   

 

Accrued interest payable

 

14,126

   

13,575

 

Current maturities of capital lease and financing obligations

 

14,852

   

12,247

 

Other accrued expenses

 

20,183

   

16,770

 

Total current liabilities

 

313,049

   

284,273

 

Long-term debt, less current maturities

 

1,300,000

   

1,203,517

 

Capital lease obligations, less current maturities

 

98,119

   

111,707

 

Financing obligations, less current maturities

 

42,524

   

48,843

 

Deferred income taxes

 

319,111

   

341,578

 

Deferred rent payable

 

75,375

   

76,798

 

Other non-current liabilities

 

20,857

   

22,747

 

Total liabilities

 

2,169,035

   

2,089,463

 

Commitments and contingencies

           

Stockholders' equity:

           

Common stock, $0.01 par value, shares: 40,000,000 authorized; 2014 - 25,240,055 
     issued, 18,953,567 outstanding; 2013 - 25,299,315 issued, 19,040,890 outstanding

 

252

   

253

 

Additional paid-in-capital

 

279,946

   

274,202

 

Retained earnings

 

313,644

   

336,578

 

Accumulated other comprehensive loss

 

(73)

   

(164)

 

Treasury stock, at cost; shares: 2014 - 6,286,488; 2013 - 6,258,425

 

(314,696)

   

(295,690)

 

Total stockholders' equity

 

279,073

   

315,179

 

Total liabilities and stockholders' equity

 

$

2,448,108

   

$

2,404,642

 

 

 

DineEquity, Inc. and Subsidiaries

Consolidated Statements of Cash Flows

(In thousands)

 
   

Twelve Months Ended

   

December 31,

   

2014

    

2013

Cash flows from operating activities:

 

(Unaudited)

     

Net income

 

$

36,453

   

$

72,037

 

Adjustments to reconcile net income to cash flows provided by operating activities:

           

Depreciation and amortization

 

34,745

   

35,355

 

Non-cash interest expense

 

5,770

   

6,246

 

Loss on extinguishment of debt

 

64,859

   

58

 

Closure and impairment charges

 

3,687

   

2,195

 

Deferred income taxes

 

(30,236)

   

(22,674)

 

Non-cash stock-based compensation expense

 

9,319

   

9,364

 

Tax benefit from stock-based compensation

 

4,316

   

3,690

 

Excess tax benefit from share-based compensation

 

(5,028)

   

(2,858)

 

Loss (gain) on disposition of assets

 

329

   

(223)

 

Other

 

(3,344)

   

(492)

 

Changes in operating assets and liabilities:

           

Receivables

 

(7,997)

   

(15,226)

 

Current income tax receivables and payables

 

(5,868)

   

6,143

 

Other current assets

 

(1,771)

   

9,334

 

Accounts payable

 

1,245

   

8,532

 

Accrued employee compensation and benefits

 

767

   

2,521

 

Gift card liability

 

7,803

   

10,266

 

Other accrued expenses

 

3,475

   

3,547

 

Cash flows provided by operating activities

 

118,524

   

127,815

 

Cash flows from investing activities:

           

Additions to property and equipment

 

(5,937)

   

(7,037)

 

Proceeds from sale of property and equipment

 

681

   

 

Principal receipts from notes, equipment contracts and other long-term receivables

 

15,284

   

13,982

 

Other

 

540

   

58

 

Cash flows provided by investing activities

 

10,568

   

7,003

 

Cash flows from financing activities:

           

Proceeds from issuance of long-term debt

 

1,300,000

   

 

Repayment of long-term debt (including premiums)

 

(1,264,086)

   

(4,800)

 

Payment of debt modification costs

 

(24,192)

   

(1,296)

 

Principal payments on capital lease and financing obligations

 

(11,825)

   

(9,968)

 

Dividends paid on DineEquity common stock

 

(42,733)

   

(57,445)

 

Repurchase of DineEquity common stock

 

(32,006)

   

(29,698)

 

Repurchase of restricted stock

 

(3,194)

   

(3,324)

 

Proceeds from stock options exercised

 

8,207

   

9,080

 

Excess tax benefit from share-based compensation

 

5,028

   

2,858

 

Change in restricted cash

 

(66,298)

   

1,249

 

Cash flows used in financing activities

 

(131,099)

   

(93,344)

 

Net change in cash and cash equivalents

 

(2,007)

   

41,474

 

Cash and cash equivalents at beginning of period

 

106,011

   

64,537

 

Cash and cash equivalents at end of period

 

$

104,004

   

$

106,011

 

 

NON-GAAP  FINANCIAL MEASURES
(In thousands, except per share amounts)
(Unaudited)

Reconciliation of net income available to common stockholders to net income available to common stockholders, as adjusted for the following items: loss on extinguishment of debt; amortization of intangible assets; incremental Senior Note interest; closure and impairment charges; non-cash interest expense; gain or loss on disposition of assets; refinancing expenses not capitalized; debt modification costs; the combined tax effect of the preceding adjustments, and income tax adjustments considered unrelated to the respective current period operations, as well as related per share data:

 

   

Three Months Ended

 

Twelve Months Ended

   

December 31,

 

December 31,

   

2014

    

2013

    

2014

    

2013

Net income available to common stockholders, as reported

 

$

(22,107)

   

$

17,857

   

$

35,932

   

$

70,837

 

Loss on extinguishment of debt

 

64,846

   

22

   

64,859

   

58

 

Amortization of intangible assets

 

2,851

   

3,070

   

12,063

   

12,282

 

Senior Note interest(1)

 

6,023

   

   

6,023

   

 

Closure and impairment charges

 

2,692

   

1,042

   

3,721

   

1,812

 

Non-cash interest expense

 

749

   

1,611

   

5,770

   

6,245

 

Loss (gain) on disposition of assets

 

(263)

   

103

   

329

   

(223)

 

Refinancing expenses not capitalized(2)

 

178

   

   

178

   

 

Debt modification costs

 

   

   

   

1,296

 

Net income tax provision for above adjustments

 

(29,292)

   

(2,194)

   

(35,317)

   

(8,052)

 

Income tax adjustments(3)

 

(3,118)

   

(2,890)

   

(3,118)

   

(2,890)

 

Net income allocated to unvested participating restricted stock

 

(618)

   

(14)

   

(862)

   

(190)

 

Net income available to common stockholders, as adjusted

 

$

21,941

   

$

18,607

   

$

89,578

   

$

81,175

 
                         

Diluted net income available to common stockholders per share:

                     

Net income available to common stockholders, as reported

 

$

(1.18)

   

$

0.94

   

$

1.90

   

$

3.70

 

Loss on extinguishment of debt

 

2.12

   

0.00

   

2.12

   

0.00

 

Amortization of intangible assets

 

0.09

   

0.10

   

0.40

   

0.40

 

Senior Note interest(1)

 

0.20

   

   

0.20

   

 

Closure and impairment charges

 

0.09

   

0.03

   

0.12

   

0.06

 

Loss (gain) on disposition of assets

 

(0.01)

   

0.01

   

0.01

   

(0.01)

 

Non-cash interest expense

 

0.02

   

0.05

   

0.19

   

0.20

 

Refinancing expenses not capitalized(2)

 

0.01

   

   

0.01

   

 

Debt modification costs

 

   

   

   

0.04

 

Income tax adjustments(3)

 

(0.16)

   

(0.15)

   

(0.16)

   

(0.15)

 

Net income allocated to unvested participating restricted stock

 

(0.03)

   

0.00

   

(0.05)

   

(0.01)

 

Rounding

 

0.01

   

   

(0.01)

   

0.01

 

Diluted net income available to common stockholders per share, as 
   adjusted

 

$

1.16

   

$

0.98

   

$

4.73

   

$

4.24

 
                         

Numerator for basic EPS-income available to common stockholders, as 
   adjusted

 

$

21,941

   

$

18,607

   

$

89,578

   

$

81,175

 

Effect of unvested participating restricted stock using the two-class 
   method

 

1

   

2

   

5

   

7

 

Numerator for diluted EPS-income available to common stockholders 
   after assumed conversions, as adjusted

 

$

21,942

   

$

18,609

   

$

89,583

   

$

81,182

 
                         

Denominator for basic EPS-weighted-average shares

 

18,741

   

18,789

   

18,753

   

18,871

 

Effect of dilutive securities:

                       

Stock options

 

199

   

273

   

203

   

270

 

Denominator for diluted EPS-weighted-average shares and assumed 
   conversions

 

18,940

   

19,062

   

18,956

   

19,141

 

(1) Represents interest paid on Senior Notes between September 30, 2014 (issuance date of Class A-2 Notes) and October 30, 2014 (retirement date of Senior Notes).
(2) Costs indirectly associated with issuance of Class A-2 Notes not capitalized as debt issuance costs in accordance with U.S. GAAP.
(3) For 2014: tax benefits from R&D credits and domestic production activity deductions related to tax years 2011-2013; for 2013: tax benefit related to release of valuation allowances established in prior years for various state operating loss carryovers.

 

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 provided by operating activities, plus receipts from notes, equipment contracts and other long-term receivables (collectively, "long-term receivables"), less additions to property and equipment, principal payments on capital lease and financing obligations and mandatory debt service payments):

   

Twelve Months Ended

   

December 31,

   

2014

 

2013

Cash flows provided by operating activities

 

$

118,524

   

$

127,815

 

Principal receipts from long-term receivables

 

15,284

   

13,982

 

Additions to property and equipment

 

(5,937)

   

(7,037)

 

Principal payments on capital lease and financing obligations

 

(11,825)

   

(9,968)

 

Mandatory debt service payments

 

(3,540)

   

(4,720)

 

Free cash flow

 

112,506

   

120,072

 

 

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, 2014

 

Franchise - 
Applebee's

    

Franchise - 
IHOP

    

Company 
Restaurants

    

Rental 
Operations

    

Financing 
Operations

   

Total

Revenue

$

47,028

   

$

68,531

   

$

15,447

   

$

30,709

   

$

2,698

   

$

164,413

 

Expense

1,440

   

32,130

   

15,438

   

23,464

   

   

72,472

 

Gross segment profit

45,588

   

36,401

   

9

   

7,245

   

2,698

   

91,941

 

Plus:

                                 

Depreciation/amortization

2,598

   

   

537

   

3,245

   

   

6,380

 

Interest charges

   

   

97

   

3,528

   

   

3,625

 

Segment EBITDA

$

48,186

   

$

36,401

   

$

643

   

$

14,018

   

$

2,698

   

$

101,946

 

 

 

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

 

 

 

Twelve months ended December 31, 2014

 

Franchise - 
Applebee's

   

Franchise - 
IHOP

   

Company 
Restaurants

    

Rental 
Operations

   

Financing 
Operations

    

Total

Revenue

$

195,600

   

$

260,525

   

$

62,454

   

$

122,932

   

$

13,477

   

$

654,988

 

Expense

5,239

   

116,554

   

62,618

   

94,637

   

825

   

279,873

 

Gross segment profit

190,361

   

143,971

   

(164)

   

28,295

   

12,652

   

375,115

 

Plus:

                                 

Depreciation/amortization

10,421

   

   

2,092

   

13,184

   

   

25,697

 

Interest charges

   

   

393

   

14,716

   

   

15,109

 

Segment EBITDA

$

200,782

   

$

143,971

   

$

2,321

   

$

56,195

   

$

12,652

   

$

415,921

 

 

 

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

 

 

Restaurant Data

The following table sets forth, for the three and twelve months ended December 31, 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

 

Twelve Months Ended

   

December 31,

 

December 31,

   

2014

 

2013

 

2014

 

2013

   

(unaudited)

Applebee's Restaurant Data

                       

Effective Restaurants(a)

                       

Franchise

 

1,988

   

1,991

   

1,986

   

1,996

 

Company

 

23

   

23

   

23

   

23

 

Total

 

2,011

   

2,014

   

2,009

   

2,019

 
                         

System-wide(b)

                       

Sales percentage change(c)

 

3.4

%

 

(0.4)

%

 

1.3

%

 

0.3

%

Domestic same-restaurant sales percentage change(d)

 

2.8

%

 

(0.7)

%

 

1.1

%

 

(0.3)

%

                         

Franchise(b)(e)

                       

Sales percentage change(c)

 

3.3

%

 

(0.4)

%

 

1.4

%

 

5.7

%

Domestic same-restaurant sales percentage change(d)

 

2.7

%

 

(0.7)

%

 

1.1

%

 

(0.3)

%

Average weekly domestic unit sales (in thousands)

 

$

45.9

   

$

44.5

   

$

47.4

   

$

46.5

 
                                 
   

Three Months Ended

 

Twelve Months Ended

   

December 31,

 

December 31,

   

2014

 

2013

 

2014

 

2013

   

(unaudited)

IHOP Restaurant Data

                       

Effective Restaurants(a)

                       

Franchise

 

1,467

   

1,422

   

1,454

   

1,414

 

Area license

 

167

   

168

   

167

   

167

 

Company

 

11

   

13

   

11

   

12

 

Total

 

1,645

   

1,603

   

1,632

   

1,593

 
                         

System-wide(b)

                       

Sales percentage change(c)

 

8.6

%

 

6.4

%

 

6.6

%

 

4.8

%

Domestic same-restaurant sales percentage change(d)

 

6.1

%

 

4.5

%

 

3.9

%

 

2.4

%

                         

Franchise(b)

                       

Sales percentage change(c)

 

8.8

%

 

6.4

%

 

6.7

%

 

4.8

%

Domestic same-restaurant sales percentage change(d)

 

6.1

%

 

4.5

%

 

3.9

%

 

2.4

%

Average weekly domestic unit sales (in thousands)

 

$

36.6

   

$

34.7

   

$

36.0

   

$

34.7

 
                         

Area License(b)

                       

Sales percentage change(c)

 

7.3

%

 

8.6

%

 

6.3

%

 

6.3

%

                                 

(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, 2014 and 2013 were as follows:

 

Three Months Ended

 

Twelve Months Ended

 

December 31,

 

December 31,

 

2014

    

2013

    

2014

    

2013

 

(In millions)

Reported sales (unaudited)

                     

Applebee's franchise restaurant sales

$

1,100.9

   

$

1,065.6

   

$

4,535.1

   

$

4,474.7

 

IHOP franchise restaurant sales

$

697.6

   

$

641.2

   

$

2,725.7

   

$

2,553.9

 

IHOP area license restaurant sales

$

66.0

   

$

61.5

   

$

265.2

   

$

249.5

 

(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 twelve months ended December 31, 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 December 31,

   

Twelve Months Ended December 31,

Applebee's Restaurant Development Activity

 2014

 

2013

 

2014

 

2013

Summary - beginning of period:

                     

Franchise

1,987

   

1,987

   

1,988

   

2,011

 

Company restaurants

23

   

23

   

23

   

23

 

Total Applebee's restaurants, beginning of period

2,010

   

2,010

   

2,011

   

2,034

 

Franchise restaurants opened:

                     

Domestic

9

   

14

   

29

   

20

 

International

3

   

2

   

7

   

6

 

Total franchise restaurants opened

12

   

16

   

36

   

26

 

Franchise restaurants closed:

                     

Domestic

(3)

   

(13)

   

(20)

   

(44)

 

International

(2)

   

(2)

   

(10)

   

(5)

 

Total franchise restaurants closed

(5)

   

(15)

   

(30)

   

(49)

 

Net franchise restaurant (reduction) development

7

   

1

   

6

   

(23)

 

Summary - end of period:

                     

Franchise

1,994

   

1,988

   

1,994

   

1,988

 

Company restaurants

23

   

23

   

23

   

23

 

Total Applebee's restaurants, end of period

2,017

   

2,011

   

2,017

   

2,011

 
                       

IHOP Restaurant Development Activity

                     

Summary - beginning of period:

                     

Franchise

1,466

   

1,421

   

1,439

   

1,404

 

Area license

168

   

168

   

168

   

165

 

Company

10

   

13

   

13

   

12

 

Total IHOP restaurants, beginning of period

1,644

   

1,602

   

1,620

   

1,581

 

Franchise/area license restaurants opened:

                     

Domestic franchise

7

   

17

   

34

   

42

 

Domestic area license

1

   

1

   

4

   

4

 

International franchise

3

   

5

   

18

   

11

 

International area license

   

   

   

1

 

Total franchise/area license restaurants opened

11

   

23

   

56

   

58

 

Franchise/area license restaurants closed:

                     

Domestic franchise

(3)

   

(4)

   

(19)

   

(17)

 

Domestic area license

(2)

   

(1)

   

(4)

   

(2)

 

International franchise

   

   

(2)

   

 

International area license

   

   

(1)

   

 

Total franchise/area license restaurants closed

(5)

   

(5)

   

(26)

   

(19)

 

Net franchise/area license restaurant development

6

   

18

   

30

   

39

 

Refranchised from Company restaurants

   

   

4

   

1

 

Franchise restaurants reacquired by the Company

(1)

   

   

(2)

   

(2)

 

Net franchise/area license restaurant additions

5

   

18

   

32

   

38

 
                       

Summary - end of period

                     

Franchise

1,472

   

1,439

   

1,472

   

1,439

 

Area license

167

   

168

   

167

   

168

 

Company

11

   

13

   

11

   

13

 

Total IHOP restaurants, end of period

1,650

   

1,620

   

1,650

   

1,620

 

SOURCE DineEquity, Inc.

Contacts:

Ken Diptee
Executive Director
Investor Relations
DineEquity, Inc.
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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