DineEquity, Inc. Reports Second Quarter Fiscal 2016 Results

Updates Fiscal 2016 Financial Performance Guidance

Second Quarter 2016 Summary

  • GAAP EPS of $1.45
  • Adjusted EPS (Non-GAAP) of $1.59
  • Domestic system-wide comparable same-restaurant sales increased 0.2% at IHOP and declined 4.2% at Applebee's
  • Returned approximately $32 million to shareholders, which includes $17 million in cash dividends and $15 million in share repurchases

First Six Months of 2016 Summary

  • GAAP EPS of $2.82
  • Adjusted EPS (Non-GAAP) of $3.17
  • Domestic system-wide comparable same-restaurant sales increased 0.8% at IHOP and declined 3.9% at Applebee's
  • Generated cash from operating activities of approximately $54 million and free cash flow (Non-GAAP) of approximately $56 million
  • Returned $69 million to shareholders, which includes $35 million in share repurchases and $34 million in cash dividends

GLENDALE, Calif., Aug. 3, 2016 // PRNewswire // -- DineEquity, Inc. (NYSE: DIN), the parent company of Applebee's Neighborhood Grill & Bar® and IHOP® restaurants, today announced financial results for the second quarter of fiscal 2016. 

"We posted growth in adjusted earnings per diluted share for the second quarter, despite soft comparable sales at Applebee's and IHOP.  While we are dissatisfied with the comparable sales results, we are confident in our clear long-term strategies for both brands," said Julia A. Stewart, Chairman and Chief Executive Officer of DineEquity, Inc.

Ms. Stewart concluded, "These long-term strategies will build our brands across the spectrum of food and beverage innovation, social and digital marketing, development expansion as well as platforms to meet the convenience needs of today's consumer, such as delivery, to-go initiatives and mobile applications to name a few."   

Second Quarter Fiscal 2016 Financial Summary

  • GAAP net income available to common stockholders was $26.4 million for the second quarter of 2016, or earnings per diluted share of $1.45. This compares to net income available to common stockholders of $26.5 million, or earnings per diluted share of $1.40, for the second quarter of 2015. The slight decrease in GAAP net income was mainly due to higher closure and impairment charges and an increase in general and administrative expenses. The decrease was partially offset by lower income tax expense, higher gross profit and a decline in interest expense. The increase in earnings per diluted share was due to a decrease in weighted average diluted shares outstanding.
  • Adjusted net income available to common stockholders was $28.8 million, or adjusted earnings per diluted share of $1.59, for the second quarter of 2016. This compares to $28.9 million, or adjusted earnings per diluted share of $1.53, for the same period of 2015. The slight decrease in adjusted net income was mainly due to higher general and administrative expenses. The increase in adjusted earnings per diluted share was due to a decrease in weighted average diluted shares outstanding. (See "Non-GAAP Financial Measures" below.)
  • General and administrative expenses were $36.5 million for the second quarter of 2016. This compares to $34.6 million for the same period of 2015. The expected increase was mainly due to higher personnel costs for several senior management positions filled after the first quarter of 2015. Approximately $0.5 million of the general and administrative expenses was related to the strategic consolidation of our restaurant support center announced on September 3, 2015.

First Six Months of Fiscal 2016 Summary

  • GAAP net income available to common stockholders was $51.6 million for the first six months of fiscal 2016, or earnings per diluted share of $2.82. This compares to net income available to common stockholders of $54.6 million, or earnings per diluted share of $2.88, for the first six months of fiscal 2015. The decrease in GAAP net income was primarily due to higher general and administrative expenses and higher closure and impairment charges in the first six months of fiscal 2016 compared to the same period of 2015. The decrease was partially offset by lower income tax expense and a decline in interest expense. Additionally, earnings per diluted share were favorably impacted by a decrease in weighted average diluted shares outstanding.
  • Adjusted net income available to common stockholders was $58.0 million, or adjusted earnings per diluted share of $3.17, for the first six months of fiscal 2016. This compares to $60.0 million, or adjusted earnings per diluted share of $3.17, for the same period of fiscal 2015. The decline in adjusted net income was mainly due to higher general and administrative expenses. The decline was partially offset by lower income taxes and a decrease in cash interest expense. Despite the decrease in adjusted earnings, earnings per diluted share were unchanged due to a decrease in weighted average diluted shares outstanding. (See "Non-GAAP Financial Measures" below.)
  • General and administrative expenses were $75.9 million for the first six months of 2016. This compares to $68.8 million for the same period of 2015. The increase was primarily due to higher personnel costs. Approximately $2.6 million of the increase in general and administrative expenses was due to the strategic consolidation of our restaurant support center.
  • In the first six months of fiscal 2016, cash flows from operating activities were $53.9 million compared to $48.1 million in the same period of fiscal 2015. Free cash flow was $56.4 million for the first six months of fiscal 2016, compared to $49.7 million for the first six months of fiscal 2015. (See "Non-GAAP Financial Measures" below.)

Same-Restaurant Sales Performance

Second Quarter of Fiscal 2016

  • IHOP's domestic system-wide comparable same restaurant sales increased 0.2% for the second quarter of 2016. 
  • Applebee's domestic system-wide comparable same-restaurant sales declined 4.2% for the second quarter of 2016.

First Six Months of Fiscal 2016

  • IHOP's domestic system-wide comparable same restaurant sales increased 0.8% for the first six months of fiscal 2016. 
  • Applebee's domestic system-wide comparable same-restaurant sales declined 3.9% for the first six months of fiscal 2016.

Financial Performance Guidance for Fiscal 2016

DineEquity reiterates its financial performance guidance for fiscal 2016 contained in the press release issued on February 24, 2016 and the Form 8-K filed on February 24, 2016, except for the revisions noted below.

  • Revised Applebee's comparable same-restaurant sales performance to range between negative 3.0% and negative 4.5%. This compares to the previous expectations of between negative 2.0% and positive 2.0%.
  • Revised IHOP's comparable same-restaurant sales performance to range between positive 0.5% and positive 2.0%. This compares to the previous expectations of between positive 1.0% and positive 4.0%.
  • Revised expectations for Applebee's franchisees to develop between 25 and 33 new restaurants, reflecting a reduction from previous expectations of between 35 and 45 new restaurants. IHOP franchisees and its area licensee are expected to develop between 65 and 77 new restaurants. This compares to the previous projections of between 60 and 70 new restaurants.
  • Revised expectations for Franchise segment profit to be between $342 million and $352 million. This compares to the previous expectations of between $345 million and $360 million.
  • Reiterated expectations for the Rental and Financing segments to generate roughly $40 million in combined profit.
  • Reiterated expectations for general and administrative expenses to range between $154 million and $158 million, including non-cash stock-based compensation expense and depreciation of approximately $20 million. This amount includes approximately $4 million of non-recurring costs related to our restaurant support center consolidation.
  • Reiterated expectations for interest expense to be approximately $62 million. Approximately $3 million is projected to be non-cash interest expense.
  • Revised expectations for weighted average diluted shares outstanding to be approximately 18.2 million shares. This compares to the previous expectations of approximately 18.5 million shares.
  • Reiterated expectations for the income tax rate to be approximately 37%.
  • Revised expectations for cash flows provided by operating activities to range between $112 million and $120 million. This compares to previous expectations of between $115 million and $125 million.
  • Reiterated expectations for capital expenditures to be roughly $8 million.
  • Revised expectations for free cash flow (See "Non-GAAP Financial Measures" below) to range between $113 million and $121 million. This compares to the original expectations of between $116 million and $126 million. Our guidance reflects non-recurring tax payments totaling approximately $10 million related to deferred gains from the repurchase of our debt, primarily in 2008 and 2009, approximately $9 million in pre-tax cash payments related to our restaurant support center consolidation and the impact of fiscal 2016 containing 52 weeks compared to 53 weeks in fiscal 2015, taking into account the effect on working capital, including gift card receivables.

2016 Free Cash Flow (Non-GAAP) Guidance Table

 

 

 

(In millions)

 

Cash flows from operations

$112 - 120

 

Approximate net receipts from notes and equipment contracts receivable

9

 

Approximate capital expenditures

(8)

 

Free cash flow (Non-GAAP)

$113 - 121

 

Investor Conference Call Today

DineEquity 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 (888) 771-4371 and reference passcode 42944239. International callers, please dial (847) 585-4405 and reference passcode 42944239.

A live webcast of the call will be available at www.dineequity.com, and may be accessed by visiting Calls & Presentations on 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 August 3, 2016 through 8:59 p.m. Pacific Time on August 10, 2016 by dialing (888) 843-7419 and referencing passcode 42944239#. International callers, please dial (630) 652-3042 and reference passcode 42944239#. An online archive of the webcast will also be available on the Investors section of DineEquity's website.

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 3,700 restaurants combined in 19 countries and U.S. territories and over 400 franchisees, 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," "could," "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)," "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 gain or loss related to the disposition of assets, and other items deemed not reflective of current operations.  This is presented on an aggregate basis and a per share (diluted) basis.  "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.  "Segment EBITDA" for a given period is defined as gross profit plus depreciation and amortization as well as interest charges related to the segment.  Management utilizes free cash flow to determine the amount of cash available for general corporate and strategic purposes and for the return of cash to stockholders pursuant to our capital allocation strategy. 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 and free cash flow are supplemental non-GAAP financial measures and should not be considered in isolation or as a substitute for measures of performance prepared in accordance with United States generally accepted accounting principles.

DineEquity, Inc. and Subsidiaries

Consolidated Statements of Income

(In thousands, except per share amounts)

(Unaudited)

 
   

Three Months Ended

 

Six Months Ended

   

June 30,

 

June 30,

   

2016

 

2015

 

2016

 

2015

Revenues:

               

Franchise and restaurant revenues

 

$

126,989

   

$

137,768

   

$

256,775

   

$

279,586

 

Rental revenues

 

30,830

   

31,132

   

62,239

   

62,534

 

Financing revenues

 

2,439

   

2,649

   

4,768

   

5,243

 

Total revenues

 

160,258

   

171,549

   

323,782

   

347,363

 

Cost of revenues:

               

Franchise and restaurant expenses

 

39,707

   

51,423

   

80,576

   

103,449

 

Rental expenses

 

23,030

   

23,319

   

46,261

   

46,809

 

Financing expenses

 

146

   

   

146

   

12

 

Total cost of revenues

 

62,883

   

74,742

   

126,983

   

150,270

 

Gross profit

 

97,375

   

96,807

   

196,799

   

197,093

 

General and administrative expenses

 

36,511

   

34,577

   

75,935

   

68,807

 

Interest expense

 

15,383

   

15,677

   

30,749

   

31,323

 

Amortization of intangible assets

 

2,500

   

2,500

   

4,980

   

5,000

 

Closure and impairment charges, net

 

3,291

   

475

   

3,726

   

2,302

 

(Gain) loss on disposition of assets

 

(48)

   

66

   

566

   

57

 

Income before income tax provision

 

39,738

   

43,512

   

80,843

   

89,604

 

Income tax provision

 

(12,909)

   

(16,615)

   

(28,471)

   

(34,295)

 

Net income

 

$

26,829

   

$

26,897

   

$

52,372

   

$

55,309

 

Net income available to common stockholders:

               

Net income

 

$

26,829

   

$

26,897

   

$

52,372

   

$

55,309

 

Less: Net income allocated to unvested participating restricted stock

 

(384)

   

(359)

   

(766)

   

(726)

 

Net income available to common stockholders

 

$

26,445

   

$

26,538

   

$

51,606

   

$

54,583

 

Net income available to common stockholders per share:

               

Basic

 

$

1.46

   

$

1.41

   

$

2.84

   

$

2.90

 

Diluted

 

$

1.45

   

$

1.40

   

$

2.82

   

$

2.88

 

Weighted average shares outstanding:

               

Basic

 

18,085

   

18,763

   

18,173

   

18,819

 

Diluted

 

18,188

   

18,895

   

18,280

   

18,959

 
                 

Dividends declared per common share

 

$

0.92

   

$

0.875

   

$

1.84

   

$

1.75

 

Dividends paid per common share

 

$

0.92

   

$

0.875

   

$

1.84

   

$

1.75

 

 

DineEquity, Inc. and Subsidiaries

Consolidated Balance Sheets

(In thousands, except share and per share amounts)

 
   

June 30,
 2016

 

December 31, 2015

   

(Unaudited)

   

Assets

       

Current assets:

       

Cash and cash equivalents

 

$

118,293

   

$

144,785

 

Receivables, net

 

101,081

   

139,206

 

Restricted cash

 

42,831

   

32,528

 

Prepaid gift card costs

 

36,455

   

46,792

 

Prepaid income taxes

 

   

5,186

 

Other current assets

 

5,637

   

4,212

 

Total current assets

 

304,297

   

372,709

 

Long-term receivables, net

 

150,922

   

160,695

 

Property and equipment, net

 

209,323

   

219,580

 

Goodwill

 

697,470

   

697,470

 

Other intangible assets, net

 

768,096

   

772,949

 

Deferred rent receivable

 

88,802

   

90,030

 

Other non-current assets, net

 

18,358

   

18,417

 

Total assets

 

$

2,237,268

   

$

2,331,850

 
         

Liabilities and Stockholders' Equity

       

Current liabilities:

       

Accounts payable

 

$

46,625

   

$

55,019

 

Gift card liability

 

114,302

   

167,657

 

Accrued employee compensation and benefits

 

14,136

   

25,085

 

Dividends payable

 

16,792

   

17,082

 

Income taxes payable

 

5,278

   

 

Current maturities of capital lease and financing obligations

 

14,559

   

14,320

 

Accrued advertising

 

5,948

   

8,758

 

Accrued interest payable

 

4,310

   

4,257

 

Other accrued expenses

 

13,725

   

6,251

 

Total current liabilities

 

235,675

   

298,429

 

Long-term debt, net

 

1,281,064

   

1,279,473

 

Capital lease obligations, less current maturities

 

77,116

   

84,781

 

Financing obligations, less current maturities

 

42,325

   

42,395

 

Deferred income taxes, net

 

254,758

   

269,469

 

Deferred rent payable

 

71,929

   

69,397

 

Other non-current liabilities

 

18,235

   

20,683

 

Total liabilities

 

1,981,102

   

2,064,627

 

Commitments and contingencies

       

Stockholders' equity:

       

Common stock, $0.01 par value, shares: 40,000,000 authorized; June 30, 2016 - 25,153,608 issued, 18,218,872 outstanding; December 31, 2015 - 25,186,048 issued, 18,535,027 outstanding

 

252

   

252

 

Additional paid-in-capital

 

288,279

   

286,952

 

Retained earnings

 

370,546

   

351,923

 

Accumulated other comprehensive loss

 

(106)

   

(107)

 

Treasury stock, at cost; shares: June 30, 2016 - 6,934,736; December 31, 2015 - 6,651,021

 

(402,805)

   

(371,797)

 

Total stockholders' equity

 

256,166

   

267,223

 

Total liabilities and stockholders' equity

 

$

2,237,268

   

$

2,331,850

 

 

DineEquity, Inc. and Subsidiaries

Consolidated Statements of Cash Flows

(In thousands)

(Unaudited)

 
   

Six Months Ended

   

June 30,

   

2016

 

2015

Cash flows from operating activities:

       

Net income

 

$

52,372

   

$

55,309

 

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

       

Depreciation and amortization

 

15,554

   

15,855

 

Non-cash interest expense

 

1,591

   

1,519

 

Deferred income taxes

 

(11,896)

   

(12,612)

 

Non-cash stock-based compensation expense

 

5,647

   

4,593

 

Tax benefit from stock-based compensation

 

1,169

   

4,688

 

Excess tax benefit from stock-based compensation

 

(865)

   

(4,572)

 

Closure and impairment charges

 

1,249

   

2,302

 

Loss on disposition of assets

 

566

   

57

 

Other

 

416

   

(1,534)

 

Changes in operating assets and liabilities:

       

Accounts receivable, net

 

880

   

(11,249)

 

Current income tax receivables and payables

 

5,291

   

5,561

 

Gift card receivables and payables

 

(18,311)

   

(3,256)

 

Other current assets

 

(1,424)

   

(2,299)

 

Accounts payable

 

8,544

   

6,024

 

Accrued employee compensation and benefits

 

(10,949)

   

(10,790)

 

Accrued interest payable

 

53

   

(10,240)

 

Other current liabilities

 

4,024

   

8,767

 

Cash flows provided by operating activities

 

53,911

   

48,123

 

Cash flows from investing activities:

       

Additions to property and equipment

 

(1,931)

   

(4,612)

 

Proceeds from sale of property and equipment

 

   

800

 

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

 

8,658

   

9,517

 

Other

 

(250)

   

(110)

 

Cash flows provided by investing activities

 

6,477

   

5,595

 

Cash flows from financing activities:

       

Principal payments on capital lease and financing obligations

 

(6,853)

   

(5,975)

 

Repurchase of common stock

 

(35,008)

   

(35,007)

 

Dividends paid on common stock

 

(34,029)

   

(33,271)

 

Tax payments for restricted stock upon vesting

 

(2,432)

   

(3,010)

 

Proceeds from stock options exercised

 

880

   

8,374

 

Excess tax benefit from stock-based compensation

 

865

   

4,572

 

Change in restricted cash

 

(10,303)

   

11,007

 

Other

 

   

(29)

 

Cash flows used in financing activities

 

(86,880)

   

(53,339)

 

Net change in cash and cash equivalents

 

(26,492)

   

379

 

Cash and cash equivalents at beginning of period

 

144,785

   

104,004

 

Cash and cash equivalents at end of period

 

$

118,293

   

$

104,383

 

 

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: Kansas City Support Center consolidation costs; amortization of intangible assets; closure and impairment charges; non-cash interest expense; gain or loss on disposition of assets; and the combined tax effect of the preceding adjustments; and deferred tax adjustments considered unrelated to current period operations, as well as related per share data:

 
 
   

Three Months Ended

 

Six Months Ended

   

June 30,

 

June 30,

   

2016

 

2015

 

2016

 

2015

Net income available to common stockholders, as reported

 

$

26,445

   

$

26,538

   

$

51,606

   

$

54,583

 

Kansas City Support Center consolidation costs(1)

 

2,966

   

   

5,032

   

 

Amortization of intangible assets

 

2,500

   

2,500

   

4,980

   

5,000

 

Closure and impairment charges

 

820

   

475

   

1,255

   

2,302

 

Non-cash interest expense

 

800

   

764

   

1,591

   

1,519

 

(Gain) loss on disposition of assets

 

(48)

   

66

   

566

   

57

 

Income tax provision

 

(2,605)

   

(1,446)

   

(4,967)

   

(3,373)

 

Deferred tax adjustments(2)

 

(2,002)

   

   

(2,002)

   

 

Net income allocated to unvested participating restricted stock

 

(35)

   

(30)

   

(97)

   

(73)

 

Net income available to common stockholders, as adjusted

 

$

28,841

   

$

28,867

   

$

57,964

   

$

60,015

 
                 

Diluted net income available to common stockholders per share:

               

Net income available to common stockholders, as reported

 

$

1.45

   

$

1.40

   

$

2.82

   

$

2.88

 

Kansas City Support Center consolidation costs(1)

 

0.10

   

   

0.17

   

 

Amortization of intangible assets

 

0.08

   

0.08

   

0.17

   

0.16

 

Closure and impairment charges

 

0.03

   

0.02

   

0.04

   

0.08

 

Non-cash interest expense

 

0.03

   

0.03

   

0.05

   

0.05

 

(Gain) loss on disposition of assets

 

(0.00)

   

0.00

   

0.02

   

0.00

 

Deferred tax adjustments(2)

 

(0.11)

   

   

(0.11)

   

 

Net income allocated to unvested participating restricted stock

 

(0.00)

   

(0.00)

   

(0.00)

   

(0.00)

 

Rounding

 

0.01

   

   

0.01

   

 

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

 

$

1.59

   

$

1.53

   

$

3.17

   

$

3.17

 
                 

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

 

$

28,841

   

$

28,867

   

$

57,964

   

$

60,015

 

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

 

1

   

1

   

2

   

3

 

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

 

$

28,842

   

$

28,868

   

$

57,966

   

$

60,018

 
                 

Denominator for basic EPS-weighted-average shares

 

18,085

   

18,763

   

18,173

   

18,819

 

Dilutive effect of stock options

 

103

   

132

   

107

   

140

 

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

 

18,188

   

18,895

   

18,280

   

18,959

 

 

   

(1)

Includes $2,471 of lease termination costs for the three and six months ended June 30, 2016 reported in "closure and impairment charges" in the Consolidated Statements of Comprehensive Income

(2)

Adjustments to deferred tax balances primarily due to reduction of effective state tax rate because of Support Center consolidation.

 

DineEquity, Inc. and Subsidiaries

Non-GAAP Financial Measures

(Unaudited)

 

Reconciliation of the Company's cash provided by operating activities to "free cash flow" (cash provided by operating activities, plus receipts from notes and equipment contracts receivable, less additions to property and equipment). We believe this information is helpful to investors to determine our cash available for general corporate purposes and for the return of cash to stockholders pursuant to our capital allocation strategy, and is the same measure used by management for these purposes.

 

     
   

Six Months Ended

   

June 30,

   

2016

 

2015

   

(In millions)

Cash flows provided by operating activities

 

$

53.9

   

$

48.1

 

Receipts from notes and equipment contracts receivable

 

4.4

   

6.2

 

Additions to property and equipment

 

(1.9)

   

(4.6)

 

Free cash flow

 

56.4

   

49.7

 

Dividends paid on common stock

 

(34.0)

   

(33.3)

 

Repurchase of DineEquity common stock

 

(35.0)

   

(35.0)

 
   

$

(12.6)

   

$

(18.6)

 

 

DineEquity, Inc. and Subsidiaries

Non-GAAP Financial Measures

(In thousands)

(Unaudited)

 

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

 
   

Three months ended June 30, 2016

   

Franchise - Applebee's

 

Franchise - IHOP

 

Company Restaurants

 

Rental Operations

 

Financing Operations

 

Total

Revenue

 

$

48,376

   

$

74,144

   

$

4,469

   

$

30,830

   

$

2,439

   

$

160,258

 

Expense

 

1,715

   

33,303

   

4,689

   

23,030

   

146

   

62,883

 

Gross profit

 

46,661

   

40,841

   

(220)

   

7,800

   

2,293

   

97,375

 

Plus:

                       

Depreciation/amortization

 

2,625

   

   

104

   

3,138

   

   

5,867

 

Interest charges

 

   

   

96

   

3,012

   

   

3,108

 

Segment EBITDA

 

$

49,286

   

$

40,841

   

$

(20)

   

$

13,950

   

$

2,293

   

$

106,350

 

 

   

Three months ended June 30, 2015

   

Franchise - Applebee's

 

Franchise - IHOP

 

Company Restaurants

 

Rental Operations

 

Financing Operations

 

Total

Revenue

 

$

49,920

   

$

70,361

   

$

17,487

   

$

31,132

   

$

2,649

   

$

171,549

 

Expense

 

1,730

   

32,338

   

17,355

   

23,319

   

   

74,742

 

Gross profit

 

48,190

   

38,023

   

132

   

7,813

   

2,649

   

96,807

 

Plus:

                       

Depreciation/amortization

 

2,588

   

   

184

   

3,196

   

   

5,968

 

Interest charges

 

   

   

98

   

3,374

   

   

3,472

 

Segment EBITDA

 

$

50,778

   

$

38,023

   

$

414

   

$

14,383

   

$

2,649

   

$

106,247

 

 

   

Six months ended June 30, 2016

   

Franchise - Applebee's

 

Franchise - IHOP

 

Company Restaurants

 

Rental Operations

 

Financing Operations

 

Total

Revenue

 

$

99,461

   

$

148,033

   

$

9,281

   

$

62,239

   

$

4,768

   

$

323,782

 

Expense

 

3,600

   

67,075

   

9,901

   

46,261

   

146

   

126,983

 

Gross profit

 

95,861

   

80,958

   

(620)

   

15,978

   

4,622

   

196,799

 

Plus:

                       

Depreciation/amortization

 

5,221

   

   

215

   

6,280

   

   

11,716

 

Interest charges

 

   

   

192

   

6,122

   

   

6,314

 

Segment EBITDA

 

$

101,082

   

$

80,958

   

$

(213)

   

$

28,380

   

$

4,622

   

$

214,829

 

 

   

Six months ended June 30, 2015

   

Franchise - Applebee's

 

Franchise - IHOP

 

Company Restaurants

 

Rental Operations

 

Financing Operations

 

Total

Revenue

 

$

102,351

   

$

142,472

   

$

34,763

   

$

62,534

   

$

5,243

   

$

347,363

 

Expense

 

3,326

   

66,259

   

33,864

   

46,809

   

12

   

150,270

 

Gross profit

 

99,025

   

76,213

   

899

   

15,725

   

5,231

   

197,093

 

Plus:

                       

Depreciation/amortization

 

5,180

   

   

373

   

6,420

   

   

11,973

 

Interest charges

 

   

   

197

   

6,875

   

   

7,072

 

Segment EBITDA

 

$

104,205

   

$

76,213

   

$

1,469

   

$

29,020

   

$

5,231

   

$

216,138

 

 

Restaurant Data

 

The following table sets forth, for the three and six months ended June 30, 2016 and 2015, 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

 

Six Months Ended

   

June 30,

 

June 30,

   

2016

 

2015

 

2016

 

2015

   

(unaudited)

Applebee's Restaurant Data

               

Effective Restaurants(a)

               

Franchise

 

2,028

   

1,990

   

2,029

   

1,991

 

Company

 

   

23

   

   

23

 

Total

 

2,028

   

2,013

   

2,029

   

2,014

 
                 

System-wide(b)

               

Sales percentage change(c)

 

(4.4)

%

 

2.0

%

 

(4.2)

%

 

2.9

%

Domestic same-restaurant sales percentage change(d)

 

(4.2)

%

 

1.0

%

 

(3.9)

%

 

2.0

%

                 

Franchise(b)

               

Sales percentage change(c)

 

(3.4)

%

 

2.0

%

 

(3.2)

%

 

2.9

%

Domestic same-restaurant sales percentage change(d)

 

(4.2)

%

 

1.0

%

 

(3.9)

%

 

2.0

%

Average weekly domestic unit sales (in thousands)

 

$

46.5

   

$

48.9

   

$

47.6

   

$

50.0

 
                                 

 

   

Three Months Ended

 

Six Months Ended

   

June 30,

 

June 30,

   

2016

 

2015

 

2016

 

2015

   

(unaudited)

IHOP Restaurant Data

               

Effective Restaurants(a)

               

Franchise

 

1,510

   

1,471

   

1,508

   

1,471

 

Area license

 

165

   

167

   

165

   

167

 

Company

 

11

   

13

   

11

   

13

 

Total

 

1,686

   

1,651

   

1,684

   

1,651

 
                 

System-wide(b)

               

Sales percentage change(c)

 

2.5

%

 

7.1

%

 

2.4

%

 

6.6

%

Domestic same-restaurant sales percentage change(d)

 

0.2

%

 

6.2

%

 

0.8

%

 

5.5

%

                 

Franchise(b)

               

Sales percentage change(c)

 

2.8

%

 

6.8

%

 

2.6

%

 

6.4

%

Domestic same-restaurant sales percentage change(d)

 

0.2

%

 

6.2

%

 

0.8

%

 

5.5

%

Average weekly domestic unit sales (in thousands)

 

$

37.5

   

$

37.4

   

$

37.6

   

$

37.6

 
                 

Area License (b)

               

Sales percentage change(c)

 

0.5

%

 

7.7

%

 

0.4

%

 

7.4

%

                                 

 

(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 franchisees and area licensees as well as those owned by the Company.

(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 six months ended June 30, 2016 and 2015 were as follows:

 

       
 

Three Months Ended

 

Six Months Ended

 

June 30,

 

June 30,

 

2016

 

2015

 

2016

 

2015

 

(In millions)

Reported sales (unaudited)

             

Applebee's domestic franchise restaurant sales

$

1,134.2

   

$

1,174.6

   

$

2,323.2

   

$

2,400.6

 

IHOP franchise restaurant sales

735.4

   

$

715.1

   

1,474.3

   

$

1,436.4

 

IHOP area license restaurant sales

70.2

   

$

69.8

   

145.5

   

$

144.8

 

Total

$

1,939.8

   

$

1,959.5

   

$

3,943.0

   

$

3,981.8

 

 

   

(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.

 

DineEquity, Inc. and Subsidiaries

Restaurant Data

 (unaudited)

 

The following table summarizes our restaurant development activity:

 
 

Three Months Ended

 

Six Months Ended

 

June 30,

 

June 30,

 

2016

 

2015

 

2016

 

2015

Applebee's Restaurant Development Activity

         

Summary - beginning of period:

             

Franchise

2,029

   

1,991

   

2,033

   

1,994

 

Company restaurants

   

23

   

   

23

 

Total Applebee's restaurants, beginning of period

2,029

   

2,014

   

2,033

   

2,017

 

Franchise restaurants opened:

             

Domestic

2

   

6

   

7

   

10

 

International

3

   

2

   

4

   

4

 

Total franchise restaurants opened

5

   

8

   

11

   

14

 

Franchise restaurants closed:

             

Domestic

(6)

   

(4)

   

(12)

   

(8)

 

International

(1)

   

(2)

   

(5)

   

(7)

 

Total  franchise restaurants closed

(7)

   

(6)

   

(17)

   

(15)

 

Net franchise restaurant (reduction) development

(2)

   

2

   

(6)

   

(1)

 

Summary - end of period:

             

Franchise

2,027

   

1,993

   

2,027

   

1,993

 

Company restaurants

   

23

   

   

23

 

Total Applebee's restaurants, end of period

2,027

   

2,016

   

2,027

   

2,016

 
   

IHOP Restaurant Development Activity

             

Summary - beginning of period:

             

Franchise

1,509

   

1,470

   

1,507

   

1,472

 

Area license

164

   

167

   

165

   

167

 

Company

11

   

13

   

11

   

11

 

Total IHOP restaurants, beginning of period

1,684

   

1,650

   

1,683

   

1,650

 

Franchise/area license restaurants opened:

         

Domestic franchise

13

   

7

   

19

   

13

 

Domestic area license

2

   

1

   

2

   

2

 

International franchise

2

   

3

   

3

   

3

 

Total franchise/area license restaurants opened

17

   

11

   

24

   

18

 

Franchise/area license restaurants closed:

             

Domestic franchise

(5)

   

(1)

   

(8)

   

(7)

 

Domestic area license

   

(2)

   

(1)

   

(3)

 

International franchise

(1)

   

   

(3)

   

 

Total franchise/area license restaurants closed

(6)

   

(3)

   

(12)

   

(10)

 

Net franchise/area license restaurant development

11

   

8

   

12

   

8

 

Refranchised from Company restaurants

1

   

   

1

   

1

 

Franchise restaurants reacquired by the Company

   

   

   

(3)

 

Net franchise/area license restaurant additions (reductions)

12

   

8

   

13

   

6

 

Summary - end of period

             

Franchise

1,519

   

1,479

   

1,519

   

1,479

 

Area license

166

   

166

   

166

   

166

 

Company

10

   

13

   

10

   

13

 

Total IHOP restaurants, end of period

1,695

   

1,658

   

1,695

   

1,658

 

SOURCE DineEquity, Inc.

Contacts:

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

Patrick Lenow
Media Relations
Vice President, Communications
DineEquity, Inc.
818-637-3122

###

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