DineEquity, Inc. Reports Second Quarter Fiscal 2017 Results

Second Quarter 2017 Summary

  • GAAP EPS of $1.18
  • Adjusted EPS (Non-GAAP) of $1.30
  • Domestic system-wide comparable same-restaurant sales declined 2.6% at IHOP and declined 6.2% at Applebee's

 

First Six Months of Fiscal 2017 Summary

  • GAAP EPS of $1.98
  • Adjusted EPS (Non-GAAP) of $2.51
  • Domestic system-wide comparable same-restaurant sales declined 2.1% at IHOP and declined 7.0% at Applebee's
  • Generated cash from operating activities of approximately $20.9 million and adjusted free cash flow (Non-GAAP) of approximately $19.2 million

GLENDALE, Calif. - Aug. 10, 2017 // 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 2017.

"We are investing in the empowerment of our brands by improving overall franchisee financial health, closing underperforming restaurants and enhancing the supply chain. We are focusing on operations and elevating the guest experience, whether in our restaurants or off-premise. We believe 2017 will be a transitional year for Applebee's and we are making the necessary investments for overall long-term brand health and expect to see improvement over the next year," said Richard J. Dahl, Chairman and interim Chief Executive Officer of DineEquity, Inc.

Mr. Dahl added, "IHOP remains on solid ground, despite soft sales this quarter. I am optimistic about the growth in both effective franchise restaurants and system-wide sales. IHOP is currently rolling out initiatives to address the convenience needs of our guests, which are inclusive of online ordering as well as accelerating tests for delivery and development of an IHOP mobile application. We believe these will create enhanced revenue channels."

Second Quarter of Fiscal 2017 Financial Highlights

GAAP net income available to common stockholders was $20.9 million for the second quarter of fiscal 2017, or earnings per diluted share of $1.18. This compares to net income available to common stockholders of $26.4 million, or earnings per diluted share of $1.45, for the second quarter of fiscal 2016. The decline in GAAP net income for the second quarter of 2017 compared to the same period of 2016 was mainly due to lower gross profit and higher income tax expense. The decrease in gross profit was due to a 6.2% decline in Applebee's domestic system-wide comparable same-restaurant sales, an increase in bad debt expense, restaurant closures and a reduction in revenue recognized due to the collectability of Applebee's franchisee royalties. These items were partially offset by a larger gain on the disposition of assets in the second quarter of 2017 compared to the same period of 2016. The impact of lower net income on earnings per diluted share was partially mitigated by fewer weighted average diluted shares outstanding for the second quarter of 2017 compared to the second quarter of 2016. Our effective tax rate for the second quarter of 2017 was 46.5% compared to 32.5% for the same quarter of 2016 primarily due to an increase in unrecognized tax benefits for deductions related to internal software development and the impact of new accounting guidance for share-based payments.

Adjusted net income available to common stockholders was $23.0 million, or adjusted earnings per diluted share of $1.30, for the second quarter of fiscal 2017. This compares to $28.8 million, or adjusted earnings per diluted share of $1.59, for the same period of fiscal 2016. The decrease in adjusted net income was mainly due to lower gross profit, as explained in the preceding paragraph. The impact of lower adjusted net income on adjusted earnings per diluted share was partially mitigated by fewer weighted average diluted shares outstanding. (See "Non-GAAP Financial Measures" below.)

General and administrative expenses were $37.4 million for the second quarter of fiscal 2017. This compares to approximately $36.5 million for the same quarter of fiscal 2016. The slight increase was mainly due to higher costs for professional services associated with investments in Applebee's stabilization initiatives, partially offset by a decrease in personnel-related costs.

First Six Months of Fiscal 2017 Financial Highlights

GAAP net income available to common stockholders was $35.0 million for the first six months of fiscal 2017, or earnings per diluted share of $1.98. This compares to net income available to common stockholders of $51.6 million, or earnings per diluted share of $2.82, for the first six months of fiscal 2016. The decrease in GAAP net income was primarily due to lower gross profit. The decrease in gross profit was due to a 7.0% decline in Applebee's domestic system-wide comparable same-restaurant sales, an increase in bad debt expense as well as restaurant closures and a reduction in revenue recognized due to the collectability of Applebee's franchisee royalties. In addition, general and administrative expenses increased for the first six months of 2017 compared to the same period of 2016. These items were partially offset by a gain on the disposition of assets in the first six months of 2017 compared to a loss in the same period of 2016. The impact of lower net income on earnings per diluted share was partially mitigated by fewer weighted average diluted shares outstanding for the first six months of 2017 compared to the same period of 2016.

Adjusted net income available to common stockholders was $44.6 million, or adjusted earnings per diluted share of $2.51, for the first six months of fiscal 2017. This compares to $58.0 million, or adjusted earnings per diluted share of $3.17, for the first six months of fiscal 2016. The decrease in adjusted net income was mainly due to lower gross profit, as explained in the preceding paragraph. The impact of lower adjusted net income on adjusted earnings per diluted share was partially offset by fewer weighted average diluted shares outstanding. (See "Non-GAAP Financial Measures" below.)

General and administrative expenses were $87.7 million the first six months of fiscal 2017 compared to $75.9 million for the same period of fiscal 2016. The increase was primarily due to approximately $9 million of non-recurring cash severance and equity compensation charges incurred in the first quarter of 2017 related to the separation of our previous chief executive officer and higher costs for professional services associated with investments in Applebee's stabilization initiatives, partially offset by a decline in recruiting and relocation costs as well as travel costs.

Cash flows from operating activities were $20.9 million for the first six months of fiscal 2017 compared to $53.9 million for the first six months of fiscal 2016. The decline was due to lower net income and unfavorable changes in net working capital. The unfavorable variance in working capital changes was mainly due to the timing of payments related to advertising funds. Adjusted free cash flow was $19.2 million for the first six months of fiscal 2017, compared to $56.4 million for the first six months of fiscal 2016. (See "Non-GAAP Financial Measures" below.)

Same-Restaurant Sales Performance
Second Quarter of Fiscal 2017

  • IHOP's domestic system-wide comparable same restaurant sales declined 2.6% for the second quarter of 2017.
  • Applebee's domestic system-wide comparable same-restaurant sales declined 6.2% for the second quarter of 2017.

First Six Months of Fiscal 2017

  • IHOP's domestic system-wide comparable same restaurant sales decreased 2.1% for the first six months of fiscal 2017.
  • Applebee's domestic system-wide comparable same-restaurant sales decreased 7.0% for the first six months of fiscal 2017.

Financial Performance Guidance for Fiscal 2017

The following projections for fiscal 2017 are based on management's expectations as of August 10, 2017. DineEquity reiterates its financial performance guidance for fiscal 2017 contained in the press release issued on May 2, 2017 and the Form 8-K filed on the same day, except for the revisions noted below.

  • Revised expectations for Applebee's domestic system-wide same-restaurant sales performance to range between negative 6.0% and negative 8.0%. This compares to previous expectations of between negative 4.0% and negative 8.0%.
  • Revised expectations for IHOP's comparable same-restaurant sales performance to range between negative 1.0% and negative 3.0%. This compares to previous expectations of between 0.0% to positive 3.0%.
  • Reiterates expectations for Applebee's franchisees to develop between 20 and 30 new restaurants globally, the majority of which are expected to be international openings.
  • Revised expectations for Applebee's closures to range between approximately 105 and 135 restaurants. This compares to previous expectations for closures of approximately 40 to 60 restaurants. The expected closures will be based on several criteria, including franchisee profitability, operational results and meeting our brand quality standards.
  • Revised expectations for IHOP franchisees and its area licensee to develop between 80 and 95 restaurants globally, the majority of which are expected to be domestic openings. This compares to previous expectations for development of 75 to 90 restaurants globally.
  • Revised expectations for IHOP closures to range between 20 and 25 restaurants. This compares to previous expectation for the closure of approximately 18 restaurants.
  • Revised expectations for Franchise segment profit to be between $302 million and $314 million. This compares to previous expectations of between $323 million and $338 million. This downward revision is primarily due to an expected contribution in the second half of 2017 of approximately $8 million to the Applebee's national advertising fund to mitigate the decline in franchisee contributions, additional expected reserves for collectability of Applebee's royalties, the revised guidance for both IHOP's comparable same-restaurant sales and Applebee's restaurant closures discussed above.
  • Reiterates expectations for the Rental and Financing segments to generate approximately $38 million in combined profit.
  • Revised expectations for general and administrative expenses to range between $166 million and $172 million, including non-cash stock-based compensation expense and depreciation of approximately $22 million. This compares to previous expectations for general and administrative expenses to range between $170 million and $177 million. The revised range is inclusive of approximately $10 million for Applebee's stabilization initiatives in fiscal 2017, of which we expect that a substantial amount will not recur. The range also includes approximately $9 million of non-recurring cash severance and equity compensation charges incurred in the first quarter of fiscal 2017.
  • Reiterates expectations for interest expense to be approximately $62 million. Approximately $3 million is projected to be non-cash interest expense.
  • Reiterates expectations for weighted average diluted shares outstanding to be approximately 18 million shares.
  • Revised expectation for the income tax rate to be approximately 40%. This compares to previous expectations for approximately 38%. The expected increase is primarily due to the impact of new accounting guidance for share-based payments.
  • Revised expectations for cash flows provided by operating activities to range between $80 million and $90 million. This compares to previous expectations of between $98 million and $108 million. The expected decline compared to fiscal 2016 is primarily due to projections for lower segment profit, partially offset by lower general and administrative expenses as discussed above.
  • Revised expectations for capital expenditures to be roughly $14 million, an increase of $2 million from the previous guidance.
  • Revised expectations for adjusted free cash flow (See "Non-GAAP Financial Measures" below) to range between $76 million and $86 million. This compares to previous expectations of between $96 million and $106 million.

2017 Adjusted Free Cash Flow (Non-GAAP) Guidance Table

 

(In millions)

 

Cash flows from operations

$80 - 90

 

Approximate net receipts from notes and equipment contracts receivable

10

 

Approximate capital expenditures

(14)

 

Adjusted free cash flow (Non-GAAP)

$76 - 86

 

Investor Conference Call Today

DineEquity will host a conference call to discuss its results on the same day at 8:00 a.m. Pacific Time.  To participate on the call, please dial (888) 771-4371 and reference passcode 45293838. International callers, please dial (847) 585-4405 and reference passcode 45293838.  A live webcast of the call will be available at www.dineequity.com, and may be accessed by visiting Events and 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 10, 2017 through 8:59 p.m. Pacific Time on August 17, 2017 by dialing (888) 843-7419 and referencing passcode 45293838#.  International callers, please dial (630) 652-3042 and reference passcode 45293838#.  An online archive of the webcast will also be available on Events and Presentations under the Investors section of DineEquity's website.

About DineEquity, Inc.

Based in Glendale, California, DineEquity, Inc. (NYSE: DIN), through its subsidiaries, franchises restaurants under both the Applebee's Neighborhood Grill & Bar and IHOP brands.  With more than 3,700 restaurants combined in 19 countries and approximately 400 franchisees, DineEquity is one of the largest full-service restaurant companies in the world. For more information on DineEquity, visit the Company's website 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 measure "adjusted net income available to common stockholders (Adjusted EPS)" and "Adjusted free cash flow." "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.  "Adjusted 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.  Management uses adjusted free cash flow in its periodic assessments of, among other things, the amount of cash dividends per share of common stock and repurchases of common stock and we believe it is important for investors to have the same measure used by management for that purpose.  Adjusted free cash flow does not represent residual cash flow available for discretionary purposes. Management may use certain of these non-GAAP financial measures along with the corresponding U.S. GAAP measures to evaluate the performance of the business and to make certain business decisions.  Additionally, adjusted EPS is one of the metrics used in determining payouts under the Company's annual cash incentive plan.  Management believes that these non-GAAP financial measures provide additional meaningful information that should be considered when assessing the business and the Company's performance compared to prior periods and the marketplace.  Adjusted EPS and adjusted 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 U.S. GAAP.

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,

   

2017

 

2016

 

2017

 

2016

Revenues:

               

Franchise and restaurant revenues

 

$

122,987

   

$

126,989

   

$

246,565

   

$

256,775

 

Rental revenues

 

30,124

   

30,830

   

60,589

   

62,239

 

Financing revenues

 

2,088

   

2,439

   

4,219

   

4,768

 

Total revenues

 

155,199

   

160,258

   

311,373

   

323,782

 

Cost of revenues:

               

Franchise and restaurant expenses

 

40,669

   

39,707

   

81,676

   

80,576

 

Rental expenses

 

22,681

   

23,030

   

45,347

   

46,261

 

Financing expenses

 

   

146

   

   

146

 

Total cost of revenues

 

63,350

   

62,883

   

127,023

   

126,983

 

Gross profit

 

91,849

   

97,375

   

184,350

   

196,799

 

General and administrative expenses

 

37,366

   

36,511

   

87,671

   

75,935

 

Interest expense

 

15,780

   

15,383

   

31,143

   

30,749

 

Amortization of intangible assets

 

2,500

   

2,500

   

5,000

   

4,980

 

Closure and impairment charges, net

 

2,701

   

3,291

   

2,918

   

3,726

 

(Gain) loss on disposition of assets

 

(6,243)

   

(48)

   

(6,352)

   

566

 

Income before income tax provision

 

39,745

   

39,738

   

63,970

   

80,843

 

Income tax provision

 

(18,465)

   

(12,909)

   

(28,327)

   

(28,471)

 

Net income

 

$

21,280

   

$

26,829

   

$

35,643

   

$

52,372

 

Net income available to common stockholders:

               

Net income

 

$

21,280

   

$

26,829

   

$

35,643

   

$

52,372

 

Less: Net income allocated to unvested participating restricted stock

 

(342)

   

(384)

   

(602)

   

(766)

 

Net income available to common stockholders

 

$

20,938

   

$

26,445

   

$

35,041

   

$

51,606

 

Net income available to common stockholders per share:

               

Basic

 

$

1.18

   

$

1.46

   

$

1.98

   

$

2.84

 

Diluted

 

$

1.18

   

$

1.45

   

$

1.98

   

$

2.82

 

Weighted average shares outstanding:

               

Basic

 

17,719

   

18,085

   

17,707

   

18,173

 

Diluted

 

17,725

   

18,188

   

17,721

   

18,280

 
                 

Dividends declared per common share

 

$

0.97

   

$

0.92

   

$

1.94

   

$

1.84

 

Dividends paid per common share

 

$

0.97

   

$

0.92

   

$

1.94

   

$

1.84

 

 

DineEquity, Inc. and Subsidiaries

Consolidated Balance Sheets

(In thousands, except share and per share amounts)

 
   

June 30, 2017

 

December 31, 2016

   

(Unaudited)

   

Assets

       

Current assets:

       

Cash and cash equivalents

 

$

112,346

   

$

140,535

 

Receivables, net

 

97,487

   

141,389

 

Restricted cash

 

31,411

   

30,256

 

Prepaid gift card costs

 

37,364

   

47,115

 

Prepaid income taxes

 

7,458

   

2,483

 

Other current assets

 

6,584

   

4,370

 

Total current assets

 

292,650

   

366,148

 

Long-term receivables, net

 

136,276

   

141,152

 

Property and equipment, net

 

200,815

   

205,055

 

Goodwill

 

697,470

   

697,470

 

Other intangible assets, net

 

760,977

   

763,431

 

Deferred rent receivable

 

85,052

   

86,981

 

Non-current restricted cash

 

14,700

   

14,700

 

Other non-current assets, net

 

3,717

   

3,646

 

Total assets

 

$

2,191,657

   

$

2,278,583

 
         

Liabilities and Stockholders' Equity

       

Current liabilities:

       

Accounts payable

 

$

28,931

   

$

50,503

 

Gift card liability

 

115,516

   

170,812

 

Dividends payable

 

17,490

   

17,465

 

Accrued employee compensation and benefits

 

9,930

   

14,609

 

Current maturities of capital lease and financing obligations

 

13,946

   

13,144

 

Accrued advertising

 

13,121

   

6,369

 

Other accrued expenses

 

15,113

   

13,410

 

Total current liabilities

 

214,047

   

286,312

 

Long-term debt, net

 

1,284,354

   

1,282,691

 

Capital lease obligations, less current maturities

 

65,982

   

74,665

 

Financing obligations, less current maturities

 

39,393

   

39,499

 

Deferred income taxes, net

 

247,682

   

253,898

 

Deferred rent payable

 

66,795

   

69,572

 

Other non-current liabilities

 

21,920

   

19,174

 

Total liabilities

 

1,940,173

   

2,025,811

 

Commitments and contingencies

       

Stockholders' equity:

       

Common stock, $0.01 par value, shares: 40,000,000 authorized; June 30, 2017 - 25,060,155 issued, 17,984,934 outstanding; December 31, 2016 - 25,134,223 issued, 17,969,636 outstanding

 

251

   

251

 

Additional paid-in-capital

 

292,387

   

292,809

 

Retained earnings

 

382,808

   

382,082

 

Accumulated other comprehensive loss

 

(107)

   

(107)

 

Treasury stock, at cost; shares: June 30, 2017 - 7,075,221; December 31, 2016 - 7,164,587

 

(423,855)

   

(422,263)

 

Total stockholders' equity

 

251,484

   

252,772

 

Total liabilities and stockholders' equity

 

$

2,191,657

   

$

2,278,583

 

 

DineEquity, Inc. and Subsidiaries

Consolidated Statements of Cash Flows

(In thousands)

(Unaudited)

 
   

Six Months Ended

   

June 30,

   

2017

 

2016

Cash flows from operating activities:

       

Net income

 

$

35,643

   

$

52,372

 

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

       

Depreciation and amortization

 

15,422

   

15,554

 

Non-cash interest expense

 

1,663

   

1,591

 

Deferred income taxes

 

(8,514)

   

(11,896)

 

Non-cash stock-based compensation expense

 

7,567

   

5,647

 

Tax benefit from stock-based compensation

 

   

1,169

 

Excess tax benefit from stock-based compensation

 

   

(865)

 

Closure and impairment charges

 

2,910

   

1,249

 

(Gain) loss on disposition of assets

 

(6,352)

   

566

 

Other

 

(2,067)

   

416

 

Changes in operating assets and liabilities:

       

Accounts receivable, net

 

(711)

   

880

 

Current income tax receivables and payables

 

(481)

   

5,291

 

Gift card receivables and payables

 

(14,121)

   

(18,311)

 

Other current assets

 

(2,215)

   

(1,424)

 

Accounts payable

 

(8,153)

   

8,544

 

Accrued employee compensation and benefits

 

(4,743)

   

(10,949)

 

Other current liabilities

 

5,046

   

4,077

 

Cash flows provided by operating activities

 

20,894

   

53,911

 

Cash flows from investing activities:

       

Additions to property and equipment

 

(6,945)

   

(1,931)

 

Proceeds from sale of property and equipment

 

1,100

   

 

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

 

9,946

   

8,658

 

Other

 

(292)

   

(250)

 

Cash flows provided by investing activities

 

3,809

   

6,477

 

Cash flows from financing activities:

       

Dividends paid on common stock

 

(34,879)

   

(34,029)

 

Repurchase of common stock

 

(10,003)

   

(35,008)

 

Principal payments on capital lease and financing obligations

 

(7,170)

   

(6,853)

 

Tax payments for restricted stock upon vesting

 

(2,320)

   

(2,432)

 

Proceeds from stock options exercised

 

2,635

   

880

 

Excess tax benefit from stock-based compensation

 

   

865

 

Cash flows used in financing activities

 

(51,737)

   

(76,577)

 

Net change in cash and cash equivalents

 

(27,034)

   

(16,189)

 

Cash, cash equivalents and restricted cash at beginning of period

 

185,491

   

192,013

 

Cash, cash equivalents and restricted cash at end of period

 

$

158,457

   

$

175,824

 

 

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

 
   

Three Months Ended

 

Six Months Ended

   

June 30,

 

June 30,

   

2017

 

2016

 

2017

 

2016

Net income available to common stockholders, as reported

 

$

20,938

   

$

26,445

   

$

35,041

   

$

51,606

 

Executive separation costs

 

   

   

8,782

   

 

Kansas City Support Center consolidation costs(1)

 

   

2,966

   

   

5,032

 

Amortization of intangible assets

 

2,500

   

2,500

   

5,000

   

4,980

 

Non-cash interest expense

 

836

   

800

   

1,663

   

1,591

 

Closure and impairment charges

 

2,701

   

820

   

2,918

   

1,255

 

(Gain) loss on disposition of assets

 

(6,243)

   

(48)

   

(6,352)

   

566

 

Income tax benefit (provision)

 

78

   

(2,605)

   

(4,564)

   

(4,967)

 

Income tax adjustments (2)

 

2,219

   

(2,002)

   

2,219

   

(2,002)

 

Net income allocated to unvested participating restricted stock

 

(36)

   

(35)

   

(156)

   

(97)

 

Net income available to common stockholders, as adjusted

 

$

22,993

   

$

28,841

   

$

44,551

   

$

57,964

 
                 

Diluted net income available to common stockholders per share:

               

Net income available to common stockholders, as reported

 

$

1.18

   

$

1.45

   

$

1.98

   

$

2.82

 

Executive separation costs

 

   

   

0.31

   

 

Kansas City Support Center consolidation costs(1)

 

   

0.10

   

   

0.17

 

Amortization of intangible assets

 

0.09

   

0.08

   

0.17

   

0.17

 

Non-cash interest expense

 

0.03

   

0.03

   

0.06

   

0.05

 

Closure and impairment charges

 

0.09

   

0.03

   

0.10

   

0.04

 

(Gain) loss on disposition of assets

 

(0.22)

   

(0.00)

   

(0.22)

   

0.02

 

Income tax adjustments (2)

 

0.13

   

(0.11)

   

0.13

   

(0.11)

 

Net income allocated to unvested participating restricted stock

 

(0.00)

   

(0.00)

   

(0.01)

   

(0.00)

 

Rounding

 

   

0.01

   

(0.01)

   

0.01

 

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

 

$

1.30

   

$

1.59

   

$

2.51

   

$

3.17

 
                 

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

 

$

22,993

   

$

28,841

   

$

44,551

   

$

57,964

 

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

 

   

1

   

   

2

 

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

 

$

22,993

   

$

28,842

   

$

44,551

   

$

57,966

 
                 

Denominator for basic EPS-weighted-average shares

 

17,719

   

18,085

   

17,707

   

18,173

 

Dilutive effect of stock options

 

6

   

103

   

14

   

107

 

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

 

17,725

   

18,188

   

17,721

   

18,280

 

 

   

(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) 

2017: unrecognized tax benefits related to domestic manufacturing deductions taken in years prior to 2017; 2016: 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 "adjusted free cash flow" (cash provided by operating activities, plus receipts from notes and equipment contracts receivable, less additions to property and equipment). Management uses this liquidity measure in its periodic assessments of, among other things, the amount of cash dividends per share of common stock and repurchases of common stock and we believe it is important for investors to have the same measure used by management for that purpose. Adjusted free cash flow does not represent residual cash flow available for discretionary purposes.

 
   

Six Months Ended

   

June 30,

   

2017

 

2016

   

(In millions)

Cash flows provided by operating activities

 

$

20.9

   

$

53.9

 

Receipts from notes and equipment contracts receivable

 

5.2

   

4.4

 

Additions to property and equipment

 

(6.9)

   

(1.9)

 

Adjusted free cash flow

 

19.2

   

56.4

 

Dividends paid on common stock

 

(34.9)

   

(34.0)

 

Repurchase of DineEquity common stock

 

(10.0)

   

(35.0)

 
   

$

(25.7)

   

$

(12.6)

 

 

Restaurant Data

 

The following table sets forth, for the three and six months ended June 30, 2017 and 2016, 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 and, as such, the percentage change in sales at Effective Restaurants is based on non-GAAP sales data. 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 partially may be 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,

   

2017

 

2016

 

2017

 

2016

   

(Unaudited)

Applebee's Restaurant Data

               

Effective Restaurants(a)

               

Franchise

 

1,984

   

2,028

   

1,995

   

2,029

 

Company

 

   

   

   

 

Total

 

1,984

   

2,028

   

1,995

   

2,029

 
                 

System-wide(b)

               

Sales percentage change(c)

 

(7.5)

%

 

(4.4)

%

 

(8.1)

%

 

(4.2)

%

Domestic same-restaurant sales percentage change(d)

 

(6.2)

%

 

(4.2)

%

 

(7.0)

%

 

(3.9)

%

                 

Franchise(b)

               

Sales percentage change(c)

 

(7.5)

%

 

(3.4)

%

 

(8.1)

%

 

(3.2)

%

Domestic same-restaurant sales percentage change(d)

 

(6.2)

%

 

(4.2)

%

 

(7.0)

%

 

(3.9)

%

Average weekly domestic unit sales (in thousands)

 

$

44.2

   

$

46.5

   

$

44.7

   

$

47.6

 
                                 

IHOP Restaurant Data

               

Effective Restaurants(a)

               

Franchise

 

1,565

   

1,510

   

1,559

   

1,508

 

Area license

 

166

   

165

   

166

   

165

 

Company

 

9

   

11

   

9

   

11

 

Total

 

1,740

   

1,686

   

1,734

   

1,684

 
                 

System-wide(b)

               

Sales percentage change(c)

 

0.2

%

 

2.5

%

 

0.2

%

 

2.4

%

Domestic same-restaurant sales percentage change(d)

 

(2.6)

%

 

0.2

%

 

(2.1)

%

 

0.8

%

                 

Franchise(b)

               

Sales percentage change(c)

 

0.5

%

 

2.8

%

 

0.6

%

 

2.6

%

Domestic same-restaurant sales percentage change(d)

 

(2.6)

%

 

0.2

%

 

(2.1)

%

 

0.8

%

Average weekly domestic unit sales (in thousands)

 

$

36.3

   

$

37.5

   

$

36.6

   

$

37.6

 
                 

Area License (b)

               

Sales percentage change(c)

 

(1.4)

%

 

0.5

%

 

(2.6)

%

 

0.4

%

                                 

 

   

(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. An increase in franchisees' reported sales will result in a corresponding increase in our royalty revenue, while a decrease in franchisees' reported sales will result in a corresponding decrease in our royalty revenue. 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, 2017 and 2016 were as follows:

   

 

 

Three Months Ended

 

Six Months Ended

 

June 30,

 

June 30,

 

2017

 

2016

 

2017

 

2016

 

(In millions)

Reported sales (unaudited)

             

Applebee's domestic franchise restaurant sales

$

1,049.6

   

$

1,134.2

   

$

2,135.8

   

$

2,323.2

 

IHOP franchise restaurant sales

739.2

   

$

735.4

   

1,483.4

   

$

1,474.3

 

IHOP area license restaurant sales

69.2

   

$

70.2

   

141.7

   

$

145.5

 

Total

$

1,858.0

   

$

1,939.8

   

$

3,760.9

   

$

3,943.0

 

 

   

(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.

 

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,

 

2017

 

2016

 

2017

 

2016

Applebee's Restaurant Development Activity

         

Beginning of period:

1,998

   

2,029

   

2,016

   

2,033

 

Franchise restaurants opened:

             

Domestic

4

   

2

   

5

   

7

 

International

4

   

3

   

4

   

4

 

Total franchise restaurants opened

8

   

5

   

9

   

11

 

Franchise restaurants closed:

             

Domestic

(33)

   

(6)

   

(52)

   

(12)

 

International

(5)

   

(1)

   

(5)

   

(5)

 

Total franchise restaurants closed

(38)

   

(7)

   

(57)

   

(17)

 

Net franchise restaurant reduction

(30)

   

(2)

   

(48)

   

(6)

 

Total Applebee's restaurants, end of period

1,968

   

2,027

   

1,968

   

2,027

 

Domestic

1,811

   

1,873

   

1,811

   

1,873

 

International

157

   

154

   

157

   

154

 
               

IHOP Restaurant Development Activity

             

Summary - beginning of period:

             

Franchise

1,564

   

1,509

   

1,556

   

1,507

 

Area license

167

   

164

   

167

   

165

 

Company(a)

10

   

11

   

10

   

11

 

Total IHOP restaurants, beginning of period

1,741

   

1,684

   

1,733

   

1,683

 

Franchise/area license restaurants opened:

         

Domestic franchise

9

   

13

   

20

   

19

 

Domestic area license

   

2

   

   

2

 

International franchise

8

   

2

   

12

   

3

 

Total franchise/area license restaurants opened

17

   

17

   

32

   

24

 

Franchise/area license restaurants closed:

             

Domestic franchise

(2)

   

(5)

   

(9)

   

(8)

 

Domestic area license

(1)

   

   

(1)

   

(1)

 

International franchise

(2)

   

(1)

   

(2)

   

(3)

 

Total franchise/area license restaurants closed

(5)

   

(6)

   

(12)

   

(12)

 

Net franchise/area license restaurant development

12

   

11

   

20

   

12

 

Refranchised from Company restaurants

9

   

1

   

9

   

1

 

Net franchise/area license restaurant additions

21

   

12

   

29

   

13

 

Summary - end of period

             

Franchise

1,586

   

1,519

   

1,586

   

1,519

 

Area license

166

   

166

   

166

   

166

 

Company

   

10

   

   

10

 

Total IHOP restaurants, end of period

1,752

   

1,695

   

1,752

   

1,695

 

Domestic

1,646

   

1,616

   

1,646

   

1,616

 

International

106

   

79

   

106

   

79

 

 

   

(a)

During the three months ending June 30, 2017, nine company-operated restaurants were refranchised and one was permanently closed.

Contacts:

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

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

View original content with multimedia:http://www.prnewswire.com/news-releases/dineequity-inc-reports-second-quarter-fiscal-2017-results-300502564.html

SOURCE DineEquity, Inc.

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