DineEquity, Inc. Announces Second Quarter 2011 Financial and Operating Results
GLENDALE, CA, Aug 02, 2011 (MARKETWIRE via COMTEX) --
DineEquity, Inc. (NYSE: DIN), the parent company of Applebee's Neighborhood Grill & Bar and IHOP Restaurants, today announced financial results for the second quarter ended June 30, 2011.
"Our second quarter results demonstrate another impressive performance by the team at Applebee's, where we have now seen a full year of positive same-restaurant sales growth, evidence that our brand revitalization strategies are working and that guests are enthusiastically reengaging with Applebee's," said Julia Stewart, Chairman and Chief Executive Officer. "While we are disappointed with IHOP's results, we believe we have identified the issues that need to be addressed to develop and execute a plan to restore same-restaurant sales growth at IHOP, the leader in family dining. Overall, we continue to make progress delivering against our strategic priorities giving us the confidence to reiterate all of the elements of our full-year outlook. In the quarter we announced another significant refranchising agreement at Applebee's, taking us closer to our goal of becoming a more fully franchised system. We also announced international expansion plans for both Applebee's and IHOP, and I am optimistic about the long-term potential these developments hold for DineEquity as we continue to focus on value, innovation and differentiation within both of our brands."
DineEquity's financial performance included the following highlights:
-- Applebee's domestic system-wide same-restaurant sales increased 3.1%
compared to the same period in 2010. Applebee's performance
represented the fourth consecutive quarter of positive same-restaurant
sales. Results were unfavorably impacted by the shift of the Easter
holiday from the first quarter of 2010 to the second quarter of 2011.
Excluding the negative impact of this holiday shift, same-restaurant
sales would have been 3.8% for the quarter. Year-to-date, Applebee's
domestic system-wide same-restaurant sales increased 3.5%.
-- IHOP's domestic system-wide same-restaurant sales decreased 2.9% for
the second quarter compared to the same period in 2010. Results were
positively impacted by the shift of the Easter holiday (the opposite
direction from Applebee's). Excluding the impact of the holiday shift,
IHOP's same-restaurant sales would have declined 3.4% for the quarter.
Year-to-date, IHOP's domestic system-wide same-restaurant sales
decreased 2.8%.
-- Total debt was reduced by $189.4 million over the first six months of
2011 as a result of net cash proceeds and financing obligation
reductions from the sale of 65 Applebee's company-operated
restaurants, cash on hand, and free cash flow. The company reduced
term loan balances by $110.0 million, retired $39.8 million of the
9.5% senior notes and $39.6 million of financing and capital lease
obligations in the first half of the year.
-- Adjusted net income available to common stockholders was $16.6 million
for the second quarter 2011, compared to $15.7 million for the same
quarter in 2010. The increase in net income was primarily due to
elimination of the dividend on Series A perpetual preferred stock and
lower cash interest expense, partially offset by lower profit due to
refranchising of 148 Applebee's company-operated restaurants and a
higher tax rate. Our non-GAAP effective tax rate for the second
quarter 2011 was 42%. This rate was higher than our expected full year
rate of 36% primarily due to the timing of discrete quarterly state
tax charges, impacting our adjusted EPS by $0.10 per diluted share.
Adjusted EPS was $0.90 per share for the quarter. With a normalized
tax rate, adjusted EPS would have been $1.00 per diluted share.
For the first six months of 2011, adjusted net income available to
common stockholders was $42.7 million, or $2.33 per diluted share
compared to $34.4 million, or $1.97 per diluted share, in the same
period in 2010. This increase was primarily due to the elimination of
the dividend on Series A perpetual preferred stock and lower cash
interest expense, partially offset by lower segment profit due to
refranchising. (See "Non-GAAP Financial Measures" below.)
-- Net loss available to common stockholders was $0.3 million, or $0.02
per diluted share, for the second quarter 2011, compared to net income
of $7.4 million, or $0.42 per diluted share, for the same quarter in
2010. The decrease was due in part to closure charges related to the
termination of the sublease of the space currently occupied by
Applebee's restaurant support center in Lenexa, Kansas and lower
segment profit as a result of refranchising a total of 148 restaurants
(of which 83 were completed in the fourth quarter of 2010 and 65 were
completed in the first quarter of 2011). These items were partially
offset by lower interest expense and the elimination of the dividend
on Series A perpetual preferred stock as a result of redeeming this
security in the fourth quarter of 2010.
For the first six months of 2011, net income available to common
stockholders was $27.9 million, or $1.53 per diluted share, compared
to $20.3 million, or $1.16 per diluted share. The increase was due in
part to a gain on the sale of 65 Applebee's company-operated
restaurants, lower interest expense, the elimination of the dividend
on Series A perpetual preferred stock and a lower tax rate. These
items were partially offset by impairment and closure charges on the
termination of the Lenexa lease, higher debt extinguishment charges,
and lower segment profit largely driven by refranchising.
-- IHOP franchisees and its area licensee opened 25 new restaurants
worldwide in the first six months of 2011, in line with our full-year
IHOP development outlook of 55 to 65 restaurants.
-- Applebee's company-operated restaurant operating margin was 13.4% in
the second quarter 2011 compared to 14.1% for the second quarter 2010.
The unfavorable comparison was primarily due to increasing commodity
costs, higher training and staffing levels, higher utility rates and
facility costs, partially offset by a price increase of 1.8% and
refranchising of lower margin restaurants. For the first six months of
2011, Applebee's company-operated restaurant operating margin was
14.5% compared to 14.4% for the same period in 2010.
-- Consolidated general and administrative expenses increased 3.8% to
$38.5 million for the second quarter 2011 compared to the second
quarter of 2010. For the year-to-date period, consolidated general and
administrative expenses decreased $1.0 million to $76.4 million versus
the same period in 2010.
-- For the first half of 2011, cash flows from operating activities were
$48.2 million, consolidated capital expenditures were $13.5 million,
and free cash flow was $41.7 million. (See "Non-GAAP Financial
Measures" below.)
Same-Restaurant Sales Performance
Applebee's domestic system-wide same-restaurant sales increased 3.1% for the second quarter 2011, which represented the fourth consecutive quarter of positive same-restaurant sales. The same-restaurant sales performance was driven by increases in average guest check and guest traffic. Domestic franchise same-restaurant sales increased 3.5% and company-operated Applebee's same-restaurant sales increased 0.7% for the second quarter 2011 compared to the same quarter in 2010. Applebee's marketing efforts during the quarter included "2 for $20 Flavors of Bourbon Street" and "Sizzling Entrees" as well as other marketing and promotional activities.
IHOP's domestic system-wide same-restaurant sales decreased 2.9% for the second quarter 2011 compared to the same quarter in 2010. Same-restaurant sales reflect a higher average guest check and declines in traffic. Despite representing a significant portion of sales mix, "Chicken and Waffles" and "Double Cheese Scrambles" did not generate overall increases in sales.
Sale of 66 Applebee's Company-Operated Restaurants
On May 31, 2011, DineEquity announced that it had entered into an asset purchase agreement with Apple American Group LLC for the sale of 66 Applebee's company-operated restaurants located in New England. The transaction is expected to result in net proceeds after taxes of approximately $49 million and reduce DineEquity's sale-leaseback related financing obligations by approximately $12 million, of which $9 million will be removed from DineEquity's balance sheet. The Company expects to pay approximately $9 million related to the settlement of net working capital liabilities and deal costs. Additionally, the sale of these Applebee's company-operated restaurants will result in approximately $3 million in annualized general and administrative savings. The Company anticipates closing this transaction by the end of the year.
Other Q2 Highlights
On May 9, 2011 IHOP announced the launch of the new IHOP at HOME(TM) line of premium frozen breakfast items that are inspired by the innovative and craveable flavors for which IHOP is known. The IHOP at HOME(TM) products such as French Toast Stuffed Pastries, Omelet Crispers and Griddle 'n Sausage Wraps are now available at more than 3,000 Wal-Mart locations nationwide.
On June 20, 2011 the Company announced that IHOP had entered into a multi-restaurant franchise agreement for the development of 40 new IHOP restaurants in Kuwait, Saudi Arabia, Jordan, Lebanon, Qatar, the United Arab Emirates, Oman, Bahrain and Egypt. Development of all 40 restaurants will occur over the next five years, with some restaurants opening in as little as 12 months.
On July 21, 2011 the Company announced that Applebee's had entered into a multi-restaurant franchise agreement for the development of ten new Applebee's restaurants in Egypt.
2011 Financial Performance Outlook
-- Reiterated consolidated cash from operations to range between $125 and
$135 million.
-- Reiterated that approximately $13 million is expected to be generated
from the structural run-off of the Company's long-term receivables.
-- Reiterated consolidated capital expenditures of approximately $26
million.
-- Reiterated consolidated free cash flow (see "References to Non-GAAP
Information" below) to range between $112 and $122 million. The
Company's primary use of cash will be funding further debt reduction.
-- Reiterated Applebee's domestic system-wide same-restaurant sales
performance to range between 2% and 4%.
-- Reiterated IHOP's domestic system-wide same-restaurant sales
performance to range between positive 1% and negative 2%. For the full
year, the Company expects IHOP to perform at the low end of the
range.
-- Reiterated restaurant operating margin at Applebee's company-operated
restaurants to range between 14.8% and 15.2%.
-- Reiterated consolidated general & administrative expense to range
between $157 and $160 million, including non-cash stock-based
compensation expense and depreciation of approximately $18 million.
-- Reiterated consolidated interest expense to range between $134 and
$139 million, of which approximately $7 million is expected to be
non-cash interest expense.
-- Reiterated Applebee's franchisees to develop between 24 and 28 new
restaurants, approximately half of which are expected to open
internationally.
-- Reiterated IHOP franchisees to develop between 55 and 65 new
restaurants, the majority of which are expected to be opened in the
U.S.
-- Reiterated an income tax rate of 36% for 2011.
-- Reiterated full-year weighted average diluted shares outstanding to be
approximately 18.3 million shares.
The Company's 2011 financial performance guidance excludes any impact from the future sales of Applebee's company-operated restaurants, the timing of which could be highly variable due to factors including the economy, the availability of buyer financing, acceptable valuations, and the operating wherewithal of the acquiring franchisee. Should additional Applebee's company-operated restaurants be sold this year, DineEquity plans to update its performance guidance accordingly, in conjunction with its regular quarterly reporting schedule, following any transaction announcement.
Investor Conference Call Today
The Company will host an investor conference call today (Tuesday, August 2, 2011, at 11:00 a.m. Eastern Time / 8:00 a.m. Pacific Time) to discuss its second quarter 2011 results. To participate on the call, please dial (888) 680-0890 and reference pass code 74542624. 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 Investor Information section. A telephonic replay of the call may be accessed through August 9, 2011 by dialing 888-286-8010 and referencing pass code 82624316. An online archive of the webcast also will be available on the Investor Information 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 3,500 restaurants combined, 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 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 substantial indebtedness; risk of future impairment charges; 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; shortages or interruptions in the supply or delivery of food; changing health or dietary preferences; harm to our brands' reputation; litigation; environmental liability; liability relating to employees; failure to comply with applicable laws and regulations; failure to effectively implement restaurant development plans; 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; changes in the number and quality of franchisees; inability of franchisees to fund capital expenditures; third-party claims with respect to intellectual property assets; heavy dependence on information technology; failure to protect the integrity and security of individually identifiable information; 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," and "free cash flow." "Adjusted EPS" is computed for a given period is computed by deducting from net income (loss) available to common stockholders for such period the effect of any impairment and closure charges, any gain or loss related to debt extinguishment, any intangible asset amortization, any non-cash interest expense, any debt modification costs and any gain or loss related to the disposition of assets incurred in such period. This is presented on an aggregate basis and a per share (diluted) basis. The Company defines "EBITDA" for a given period is defined as income before income taxes less interest expense, loss on retirement of debt and Series A preferred stock, depreciation and amortization, impairment and closure charges, stock-based compensation, gain/loss on sale of assets and other charge backs as defined by its credit agreement. "Free cash flow" for a given period is defined as cash provided by operating activities, plus receipts from notes and equipment contracts receivable ("long-term notes receivable"), less dividends paid and capital expenditures. Management utilizes EBITDA for debt covenant purposes and free cash flow to determine the amount of cash remaining for general corporate and strategic purposes after the receipts from long-term notes receivable, and the funding of operating activities, capital expenditures and preferred dividends. Management believes this information is helpful to investors to determine the Company's adherence to debt covenants and the Company's cash available for these purposes. Adjusted EPS, EBITDA 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,
------------------------ ------------------------
2011 2010 2011 2010
----------- ----------- ----------- -----------
Segment Revenues:
Franchise revenues $ 98,551 $ 93,327 $ 203,103 $ 188,694
Company restaurant
sales 134,634 210,694 289,337 435,309
Rental revenues 31,624 32,187 63,840 66,119
Financing revenues 3,529 3,928 12,258 8,078
----------- ----------- ----------- -----------
Total segment
revenues 268,338 340,136 568,538 698,200
----------- ----------- ----------- -----------
Segment Expenses:
Franchise expenses 26,207 26,027 53,650 50,865
Company restaurant
expenses 117,279 182,064 249,045 374,621
Rental expenses 24,566 24,645 49,213 49,709
Financing expenses 1 2 5,576 471
----------- ----------- ----------- -----------
Total segment
expenses 168,053 232,738 357,484 475,666
----------- ----------- ----------- -----------
Gross segment profit 100,285 107,398 211,054 222,534
General and
administrative
expenses 38,450 37,034 76,419 77,400
Interest expense 32,867 43,668 69,173 88,716
Impairment and closure
charges 21,816 1,871 26,754 2,582
Debt modification costs 10 -- 4,124 --
Amortization of
intangible assets 3,075 3,076 6,150 6,153
Loss (gain) on
extinguishment of debt 939 (1,055) 7,885 (4,640)
Loss (gain) on
disposition of assets 1,291 431 (22,463) 178
----------- ----------- ----------- -----------
Income before income
taxes 1,837 22,373 43,012 52,145
Provision for income
taxes (1,489) (8,332) (12,965) (18,433)
----------- ----------- ----------- -----------
Net income $ 348 $ 14,041 $ 30,047 $ 33,712
=========== =========== =========== ===========
Net (loss) income
available to common
stockholders
Net income $ 348 $ 14,041 $ 30,047 $ 33,712
Less: Series A
preferred stock
dividends -- (5,700) -- (11,460)
Less: Accretion of
Series B preferred
stock (639) (603) (1,268) (1,198)
Less: Net loss (income)
allocated to unvested
participating
restricted stock 7 (296) (846) (801)
----------- ----------- ----------- -----------
Net (loss) income
available to common
stockholders $ (284) $ 7,442 $ 27,933 $ 20,253
=========== =========== =========== ===========
Net (loss) income
available to common
stockholders per share
Basic $ (0.02) $ 0.43 $ 1.56 $ 1.18
=========== =========== =========== ===========
Diluted $ (0.02) $ 0.42 $ 1.53 $ 1.16
=========== =========== =========== ===========
Weighted average shares
outstanding
Basic 18,072 17,226 17,884 17,119
=========== =========== =========== ===========
Diluted 18,072 17,560 18,280 17,476
=========== =========== =========== ===========
DINEEQUITY, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(In thousands, except share and per share amounts)
December 31,
June 30, 2011 2010
------------- -------------
(Unaudited)
Assets
Current assets:
Cash and cash equivalents $ 34,522 $ 102,309
Restricted cash 91 854
Receivables, net 71,866 98,776
Inventories 10,570 10,757
Prepaid income taxes 13,118 34,094
Prepaid gift cards 24,094 27,465
Prepaid expenses 13,776 14,602
Deferred income taxes 39,255 24,301
Assets held for sale 42,678 37,944
------------- -------------
Total current assets 249,970 351,102
------------- -------------
Non-current restricted cash 49 778
Restricted assets related to captive insurance
subsidiary 3,839 3,562
Long-term receivables 234,323 239,945
Property and equipment, net 531,805 612,175
Goodwill 697,470 697,470
Other intangible assets, net 828,167 835,879
Other assets, net 114,773 115,730
------------- -------------
Total assets $ 2,660,396 $ 2,856,641
============= =============
Liabilities and Stockholders' Equity
Current liabilities:
Current maturities of long-term debt $ 7,420 $ 9,000
Accounts payable 26,668 32,724
Accrued employee compensation and benefits 21,892 32,846
Gift card liability 75,789 124,972
Accrued interest payable 13,455 17,482
Current maturities of capital lease and
financing obligations 15,017 16,556
Facility closure liability 20,560 --
Other accrued expenses 27,411 31,502
------------- -------------
Total current liabilities 208,212 265,082
------------- -------------
Long-term debt, less current maturities 1,479,489 1,631,469
Financing obligations, less current maturities 204,327 237,826
Capital lease obligations, less current
maturities 139,363 144,016
Deferred income taxes 388,058 375,697
Other liabilities 114,719 118,972
------------- -------------
Total liabilities 2,534,168 2,773,062
Commitments and contingencies
Stockholders' equity:
Convertible preferred stock, Series B, at
accreted value, 10,000,000 shares
authorized; 35,000 shares issued; June 30,
2011: 34,900 shares outstanding; December
31, 2010: 35,000 shares outstanding 43,203 42,055
Common stock, $.01 par value, 40,000,000
shares authorized; June 30, 2011:
24,691,059 shares issued and 18,556,873
shares outstanding; December 31, 2010:
24,382,991 shares issued and 18,183,083
shares outstanding 247 243
Additional paid-in-capital 203,495 192,214
Retained earnings 153,029 124,250
Accumulated other comprehensive loss (262) (282)
Treasury stock, at cost (June 30, 2011:
6,134,178 shares; December 31, 2010:
6,199,908 shares) (273,484) (274,901)
------------- -------------
Total stockholders' equity 126,228 83,579
------------- -------------
Total liabilities and stockholders'
equity $ 2,660,396 $ 2,856,641
============= =============
DINEEQUITY, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
Six Months Ended June 30,
----------------------------
2011 2010
------------- -------------
Cash flows from operating activities
Net income $ 30,047 $ 33,712
Adjustments to reconcile net income to cash
flows provided by operating activities
Depreciation and amortization 26,339 32,164
Non-cash interest expense 2,988 20,621
Loss (gain) on extinguishment of debt 7,885 (4,640)
Impairment and closure charges 26,540 2,196
Debt modification costs 4,124 --
Deferred income taxes (2,592) (13,299)
Non-cash stock-based compensation expense 5,063 7,300
Tax benefit from stock-based compensation 6,021 1,249
Excess tax benefit from stock options
exercised (5,687) (1,968)
(Gain) loss on disposition of assets (22,463) 178
Other (4,008) (276)
Changes in operating assets and liabilities
Receivables 26,337 27,693
Inventories (1,053) 246
Prepaid expenses 4,067 1,649
Current income tax receivables and
payables 22,052 10,310
Accounts payable (8,042) (7,196)
Accrued employee compensation and
benefits (10,955) (7,073)
Gift card liability (49,183) (44,523)
Other accrued expenses (9,292) (8,068)
------------- -------------
Cash flows provided by operating
activities 48,188 50,275
------------- -------------
Cash flows from investing activities
Additions to property and equipment (13,510) (6,859)
Proceeds from sale of property and
equipment and assets held for sale 55,494 2,583
Principal receipts from notes, equipment
contracts and other long-term receivables 7,055 10,818
Other (574) 1,121
------------- -------------
Cash flows provided by investing
activities 48,465 7,663
------------- -------------
Cash flows from financing activities
Proceeds from issuance of long-term debt 25,000 --
Repayment of long-term debt (178,437) (74,359)
Principal payments on capital lease and
financing obligations (6,764) (7,946)
Dividends paid -- (11,400)
Payment of debt modification and issuance
costs (12,316) --
Repurchase of restricted stock (4,742) (832)
Proceeds from stock options exercised 6,240 1,953
Excess tax benefit from stock options
exercised 5,687 1,968
Change in restricted cash 1,492 14,778
Other (600) (294)
------------- -------------
Cash flows used in financing activities (164,440) (76,132)
------------- -------------
Net change in cash and cash equivalents (67,787) (18,194)
Cash and cash equivalents at beginning of
period 102,309 82,314
------------- -------------
Cash and cash equivalents at end of period $ 34,522 $ 64,120
============= =============
NON-GAAP FINANCIAL MEASURES
(In thousands, except per share amounts)
(Unaudited)
Reconciliation of (i) net income (loss) available to common stockholders to (ii) net income available to common stockholders excluding impairment and closure charges, loss (gain) on extinguishment of debt, amortization of intangible assets, non-cash interest expense, debt modification costs and loss (gain) on disposition of assets, and related per share data:
Three Months Ended Six Months Ended
June 30, June 30,
------------------------ ------------------------
2011 2010 2011 2010
----------- ----------- ----------- -----------
Net income (loss)
available to common
stockholders, as
reported $ (284) $ 7,442 $ 27,933 $ 20,253
Impairment and closure
charges 21,823 1,687 26,540 2,196
Loss (gain) on
extinguishment of debt 939 (1,055) 7,885 (4,640)
Amortization of
intangible assets 3,075 3,076 6,150 6,153
Non-cash interest expense 1,571 10,250 2,988 20,621
Debt modification costs 10 -- 4,124 --
Loss (gain) on
disposition of assets 1,291 364 (22,463) 178
Income tax benefit
(provision) (11,426) (5,700) (10,039) (9,754)
Net income allocated to
unvested participating
restricted stock (437) (327) (446) (562)
----------- ----------- ----------- -----------
Net income available to
common stockholders, as
adjusted $ 16,562 $ 15,737 $ 42,672 $ 34,445
=========== =========== =========== ===========
Diluted net income available to common stockholders per share:
Net income available to
common stockholders , as
reported $ (0.02) $ 0.42 $ 1.53 $ 1.16
Impairment and closure
charges 0.72 0.06 0.84 0.08
Loss (gain) on
extinguishment of debt 0.03 (0.04) 0.25 (0.16)
Amortization of
intangible assets 0.10 0.11 0.20 0.21
Non-cash interest expense 0.05 0.35 0.10 0.71
Debt modification costs -- -- 0.13 --
Loss (gain) on
disposition of assets 0.04 0.01 (0.72) 0.01
Net income allocated to
unvested participating
restricted stock (0.02) (0.02) (0.02) (0.03)
Change due to increase in
net income -- 0.01 0.02 (0.01)
----------- ----------- ----------- -----------
Diluted net income
available to common
stockholders per share,
as adjusted $ 0.90 $ 0.90 $ 2.33 $ 1.97
=========== =========== =========== ===========
Numerator for basic EPS-
income available to
common stockholders, as
adjusted $ 16,562 $ 15,737 $ 42,672 $ 34,445
Effect of unvested
participating restricted
stock using the two-
class method 7 11 66 28
Effect of dilutive
securities:
Stock options -- -- -- --
Convertible Series B
preferred stock -- -- 1,268 --
----------- ----------- ----------- -----------
Numerator for diluted
EPS-income available to
common stockholders
after assumed
conversions, as adjusted $ 16,569 $ 15,748 $ 44,006 $ 34,473
=========== =========== =========== ===========
Denominator for basic
EPS-weighted-average
shares 18,072 17,226 17,884 17,119
Effect of dilutive
securities:
Stock options 341 334 396 357
Convertible Series B
preferred stock -- -- 624 --
----------- ----------- ----------- -----------
Denominator for diluted
EPS-weighted-average
shares and assumed
conversions 18,413 17,560 18,904 17,476
=========== =========== =========== ===========
NON-GAAP FINANCIAL MEASURES
(In thousands)
(Unaudited)
Reconciliation of U.S. GAAP income (loss) before income taxes to EBITDA:
Six Months Twelve Months
Ended Ended
June 30, 2011 June 30, 2011
------------- -------------
U.S. GAAP income (loss) before income taxes $ 43,012 $ (21,213)
Interest charges 78,697 171,071
Loss on retirement of debt and Series A
Preferred Stock 7,885 119,529
Depreciation and amortization 26,339 55,603
Non-cash stock-based compensation 5,063 10,849
Impairment and closure charges 26,533 27,819
Other 4,978 6,013
Gain on sale of assets (22,463) (36,213)
------------- -------------
EBITDA $ 170,044 $ 333,458
============= =============
Reconciliation of the Company's cash provided by operating activities to free cash flow:
Six Months Ended June 30,
----------------------------
2011 2010
------------- -------------
Cash flows from operating activities $ 48,188 $ 50,275
Principal receipts from notes, equipment
contracts and other long-term receivables 7,055 10,818
Dividends paid -- (11,400)
Capital expenditures (13,510) (6,859)
------------- -------------
Free cash flow $ 41,733 $ 42,834
============= =============
Restaurant Data
The following table sets forth, for the three-month and six-month periods ended June 30, 2011 and 2010, 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. "Effective restaurants" are the number of restaurants in a given period, adjusted to account for restaurants open for only a portion of the period. Information is presented for all effective restaurants in the IHOP and Applebee's systems, which includes restaurants owned by the Company, as well as those owned by franchisees and area licensees. 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, as well as rental payments under leases that are usually 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,
------------------------- -------------------------
2011 2010 2011 2010
----------- ----------- ----------- -----------
Applebee's Restaurant
Data (unaudited)
Effective
restaurants(a)
Franchise 1,767 1,607 1,753 1,605
Company 244 393 257 395
----------- ----------- ----------- -----------
Total 2,011 2,000 2,010 2,000
=========== =========== =========== ===========
System-wide(b)
Sales percentage
change(c) 3.8% (2.5)% 4.1% (2.9)%
Domestic same-
restaurant sales
percentage
change(d) 3.1% (1.6)% 3.5% (2.2)%
Franchise(b)(e)(g)
Sales percentage
change(c) 13.5% (1.8)% 13.3% (2.1)%
Same-restaurant
sales percentage
change(d) 3.5% (1.3)% 3.9% (2.0)%
Average weekly
domestic unit
sales (in
thousands) $ 46.8 $ 45.7 $ 48.5 $ 46.9
Company(f)(g)
Sales percentage
change(c) (36.9)% (5.2)% (34.1)% (5.8)%
Same-restaurant
sales percentage
change(d) 0.7% (2.6)% 0.7% (3.0)%
Average weekly
domestic unit
sales (in
thousands) $ 41.1 $ 40.4 $ 41.8 $ 41.5
Three Months Ended Six Months Ended
June 30, June 30,
------------------------- -------------------------
2011 2010 2011 2010
----------- ----------- ----------- -----------
IHOP Restaurant Data (unaudited)
Effective
restaurants(a)
Franchise 1,339 1,290 1,334 1,285
Company 10 12 10 12
Area license 163 164 164 164
----------- ----------- ----------- -----------
Total 1,512 1,466 1,508 1,461
=========== =========== =========== ===========
System-wide(b)
Sales percentage
change(c) 1.1% 4.1% 1.2% 3.7%
Domestic same-
restaurant sales
percentage
change(d) (2.9)% (0.1)% (2.8)% (0.7)%
Franchise(b)(e)(g)
Sales percentage
change(c) 0.9% 4.4% 1.2% 3.7%
Same-restaurant
sales percentage
change(d) (2.8)% (0.1)% (2.8)% (0.7)%
Average weekly
domestic unit
sales (in
thousands) $ 34.2 $ 35.1 $ 34.7 $ 35.6
Company(f)(g) n.m. n.m. n.m. n.m.
Area License(e)
Sales percentage
change(c) 3.0% 1.0% 1.6% 3.7%
(a) "Effective restaurants" are the number of restaurants 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 IHOP and Applebee's 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 IHOP and Applebee's restaurants operated by franchisees and IHOP restaurants operated by 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.
(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) "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 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 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 restaurants located in Florida.
(e)
Three Months Ended June Six Months Ended June
30, 30,
----------------------- -----------------------
Reported sales (unaudited) 2011 2010 2011 2010
----------- ----------- ----------- -----------
(In millions)
Applebee's franchise
restaurant sales $ 987.7 $ 870.2 $ 2,024.5 $ 1,787.4
IHOP franchise restaurant
sales $ 594.8 $ 589.2 $ 1,202.8 $ 1,188.9
IHOP area license restaurant
sales $ 56.6 $ 55.0 $ 116.9 $ 115.1
(f) Sales percentage change and same-restaurant sales percentage change for IHOP company-operated restaurants are not meaningful ("n.m.") due to the relatively small number and test-market nature of the restaurants, along with the periodic inclusion of restaurants reacquired from franchisees that are temporarily operated by the Company.
(g) The sales percentage change for the three months and six months ended June 30, 2011 for Applebee's franchise and company-operated restaurants was impacted by the franchising of 65 company-operated restaurants during the first quarter of 2011 and 83 company-operated restaurants in 2010.
DINEEQUITY, INC. AND SUBSIDIARIES
RESTAURANT DATA
The following table summarizes our restaurant development activity:
Three Months Ended Six Months Ended June
June 30, 30,
---------------------- ----------------------
2011 2010 2011 2010
---------- ---------- ---------- ----------
(unaudited)
Applebee's Restaurant
Development Activity
Beginning of period 2,011 1,999 2,010 2,008
New openings
Franchisee-developed 5 5 8 8
---------- ---------- ---------- ----------
Total new openings 5 5 8 8
---------- ---------- ---------- ----------
Closings
Company -- -- -- (6)
Franchise (4) (3) (6) (9)
---------- ---------- ---------- ----------
Total closings (4) (3) (6) (15)
---------- ---------- ---------- ----------
End of period 2,012 2,001 2,012 2,001
========== ========== ========== ==========
Summary-end of period
Franchise 1,768 1,608 1,768 1,608
Company 244 393 244 393
---------- ---------- ---------- ----------
Total 2,012 2,001 2,012 2,001
========== ========== ========== ==========
Three Months Ended Six Months Ended
June 30, June 30,
---------------------- ----------------------
2011 2010 2011 2010
---------- ---------- ---------- ----------
(unaudited)
IHOP Restaurant Development
Activity
Beginning of period 1,513 1,461 1,504 1,456
New openings
Franchisee-developed 12 20 23 26
Area license -- 1 2 2
---------- ---------- ---------- ----------
Total new openings 12 21 25 28
---------- ---------- ---------- ----------
Closings
Company -- (2) -- (2)
Franchise -- (2) (3) (3)
Area license (3) (2) (4) (3)
---------- ---------- ---------- ----------
Total closings (3) (6) (7) (8)
---------- ---------- ---------- ----------
End of period 1,522 1,476 1,522 1,476
========== ========== ========== ==========
Summary-end of period
Franchise 1,349 1,303 1,349 1,303
Company 11 10 11 10
Area license 162 163 162 163
---------- ---------- ---------- ----------
Total 1,522 1,476 1,522 1,476
========== ========== ========== ==========
SOURCE: DineEquity, Inc.