SOURCE: DineEquity, Inc.
Applebee’s Posts Third Consecutive Quarter of Domestic System-Wide Same-Restaurant Sales Improvement, IHOP Franchisees Open 21 Restaurants, Company Retires an Additional $26 Million of Securitized Debt
GLENDALE, CA–(Marketwire – July 29, 2010) – DineEquity, Inc. (
company of Applebee’s Neighborhood Grill & Bar and IHOP Restaurants, today
announced financial results for the second quarter 2010. DineEquity’s
financial performance for the second quarter and six months ended June 30,
2010 included the following highlights:
-- For the quarter, IHOP's domestic system-wide same-restaurant sales decreased 1.0% and Applebee's domestic system-wide same-restaurant sales decreased 1.6% compared to the same periods in 2009, which represented Applebee's third consecutive quarter of improvement. Year-to-date, IHOP's domestic system-wide same-restaurant sales decreased 0.7% and Applebee's domestic system-wide same-restaurant sales decreased 2.2%. -- Securitized debt was reduced by $25.8 million for the second quarter 2010 and by $80.7 million in the first six months of 2010 primarily due to the use of free cash flow for ongoing debt retirement efforts. -- Restaurant operating margins at Applebee's company-operated restaurants improved 10 basis points to 14.1% for the second quarter 2010 compared to 14.0% for the same quarter of 2009 as the Company continued to sustain the restaurant profitability improvements achieved over the past two years. -- Net income available to common stockholders was $7.4 million, or $0.42 per diluted share, for the second quarter 2010 compared to net income of $18.8 million, or $1.09 per diluted share, for the same quarter in 2009. For the first six months of 2010, net income available to common stockholders was $20.3 million, or $1.16 per diluted share, compared to net income of $49.4 million, or $2.87 per diluted share, for the same period in 2009. These decreases were primarily due to fewer gains in 2010 with respect to debt repurchases and asset sales related to Applebee's company-operated restaurants. -- Adjusted net income available to common stockholders (see "Non-GAAP Financial Measures" below) was $15.7 million, or $0.90 per diluted share, for the second quarter 2010 compared to $20.1 million, or $1.16 per diluted share, for the same quarter in 2009. For the first six months of 2010, adjusted net income available to common stockholders was $34.4 million, or $1.97 per diluted share, compared to $39.8 million, or $2.32 per diluted share, for the same period in 2009. These decreases were primarily due to lower operating results, a higher income tax rate and increased preferred dividend payments, which were partially offset by decreased interest expense. -- Consolidated G&A expenses increased 8.9% to $37.0 million for the second quarter 2010 compared to the same quarter in 2009 primarily due to higher expenses for salaries and incentive compensation plans. For the first six months of 2010, G&A decreased 4.9% to $77.2 million compared to the same period in 2009 primarily due to one-time costs of $6.3 million incurred in February 2009 related to the establishment of a purchasing co-operative. -- For the first six months of 2010, cash flows from operating activities were $50.3 million, consolidated capital expenditures were $6.9 million, and free cash flow (see "Non-GAAP Financial Measures" below) was $41.0 million.
“We are pleased with our second quarter 2010. Same-restaurant sales results
at both brands were encouraging, with Applebee’s experiencing a third
sequential quarter of improvement as IHOP’s performance continued to be
strong relative to the family dining category. Our business’ significant
free cash flow generation abilities enabled the retirement of more than $80
million of securitized debt year-to-date. And, we recently announced the
sale of 63 company-operated Applebee’s restaurants that will result in a
$105 million financial benefit to the Company,” said Julia A. Stewart,
DineEquity’s chairman and chief executive officer. “Looking ahead, we
remain focused on executing our revitalizing plans for Applebee’s and
ensuring that IHOP creates an insurmountable lead in family dining. Our
plan includes marketing, menu, operational and remodel initiatives that
will differentiate the Applebee’s and IHOP brands and position DineEquity
for a solid financial performance in the second half of 2010.”
Same-Restaurant Sales Performance
IHOP’s domestic system-wide same-restaurant sales decreased 1.0% for the
second quarter 2010 compared to the same quarter in 2009. Same-restaurant
sales reflect a higher average guest check and declines in guest traffic.
This reflected timing impacts related to the Easter and Fourth of July
holidays which negatively impacted results by 40 basis points. IHOP’s
marketing efforts during the quarter included Loaded Country Potatoes and
Pancake Stackers limited-time offers, and its Kids Eat Free dinner
promotion, among other activities.
Applebee’s domestic system-wide same-restaurant sales decreased 1.6% for
the second quarter 2010, which reflected Applebee’s third quarter of
sequential improvements. Domestic franchise same-restaurant sales decreased
1.3% and company-operated Applebee’s same-restaurant sales decreased 2.6%
for the second quarter 2010 compared to the same quarter in 2009. Results
at Company restaurants reflected declines in guest traffic and a higher
average guest check, including a 1.6% increase in effective pricing, as
well as timing impacts related to the Easter holiday which positively
impacted results by 40 basis points. Applebee’s marketing efforts during
the quarter included the promotion of its Great Tasting and Under 550
Calories and Realburgers Across America menu offerings, as well as the
introduction of Applebee’s new Sizzling Skillet Entrees, among other
activities.
Applebee’s Restaurant Operating Margins
Applebee’s company-operated restaurant operating margin was 14.1% in the
second quarter 2010 compared to 14.0% for the second quarter 2009. The 10
basis point improvement was primarily due to favorable commodity costs
partially offset by increased marketing programs to drive guest traffic.
For the first six months of 2010, Applebee’s company-operated restaurant
operating margin was 14.4% compared to 15.2% for the same period in 2009.
The 80 basis point decline was primarily due to increased marketing
programs to drive guest traffic and higher facility related costs partially
offset by favorable commodity costs and continued improvements in labor
management.
Debt Management
Securitized debt was reduced by $25.8 million during the second quarter
2010 and by $80.7 million year-to-date as a result of open market purchases
and scheduled payments on the Company’s subordinated notes. DineEquity has
reduced its total outstanding debt levels by $405.5 million, or 16.4%,
since the acquisition of Applebee’s in November 2007.
As of the end of the second quarter 2010, DineEquity remained comfortably
in compliance with the debt covenants set forth in the Company’s
securitized debt agreements. The Company’s consolidated leverage ratio was
5.96x compared to a required threshold of 7.0x. Debt service coverage
ratios (DSCR) were 3.48x for IHOP’s securitized debt on a three-month
unadjusted basis and 3.70x for the Applebee’s securitized debt on a
three-month adjusted basis, both compared to a minimum required threshold
of 1.85x. Applebee’s 12-month adjusted DSCR was 3.33x, compared to a
minimum required threshold of 2.25x.
DineEquity has provided supplemental information to this news release
regarding its compliance with its debt covenants, which may be accessed by
visiting the Calls & Presentations section of DineEquity’s Investor
Relations Web site at http://investors.dineequity.com and referring to
supporting materials for the Company’s second quarter 2010 webcast.
Sale of 63 Company-Operated Applebee’s
On July 23, 2010, DineEquity announced that it had entered into an asset
purchase agreement with Apple American Group LLC for the sale of 63
company-operated Applebee’s restaurants located in Minnesota and parts of
Wisconsin. This transaction is accretive to the Company’s consolidated
leverage ratio as defined by its debt covenants and furthers its strategic
objective of transitioning Applebee’s into a more highly franchised
restaurant system over time. Scheduled to close in the fourth quarter 2010,
the transaction is expected to deliver $105 million of financial benefit to
the Company including: 1) the reduction of securitized debt by $28 million
on an after-tax basis, 2) the reduction of sale-leaseback related financing
obligations by $46 million, and 3) the removal of $31 million of operating
lease obligations for debt covenant calculation purposes.
2010 Financial Performance Guidance
DineEquity provided the following update to its fiscal 2010 financial
outlook primarily reflecting the impact of the scheduled sale of 63
company-operated Applebee’s restaurants which is scheduled to be completed
in the fourth quarter 2010:
-- Reduced consolidated cash from operations guidance by $10 million to range between $135 and $145 million as the result of the sale of Applebee's company-operated restaurants. Key components that comprise the change include expected payments of net working capital liabilities, income tax payments and reduced profit contribution. This compares to the Company's previous expectations of $145 million to $155 million of consolidated cash from operations in 2010. -- Reduced consolidated free cash flow to range between $108 and $118 million due to the reduction in consolidated cash from operations expectations. Free cash flow consists of consolidated cash from operations plus approximately $16 million generated from the structural run-off of the Company's long-term notes receivable. Uses of cash include consolidated capital expenditures of approximately $20 million and approximately $23 million in preferred stock dividend payments. The Company plans to use available free cash flow to fund securitized debt reductions. -- Reduced consolidated securitized debt interest expense expectations to range between $170 million and $175 million for 2010, approximately $40 million of which is non-cash interest expense, due to more aggressive debt retirement efforts in the first half of 2010. This compares to the Company's previous expectations of $175 million to $180 million. -- Increased the Company's income tax rate expectations to range between 35% and 36% compared to previous expectations of approximately 34%. This change is primarily related to settlements on state tax audits. -- Reiterated Applebee's domestic system-wide same-restaurant sales performance expectations to range between flat and negative 3% for fiscal 2010, with Applebee's franchisees slated to open between 25 and 30 new restaurants this year. -- Reiterated operating margin expectations at Applebee's company-operated restaurants to range between 13.5% and 14.5% for the full year 2010. -- Reiterated IHOP's domestic system-wide same-restaurant sales performance expectations to range between positive 1% and negative 1% for fiscal 2010, with IHOP franchisees slated to open between 60 and 70 new restaurants this year. -- Reiterated consolidated G&A expense expectations to range between $158 million and $161 million for fiscal 2010, including non-cash stock based compensation expense and depreciation of approximately $20 million. -- Reiterated depreciation and amortization expectations to range between $65 million and $70 million.
Investor Conference Call Today
The Company will host an investor conference call to discuss its second
quarter 2010 financial results today at 11:00 a.m. Eastern Time (8:00 a.m.
Pacific Time). To participate on the call, please dial (888) 713-4211 and
reference pass code 88785262. 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 5,
2010 by dialing 888-286-8010 and referencing pass code 50100212. 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 3,450 restaurants combined,
DineEquity is the largest full-service restaurant company in the world. For
more information on DineEquity, visit the Company’s Web site located at
www.dineequity.com.
Forward-Looking Statements
There are forward-looking statements contained in this news release. They
use such words as “may,” “will,” “expect,” “believe,” “plan,” or other
similar terminology. These statements involve known and unknown risks,
uncertainties and other factors, which may cause the actual results to be
materially different than those expressed or implied in such statements.
These factors include, but are not limited to: the implementation of
DineEquity, Inc.’s (the “Company”) strategic growth plan; the availability
of suitable locations and terms for sites designated for development; the
ability of franchise developers to fulfill their commitments to build new
restaurants in the numbers and time frames covered by their development
agreements; legislation and government regulation including the ability to
obtain satisfactory regulatory approvals; risks associated with the
Company’s indebtedness; conditions beyond the Company’s control such as
weather, natural disasters, disease outbreaks, epidemics or pandemics
impacting the Company’s customers or food supplies, or acts of war or
terrorism; availability and cost of materials and labor; cost and
availability of capital; competition; potential litigation and associated
costs; continuing acceptance of the International House of Pancakes
(“IHOP”) and Applebee’s brands and concepts by guests and franchisees; the
Company’s overall marketing, operational and financial performance;
economic and political conditions; adoption of new, or changes in,
accounting policies and practices; and other factors discussed from time to
time in the Company’s news releases, public statements and/or filings with
the Securities and Exchange Commission, especially the “Risk Factors”
sections of Annual and Quarterly Reports on Forms 10-K and 10-Q.
Forward-looking information is provided by the Company pursuant to the safe
harbor established under the Private Securities Litigation Reform Act of
1995 and should be evaluated in the context of these factors. In addition,
the Company disclaims any intent or obligation to update these
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 by deducting from net income (loss) available to common stockholders
for such period the effect of any impairment and closure charges, any gain
related to debt extinguishment, any intangible asset amortization, any
non-cash interest expense 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 as income before income taxes (including gain on extinguishment of
debt) less interest expense, depreciation and amortization, impairment and
closure charges, stock-based compensation, gain/loss on sale of assets and
non-cash amounts related to a captive insurance subsidiary. “EBITDAR” for a
given period is defined as EBITDA plus annualized operating lease expense
(Rent). “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 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,
-------------------- --------------------
2010 2009 2010 2009
--------- --------- --------- ---------
Revenues
Franchise revenues $ 93,203 $ 90,514 $ 188,479 $ 188,724
Company restaurant sales 210,695 222,268 435,309 461,792
Rental revenues 32,187 32,544 66,119 66,253
Financing revenues 3,838 4,324 7,988 8,437
--------- --------- --------- ---------
Total revenues 339,923 349,650 697,895 725,206
--------- --------- --------- ---------
Costs and Expenses
Franchise expenses 25,950 23,736 50,855 52,034
Company restaurant expenses 182,048 192,181 374,607 394,037
Rental expenses 23,849 24,275 48,249 48,817
Financing expenses 2 339 471 346
General and administrative
expenses 36,981 33,959 77,166 81,118
Interest expense 43,692 45,970 88,570 94,380
Impairment and closure
charges 1,687 2,352 2,196 2,001
Amortization of intangible
assets 3,076 3,018 6,153 6,037
Gain on extinguishment of
debt (1,055) (12,449) (4,640) (38,803)
Loss (gain) on disposition
of assets 364 (5) 178 (5,142)
Other expense (income), net 956 (94) 1,945 129
--------- --------- --------- ---------
Total costs and expenses 317,550 313,282 645,750 634,954
--------- --------- --------- ---------
Income before income taxes 22,373 36,368 52,145 90,252
Provision for income taxes (8,332) (11,554) (18,433) (28,297)
--------- --------- --------- ---------
Net income $ 14,041 $ 24,814 $ 33,712 $ 61,955
========= ========= ========= =========
Net income $ 14,041 $ 24,814 $ 33,712 $ 61,955
Less: Series A preferred
stock dividends (5,700) (4,750) (11,460) (9,500)
Less: Accretion of Series B
preferred stock (603) (569) (1,198) (1,129)
Less: Net income allocated
to unvested participating
restricted stock (296) (719) (801) (1,916)
--------- --------- --------- ---------
Net income available to common
stockholders $ 7,442 $ 18,776 $ 20,253 $ 49,410
========= ========= ========= =========
Net income available to common
stockholders per share
Basic $ 0.43 $ 1.11 $ 1.18 $ 2.93
========= ========= ========= =========
Diluted $ 0.42 $ 1.09 $ 1.16 $ 2.87
========= ========= ========= =========
Weighted average shares
outstanding
Basic 17,226 16,929 17,119 16,886
========= ========= ========= =========
Diluted 17,560 17,845 17,476 17,625
========= ========= ========= =========
DINEEQUITY, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(In thousands, except share and per share amounts)
June 30, December 31,
2010 2009
----------- -----------
(Unaudited)
Assets
Current assets:
Cash and cash equivalents $ 64,120 $ 82,314
Restricted cash 60,624 72,690
Receivables, net 75,420 104,690
Inventories 11,966 12,236
Prepaid income taxes -- 7,702
Prepaid gift cards 14,971 19,878
Prepaid expenses 16,663 13,425
Deferred income taxes 19,050 15,444
Assets held for sale 6,237 8,765
----------- -----------
Total current assets 269,051 337,144
----------- -----------
Non-current restricted cash 45,461 48,173
Restricted assets related to captive insurance
subsidiary 3,898 4,344
Long-term receivables 250,399 259,775
Property and equipment, net 750,270 771,372
Goodwill 697,470 697,470
Other intangible assets, net 843,529 849,552
Other assets, net 125,754 133,038
----------- -----------
Total assets $ 2,985,832 $ 3,100,868
=========== ===========
Liabilities and Stockholders' Equity
Current liabilities:
Current maturities of long-term debt $ 25,200 $ 25,200
Accounts payable 25,210 31,729
Accrued employee compensation and benefits 30,409 37,397
Gift card liability 60,943 105,465
Other accrued expenses 49,918 54,549
Accrued interest payable 3,936 3,627
----------- -----------
Total current liabilities 195,616 257,967
----------- -----------
Long-term debt, less current maturities 1,561,224 1,637,198
Financing obligations, less current maturities 304,980 309,415
Capital lease obligations, less current maturities 148,480 152,758
Deferred income taxes 362,416 369,127
Other liabilities 119,721 117,449
----------- -----------
Total liabilities 2,692,437 2,843,914
Commitments and contingencies
Preferred stock, Series A 187,050 187,050
Total stockholders' equity 106,345 69,904
----------- -----------
Total liabilities and stockholders' equity $ 2,985,832 $ 3,100,868
=========== ===========
DINEEQUITY, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
Six Months Ended
June 30,
--------------------
2010 2009
--------- ---------
Cash flows from operating activities
Net income $ 33,712 $ 61,955
Adjustments to reconcile net income to cash flows
provided by operating activities
Depreciation and amortization 32,164 32,382
Non-cash interest expense 20,621 19,280
Gain on extinguishment of debt (4,640) (38,803)
Impairment and closure charges 2,196 2,001
Deferred income taxes (13,299) 4,845
Non-cash stock-based compensation expense 7,300 5,277
Tax benefit from stock-based compensation 1,249 376
Excess tax benefit from stock options exercised (1,968) (41)
Loss (gain) on disposition of assets 178 (5,142)
Other (276) (3,620)
Changes in operating assets and liabilities
Receivables 27,693 35,384
Inventories 246 (1,009)
Prepaid expenses 14,263 6,070
Accounts payable (7,196) (13,931)
Accrued employee compensation and benefits (7,073) (12,617)
Gift card liability (44,523) (45,254)
Other accrued expenses (10,372) 14,328
--------- ---------
Cash flows provided by operating activities 50,275 61,481
--------- ---------
Cash flows from investing activities
Additions to property and equipment (6,859) (5,899)
Proceeds from sale of property and equipment and
assets held for sale 2,583 11,260
Principal receipts from notes and equipment
contracts receivable 8,955 8,206
Reduction of long-term receivables 1,863 1,029
Other 1,121 896
--------- ---------
Cash flows provided by investing activities 7,663 15,492
--------- ---------
Cash flows from financing activities
Proceeds from issuance of long-term debt -- 10,000
Repayment of long-term debt (74,359) (101,701)
Principal payments on capital lease and financing
obligations (7,946) (7,047)
Dividends paid (11,400) (9,500)
Repurchase of restricted stock (832) (287)
Proceeds from stock options exercised 1,953 308
Excess tax benefit from stock options exercised 1,968 41
Payment of accrued debt issuance costs -- (20,030)
Restricted cash related to securitization 14,778 17,293
Other (294) (123)
--------- ---------
Cash flows used in financing activities (76,132) (111,046)
--------- ---------
Net change in cash and cash equivalents (18,194) (34,073)
Cash and cash equivalents at beginning of period 82,314 114,443
--------- ---------
Cash and cash equivalents at end of period $ 64,120 $ 80,370
========= =========
NON-GAAP FINANCIAL MEASURES
(In thousands, except per share amounts)
(Unaudited)
Reconciliation of (i) net income available to common stockholders to (ii)
net income available to common stockholders excluding impairment and
closure charges, gain on extinguishment of debt, amortization of intangible
assets, non-cash interest expense and loss (gain) on disposition of assets,
and related per share data:
Three Months Ended Six Months Ended
June 30, June 30,
-------------------- --------------------
2010 2009 2010 2009
--------- --------- --------- ---------
Net income available to common
stockholders, as reported $ 7,442 $ 18,776 $ 20,253 $ 49,410
Impairment and closure charges 1,687 2,352 2,196 2,001
Gain on extinguishment of debt (1,055) (12,449) (4,640) (38,803)
Amortization of intangible
assets 3,076 3,018 6,153 6,037
Non-cash interest expense 10,250 9,344 20,621 19,280
Loss (gain) on disposition of
assets 364 (5) 178 (5,142)
Income tax (provision) benefit (5,700) (899) (9,754) 6,618
Net income allocated to
unvested participating
restricted stock (327) (50) (562) 374
--------- --------- --------- ---------
Net income available to
common stockholders, as
adjusted $ 15,737 $ 20,087 $ 34,445 $ 39,775
========= ========= ========= =========
Diluted net income available
to common stockholders per
share:
Net income available to common
stockholders per share, as
reported $ 0.42 $ 1.09 $ 1.16 $ 2.87
Impairment and closure charges
per share 0.06 0.08 0.08 0.07
Gain on extinguishment of debt
per share (0.04) (0.42) (0.16) (1.33)
Amortization of intangible
assets per share 0.11 0.10 0.21 0.21
Non-cash interest expense per
share 0.35 0.32 0.71 0.66
Loss (gain) on disposition of
assets per share 0.01 -- 0.01 (0.18)
Net income allocated to
unvested participating
restricted stock per share (0.02) -- (0.03) 0.02
Per share effect of dilutive
calculation adjustments 0.01 (0.01) (0.01) --
--------- --------- --------- ---------
Diluted net income available to
common stockholders per share,
as adjusted $ 0.90 $ 1.16 $ 1.97 $ 2.32
========= ========= ========= =========
Numerator for basic EPS-income
available to common
stockholders, as adjusted $ 15,737 $ 20,087 $ 34,445 $ 39,775
Effect of unvested
participating restricted stock
using the two-class method 11 38 28 62
Effect of dilutive securities:
Stock options -- -- -- --
Convertible Series B preferred
stock -- 569 -- 1,129
--------- --------- --------- ---------
Numerator for diluted
EPS-income available to common
stockholders after assumed
conversions, as adjusted $ 15,748 $ 20,694 $ 34,473 $ 40,966
========= ========= ========= =========
Denominator for basic
EPS-weighted-average shares 17,226 16,929 17,119 16,886
Effect of dilutive securities:
Stock options 334 362 357 183
Convertible Series B preferred
stock -- 556 -- 556
--------- --------- --------- ---------
Denominator for diluted
EPS-weighted-average shares
and assumed conversions 17,560 17,847 17,476 17,625
========= ========= ========= =========
NON-GAAP FINANCIAL MEASURES
(In thousands)
(Unaudited)
Reconciliation of (i) loss before income taxes to (ii) EBITDA and to (ii)
EBITDAR:
Trailing Twelve Months Ended June 30, 2010
Loss before income taxes (including gain on extinguishment of
debt) $ (1,523)
Interest expense 201,129
Depreciation and amortization 65,096
Impairment and closure charges 105,290
Non-cash stock-based compensation 12,733
Gain on sale of assets (2,023)
Non-cash amounts related to captive insurance subsidiary 332
-----------
EBITDA 381,034
Annualized operating lease expense 96,901
-----------
EBITDAR $ 477,935
===========
Reconciliation of the Company's cash provided by operating activities to
free cash flow:
Six Months Ended
June 30,
------------------
2010 2009 2010 Guidance*
-------- -------- --------------------
Cash flows from operating
activities $ 50,275 $ 61,481 $ 135,000 to 145,000
Receipts from long-term notes
receivable 8,955 8,206 16,000
Dividends paid (11,400) (9,500) (23,000)
Capital expenditures (6,859) (5,899) (20,000)
-------- -------- --------------------
Free cash flow $ 40,971 $ 54,288 $ 108,000 to 118,000
======== ======== ====================
*Inclusive of expected payments of net working capital liabilities, income
tax payments and reduced profit contribution associated with the scheduled
sale of 63 Applebee's company-operated restaurants in 2010.
Restaurant Data
The following table sets forth, for the three-month and six-month
periods ended June 30, 2010 and 2009, 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 Six Months
Ended June 30, Ended June 30,
------------------ ------------------
2010 2009 2010 2009
------- ------- ------- -------
Applebee's Restaurant Data (unaudited)
Effective restaurants(a)
Franchise 1,607 1,589 1,605 1,589
Company 393 401 395 403
------- ------- ------- -------
Total 2,000 1,990 2,000 1,992
======= ======= ======= =======
System-wide(b)
Sales percentage change(c) (2.5)% (4.2)% (2.9)% (3.3)%
Domestic same-restaurant
sales percentage change(d) (1.6)% (4.3)% (2.2)% (3.6)%
Franchise(e)
Sales percentage change(c)(g) (1.8)% 3.1 % (2.1)% 3.9 %
Same-restaurant sales
percentage change(d) (1.3)% (4.2)% (2.0)% (3.5)%
Average weekly domestic unit
sales (in thousands) $ 45.7 $ 46.6 $ 46.9 $ 48.0
Company
Sales percentage change(c)(g) (5.2)% (25.4)% (5.8)% (24.5)%
Same-restaurant sales
percentage change(d) (2.6)% (4.8)% (3.0)% (4.0)%
Average weekly domestic unit
sales (in thousands) $ 40.4 $ 41.9 $ 41.5 $ 43.3
Three Months Six Months
Ended June 30, Ended June 30,
------------------ ------------------
2010 2009 2010 2009
------- ------- ------- -------
IHOP Restaurant Data (unaudited)
Effective restaurants(a)
Franchise 1,290 1,235 1,285 1,230
Company 12 11 12 11
Area license 164 160 164 159
------- ------- ------- -------
Total 1,466 1,406 1,461 1,400
======= ======= ======= =======
System-wide(b)
Sales percentage change(c) 4.1 % 3.6 % 3.7 % 4.6 %
Domestic same-restaurant
sales percentage change(d) (1.0)% (0.6)% (0.7)% 0.7 %
Franchise(e)
Sales percentage change(c) 4.4 % 3.9 % 3.7 % 5.1 %
Same-restaurant sales
percentage change(d) (1.0)% (0.6)% (0.7)% 0.7 %
Average weekly unit sales (in
thousands) $ 35.1 $ 35.2 $ 35.6 $ 35.8
Company(f) n.m. n.m. n.m. n.m.
Area License(h)
Sales percentage change(c) 1.0 % 0.9 % 3.7 % (0.3)%
(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) Applebee's franchise restaurant sales were $870.2 million and $886.4
million for the three months ended June 30, 2010 and 2009,
respectively, and $1,787.4 million and $1,826.3 million for the six
months ended June 30, 2010 and 2009, respectively. IHOP franchise
restaurant sales were $589.2 million and $564.3 million for the three
months ended June 30, 2010 and 2009, respectively, and $1,188.9
million and $1,146.3 million for the six months ended June 30, 2010
and 2009, respectively.
(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 and six months ended
June 30, 2009 for Applebee's franchise and company-operated
restaurants was impacted by the franchising of 103 company-operated
restaurants during 2008 and seven company-operated restaurants in
2009.
(h) Sales at IHOP area license restaurants were $55.0 million and $54.4
million for the three months ended June 30, 2010 and 2009,
respectively, and $115.1 million and $110.9 million for the six
months ended June 30, 2010 and 2009, respectively.
DINEEQUITY, INC. AND SUBSIDIARIES
RESTAURANT DATA
The following table summarizes our restaurant development activity:
Three Months Six Months
Ended June 30, Ended June 30,
---------------- ----------------
2010 2009 2010 2009
------- ------- ------- --------
(unaudited)
Applebee's Restaurant Development
Activity
Total restaurants, beginning of period 1,999 1,992 2,008 2,004
New openings
Company-developed -- -- -- --
Franchise-developed 5 5 8 10
------- ------- ------- --------
Total new openings 5 5 8 10
Closings
Company -- -- (6) --
Franchise (3) (5) (9) (22)
------- ------- ------- --------
Total closings (3) (5) (15) (22)
------- ------- ------- --------
Total restaurants, end of period 2,001 1,992 2,001 1,992
======= ======= ======= =======
Summary-end of period
Franchise 1,608 1,591 1,608 1,591
Company 393 401 393 401
------- ------- ------- --------
Total 2,001 1,992 2,001 1,992
======= ======= ======= =======
Three Months Six Months
Ended June 30, Ended June 30,
---------------- ----------------
2010 2009 2010 2009
------- ------- ------- --------
(unaudited)
IHOP Restaurant Development Activity
Total restaurants, beginning of period 1,461 1,402 1,456 1,396
New openings
Company-developed -- -- -- --
Franchise-developed 20 20 26 31
Area license 1 3 2 3
------- ------- ------- --------
Total new openings 21 23 28 34
Closings
Company (2) -- (2) --
Franchise (2) (3) (3) (7)
Area license (2) (1) (3) (2)
------- ------- ------- --------
Total new closings (6) (4) (8) (9)
------- ------- ------- --------
Total restaurants, end of period 1,476 1,421 1,476 1,421
======= ======= ======= =======
Summary-end of period
Franchise 1,303 1,249 1,303 1,249
Company 10 11 10 11
Area license 163 161 163 161
------- ------- ------- --------
Total 1,476 1,421 1,476 1,421
======= ======= ======= =======