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DineEquity, Inc. Reports Fourth Quarter And Fiscal 2012 Results

DineEquity, Inc. (NYSE: DIN), the parent company of Applebee's Neighborhood Grill & Bar and IHOP Restaurants, today announced financial results for the fourth quarter and full year of 2012.

“For DineEquity, 2012 was a year of milestones. The year was marked by accomplishing what we set out to do when we acquired Applebee’s, completing the transition to a 99% franchised restaurant system. In addition, we reduced total debt by over $1.0 billion since the acquisition in 2007,” said Julia A. Stewart, Chairman and Chief Executive Officer of DineEquity, Inc. “We remain steadfast in managing our capital structure with a long-term view to maximize shareholder value. Today’s announcement of our capital allocation strategy reflects our strong free cash flow, solid fundamentals, and less capital intensive business model.”

Fourth Quarter 2012 Financial Highlights

  • Total debt was reduced by $77.2 million in the fourth quarter of 2012 as a result of net cash proceeds and financing obligation reductions from the refranchise and sale of Applebee’s company-operated restaurants and free cash flow. The Company reduced Term Loan balances by $30.6 million and financing and capital lease obligations by $46.5 million.
  • Adjusted net income available to common stockholders was $15.5 million, representing adjusted earnings per diluted share of $0.83 for the fourth quarter of 2012. This compares to $16.4 million, or adjusted earnings per diluted share of $0.91, for the same quarter in 2011. The decrease in adjusted earnings was mainly due to, as expected, lower segment profit caused by the refranchise and sale of Applebee’s company-operated restaurants and higher income taxes. These items were partially offset by lower cash interest expense and lower general and administrative expenses. (See “Non-GAAP Financial Measures” below.)
  • GAAP net income available to common stockholders was $18.0 million, or earnings per diluted share of $0.97 for the fourth quarter of 2012, compared to $27.3 million, or earnings per diluted share of $1.51, for the same quarter in 2011. The decrease was primarily due to a lower gain on the disposition of assets, as expected, lower segment profit due to the refranchise and sale of Applebee’s company-operated restaurants and higher income taxes. These items were partially offset by lower interest expense, a decline in general and administrative expenses, and the reduced impact from debt extinguishment.
  • EBITDA was $74.0 million for the fourth quarter of 2012. (See “Non-GAAP Financial Measures” below.)
  • Consolidated general and administrative expenses were $37.6 million for the fourth quarter of 2012 compared to $40.7 million in the fourth quarter of 2011. The decrease was primarily due to the net savings in employee compensation associated with the Company’s previously announced restructuring initiative. The decline was partially offset by higher stock-based compensation due to stock appreciation and severance charges related to the workforce reduction announced in the third quarter of 2012.

Fiscal 2012 Highlights

  • Total debt was reduced by $332.6 million in fiscal 2012 as a result of net cash proceeds and financing obligation reductions from the refranchise and sale of Applebee’s company-operated restaurants and free cash flow. The Company reduced Term Loan balances by $206.3 million, Senior Notes by $3.1 million, and financing and capital lease obligations by $123.2 million.
  • Adjusted net income available to common stockholders was $78.1 million for fiscal 2012, representing adjusted earnings per diluted share of $4.28. This compares to $78.2 million, or adjusted earnings per diluted share of $4.29, for fiscal 2011. The minimal decrease in adjusted earnings was primarily due to, as expected, lower segment profit primarily due to the refranchise and sale of Applebee’s company-operated restaurants and higher income taxes. These items were offset by lower cash interest expense and lower general and administrative expenses. (See “Non-GAAP Financial Measures” below.)
  • GAAP net income available to common stockholders was $122.5 million for fiscal 2012, or earnings per diluted share of $6.63, compared to $70.7 million, or earnings per diluted share of $3.89 for fiscal 2011. The increase was due to a higher gain on the refranchise and sale of Applebee’s company-operated restaurants, lower impairment and closure charges, and lower interest expense. These items were partially offset by lower segment profit due to refranchising, higher income taxes, and higher general and administrative expenses due to a non-recurring litigation settlement.
  • EBITDA was $300.3 million for fiscal 2012. (See “Non-GAAP Financial Measures” below.)
  • For fiscal 2012, cash flows from operating activities were $52.9 million, capital expenditures were $17.0 million, and free cash flow was $48.2 million. (See “Non-GAAP Financial Measures” below.) For fiscal 2011, free cash flow was $108.5 million. The decline in free cash flow in fiscal 2012 was primarily due to the increase in cash taxes paid on refranchising proceeds and, as expected, lower segment profit due to refranchising. These items were partially offset by lower cash interest paid and lower capital expenditures.
  • Applebee’s company-operated restaurant operating margin was 16.3% for fiscal 2012 compared to 14.5% for 2011. The increase of 180 basis points was primarily due to the refranchise and sale of less profitable Applebee’s company-operated restaurants. The refranchised company-operated restaurants had higher-than-average labor and occupancy costs.

Same-Restaurant Sales Performance

Fourth Quarter 2012

  • Applebee’s domestic system-wide same-restaurant sales increased 0.9% for the fourth quarter of 2012 compared to the fourth quarter of 2011. The increase in same-restaurant sales reflected a higher average guest check, partially offset by a decline in traffic compared to the same quarter a year ago.
  • IHOP’s domestic system-wide same restaurant sales decreased 2.6% for the fourth quarter of 2012 compared to the fourth quarter of 2011. The decline in same-restaurant sales reflected a decrease in traffic and a lower average guest check compared to the same period in 2011.

Fiscal 2012

  • Applebee’s domestic system-wide same-restaurant sales increased 1.2% for fiscal 2012 compared to fiscal 2011. The increase in same-restaurant sales was mainly driven by a higher average guest check, partially offset by a decline in traffic.
  • IHOP’s domestic system-wide same-restaurant sales declined 1.6% for fiscal 2012 compared to fiscal 2011. Same-restaurant sales performance reflected a decrease in traffic, partially offset by a slightly higher average guest check.

Investor Conference Call Today

The Company will host an investor conference call today (Wednesday, February 27, 2013, at 11:00 a.m. Eastern Time / 8:00 a.m. Pacific Time) to discuss its fourth quarter and full year 2012 results. To participate on the call, please dial (888) 680-0879 and reference pass code 73306646. International callers, please dial (617) 213-4856 and reference pass code 73306646. Participants may also pre-register to obtain a unique pin number to join the live call without operator assistance by visiting the following Web site:

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