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DineEquity, Inc. Reports Strong Second Quarter 2013 Results

Stocks in this article: DIN

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 2013.

“DineEquity’s second quarter included a number of accomplishments. Same-restaurant sales were positive for both brands. In particular, same-restaurant sales at IHOP rose 1.9%, with an increase in guest traffic. This is IHOP’s first quarter of both positive same-restaurant sales and guest traffic since the fourth quarter of 2010. We are very pleased with the results and will continue our efforts to build momentum. Applebee’s performance was also strong in an uneven consumer environment, generating same-restaurant sales growth of 1.3%,” said Julia A. Stewart, Chairman and Chief Executive Officer of DineEquity, Inc. “We are actively managing our Shared Services model, driving cost efficiencies and innovation for both brands. We continued to execute on our balanced approach to return significant free cash flow to our stockholders, paying a second quarter dividend of $0.75 per share, resulting in a very competitive yield. We also repurchased $14.5 million of our common stock, creating additional stockholder value.”

Second Quarter 2013 Financial Highlights

  • Adjusted net income available to common stockholders was $19.7 million, representing adjusted earnings per diluted share of $1.02 for the second quarter of 2013. This compares to $19.1 million, or adjusted earnings per diluted share of $1.06, for the second quarter of 2012. The increase in adjusted net income was due to lower cash interest expense and a decline in general and administrative expenses. The increase was partially offset by, as expected, lower segment profit resulting from the refranchise and sale of 137 Applebee’s company-operated restaurants during the third and fourth quarters of 2012. The decline in adjusted earnings per diluted share was due to a higher number of weighted average shares outstanding. (See “Non-GAAP Financial Measures” below.)
  • GAAP net income available to common stockholders was $16.6 million, or earnings per diluted share of $0.87 for the second quarter of 2013, compared to $15.9 million, or earnings per diluted share of $0.88, for the second quarter of 2012. The increase in net income was primarily due to lower interest expense, a decline in general and administrative expenses, and lower asset disposition losses. These items were partially offset by lower segment profit as a result of refranchising.
  • Consolidated general and administrative expenses were $35.6 million for the second quarter of 2013 compared to $37.2 million in the second quarter of 2012. The decrease was primarily due to lower personnel costs as a result of refranchising, the Company’s 2012 comprehensive restructuring initiative, and lower stock-based compensation. The lower personnel costs were partially offset by higher costs for professional services and consumer research.

First Six Months of 2013 Highlights

  • Adjusted net income available to common stockholders was $41.5 million in the first six months of 2013, representing adjusted earnings per diluted share of $2.16. This compares to $43.8 million, or adjusted earnings per diluted share of $2.41, for the same period in 2012. The decrease was primarily due to lower segment profit as a result of refranchising. These items were partially offset by lower cash interest expense and a decline in general and administrative expenses. (See “Non-GAAP Financial Measures” below.)
  • GAAP net income available to common stockholders was $34.5 million in the first six months of 2013, or earnings per diluted share of $1.80, compared to $45.8 million, or earnings per diluted share of $2.52 for the same period in 2012. The decrease was primarily due to lower segment profit as a result of refranchising, lower asset disposition gains, and debt modification costs. These items were partially offset by lower interest expense, a decline in general and administrative expenses, and the reduced impact from debt extinguishment.
  • Consolidated general and administrative expenses were $69.7 million in the first six months of 2013 compared to $76.9 million for the same period of 2012. The decrease was primarily due to lower personnel costs as a result of refranchising and the Company’s 2012 comprehensive restructuring initiative. The Company’s strategy remains on track to deliver the targeted annualized savings in general and administrative expenses.
  • EBITDA was $142.5 million for the first six months of 2013. (See “Non-GAAP Financial Measures” below.)
  • For the first six months of 2013, cash flows from operating activities were $55.4 million, capital expenditures were $3.0 million, and free cash flow was $52.1 million. (See “Non-GAAP Financial Measures” below.)

Same-Restaurant Sales Performance

Second Quarter 2013

  • Applebee’s domestic system-wide same-restaurant sales increased 1.3% for the second quarter of 2013 compared to the second quarter of 2012. The increase in same-restaurant sales reflected a higher average guest check, partially offset by a slight decline in traffic.
  • IHOP’s domestic system-wide same restaurant sales increased 1.9% for the second quarter of 2013 compared to the same quarter of 2012. The increase in same-restaurant sales reflected a higher average guest check and an increase in traffic.

First Six Months of 2013 Highlights

  • Applebee’s domestic system-wide same-restaurant sales were flat for the first six months of 2013 compared to the same period in 2012. The flat same-restaurant sales reflected a higher average guest check offset by a decline in traffic.
  • IHOP’s domestic system-wide same restaurant sales increased 0.7% for the first six months of 2013 compared to the first six months of 2012. The increase in same-restaurant sales reflected a higher average guest check, partially offset by a decrease in traffic.

Financial Performance Guidance for Fiscal 2013

DineEquity reiterates its financial performance guidance for fiscal 2013 contained in the press release issued on February 27, 2013, except for consolidated general and administrative expenses. The Company revised consolidated general and administrative expenses to range between $142 million and $146 million. This reflects a reduction from the previous expectations of between $144 million and $147 million.

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