This Day On The Street
Continue to site right-arrow
ADVERTISEMENT
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here
$1 buys you full access to ALL of TheStreet's Subscription Services! Learn More

DineEquity, Inc. Reports Strong Third 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 third quarter of 2013.

“I am pleased with our same-restaurant sales performance in a challenging economic environment. We are building momentum and are on the right track with consumers. We are continuing to execute on our strategy to differentiate both brands, driving both innovation and change,” said Julia A. Stewart, Chairman and Chief Executive Officer of DineEquity, Inc. “During the third quarter, we generated substantial free cash flow, which allowed us to return significant cash to stockholders through the combination of a cash dividend payment and share repurchases. I am confident in our strategy for long-term success.”

Third Quarter 2013 Financial Highlights

  • Adjusted net income available to common stockholders was $21.0 million, representing adjusted earnings per diluted share of $1.10 for the third quarter of 2013, which includes approximately $3.8 million in non-recurring termination fees arising from the previously disclosed bankruptcy filing by an Applebee’s franchisee. This compares to $18.9 million, or adjusted earnings per diluted share of $1.03, for the third 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, and a higher tax rate. (See “Non-GAAP Financial Measures” below.)
  • GAAP net income available to common stockholders was $18.4 million, or earnings per diluted share of $0.97 for the third quarter of 2013, compared to $58.7 million, or earnings per diluted share of $3.14, for the third quarter of 2012. The decrease in net income was primarily due to the impact of 2012 refranchising asset sales and related lower segment profit. These items were partially offset by lower income tax expense, a decline in general and administrative expenses, and lower interest expense.
  • Consolidated general and administrative expenses were $35.3 million for the third quarter of 2013 compared to $48.7 million in the third quarter of 2012. The decrease was primarily due to a non-recurring $9.0 million charge recorded in the third quarter of 2012 related to settlement of litigation that commenced prior to our acquisition of Applebee’s and lower personnel costs.

First Nine Months of 2013 Highlights

  • Adjusted net income available to common stockholders was $62.5 million in the first nine months of 2013, representing adjusted earnings per diluted share of $3.26. This compares to $62.6 million, or adjusted earnings per diluted share of $3.44, for the same period in 2012. The decrease was primarily due to lower segment profit as a result of refranchising and a higher tax rate. 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 $53.0 million in the first nine months of 2013, or earnings per diluted share of $2.76, compared to $104.3 million, or earnings per diluted share of $5.66 for the same period in 2012. The decrease in net income was primarily due to the impact of 2012 refranchising asset sales and related lower segment profit. These items were partially offset by lower income tax expense, a decline in general and administrative expenses, and lower interest expense.
  • Consolidated general and administrative expenses were $105.0 million in the first nine months of 2013 compared to $125.6 million for the same period of 2012. The decrease was primarily due to a decline in compensation costs and a non-recurring $9.0 million charge recorded in the third quarter of 2012 related to settlement of litigation.
  • EBITDA was $211.9 million for the first nine months of 2013. (See “Non-GAAP Financial Measures” below.)
  • For the first nine months of 2013, cash flows from operating activities were $102.8 million, principal receipts from long-term receivables were $10.3 million, capital expenditures were $4.5 million, principal payments on capital lease and financing obligations were $7.5 million, the mandatory 1% repayment on the Term Loan principal balance was $2.4 million, and free cash flow was $98.6 million. (See “Non-GAAP Financial Measures” below.)

Same-Restaurant Sales Performance

Third Quarter 2013

  • Applebee’s domestic system-wide same-restaurant sales decreased 0.4% for the third quarter of 2013 compared to the same quarter of 2012. The decrease in same-restaurant sales reflected a decline in traffic, partially offset by an increase in average guest check.
  • IHOP’s domestic system-wide same restaurant sales increased 3.6% for the third quarter of 2013 compared to the same quarter of 2012. The increase in same-restaurant sales reflected a higher average guest check, largely due to a favorable shift in product mix. The increase was partially offset by a decline in traffic.

First Nine Months of 2013

  • Applebee’s domestic system-wide same-restaurant sales decreased 0.1% for the first nine months of 2013 compared to the same period in 2012. The decrease in same-restaurant sales reflected a decline in traffic, partially offset by an increase in average guest check.
  • IHOP’s domestic system-wide same restaurant sales increased 1.7% for the first nine months of 2013 compared to the same period in 2012. The increase in same-restaurant sales reflected a higher average guest check, partially offset by a decline in traffic.

Financial Performance Guidance for Fiscal 2013

  • Revised Applebee’s domestic system-wide same-restaurant sales performance to range between negative 0.5% and positive 0.5%. This reflects a narrowing of the range from our previous expectations of between negative 1.5% and positive 1.5%.
  • Revised IHOP’s domestic system-wide same-restaurant sales performance to range between positive 2.0% and positive 3.0%. This reflects an increase from previous expectations of between negative 1.5% and positive 1.5%.
  • Revised Applebee’s franchisees to develop between 25 and 30 new restaurants, the majority of which are expected to be opened in the U.S. This reflects a reduction from previous expectations of between 40 and 50 new restaurants.
  • Reiterated IHOP franchisees and its area licensee to develop between 50 and 60 new restaurants, the majority of which are expected to be domestic openings.
  • Revised Franchise segment profit to be between $329 million and $331 million. This reflects an increase from previous expectations of between $312 million and $325 million.
  • Revised Company Restaurants segment profit to breakeven. This is net of approximately $2 million of depreciation and amortization. The profit revision reflects a reduction from previous expectations of approximately $1 million on an annualized basis. DineEquity will operate its remaining company-operated restaurants to primarily test new products, operational improvements, technology, and service platforms.
  • Revised Rental and Financing segments are expected to generate approximately $40 million in combined profit. This reflects an increase from previous expectations of between $34 million and $35 million in combined profit.
  • Revised expectations for consolidated general and administrative expenses to between $142 million and $144 million, including non-cash stock-based compensation expense and depreciation of approximately $16 million.
  • Revised expectations for consolidated interest expense to be approximately $101 million. Approximately $6 million is expected to be non-cash interest expense.
  • Reiterated the income tax rate to be approximately 38%.
  • Revised consolidated cash from operations is expected to range between $102 million and $116 million. This reflects an increase from previous expectations of between $88 million and $102 million. The increase is primarily due to improvements in net income and net working capital.
  • Reiterated the structural run-off of the Company’s long-term receivables is expected to be approximately $14 million.
  • Reiterated the principal payments on capital leases and financing obligations will be approximately $10 million.
  • Revised consolidated capital expenditures are expected to be approximately $7 million. This reflects a reduction from expectations of capital expenditures between $8 million and $10 million.
  • Reiterated a mandatory annual repayment of 1% on the current outstanding Term Loan principal balance will be $4.7 million.
  • Revised consolidated free cash flow (see "Non-GAAP Measures" below) to range between $93 million and $108 million. This reflects an increase from previous expectations of $77 to $93 million. Consolidated free cash flow is defined as consolidated cash from operations, plus principal receipts from long-term receivables, less principal payments on capital leases and financing obligations, consolidated capital expenditures, and the mandatory annual repayment of 1% on our Term Loan principal balance.
  • Reiterated net income allocated to unvested participating restricted stock is expected to total approximately $1.5 million.
  • Revised weighted average diluted shares outstanding are expected to be approximately 19.1 million. This reflects an increase from the prior year primarily due to the fourth quarter 2012 conversion of the Series B Convertible Preferred Stock into the Company's common stock. No estimate is made in this number for any potential share repurchases.
  • Adjusted earnings per diluted share for fiscal 2013 are expected to be between $4.14 and $4.24.

Investor Conference Call Today

The Company will host an investor conference call on Tuesday, October 29, 2013, at 11:00 a.m. Eastern Time / 8:00 a.m. Pacific Time to discuss its third quarter 2013 results. To participate on the call, please dial (888) 679-8035 and reference pass code 18020176. International callers, please dial (617) 213-4848 and reference pass code 18020176. 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:

1 of 4

Select the service that is right for you!

COMPARE ALL SERVICES
Action Alerts PLUS
Try it NOW

Jim Cramer and Stephanie Link actively manage a real portfolio and reveal their money management tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
  • Weekly roundups
TheStreet Quant Ratings
Try it NOW
Only $49.95/yr

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
  • Upgrade/downgrade alerts
Stocks Under $10
Try it NOW

David Peltier, uncovers low dollar stocks with extraordinary upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
  • Weekly roundups
Dividend Stock Advisor
Try it NOW

Jim Cramer's protege, David Peltier, identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Alerts when market news affect the portfolio
  • Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
Real Money Pro
Try it NOW

All of Real Money, plus 15 more of Wall Street's sharpest minds delivering actionable trading ideas, a comprehensive look at the market, and fundamental and technical analysis.

Product Features:
  • Real Money + Doug Kass Plus 15 more Wall Street Pros
  • Intraday commentary & news
  • Ultra-actionable trading ideas
Options Profits
Try it NOW

Our options trading pros provide daily market commentary and over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • 100+ monthly options trading ideas
  • Actionable options commentary & news
  • Real-time trading community
  • Options TV
To begin commenting right away, you can log in below using your Disqus, Facebook, Twitter, OpenID or Yahoo login credentials. Alternatively, you can post a comment as a "guest" just by entering an email address. Your use of the commenting tool is subject to multiple terms of service/use and privacy policies - see here for more details.
Submit an article to us!

Markets

DOW 17,827.75 +12.81 0.07%
S&P 500 2,072.83 +5.80 0.28%
NASDAQ 4,787.3170 +29.0650 0.61%

Brokerage Partners

Rates from Bankrate.com

  • Mortgage
  • Credit Cards
  • Auto

Free Newsletters from TheStreet

My Subscriptions:

After the Bell

Before the Bell

Booyah! Newsletter

Midday Bell

TheStreet Top 10 Stories

Winners & Losers

Register for Newsletters
Top Rated Stocks Top Rated Funds Top Rated ETFs