DineEquity, Inc. (NYSE: DIN), the parent company of Applebee’s Neighborhood Grill & Bar and IHOP Restaurants, today announced financial guidance for fiscal 2013, reflecting its transition to a 99% franchised model. “We believe it is appropriate to provide guidance in some greater detail this year given the successful transition to a fully franchised business model,” said Julia A. Stewart, Chairman and Chief Executive Officer of DineEquity, Inc. Fiscal 2013 Key Financial Performance Guidance Now that the Company’s is 99% franchised, we are focused on driving same-restaurant sales and traffic to support franchisees. The Company expects its business model to generate continued strong free cash flow in 2013. (See "Non-GAAP Financial Measures" below.)
- Applebee’s domestic system-wide same-restaurant sales performance to range between negative 1.5% and positive 1.5%.
- IHOP’s domestic system-wide same-restaurant sales performance to range between negative 1.5% and positive 1.5%.
- Applebee’s franchisees to develop between 40 and 50 new restaurants, the majority of which are expected to be opened in the U.S.
- IHOP franchisees and its area licensee to develop between 50 and 60 new restaurants, the majority of which are expected to be domestic openings.
- Franchise segment profit is expected to be between $312 million and $325 million.
- DineEquity will operate its remaining company-operated restaurants to primarily test new products, operational improvements, technology, and service platforms. Given the nature of these restaurants, they are expected to generate a profit of approximately $1 million on an annualized basis. This is net of approximately $2 million of depreciation and amortization.
- The Rental and Financing segments are expected to generate approximately $34 million to $35 million in combined profit. This reflects revenue and expenses mainly generated from franchise restaurant development by IHOP prior to 2003. A structural run off applies to both the rental and financing segments.
- Consolidated general and administrative expenses are expected to decrease to between $144 million and $147 million, including non-cash stock-based compensation expense and depreciation of approximately $19 million, due to the comprehensive general and administrative cost reduction initiatives implemented in 2012.
- Consolidated interest expense is expected to be between $101 million and $103 million due to the reduction of long-term debt balances and the decrease of financing obligations as a result of refranchising. Approximately $6 million is expected to be non-cash interest expense.
- The Federal income tax rate is expected to be approximately 38% compared to the effective Federal income tax rate of 34.5% for fiscal 2012. The higher tax rate is primarily due to the decrease in the Federal employment tip credit now that the Company is 99% franchised.
- Consolidated cash from operations is expected to range between $88 million and $102 million.
- The structural run-off of the Company’s long-term receivables is expected to be approximately $14 million.
- Principal payments on capital leases and financing obligations will be approximately $10 million.
- Consolidated capital expenditures are expected to decline to between $8 million and $10 million mainly due to significantly fewer company-operated restaurants.
- A mandatory annual repayment of 1% on the current outstanding Term Loan principal balance will be $4.7 million.
- Consolidated free cash flow (see "Non-GAAP Measures" below) to range between $77 million and $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.
- Net income allocated to unvested participating restricted stock is expected to total approximately $1.5 million.
- Weighted average diluted shares outstanding are expected to be approximately 19.3 million. This increase from the prior year is 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.
Non-GAAP Financial MeasuresThis news release includes references to the Company's non-GAAP financial measure "free cash flow". "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 receivable"), less principal payments on capital leases and financing obligations, less capital expenditures and less a mandatory annual 1% repayment on the outstanding Term Loan principal balance.
|2013 Financial Performance Guidance Table|
|Cash from operations||$88 - 102|
|Principal receipts from long-term receivables||14|
|Principal payments on capital leases and financing obligations||(10)|
|Capital expenditures||(8 - 10)|
|Mandatory annual 1% repayment on Term Loan||(5)|
|Free cash flow||$77 - 93|