DineEquity, Inc. Reports Strong First Quarter 2014 Results

2014-05-01
  • Send
  • PDF
  • Print
  • Bookmark
  • Text Size:
  •  Repost This Article
  • First quarter 2014 adjusted EPS (Non-GAAP) of $1.26 and GAAP EPS of $1.08 - Adjusted EPS (Non-GAAP) increased 11% compared to the first quarter of 2013

    DineEquity, Inc. (NYSE: DIN), the parent company of Applebee's Neighborhood Grill & Bar® and IHOP® restaurants, today announced financial results for the first quarter of 2014.

    “DineEquity started 2014 with a strong first quarter, building on our accomplishments from the prior year. We continue to execute on our strategy and generate strong free cash flow,” said Julia A. Stewart, Chairman and Chief Executive Officer of DineEquity, Inc.

    Ms. Stewart continued, “IHOP’s same-restaurant sales were positive for the fourth consecutive quarter and overwhelmingly outperformed its category, reflecting our focus on menu enhancements, innovative advertising, and higher operating standards. At Applebee’s, we are conducting a comprehensive assessment of the brand, with the goal of achieving consistent and positive same-restaurant sales and traffic. We have the foundation to build momentum at both brands and maintain our commitment to create additional value for our shareholders.”

    First Quarter 2014 Financial Highlights

    • Adjusted net income available to common stockholders was $24.0 million for the first quarter of 2014, or adjusted earnings per diluted share of $1.26. This compares to $21.8 million, or adjusted earnings per diluted share of $1.14, for the same period of 2013. The increase in adjusted net income was due to higher segment profit and lower cash interest expense. These items were partially offset by higher income taxes and a slight increase in general and administrative expenses. (See “Non-GAAP Financial Measures” below.)
    • GAAP net income available to common stockholders was $20.5 million for the first quarter of 2014, or earnings per diluted share of $1.08. This compares to $17.9 million, or earnings per diluted share of $0.93 for the same period of 2013. The increase in net income was primarily due to higher segment profit and debt modification costs that occurred in the first quarter of 2013 that did not recur in the first quarter of 2014. These items were partially offset by a loss on the disposition of assets in the first quarter of 2014 compared to a gain in the same period of 2013 and a modest increase in general and administrative expenses.
    • EBITDA was $77.6 million for first quarter of 2014. (See “Non-GAAP Financial Measures” below.)
    • For the first quarter of 2014, cash flows from operating activities were $52.8 million, principal receipts from long-term receivables were $3.4 million, capital expenditures were $2.0 million, principal payments on capital lease and financing obligations were $2.7 million, the mandatory 1% repayment on the Term Loan principal balance was $1.2 million, and free cash flow was $50.3 million. (See “Non-GAAP Financial Measures” below.)

    Potential Refinancing of Indebtedness

    The Company is actively evaluating debt refinancing options. DineEquity continually monitors, among other things, prevailing interest rates and the economic environment to determine the optimal timing of a transaction. The Company anticipates refinancing some or all of its long-term debt in 2014 if financial market and economic conditions are favorable to do so.

    Same-Restaurant Sales Performance

    • Applebee’s domestic system-wide same-restaurant sales decreased 0.5% for the first quarter of 2014 compared to the same quarter of 2013.
    • IHOP’s domestic system-wide same restaurant sales increased 3.9% for the first quarter of 2014 compared to the same period of 2013.

    Financial Performance Guidance for Fiscal 2014

    DineEquity reiterates its financial performance guidance for fiscal 2014 contained in the press release issued on February 26, 2014.

    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 3,600 restaurants combined in 19 countries, over 400 franchisees and approximately 200,000 team members (including franchisee- and company-operated restaurant employees), DineEquity is one of the largest full-service restaurant companies in the world. 

    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," "free cash flow," and "segment EBITDA." "Adjusted EPS" is computed for a given period by deducting from net income or loss available to common stockholders for such period the effect of any closure and impairment charges, any gain or loss related to debt extinguishment, any intangible asset amortization, any non-cash interest expense, any debt modification costs, and any gain or loss related to the disposition of assets. 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 less interest expense, loss on extinguishment of debt, depreciation and amortization, closure and impairment charges, non-cash stock-based compensation, gain or loss on disposition of assets and other charge backs as defined by its credit agreement. "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 principal payments on capital lease and financing obligations, the mandatory 1% of Term Loan principal balance repayment, and capital expenditures. "Segment EBITDA" for a given period is defined as gross segment profit plus depreciation and amortization as well as interest charges related to the segment. Management utilizes EBITDA for debt covenant purposes and free cash flow to determine the amount of cash remaining for general corporate and strategic purposes and for the return of cash to stockholders pursuant to our capital allocation strategy, after the receipts from long-term receivables, and the funding of operating activities, capital expenditures and debt service. 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, free cash flow and segment EBITDA 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 United States generally accepted accounting principles.

    DineEquity, Inc. and Subsidiaries
    Consolidated Statements of Income
    (In thousands, except per share amounts)
    (Unaudited)
     
            Three Months Ended
    March 31,
    2014     2013
    Segment Revenues:
    Franchise and restaurant revenues $ 131,795 $ 128,329
    Rental revenues 30,753

    31,003

    Financing revenues 4,653   3,837  
    Total segment revenues 167,201   163,169  
    Segment Expenses:
    Franchise and restaurant expenses 45,678 44,476
    Rental expenses 23,866 24,269
    Financing expenses 585    
    Total segment expenses 70,129   68,745  
    Gross segment profit 97,072 94,424
    General and administrative expenses 34,185 34,032
    Interest expense 24,969 25,295
    Amortization of intangible assets 3,071 3,071
    Closure and impairment charges 200 838
    Loss on extinguishment of debt 6 20
    Debt modification costs 1,296
    Loss (gain) on disposition of assets   927   (318 )
    Income before income taxes 33,714 30,190
    Income tax provision (12,890 ) (11,951 )
    Net income $ 20,824   $ 18,239  
    Net income available to common stockholders:
    Net income $ 20,824 $ 18,239
    Less: Net income allocated to unvested participating restricted stock (343 ) (329 )
    Net income available to common stockholders $ 20,481   $ 17,910  
    Net income available to common stockholders per share:
    Basic $ 1.09   $ 0.95  
    Diluted $ 1.08   $ 0.93  
    Weighted average shares outstanding:
    Basic 18,794   18,911  
    Diluted 19,054   19,193  
     
    Dividends declared per common share $ 0.75   $ 0.75  
    Dividends paid per common share $ 0.75   $ 0.75  
     
     
    DineEquity, Inc. and Subsidiaries
    Consolidated Balance Sheets
    (In thousands, except share and per share amounts)
               

    March 31,

    2014

    December 31,

    2013

    (Unaudited)
    Assets
    Current assets:
    Cash and cash equivalents $ 133,218 $ 106,011
    Receivables, net 91,493 144,137
    Prepaid income taxes 4,708
    Prepaid gift cards 39,559 49,223
    Deferred income taxes 26,501 23,853
    Other current assets 8,092   3,650  
    Total current assets 298,863 331,582
    Long-term receivables 194,066 197,153
    Property and equipment, net 264,855 274,295
    Goodwill 697,470 697,470
    Other intangible assets, net 791,033 794,057
    Other assets, net 108,960   110,085  
    Total assets $ 2,355,247   $ 2,404,642  
    Liabilities and Stockholders’ Equity
    Current liabilities:
    Current maturities of long-term debt $ 4,720 $ 4,720
    Accounts payable 39,857 40,050
    Gift card liability 111,020 171,955
    Accrued employee compensation and benefits 10,099 24,956
    Accrued interest payable 31,671 13,575
    Income taxes payable 12,890
    Current maturities of capital lease and financing obligations 12,577 12,247
    Other accrued expenses 22,940   16,770  
    Total current liabilities 245,774   284,273  
    Long-term debt, less current maturities 1,203,247 1,203,517
    Capital lease obligations, less current maturities 108,533 111,707
    Financing obligations, less current maturities 46,848 48,843
    Deferred income taxes 334,195 341,578
    Other liabilities 98,470   99,545  
    Total liabilities 2,037,067   2,089,463  
    Commitments and contingencies
    Stockholders’ equity:
    Common stock, $0.01 par value, shares: 40,000,000 authorized; March 31, 2014 - 25,284,475 issued, 19,155,078 outstanding; December 31, 2013 - 25,299,315 issued, 19,040,890 outstanding 253 253
    Additional paid-in-capital 274,557 274,202
    Retained earnings 343,095 336,578
    Accumulated other comprehensive loss (170 ) (164 )
    Treasury stock, at cost; shares: March 31, 2014 - 6,129,397; December 31, 2013 - 6,258,425 (299,555 ) (295,690 )
    Total stockholders’ equity 318,180   315,179  
    Total liabilities and stockholders’ equity $ 2,355,247   $ 2,404,642  
     
     
    DineEquity, Inc. and Subsidiaries
    Consolidated Statements of Cash Flows
    (In thousands)
    (Unaudited)
     
            Three Months Ended
    March 31,
    2014     2013
    Cash flows from operating activities:
    Net income $ 20,824 $ 18,239
    Adjustments to reconcile net income to cash flows provided by operating activities:
    Depreciation and amortization 8,783 8,836
    Non-cash interest expense 1,642 1,503
    Deferred income taxes (10,031 ) (8,253 )
    Non-cash stock-based compensation expense 3,143 3,189
    Tax benefit from stock-based compensation 3,524 2,228
    Excess tax benefit from share-based compensation (4,455 ) (966 )
    Loss (gain) on disposition of assets 927 (318 )
    Debt modification costs 1,282
    Other (196 ) 1,806
    Changes in operating assets and liabilities:
    Receivables 52,887 47,216
    Current income tax receivables and payables 18,020 16,528
    Other current assets 8,913 16,678
    Accounts payable 775 1,659
    Accrued employee compensation and benefits (14,857 ) (11,482 )
    Gift card liability (60,936 ) (54,332 )
    Other accrued expenses 23,877   27,413  
    Cash flows provided by operating activities 52,840   71,226  
    Cash flows from investing activities:
    Additions to property and equipment (2,039 ) (1,495 )
    Proceeds from sale of property and equipment 681
    Principal receipts from notes, equipment contracts and other long-term receivables 3,415 3,810
    Other (55 ) 68  
    Cash flows provided by investing activities 2,002   2,383  
    Cash flows from financing activities:
    Repayment of long-term debt (1,200 ) (1,200 )
    Payment of debt modification costs (1,282 )
    Principal payments on capital lease and financing obligations (2,695 ) (2,483 )
    Repurchase of DineEquity common stock (15,002 )
    Dividends paid on common stock (14,293 ) (14,512 )
    Repurchase of restricted stock (1,831 ) (2,590 )
    Proceeds from stock options exercised 6,623 3,018
    Excess tax benefit from share-based compensation 4,455 966
    Change in restricted cash (3,692 ) (2,681 )
    Cash flows used in financing activities (27,635 ) (20,764 )
    Net change in cash and cash equivalents 27,207 52,845
    Cash and cash equivalents at beginning of period 106,011   64,537  
    Cash and cash equivalents at end of period $ 133,218   $ 117,382  
     
     

    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 closure and impairment charges; loss on extinguishment of debt; amortization of intangible assets; non-cash interest expense; debt modification costs; and gain/loss on disposition of assets, all items net of taxes (as appropriate), and related per share data:

            Three Months Ended
    March 31,
    2014     2013
    Net income available to common stockholders, as reported $ 20,481 $ 17,910
    Closure and impairment charges 200 838
    Loss on extinguishment of debt 6 20
    Amortization of intangible assets 3,071 3,071
    Non-cash interest expense 1,642 1,503
    Debt modification costs 1,296
    Loss (gain) on disposition of assets 927 (318 )
    Income tax provision (2,221 ) (2,436 )
    Net income allocated to unvested participating restricted stock (61 ) (77 )
    Net income available to common stockholders, as adjusted $ 24,045   $ 21,807  
     
    Diluted net income available to common stockholders per share:
    Net income available to common stockholders, as reported $ 1.08 $ 0.93
    Closure and impairment charges 0.01 0.02
    Loss on extinguishment of debt 0.00 0.00
    Amortization of intangible assets 0.10 0.10
    Noncash interest expense 0.06 0.05
    Debt modification costs 0.04
    Loss (gain) on disposition of assets 0.03 (0.01 )
    Net income allocated to unvested participating restricted stock (0.00 ) (0.00 )
    Rounding (0.02 ) 0.01  
    Diluted net income available to common stockholders per share, as adjusted $ 1.26   $ 1.14  
     
    Numerator for basic EPS-income available to common stockholders, as adjusted $ 24,045 $ 21,807
    Effect of unvested participating restricted stock using the two-class method 3   3  
    Numerator for diluted EPS-income available to common stockholders after assumed conversions, as adjusted $ 24,048   $ 21,810  
     
    Denominator for basic EPS-weighted-average shares 18,794 18,911
    Dilutive effect of stock options 260   282  
    Denominator for diluted EPS-weighted-average shares and assumed conversions 19,054   19,193  
     
     
    DineEquity, Inc. and Subsidiaries
    Non-GAAP Financial Measures
    (In thousands)
    (Unaudited)
     

    Reconciliation of U.S. GAAP income before income taxes to EBITDA:

               

    Three Months

    Ended

    Twelve Months

    Ended

    March 31, 2014
    U.S. GAAP income before income taxes $ 33,714 $ 114,141
    Interest charges 28,952 115,888
    Depreciation and amortization 8,784 35,302
    Non-cash stock-based compensation 3,143 9,318
    Closure and impairment charges 200 974
    Gain on sale of assets 927 1,022
    Other 1,858   4,301
    EBITDA $ 77,578   $ 280,946
     
     

    Reconciliation of the Company's cash provided by operating activities to "free cash flow" (cash from operations, plus receipts from notes, equipment contracts and other long-term receivables, less consolidated capital expenditures, principal payments on capital leases and financing obligations and the mandatory annual repayment of 1% of our Term Loan principal balance):

            Three Months Ended
    March 31,
    2014     2013
    Cash flows provided by operating activities $ 52,840 $ 71,226
    Principal receipts from long-term receivables 3,415 3,810
    Additions to property and equipment (2,039 ) (1,495 )
    Free cash flow before debt service 54,216 73,541
    Principal payments on capital lease and financing obligations (2,695 ) (2,483 )
    Mandatory 1% of Term Loans principal balance repayment (1,180 ) (1,180 )
    Free cash flow 50,341 69,878
    Dividends paid on common stock (14,293 ) (14,512 )
    Repurchase of DineEquity common stock (15,002 )  
    $ 21,046   $ 55,366  
     
     
    DineEquity, Inc. and Subsidiaries
    Non-GAAP Financial Measures
    (In millions)
    (Unaudited)
     

    Reconciliation of U.S. GAAP gross segment profit to segment EBITDA:

     

    Three months ended March 31, 2014

                                       

    Franchise -

    Applebee's

       

    Franchise -

    IHOP

       

    Company

    Restaurants

       

    Rental

    Operations

       

    Financing

    Operations

        Total
    Revenue $ 50,753 $ 64,741 $ 16,301 $ 30,753 $ 4,653 $ 167,201
    Expense 1,400   27,973   16,305   23,866   585   70,129
    Gross segment profit 49,353 36,768 (4 ) 6,887 4,068 97,072
    Plus:
    Depreciation/amortization 2,621 524 3,344 6,489
    Interest charges     100   3,860     3,960
    Segment EBITDA $ 51,974   $ 36,768   $ 620     $ 14,091   $ 4,068   $ 107,521
     
     

    Three months ended March 31, 2013

                                   

    Franchise -

    Applebee's

    Franchise -

    IHOP

    Company

    Restaurants

    Rental

    Operations

    Financing

    Operations

    Total
    Revenue $ 50,733 $ 61,131 $ 16,465 $ 31,003 $ 3,837 $ 163,169
    Expense 1,484   26,703   16,289   24,269     68,745
    Gross segment profit 49,249 34,428 176 6,734 3,837 94,424
    Plus:
    Depreciation/amortization 2,760 529 3,408 6,697
    Interest charges     94   4,092     4,186
    Segment EBITDA $ 52,009   $ 34,428   $ 799   $ 14,234   $ 3,837   $ 105,307
     
     

    Restaurant Data

    The following table sets forth, for the three and three months ended March 31, 2014 and 2013, 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. 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, and, where applicable, rental payments under leases that may be partially 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 Ended
    March 31,
    2014     2013

     

    (unaudited)

    Applebee's Restaurant Data
    Effective Restaurants(a)
    Franchise 1,985 2,006
    Company   23     23  
    Total   2,008     2,029  
     
    System-wide(b)
    Sales percentage change(c) (0.7 )% (0.4 )%
    Domestic same-restaurant sales percentage change(d) (0.5 )% (1.3 )%
     
    Franchise(b)(e)
    Sales percentage change(c) (0.7 )% 7.2 %
    Domestic same-restaurant sales percentage change(d) (0.5 )% (1.2 )%
    Average weekly domestic unit sales (in thousands) $ 49.5 $ 49.3
     
    <

            Three Months Ended
    March 31,
    2014     2013

     

    (unaudited)

    IHOP Restaurant Data
    Effective Restaurants(a)
    Franchise 1,439 1,408
    Area license 169 167
    Company   11     12  
    Total   1,619     1,587  
     
    System-wide(b)
    Sales percentage change(c) 6.5 % 2.4 %
    Domestic same-restaurant sales percentage change(d) 3.9 % (0.5 )%
     
    Franchise(b)
    Sales percentage change(c) 6.4 % 2.3 %
    Domestic same-restaurant sales percentage change(d) 3.9 % (0.5 )%
    Average weekly domestic unit sales (in thousands)



    Logos, product and company names mentioned are the property of their respective owners.

  • Send
  • PDF
  • Print
  • Bookmark
  • Go Back
  • Text Size:

  • comments powered by Disqus
    Ads by Nevistas

    Newsletters
    Restaurant
    Industry News
     
    Hospitality
    Newsletter
     
    Hospitality
    Trends
     
    Hospitality
    Technology
     
    Your Email Address
     
    Advertise Here