DineEquity, Inc. Reports Successful Second Quarter 2014 Results

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 fiscal 2014.

“We delivered successful results for the second quarter, driven by the continued focus on our strategic objectives,” said Julia A. Stewart, Chairman and Chief Executive Officer of DineEquity, Inc. Ms. Stewart added, “We are very pleased to announce that IHOP and Applebee’s reported positive same-restaurant sales and outperformed their respective categories based on industry sales data. We are doing the work necessary to drive long-term success at both of our brands. In addition, we continue to generate substantial free cash flow, tightly manage our general and administrative expenses, and return significant cash to shareholders. We remain clearly focused on maximizing shareholder value and driving sustainable growth.”

Second Quarter 2014 Financial Highlights

  • Adjusted net income available to common stockholders was $22.1 million, representing adjusted earnings per diluted share of $1.16 for the second quarter of 2014. This compares to $19.7 million, or adjusted earnings per diluted share of $1.02, for the second quarter of 2013. Adjusted earnings per diluted share increased by 14% compared to the second quarter of 2013. The improvement in adjusted net income was due to higher segment profit, lower general and administrative expenses, and lower cash interest expense. These items were partially offset by higher income taxes. (See “Non-GAAP Financial Measures” below.)
  • GAAP net income available to common stockholders was $18.9 million, or earnings per diluted share of $1.00, for the second quarter of 2014. This compares to $16.6 million, or earnings per diluted share of $0.87, for the second quarter of 2013. Earnings per diluted share improved by 15% compared to the second quarter of 2013. The increase in net income was primarily due to higher segment profit, lower general and administrative expenses, and a gain on the disposition of assets in the second quarter of 2014 compared to a loss in the same period of 2013. These items were partially offset by higher income tax expense and an increase in closure and impairment charges.
  • General and administrative expenses were $34.8 million for the second quarter of 2014 compared to $35.6 million for the same period of 2013.

First Six Months of 2014 Highlights

  • Adjusted net income available to common stockholders was $46.1 million in the first six months of 2014, representing adjusted earnings per diluted share of $2.43. This compares to $41.5 million, or adjusted earnings per diluted share of $2.16, for the same period in 2013. Adjusted earnings per diluted share for the first six months of 2014 rose by 13% compared to the same period in 2013. The increase was primarily due to higher segment profit, lower general and administrative expenses, and a decline in cash interest expense. These items were partially offset by higher income taxes. (See “Non-GAAP Financial Measures” below.)
  • GAAP net income available to common stockholders was $39.3 million in the first six months of 2014, or earnings per diluted share of $2.07, compared to $34.5 million, or earnings per diluted share of $1.80 for the same period in 2013. Earnings per diluted share for the first six months of 2014 improved by 15% compared to the same period in 2013. The increase was primarily due to higher segment profit, debt modification costs that occurred in the first six months of 2013 that did not recur in the first six months of 2014, and a decline in general and administrative expenses. These items were partially offset by higher income tax expense and a loss on the disposition of assets in the first six months of 2014 compared to a gain in the first six months of 2013.
  • General and administrative expenses were $69.0 million in the first six months of 2014 compared to $69.7 million for the same period of 2013.
  • EBITDA was $149.4 million for the first six months of 2014. (See “Non-GAAP Financial Measures” below.)
  • For the first six months of 2014, cash flows from operating activities were $56.0 million and free cash flow was $50.0 million. (See “Non-GAAP Financial Measures” below.)

Same-Restaurant Sales Performance

Second Quarter 2014

  • Applebee’s domestic system-wide same-restaurant sales increased 0.6% for the second quarter of 2014 compared to the second quarter of 2013.
  • IHOP’s domestic system-wide same restaurant sales increased 3.2% for the second quarter of 2014 compared to the same quarter of 2013.

First Six Months of 2014 Highlights

  • Applebee’s domestic system-wide same-restaurant sales remained flat for the first six months of 2014 compared to the same period in 2013.
  • IHOP’s domestic system-wide same restaurant sales increased 3.6% for the first six months of 2014 compared to the first six months 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, except for IHOP’s domestic system-wide same restaurant sales. The Company revised IHOP’s sales performance guidance to range between positive 1.0% and positive 2.5%. This reflects an increase from the previous expectations of between positive 0.5% and positive 2.0%.

Investor Conference Call Today

The Company will host a conference call to discuss its results on the same day at 11:00 a.m. Eastern Time / 8:00 a.m. Pacific Time. To participate on the call, please dial (800) 708-4539 and reference pass code 37666196. International callers, please dial (847) 619-6396 and reference pass code 37666196.

A live webcast of the call will be available on DineEquity's Web site at www.dineequity.com, and may be accessed by visiting Calls & Presentations under the site’s Investors section. Participants should allow approximately ten minutes prior to the call's start time to visit the site and download any streaming media software needed to listen to the webcast. A telephonic replay of the call may be accessed from 10:30 a.m. Pacific Time on July 29, 2014 through 11:59 p.m. Pacific Time on August 5, 2014 by dialing (888) 843-7419 and referencing pass code 37666196#. International callers, please dial (630) 652-3042 and reference pass code 37666196#. An online archive of the webcast will also be available on the Investors section of DineEquity's Web site.

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. For more information on DineEquity, visit the Company's Web site located at www.dineequity.com.

Forward-Looking Statements

Statements contained in this press release may constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. You can identify these forward-looking statements by words such as "may," "will," "should," "expect," "anticipate," "believe," "estimate," "intend," "plan" and other similar expressions. These statements involve known and unknown risks, uncertainties and other factors, which may cause actual results to be materially different from those expressed or implied in such statements. These factors include, but are not limited to: the effect of general economic conditions; the Company's indebtedness and risks associated with the timing and our ability to refinance the Company’s indebtedness; risk of future impairment charges; trading volatility and the price of the Company’s common stock; the Company's results in any given period differing from guidance provided to the public; the highly competitive nature of the restaurant business; the Company's business strategy failing to achieve anticipated results; risks associated with the restaurant industry; risks associated with locations of current and future restaurants; rising costs for food commodities and utilities; shortages or interruptions in the supply or delivery of food; ineffective marketing and guest relationship initiatives and use of social media; changing health or dietary preferences; our engagement in business in foreign markets; harm to our brands' reputation; litigation; fourth-party claims with respect to intellectual property assets; environmental liability; liability relating to employees; failure to comply with applicable laws and regulations; failure to effectively implement restaurant development plans; our dependence upon our franchisees; concentration of Applebee's franchised restaurants in a limited number of franchisees; credit risk from IHOP franchisees operating under our previous business model; termination or non-renewal of franchise agreements; franchisees breaching their franchise agreements; insolvency proceedings involving franchisees; changes in the number and quality of franchisees; inability of franchisees to fund capital expenditures; heavy dependence on information technology; the occurrence of cyber incidents or a deficiency in our cybersecurity; failure to execute on a business continuity plan; inability to attract and retain talented employees; risks associated with retail brand initiatives; failure of our internal controls; and other factors discussed from time to time in the Company's Annual and Quarterly Reports on Forms 10-K and 10-Q and in the Company's other filings with the Securities and Exchange Commission. The forward-looking statements contained in this release are made as of the date hereof and the Company assumes no obligation to update or supplement any forward-looking statements.

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 EndedSix Months Ended
June 30,June 30,
2014201320142013
Segment Revenues:
Franchise and restaurant revenues $ 126,444 $ 124,153 $ 258,239 $ 252,482
Rental revenues 30,709 30,731 61,462 61,734
Financing revenues 3,368 3,230 8,021 7,067
Total segment revenues 160,521 158,114 327,722 321,283
Segment Expenses:
Franchise and restaurant expenses 42,155 42,308 87,833 86,784
Rental expenses 23,653 24,535 47,519 48,804
Financing expenses 240 245 825 245
Total segment expenses 66,048 67,088 136,177 135,833
Gross segment profit 94,473 91,026 191,545 185,450
General and administrative expenses 34,816 35,641 69,001 69,673
Interest expense 24,942 24,956 49,911 50,251
Amortization of intangible assets 3,070 3,069 6,141 6,140
Closure and impairment charges 637 324 837 1,162
Loss on extinguishment of debt 6 16 12 36
Debt modification costs 1,296
(Gain) loss on disposition of assets (130 ) 64 797 (254 )
Income before income tax provision 31,132 26,956 64,846 57,146
Income tax provision (11,965 ) (10,019 ) (24,855 ) (21,970 )
Net income $ 19,167 $ 16,937 $ 39,991 $ 35,176
Net income available to common stockholders:
Net income $ 19,167 $ 16,937 $ 39,991 $ 35,176
Less: Net income allocated to unvested participating restricted stock (307 ) (298 ) (649 ) (627 )
Net income available to common stockholders $ 18,860 $ 16,639 $ 39,342 $ 34,549
Net income available to common stockholders per share:
Basic $ 1.00 $ 0.88 $ 2.09 $ 1.82
Diluted $ 1.00 $ 0.87 $ 2.07 $ 1.80
Weighted average shares outstanding:
Basic 18,776 18,953 18,785 18,932
Diluted 18,955 19,222 19,003 19,207
Dividends declared per common share $ 0.75 $ 0.75 $ 1.50 $ 1.50
Dividends paid per common share $ 0.75 $ 0.75 $ 1.50 $ 1.50
DineEquity, Inc. and Subsidiaries
Consolidated Balance Sheets
(In thousands, except share and per share amounts)

June 30,
2014

December 31,
2013

(Unaudited)
Assets
Current assets:
Cash and cash equivalents $ 100,350 $ 106,011
Receivables, net 91,187 144,137
Prepaid gift cards 40,459 49,223
Prepaid income taxes 4,708
Deferred income taxes 28,874 23,853
Other current assets 12,323 3,650
Total current assets 273,193 331,582
Long-term receivables, net 190,380 197,153
Property and equipment, net 261,201 274,295
Goodwill 697,470 697,470
Other intangible assets, net 788,105 794,057
Other assets, net 108,740 110,085
Total assets $ 2,319,089 $ 2,404,642
Liabilities and Stockholders’ Equity
Current liabilities:
Current maturities of long-term debt $ 4,720 $ 4,720
Accounts payable 41,138 40,050
Gift card liability 108,046 171,955
Accrued employee compensation and benefits 14,404 24,956
Accrued interest payable 13,622 13,575
Income taxes payable 10,812
Current maturities of capital lease and financing obligations 12,936 12,247
Other accrued expenses 19,098 16,770
Total current liabilities 224,776 284,273
Long-term debt, net (less current maturities) 1,202,995 1,203,517
Capital lease obligations (less current maturities) 105,212 111,707
Financing obligations (less current maturities) 46,815 48,843
Deferred income taxes 330,525 341,578
Other liabilities 98,173 99,545
Total liabilities 2,008,496 2,089,463
Commitments and contingencies
Stockholders’ equity:
Common stock, $0.01 par value, shares: 40,000,000 authorized; June 30, 2014 - 25,277,373 issued, 18,967,460 outstanding; December 31, 2013 - 25,299,315 issued, 19,040,890 outstanding 253 253
Additional paid-in-capital 276,636 274,202
Retained earnings 348,026 336,578
Accumulated other comprehensive loss (56 ) (164 )
Treasury stock, at cost; shares: June 30, 2014 - 6,309,913; December 31, 2013 - 6,258,425 (314,266 ) (295,690 )
Total stockholders’ equity 310,593 315,179
Total liabilities and stockholders’ equity $ 2,319,089 $ 2,404,642
DineEquity, Inc. and Subsidiaries
Consolidated Statements of Cash Flows
(In thousands)
(Unaudited)
Six Months Ended
June 30,
20142013
Cash flows from operating activities:
Net income $ 39,991 $ 35,176
Adjustments to reconcile net income to cash flows provided by operating activities:
Depreciation and amortization 17,498 17,636
Non-cash interest expense 3,315 3,054
Deferred income taxes (16,047 ) (15,335 )
Non-cash stock-based compensation expense 5,508 5,842
Tax benefit from stock-based compensation 3,578 2,943
Excess tax benefit from share-based compensation (4,455 ) (1,567 )
Loss (gain) on disposition of assets 797 (254 )
Debt modification costs 1,281
Other (867 ) 1,072
Changes in operating assets and liabilities:
Receivables, net 54,225 34,670
Current income tax receivables and payables 16,004 8,716
Prepaid expenses and other current assets 7,156 16,476
Accounts payable 1,911 8,089
Accrued employee compensation and benefits (10,552 ) (7,612 )
Gift card liability (63,911 ) (59,936 )
Other accrued expenses 1,841 5,178
Cash flows provided by operating activities 55,992 55,429
Cash flows from investing activities:
Additions to property and equipment (4,086 ) (2,953 )
Proceeds from sale of property and equipment 681
Principal receipts from notes, equipment contracts and other long-term receivables 6,066 7,063
Other 75 11
Cash flows provided by investing activities 2,736 4,121
Cash flows from financing activities:
Repayment of long-term debt (2,400 ) (2,400 )
Payment of debt modification costs (1,281 )
Principal payments on capital lease and financing obligations (5,570 ) (5,018 )
Repurchase of DineEquity common stock (30,006 ) (14,504 )
Dividends paid on common stock (28,518 ) (28,885 )
Repurchase of restricted stock (1,944 ) (2,841 )
Proceeds from stock options exercised 6,658 3,348
Excess tax benefit from share-based compensation 4,455 1,567
Change in restricted cash (7,064 ) 1,564
Cash flows used in financing activities (64,389 ) (48,450 )
Net change in cash and cash equivalents (5,661 ) 11,100
Cash and cash equivalents at beginning of period 106,011 64,537
Cash and cash equivalents at end of period $ 100,350 $ 75,637
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 or loss on disposition of assets, all items net of taxes, and related per share data:

Three Months EndedSix Months Ended
June 30,June 30,
2014201320142013
Net income available to common stockholders, as reported $ 18,860 $ 16,639 $ 39,342 $ 34,549
Closure and impairment charges 637 324 837 1,162
Loss on extinguishment of debt 6 16 12 36
Amortization of intangible assets 3,070 3,069 6,141 6,140
Non-cash interest expense 1,673 1,551 3,315 3,054
Debt modification costs 1,296
(Gain) loss on disposition of assets (130 ) 64 797 (254 )
Income tax provision (1,997 ) (1,909 ) (4,219 ) (4,345 )
Net income allocated to unvested participating restricted stock (55 ) (60 ) (116 ) (137 )
Net income available to common stockholders, as adjusted $ 22,064 $ 19,694 $ 46,109 $ 41,501
Diluted net income available to common stockholders per share:
Net income available to common stockholders, as reported $ 1.00 $ 0.87 $ 2.07 $ 1.80
Closure and impairment charges 0.02 0.01 0.02 0.04
Loss on extinguishment of debt 0.00 0.00 0.00 0.00
Amortization of intangible assets 0.10 0.10 0.20 0.20
Noncash interest expense 0.06 0.05 0.11 0.10
Debt modification costs 0.04
(Gain) loss on disposition of assets (0.01 ) 0.00 0.02 (0.01 )
Net income allocated to unvested participating restricted stock 0.00 0.00 0.00 (0.01 )
Rounding (0.01 ) (0.01 ) 0.01
Diluted net income available to common stockholders per share, as adjusted $ 1.16 $ 1.02 $ 2.43 $ 2.16

Numerator for basic EPS-income available to common stockholders, as adjusted

$ 22,064 $ 19,694 $ 46,109 $ 41,501
Effect of unvested participating restricted stock using the two-class method 1 1 3 4
Numerator for diluted EPS-income available to common stockholders after assumed conversions, as adjusted $ 22,065 $ 19,695 $ 46,112 $ 41,505
Denominator for basic EPS-weighted-average shares 18,776 18,953 18,785 18,932
Dilutive effect of stock options 179 269 218 275
Denominator for diluted EPS-weighted-average shares and assumed conversions 18,955 19,222 19,003 19,207
DineEquity, Inc. and Subsidiaries
Non-GAAP Financial Measures
(In thousands)
(Unaudited)

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

Six Months
Ended

Twelve Months
Ended

June 30, 2014
U.S. GAAP income before income taxes $ 64,846 $ 118,317
Interest charges 57,741 115,591
Depreciation and amortization 17,498 35,217
Non-cash stock-based compensation 5,508 9,030
Closure and impairment charges 837 1,487
Gain on sale of assets 797 828
Other 2,154 3,453
EBITDA $ 149,381 $ 283,923

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):

Six Months Ended
June 30,
20142013
Cash flows provided by operating activities $ 55,992 $ 55,429
Principal receipts from long-term receivables 6,066 7,063
Additions to property and equipment (4,086 ) (2,953 )
Free cash flow before debt service 57,972 59,539
Principal payments on capital lease and financing obligations (5,570 ) (5,018 )
Mandatory 1% of Term Loans principal balance repayment (2,360 ) (2,360 )
Free cash flow 50,042 52,161
Dividends paid on common stock (28,518 ) (28,885 )
Repurchase of DineEquity common stock (30,006 ) (14,504 )
$ (8,482 ) $ 8,772
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 June 30, 2014

Franchise -
Applebee's

Franchise -
IHOP

Company
Restaurants

Rental
Operations

Financing
Operations

Total
Revenue $ 50,039 $ 60,731 $ 15,674 $ 30,709 $ 3,368 $ 160,521
Expense 1,294 25,331 15,530 23,653 240 66,048
Gross segment profit 48,745 35,400 144 7,056 3,128 94,473
Plus:
Depreciation/amortization 2,615 495 3,314 6,424
Interest charges 99 3,721 3,820
Segment EBITDA $ 51,360 $ 35,400 $ 738 $ 14,091 $ 3,128 $ 104,717

Three months ended June 30, 2013

Franchise -
Applebee's

Franchise -
IHOP

Company
Restaurants

Rental
Operations

Financing
Operations

Total
Revenue

$

50,223

$

57,773

$ 16,157

$

30,731

$ 3,230 $ 158,114
Expense

1,448

24,695

16,165

24,535

245 67,088
Gross segment profit

48,775

33,078

(8 )

6,196

2,985 91,026
Plus:
Depreciation/amortization

2,711

542

3,346

6,599
Interest charges

93

4,020

4,113
Segment EBITDA

$

51,486

$

33,078

$ 627

$

13,562

$ 2,985 $ 101,738

Six months ended June 30, 2014

Franchise -
Applebee's

Franchise -
IHOP

Company
Restaurants

Rental
Operations

Financing
Operations

Total
Revenue $ 100,792 $ 125,472 $ 31,975 $ 61,462 $ 8,021 $ 327,722
Expense 2,694 53,304 31,835 47,519 825 136,177
Gross segment profit 98,098 72,168 140 13,943 7,196 191,545
Plus:
Depreciation/amortization 5,236 1,019 6,658 12,913
Interest charges 199 7,581 7,780
Segment EBITDA $ 103,334 $ 72,168 $ 1,358 $ 28,182 $ 7,196 $ 212,238
Six months ended June 30, 2013

Franchise -
Applebee's

Franchise -
IHOP

Company
Restaurants

Rental
Operations

Financing
Operations

Total
Revenue $ 100,956 $ 118,904 $ 32,622 $ 61,734 $ 7,067 $ 321,283
Expense 2,932 51,398 32,454 48,804 245 135,833
Gross segment profit 98,024 67,506 168 12,930 6,822 185,450
Plus:
Depreciation/amortization 5,471 1,071 6,754 13,296
Interest charges 187 8,112 8,299
Segment EBITDA $ 103,495 $ 67,506 $ 1,426 $ 27,796 $ 6,822 $ 207,045

Restaurant Data

The following table sets forth, for the three and six months ended June 30, 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 EndedSix Months Ended
June 30,June 30,
2014201320142013
(unaudited)
Applebee's Restaurant Data
Effective Restaurants(a)
Franchise 1,985 2,003 1,985 2,005
Company 23 23 23 23
Total 2,008 2,026 2,008 2,028
System-wide(b)
Sales percentage change(c) 0.6 % 0.6 % (0.1 )% 0.7 %
Domestic same-restaurant sales percentage change(d) 0.6 % 1.3 % 0.0 % 0.0 %
Franchise(b)(e)
Sales percentage change(c) 0.6 % 8.7 % (0.1 )% 8.9 %
Domestic same-restaurant sales percentage change(d) 0.6 % 1.3 % 0.1 % 0.0 %
Average weekly domestic unit sales (in thousands) $ 48.2 $ 47.4 $ 48.8 $ 48.3
Three Months EndedSix Months Ended
June 30,June 30,
2014201320142013
(unaudited)
IHOP Restaurant Data
Effective Restaurants(a)
Franchise 1,448 1,410 1,444 1,409
Area license 167 167 167 167
Company 10 12 11 12
Total 1,625 1,589 1,622 1,588
System-wide(b)
Sales percentage change(c) 6.0 % 4.3 % 6.2 % 3.3 %
Domestic same-restaurant sales percentage change(d) 3.2 % 1.9 % 3.6 % 0.7 %
Franchise(b)
Sales percentage change(c) 6.1 % 4.3 % 6.3 % 3.3 %
Domestic same-restaurant sales percentage change(d) 3.2 % 1.9 % 3.6 % 0.7 %
Average weekly domestic unit sales (in thousands) $ 35.6 $ 34.4 $ 36.4 $ 34.7
Area License (b)
Sales percentage change(c) 5.8 % 4.8 % 6.9 % 4.5 %

(a)

"Effective Restaurants" are the weighted average number of restaurants open in a given fiscal period, adjusted to account for restaurants open for only a portion of the period. Information is presented for all Effective Restaurants in the Applebee’s and IHOP systems, which includes restaurants owned by the Company as well as those owned by franchisees and area licensees.

(b)

“System-wide” sales are retail sales at Applebee’s restaurants operated by franchisees and IHOP restaurants operated by franchisees and area licensees, as reported to the Company, in addition to retail sales at company-operated restaurants. Sales at restaurants that are owned by franchisees and area licensees are not attributable to the Company. Unaudited reported sales for Applebee's domestic franchise restaurants, IHOP franchise restaurants and IHOP area license restaurants for the three and six months ended June 30, 2014 and 2013 were as follows:

Three Months EndedSix Months Ended
June 30,June 30,
2014201320142013
(In millions)

Reported sales (unaudited)

Applebee's franchise restaurant sales $ 1,150.7 $ 1,144.2 $ 2,333.8 $ 2,335.7
IHOP franchise restaurant sales $ 669.5 $ 630.9 $ 1,349.8 $ 1,270.2
IHOP area license restaurant sales $ 64.8 $ 61.3 $ 134.9 $ 126.2

(c)

“Sales percentage change” reflects, for each category of restaurants, the percentage change in sales in any given fiscal period compared to the prior fiscal period for all restaurants in that category.

(d)

“Domestic same-restaurant sales percentage change” reflects the percentage change in sales, in any given fiscal period, compared to the same weeks in the prior year for domestic restaurants that have been operated throughout both fiscal periods that are being compared and have been open for at least 18 months. Because of new unit openings and restaurant closures, the domestic restaurants open throughout both fiscal periods being compared may be different from period to period. Same-restaurant sales percentage change does not include data on IHOP area license restaurants located in Florida.

DineEquity, Inc. and Subsidiaries
Restaurant Data

The following table summarizes our restaurant development activity:

Three Months EndedSix Months Ended
June 30,June 30,
2014201320142013
(Unaudited)

Applebee's Restaurant Development Activity

Summary - beginning of period:
Franchise 1,988 2,008 1,988 2,011
Company restaurants 23 23 23 23
Total Applebee's restaurants, beginning of period2,0112,0312,0112,034
Franchise restaurants opened:
Domestic 5 3 13 5
International 1 1 1 1
Total franchise restaurants opened 6 4 14 6
Franchise restaurants closed:
Domestic (5 ) (22 ) (10 ) (25 )
International (3 ) (1 ) (6 ) (3 )
Total franchise restaurants closed (8 ) (23 ) (16 ) (28 )
Net franchise restaurant (reduction) development(2)(19)(2)(22)
Summary - end of period:
Franchise 1,986 1,989 1,986 1,989
Company restaurants 23 23 23 23
Total Applebee's restaurants, end of period2,0092,0122,0092,012

IHOP Restaurant Development Activity

Summary - beginning of period:
Franchise 1,449 1,410 1,439 1,404
Area license 168 167 168 165
Company 10 12 13 12
Total IHOP restaurants, beginning of period 1,627 1,589 1,620 1,581
Franchise/area license restaurants opened:
Domestic franchise 7 7 16 15
Domestic area license 1 1 2 3
International franchise 5 1 9 3
International area license 1 1
Total franchise/area license restaurants opened 13 10 27 22
Franchise/area license restaurants closed:
Domestic franchise (6 ) (5 ) (11 ) (9 )
Domestic area license (2 ) (2 )
International franchise (1 )
International area license (1 ) (1 ) (1 )
Total franchise/area license restaurants closed (8 ) (6 ) (15 ) (10 )
Net franchise/area license restaurant development541212
Refranchised from Company restaurants 1 1 4 1
Franchise restaurants reacquired by the Company (1 ) (1 )
Net franchise/area license restaurant additions 5 5 15 13
Summary - end of period
Franchise 1,455 1,414 1,455 1,414
Area license 167 168 167 168
Company 10 11 10 11
Total IHOP restaurants, end of period1,6321,5931,6321,593

Contacts:

Investor Contact
DineEquity, Inc.
Ken Diptee
Executive Director, Investor Relations
818-637-3632
or
Media Contact
Sard Verbinnen & Co.
Stacy Roughan and Samantha Verdile
310-201-2040 and 212-687-8080

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