With more than 3,600 restaurants combined in 18 countries, more than 400 franchisees and approximately 200,000 team members (including franchisee- and company-operated restaurant employees), DineEquity (DIN, Financial) is one of the largest full-service restaurant companies in the world.
Successful Quarter Results
"DineEquity delivered successful results for fiscal 2014. We achieved several significant goals this year, aimed at driving additional shareholder value. We saw meaningful progress in accelerating same-restaurant sales at both Applebee's and IHOP, as each brand finished the year with great momentum," said Julia A. Stewart, Chairman and Chief Executive Officer of DineEquity, Inc. Ms. Stewart continued, "We further positioned the Company for long-term success by completing a securitization refinancing to obtain a significantly lower fixed interest rate for the long-term. The increased financial flexibility paved the way for our new capital allocation strategy, highlighting our commitment to return substantial cash to shareholders. As we begin 2015, we are executing on our key strategic priorities to sustain strong financial performance and build even stronger brands."
Fourth Quarter 2014 Financial Highlights
- Adjusted net income available to common stockholders was $21.9 million, representing adjusted earnings per diluted share of $1.16, for the fourth quarter of 2014. This compares to $18.6 million, or adjusted earnings per diluted share of $0.98, for the fourth quarter of 2013, an increase of 18%. The increase in adjusted net income was mainly due to a decline in cash interest expense and higher segment profit. These items were partially offset by an increase in general and administrative expenses in the fourth quarter of 2014 compared to the same period of 2013 and higher income taxes. The fourth quarter financial results reflect the financial impact of the securitization refinancing transaction. (See "Non-GAAP Financial Measures" below.)
- GAAP net loss was $22.1 million for the fourth quarter of 2014, or net loss per share of $1.18. This compares to net income available to common stockholders of $17.9 million, or earnings per diluted share of $0.94, for the fourth quarter of 2013. The net loss was driven by a loss on the extinguishment of debt and higher general and administrative expenses. These items were partially offset by lower income tax expense, a decline in interest expense, and higher segment profit.
Income tax expense was lower in the fourth quarter of 2014 compared to the fourth quarter of 2013 due to the write-off of costs associated with our refinancing transaction and the adoption of certain production activity deductions and research credits. - General and administrative expenses were $43.1 million for the fourth quarter of 2014 compared to $38.6 million for the same period of 2013. The increase was mainly due to the timing of franchise conference expenses and personnel costs year-over-year. For fiscal 2014, the increase in general and administrative expenses was $2.3 million, or 1.6%.
Fiscal 2014 Highlights
- Adjusted net income available to common stockholders was $89.6 million in fiscal 2014, representing adjusted earnings per diluted share of $4.73. This compares to $81.2 million, or adjusted earnings per diluted share of $4.24, for fiscal 2013, an increase of 12%. The increase was primarily due to lower cash interest expense and higher segment profit. These items were partially offset by higher income taxes. (See "Non-GAAP Financial Measures" below.)
- GAAP net income available to common stockholders was $35.9 million in fiscal 2014, or earnings per diluted share of $1.90, compared to $70.8 million, or earnings per diluted share of $3.70 for fiscal 2013. The decrease was primarily due to a loss on the extinguishment of debt in fiscal 2014 compared to fiscal 2013. This item was partially offset by lower income tax expense, higher segment profit, and a decline in interest expense.
- For fiscal 2014, cash flows from operating activities were $118.5 million and free cash flow was $112.5 million. (See "Non-GAAP Financial Measures" below.)
Same-Restaurant Sales Performance
Fourth Quarter 2014
- IHOP's domestic system-wide same restaurant sales increased 6.1% for the fourth quarter of 2014 compared to the same quarter of 2013. This is the highest quarterly sales increase since the first quarter of 2004.
- Applebee's domestic system-wide same-restaurant sales increased 2.8% for the fourth quarter of 2014 compared to the fourth quarter of 2013, representing the strongest quarterly sales increase since the second quarter of 2011.
Fiscal 2014 Highlights
- IHOP's domestic system-wide same restaurant sales increased 3.9% for fiscal 2014 compared to fiscal 2013, representing the strongest full-year sales increase since fiscal 2004.
- Applebee's domestic system-wide same-restaurant sales increased 1.1% for fiscal 2014 compared to fiscal 2013.
Financial Performance Guidance for Fiscal 2015
The Company's financial performance guidance reflects the impact of a 53rd operating week in fiscal 2015, in which the last month of the fiscal fourth quarter contains six weeks.
- Applebee's domestic system-wide same-restaurant sales performance is expected to range between positive 1.0% and positive 4.0%.
- IHOP's domestic system-wide same-restaurant sales performance is expected to range between positive 2.0% and positive 5.0%.
- Applebee's franchisees are projected to develop between 30 and 40 new restaurants, the majority of which are expected to be opened in the U.S.
- IHOP franchisees and its area licensee are projected to develop between 50 and 60 new restaurants, the majority of which are expected to be domestic openings.
- The franchise segment profit is expected to be between $345 million and $358 million.
- Rental and Financing segments are expected to generate roughly $39 million in combined profit.
- General and administrative expenses are expected to range between $149 million and $153 million, including non-cash stock-based compensation expense and depreciation of approximately $18 million.
- Interest expense is expected to be roughly $63 million. Approximately $3 million is projected to be non-cash interest expense.
- The income tax rate is expected to be approximately 38%.
- Capital expenditures are projected to be about $9 million.
- Free cash flow is expected to range between $114 million and $124 million. For fiscal 2015, "Free cash flow" for a given period is defined as cash provided by operating activities, plus receipts from notes and equipment contracts receivable, less capital expenditures.
- Weighted average diluted shares outstanding are expected to be approximately 19 million.
To End
Restaurant stocks are booming and this company is no exception. Perceptions have changed as regards the way people eat out. This company posted a solid quarterly report and is expected to create shareholder returns in the near future. Investors may add this company to their portfolio.
(Source: Company's Website)
