DineEquity, Inc. Reports Fourth Quarter and Fiscal 2016 Results

Fourth Quarter of Fiscal 2016

• IHOP's domestic system-wide comparable same restaurant sales declined 2.1% for the fourth quarter of 2016.
• Applebee's domestic system-wide comparable same-restaurant sales declined 7.2% for the fourth quarter of 2016.

Fiscal 2016

• IHOP's domestic system-wide comparable same restaurant sales decreased 0.1% for fiscal 2016.
• Applebee's domestic system-wide comparable same-restaurant sales decreased 5.0% for fiscal 2016.

Financial Performance Guidance for Fiscal 2017

The following projections for fiscal 2017 are based on management's expectations as of March 1, 2017.

• Applebee's domestic system-wide same-restaurant sales performance is expected to range between negative 4.0% and negative 8.0%.
• IHOP's domestic system-wide same-restaurant sales performance is expected to range between 0.0% and positive 3.0%.
• Applebee's franchisees are projected to develop between 20 and 30 new restaurants globally, the majority of which are expected to be international openings.  As part of a detailed system-wide analysis to optimize the health of the franchisee system, we anticipate the closure of approximately 40 to 60 restaurants.  The expected closures will be based on several criteria, including meeting our brand and image standards and operational results.
• IHOP franchisees and its area licensee are projected to develop between 75 and 90 restaurants globally, the majority of which are expected to be domestic openings.  We expect the closure of approximately 18 restaurants as part of normal attrition.
• Franchise segment profit is expected to be between $323 million and $338 million.
• Rental and Financing segments are expected to generate roughly $38 million in combined profit.
• General and administrative expenses are expected to range between $170 million and $177 million, including non-cash stock-based compensation expense and depreciation of approximately $22 million.  The anticipated increase in general and administrative expenses compared to fiscal 2016 is primarily due to expectations for higher personnel-related and incentive compensation costs as well as investments in Applebee's stabilization initiatives.  These initiatives will total approximately $10 million in fiscal 2017 and we expect that a substantial amount will not recur.  The range for expected general and administrative expenses is inclusive of approximately $9 million of non-recurring cash severance and equity compensation charges to be incurred in the first quarter of fiscal 2017.     
• Interest expense is expected to be approximately $62 million. Approximately $3 million is projected to be non-cash interest expense.
• Weighted average diluted shares outstanding are expected to be approximately 18 million shares.
• The income tax rate is expected to be approximately 38%.
• Cash flow provided by operating activities is expected to range between $98 million and $108 million.  The expected decline compared to fiscal 2016 is primarily due to projections for lower net income due to higher general and administrative expenses as well as expectations for domestic system-wide comparable same restaurant sales.  
• Capital expenditures are projected to be roughly $12 million.
• Adjusted free cash flow (See "Non-GAAP Financial Measures" below) is projected to range between $96 million and $106 million.  The expected decline in adjusted free cash flow compared to fiscal 2016 is primarily due to projections for lower net income due to higher general and administrative expenses as well as expectations for domestic system-wide comparable same restaurant sales.  

Investor Conference Call Today

DineEquity will host a conference call to discuss its results on the same day at 8:00 a.m. Pacific Time.  To participate on the call, please dial (888) 771-4371 and reference passcode 44360070. International callers, please dial (847) 585-4405 and reference passcode 44360070.  A live webcast of the call will be available at www.dineequity.com, and may be accessed by visiting Calls & Presentations on 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 March 1, 2017 through 8:59 p.m. Pacific Time on March 8, 2017 by dialing (888) 843-7419 and referencing passcode 44360070#.  International callers, please dial (630) 652-3042 and reference passcode 44360070#.  An online archive of the webcast will also be available on Calls & Presentations under the Investors section of DineEquity's website.

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 3,700 restaurants combined in 18 countries and 3 U.S. territories and approximately 400 franchisees, 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," "could," "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; 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 measure "adjusted net income available to common stockholders (Adjusted EPS)" and "Adjusted free cash flow." "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 gain or loss related to the disposition of assets, and other items deemed not reflective of current operations.  This is presented on an aggregate basis and a per share (diluted) basis.  "Adjusted 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.  Management uses adjusted free cash flow in its periodic assessments of, among other things, the amount of cash dividends per share of common stock and repurchases of common stock and we believe it is important for investors to have the same measure used by management for that purpose.  Adjusted free cash flow does not represent residual cash flow available for discretionary purposes. Management may use certain of these non-GAAP financial measures along with the corresponding U.S. GAAP measures to evaluate the performance of the business and to make certain business decisions.  Additionally, adjusted EPS is one of the metrics used in determining payouts under the Company's annual cash incentive plan.  Management believes that these non-GAAP financial measures provide additional meaningful information that should be considered when assessing the business and the Company's performance compared to prior periods and the marketplace.  Adjusted EPS and adjusted free cash flow 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 U.S. GAAP.

DineEquity, Inc. and Subsidiaries
Consolidated Statements of Income
(In thousands, except per share amounts)
(Unaudited)
		Three Months Ended								Twelve Months Ended
		December 31,								December 31,
		2016				2015				2016				2015
Revenues:
Franchise and restaurant revenues		$	121,711			$	134,832			$	501,745			$	542,606
Rental revenues		30,291				33,895				123,037				127,650
Financing revenues		2,172				2,573				9,191				10,844
Total revenues		154,174				171,300				633,973				681,100
Cost of revenues:
Franchise and restaurant expenses		40,731				41,553				162,860				186,986
Rental expenses		22,508				24,515				91,540				94,588
Financing expenses		—				4				155				520
Total cost of revenues		63,239				66,072				254,555				282,094
Gross profit		90,935				105,228				379,418				399,006
General and administrative expenses		36,998				45,044				148,935				155,428
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