DineEquity, Inc., the parent company of Applebee's Neighborhood Grill & Bar and IHOP restaurants, announced financial results for the third quarter of fiscal 2016.
"Despite challenges facing the industry, DineEquity again posted year-over-year growth in earnings per diluted share and generated substantial adjusted free cash flow. We reaffirmed our commitment to return significant cash to shareholders by increasing the quarterly dividend by 5.4 percent, effective with the next dividend paid on January 6, 2017. Additionally, we completed our restaurant support center consolidation, which enables us to reallocate resources as needed," says Julia A. Stewart, chairman and chief executive officer of DineEquity, Inc.
Stewart concludes, "Our top priority is driving the performance of the Applebee's brand. In addition, we recognize that there is more work to be done to sustain the momentum at IHOP and we're taking action. I'm pleased to say that we held successful franchise conferences for both Applebee's and IHOP in September and we're collaborating with franchisees to execute our long-term strategy to strengthen the brands."
Same-Restaurant Sales Performance
Third Quarter of Fiscal 2016
IHOP's domestic system-wide comparable same restaurant sales were negative 0.1 percent for the third quarter of 2016.
Applebee's domestic system-wide comparable same-restaurant sales declined 5.2 percent for the third quarter of 2016.
First Nine Months of Fiscal 2016
IHOP's domestic system-wide comparable same restaurant sales increased 0.5 percent for the first nine months of fiscal 2016.
Applebee's domestic system-wide comparable same-restaurant sales declined 4.4 percent for the first nine months of fiscal 2016.
Financial Performance Guidance for Fiscal 2016
Revised Applebee's comparable same-restaurant sales performance to range between negative 4 percent and negative 5 percent. This compares to the previous expectations of between negative 3 percent and negative 4.5 percent. The company expects comparable same-restaurant sales to be near the low end of the guidance range.
Reiterated IHOP's comparable same-restaurant sales performance to range between positive 0.5 percent and positive 2 percent. The company expects comparable same-restaurant sales to be near the low end of the guidance range.
Reiterated worldwide development expectations for Applebee's franchisees to develop between 25 and 33 new restaurants. IHOP franchisees and its area licensee are expected to develop between 65 and 77 new restaurants.
Revised expectations for Franchise segment profit to be between $340 million and $345 million. This compares to the previous expectations of between $342 million and $352 million.
Third Quarter of Fiscal 2016 Financial Highlights
GAAP net income available to common stockholders was $23.9 million for the third quarter of 2016, or earnings per diluted share of $1.33. This compares to net income available to common stockholders of $23.9 million, or earnings per diluted share of $1.28, for the third quarter of 2015. GAAP net income for the third quarter of 2016 was essentially flat compared to the same period of 2015 mainly due to gross profit declines being offset by lower general and administrative expenses. The increase in earnings per diluted share was due to a decrease in weighted average diluted shares outstanding.
Adjusted net income available to common stockholders was $26.4 million, or adjusted earnings per diluted share of $1.46, for the third quarter of 2016. This compares to $26.7 million, or adjusted earnings per diluted share of $1.43, for the same period of 2015. The slight decrease in adjusted net income was mainly due to lower gross profit. The decrease was partially offset by lower income taxes and a decline in general and administrative expenses. The increase in adjusted earnings per diluted share was due to a decrease in weighted average diluted shares outstanding.
General and administrative expenses were $36 million for the third quarter of 2016. This compares to approximately $41.6 million for the same period of 2015. The decrease was primarily due to lower non-recurring restaurant support center consolidation costs, partially offset by higher costs associated with the timing of franchise conferences.
First Nine Months of Fiscal 2016 Financial Highlights
GAAP net income available to common stockholders was $75.5 million for the first nine months of fiscal 2016, or earnings per diluted share of $4.15. This compares to net income available to common stockholders of $78.5 million, or earnings per diluted share of $4.16, for the first nine months of fiscal 2015. The decrease in GAAP net income was primarily due to lower gross profit and a loss on the disposition of assets in the first nine months of 2016 compared to a gain in the same period of 2015. The decrease was partially offset by lower income tax expense. The decline in earnings per diluted share was less than the decline in net income due to fewer weighted average diluted shares outstanding.
Adjusted net income available to common stockholders was $84.3 million, or adjusted earnings per diluted share of $4.63, for the first nine months of fiscal 2016. This compares to $86.7 million, or adjusted earnings per diluted share of $4.59, for the same period of fiscal 2015. The decline in adjusted net income was mainly due to lower gross profit and higher general and administrative expenses, partially offset by lower income taxes. Despite the decrease in adjusted earnings, adjusted earnings per diluted share increased due to fewer weighted average diluted shares outstanding.
General and administrative expenses were $111.9 million for the first nine months of 2016. This compares to $110.4 million for the same period of 2015. The slight increase was primarily due to higher costs associated with the timing of franchise conferences, partially offset by a decrease in personnel and related costs.
In the nine months of fiscal 2016, cash flows from operating activities were $62.1 million compared to $70.6 million in the same period of fiscal 2015. Adjusted free cash flow was $66.2 million for the first nine months of fiscal 2016, compared to $75.6 million for the first nine months of fiscal 2015.
