DineEquity completes transition, stock surges

DineEquity completes transition, 4Q adj. profit beats Street's view; stock hits all-time high

Associated Press

GLENDALE, Calif. (AP) -- DineEquity has transformed its Applebee's restaurants into a franchised system and, with its debt pared down and fourth-quarter results toping Wall Street expectations Wednesday, shares jumped to an all-time high.

In October the company announced that it had closed on the sale of 33 Applebee's company-run restaurants to American Franchise Capital LLC and 65 others to TSFR Apple Venture. It also sold 39 to Potomac Family Dining Group LLC and said that it was able to bring Applebee's to a 99 percent franchised operation last year.

That, according to DineEquity Inc., has made the company less capital intensive and an engine for larger operating margins.

The parent to Applebee's as well as IHOP, reduced its fourth-quarter total debt by $77.2 million and lowered its total debt by $332.6 million in fiscal 2012. The Glendale, Calif. company said it has cut total debt by more than $1 billion since acquiring Applebee's in 2007.

During the fourth quarter, DineEquity earned $18 million, or 97 cents per share. That's down from $27.3 million, or $1.51 per share, in the prior-year period.

The company was hampered by increased income taxes and a smaller gain from asset sales compared with a year ago.

Stripping out impairment and closure charges and other items, earnings were 83 cents per share. That beat the 78 cents per share that analysts surveyed by FactSet expected.

Company shares added $3.15, or 4.4 percent, to $75.43 in afternoon trading. The shares hit an all-time high of $78.38 earlier in the session.

Revenue for the three months ended Dec. 31 fell 35 percent to $158.6 million from $242.2 million because the company is no longer receiving revenue from Applebee's locations that were sold or refranchised.

Wall Street expected revenue of $161.5 million.

Sales at Applebee's in the U.S. that have been in operation for at least a year edged up 0.9 percent as customers spent more at the table.

At IHOP, comparable-store sales fell 2.6 percent as restaurant traffic fell and customer spending slipped.

DineEquity's full-year net income jumped 73 percent to $122.5 million, or $6.63 per share, from $70.7 million, or $3.89 per share, in the previous year.

Adjusted earnings were $4.28 per share.

Annual revenue fell to $849.9 million from $1.08 billion.

Applebee's company-run restaurant operating margin improved to 16.3 percent from 14.5 percent mostly because of the refranchise and sale of less profitable company-run locations.

The company also announced Wednesday that its board declared a first-quarter dividend of 75 cents per share. The dividend will be paid on March 29 to shareholders of record on March 15.

The board also approved a $100 million stock repurchase program. The buyback replaces a $45 million repurchase program that was announced in August 2011.

DineEquity has more than 3,600 restaurants combined in 17 countries and more than 400 franchisees.

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