Key Performance Benchmarks to Show Continued Strength of IHOP Brand and Applebee's Business Model Transformation and Brand Turnaround
GLENDALE, CA, Feb 27, 2008 (MARKET WIRE via COMTEX News Network) -- IHOP Corp. (NYSE: IHP) today provided financial guidance and
highlighted key operational and financial benchmarks that will drive
the performance of its IHOP and Applebee's businesses in fiscal 2008.
The Company expects to generate consolidated cash from operations of
approximately $100 million in fiscal 2008. Consolidated cash from
operations is expected to be augmented by approximately $17 million
from the structural run-off of the IHOP business unit's long-term
notes receivable in fiscal 2008. IHOP Corp. expects consolidated
capital expenditures to be approximately $25 million in fiscal 2008.
In fiscal 2008, the Company expects to generate approximately $92
million in consolidated free cash flow, or $5.11 per diluted share.
See "References to Non-GAAP Information" below.
Julia A. Stewart, IHOP Corp.'s chairman and chief executive officer,
said, "The primary financial goal of the Applebee's acquisition was to
realize the free cash flow potential of the business by transitioning
its model to a more highly franchised one and successfully
re-energizing the brand. For this reason, we encourage investors to
focus not only on critical operational metrics like same-store sales
growth and new franchise restaurant development, but also to focus on
the consolidated free cash flow performance of our business in 2008
and beyond. This measurement is the critical element of our investor
proposition as we expect to significantly reduce capital expenditures
and improve cash performance of the Applebee's business over time.
"We have already successfully accomplished this type of
transformation with the IHOP business. In 2008, we expect to see a
continuation of the steady, predictable financial results from IHOP
that have been the hallmark of our performance over the past several
years," Stewart concluded.
Additionally, the Company expects to generate between $480 and $490
million in after-tax cash proceeds with its plans to franchise
approximately 100 company-operated Applebee's restaurants and the
sale leaseback of approximately 190 company-owned Applebee's
locations as well as Applebee's Restaurant Support Center
headquartered in Lenexa, Kansas. The uses of cash in fiscal 2008
include approximately $450 million in repayment of the Company's
consolidated funded debt, approximately $70 million in unpaid
transaction related expenses associated with the acquisition of
Applebee's, approximately $36 million in dividend payments to
shareholders of common and preferred stock as well as consolidated
capital expenditure needs noted earlier.
Key Performance Benchmarks
The Company highlighted key performance benchmarks addressing its
ability to continue the momentum of the IHOP brand and the successful
transformation of Applebee's business model and revitalization of the
brand. These benchmarks include:
-- The sale of approximately 100 company-operated Applebee's restaurants
in fiscal 2008. This is expected to generate after-tax cash proceeds in
the range of $90 to $100 million this year. In addition, the Company's
objective is to conclude fiscal 2008 with as many as 60 additional purchase
commitments of Applebee's company-operated restaurants to close in 2009.
-- The sale-leaseback of approximately 190 company-owned Applebee's
restaurant locations as well as its Restaurant Support Center. These
actions are expected to generate after-tax cash proceeds of approximately
$350 million and approximately $40 million, respectively.
-- Continued new franchise restaurant development within both the IHOP
and Applebee's systems. The Company expects franchisees and its area
licensee to open between 65 and 70 IHOP restaurants, primarily in the
United States, in fiscal 2008. The Company also expects Applebee's
franchise restaurant expansion to continue with approximately 50 to 65 new
Applebee's planned for development by franchisees, 30 to 40 of which are
expected to be developed in the United States and 20 to 25 internationally.
Applebee's expects to develop no more than two company restaurants this
year as it discontinues company restaurant development.
-- The generation of positive same-store sales growth. The Company
expects same-store sales for the IHOP system to grow between 2% and 4% for
fiscal 2008. The Company also expects same-store sales for the Applebee's
system to grow between 1% and 2% for fiscal 2008.
Performance Guidance by Business Unit
The Company provided the following additional financial performance
guidance for its IHOP and Applebee's business units, as well as IHOP
Corp., the parent company, for fiscal 2008:
-- IHOP: The Company expects IHOP's capital expenditures to range
between $4 and $6 million, while G&A spending is expected to range between
$53 and $57 million.
-- Applebee's: The Company expects to significantly reduce Applebee's
capital expenditures to range between $12 and $16 million as it
discontinues the development of company-operated Applebee's restaurants.
G&A spending is expected to range between $95 and $100 million, excluding
$12 million in expected retention and severance costs. This reflects the
benefit of the corporate reorganization completed to date as well as an
initial expense reduction anticipated in conjunction with the planned
franchising of Applebee's company-operated restaurants in fiscal 2008.
-- The Parent Company: The Company expects corporate G&A to range
between $38 and $42 million, primarily reflecting the shift of certain
overhead from the business units to the corporate level. Corporate capital
expenditures are expected to range between $7 and $8 million.
Investor Conference Call Today
IHOP Corp. will host an investor conference call to discuss its
fiscal 2008 financial performance guidance as well as fourth quarter
and fiscal 2007 financial results today, Wednesday, February 27,
2008, at 11:00 a.m. Eastern Time (8:00 a.m. Pacific Time). To
participate on the call, please dial (888) 680-0860 and reference
pass code 40886137. A live webcast of the call will be available on
IHOP's Web site at www.ihop.com, and may be accessed by visiting
Calls & Presentations under the site's Investor Information 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 through March 5, 2008 by dialing 888-286-8010
and referencing pass code 10840728. An online archive of the webcast
also will be available on the Investor Information section of IHOP's
About IHOP Corp.
Based in Glendale, California, IHOP Corp. franchises and operates
restaurants under the International House of Pancakes, or IHOP, and
the Applebee's Neighborhood Grill & Bar brands. With more than 3,300
restaurants combined, IHOP Corp. is the largest full-service
restaurant company in the world. IHOP Corp.'s common stock is listed
on the NYSE under the symbol "IHP." For more information on IHOP
Corp., visit the Investor Relations section of the Company's Web site
located at www.ihop.com.
There are forward-looking statements contained in this news release.
They use such words as "may," "will," "expect," "believe," "plan," or
other similar terminology, and include statements regarding the
strategic and financial benefits of the acquisition of Applebee's
International, Inc., expectations regarding integration and cost
savings, and other financial guidance. These statements involve known
and unknown risks, uncertainties and other factors, which may cause
the actual results to be materially different than those expressed or
implied in such statements. These factors include, but are not
limited to: the implementation of the Company's strategic growth
plan; the availability of suitable locations and terms for the sites
designated for development; the ability of franchise developers to
fulfill their commitments to build new restaurants in the numbers and
time frames covered by their development agreements; legislation and
government regulation including the ability to obtain satisfactory
regulatory approvals; risks associated with executing the Company's
strategic plan for Applebee's; risks associated with the Company's
incurrence of significant indebtedness to finance the acquisition;
the failure to realize the synergies and other perceived advantages
resulting from the acquisition; costs and potential litigation
associated with the acquisition; the ability to retain key personnel
after the acquisition; conditions beyond the Company's control such
as weather, natural disasters, disease outbreaks, epidemics or
pandemics impacting the Company's customers or food supplies or acts
of war or terrorism; availability and cost of materials and labor;
cost and availability of capital; competition; continuing acceptance
of the IHOP, International House of Pancakes and Applebee's brands
and concepts by guests and franchisees; the Company's overall
marketing, operational and financial performance; economic and
political conditions; adoption of new, or changes in, accounting
policies and practices; and other factors discussed from time to time
in the Company's news releases, public statements and/or filings with
the Securities and Exchange Commission, especially the "Risk Factors"
sections of Annual and Quarterly Reports on Forms 10-K and 10-Q, as
well as releases, statements and SEC filings by Applebee's
International, Inc. prior to its acquisition by the Company.
Forward-looking information is provided by IHOP Corp. pursuant to the
safe harbor established under the Private Securities Litigation
Reform Act of 1995 and should be evaluated in the context of these
factors. In addition, the Company disclaims any intent or obligation
to update these forward-looking statements.
References to Non-GAAP Information
This press release includes references to the non-GAAP financial
measures "free cash flow" and "free cash flow per share." The Company
defines "free cash flow" for a given period as cash provided by
operating activities, plus receipts from notes and equipment
contracts receivable ("long-term notes receivable"), less capital
expenditures. The Company defines "free cash flow per share" for a
given period as free cash flow for that period, divided by the
weighted average shares of common stock on a fully diluted basis
assumed outstanding for the period. Management utilizes free cash
flow to determine the amount of cash remaining for general corporate
and strategic purposes after the receipts from long-term notes
receivable, and the funding of operating activities and capital
expenditures. Management believes this information is helpful to
investors to determine the Company's cash available for these
purposes. Free cash flow and free cash flow per share 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 generally accepted accounting principles.
The following table reconciles the Company's cash provided by
operating activities to free cash flow for the Company's fiscal 2008
Fiscal 2008 Guidance
(in millions except
per share amounts)
Cash flows from operating activities $ 100
Receipts from long term notes receivable 17
Capital expenditures (25)
Free cash flow $ 92
Free cash flow per share $ 5.11*
* Assumes weighted average fully diluted shares outstanding for the
period of approximately 18.0 million
Director, Investor Relations
SOURCE: IHOP Corp.