SOURCE: DineEquity, Inc.

DineEquity, Inc.

February 25, 2009 07:00 ET

DineEquity, Inc. Announces Fourth Quarter 2008 Financial Results

Improved Expense Control Enhances Financial Flexibility

GLENDALE, CA--(Marketwire - February 25, 2009) - DineEquity, Inc. (NYSE: DIN), the parent company of Applebee's Neighborhood Grill & Bar and IHOP Restaurants, today announced financial results for the fourth quarter ended December 31, 2008.

The Company generated $110.8 million of cash flows from operating activities for fiscal 2008, a 4.2% increase compared to fiscal 2007. The Company's cash flows from operating activities for fiscal 2008 was further augmented by $15.8 million from the run-off of the IHOP business' long-term notes receivable, offset by consolidated capital expenditures of $31.8 million for fiscal 2008. Free cash flow for fiscal 2008 was $94.8 million (see "References to Non-GAAP Financial Measures" below).

For the fourth quarter 2008, the Company reported a net loss available to common stockholders of $136.9 million, or a net loss per diluted share available to common stockholders of $8.15. The loss was primarily due to non-cash, after tax impairment charges of $148.3 million related to write downs of Applebee's goodwill and intangible assets. Excluding impairment charges for the fourth quarter 2008, the Company reported net income available to common stockholders of $5.7 million, or net income per diluted share available to common stockholders of $0.34.

Julia A. Stewart, DineEquity's chairman and chief executive officer, said, "Our results for the quarter and full year 2008 reflect the significant contraction of consumer spending in the second half of the year. We continue to believe that IHOP is well positioned to extend its lead in family dining even in this challenging economy, and we are taking significant steps to reposition the Applebee's brand in order to drive future growth. Additionally, we have taken proactive steps to maximize our financial flexibility and tighten expenses as we continue to manage our business for the long-term."

IHOP Performance Highlights

The following is a summary of key performance drivers of DineEquity's IHOP business unit for the fourth quarter and fiscal 2008:

--  IHOP's system-wide same-store sales decreased 1.0% for the fourth
    quarter 2008 compared to the same quarter last year and increased 1.5% for
    fiscal 2008, reflecting higher average guest check and a reduction in guest
    traffic for both periods. IHOP's marketing efforts during the quarter
    included unique limited-time offers such as Fruit Crepe Fever and Coffee
    Cake Pancakes supported by national advertising, holiday gift card and IHOP
    'n Go carry out program advertising, along with restaurant level programs
    aimed at driving the dinner day part.
    
--  During the quarter, franchisees and its Florida area licensee opened
    26 new IHOP restaurants, bringing total fiscal 2008 new franchise openings
    to 71 restaurants in the U.S., Mexico and Canada.
    
--  IHOP's franchising business generated revenue growth of 5.6% to $51.6
    million for the fourth quarter 2008 compared to the same quarter last year
    primarily due to a 3.5% increase in effective units during the quarter.
    IHOP's franchise operations segment profitability increased 7.0% to $27.8
    million for the fourth quarter 2008 compared to the same quarter last year.
    

Stewart commented, "Despite a difficult consumer environment, IHOP delivered a solid performance in 2008 due to the successful brand revitalization and operational improvement strategies employed over the past several years. These strategies of energizing the brand, improving operations and maximizing development remain as relevant today as they were when initiated in 2003, and will provide the framework for the IHOP team and our franchisees to sustain system momentum."

Applebee's Performance Highlights

The following is a summary of key performance drivers of DineEquity's Applebee's business unit for the fourth quarter and fiscal 2008:

--  Applebee's system-wide domestic same-store sales decreased 4.6% for
    the fourth quarter 2008 compared to the same quarter last year and
    decreased 2.2% for fiscal 2008. Same-store sales for Applebee's domestic
    franchise restaurants decreased 4.7% for the fourth quarter 2008 compared
    to the same quarter last year and decreased 2.4% for fiscal 2008. Same-
    store sales for Applebee's company-operated restaurants decreased 4.2% for
    the fourth quarter 2008 compared to the same quarter last year and
    decreased 1.3% for fiscal 2008. Applebee's company-operated restaurant same-
    store sales results for the fourth quarter 2008 reflected traffic declines,
    which offset an increased average guest check that was primarily driven by
    an effective pricing increase of nearly 4.0%. Applebee's marketing efforts
    during the quarter included an enhanced value offering, Two for $20,
    supported by national advertising, a holiday gift card promotion and the
    continuation of Applebee's "It's a Whole New Neighborhood" campaign.
    
--  During the quarter, franchisees opened 14 new Applebee's restaurants,
    bringing the total number of new franchise openings to 48 restaurants for
    fiscal 2008 throughout the U.S. and in several international locations.
    
--  On a pro forma basis, which compares fourth quarter 2008 results for
    Applebee's franchise operations segment to the same period last year,
    Applebee's franchise operations segment profitability grew 0.3% to $34.5
    million due to a 7.3% increase in effective units, which offset a 4.7%
    decrease in domestic franchise same-store sales for the fourth quarter
    2008.
    
--  On a pro forma basis, which compares fourth quarter 2008 results for
    Applebee's company operations segment to the same period last year, sales
    at Applebee's company-operated restaurants decreased 18.3% to $225.0
    million primarily due to a 13.2% decrease in the number of effective units
    as a result of the Company's refranchising efforts. Operating margin, which
    is defined as total sales less expenses, improved 280 basis points to 10.7%
    compared to a 7.9% operating margin, excluding pre-opening expense of 10
    basis points, for the fourth quarter 2007. Applebee's operating margin
    performance for the quarter was primarily driven by improvement in the
    management of labor expense and food and beverage costs, which more than
    offset higher commodity and utility costs. These factors resulted in an
    11.5% increase in segment profitability to $24.0 million for the fourth
    quarter 2008.
    
--  In line with its strategy to franchise the majority of Applebee's
    company-operated restaurants, Applebee's completed the sale of 103
    restaurants in Southern California, Delaware, Nevada and Texas during
    fiscal 2008.
    

Stewart commented, "We have strong interest from prospective buyers in all of Applebee's company-operated restaurants available for sale, but recognize that closing deals is very difficult in the current environment. We continue to believe we will meet our 2009 refranchising goal of selling approximately 200 restaurants as we are working with several interested parties to overcome obstacles posed by the credit markets and weakness in the broader economy. In the meantime, we remain focused on margin improvement and profitability enhancement at Applebee's company-operated restaurants. Additionally, we are moving into the next stage of Applebee's brand revitalization process with strategic menu updates and expanded marketing efforts planned throughout the year."

Maximizing Financial Flexibility

Through a combination of refranchising and sale-leaseback proceeds, rental obligation assignments, and the use of free cash flow to retire debt, DineEquity reduced its leverage levels by approximately $500 million in fiscal 2008. Additionally, the Company has taken proactive steps to further maximize its financial flexibility, including cost reduction actions that have already resulted in approximately $20 million worth of profit enhancements over and above the approximate $35 million worth of cost savings to date made possible by the Applebee's acquisition and the sale of company-operated restaurants.

As a result, DineEquity complied with its debt covenants throughout fiscal 2008 and believes it will continue to do so in fiscal 2009. The Company's consolidated leverage ratio as of the end of the fourth quarter 2008 was 6.77x. As of the end of the fourth quarter 2008, debt service coverage ratios were 3.0x for IHOP's securitization on a three-month unadjusted basis and 2.0x for the Applebee's securitization on three-month adjusted basis.

DineEquity has provided supplemental information to this news release regarding its compliance with its debt covenants, which may be accessed by visiting the Calls & Presentations section of DineEquity's Investor Relations website at http://investors.dineequity.com and referring to supporting materials for the Company's fourth quarter 2008 webcast.

Investor Conference Call Today

The Company will host an investor conference call to discuss its fourth quarter and fiscal 2008 financial results and 2009 performance guidance today at 11:00 a.m. Eastern Time (8:00 a.m. Pacific Time). To participate on the call, please dial (888) 679-8037 and reference pass code 81027656. A live webcast of the call will be available on DineEquity's Web site at www.dineequity.com, and may be accessed by visiting Calls & Presentations under the site's Investor Information section. A telephonic replay of the call may be accessed through March 4, 2009 by dialing 888-286-8010 and referencing pass code 85912763. An online archive of the webcast also will be available on the Investor Information section of DineEquity's Web site.

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 approximately 3,400 restaurants combined, DineEquity is the largest full-service restaurant company in the world. For more information on DineEquity, visit the Company's Web site located at www.dineequity.com.

Forward-Looking Statements

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 of Applebee's; 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; acts of war or terrorism; availability and cost of materials and labor; cost and availability of capital; competition; continuing acceptance of the IHOP 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. Forward-looking information is provided by the Company 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.

Non-GAAP Financial Measures

This news release includes references to the Company's "net loss available to common stockholders, excluding impairment charges" and the non-GAAP financial measure "free cash flow." The former is computed for a given period by deducting from net (loss) income available to common stockholders for such period the effect of any loss related to impairment and closure charges incurred in such period. This is presented on an aggregate basis and a per share (diluted) basis. For the latter, 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. 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 is a supplemental non-GAAP financial measure 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 fiscal 2008:

                                         For the year Ended
                                         December 31, 2008
                                         ------------------
                                           (in millions)
Cash flows from operating activities     $            110.8
Receipts from long term notes receivable               15.8
Capital expenditures                                  (31.8)
                                         ------------------
Free cash flow                           $             94.8
                                         ==================




                    DINEEQUITY, INC. AND SUBSIDIARIES

                 CONSOLIDATED STATEMENTS OF OPERATIONS
                (In thousands, except per share amounts)
                            (Unaudited)

                              Three Months Ended         Year Ended
                                 December 31,            December 31,
                            ----------------------  ----------------------
                               2008        2007        2008        2007
                            ----------  ----------  ----------  ----------
Revenues
  Franchise revenues        $   88,547  $   62,991  $  353,331  $  205,757
  Company restaurant sales     228,891     112,750   1,103,228     125,905
  Rental income                 32,852      33,112     131,347     132,422
  Financing revenues             5,235       4,740      25,722      20,475
                            ----------  ----------  ----------  ----------
    Total revenues             355,525     213,593   1,613,628     484,559
                            ----------  ----------  ----------  ----------
Costs and Expenses
  Franchise expenses            26,227      22,986      96,243      88,054
  Company restaurant
   expenses                    205,491     102,299     978,197     117,448
  Rental expenses               24,299      24,549      98,057      98,402
  Financing expenses             1,101         228       7,314       1,215
  General and
   administrative expenses      43,617      33,531     182,239      81,597
  Interest expense              50,443      19,769     203,141      28,654
  Impairment and closure
   charges                     170,732       4,326     240,630       4,381
  Amortization of
   intangible assets             3,076       1,132      12,132       1,132
  (Gain) loss on
   extinguishment of debt      (12,808)         --     (15,242)      2,223
  Other (income) expense,
   net                           1,659         313        (926)      2,030
  Loss on derivative
   financial instrument             --      26,513          --      62,131
                            ----------  ----------  ----------  ----------
    Total costs and
     expenses                  513,837     235,646   1,801,785     487,267
                            ----------  ----------  ----------  ----------
Loss from continuing
 operations before income
 taxes                        (158,312)    (22,053)   (188,157)     (2,708)
Benefit for income taxes       (21,188)     (7,746)    (33,698)     (2,228)
                            ----------  ----------  ----------  ----------
Net loss                    $ (137,124) $  (14,307) $ (154,459) $     (480)
                            ==========  ==========  ==========  ==========
Net loss                    $ (137,124) $  (14,307) $ (154,459) $     (480)
  Less: Series A preferred
   stock dividends              (4,750)     (1,561)    (19,000)     (1,561)
  Less: Accretion of Series
   B preferred stock              (551)       (181)     (2,151)       (181)
  Less: Net loss allocated
   to unvested
   participating
   restricted stock              5,476          --       6,417          --
                            ----------  ----------  ----------  ----------
Net loss available to
 common stockholders        $ (136,949) $  (16,049) $ (169,193) $   (2,222)
                            ==========  ==========  ==========  ==========
Net loss available to
 common stockholders per
 share
  Basic                     $    (8.15) $    (0.94) $   (10.09) $    (0.13)
                            ==========  ==========  ==========  ==========
  Diluted                   $    (8.15) $    (0.94) $   (10.09) $    (0.13)
                            ==========  ==========  ==========  ==========
Weighted average shares
 outstanding
  Basic                         16,799      16,996      16,764      17,232
                            ==========  ==========  ==========  ==========
  Diluted                       16,799      16,996      16,764      17,232
                            ==========  ==========  ==========  ==========
Dividends declared per
 common share               $     0.25  $     0.25  $     1.00  $     1.00
                            ==========  ==========  ==========  ==========
Dividends paid per common
 share                      $     0.25  $     0.25  $     1.00  $     1.00
                            ==========  ==========  ==========  ==========




                           DineEquity, Inc.

                          IHOP BUSINESS UNIT

The following table sets forth, for the three-month and twelve-month periods ended December 31 of the current year and prior year, the number of effective restaurants in the IHOP system and information regarding the percentage change in sales at those restaurants compared to the same periods in the prior year. "Effective restaurants" are the number of restaurants in a given period, adjusted to account for restaurants open for only a portion of the period. Information is presented for all effective restaurants in the IHOP system, which includes IHOP restaurants owned by the Company, as well as those owned by franchisees and area licensees. Sales at restaurants that are owned by franchisees and area licensees are not attributable to the Company. However, we believe that presentation of this information is useful in analyzing our revenues because franchisees and area licensees pay us royalties and advertising fees that are generally based on a percentage of their sales, as well as rental payments under leases that are usually based on a percentage of their sales. Management also uses this information to make decisions about future plans for the development of additional restaurants as well as evaluation of current operations. Pro forma information on Applebee's restaurant data and restaurant development and franchising activity is presented in the section entitled "Pro Forma Comparison of Three Months and Year ended December 31, 2008 with Three Months and Year ended December 31, 2007 -- Applebee's" herein.

                                Three Months Ended        Year Ended
                                    December 31,          December 31,
                                -------------------   --------------------
                                  2008       2007       2008       2007
                                --------   ---------  ---------  ---------
Restaurant Data
Effective restaurants(a)
  Franchise                        1,206       1,162      1,189      1,144
  Company                             11          11         10         12
  Area license                       159         157        158        158
                                --------   ---------  ---------  ---------
   Total                           1,376       1,330      1,357      1,314
                                ========   =========  =========  =========
System-wide(b)
  Sales percentage change(c)         3.6 %       7.8%       5.5%       6.9%
  Same-store sales percentage
   change(d)                        (1.0)%       3.7%       1.5%       2.2%
Franchise(b)
  Sales percentage change(c)         3.4 %       8.3%       5.9%       7.1%
  Same-store sales percentage
   change(d)                        (1.0)%       3.7%       1.5%       2.2%
Area License(b)
  Sales percentage change(c)         6.2 %       3.8%       3.1%       4.2%


(a) "Effective restaurants" are the number of restaurants in a given
    fiscal period adjusted to account for restaurants open for only a
    portion of the period. Information is presented for all effective
    restaurants in the IHOP system, which includes IHOP restaurants owned
    by the Company as well as those owned by franchisees and area
    licensees.

(b) "System-wide sales" are retail sales at IHOP restaurants operated by
    franchisees, area licensees and the Company, as reported to the
    Company. Franchise restaurant sales were $539.7 million and
    $2.2 billion for the fourth quarter and fiscal year ended
    December 31, 2008, respectively, and sales at area license restaurants
    were $55.2 million and $218.4 million for the fourth quarter and fiscal
    year ended December 31, 2008, respectively. Franchise restaurant sales
    were $522.0 million and $2.1 billion for the fourth quarter and fiscal
    year ended December 31, 2007, respectively, and sales at area license
    restaurants were $51.9 million and $211.9 million for the fourth
    quarter and fiscal year ended December 31, 2007, respectively. Sales
    at restaurants that are owned by franchisees and area licensees are
    not attributable to the Company.

(c) "Sales percentage change" reflects, for each category of restaurants,
    the percentage change in sales in any given fiscal period compared
    to the prior fiscal period for all restaurants in that category.

(d) "Same-store sales percentage change" reflects the percentage change
    in sales, in any given fiscal period compared to the prior fiscal
    period, for restaurants that have been operated throughout both
    fiscal periods that are being compared and have been open for at
    least 18 months. Because of new unit openings and store closures,
    the restaurants open throughout both fiscal periods being compared
    will be different from period to period. Same-store sales percentage
    change does not include data on restaurants located in Florida.



                       DineEquity, Inc.

                      IHOP BUSINESS UNIT

The following table summarizes our restaurant development and
franchising activity:


                                 Three Months Ended       Year Ended
                                    December 31,         December 31,
                                --------------------  --------------------
                                  2008       2007       2008       2007
                                ---------  ---------  ---------  ---------

Restaurant Development Activity
Beginning of period                 1,375      1,328      1,344      1,302
New openings
  Company-developed                     1         --          1         --
  Domestic franchisee-developed        21         22         62         57
  International
   franchisee-developed                 1         --          3          2
  Area license                          3          1          5          1
                                ---------  ---------  ---------  ---------
    Total new openings                 26         23         71         60
Closings
  Company and domestic
   franchise                           (5)        (7)       (16)       (14)
  International franchise              --         --         (1)        --
  Area license                         --         --         (2)        (4)
                                ---------  ---------  ---------  ---------
End of period                       1,396      1,344      1,396      1,344
                                =========  =========  =========  =========

Summary-end of period
Franchise                           1,225      1,176      1,225      1,176
Company                                11         11         11         11
Area license                          160        157        160        157
                                ---------  ---------  ---------  ---------
    Total                           1,396      1,344      1,396      1,344
                                =========  =========  =========  =========

Restaurant Franchising Activity
Company-developed                      --         --         --         --
Franchisee-developed                   21         22         62         57
International
 franchisee-developed                   1         --          3          2
Rehabilitated and refranchised          3         --         13          4
                                ---------  ---------  ---------  ---------
    Total restaurants franchised       25         22         78         63
Reacquired by the Company              --         (1)       (13)        (7)
Closed                                 (5)        (6)       (16)       (12)
                                ---------  ---------  ---------  ---------
    Net addition                       20         15         49         44
                                =========  =========  =========  =========



                                 DineEquity, Inc.

                             APPLEBEE'S BUSINESS UNIT

Pro Forma Comparison of Three Months and Year ended December 31, 2008 with Three Months and Year ended December 31, 2007 -- Applebee's

The following section illustrates certain financial results of Applebee's on a stand-alone basis comparing 2008 as consolidated into DineEquity with 2007 information comprised of the 11-month data from Applebee's prior to the acquisition date of November 29, 2007 and the one-month data of Applebee's subsequent to the acquisition date ("Pro Forma 2007").

Restaurant Data

The following table sets forth, for the three months and years ended December 31, 2008 and 2007, the number of effective restaurants in the Applebee's system and information regarding the percentage change in sales at those restaurants compared to the same period in the prior year.

                                Three Months Ended       Year Ended
                                    December 31,         December 31,
                                -------------------   -------------------
                                              Pro                   Pro
                                             Forma                 Forma
                                  2008       2007       2008       2007
                                --------   --------   --------   --------
Applebee's Restaurant Data
Effective restaurants(a)
  Franchise                        1,555      1,449      1,504      1,429
  Company                            442        509        486        513
                                --------   --------   --------   --------
    Total                          1,997      1,958      1,990      1,942
                                ========   ========   ========   ========

System-wide(b)
  Applebee's domestic sales
   percentage change(c)(e)          (3.4)%     (7.0)%     (0.4)%     (0.2)%
  Applebee's domestic
   same-store sales percentage
   change(d)(e)                     (4.6)%     (2.9)%     (2.2)%     (2.1)%
Franchise(b)
  Applebee's domestic sales
   percentage change(c)(e)           1.7%      (6.7)%      1.6%       0.1%
  Applebee's domestic
   same-store sales percentage
   change(d)(e)                     (4.7)%     (2.9)%     (2.4)%     (2.0)%
Company
  Applebee's domestic sales
   percentage change(c)(e)         (18.3)%     (7.7)%     (6.1)%     (0.9)%
  Applebee's domestic
   same-store sales
   percentage(d)(e)                 (4.2)%     (2.8)%     (1.3)%     (2.2)%



(a) "Effective restaurants" are the number of restaurants in a given fiscal
    period adjusted to account for restaurants open for only a portion of
    the period. Information is presented for all effective restaurants in
    the Applebee's system, which includes restaurants owned by Applebee's
    as well as those owned by franchisees and international licensees.

(b) "System-wide sales" are sales of Applebee's restaurants operated by
    franchisees and Applebee's as reported to the Company. The Company
    acquired Applebee's International, Inc. on November 29, 2007. Domestic
    franchise restaurant sales for Applebee's restaurants were
    $817.1 million and $803.3 million for the three months ended
    December 31, 2008 and 2007, respectively, and $3.4 billion and
    $3.3 billion for the fiscal year ended December 31, 2008 and 2007,
    respectively. Franchise restaurant sales are sales recorded at
    restaurants that are owned by franchisees and are not attributable to
    either the Company or Predecessor Applebee's. Franchise restaurant
    sales are useful in analyzing our franchise revenues because
    franchisees pay royalties and other fees that are generally based on
    a percentage of their sales.

(c) "Sales percentage change" reflects, for each category of restaurants,
    the percentage change in sales in any given fiscal year compared to
    the prior fiscal year for all restaurants in that category. All
    periods for company-owned Applebee's restaurants exclude the impact
    of discontinued operations.

(d) "Same-store sales percentage change" reflects the percentage change
    in sales, in any given fiscal year compared to the prior fiscal year,
    for restaurants that have been operated throughout both fiscal
    periods that are being compared and have been open for at least
    18 months. Because of new unit openings and store closures, the
    restaurants open throughout both fiscal periods being compared will
    be different from period to period.

(e) These amounts represent changes for Applebee's restaurants for the full
    fiscal year. We acquired Applebee's on November 29, 2007. The change
    in Applebee's store sales and same-store sales was (5.1)% and (4.5)%,
    respectively, for the five-week period in 2007 subsequent to the
    acquisition date. The change in domestic franchise restaurant store
    sales and same-store sales, as reported to the Company, was (2.4)%
    and (5.0)%, respectively, for the five-week period in 2007
    subsequent to the acquisition date. The change in domestic system
    store sales was (3.1)% and (4.8)%, respectively, for the five-week
    period in 2007 subsequent to the acquisition date.



                     DineEquity, Inc.

                 APPLEBEE'S BUSINESS UNIT

The following table summarizes Applebee's restaurant development and
franchising activity:

                                 Three Months Ended      Year Ended
                                    December 31,         December 31,
                                --------------------  --------------------
                                  2008      2007 (a)     2008     2007 (a)
                                ---------  ---------  ---------  ---------

Applebee's Restaurant
 Development Activity
Beginning of period                 1,997      1,953      1,976      1,930
New openings
  Company-developed                    --          2          1         14
  Franchisee-developed                 14         24         48         66
                                ---------  ---------  ---------  ---------
    Total new openings                 14         26         49         80
Closings
  Company                              --         (1)        (3)       (24)
  Franchise                            (7)        (2)       (18)       (10)
                                ---------  ---------  ---------  ---------
End of period                       2,004      1,976      2,004      1,976
                                =========  =========  =========  =========
Summary-end of period
  Company                             406        511        406        511
  Franchise                         1,598      1,465      1,598      1,465
                                ---------  ---------  ---------  ---------
    Total                           2,004      1,976      2,004      1,976
                                =========  =========  =========  =========
Applebee's Restaurant
 Franchising Activity
Domestic franchisee-developed           5         14         28         44
International
 franchisee-developed                   9         10         20         22
Refranchised                           74         --        103         --
                                ---------  ---------  ---------  ---------
    Total restaurants franchised       88         24        151         66
Closings
  Domestic franchisee                  (6)        (2)       (15)       (10)
  International franchisee             (1)        --         (3)        --
                                ---------  ---------  ---------  ---------
    Net addition                       81         22        133         56
                                =========  =========  =========  =========
(a) Pro Forma


    The following table summarizes Applebee's segment profit:

                              Three Months Ended         Year Ended
                                 December 31,           December 31,
                            ----------------------- -----------------------
                               2008      2007 (a)      2008      2007 (a)
                            ----------- ----------- ----------- -----------
Franchise revenues          $    36,991 $    34,837 $   148,391 $   143,697
Franchise expenses                2,481         427       4,122       1,528
                            ----------- ----------- ----------- -----------
Franchise segment profit    $    34,510 $    34,410 $   144,269 $   142,169
                            =========== =========== =========== ===========

Company restaurant revenues $   225,043 $   275,409 $ 1,088,101 $ 1,158,537
Company restaurant expenses     201,024     253,873     961,019   1,039,126
                            ----------- ----------- ----------- -----------
Company restaurant segment
 profit                     $    24,019 $    21,536 $   127,082 $   119,411
                            =========== =========== =========== ===========
(a) Pro Forma



                  DINEEQUITY, INC. AND SUBSIDIARIES

                    CONSOLIDATED BALANCE SHEETS

                (In thousands, except share amounts)

                                               December 31,   December 31,
                                                  2008           2007
                                              -------------  -------------
                                               (Unaudited)
                   Assets
Current assets
  Cash and cash equivalents                   $     114,443  $      26,838
  Restricted cash                                    83,355        128,138
  Short-term investments, at market value               276            300
  Receivables, net                                  117,930        115,335
  Inventories                                        10,959         13,280
  Prepaid income taxes                               15,734         31,020
  Prepaid expenses                                   17,067         30,831
  Deferred income taxes                              27,504         21,862
  Assets held for sale                               11,861         66,074
                                              -------------  -------------
    Total current assets                            399,129        433,678
                                              -------------  -------------
Non-current restricted cash                          53,395         57,962
Restricted assets related to captive
 insurance subsidiary                                 5,573         10,518
Long-term receivables                               277,106        288,452
Property and equipment, net                         824,482      1,139,616
Goodwill                                            697,470        730,728
Other intangible assets, net                        956,036      1,011,457
Other assets, net                                   148,026        158,751
                                              -------------  -------------
    Total assets                              $   3,361,217  $   3,831,162
                                              =============  =============
Liabilities and Stockholders' Equity
Current liabilities
  Current maturities of long-term debt        $      15,000  $          --
  Accounts payable                                   48,983         99,019
  Accrued employee compensation and benefits         44,299         56,795
  Deferred revenue                                   95,532         76,802
  Accrued financing costs                            20,071         63,045
  Other accrued expenses                             55,249         49,203
  Deferred compensation                                  --         21,236
  Accrued interest payable                            3,580         15,240
                                              -------------  -------------
    Total current liabilities                       282,714        381,340
                                              -------------  -------------
Long-term debt                                    1,853,367      2,263,887
Financing obligations, less current
 maturities                                         318,651             --
Capital lease obligations, less current
 maturities                                         161,310        168,242
Deferred income taxes                               395,448        504,865
Other liabilities                                   119,910        116,405
Commitments and contingencies
Preferred stock, Series A, $1 par value,
 220,000 shares authorized; 190,000 shares
 issued and outstanding as of December 31,
 2008 and 2007                                      187,050        187,050
Stockholders' equity
  Convertible Preferred stock, Series B, at
   accreted value, 10,000,000 shares
   authorized; 35,000 shares issued and
   outstanding at December 31, 2008 and 2007         37,332         35,181
  Common stock, $.01 par value, 40,000,000
   shares authorized; December 31, 2008:
   23,696,950 shares issued and 17,466,355
   shares outstanding;  December 31, 2007:
   23,359,664 shares issued and 17,105,469
   shares outstanding                                   237            230
Additional paid-in-capital                          165,315        149,564
Retained earnings                                   145,810        338,790
Accumulated other comprehensive loss                (29,408)       (36,738)
Treasury stock, at cost (6,230,595 shares and
 6,254,195 shares at December 31, 2008 and
 2007, respectively)                               (276,519)      (277,654)
                                              -------------  -------------
    Total stockholders' equity                       42,767        209,373
                                              -------------  -------------
    Total liabilities and stockholders'
     equity                                   $   3,361,217  $   3,831,162
                                              =============  =============



              DINEEQUITY, INC. AND SUBSIDIARIES

             CONSOLIDATED STATEMENTS OF CASH FLOWS

                       (In thousands)

                                                    Year Ended December 31,
                                                    ----------------------
                                                       2008        2007
                                                    ----------  ----------

Cash flows from operating activities
Net loss                                            $ (154,459) $     (480)
  Adjustments to reconcile net loss to cash flows
   provided by operating activities
     Depreciation and amortization                     112,017      31,829
     Loss on derivative financial instrument                --      62,131
     Impairment and closure charges                    240,630       4,381
     (Gain) loss on extinguishment of debt             (15,242)      2,223
     Deferred income taxes                             (65,226)    (31,324)
     Stock-based compensation expense                   12,089       6,958
     Tax benefit from stock-based compensation           1,864       3,476
     Excess tax benefit from stock options
      exercised                                           (315)     (2,693)
     Loss (gain) on disposition of assets                  259         (98)
     Changes in operating assets and liabilities
       Receivables                                      (2,441)    (22,479)
       Inventories                                         182         512
       Prepaid expenses                                   (146)    (17,147)
       Accounts payable                                (23,749)     37,266
       Accrued employee compensation and benefits      (11,609)    (21,868)
       Deferred revenues                                18,480      43,685
       Other accrued expenses                           (2,152)     13,553
       Other                                               657      (3,602)
                                                    ----------  ----------
         Cash flows provided by operating
          activities                                   110,839     106,323
                                                    ----------  ----------
Cash flows from investing activities
     Additions to property and equipment               (31,765)    (11,871)
     (Additions) reductions to long-term
      receivables                                       (4,743)      1,538
     Acquisition of business, net of cash
      acquired                                         (10,261) (1,943,567)
     Collateral released by captive insurance
      subsidiary                                         4,559         345
     Proceeds from sale of property and equipment       61,137         870
     Principal receipts from notes and equipment
      contracts receivable                              15,797      16,617
     Additions to assets held for sale                     476        (688)
     Other                                                  (5)       (636)
                                                    ----------  ----------
         Cash flows provided by investing
          activities                                    35,195  (1,937,392)
                                                    ----------  ----------
Cash flows from financing activities
     Proceeds from issuance of long-term debt           35,000   2,296,216
     Proceeds from financing obligations               370,502          --
     Repayment of long-term debt                      (421,325)   (268,199)
     Principal payments on capital lease and
      financing obligations                             (9,854)     (5,364)
     Dividends paid                                    (33,362)    (17,293)
     Payment of preferred stock issuance costs          (1,500)    222,800
     Reissuance (purchase) of treasury stock, net        1,135     (76,050)
     Repurchase of restricted stock                       (540)         --
     Proceeds from stock options exercised                 989       8,928
     Excess tax benefit from stock options
      exercised                                            315       2,693
     Payment of accrued debt issuance costs            (48,902)   (138,021)
     Payment of early debt extinguishment costs           (103)     (1,219)
     Restricted cash related to securitization          49,216    (186,100)
                                                    ----------  ----------
         Cash flows used in financing activities       (58,429)  1,838,391
                                                    ----------  ----------
     Net change in cash and cash equivalents            87,605       7,322
     Cash and cash equivalents at beginning of year     26,838      19,516
                                                    ----------  ----------
     Cash and cash equivalents at end of year       $  114,443  $   26,838
                                                    ==========  ==========
Supplemental disclosures
     Interest paid                                  $  194,763  $   31,331
     Income taxes paid                              $   40,931  $   25,712




                DINEEQUITY, INC. AND SUBSIDIARIES

                  NON-GAAP FINANCIAL MEASURES
            (In thousands, except per share amounts)
                         (Unaudited)

Reconciliation of (i) net loss available to common stockholders to
(ii) net loss available to common stockholders excluding impairment
and closure charges and loss on derivative financial instrument,
and related per share data:
                              Three Months Ended        Year Ended
                                 December 31,          December 31,
                            ----------------------  ----------------------
                               2008        2007        2008        2007
                            ----------  ----------  ----------  ----------
Net loss available to
 common stockholders, as
 reported                   $ (136,949) $  (16,049) $ (169,193) $   (2,222)
Impairment and closure
 charges                       170,732       4,326     240,630       4,381
Loss on derivative
 financial instrument               --      26,513          --      62,131
Income tax benefit             (22,433)    (12,073)    (49,833)    (26,037)
Net income allocated to
 unvested participating
 restricted stock               (5,700)         --      (6,968)         --
                            ----------  ----------  ----------  ----------
Net (loss) income
 available to common
 stockholders, as
 adjusted                   $    5,650  $    2,717  $   14,636  $   38,253
                            ==========  ==========  ==========  ==========

Diluted net income
 available to common
 stockholders per share:
Net loss available to
 common stockholders per
 share, as reported         $    (8.15) $    (0.94) $   (10.09) $    (0.13)
Dilutive effect per share           --          --        0.02          --
Impairment and closure
 charges per share               10.16        0.25       14.32        0.25
Loss on derivative
 financial instrument per
 share                              --        1.56          --        3.61
Income tax benefit per
 share                           (1.34)      (0.71)      (2.97)      (1.51)
Net income allocated to
 unvested participating
 restricted stock per share      (0.33)         --       (0.41)         --
                            ----------  ----------  ----------  ----------
Diluted net (loss) income
 available to common
 stockholders per share, as
 adjusted                   $     0.34  $     0.16  $     0.87  $     2.22
                            ==========  ==========  ==========  ==========

Contact Information

  • Investor Contact:
    Stacy Roughan
    Director, Investor Relations
    DineEquity, Inc.
    818-637-3632

    Media Contact:
    Lucy Neugart
    Sard Verbinnen
    415-618-8750