SOURCE: DineEquity, Inc.

DineEquity, Inc.

May 03, 2011 07:00 ET

DineEquity, Inc. Announces Strong First Quarter 2011 Financial and Operating Results

Applebee's Same-Restaurant Sales up 3.9

Company Reduces Total Debt by 8.8% in Quarter

GLENDALE, CA--(Marketwire - May 3, 2011) - DineEquity, Inc. (NYSE: DIN), the parent company of Applebee's Neighborhood Grill & Bar and IHOP Restaurants, today announced financial results for the first quarter ended March 31, 2011. DineEquity's financial performance for the first quarter 2011 included the following highlights:

--  Applebee's domestic system-wide same-restaurant sales increased 3.9%
    compared to the same period in 2010.  Applebee's performance
    represented the third consecutive quarter of positive same-restaurant
    sales.  Results were favorably impacted by the shift of the Easter
    holiday from Q1 2010 to Q2 2011.  Excluding the positive impact of
    this shift, same-restaurant sales would have been 3.3% for the quarter.
    Based on this strong performance, the Company increased its full-year
    guidance for Applebee's system-wide same-restaurant sales.

--  IHOP's domestic system-wide same-restaurant sales decreased 2.7% for
    the first quarter compared to the same period in 2010.  Results were
    negatively impacted by the shift of the Easter holiday.  Excluding
    this shift, IHOP's same-restaurant sales would have been negative 2.3%
    for the quarter.  The Company reiterated current full-year guidance
    for same-restaurant sales.

--  Total debt was reduced by 8.8%, or $178.6 million, in the first
    quarter 2011, as a result of net cash proceeds and financing obligation
    reductions from the sale of 65 Applebee's company-operated restaurants,
    cash on hand, and free cash flow.  The Company reduced term loan
    balances by $110.0 million and retired $32.3 million of the 9.5% senior
    notes.

--  Net income available to common stockholders was $28.1 million, or
    $1.53 per diluted share, for the first quarter 2011, compared to net
    income of $12.8 million, or $0.75 per diluted share, for the same
    quarter in 2010.  The increase was due in part to a gain on the sale
    of 65 Applebee's company-operated restaurants during the quarter,
    the elimination of the dividend on Series A perpetual preferred
    stock and lower non-cash interest.  These items were partially
    offset by expenses related to re-pricing of the Company's credit
    facility in February of 2011, lower segment profit as a result of
    refranchising a total of 148 restaurants (of which 83 were completed
    in the fourth quarter of 2010 and 65 were completed in the first
    quarter of 2011), and impairment charges related to the termination of
    the sublease of the space currently occupied by Applebee's headquarters
    in Lenexa, Kansas.

--  Adjusted net income available to common stockholders was $26.0 million,
    or $1.42 per diluted share, for the first quarter 2011, compared to
    $18.7 million, or $1.08 per diluted share, for the same quarter in
    2010. The increase was primarily due to elimination of the dividend on
    Series A perpetual preferred stock and a lower tax rate ($0.18 per
    share impact compared to the previous year tax rate of 35.5%) due to a
    favorable IRS ruling on the handling of gift cards, partially offset
    by lower profit due to refranchising of 148 Applebee's company-operated
    restaurants.  (See "Non-GAAP Financial Measures" below.)

--  Consolidated G&A expenses decreased 5.9% to $38.0 million for the first
    quarter 2011 compared to the same period in 2010.

--  Operating margins at Applebee's company-operated restaurants were 15.3%
    for the first quarter 2011, compared to 14.8% in the first three months
    of 2010.

--  Cash flows from operating activities for the first quarter 2011 were
    $50.5 million.  Consolidated capital expenditures were $3.8 million for
    the first three months of 2011.  Free cash flow was $50.0 million for
    the first three months of fiscal 2011.  (See "Non-GAAP Financial
    Measures" below.)

"We are very pleased with the progress made in the first quarter toward several strategic goals, including revitalizing the Applebee's brand and reducing our debt," said Julia A. Stewart, DineEquity's Chairman and Chief Executive Officer. "In the quarter, we lowered total outstanding debt by nearly nine percent and we are making significant progress in reducing our leverage. Our turnaround initiatives at Applebee's are delivering meaningful results and have now produced nine consecutive months of positive same-restaurant sales. We remain focused on value and innovation as we work to better differentiate IHOP and sustain our momentum at Applebee's to create additional value for our shareholders."

Same-Restaurant Sales Performance

IHOP's domestic system-wide same-restaurant sales decreased 2.7% for the first quarter 2011 compared to the same quarter in 2010. Same-restaurant sales reflect a higher average guest check and declines in traffic. An "All You Can Eat Pancakes" limited-time offer promotion produced disappointing results early in the quarter, while a new "Chicken & Waffles" promotion introduced mid-quarter produced promising results.

Applebee's domestic system-wide same-restaurant sales increased 3.9% for the first quarter 2011, which represented the third consecutive quarter of positive same-restaurant sales. Domestic franchise same-restaurant sales increased 4.3% and company-operated Applebee's same-restaurant sales increased 0.7% for the first quarter 2011 compared to the same quarter in 2010. Applebee's marketing efforts during the quarter included "Great Tasting and Under 550 Calories," "2 for $20 Flavors of Bourbon Street," and "All You Can Eat Soup, Salad and Breadsticks" at lunch, as well as other enhanced marketing and promotional activities.

Applebee's Restaurant Operating Margin

Applebee's company-operated restaurant margin was 15.3% in the first quarter 2011 compared to 14.8% for the first quarter 2010. The favorable comparison was primarily due to the refranchising of 148 Applebee's company-operated restaurants, the closure of seven Applebee's company-operated restaurants, a 1.9% increase in menu pricing (taken in 2010) and favorable food and beverage costs partially offset by a decline in guest traffic and unfavorable facility costs.

Sale of Applebee's Company Restaurants

In the first quarter of 2011, DineEquity successfully completed two previously-announced transactions for the sale of 65 company-operated Applebee's restaurants located in St. Louis, Missouri and parts of Illinois and in Washington, D.C. These transactions resulted in after-tax cash proceeds of $53 million and reduced sale-leaseback related financing obligations by $33 million. The closing on the sale of one restaurant in the Washington, D.C. market is still pending and expected to be completed in the second quarter.

Term Loan Re-Pricing Completion

On February 25, 2011, DineEquity completed a re-pricing of its senior secured term loan facility to take advantage of lower interest rates available in the senior secured debt market. This re-pricing transaction established a $742.0 million senior secured credit facility. The Company also increased the amount of its $50 million senior secured revolving credit facility to $75 million. No amounts were drawn on the revolving credit facility as of March 31, 2011. DineEquity's bank loans will bear interest at an annual rate equal to LIBOR plus 300 basis points, subject to a LIBOR floor of 125 basis points. Today, this represents a 4.25% interest rate, or a 175 basis point reduction compared to the Company's previous interest rate. Fees and other costs related to the February 2011 re-pricing transaction totaled $12.3 million, of which $4.1 million related to third-party costs of the transaction were expensed in the first quarter. The remaining $8.2 million of cost, primarily consisting of the 1% soft call early prepayment fee, will be amortized as interest expense over the remaining life of the term loan. In connection with the re-pricing, we expect to receive approximately $8 million in cash tax benefits in 2011 due to the write-off of certain deferred costs related to the October 2010 refinancing transaction.

Lenexa Facility Lease Termination

On April 4, 2011, the Company announced an agreement to terminate its sublease on the commercial space currently occupied by the Applebee's headquarters in Lenexa, Kansas and relocate approximately 350 team members to a smaller, more appropriately sized facility in the Kansas City area. The lease termination will allow DineEquity to reduce financing obligation debt by approximately $34 million after incurring $26 million in pre-tax charges. The pre-tax charges consist of a $4.5 million impairment charge recorded in the first quarter 2011 and a cash lease termination fee and other closing costs of approximately $21 million that will be recorded in the second quarter. As a result of the lease termination, we expect approximately $8 million in cash tax savings in 2011.

2011 Financial Performance Outlook

--  Reiterated consolidated cash from operations to range between $125 and
    $135 million.

--  Reiterated that approximately $13 million is expected to be generated
    from the structural run-off of the Company's long-term receivables.

--  Reiterated consolidated capital expenditures of approximately
    $26 million.

--  Reiterated consolidated free cash flow (see "References to Non-GAAP
    Information" below) to range between $112 and $122 million.  The
    Company's primary use of cash will be funding further debt reduction.

--  Revised Applebee's domestic system-wide same-restaurant sales
    performance to range between 2% and 4%.

--  Reiterated IHOP's domestic system-wide same-restaurant sales
    performance to range between positive 1% and negative 2%.

--  Reiterated restaurant operating margin at Applebee's company-operated
    restaurants to range between 14.8% and 15.2%.

--  Reiterated consolidated General & Administrative expense to range
    between $157 and $160 million, including non-cash stock-based
    compensation expense and depreciation of approximately $18 million.

--  Revised consolidated interest expense to range between $134 and
    $139 million, of which approximately $7 million is non-cash interest
    expense.  This reflects a decrease of $6 million from previous
    expectations of $140 to $145 million.

--  Reiterated Applebee's franchisees to develop between 24 and 28 new
    restaurants, approximately half of which are expected to open
    internationally.

--  Reiterated IHOP franchisees to develop between 55 and 65 new
    restaurants, the majority of which are expected to be opened in
    the U.S.

--  Reiterated a federal income tax rate of 36% for the remaining
    three quarters of the year.

--  Revised full-year weighted average diluted shares outstanding to be
    approximately 18.3 million shares.  This reflects an increase from
    previous expectations for a share count of approximately 18 million
    shares.

The Company's 2011 financial performance guidance excludes any impact from the future sales of Applebee's company-operated restaurants, the timing of which could be highly variable due to factors including the economy, the availability of buyer financing, acceptable valuations, and the operating wherewithal of the acquiring franchisee. Should company-operated Applebee's restaurants be sold this year, DineEquity plans to update its performance guidance accordingly, in conjunction with its regular quarterly reporting schedule, following any transaction announcement.

Investor Conference Call Today

The Company will host an investor conference call today (Tuesday, May 3, 2011, at 11:00 a.m. Eastern Time / 8:00 a.m. Pacific Time) to discuss its first quarter 2011 results. To participate on the call, please dial (888) 680-0879 and reference pass code 43544778. 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 May 10, 2011 by dialing 888-286-8010 and referencing pass code 34325172. 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 more than 3,500 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. 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 DineEquity, Inc.'s (the "Company") strategic growth plan; the availability of suitable locations and terms for 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 the Company's indebtedness; 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; potential litigation and associated costs; continuing acceptance of the International House of Pancakes ("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 non-GAAP financial measures "adjusted net income available to common stockholders (adjusted EPS)," "EBITDA," and "free cash flow." Adjusted EPS is computed for a given period by deducting from net income (loss) available to common stockholders for such period the effect of any impairment and closure charges, any gain or loss related to debt extinguishment, any intangible asset amortization, any non-cash interest expense, any debt modification costs and any gain or loss related to the disposition of assets incurred in such period. This is presented on an aggregate basis and a per share (diluted) basis. The Company defines "EBITDA" for a given period as income before income taxes less interest expense, loss on retirement of debt and Series A preferred stock, depreciation and amortization, impairment and closure charges, stock-based compensation, gain/loss on sale of assets and other charge backs as defined by its credit agreement. "Free cash flow" for a given period is defined as cash provided by operating activities, plus receipts from notes and equipment contracts receivable ("long-term notes receivable"), less dividends paid and capital expenditures. Management utilizes EBITDA for debt covenant purposes and 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, capital expenditures and preferred dividends. Management believes this information is helpful to investors to determine the Company's adherence to debt covenants and the Company's cash available for these purposes. Adjusted EPS, EBITDA and 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 generally accepted accounting principles.

                   DINEEQUITY, INC. AND SUBSIDIARIES
                   CONSOLIDATED STATEMENTS OF INCOME
               (In thousands, except per share amounts)
                              (Unaudited)


                                                     Three Months Ended
                                                          March 31,
                                                  ------------------------
                                                      2011         2010
                                                  -----------  -----------
Segment Revenues:
  Franchise revenues                              $   104,552  $    95,367
  Company restaurant sales                            154,703      224,615
  Rental revenues                                      32,216       33,932
  Financing revenues                                    8,729        4,150
                                                  -----------  -----------
    Total revenues                                    300,200      358,064
                                                  -----------  -----------
Segment Expenses:
  Franchise expenses                                   27,443       24,838
  Company restaurant expenses                         131,766      192,557
  Rental expenses                                      24,647       25,064
  Financing expenses                                    5,575          469
                                                  -----------  -----------
    Total segment expenses                            189,431      242,928
                                                  -----------  -----------
  Gross segment profit                                110,769      115,136
  General and administrative expenses                  37,969       40,366
  Interest expense                                     36,306       45,048
  Impairment and closure charges                        4,938          711
  Debt modification costs                               4,114           --
  Amortization of intangible assets                     3,075        3,077
  Loss (gain) on extinguishment of debt                 6,946       (3,585)
  Gain on disposition of assets                       (23,754)        (253)
                                                  -----------  -----------
Income before income taxes                             41,175       29,772
Provision for income taxes                            (11,476)     (10,101)
                                                  -----------  -----------
Net income                                        $    29,699  $    19,671
                                                  ===========  ===========
Net income                                        $    29,699  $    19,671
  Less: Series A preferred stock dividends                --       (5,760)
  Less: Accretion of Series B preferred stock           (629)        (595)
  Less: Net income allocated to unvested
   participating restricted stock                      (1,014)        (509)
                                                  -----------  -----------
Net income available to common stockholders       $    28,056  $    12,807
                                                  ===========  ===========
Net income available to common stockholders per
 share
  Basic                                           $      1.59  $      0.75
                                                  ===========  ===========
  Diluted                                         $      1.53  $      0.75
                                                  ===========  ===========
Weighted average shares outstanding
  Basic                                                17,697       17,011
                                                  ===========  ===========
  Diluted                                              18,763       17,972
                                                  ===========  ===========



                    DINEEQUITY, INC. AND SUBSIDIARIES
                        CONSOLIDATED BALANCE SHEETS
            (In thousands, except share and per share amounts)

                                                   March 31,  December 31,
                                                      2011         2010
                                                  -----------  -----------
                                                  (Unaudited)
                       Assets

Current assets:
  Cash and cash equivalents                       $    50,360  $   102,309
  Restricted cash                                       3,975          854
  Receivables, net                                     73,929       98,776
  Inventories                                           9,895       10,757
  Prepaid income taxes                                  1,924       34,094
  Prepaid gift cards                                   22,360       27,465
  Prepaid expenses                                     13,958       14,602
  Deferred income taxes                                27,128       24,301
  Assets held for sale                                  7,025       37,944
                                                  -----------  -----------
    Total current assets                              210,554      351,102
                                                  -----------  -----------
Non-current restricted cash                                49          778
Restricted assets related to captive insurance
 subsidiary                                             3,970        3,562
Long-term receivables                                 238,002      239,945
Property and equipment, net                           568,913      612,175
Goodwill                                              697,470      697,470
Other intangible assets, net                          832,476      835,879
Other assets, net                                     114,665      115,730
                                                  -----------  -----------
Total assets                                      $ 2,666,099  $ 2,856,641
                                                  ===========  ===========

    Liabilities and Stockholders' Equity

Current liabilities:
  Current maturities of long-term debt            $     7,420  $     9,000
  Accounts payable                                     35,894       32,724
  Accrued employee compensation and benefits           20,598       32,846
  Gift card liability                                  77,974      124,972
  Accrued interest payable                             34,711       17,482
  Current maturities of capital lease and
   financing obligations                               15,794       16,556
  Other accrued expenses                               30,070       31,502
                                                  -----------  -----------
    Total current liabilities                         222,461      265,082
                                                  -----------  -----------
Long-term debt, less current maturities             1,485,929    1,631,469
Financing obligations, less current maturities        204,561      237,826
Capital lease obligations, less current
 maturities                                           141,703      144,016
Deferred income taxes                                 374,621      375,697
Other liabilities                                     114,435      118,972
                                                  -----------  -----------
    Total liabilities                               2,543,710    2,773,062
Commitments and contingencies

Stockholders' equity:
  Convertible preferred stock, Series B, at
   accreted value, 10,000,000 shares authorized;
   35,000 shares issued;  March 31, 2011: 34,900
   shares outstanding;  December 31, 2010:
   35,000 shares outstanding                           42,564       42,055
  Common stock, $.01 par value, 40,000,000
   shares authorized; March 31, 2011: 24,736,019
   shares issued and 18,536,111 shares
   outstanding; December 31, 2010: 24,382,991
   shares issued and 18,183,083 shares
   outstanding                                            247          243
  Additional paid-in-capital                          201,420      192,214
  Retained earnings                                   153,320      124,250
  Accumulated other comprehensive loss                   (261)        (282)
  Treasury stock, at cost (March 31, 2011 and
   December 31, 2010:  6,199,908 shares)             (274,901)    (274,901)
                                                  -----------  -----------
Total stockholders' equity                            122,389       83,579
                                                  -----------  -----------
    Total liabilities and stockholders' equity    $ 2,666,099  $ 2,856,641
                                                  ===========  ===========




                    DINEEQUITY, INC. AND SUBSIDIARIES
                  CONSOLIDATED STATEMENTS OF CASH FLOWS
                              (In thousands)
                                (Unaudited)

                                                     Three Months Ended
                                                          March 31,
                                                  ------------------------
                                                      2011         2010
                                                  -----------  -----------
Cash flows from operating activities
Net income                                        $    29,699  $    19,671
  Adjustments to reconcile net income to cash
   flows provided by operating activities
    Depreciation and amortization                      13,290       16,156
    Non-cash interest expense                           1,417       10,371
    Loss (gain) on extinguishment of debt               6,946       (3,585)
    Impairment and closure charges                      4,717          509
    Debt modification costs                             4,114           --
    Deferred income taxes                              (3,903)      (7,009)
    Non-cash stock-based compensation expense           1,863        3,956
    Tax benefit from stock-based compensation           5,121        1,035
    Excess tax benefit from stock options
     exercised                                         (4,866)      (1,792)
    Gain on disposition of assets                     (23,754)        (253)
    Other                                              (3,753)        (287)
    Changes in operating assets and liabilities
      Receivables                                      24,636       26,008
      Inventories                                        (378)           3
      Prepaid expenses                                  5,567        1,500
      Current income tax receivables and payables      32,194       14,525
      Accounts payable                                  1,358       (1,147)
      Accrued employee compensation and benefits      (12,249)      (9,031)
      Gift card liability                             (46,998)     (40,171)
      Other accrued expenses                           15,455         (189)
                                                  -----------  -----------
        Cash flows provided by operating
         activities                                    50,476       30,270
                                                  -----------  -----------
Cash flows from investing activities
    Additions to property and equipment                (3,835)      (2,649)
    Proceeds from sale of property and equipment
     and assets held for sale                          54,597        2,784
    Principal receipts from notes, equipment
     contracts and other long-term receivables          3,395        6,753
    Other                                                (128)         655
                                                  -----------  -----------
        Cash flows provided by investing
         activities                                    54,029        7,543
                                                  -----------  -----------
Cash flows from financing activities
    Repayment of long-term debt                      (145,273)     (50,100)
    Principal payments on capital lease and
     financing obligations                             (3,553)      (3,791)
    Dividends paid                                         --       (5,700)
    Payment of debt modification and issuance
     costs                                            (12,208)          --
    Repurchase of restricted stock                     (3,272)        (577)
    Proceeds from stock options exercised               5,378        1,275
    Excess tax benefit from stock options
     exercised                                          4,866        1,792
    Change in restricted cash                          (2,392)       5,479
    Other                                                  --          (46)
                                                  -----------  -----------
        Cash flows used in financing activities      (156,454)     (51,668)
                                                  -----------  -----------
    Net change in cash and cash equivalents           (51,949)     (13,855)
    Cash and cash equivalents at beginning of
     period                                           102,309       82,314
                                                  -----------  -----------
    Cash and cash equivalents at end of period    $    50,360  $    68,459
                                                  ===========  ===========



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

Reconciliation of (i) net income available to common stockholders to (ii) net income available to common stockholders excluding impairment and closure charges, loss (gain) on extinguishment of debt, amortization of intangible assets, non-cash interest expense, debt modification costs and gain on disposition of assets, and related per share data:

                                                     Three Months Ended
                                                          March 31,
                                                  ------------------------
                                                      2011         2010
                                                  -----------  -----------
Net income available to common stockholders, as
 reported                                         $    28,056  $    12,807
Impairment and closure charges                          4,717          509
Loss (gain) on extinguishment of debt                   6,946       (3,585)
Amortization of intangible assets                       3,075        3,077
Non-cash interest expense                               1,417       10,371
Debt modification costs                                 4,114           --
Gain on disposition of assets                         (23,754)        (186)
Income tax benefit (provision)                          1,387       (4,054)
Net income allocated to unvested participating
 restricted stock                                          73         (234)
                                                  -----------  -----------
Net income available to common stockholders, as
 adjusted                                         $    26,031  $    18,705
                                                  ===========  ===========

Diluted net income available to common
 stockholders per share:
Net income available to common stockholders, as
 reported                                         $      1.53  $      0.75
Impairment and closure charges                           0.15         0.02
Loss (gain) on extinguishment of debt                    0.22        (0.12)
Amortization of intangible assets                        0.10         0.10
Non-cash interest expense                                0.05         0.35
Debt modification costs                                  0.13           --
Gain on disposition of assets                           (0.76)       (0.01)
Net income allocated to unvested participating
 restricted stock                                          --        (0.01)
                                                  -----------  -----------
Diluted net income available to common
 stockholders per share, as adjusted              $      1.42  $      1.08
                                                  ===========  ===========

Numerator for basic EPS-income available to
 common stockholders, as adjusted                 $    26,031  $    18,705
Effect of unvested participating restricted stock
 using the two-class method                                53           39
Effect of dilutive securities:
Stock options                                              --           --
Convertible Series B preferred stock                      629          595
                                                  -----------  -----------
Numerator for diluted EPS-income available to
 common stockholders after assumed conversions,
 as adjusted                                      $    26,713  $    19,339
                                                  ===========  ===========

Denominator for basic EPS-weighted-average shares      17,697       17,011
Effect of dilutive securities:
Stock options                                             451          380
Convertible Series B preferred stock                      615          581
                                                  -----------  -----------
Denominator for diluted EPS-weighted-average
 shares and assumed conversions                        18,763       17,972
                                                  ===========  ===========


                        NON-GAAP FINANCIAL MEASURES
                              (In thousands)
                                (Unaudited)

Reconciliation of U.S. GAAP income (loss) before income taxes to EBITDA:

                                              Three Months   Twelve Months
                                                  Ended          Ended
                                             March 31, 2011  March 31, 2011
                                              -------------  -------------
U.S. GAAP income (loss) before income taxes   $      41,175  $        (677)
Interest charges                                     41,128        182,113
Loss on retirement of debt and Series A
 Preferred Stock                                      6,946        117,535
Depreciation and amortization                        13,290         58,558
Non-cash stock-based compensation                     1,863         10,993
Impairment and closure charges                        4,717          7,690
Other                                                 4,549          6,121
Gain on sale of assets                              (23,754)       (37,074)
                                              -------------  -------------
EBITDA                                        $      89,914  $     345,259
                                              =============  =============

Reconciliation of the Company's cash provided by operating activities to free cash flow:

                                                  Three Months Ended
                                                       March 31,
                                             ----------------------------
                                                 2011           2010
                                             -------------  -------------
Cash flows from operating activities         $      50,476  $      30,270
Principal receipts from notes, equipment
 contracts and other long-term receivables           3,395          6,753
Dividends paid                                          --         (5,700)
Capital expenditures                                (3,835)        (2,649)
                                             -------------  -------------
Free cash flow                               $      50,036  $      28,674
                                             =============  =============

Restaurant Data

The following table sets forth, for the three-month periods ended March 31, 2011 and 2010, the number of effective restaurants in the Applebee's and IHOP systems 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 and Applebee's systems, which includes 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.

                                                   Three Months Ended
                                                       March 31,
                                                ------------------------
                                                    2011         2010
                                                -----------   -----------
Applebee's Restaurant Data
Effective restaurants(a)
  Franchise                                           1,738        1,604
  Company                                               271          397
                                                -----------   -----------
    Total                                             2,009        2,001
                                                ===========   ===========
System wide(b)
  Sales percentage change(c)                            4.4 %       (3.2)%
  Domestic same restaurant sales percentage
   change(d)                                            3.9 %       (2.7)%
Franchise(b)(e)(g)
  Sales percentage change(c)                           13.1 %       (2.4)%
  Same restaurant sales percentage change(d)            4.3 %       (2.6)%
  Average weekly domestic unit sales (in
   thousands)                                   $      50.1  $      48.1
Company(f)(g)
  Sales percentage change(c)                          (31.6)%       (6.4)%
  Same restaurant sales percentage change(d)            0.7 %       (3.4)%
  Average weekly domestic unit sales (in
   thousands)                                   $      42.5  $      42.6


                                                    Three Months Ended
                                                        March 31,
                                                -------------------------
                                                   2011          2010
                                                -----------   -----------
IHOP Restaurant Data
Effective restaurants(a)
  Franchise                                           1,329         1,279
  Company                                                10            12
  Area license                                          165           164
                                                -----------   -----------
    Total                                             1,504         1,455
                                                ===========   ===========
System wide(b)
  Sales percentage change(c)                            1.3 %         3.3 %
  Domestic same restaurant sales percentage
   change(d)                                           (2.7)%        (0.4)%
Franchise(e)
  Sales percentage change(c)                            1.4 %         3.0 %
  Same restaurant sales percentage change(d)           (2.7)%        (0.4)%
  Average weekly unit sales (in thousands)      $      35.2   $      36.1
Company(f)                                             n.m.          n.m.
Area License(e)
  Sales percentage change(c)                            0.3 %        (6.3)%

(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 and Applebee's systems, which includes restaurants owned by the Company as well as those owned by franchisees and area licensees.

(b) "System-wide" sales are retail sales at IHOP and Applebee's restaurants operated by franchisees and IHOP restaurants operated by area licensees, as reported to the Company, in addition to retail sales at company-operated restaurants. 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-restaurant sales percentage change" reflects the percentage change in sales, in any given fiscal period compared to the same weeks in the prior 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 restaurant closures, the restaurants open throughout both fiscal periods being compared may be different from period to period. Same-restaurant sales percentage change does not include data on IHOP restaurants located in Florida.

(e)

                                                 Three Months Ended
                                                       March 31,
                                             ----------------------------
Reported sales (unaudited)                        2011          2010
                                             -------------  -------------
  (In millions)
Applebee's franchise restaurant sales        $     1,036.8  $       917.1
IHOP franchise restaurant sales              $       608.0  $       599.6
IHOP area license restaurant sales           $        60.3  $        60.1

(f) Sales percentage change and same-restaurant sales percentage change for IHOP company-operated restaurants are not meaningful ("n.m.") due to the relatively small number and test-market nature of the restaurants, along with the periodic inclusion of restaurants reacquired from franchisees that are temporarily operated by the Company.

(g) The sales percentage change for the three months ended March 31, 2011 for Applebee's franchise and company-operated restaurants was impacted by the franchising of 65 company-operated restaurants during the first quarter of 2011 and 83 company-operated restaurants in 2010.

                    DINEEQUITY, INC. AND SUBSIDIARIES
                           RESTAURANT DATA

The following table summarizes our restaurant development activity:



                                                   Three Months Ended
                                                        March 31,
                                                -------------------------
                                                   2011          2010
                                                -----------   -----------
                                                       (unaudited)
Applebee's Restaurant Development Activity
Total restaurants, beginning of period                2,010         2,008
New openings
  Franchisee developed                                    3             3
                                                -----------   -----------
    Total new openings                                    3             3
Closings
  Company                                                 -            (6)
  Franchise                                              (2)           (6)
                                                -----------   -----------
    Total closings                                       (2)          (12)
                                                -----------   -----------
Total restaurants, end of period                      2,011         1,999
                                                ===========   ===========
Summary-end of period
Franchise                                             1,767         1,606
Company                                                 244           393
                                                -----------   -----------
    Total                                             2,011         1,999
                                                ===========   ===========


                                                   Three Months Ended
                                                         March 31,
                                                -------------------------
                                                   2011          2010
                                                -----------   -----------
  (unaudited)
IHOP Restaurant Development Activity
Total restaurants, beginning of period                1,504         1,456
New openings
  Franchisee developed                                   11             6
  Area license                                            2             1
                                                -----------   -----------
    Total new openings                                   13             7
Closings
  Franchise                                              (3)           (1)
  Area license                                           (1)           (1)
                                                -----------   -----------
    Total new closings                                   (4)           (2)
                                                -----------   -----------
Total restaurants, end of period                      1,513         1,461
                                                ===========   ===========
Summary-end of period
Franchise                                             1,338         1,285
Company                                                  10            12
Area license                                            165           164
                                                -----------   -----------
  Total                                               1,513         1,461
                                                ===========   ===========