SOURCE: IHOP Corp.

April 28, 2008 07:00 ET

IHOP Corp. Reports Solid First Quarter 2008 Financial Results

GLENDALE, CA--(Marketwire - April 28, 2008) - IHOP Corp. (NYSE: IHP) today announced financial results for the first quarter ended March 31, 2008, which included the first full quarter of operating results after the Company's acquisition of Applebee's International, Inc. on November 29, 2007. Performance highlights of the newly combined company for the first quarter 2008 included:

--  During the first quarter 2008, the IHOP business unit produced system-
    wide same-store sales growth of 3.7%, resulting in its 21st consecutive
    quarter of positive growth.  The Applebee's business unit produced system-
    wide domestic same-store sales growth of 0.5%, reflecting its first quarter
    of positive growth in two years.
    
--  Franchisees opened 11 new IHOP restaurants and 16 new Applebee's
    restaurants during the first quarter 2008, bringing the total number of
    IHOP and Applebee's restaurants system-wide to 1,353 and 1,986,
    respectively.
    
--  Consolidated cash from operating activities amounted to $10.0 million
    in the first quarter 2008.  The Company's cash position was augmented by
    $4.2 million from the run-off of the IHOP business's long-term notes
    receivable.
    
--  Consolidated capital expenditures were $18.1 million for the first
    quarter 2008, primarily attributable to expenditures on the Applebee's
    Restaurant Support Center in Lenexa, Kansas, and company-operated
    Applebee's restaurants.
    

Julia A. Stewart, IHOP Corp.'s chairman and chief executive officer, said, "We are pleased to report a solid first quarter of financial results for our newly combined company. The IHOP business unit continued to perform well during the first quarter 2008 as we drove same-stores sales growth, benefited from new franchise restaurant openings, moderated G&A spending and minimized capital expenditures.

"Within the Applebee's business unit, we generated the brand's first positive quarter of same-store sales growth since the first quarter 2006. We also made progress on our plan to improve Applebee's company restaurant operating margins as the result of better management of labor and controllable expenses during the quarter. In March, we launched Applebee's new advertising campaign -- It's a Whole New Neighborhood -- and finalized our brand positioning and menu strategy approach. We also began the process of franchising Applebee's company-operated restaurants with the agreement to sell our Southern California and Nevada markets.

"Finally, while we are making progress on our planned sale-leaseback of Applebee's 191 company-owned restaurant locations, the transaction has been challenged by weakening credit market conditions. We are continuing our negotiations with several parties and will determine if the deal terms available are in the best economic interests of the Company to move forward with a transaction in the original timeframe contemplated. We will keep investors updated on future developments," Stewart said.

First Quarter 2008 Financial Performance Detail

For the quarter ended March 31, 2008, the Company reported a 24.1% decrease in net income available to common stockholders to $8.6 million, or a 20.6% decrease in net income per diluted share available to common shareholders to $0.50. The decreases were primarily due to a $48.4 million increase in interest expense primarily related to the financing of the Applebee's acquisition, a $31.5 million increase in G&A expenses due to a full quarter of Applebee's G&A expenses, as well as dividends on preferred stock issued to finance the Applebee's acquisition.

These factors were partially offset during the first quarter 2008 by the strong performance of the parent company's core franchising businesses, which produced a $40.7 million increase in Franchise Operations profitability due to a full quarter's recognition of Applebee's Franchise Operations profit and a 12.5% increase in IHOP Franchise Operations profit. Additionally, the Company's quarterly performance benefited from a lower effective tax rate of 9.9% compared to 36.9% in the first quarter last year. The effective tax rate of 9.9% in the first quarter 2008 reflects the benefit of compensation related tax credits associated with Applebee's company-owned restaurant operations.

The Company's consolidated cash from operating activities of $10.0 million in the first quarter 2008 was impacted by a $32.1 million decrease in deferred revenues primarily due to the redemption of Applebee's gift cards as expected during the quarter. Consolidated capital expenditures were higher than anticipated at $18.1 million, primarily as the result of final construction expenditures on Applebee's Lenexa Restaurant Support Center in Lenexa, Kansas, and company-operated Applebee's restaurants.

Update on Applebee's Business Model Transformation

While IHOP Corp. is making progress on its planned sale-leaseback of Applebee's 191 company-owned restaurant locations, the transaction has been challenged by weakening credit market conditions. The Company is continuing its negotiations with several parties and will determine if the deal terms available are in its best economic interests to move forward with a transaction during the second quarter 2008.

An asset purchase agreement for Applebee's Restaurant Support Center in Lenexa, Kansas, has been negotiated and is expected to result in a closing on or before June 1, 2008, with after-tax cash proceeds of approximately $40 million.

On March 19, 2008, IHOP Corp. announced that it had reached agreement with Apple American Group LLC for the sale of 41 company-operated Applebee's restaurants located in Southern California and Nevada. The agreement also provided for future franchise restaurant development in these markets. IHOP Corp. reiterated its plans to franchise approximately 100 company-operated Applebee's restaurants in fiscal 2008 for after-tax cash proceeds ranging between $90 and $100 million. Currently, the Company is in discussions with a number of prospective franchisees for the sale of additional markets in fiscal 2008.

2008 Performance Guidance

IHOP Corp. is amending its 2008 financial performance guidance for consolidated capital expenditures and consolidated cash from operating activities due to a reclassification of expenditures from consolidated cash from operating activities to consolidated capital expenditures of approximately $8 million. These expenditures were associated with final construction costs of Applebee's newly developed Restaurant Support Center in Lenexa, Kansas. As a result, consolidated cash from operations is expected to range between $105 and $110 million versus the Company's previous expectations of approximately $100 million for fiscal 2008. Consolidated capital expenditures are expected to range between $30 and $34 million versus the Company's previous expectations of approximately $25 million for fiscal 2008.

The Company's cash performance is expected to be augmented by approximately $17 million from the structural run-off of the IHOP business unit's long-term notes receivable in fiscal 2008. In fiscal 2008, the Company expects to generate between $88 and $97 million in consolidated free cash flow. See "References to Non-GAAP Financial Measure" below.

The Company reiterated its expectations for IHOP same-store sales to grow between 2% and 4% for fiscal 2008, and for its franchisees and area licensee to open between 65 and 70 new IHOP restaurants this year. IHOP Corp. also reiterated its expectations for Applebee's same-store sales to grow between 1% and 2% for fiscal 2008, and for its franchisees to open between 50 and 65 new Applebee's restaurants and that Applebee's will open only one company restaurant this year, which occurred in the first quarter 2008.

IHOP Corp. also reiterated its consolidated G&A expense expectations of ranging between $186 and $199 million in fiscal 2008.

Investor Conference Call Today

IHOP Corp. will host an investor conference call to discuss its first quarter 2008 financial results today, Monday, April 28, 2008, at 11:00 a.m. Eastern Time (8:00 a.m. Pacific Time). To participate on the call, please dial (888) 680-0878 and reference pass code 21919378. A live webcast of the call will be available on IHOP's Web site at www.ihop.com, and may be accessed by visiting Calls & Presentations under the site's Investor Information section. Participants should allow approximately ten minutes prior to the call's start time to visit the site and download any streaming media software needed to listen to the webcast.

About IHOP Corp.

Based in Glendale, California, IHOP Corp. franchises and operates restaurants under the International House of Pancakes, or IHOP, and the Applebee's Neighborhood Grill & Bar brands. With more than 3,300 restaurants combined, IHOP Corp. is the largest full-service restaurant company in the world. IHOP Corp.'s common stock is listed on the NYSE under the symbol "IHP." For more information on IHOP Corp., visit the Investor Relations section of the Company's Web site located at www.ihop.com.

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; or acts of war or terrorism; availability and cost of materials and labor; cost and availability of capital; competition; continuing acceptance of the IHOP, International House of Pancakes and Applebee's brands and concepts by guests and franchisees; the Company's overall marketing, operational and financial performance; economic and political conditions; adoption of new, or changes in, accounting policies and practices; and other factors discussed from time to time in the Company's news releases, public statements and/or filings with the Securities and Exchange Commission, especially the "Risk Factors" sections of Annual and Quarterly Reports on Forms 10-K and 10-Q. Forward-looking information is provided by IHOP Corp. pursuant to the safe harbor established under the Private Securities Litigation Reform Act of 1995 and should be evaluated in the context of these factors. In addition, the Company disclaims any intent or obligation to update these forward-looking statements.

References to Non-GAAP Financial Measure

This news release includes references to the non-GAAP financial measure "free cash flow." 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 the Company's fiscal 2008 performance guidance:

                                           Fiscal 2008 Guidance
                                          (in millions except per
                                           share amounts)
Cash flows from operating activities       $ 105-110
Receipts from long term notes receivable          17
Capital expenditures                        (30)-(34)
                                           ---------
Free cash flow                             $   88-97
                                           =========




                        IHOP CORP. AND SUBSIDIARIES
                  CONSOLIDATED STATEMENTS OF OPERATIONS
                 (In thousands, except per share amounts)
                                (Unaudited)



                                                        Three Months Ended
                                                             March 31,
                                                        -------------------
                                                          2008      2007
                                                        --------  ---------
Revenues
  Franchise revenues                                    $ 89,934  $  47,050
  Company restaurant sales                               311,922      3,984
  Rental income                                           32,965     33,010
  Financing revenues                                       7,968      6,080
                                                        --------  ---------
    Total revenues                                       442,789     90,124
                                                        --------  ---------
Costs and Expenses
  Franchise expenses                                      23,377     21,221
  Company restaurant expenses                            276,546      4,613
  Rental expenses                                         24,709     24,581
  Financing expenses                                       3,339        472
  General and administrative expenses                     47,574     16,121
  Interest expense                                        50,647      2,215
  Amortization of intangible assets                        2,899         --
  Other (income) expense, net                             (1,782)       749
  Early debt extinguishment costs                             --      2,223
                                                        --------  ---------
    Total costs and expenses                             427,309     72,195
                                                        --------  ---------
Income from continuing operations before income taxes     15,480     17,929
Provision for income taxes                                 1,538      6,616
                                                        --------  ---------
Income from continuing operations                         13,942     11,313
Loss from discontinued operations, net of tax                (88)        --
                                                        --------  ---------
Net income                                              $ 13,854  $  11,313
                                                        ========  =========

Net income                                              $ 13,854  $  11,313
  Less: Series A preferred stock dividends                (4,750)        --
  Less: Accretion of Series B preferred stock               (521)        --
                                                        --------  ---------
Net income available to common stockholders             $  8,583  $  11,313
                                                        ========  =========
Net income available to common stockholders per share
  Basic                                                 $   0.50  $    0.63
                                                        ========  =========
  Diluted                                               $   0.50  $    0.63
                                                        ========  =========
Weighted average shares outstanding
  Basic                                                   17,200     17,842
                                                        ========  =========
  Diluted                                                 17,424     18,046
                                                        ========  =========
Dividends declared per common share                     $   0.25  $    0.25
                                                        ========  =========
Dividends paid per common share                         $   0.25  $    0.25
                                                        ========  =========



                           IHOP CORP. AND SUBSIDIARIES
                        IHOP BUSINESS UNIT RESTAURANT DATA
                                    (Unaudited)

The following table sets forth the number of effective restaurants in the IHOP system and information regarding the percentage change in sales at those restaurants compared to the same period 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 restaurants owned by the Company, as well as those owned by franchisees and area licensees. Sales of 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 restaurant development and franchising activity is presented in the section entitled "Pro forma comparison -- Applebee's" herein.

                                                      Three Months Ended
                                                            March 31,
                                                      -------------------
                                                        2008       2007
                                                      --------   ---------
IHOP Restaurant Data
  Effective restaurants (a)
    Franchise                                            1,175       1,128
    Company                                                 10          11
    Area license                                           157         160
                                                      --------   ---------
      Total                                              1,342       1,299
                                                      ========   =========
System-wide (b)
  IHOP sales percentage change (c)                         7.9%        5.3%
  IHOP same-store sales percentage change (d)              3.7%        0.5%
Franchise (b)
  IHOP sales percentage change (c)                         8.5%        5.2%
  IHOP same-store sales percentage change (d)              3.7%        0.6%
Company
  IHOP sales percentage change (c)                        (2.2)%      18.1%
Area License (b)
  IHOP sales percentage change (c)                         3.2%        5.0%

(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 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. IHOP franchise restaurant sales were $547.2 million and $504.2 million for the first quarter ended March 31, 2008 and 2007, respectively, and sales at IHOP area license restaurants were $57.3 million and $55.5 million for the first quarter ended March 31, 2008 and 2007, respectively. Franchise restaurant retail sales and Area License retail sales are sales recorded at restaurants that are owned by franchisees and area licensees and are not attributable to the Company. Franchise restaurant retail sales and Area License retail sales are useful in analyzing our franchise revenues because franchisees and area licenses pay us royalties and other fees that are generally based on a percentage of their sales. Sales of restaurants that are owned by franchisees and area licenses 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 IHOP restaurants located in Florida.

                        IHOP CORP. AND SUBSIDIARIES
    IHOP BUSINESS UNIT RESTAURANT DEVELOPMENT AND FRANCHISING ACTIVITY
                                (Unaudited)


The following table summarizes IHOP restaurant development and
franchising activity:


                                                      Three Months Ended
                                                            March 31,
                                                      --------------------
                                                        2008       2007
                                                      ---------  ---------
IHOP Restaurant Development Activity
Beginning of period                                       1,344      1,302
  New openings
    Company-developed                                        --         --
    Franchisee-developed                                     11          6
    International franchisee-developed                       --          2
    Area license                                             --         --
                                                      ---------  ---------
      Total new openings                                     11          8
  Closings
    Company and franchise                                    (2)        (4)
    Area license                                             --         --
                                                      ---------  ---------
End of period                                             1,353      1,306
                                                      =========  =========

Summary-end of period
    Franchise                                             1,186      1,133
    Company                                                  10         13
    Area license                                            157        160
                                                      ---------  ---------
      Total                                               1,353      1,306
                                                      =========  =========

IHOP Restaurant Franchising Activity
Domestic franchisee-developed                                11          6
International franchisee-developed                           --          2
Rehabilitated and refranchised                                4          2
                                                      ---------  ---------
      Total restaurants franchised                           15         10
Reacquired by the Company                                    (3)        (6)
Closed                                                       (2)        (3)
                                                      ---------  ---------
      Net addition                                           10          1
                                                      =========  =========



                           IHOP CORP. AND SUBSIDIARIES
                    APPLEBEE'S BUSINESS UNIT RESTAURANT DATA
                                    (Unaudited)

Pro Forma Comparison -- Applebee's

The 2007 Predecessor information represents data derived from Applebee's for the three months ended March 31, 2007, prior to the acquisition date of November 29, 2007.

Restaurant Data

The following table sets forth 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
                                                           March 31,
                                                      --------------------
                                                                   2007
                                                                Predecessor
                                                        2008    Applebee's
                                                      ---------  --------
Applebee's Restaurant Data
  Effective restaurants (a)
    Company                                                 511       524
    Franchise                                             1,467     1,412
                                                      ---------  --------
      Total                                               1,978     1,936
                                                      =========  ========
System-wide (b)
  Applebee's domestic sales percentage change (c)           2.8%      0.3%
  Applebee's domestic same-store sales percentage
   change (d)                                               0.5%     (4.0)%
Franchise (b)
  Applebee's domestic sales percentage change (c)           2.6%      0.6%
  Applebee's domestic same-store sales percentage
   change (d)                                               0.0%     (3.9)%
Company
  Applebee's sales percentage change (c)                    3.2%     (0.8)%
  Applebee's same-store sales percentage change (d)         2.1%     (4.5)%

(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.

(b) "System-wide sales" are sales at Applebee's restaurants operated by franchisees and Applebee's, as reported to the Company. Domestic franchise restaurant sales for Applebee's restaurants were $897.8 million and $875.0 million for the first quarter ended March 31, 2008 and 2007, respectively. Franchise restaurant sales are sales recorded at restaurants that are owned by franchisees and are not attributable to the Company (2008) or Applebee's (2007). 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 period compared to the prior fiscal period for all restaurants in that category. In addition, data for company-operated Applebee's restaurants for both periods excludes the impact of discontinued operations.

(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.

                        IHOP CORP. AND SUBSIDIARIES
 APPLEBEE'S BUSINESS UNIT RESTAURANT DEVELOPMENT AND FRANCHISING ACTIVITY
                                (Unaudited)


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


                                                       Three Months Ended
                                                           March 31,
                                                     ---------------------
                                                                   2007
                                                                Predecessor
                                                       2008     Applebee's
                                                     ---------   ---------
Beginning of period                                      1,976       1,930
  New openings
    Company-developed                                        1           7
    Franchisee-developed                                    16          13
                                                     ---------   ---------
      Total new openings                                    17          20
  Closings
    Company                                                 (1)        (19)
    Franchise                                               (6)         (1)
                                                     ---------   ---------
End of period                                            1,986       1,930
                                                     =========   =========

Summary-end of period
    Company                                                511         509
    Franchise                                            1,475       1,421
                                                     ---------   ---------
      Total                                              1,986       1,930
                                                     =========   =========

Applebee's Restaurant Franchising Activity
Domestic franchisee-developed                               11          12
International franchisee-developed                           5           1
                                                     ---------   ---------
      Total restaurants franchised                          16          13
Closings
  Domestic franchisee                                       (5)         (1)
  International franchisee                                  (1)          -
                                                     ---------   ---------
  Total franchisee closed                                   (6)         (1)
                                                     ---------   ---------
Net addition                                                10          12
                                                     =========   =========




                        IHOP CORP. AND SUBSIDIARIES
                        CONSOLIDATED BALANCE SHEETS
                   (In thousands, except share amounts)



                                                   March 31,   December 31,
                                                     2008         2007
                                                  -----------  -----------
                                                  (Unaudited)
Assets
Current assets
  Cash and cash equivalents                       $    33,084  $    26,838
  Restricted cash                                     105,452      128,138
  Short-term investments, at market value                 302          300
  Receivables, net                                     86,938      115,335
  Inventories                                          13,205       13,280
  Prepaid income taxes                                 27,665       30,695
  Prepaid expenses                                     13,882       30,831
  Deferred income taxes                                25,470       21,862
  Assets held for sale                                 45,108       60,347
  Current assets related to discontinued
   operations                                           5,834        6,052
                                                  -----------  -----------
    Total current assets                              356,940      433,678
                                                  -----------  -----------
Non-current restricted cash                            64,372       57,962
Restricted assets related to captive insurance
 subsidiary                                             7,838       10,518
Long-term receivables                                 285,863      288,452
Property and equipment, net                         1,120,844    1,139,616
Goodwill                                              734,462      730,728
Other intangible assets, net                        1,012,755    1,011,457
Other assets, net                                     158,189      156,193
Non-current assets related to discontinued
 operations                                             2,558        2,558
                                                  -----------  -----------
    Total assets                                  $ 3,743,821  $ 3,831,162
                                                  ===========  ===========
Liabilities and Stockholders' Equity
Current liabilities
  Accounts payable                                $    48,922  $    99,019
  Accrued employee compensation and benefits           53,372       56,795
  Deferred revenue                                     44,715       76,802
  Accrued financing costs                              62,934       63,045
  Other accrued expenses                               58,672       49,203
  Deferred compensation                                 1,264       21,236
  Accrued interest payable                              6,247       15,240
                                                  -----------  -----------
    Total current liabilities                         276,126      381,340
                                                  -----------  -----------
Long-term debt                                      2,265,947    2,263,887
Capital lease obligations, less current
 maturities                                           167,009      168,242
Deferred income taxes                                 504,034      504,865
Other liabilities                                     118,888      113,103
Non-current liabilities related to discontinued
 operations                                             3,302        3,302
Commitments and contingencies
Preferred stock, Series A, $1 par value, 220,000
 shares authorized; 190,000 shares issued and
 outstanding as of March 31, 2008 and December
 31, 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 March
   31, 2008 and December  31, 2007                     35,702       35,181
  Common stock, $.01 par value, 40,000,000 shares
   authorized;  March 31, 2008: 23,615,673 shares
   issued and 17,385,078 shares outstanding;
   December 31, 2007: 23,359,664 shares issued
   and 17,105,469 shares outstanding                      230          230
Additional paid-in-capital                            153,953      149,564
Retained earnings                                     343,102      338,790
Accumulated other comprehensive loss                  (35,016)     (36,738)
Treasury stock, at cost (6,230,595 shares and
 6,254,195 shares at March 31, 2008 and December
 31, 2007, respectively)                             (276,506)    (277,654)
                                                  -----------  -----------
  Total stockholders' equity                          221,465      209,373
                                                  -----------  -----------
  Total liabilities and stockholders' equity      $ 3,743,821  $ 3,831,162
                                                  ===========  ===========




                        IHOP CORP. AND SUBSIDIARIES
                  CONSOLIDATED STATEMENTS OF CASH FLOWS
                              (In thousands)
                                (Unaudited)



                                                       Three Months Ended
                                                            March 31,
                                                      --------------------
                                                        2008       2007
                                                      ---------  ---------
Cash flows from operating activities
Net  income                                           $  13,854  $  11,313
  Adjustments to reconcile net income to cash flows
   provided by operating activities
    Depreciation and amortization                        28,783      5,180
    Debt extinguishment and other costs                      --      2,223
    Deferred income taxes                                (4,898)      (995)
    Stock-based compensation expense                      3,072      1,065
    Tax benefit from stock-based compensation               984      1,498
    Excess tax benefit from stock options exercised        (251)    (1,498)
    Gain on disposition of assets                          (219)        --
    Changes in operating assets and liabilities
      Receivables                                        28,171      2,637
      Inventories                                            75        (19)
      Prepaid expenses                                    2,661      1,789
      Accounts payable                                  (23,999)         5
      Accrued employee compensation and benefits         (3,423)    (4,813)
      Deferred revenues                                 (32,086)        --
      Other accrued expenses                             (4,937)    (1,713)
     Other                                                2,175       (855)
                                                      ---------  ---------
        Cash flows provided by operating activities       9,962     15,817
                                                      ---------  ---------
Cash flows from investing activities
    Additions to property and equipment                 (18,102)      (784)
    Additions to long-term receivables                   (1,390)      (659)
    Payment of accrued acquisition costs                (10,001)        --
    Proceeds from captive insurance subsidiary            2,680         --
    Proceeds from sale of property and equipment             30         --
    Principal receipts from notes and equipment
     contracts receivable                                 4,219      3,934
    Reductions (additions) to assets held for sale       12,386       (429)
    Property insurance proceeds                             (37)       (26)
                                                      ---------  ---------
      Cash flows (used in) provided by investing
       activities                                       (10,215)     2,036
                                                      ---------  ---------
Cash flows from financing activities
    Proceeds from issuance of long-term debt                 --    190,000
    Repayment of long-term debt                              --   (129,206)
    Principal payments on capital lease obligations      (1,391)    (1,583)
    Dividends paid                                       (6,012)    (4,464)
    Payment of preferred stock issuance costs            (1,500)        --
    Purchase of treasury stock, net                       1,056    (30,961)
    Proceeds from stock options exercised                   664      3,719
    Excess tax benefit from stock options exercised         251      1,498
    Payment of debt issuance costs                       (2,845)   (13,335)
    Prepayment penalties on early debt extinguishment        --     (1,219)
    Restricted cash related to securitization            16,276         --
                                                      ---------  ---------
      Cash flows provided by financing activities         6,499     14,449
                                                      ---------  ---------
    Net change in cash and cash equivalents               6,246     32,302
    Cash and cash equivalents at beginning of year       26,838     19,516
                                                      ---------  ---------
    Cash and cash equivalents at end of year          $  33,084  $  51,818
                                                      =========  =========
Supplemental disclosures
    Interest paid                                     $  49,631  $   7,637
    Income taxes paid                                 $   1,111  $   2,660

Contact Information

  • Contact:
    Stacy Roughan
    Director, Investor Relations
    IHOP Corp.
    818-637-3632