IHOP Corp. Reports Fourth Quarter and Fiscal 2007 Financial Results
Posted on: Wednesday, 27 February 2008, 09:00 CST
IHOP Corp. (NYSE: IHP) today announced financial results for the fourth quarter and fiscal year ended December 31, 2007, which reflected the Company's $2.0 billion acquisition of Applebee's International, Inc. ("Applebee's") on November 29, 2007.
Julia A. Stewart, IHOP's chairman and chief executive officer, said, "2007 was a year of significant accomplishments for our Company. During the fourth quarter 2007, we completed the acquisition of Applebee's, which we believe represents an opportunity to create significant long-term value for IHOP Corp. shareholders. In addition, our proven financial formula for success within the IHOP business unit -- driving top line sales through new franchise restaurant openings and same-store sales growth while moderating G&A expenses -- was evident once again. We will look to achieve this same level of consistent performance with the Applebee's business as we work to re-energize the brand and transition it, over time, to a more highly franchised model."
Fourth Quarter and Fiscal 2007 Financial Performance
IHOP's financial performance for the fourth quarter and fiscal year ended December 31, 2007 was materially impacted by the acquisition of Applebee's International, Inc. Financial results reflect the inclusion of Applebee's financial performance for one month of 2007.
The Company reported a net loss of $16.0 million available to common stockholders, or $0.94 per diluted share for the fourth quarter 2007. The decreases primarily resulted from the recognition of a $16.1 million expense (net of tax) due to an interest rate swap transaction, which was settled during the quarter, related to the financing of the Applebee's acquisition.
Total swap transaction expenditures amounted to $124.0 million for fiscal 2007. The swap was required to hedge IHOP's interest payments on the notes issued in the acquisition securitization transactions. The swap had a notional amount of $2.039 billion and a fixed interest rate of 5.694%. As a result of the swap settlement, the Company incurred a loss on the undesignated hedge of $26.5 million and $62.1 million for the fourth quarter and fiscal 2007, respectively, and will amortize the designated portion of the interest rate swap of $61.9 million into interest expense over the expected lives of the notes.
Excluding the loss on the undesignated hedge, the Company reported a decrease in net income available to common stockholders to $85,000, and a decrease in diluted net income available to common stockholders per share to $0.01 in the fourth quarter 2007 as compared with the same quarter in fiscal 2006. The decreases resulted primarily from an increase in interest expense of $18.0 million associated with higher debt levels. The Company's quarterly performance was also impacted by higher General and Administrative (G&A) expenses reflecting the inclusion of one month's worth of Applebee's results and $4.3 million in asset impairment and closure charges related to Company Operations.
These factors were partially offset in the fourth quarter 2007 by a 68.2% increase in Franchise Operations profitability, mostly related to the inclusion of one month's worth of Applebee's results. The Company's quarterly results also benefited from a 9.3% increase in IHOP Franchise Operations profitability, which was due to a 3.7% increase in same-store sales and a 3.5% increase in effective restaurants within the IHOP system. In addition, the Company's consolidated tax rate was 35.1% in the fourth quarter 2007 versus a consolidated tax rate of 38.0% in the third quarter 2007, which was lower due to compensation related tax credits. Further, a 5.8% reduction in diluted weighted average shares outstanding due to share repurchases by the Company made over the past 12 months positively impacted diluted net income available to common stockholders per share performance for the fourth quarter 2007.
For the fiscal year ended December 31, 2007, the Company reported a net loss available to common stockholders of $2.2 million, or $0.13 per diluted share. The decreases primarily resulted from the recognition of a $37.8 million expense (net of tax) related to the swap settlement in the second half of fiscal 2007 and a $1.4 million expense (net of tax) related to the early extinguishment of debt in March 2007. Excluding the swap expense and early debt extinguishment costs, the Company reported a decrease of 17.1% in net income available to common stockholders to $36.9 million, and an 11.9% decrease in diluted net income available to common stockholders per share to $2.14 for fiscal 2007 compared to fiscal 2006. The decreases resulted primarily from an increase in interest expense of $20.8 million. The Company's fiscal 2007 performance was also impacted by higher G&A expenses reflecting the inclusion of one month's worth of Applebee's results.
These factors were partially offset in fiscal 2007 by a 22.3% increase in Franchise Operations profitability, mostly related to the inclusion of one month's worth of Applebee's results. The Company's fiscal 2007 results also benefited from a 7.7% increase in IHOP Franchise Operations profitability, which was due to a 2.2% increase in same-store sales and a 4.5% increase in effective restaurants within the IHOP system. In addition, the Company recognized an income tax benefit from continuing operations of $2.2 million for fiscal 2007 versus an income tax expense of $28.3 million for fiscal 2006. The overall reduction in income taxes was primarily due to a taxable loss of $2.8 million in fiscal 2007 versus taxable income of $72.9 million in fiscal 2006. Further, a 5.8% reduction in diluted weighted average shares outstanding due to share repurchases by IHOP Corp. made over the past 12 months positively impacted fiscal 2007 diluted net income available to common stockholders per share performance.
Cash flows from operating activities increased 63.9% for fiscal 2007 to $106.3 million compared with $64.9 million for fiscal 2006. This increase was primarily due to $41.8 million from one month of Applebee's operating activities. Principal receipts from notes and equipment contracts receivable, which are an additional source of cash generation for the Company, amounted to $16.6 million for fiscal 2007. Capital expenditures increased to $11.9 million for fiscal 2007 compared with $9.4 million for fiscal 2006. The increase in capital expenditures primarily reflects the inclusion of Applebee's capital expenditures during December 2007, which was offset by lower IHOP capital spending consistent with the Company's plan not to open any locations in its dedicated Company market in Cincinnati, Ohio, in fiscal 2007.
Investor Conference Call Today
IHOP Corp. will host an investor conference call to discuss its fourth quarter and fiscal 2007 financial results as well as 2008 financial performance guidance today, Wednesday, February 27, 2008, at 11:00 a.m. Eastern Time (8:00 a.m. Pacific Time). To participate on the call, please dial (888) 680-0860 and reference pass code 40886137. A live webcast of the call will be available on IHOP's Web site at www.ihop.com, and may be accessed by visiting Calls & Presentations under the site's Investor Information section. Participants should allow approximately ten minutes prior to the call's start time to visit the site and download any streaming media software needed to listen to the webcast. A telephonic replay of the call may be accessed through March 5, 2008 by dialing 888-286-8010 and referencing pass code 10840728. An online archive of the webcast also will be available on the Investor Information section of IHOP's Web site.
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; the failure to realize the synergies and other perceived advantages resulting from the acquisition; costs and potential litigation associated with the acquisition; the ability to retain key personnel after the acquisition; conditions beyond the Company's control such as weather, natural disasters, disease outbreaks, epidemics or pandemics impacting the Company's customers or food supplies or acts of war or terrorism; availability and cost of materials and labor; cost and availability of capital; competition; continuing acceptance of the IHOP, International House of Pancakes and Applebee's brands and concepts by guests and franchisees; the Company's overall marketing, operational and financial performance; economic and political conditions; adoption of new, or changes in, accounting policies and practices; and other factors discussed from time to time in the Company's news releases, public statements and/or filings with the Securities and Exchange Commission, especially the "Risk Factors" sections of Annual and Quarterly Reports on Forms 10-K and 10-Q, as well as releases, statements and SEC filings by Applebee's International, Inc. prior to its acquisition by the Company. Forward-looking information is provided by IHOP Corp. pursuant to the safe harbor established under the Private Securities Litigation Reform Act of 1995 and should be evaluated in the context of these factors. In addition, the Company disclaims any intent or obligation to update these forward-looking statements.
References to Non-GAAP Financial Measures
This news release includes references to the Company's "net (loss) income available to common stockholders, excluding a loss on the undesignated hedge and early debt extinguishment costs." This is computed for a given period by deducting from net (loss) income available to common stockholders for such period, the effect of any loss on the undesignated hedge and early debt extinguishment costs incurred in such period. This is presented on an aggregate basis and a per share (diluted) basis. Each of these 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. A reconciliation of these amounts to the most directly comparable GAAP financial measure is included in a table at the end of this release.
IHOP CORP. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS (In thousands, except per share amounts) (Unaudited) Three Months Ended Fiscal Year Ended December 31, December 31, 2007 2006 2007 2006 --------- ---------- --------- ---------- Revenues Franchise revenues $ 62,991 $ 45,625 $ 205,757 $ 179,331 Company restaurant sales 112,750 3,936 125,905 13,585 Rental income 33,112 33,069 132,422 132,101 Financing revenues 4,740 5,302 20,475 24,543 --------- ---------- --------- ---------- Total revenues 213,593 87,932 484,559 349,560 --------- ---------- --------- ---------- Costs and Expenses Franchise expenses 22,986 21,835 88,054 83,079 Company restaurant expenses 102,451 4,660 117,435 15,601 Rental expenses 24,549 24,378 98,402 97,904 Financing expenses 227 181 1,215 4,240 General and administrative expenses 33,531 17,035 81,597 63,543 Interest expense 19,770 1,804 28,654 7,902 Amortization of intangible assets 1,132 -- 1,132 -- Other expense, net 265 919 2,147 4,398 Impairment and closure charges 4,271 -- 4,326 43 Loss on derivative instrument 26,513 -- 62,131 -- Early debt extinguishment costs -- -- 2,223 -- --------- ---------- --------- ---------- Total costs and expenses 235,695 70,812 487,316 276,710 --------- ---------- --------- ---------- (Loss) income from continuing operations before income taxes (22,102) 17,120 (2,757) 72,850 (Benefit) provision for income taxes (7,765) 6,790 (2,247) 28,297 --------- ---------- --------- ---------- (Loss) income from continuing operations (14,337) 10,330 (510) 44,553 Income from discontinued operations, net of tax 30 -- 30 -- --------- ---------- --------- ---------- Net (loss) income $ (14,307) $ 10,330 $ (480) $ 44,553 ========= ========== ========= ========== Net (loss) income $ (14,307) $ 10,330 $ (480) $ 44,553 Less: Preferred stock dividends (1,742) -- (1,742) -- --------- ---------- --------- ---------- Net (loss) income available to common stockholders $ (16,049) $ 10,330 $ (2,222) $ 44,553 ========= ========== ========= ========== Net (Loss) Income Available to Common Stockholders Per Share Basic $ (0.94) $ 0.58 $ (0.13) $ 2.46 ========= ========== ========= ========== Diluted $ (0.94) $ 0.57 $ (0.13) $ 2.43 ========= ========== ========= ========== Weighted Average Shares Outstanding Basic 16,996 17,839 17,232 18,085 ========= ========== ========= ========== Diluted 16,996 18,051 17,232 18,298 ========= ========== ========= ========== Dividends Declared Per Share $ 0.25 $ 0.25 $ 1.00 $ 1.00 ========= ========== ========= ========== Dividends Paid Per Share $ 0.25 $ 0.25 $ 1.00 $ 1.00 ========= ========== ========= ========== IHOP CORP. AND SUBSIDIARIES IHOP 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 Fiscal Year Ended December 31, December 31, 2007 2006 2007 2006 -------- -------- -------- -------- IHOP Restaurant Data Effective restaurants (a) Franchise 1,162 1,116 1,144 1,095 Company 11 10 12 8 Area license 157 159 158 156 -------- -------- -------- -------- Total 1,330 1,285 1,314 1,259 ======== ======== ======== ======== System-wide (b) IHOP sales percentage change (c) 7.8% 6.2% 6.9% 7.4% IHOP same-store sales percentage change (d) 3.7% 0.4% 2.2% 2.5% Franchise (b) IHOP sales percentage change (c) 8.3% 5.9% 7.1% 7.5% IHOP same-store sales percentage change (d) 3.7% 0.5% 2.2% 2.5% Company IHOP sales percentage change (c) 0.8% 51.5% 26.0% (2.7)% (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 $522.0 million and $2.1 billion for the fourth quarter and fiscal year ended December 31, 2007, respectively, and sales at IHOP area license restaurants were $51.9 million and $211.9 million for the fourth quarter and fiscal year ended December 31, 2007, respectively. Franchise restaurant 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 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 RESTAURANT DEVELOPMENT AND FRANCHISING ACTIVITY (Unaudited)
The following table summarizes IHOP restaurant development and franchising activity:
Three Months Ended Fiscal Year Ended December 31, December 31, ------------------ ------------------ 2007 2006 2007 2006 -------- -------- -------- -------- IHOP Restaurant Development Activity Beginning of period 1,328 1,278 1,302 1,242 New openings Company-developed -- 1 -- 4 Franchisee-developed 22 22 57 57 International franchisee-developed -- -- 2 -- Area license 1 2 1 8 -------- -------- -------- -------- Total new openings 23 25 60 69 Closings Company (1) -- (2) -- Franchise (6) (1) (12) (8) Area license -- -- (4) (1) -------- -------- -------- -------- End of period 1,344 1,302 1,344 1,302 ======== ======== ======== ======== Summary-end of period Franchise 1,176 1,132 1,176 1,132 Company 11 10 11 10 Area license 157 160 157 160 -------- -------- -------- -------- Total 1,344 1,302 1,344 1,302 ======== ======== ======== ======== IHOP Restaurant Franchising Activity Franchisee-developed 22 22 57 57 International franchisee-developed -- -- 2 -- Rehabilitated and refranchised -- 1 4 9 -------- -------- -------- -------- Total restaurants franchised 22 23 63 66 Reacquired by the Company (1) (1) (7) (8) Closed (6) (1) (12) (8) -------- -------- -------- -------- Net addition 15 21 44 50 ======== ======== ======== ======== IHOP CORP. AND SUBSIDIARIES APPLEBEE'S RESTAURANT DATA (Unaudited)
Pro Forma Comparison--Applebee's
The 2007 Pro Forma information includes 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. The 2006 Predecessor information represents data derived from Applebee's prior to the acquisition date.
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 Fiscal Year Ended December 31, December 31, ------------------- ------------------- 2007 2006 2007 2006 -------- -------- -------- -------- Pro Forma Predecessor Pro Forma Predecessor -------- -------- -------- -------- Applebee's Restaurant Data Effective restaurants (a) Franchise 1,449 1,388 1,429 1,353 Company 509 517 513 506 -------- -------- -------- -------- Total 1,958 1,905 1,942 1,859 ======== ======== ======== ======== System-wide (b) Applebee's domestic sales percentage change (c)(e) (7.0)% 14.9 % (0.2)% 8.4 % Applebee's domestic same-store sales percentage change (d)(e) (2.9)% (1.1)% (2.1)% (0.6)% Franchise (b) Applebee's domestic sales percentage change (c)(e) (6.7)% 15.0 % 0.1 % 7.6 % Applebee's domestic same-store sales percentage change (d)(e) (2.9)% (1.0)% (2.0)% (0.5)% Company Applebee's sales percentage change (c)(e) (7.7)% 14.6 % (0.9)% 10.6 % Applebee's same-store sales percentage change (d)(e) (2.8)% (1.4)% (2.2)% (1.0)% (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 Applebee's system, which includes restaurants owned by Applebee's as well as those owned by franchisees. (b) "System-wide sales" are retail sales at Applebee's restaurants operated by franchisees, area licensees and Applebee's, as reported to the Company. The Company acquired Applebee's International, Inc. on November 29, 2007. Applebee's system-wide sales information includes the full year. Domestic franchise restaurant sales for Applebee's restaurants were $803.3 million and $3.3 billion for the fourth quarter and fiscal year ended December 31, 2007, respectively. Domestic franchise restaurant sales for Applebee's restaurants in the 2007 period subsequent to the acquisition date were $319.5 million. Franchise restaurant 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 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. The sales percentage changes for Applebee's restaurants for the three months ended December 31, 2007 and 2006 were impacted by a 14th week in 2006. The sales percentage changes for Applebee's restaurants for the fiscal years ended December 31, 2007 and 2006 were impacted by a 53rd week in 2006. In addition, all periods for company-operated 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 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. (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. IHOP CORP. AND SUBSIDIARIES APPLEBEE'S RESTAURANT DEVELOPMENT AND FRANCHISING ACTIVITY (Unaudited)
The following table summarizes Applebee's restaurant development and franchising activity:
Three Months Ended Fiscal Year Ended December 31, December 31, -------------------- -------------------- 2007 2006 2007 2006 --------- --------- --------- --------- Pro Forma Predecessor Pro Forma Predecessor --------- --------- --------- --------- Applebee's Restaurant Development Activity Beginning of period 1,953 1,884 1,930 1,804 New openings Company-developed 2 10 14 35 Franchisee-developed 24 41 66 108 --------- --------- --------- --------- Total new openings 26 51 80 143 Closings Company (1) (1) (24) (4) Franchise (2) (4) (10) (13) --------- --------- --------- --------- End of period 1,976 1,930 1,976 1,930 ========= ========= ========= ========= Summary-end of period Franchise 1,465 1,409 1,465 1,409 Company 511 521 511 521 --------- --------- --------- --------- Total 1,976 1,930 1,976 1,930 ========= ========= ========= ========= Applebee's Restaurant Franchising Activity Franchisee-developed 14 32 44 90 International franchisee-developed 10 9 22 18 --------- --------- --------- --------- Total restaurants franchised 24 41 66 108 Reacquired by the Company -- -- -- (4) Closed (2) (4) (10) (13) --------- --------- --------- --------- Net addition 22 37 56 91 ========= ========= ========= ========= IHOP CORP. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (In thousands, except share amounts) December 31, December 31, 2007 2006 ------------ ------------ (Unaudited) Assets Current assets Cash and cash equivalents $ 26,838 $ 19,516 Restricted cash 128,138 -- Short-term investments, at market value 300 -- Receivables, net 115,335 45,571 Inventories 13,280 396 Prepaid income taxes 30,695 3,320 Prepaid expenses 30,831 1,553 Deferred income taxes 21,862 5,417 Assets held for sale 60,347 -- Current assets related to discontinued operations 6,052 -- ------------ ------------ Total current assets 433,678 75,773 ------------ ------------ Non-current restricted cash 57,962 -- Restricted assets related to captive insurance subsidiary 10,518 -- Long-term receivables 288,452 302,088 Property and equipment, net 1,139,616 309,737 Goodwill 730,728 10,767 Other intangible assets, net 1,011,457 -- Other assets 156,193 67,885 Non-current assets related to discontinued operations 2,558 -- ------------ ------------ Total assets $ 3,831,162 $ 766,250 ============ ============ Liabilities and Stockholders' Equity Current liabilities Current maturities of long-term debt $ -- $ 19,738 Accounts payable 99,019 14,689 Accrued employee compensation and benefits 56,795 13,359 Deferred revenue 76,802 -- Accrued financing costs 63,045 1,601 Deferred compensation 21,236 -- Accrued interest payable 15,240 2,498 Other accrued expenses 49,203 9,600 ------------ ------------ Total current liabilities 381,340 61,485 ------------ ------------ Long-term debt, less current maturities 2,263,887 94,468 Capital lease obligations, less current maturities 168,242 170,412 Deferred income taxes 504,865 76,017 Other liabilities 113,103 74,655 Non-current liabilities related to discontinued operations 3,302 -- Commitments and contingencies Preferred stock, Series A, $1 par value, 220,000 shares authorized; 190,000 shares issued and outstanding 187,050 -- Stockholders' equity Preferred stock, Series B, $1 par value, 10,000,000 shares authorized; 35,000 shares issued and outstanding 35 -- Common stock, $.01 par value, 40,000,000 shares authorized; 2007: 23,359,664 shares issued and 17,105,469 shares outstanding; 2006: 22,818,007 shares issued and 17,873,548 shares outstanding 230 227 Additional paid-in capital 184,710 131,748 Retained earnings 338,790 358,975 Accumulated other comprehensive loss (36,738) (133) Treasury stock, at cost (2007: 6,254,195 shares; 2006: 4,944,459 shares) (277,654) (201,604) ------------ ------------ Total stockholders' equity 209,373 289,213 ------------ ------------ Total liabilities and stockholders' equity $ 3,831,162 $ 766,250 ============ ============ IHOP CORP. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (In thousands) (Unaudited) Fiscal Year Ended December 31, 2007 2006 ----------- ----------- Cash flows from operating activities Net (loss) income $ (480) $ 44,553 Adjustments to reconcile net (loss) income to cash flows provided by operating activities Depreciation and amortization 31,829 20,050 Debt extinguishment and other costs 2,223 -- Loss on derivative financial instrument 62,131 -- Impairment and closure charges 4,381 43 Deferred income taxes (31,324) 6,304 Stock-based compensation expense 6,958 3,911 Tax benefit from stock-based compensation 3,476 1,720 Excess tax benefit from stock-based compensation (2,693) (1,720) Gain on sale of land (98) -- Changes in operating assets and liabilities Receivables (22,479) (2,524) Inventories 512 141 Prepaid expenses (17,147) (4,975) Accounts payable 37,266 (394) Accrued employee compensation and benefits (21,868) 2,614 Deferred revenue 43,685 -- Other accrued expenses 13,553 (3,422) Loss reserve and unearned premiums related to captive insurance subsidiary (613) -- Other (2,989) (1,442) ----------- ----------- Cash flows provided by operating activities 106,323 64,859 ----------- ----------- Cash flows from investing activities Additions to property and equipment (11,871) (9,426) Acquisition of business, net of cash acquired (1,943,567) -- Additions and reductions to long-term receivables 1,538 (159) Principal receipts from notes and equipment contracts receivable 16,617 17,781 Investment in captive insurance subsidiary 345 -- Additions to assets held for sale (688) (594) Property insurance proceeds, net (636) 1,694 Proceeds from sale of property and equipment 870 -- ----------- ----------- Cash flows (used in) provided by investing activities (1,937,392) 9,296 ----------- ----------- Cash flows from financing activities Proceeds from issuance of long-term debt 2,296,216 -- Repayment of long-term debt (268,199) (19,568) Payment of debt issuance costs (138,021) (925) Prepayment penalties on early debt extinguishment (1,219) -- Principal payments on capital lease obligations (5,364) (4,088) Dividends paid (17,293) (18,138) Issuance of preferred stock 222,800 -- Purchase of treasury stock, net (76,050) (42,695) Proceeds from stock options exercised 8,928 5,944 Excess tax benefit from stock-based compensation 2,693 1,720 Restricted cash related to securitization (186,100) -- ----------- ----------- Cash flows provided by (used in) financing activities 1,838,391 (77,750) ----------- ----------- Net change in cash and cash equivalents 7,322 (3,595) Cash and cash equivalents at beginning of year 19,516 23,111 ----------- ----------- Cash and cash equivalents at end of year $ 26,838 $ 19,516 =========== =========== IHOP CORP. AND SUBSIDIARIES NON-GAAP FINANCIAL MEASURES (In thousands, except per share amounts) (Unaudited) Reconciliation of (i) net (loss) income available to common stockholders to (ii) net income available to common stockholders excluding the impact of a loss on the undesignated hedge and early debt extinguishment costs, and related per share data: Three Months Ended Fiscal Year Ended December 31, December 31, -------------------- -------------------- 2007 2006 2007 2006 --------- ---------- --------- ---------- Net (loss) income available to common stockholders, as reported $ (16,049) $ 10,330 $ (2,222) $ 44,553 Loss on the undesignated hedge 26,513 -- 62,131 -- Early debt extinguishment costs -- -- 2,223 -- Income tax benefit (10,379) -- (25,193) -- --------- ---------- --------- ---------- Net income available to common stockholders, as adjusted $ 85 $ 10,330 $ 36,939 $ 44,553 ========= ========== ========= ========== Diluted net income available to common stockholders per share: Net (loss) income available to common stockholders per share, as reported $ (0.94) $ 0.57 $ (0.13) $ 2.43 Loss on the undesignated hedge per share 1.56 -- 3.60 -- Early debt extinguishment costs per share -- -- 0.13 -- Income tax benefit per share (0.61) -- (1.46) -- --------- ---------- --------- ---------- Diluted net income available to common stockholders per share, as adjusted $ 0.01 $ 0.57 $ 2.14 $ 2.43 ========= ========== ========= ==========
Contact: Stacy Roughan Director, Investor Relations IHOP Corp. 818-637-3632
SOURCE: IHOP Corp.
Source: MARKET WIRE
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