Exhibit 99.1
FOR IMMEDIATE RELEASE | | Investor Contacts |
| | Tom Conforti |
| | Chief Financial Officer |
| | IHOP Corp. |
| | 818-240-6055 |
| | |
| | Stacy Roughan |
| | Investor Relations |
| | Hill & Knowlton |
| | 323-966-5784 |
| | |
| | Media Contact |
| | Chris Kuechenmeister |
| | Media Relations |
| | Hill & Knowlton |
| | 323-966-5709 |
IHOP CORP. REPORTS SECOND QUARTER 2003 RESULTS
GLENDALE, Calif., August 7, 2003 – IHOP Corp. (NYSE: IHP) today announced financial results for its second quarter and six months ended June 30, 2003.
Second Quarter 2003 Financial Results
The Company reported an 18.3% increase in net income to $11.0 million, or an increase of 15.9% in diluted net earnings per share to $0.51 in the second quarter 2003, compared with net income of $9.3 million, or diluted net income per share of $0.44 in the second quarter 2002. IHOP’s net income and diluted net earnings per share performance was impacted during the quarter by one-time charges of $811,000, or $0.02 per diluted share, associated with the Company’s reorganization announced in January 2003. After accounting for these charges, net income for the second quarter 2003 increased 23.7% to $11.5 million or 20.5% increase in diluted net income per share of $0.53.
For the six months ended June 30, the Company reported an 11.5% decrease of net income to $16.9 million, and a decrease of 13.3% in diluted net income per share to $0.78 in 2003, compared with net income of $19.1 million, or diluted net income per share of $0.90 in the same 2002 period. After accounting for one-time reorganization charges, net income for the first six months of 2003 increased 13.1% to $21.6 million or an 11.1% increase in diluted net income per share of $1.00.
Julia A. Stewart, IHOP Corp. President and Chief Executive Officer, said, “Our system performed extremely well during the quarter. Our focus on brand building, marketing promotions, improved operations and enhanced training efforts are paying off as more guests visit IHOP restaurants more often. The success of our strategies to date is very encouraging. We are confident about our future and look for continuing improvements in the second half of the year.”
IHOP Corp.
System-wide sales increased 16.1% in the quarter and by 14.6% in the six months ended June 30, 2003 over the same periods in 2002. The sales increase is primarily the result of growth in the number of effective restaurants and increases in average per unit sales. Effective restaurants grew by 8.8% in the second quarter and by 8.6% for the six months ended June 30, 2003 over the same periods in 2002. In addition, the company franchised five more restaurants in the quarter than in second quarter 2002. As previously announced, system-wide comparable store sales increased by 4.8% for the second quarter, which reflected the highest quarterly growth in 10 years. For the six months ended June 30, 2003, comparable store sales were 3.6%. Both these comparable store sales figures are calculated on a 12-month basis.
IHOP’s comparable store sales performance for the second quarter benefited from the carryover effect of national network advertising in the first quarter 2003 and other operational initiatives. Additionally, IHOP provided new reasons for guests to visit with two promotional items, Stuffed French Toast and Paradise Pancakes. During the ten week promotional period for Stuffed French Toast, comparable store sales increased by 5.8%. Five weeks of that promotion took place in the second quarter. For the eight week promotional period of Paradise Pancakes, comparable store sales increased by 4.6%.
Change in Comp-Store Sales Methodology
Beginning with the second quarter 2003, IHOP is changing its methodology for calculating comparable store sales from a 12-month basis to an 18-month basis. The Company believes that changing this methodology, where restaurants opened only 18 months or more will be used for calculation of year-to-year changes, will enable a more accurate view of its system’s performance. This is because the calculations will now exclude the effect of high sales levels typically seen during the first months of operation at new restaurants. Accordingly, system-wide comparable store sales increased by 5.1% for the second quarter and 4.1% for the six months ended June 30, 2003 using the 18-month methodology.
Operations Initiatives
IHOP restaurants performed well during the quarter, reflecting several positive operations initiatives during the second quarter 2003.
IHOP completed the process of assessing restaurants as “A” or “B” operations to best leverage and further develop the strongest operators in its system. The Company also worked to identify IHOP restaurants that may not perform at the top of its expectations and encouraged those operators to improve by returning to operations and training basics. The goal is to dramatically improve operations at challenged restaurants.
Mystery Shop evaluations were successfully conducted in the second quarter 2003. IHOP received significant feedback in the areas of service and hospitality, uncovering additional opportunities to improve the guest experience. Based on this feedback, IHOP will continue to augment its operational and training efforts as franchisees implement change at the restaurant level.
IHOP recently launched an initiative to identify high potential locations that could benefit from 24-hour operations. With field consultants trained in the financial operating model, the Company is educating selected franchisees on the profitability and sales growth opportunities of 24-hour operations.
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Enhanced training efforts continued with the rollout of Paradise Pancakes during the second quarter 2003. More than 50,000 employees were trained in the promotion’s details.
Performance Outlook
In view of the positive momentum in its business, IHOP reiterated its guidance of $1.55 to $1.70 in net income per diluted share for fiscal 2003.
Second Quarter 2003 Conference Call
The Company will host an investor conference call to discuss its second quarter results today, Thursday, August 7, 2003 at 11:00 a.m. ET (8:00 a.m. PT). To participate in the call, please dial (877) 356-3747. A live webcast of the call can be accessed on the Investor Relations section of IHOP’s Web site at www.ihop.com. 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.
The IHOP family restaurant chain has been serving a wide variety of breakfast, lunch and dinner selections for 45 years. Offering more than 16 types of pancakes, as well as omelettes, breakfast specialties, burgers, chicken and steaks, IHOP’s diverse menu appeals to people of all ages. IHOP restaurants are developed, operated and franchised by Glendale, California based IHOP Corp. As of June 30, 2003, there were 1,136 IHOP restaurants in 48 states and Canada. IHOP is publicly traded on the NYSE under the symbol “IHP.” For more information, call the Company’s headquarters at (818) 240-6055 or visit the Company’s Website 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. 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: risks associated with the implementation of the Company’s new strategic growth plan, the availability of suitable locations and terms of the sites designated for development; legislation and government regulation including the ability to obtain satisfactory regulatory approvals; conditions beyond IHOP’s control such as weather, natural disasters or acts of war or terrorism; availability and cost of materials and labor; cost and availability of capital; competition; continuing acceptance of the International House of Pancakes brand and concepts by guests and franchisees; IHOP’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 IHOP’s filings with the Securities and Exchange Commission. Forward-looking information is provided by IHOP 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, IHOP disclaims any intent or obligation to update these forward-looking statements.
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[Financial Tables to Follow]
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IHOP CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
PERIOD ENDED JUNE 30, 2003
(Dollars in thousands, except per share amounts)
(Unaudited)
| | Three Months Ended
June 30, | | Six Months Ended
June 30, | |
| | 2003 | | 2002 | | 2003 | | 2002 | |
| | | | | | | | | |
Revenues | | | | | | | | | |
Franchise revenues | | $ | 34,722 | | $ | 29,947 | | $ | 68,508 | | $ | 59,987 | |
Rental income | | 28,993 | | 24,416 | | 57,307 | | 48,390 | |
Company restaurant sales | | 21,335 | | 17,986 | | 41,009 | | 35,776 | |
Financing revenues | | 18,234 | | 12,510 | | 30,451 | | 22,246 | |
Total revenues | | 103,284 | | 84,859 | | 197,275 | | 166,399 | |
Costs and Expenses | | | | | | | | | |
Franchise expenses | | 15,961 | | 13,592 | | 31,362 | | 27,349 | |
Rental expenses | | 21,320 | | 18,224 | | 42,139 | | 35,712 | |
Company restaurant expenses | | 22,493 | | 18,627 | | 43,401 | | 37,181 | |
Financing expenses | | 9,868 | | 5,882 | | 16,701 | | 9,917 | |
General and administrative expenses | | 13,562 | | 12,665 | | 25,829 | | 23,350 | |
Other (income) expense, net | | 1,713 | | 989 | | 3,226 | | 2,400 | |
Reorganization charges | | 811 | | — | | 7,520 | | — | |
Total costs and expenses | | 85,728 | | 69,979 | | 170,178 | | 135,909 | |
Income before income taxes | | 17,556 | | 14,880 | | 27,097 | | 30,490 | |
Provision for income taxes | | 6,584 | | 5,580 | | 10,162 | | 11,434 | |
Net income | | $ | 10,972 | | $ | 9,300 | | $ | 16,935 | | $ | 19,056 | |
| | | | | | | | | |
Net Income Per Share | | | | | | | | | |
Basic | | $ | 0.51 | | $ | 0.44 | | $ | 0.79 | | $ | 0.91 | |
Diluted | | $ | 0.51 | | $ | 0.44 | | $ | 0.78 | | $ | 0.90 | |
| | | | | | | | | |
Weighted Average Shares Outstanding | | | | | | | | | |
Basic | | 21,520 | | 20,904 | | 21,417 | | 20,838 | |
Diluted | | 21,705 | | 21,340 | | 21,574 | | 21,254 | |
| | | | | | | | | |
Dividends Declared Per Share | | $ | — | | $ | — | | $ | 0.25 | | $ | — | |
| | | | | | | | | |
Dividends Paid Per Share | | $ | 0.25 | | $ | — | | $ | 0.25 | | $ | — | |
| | | | | | | | | | | | | | |
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IHOP CORP. AND SUBSIDIARIES
RESULTS OF OPERATIONS
(Dollars in thousands)
(Unaudited)
| | Three Months Ended
June 30, | | Six Months Ended
June 30, | |
| | 2003 | | 2002 | | 2003 | | 2002 | |
| | | | | | | | | |
Restaurant Data | | | | | | | | | |
Effective restaurants(a) | | | | | | | | | |
Franchise | | 919 | | 834 | | 911 | | 829 | |
Company | | 79 | | 75 | | 77 | | 74 | |
Area license | | 125 | | 123 | | 125 | | 122 | |
Total | | 1,123 | | 1,032 | | 1,113 | | 1,025 | |
| | | | | | | | | |
System-wide | | | | | | | | | |
Sales(b) | | $ | 425,533 | | $ | 366,594 | | $ | 839,358 | | $ | 732,434 | |
Percent change | | 16.1 | % | 10.7 | % | 14.6 | % | 10.7 | % |
Average sales per effective restaurant | | $ | 379 | | $ | 355 | | $ | 754 | | $ | 715 | |
Percent change | | 6.8 | % | 2.6 | % | 5.5 | % | 4.1 | % |
Comparable sales percentage change (c) | | 4.8 | % | 1.8 | % | 3.6 | % | 1.9 | % |
| | | | | | | | | |
Franchise | | | | | | | | | |
Sales | | $ | 369,884 | | $ | 317,017 | | $ | 728,257 | | $ | 631,740 | |
Percent change | | 16.7 | % | 13.0 | % | 15.3 | % | 13.7 | % |
Average sales per effective restaurant | | $ | 402 | | $ | 380 | | $ | 799 | | $ | 762 | |
Percent change | | 5.8 | % | 2.2 | % | 4.9 | % | 2.7 | % |
Comparable sales percentage change(c) | | 4.7 | % | 1.8 | % | 3.6 | % | 1.9 | % |
| | | | | | | | | |
Company | | | | | | | | | |
Sales | | $ | 21,335 | | $ | 17,986 | | $ | 41,009 | | $ | 35,776 | |
Percent change | | 18.6 | % | (0.1 | )% | 14.6 | % | 2.9 | % |
Average sales per effective restaurant | | $ | 270 | | $ | 240 | | $ | 533 | | $ | 483 | |
Percent change | | 12.5 | % | (1.2 | )% | 10.4 | % | 1.5 | % |
| | | | | | | | | |
Area License | | | | | | | | | |
Sales | | $ | 34,314 | | $ | 31,591 | | $ | 70,092 | | $ | 64,918 | |
Percent change | | 8.6 | % | (3.2 | )% | 8.0 | % | (9.0 | )% |
Average sales per effective restaurant | | $ | 275 | | $ | 257 | | $ | 561 | | $ | 532 | |
Percent change | | 7.0 | % | 2.4 | % | 5.5 | % | 5.1 | % |
(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. It is calculated by dividing total restaurant operating days by 91 days for a quarterly calculation.
(b) “System-wide sales” are retail sales of franchisees, area licensees and Company-operated restaurants, as reported to IHOP.
(c) “Comparable sales percentage change” reflects the percentage change in sales for restaurants that are operated for the entire fiscal period in which they are being compared and are open for at least 12 months. Because of new unit openings and store closures, the restaurants opened for an entire fiscal period being compared will be different from period to period. Comparable average sales do not include data on restaurants located in Florida.
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IHOP CORP. AND SUBSIDIARIES
RESTAURANT DEVELOPMENT AND FRANCHISING ACTIVITY
(Unaudited)
| | Three Months Ended
June 30, | | Six Months Ended
June 30, | |
| | 2003 | | 2002 | | 2003 | | 2002 | |
RESTAURANT DEVELOPMENT ACTIVITY | | | | | | | | | |
| | | | | | | | | |
IHOP-beginning of period | | 1,118 | | 1,028 | | 1,103 | | 1,017 | |
New openings | | | | | | | | | |
IHOP-developed | | 16 | | 14 | | 33 | | 24 | |
Franchisee-developed | | 3 | | 4 | | 6 | | 5 | |
Area license | | — | | 1 | | — | | 2 | |
Total new openings | | 19 | | 19 | | 39 | | 31 | |
Closings | | | | | | | | | |
Company and franchise | | (1 | ) | (4 | ) | (6 | ) | (5 | ) |
Area License | | — | | — | | — | | — | |
IHOP-end of period | | 1,136 | | 1,043 | | 1,136 | | 1,043 | |
| | | | | | | | | |
Summary-end of period | | | | | | | | | |
Franchise | | 932 | | 843 | | 932 | | 843 | |
Company | | 79 | | 76 | | 79 | | 76 | |
Area license | | 125 | | 124 | | 125 | | 124 | |
Total IHOP | | 1,136 | | 1,043 | | 1,136 | | 1,043 | |
| | | | | | | | | |
RESTAURANT FRANCHISING ACTIVITY | | | | | | | | | |
IHOP-developed | | 19 | | 13 | | 30 | | 22 | |
Franchisee-developed | | 3 | | 4 | | 6 | | 5 | |
Rehabilitated and refranchised | | 1 | | 1 | | 2 | | 1 | |
Total restaurants franchised | | 23 | | 18 | | 38 | | 28 | |
Reacquired by IHOP | | (4 | ) | (2 | ) | (6 | ) | (4 | ) |
Closed | | — | | (3 | ) | (2 | ) | (4 | ) |
| | | | | | | | | |
Net addition | | 19 | | 13 | | 30 | | 20 | |
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IHOP CORP. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Dollars in thousands)
| | June 30,
2003 | | December 31,
2002 | |
| | (Unaudited) | | | |
| | | | | |
Current assets, net | | $ | 139,620 | | $ | 159,101 | |
Property and equipment, net | | 310,795 | | 286,226 | |
Long-term receivables: | | | | | |
Notes receivable | | 46,852 | | 46,929 | |
Equipment contracts receivable | | 160,564 | | 153,261 | |
Direct financing leases receivable | | 131,304 | | 132,602 | |
Other assets | | 47,199 | | 41,681 | |
Total assets | | $ | 836,334 | | $ | 819,800 | |
| | | | | |
Current liabilities | | $ | 42,652 | | $ | 53,564 | |
Long-term debt | | 144,694 | | 145,768 | |
Other long-term liabilities | | 269,262 | | 256,079 | |
Stockholders’ equity | | 379,726 | | 364,389 | |
Total liabilities and stockholders’ equity | | $ | 836,334 | | $ | 819,800 | |
IHOP CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
(Dollars in thousands)
(Unaudited)
| | Six Months Ended
June 30, | |
| | 2003 | | 2002 | |
Cash provided by operating activities | | $ | 32,182 | | $ | 31,210 | |
Cash used in investing activities | | | | | |
Additions to property and equipment | | (49,634 | ) | (48,163 | ) |
Investments in short-term marketable securities | | (33,367 | ) | — | |
Additions to other assets, net | | (332 | ) | 2,687 | |
Cash provided by financing activities | | 6,097 | | 23,749 | |
Net change in cash and cash equivalents | | (45,054 | ) | 9,483 | |
Cash and cash equivalents at beginning of period | | 98,739 | | 6,252 | |
Cash and cash equivalents at end of period | | $ | 53,685 | | $ | 15,735 | |
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IHOP CORP. AND SUBSIDIARIES
RESTATED CONSOLIDATED STATEMENT OF OPERATIONS
(Dollars in thousands, except per share amounts)
(Unaudited)
| | 1st Qtr.
2002 | | 2nd Qtr.
2002 | | 6 Mos.
2002 | | 3rd Qtr.
2002 | | 9 Mos.
2002 | | 4th Qtr.
2002 | | 12 Mos.
2002 | |
Revenues | | | | | | | | | | | | | | | |
Franchise revenues | | $ | 30,040 | | $ | 29,947 | | $ | 59,987 | | $ | 30,946 | | $ | 90,933 | | $ | 32,117 | | $ | 123,050 | |
Rental income | | 23,974 | | 24,416 | | 48,390 | | 25,158 | | 73,548 | | 26,047 | | 99,595 | |
Company restaurant sales | | 17,790 | | 17,986 | | 35,776 | | 19,634 | | 55,410 | | 19,023 | | 74,433 | |
Financing revenues | | 9,736 | | 12,510 | | 22,246 | | 16,345 | | 38,591 | | 30,205 | | 68,796 | |
Total revenues | | 81,540 | | 84,859 | | 166,399 | | 92,083 | | 258,482 | | 107,392 | | 365,874 | |
| | | | | | | | | | | | | | | |
Costs and Expenses | | | | | | | | | | | | | | | |
Franchise expenses | | 13,757 | | 13,592 | | 27,349 | | 13,673 | | 41,022 | | 14,117 | | 55,139 | |
Rental expenses | | 17,488 | | 18,224 | | 35,712 | | 18,517 | | 54,229 | | 19,583 | | 73,812 | |
Company restaurant expenses | | 18,554 | | 18,627 | | 37,181 | | 20,442 | | 57,623 | | 20,799 | | 78,422 | |
Financing expenses | | 4,035 | | 5,882 | | 9,917 | | 9,027 | | 18,944 | | 19,241 | | 38,185 | |
General and administrative expenses | | 10,685 | | 12,665 | | 23,350 | | 13,326 | | 36,676 | | 12,850 | | 49,526 | |
Other (income) expense, net | | 1,411 | | 989 | | 2,400 | | 1,357 | | 3,757 | | 1,676 | | 5,433 | |
Total costs and expenses | | 65,930 | | 69,979 | | 135,909 | | 76,342 | | 212,251 | | 88,266 | | 300,517 | |
| | | | | | | | | | | | | | | |
Income before taxes | | 15,610 | | 14,880 | | 30,490 | | 15,741 | | 46,231 | | 19,126 | | 65,357 | |
Provision for income tax | | 5,854 | | 5,580 | | 11,434 | | 5,903 | | 17,337 | | 7,172 | | 24,509 | |
Net income | | $ | 9,756 | | $ | 9,300 | | $ | 19,056 | | $ | 9,838 | | $ | 28,894 | | $ | 11,954 | | $ | 40,848 | |
| | | | | | | | | | | | | | | |
Net Income Per Share | | | | | | | | | | | | | | | |
Basic | | $ | 0.47 | | $ | 0.44 | | $ | 0.91 | | $ | 0.47 | | $ | 1.38 | | $ | 0.57 | | $ | 1.95 | |
Diluted | | $ | 0.46 | | $ | 0.44 | | $ | 0.90 | | $ | 0.46 | | $ | 1.36 | | $ | 0.56 | | $ | 1.92 | |
| | | | | | | | | | | | | | | |
Weighted Average Shares Outstanding | | | | | | | | | | | | | | | |
Basic | | 20,771 | | 20,904 | | 20,838 | | 20,958 | | 20,878 | | 21,152 | | 20,946 | |
Diluted | | 21,169 | | 21,340 | | 21,254 | | 21,235 | | 21,248 | | 21,334 | | 21,269 | |
| | | | | | | | | | | | | | | | | | | | | | | |
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IHOP CORP.
18 MONTH SAME STORE SALES
PERCENT INCREASES (DECREASES) OVER PRIOR PERIOD
| | 1999 | | 2000 | | 2001 | | 2002 | | 2003 | |
| | | | | | | | | | | |
1st Quarter | | 0.5 | % | 0.2 | % | 2.2 | % | 2.6 | % | 3.1 | % |
| | | | | | | | | | | |
2nd Quarter | | 2.1 | % | 1.1 | % | 0.0 | % | 1.9 | % | 5.1 | % |
| | | | | | | | | | | |
6 Months | | 1.4 | % | 0.8 | % | 1.2 | % | 2.3 | % | 4.1 | % |
| | | | | | | | | | | |
3rd Quarter | | 1.4 | % | 2.1 | % | 0.0 | % | (0.7 | )% | | |
| | | | | | | | | | | |
9 Months | | 1.5 | % | 1.4 | % | 0.8 | % | 1.3 | % | | |
| | | | | | | | | | | |
4th Quarter | | 1.5 | % | 0.7 | % | 1.3 | % | (0.3 | )% | | |
| | | | | | | | | | | |
Full Year | | 1.6 | % | 1.2 | % | 1.0 | % | 0.9 | % | | |
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