Exhibit 99.1
RESTAURANT SUPPORT CENTER
FOR IMMEDIATE RELEASE
| | Stacy Roughan
Director, Investor Relations
IHOP Corp.
818-637-3632 |
IHOP CORP. REPORTS SECOND QUARTER 2006 FINANCIAL RESULTS
GLENDALE, Calif., July 26, 2006 — IHOP Corp. (NYSE: IHP) today announced financial results for its second quarter and six months ended June 30, 2006. Financial performance highlights included:
· EPS excluding stock based compensation expense of $1.1 million was $0.60, flat over prior year’s performance. Year-to-date EPS increased 18.2% to $1.30 excluding stock based compensation expense of $1.9 million.
· Cash Flow from Operating Activities increased 13.3% to $30.4 million year-to-date. Additionally, $9.2 million of cash was provided by the collection of the Company’s long-term receivables for the first six months of 2006.
· Share repurchases in the second quarter 2006 amounted to 397,300 shares of IHOP stock totaling $19.0 million. Compared to prior year, diluted weighted average shares outstanding were reduced by 8.0%.
· Segment leading same-store sales growth of 3.1% reflects sizable increases in traffic that outpaced average guest check increases.
· System-wide restaurants grew 4.7% year-over-year to a total of 1,264 IHOPs. 16 new restaurants were developed and opened by IHOP franchisees during the quarter.
· Management reiterated fiscal 2006 EPS guidance of $2.35 to 2.45 per diluted share, excluding stock based compensation expense of $2.5 to $3.5 million.
Julia A. Stewart, IHOP’s Chairman and Chief Executive Officer, said, “Positive, traffic driven sales growth, new franchise restaurant openings and ongoing share repurchases contributed to our second quarter results and a strong first half of the year and should continue to be the key levers we employ to manage our business. While General & Administrative (G&A) expenses grew for the quarter in part due to the adoption of FAS 123R, this increase was expected and is provided for in our existing guidance for the full year. We remain confident of meeting our previously stated performance expectations for fiscal 2006.”
Second Quarter 2006 Performance
IHOP reported a decrease of 13.6% in net income to $10.3 million, and a decrease of 6.7% in diluted net income per share to $0.56 in the second quarter 2006. Excluding pre-tax stock based compensation expense of $1.1 million, net income decreased 8.7% to $10.9 million, and diluted net income per share was flat at $0.60. The decreases in net income and diluted net income per share resulted primarily from a 21.4% increase in G&A expenses, offset in part by an 8.0% reduction in diluted average weighted shares outstanding due to ongoing share repurchases by the Company.
450 N. Brand Boulevard • 7th Floor • Glendale, CA 91203-2306 • Phone: (818) 637-3632 • Fax: (818) 637-3120
IHOP CORP. • INTERNATIONAL HOUSE OF PANCAKES, INC. • IHOP REALTY CORP. • IHOP PROPERTIES, INC. • IHOP ENTERPRISES, INC
For the six months ended June 30, 2006, IHOP reported an increase of 4.1% in net income to $22.9 million, and an increase of 12.7% in diluted net income per share to $1.24. Excluding pre-tax stock based compensation expense of $1.9 million, net income increased 8.9% to $24.0 million, and diluted net income per share increased 18.2% to $1.30. The increases in net income and diluted net income per share resulted primarily from an 11.3% increase in Franchise Operations segment profit due to higher same-store sales performance in the first six months of 2006, which effectively leveraged against modest expense growth in this segment. Additionally, a 7.9% reduction in diluted weighted average shares outstanding due to ongoing share repurchases by the Company contributed to IHOP’s per share earnings performance for the first half of 2006.
Cash Flow from Operating Activities increased in the six months ended June 30, 2006 to $30.4 million compared with $26.8 million in the same period in 2005. This increase is primarily due to net earnings growth exclusive of non-cash stock based compensation expense as well as improved collection of receivables compared to the same period in 2005. Principal receipts from notes and equipment contracts receivable, which are an additional source of cash generation for the Company, amounted to $9.2 million in the six months ended June 30, 2006. Capital expenditures increased to $3.9 million in the first six months of 2006 versus $2.6 million in the same period in 2005. The increase in capital expenditures primarily reflects the cost of restaurant development in IHOP’s Company market in Cincinnati, Ohio.
2006 Guidance Reiteration
IHOP reiterated its 2006 earnings performance expectations, ranging between $2.25 and $2.35 per diluted share including estimated stock based compensation expense ranging between $2.5 million and $3.5 million for the year. The Company’s earnings performance expectations are primarily based on revenue drivers including positive same-store sales growth of between 2% and 4% and the addition of 64 to 69 new restaurants to the IHOP system in 2006, managed G&A growth with expenses expected to range between $65 million to $67 million in 2006, which includes estimated stock based compensation expense, and the effect of ongoing share repurchases by the Company.
Cash Flow from Operating Activities is expected to range between $55 million and $60 million in 2006, and principal receipts from notes and equipment contract receivable are expected to be within the range of $18 million to $20 million. Capital expenditures are expected to range between $12 million to $14 million in 2006, which primarily reflects investment in the development of four IHOP restaurants in its Company market in Cincinnati, Ohio, as well as supporting and optimizing the Company’s Information Technology infrastructure. Cash commitments in 2006 are expected to be approximately $24 million, which includes the first principal repayment of the Company’s private placement debt, other scheduled principal payments on long-term debt and capital lease obligations. Additionally, year-to-date the Company has paid to its shareholders $9.2 million in dividends and has declared its third quarter dividend in the approximate amount of $4.6 million, payable August 22, 2006.
Investor Conference Call Today
IHOP will host an investor conference call to discuss its second quarter 2006 results today, Wednesday, July 26, 2006 at 11:00 a.m. Eastern Time (8:00 a.m. Pacific Time). To participate on the call, please dial 800-659-1966 and reference pass code 63639101. A live webcast of the call will be available on IHOP’s Web site at www.ihop.com, and may be accessed by visiting Conference 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
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any streaming media software needed to listen to the webcast. A telephonic replay of the call may be accessed through August 2, 2006 by dialing 888-286-8010 and referencing pass code 58557247. An online archive of the webcast will also be available on the Investor Information section of IHOP’s Web site.
About IHOP Corp.
The IHOP family restaurant chain has been serving a wide variety of breakfast, lunch and dinner selections for more than 45 years. Offering 14 types of pancakes as well as omelettes, breakfast specialties, burgers, sandwiches, chicken and steaks, IHOP’s diverse menu appeals to people of all ages. IHOP restaurants are franchised and operated by Glendale, California based IHOP Corp. As of June 30, 2006, the end of IHOP’s second quarter, there were 1,264 IHOP restaurants in 48 states and Canada. IHOP Corp. common stock is listed and 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 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,” “anticipate,” “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 strategic growth plan, the availability of suitable locations and terms of the sites designated for development; the ability of franchise developers to fulfill their commitments to build new IHOP restaurants in the numbers and time frames covered by their development agreements; the ability of the Company to franchise its remaining Company-operated restaurants; legislation and government regulation including the ability to obtain satisfactory regulatory approvals; conditions beyond the Company’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; 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 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, 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 non-GAAP financial measure “net income excluding stock based compensation expense.” The Company defines “net income excluding stock based compensation expense” for a given period as net income for such period, less any stock based compensation expense incurred in such period. Management believes net income excluding stock based compensation expense and basic and diluted net income per share excluding stock based compensation expense is useful because it provides a more accurate period to period comparison. Net income excluding stock based compensation expense for any given period may be affected by a variety of factors, including but not limited to, changes in assets and liabilities and the timing of purchases and payments. Net income excluding stock
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based compensation expense 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.
[Financial Tables to Follow]
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IHOP CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(In thousands, except per share amounts)
(Unaudited)
| | Three Months Ended
June 30, | | Six Months Ended
June 30, | |
| | 2006 | | 2005 | | 2006 | | 2005 | |
Revenues | | | | | | | | | |
Franchise revenues | | $ | 42,490 | | $ | 39,887 | | $ | 87,745 | | $ | 80,784 | |
Rental income | | 32,254 | | 32,806 | | 65,604 | | 65,844 | |
Company restaurant sales | | 2,785 | | 3,806 | | 6,157 | | 7,792 | |
Financing revenues | | 7,545 | | 6,409 | | 14,085 | | 14,311 | |
Total revenues | | 85,074 | | 82,908 | | 173,591 | | 168,731 | |
Costs and Expenses | | | | | | | | | |
Franchise expenses | | 19,226 | | 18,196 | | 39,724 | | 37,651 | |
Rental expenses | | 24,507 | | 24,333 | | 49,155 | | 49,016 | |
Company restaurant expenses | | 3,131 | | 3,788 | | 6,887 | | 8,594 | |
Financing expenses | | 4,829 | | 2,794 | | 7,869 | | 6,158 | |
General and administrative expenses | | 15,188 | | 12,514 | | 30,278 | | 28,077 | |
Other expense, net | | 979 | | 1,950 | | 2,151 | | 3,572 | |
Total costs and expenses | | 67,860 | | 63,575 | | 136,064 | | 133,068 | |
Income before income taxes | | 17,214 | | 19,333 | | 37,527 | | 35,663 | |
Provision for income taxes | | 6,908 | | 7,404 | | 14,627 | | 13,659 | |
Net income | | $ | 10,306 | | $ | 11,929 | | $ | 22,900 | | $ | 22,004 | |
| | | | | | | | | |
Net Income Per Share | | | | | | | | | |
Basic | | $ | 0.57 | | $ | 0.60 | | $ | 1.25 | | $ | 1.11 | |
Diluted | | $ | 0.56 | | $ | 0.60 | | $ | 1.24 | | $ | 1.10 | |
| | | | | | | | | |
Weighted Average Shares Outstanding | | | | | | | | | |
Basic | | 18,159 | | 19,764 | | 18,290 | | 19,877 | |
Diluted | | 18,369 | | 19,968 | | 18,509 | | 20,090 | |
| | | | | | | | | |
Dividends Declared Per Share | | $ | 0.25 | | $ | 0.25 | | $ | 0.50 | | $ | 0.50 | |
| | | | | | | | | |
Dividends Paid Per Share | | $ | 0.25 | | $ | 0.25 | | $ | 0.50 | | $ | 0.50 | |
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IHOP CORP. AND SUBSIDIARIES
RESTAURANT DATA
(Unaudited)
| | Three Months Ended
June 30, | | Six Months Ended
June 30, | |
| | 2006 | | 2005 | | 2006 | | 2005 | |
Restaurant Data | | | | | | | | | |
Effective restaurants (a) | | | | | | | | | |
Franchise | | 1,087 | | 1,042 | | 1,083 | | 1,038 | |
Company | | 6 | | 9 | | 7 | | 9 | |
Area license | | 155 | | 150 | | 155 | | 149 | |
Total | | 1,248 | | 1,201 | | 1,245 | | 1,196 | |
| | | | | | | | | |
System-wide (b) | | | | | | | | | |
Sales percentage change (c) | | 7.8 | % | 5.6 | % | 8.6 | % | 5.2 | % |
Same-store sales percentage change (d) | | 3.1 | % | 0.9 | % | 4.1 | % | 0.8 | % |
| | | | | | | | | |
Franchise (b) | | | | | | | | | |
Sales percentage change (c) | | 8.0 | % | 6.3 | % | 9.0 | % | 6.1 | % |
Same-store sales percentage change (d) | | 3.1 | % | 0.8 | % | 4.2 | % | 0.8 | % |
| | | | | | | | | |
Company | | | | | | | | | |
Sales percentage change (c) | | (26.8 | )% | (54.2 | )% | (21.0 | )% | (58.7 | )% |
| | | | | | | | | |
Area License (b) | | | | | | | | | |
Sales percentage change (c) | | 8.5 | % | 10.0 | % | 7.2 | % | 10.7 | % |
(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 IHOP restaurants owned by the Company as well as those owned by franchisees and area licensees.
(b) System-wide sales are retail sales at IHOP restaurants operated by franchisees, area licensees and the Company, as reported to the Company. Franchise restaurant sales were $470.2 million and $949.6 million for the second quarter and first six months ended June 30, 2006, respectively, and sales at area license restaurants were $50.8 million and $103.6 million for the second quarter and first six months ended June 30, 2006, respectively. Sales at restaurants that are owned by franchisees and area licensees are not attributable to the Company.
(c) “Sales percentage change” reflects, for each category of restaurants, the percentage change in sales in any given fiscal period compared to the prior fiscal period for all restaurants in that category.
(d) “Same-store sales percentage change” reflects the percentage change in sales, in any given fiscal period compared to the prior fiscal period, for restaurants that have been operated throughout both fiscal periods that are being compared and have been open for at least 18 months. Because of new unit openings and store closures, the restaurants open throughout both fiscal periods being compared will be different from period to period. Same-store sales percentage change does not include data on restaurants located in Florida.
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