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IHOP CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(In thousands, except per share amounts)
(Unaudited)
Three Months Ended Six Months Ended
June 30, June 30,
2007 2006 2007 2006
--------- --------- --------- ---------
Revenues
Franchise revenues $ 46,934 $ 42,490 $ 93,984 $ 87,745
Rental income 33,058 32,254 66,068 65,604
Company restaurant sales 4,625 2,785 8,609 6,157
Financing revenues 4,870 7,545 10,950 14,085
--------- --------- --------- ---------
Total revenues 89,487 85,074 179,611 173,591
--------- --------- --------- ---------
Costs and Expenses
Franchise expenses 21,369 19,226 42,590 39,724
Rental expenses 24,594 24,507 49,175 49,155
Company restaurant expenses 5,317 3,131 9,875 6,887
Financing expenses 2,569 4,829 4,951 7,869
General and administrative expenses 14,103 15,188 30,224 30,278
Other expense, net 1,376 979 2,485 2,151
Early debt extinguishment costs -- -- 2,223 --
--------- --------- --------- ---------
Total costs and expenses 69,328 67,860 141,523 136,064
--------- --------- --------- ---------
Income before income taxes 20,159 17,214 38,088 37,527
Provision for income taxes 6,029 6,908 12,645 14,627
--------- --------- --------- ---------
Net income $ 14,130 $ 10,306 $ 25,443 $ 22,900
========= ========= ========= =========
Net Income Per Share
Basic $ 0.82 $ 0.57 $ 1.45 $ 1.25
========= ========= ========= =========
Diluted $ 0.82 $ 0.56 $ 1.44 $ 1.24
========= ========= ========= =========
Weighted Average Shares
Outstanding
Basic 17,156 18,159 17,500 18,290
========= ========= ========= =========
Diluted 17,328 18,369 17,688 18,509
========= ========= ========= =========
Dividends Declared Per Share $ 0.25 $ 0.25 $ 0.50 $ 0.50
========= ========= ========= =========
Dividends Paid Per Share $ 0.25 $ 0.25 $ 0.50 $ 0.50
========= ========= ========= =========
IHOP CORP. AND SUBSIDIARIES
RESTAURANT DATA
(Unaudited)
Three Months Ended Six Months Ended
June 30, June 30,
---------------- ----------------
2007 2006 2007 2006
------- ------ ------- ------
Restaurant Data
Effective restaurants (a)
Franchise 1,137 1,087 1,133 1,083
Company 13 6 12 7
Area license 159 155 159 155
------- ------ ------- ------
Total 1,309 1,248 1,304 1,245
======= ====== ======= ======
System-wide (b)
Sales percentage change (c) 7.9% 7.8 % 6.6% 8.6 %
Same-store sales percentage change (d) 2.5% 3.1 % 1.6% 4.1 %
Franchise (b)
Sales percentage change (c) 8.0% 8.0 % 6.6% 9.0 %
Same-store sales percentage change (d) 2.6% 3.1 % 1.6% 4.2 %
Company
Sales percentage change (c) 66.1% (26.8)% 39.8% (21.0)%
Area License (b)
Sales percentage change (c) 4.0% 8.5 % 4.5% 7.2 %
(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 $508.0 million and
$1,012.2 million for the second quarter and first six months ended
June 30, 2007, respectively, and sales at area license restaurants
were $52.8 million and $108.3 million for the second quarter and first
six months ended June 30, 2007, 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.
IHOP CORP. AND SUBSIDIARIES
RESTAURANT DEVELOPMENT AND FRANCHISING ACTIVITY
(Unaudited)
Three Months Six Months
Ended Ended
June 30, June 30,
------------ ------------
2007 2006 2007 2006
----- ----- ----- -----
Restaurant Development Activity
Beginning of period 1,306 1,252 1,302 1,242
New openings
Company-developed -- 1 -- 1
Franchisee-developed 15 16 21 23
International franchisee-developed -- -- 2 --
Area license -- -- -- 3
----- ----- ----- -----
Total new openings 15 17 23 27
Closings
Company and franchise (1) (4) (5) (4)
Area license (1) (1) (1) (1)
----- ----- ----- -----
End of period 1,319 1,264 1,319 1,264
===== ===== ===== =====
Summary-end of period
Franchise 1,147 1,102 1,147 1,102
Company 13 7 13 7
Area license 159 155 159 155
----- ----- ----- -----
Total 1,319 1,264 1,319 1,264
===== ===== ===== =====
Restaurant Franchising Activity
Company-developed -- -- -- --
Franchisee-developed 15 16 21 23
International franchisee-developed -- -- 2 --
Rehabilitated and refranchised -- 5 2 8
----- ----- ----- -----
Total restaurants franchised 15 21 25 31
Reacquired by the Company -- (5) (6) (7)
Closed (1) (4) (4) (4)
----- ----- ----- -----
Net addition 14 12 15 20
===== ===== ===== =====
IHOP CORP. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(In thousands, except share amounts)
June 30, December 31,
2007 2006
---------- ----------
(Unaudited)
Assets
Current assets
Cash and cash equivalents $ 32,561 $ 19,516
Receivables, net 42,530 45,571
Reacquired franchises and equipment held for
sale, net 428 --
Inventories 302 396
Prepaid expenses 10,096 7,493
Deferred income taxes 5,643 5,417
--------- ---------
Total current assets 91,560 78,393
--------- ---------
Long-term receivables 293,893 302,088
Property and equipment, net 300,588 309,737
Excess of costs over net assets acquired 10,767 10,767
Other assets 82,750 67,885
--------- ---------
Total assets $ 779,558 $ 768,870
========= =========
Liabilities and Stockholders’ Equity
Current liabilities
Current maturities of long-term debt $ 18,000 $ 19,738
Accounts payable 7,703 14,689
Accrued employee compensation and benefits 9,444 13,359
Other accrued expenses 5,985 11,317
Capital lease obligations 5,377 5,002
--------- ---------
Total current liabilities 46,509 64,105
--------- ---------
Long-term debt, less current maturities 175,000 94,468
Deferred income taxes 73,490 76,017
Capital lease obligations 167,228 170,412
Other liabilities 76,943 74,655
Commitments and contingencies
Stockholders’ equity
Preferred stock, $1 par value, 10,000,000 shares
authorized; none issued and outstanding -- --
Common stock, $.01 par value, 40,000,000 shares
authorized; June 30, 2007: 23,113,424 shares
issued and 16,859,229 shares outstanding;
December 31, 2006: 22,818,007 shares issued and
17,873,548 shares outstanding 229 227
Additional paid-in capital 142,704 131,748
Retained earnings 375,109 358,975
Accumulated other comprehensive loss -- (133)
Treasury stock, at cost (6,254,195 shares and
4,944,459 shares at June 30, 2007 and December 31,
2006, respectively) (277,654) (201,604)
--------- ---------
Total stockholders’ equity 240,388 289,213
--------- ---------
Total liabilities and stockholders’ equity $ 779,558 $ 768,870
========= =========
IHOP CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
Six Months Ended
June 30,
------------------
2007 2006
-------- --------
Cash flows from operating activities
Net income $ 25,443 $ 22,900
Adjustments to reconcile net income to cash flows
provided by operating activities
Depreciation and amortization 10,830 9,988
Debt extinguishment and other costs 2,223 --
Deferred income taxes (2,753) (6,893)
Stock-based compensation expense 2,245 1,859
Excess tax benefit from stock-based compensation (2,343) (395)
Gain on sale of land (98) --
Changes in operating assets and liabilities
Receivables 2,595 2,758
Inventories 94 12
Prepaid expenses (2,603) 114
Accounts payable (6,986) 2,030
Accrued employee compensation and benefits (3,915) (1,642)
Other accrued expenses (2,243) 1,316
Other 1,090 (1,655)
-------- --------
Cash flows provided by operating activities 23,579 30,392
-------- --------
Cash flows from investing activities
Additions to property and equipment (1,449) (3,857)
Additions and reductions to long-term receivables (893) 168
Principal receipts from notes and equipment contracts
receivable 8,283 9,197
Additions to reacquired franchises held for sale (429) (581)
Property insurance proceeds, net (173) 2,234
Proceeds from sale of land 795 --
-------- --------
Cash flows provided by investing activities 6,134 7,161
-------- --------
Cash flows from financing activities
Proceeds from issuance of long-term debt, including
revolving line of credit 208,000 --
Repayment of long-term debt (129,206) (1,035)
Payment of debt issuance costs (14,307) --
Prepayment penalties on early debt extinguishment (1,219) --
Principal payments on capital lease obligations (2,809) (2,155)
Dividends paid (8,820) (9,182)
Purchase of treasury stock (77,020) (29,580)
Proceeds from stock options exercised 6,370 2,194
Excess tax benefit from stock-based compensation 2,343 395
-------- --------
Cash flows used in financing activities (16,668) (39,363)
-------- --------
Net change in cash and cash equivalents 13,045 (1,810)
Cash and cash equivalents at beginning of period 19,516 23,111
-------- --------
Cash and cash equivalents at end of period $ 32,561 $ 21,301
======== ========
IHOP CORP. AND SUBSIDIARIES
NON-GAAP FINANCIAL MEASURES
(In thousands, except per share amounts)
(Unaudited)
Reconciliation of net income to net income excluding impact of
early debt extinguishment costs:
Three Months Ended Six Months Ended
June 30, June 30,
------------------- ------------------
2007 2006 2007 2006
--------- --------- -------- ---------
Net income, as reported $ 14,130 $ 10,306 $ 25,443 $ 22,900
Early debt extinguishment costs -- -- 2,223 --
Income tax benefit -- -- (738) --
--------- --------- -------- ---------
Net income excluding early debt
extinguishment costs $ 14,130 $ 10,306 $ 26,928 $ 22,900
========= ========= ======== =========
Basic net income per share:
Net income, as reported per share
Impairment and closure charges $ 0.82 $ 0.57 $ 1.45 $ 1.25
Early debt extinguishment costs per
share -- -- 0.13 --
Income tax benefit per share -- -- (0.04) --
--------- --------- -------- ---------
Net income excluding early debt
extinguishment costs per share $ 0.82 $ 0.57 $ 1.54 $ 1.25
========= ========= ======== =========
Diluted net income per share:
Net income, as reported per share
Impairment and closure charges $ 0.82 $ 0.56 $ 1.44 $ 1.24
Early debt extinguishment costs per
share -- -- 0.12 --
Income tax benefit per share -- -- (0.04) --
--------- --------- -------- ---------
Net income excluding early debt
extinguishment costs per share $ 0.82 $ 0.56 $ 1.52 $ 1.24
========= ========= ======== =========
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