IHOP Corp. Reports Strong First Quarter 2006 Results.GLENDALE Glendale. 1 City (1990 pop. 148,134), Maricopa co., S central Ariz., adjacent to Phoenix; inc. 1910. It is located in a rich agricultural region irrigated by the Salt River project. Glendale has become one of the fastest-growing U.S. , Calif. -- IHOP IHOP International House Of Pancakes (restaurant chain) iHOP Information Hyperlinked Over Proteins IHOP International House of Prayer IHOP International H2O Project IHOP International House of Pain Corp. (NYSE NYSE See: New York Stock Exchange :IHP ihp or i.hp. abbr. indicated horsepower ) today announced results for its first quarter ended March 31, 2006. Financial performance highlights for the quarter included: --Diluted earnings per share growth of 36.0% to $0.68, including $0.03 per diluted di·lute tr.v. di·lut·ed, di·lut·ing, di·lutes 1. To make thinner or less concentrated by adding a liquid such as water. 2. To lessen the force, strength, purity, or brilliance of, especially by admixture. share of stock option and other stock compensation expense --Cash Flow from Operating Activities increased 44.0% to $21.5 million; also cash of $4.2 million was provided by the collection of the Company's long-term Long-term Three or more years. In the context of accounting, more than 1 year. long-term 1. Of or relating to a gain or loss in the value of a security that has been held over a specific length of time. Compare short-term. receivables Receivables An asset designation applicable to all debts, unsettled transactions or other monetary obligations owed to a company by its debtors or customers. Receivables are recorded by a company's accountants and reported on the balance sheet, and they and include all debts owed --Strong same-store sales Same-store sales is a business term which refers to the revenue generated by one of a retail chain's specific outlets during a certain period of time (often a fiscal quarter or a particular shopping season), compared to an identical period in the past, usually in the previous year. growth of 5.1%, consisting of a healthy balance between increases in traffic and average guest check --4.5% year-over-year growth in the number of system-wide restaurants to a total of 1,252 IHOPs; 10 new restaurants were developed and opened by IHOP franchisees and Florida Florida, state, United States Florida (flôr`ĭdə, flŏr`–), state in the extreme SE United States. A long, low peninsula between the Atlantic Ocean (E) and the Gulf of Mexico (W), Florida is bordered by Georgia and area licensee licensee n. a person given a license by government or under private agreement. (See: license, licensor) LICENSEE. One to whom a license has been given. 1 M. Q. & S. 699 n. during the quarter --3.0% reduction in General & Administrative (G&A) expenses, including stock option and other stock compensation expense --Repurchased 212,600 shares of IHOP stock, totaling $10.6 million, and reduced diluted weighted average shares outstanding by 7.7% year-over-year Julia Julia, feminine name in the Julian gens. 1 Died 54 B.C., daughter of Julius Caesar and wife of Pompey. By her grace and tact she maintained the bond between her father and her husband. After her death the two statesmen became open enemies. A. Stewart Stewart, river, Canada Stewart, river, 331 mi (533 km) long, rising in the Mackenzie Mts., central Yukon Territory, Canada, and flowing generally W to the Yukon River S of Dawson. , IHOP's President and Chief Executive Officer, said, "Our first quarter 2006 financial performance was exceptionally strong due to a number of positive factors. Our same-store sales growth of 5.1% for the quarter drove revenue in our core Franchise Operations business substantially higher while expenses in this segment grew at a lower rate. Additionally, we benefited from lower G&A spending as well as the continued reduction in shares outstanding as the result of share repurchase Share Repurchase A program by which a company buys back its own shares from the marketplace, reducing the number of outstanding shares. This is usually an indication that the company's management thinks the shares are undervalued. activities over the past year. We are able to deliver outstanding results by focusing on driving top line growth, producing operating leverage Operating Leverage A measurement of the degree to which a firm or project relies on fixed rather than variable costs. Notes: The higher the degree of operating leverage, the greater the potential danger from forecasting risk. through expense control and utilizing our capital in ways that create value for our shareholders through share repurchase and dividend payments. Taken together, these dynamics demonstrated the power and attractiveness of our franchise business model during the first quarter of 2006." First Quarter 2006 Performance IHOP reported an increase of 25.0% in net income to $12.6 million, and an increase of 36.0% in diluted net income per share to $0.68 in the first quarter 2006. Excluding pre-tax pre-tax adj → anterior al impuesto pre-tax adj → avant impôt(s) pre-tax adj → al lordo d'imposta stock option and other stock compensation expense of $809,000, net income would have increased 29.8% to $13.1 million, and diluted net income per share would have increased 42.0% to $0.71 in the first quarter 2006. The increases in IHOP's net income and diluted net income per share resulted primarily from a 15.5% increase in Franchise Operations segment profit due to higher same-store sales performance, which effectively leveraged against modest expense growth in this segment. Additionally, reduced G&A expenses and the reduction in diluted weighted average shares outstanding, due to share repurchase, also contributed to the Company's strong earnings performance for the first quarter 2006. Cash Flow from Operating Activities increased in the three months ended March 31, 2006 to $21.5 million compared with $14.9 million in the same period in 2005. This increase is due partly to increases in net income and accounts payables Payables Related: Accounts payable in the first quarter of 2006 compared to the same period in 2005. Principal receipts from notes and equipment contracts receivable, which are an additional source of annual cash generation for the Company, amounted to $4.2 million in the first quarter 2006. Capital expenditures were reduced from $1.2 million in the first quarter 2005 to $241,000 in the first quarter 2006, primarily reflecting the Company's business model change as well as reduced spending associated with Information Technology initiatives and the timing of restaurant development in IHOP's Company market of Cincinnati Cincinnati (sĭnsənăt`ē, –năt`ə), city (1990 pop. 364,040), seat of Hamilton co., extreme SW Ohio, on the Ohio River opposite Newport and Covington, Ky.; inc. as a city 1819. . Strategic Highlights The following are key business highlights for the first quarter 2006 based on IHOP's three strategic objectives: Energize en·er·gize v. en·er·gized, en·er·giz·ing, en·er·giz·es v.tr. 1. To give energy to; activate or invigorate: "His childhood the Brand, Improve Operations Performance and Maximize In a graphical environment, to enlarge a window to the full size of the screen. See Win Maximize windows. Franchise Development. --Energize the Brand: IHOP's sales performance was fueled by programs that were successfully built upon IHOP's core brand equities, including two appealing limited-time offers featured during the quarter - All You Can Eat Pancakes and Cinn-A-Stacks - as well as extensive efforts supporting the celebration of National Pancake pancake, thin, flat cake, made of batter and baked on a griddle or fried in a pan. Pancakes, probably the oldest form of bread, are known in different forms throughout the world. Day. During the quarter, IHOP experienced a healthy balance of traffic and guest check increases, which were the result of effective promotions that motivated mo·ti·vate tr.v. mo·ti·vat·ed, mo·ti·vat·ing, mo·ti·vates To provide with an incentive; move to action; impel. mo guests to visit IHOP restaurants more often and continued pricing moderation by franchisees that further solidified so·lid·i·fy v. so·lid·i·fied, so·lid·i·fy·ing, so·lid·i·fies v.tr. 1. To make solid, compact, or hard. 2. To make strong or united. v.intr. the important price/value relationship IHOP has with its guests. --Improve Operations: The Company evaluates each franchise operator on an "A" through "F" scale based on a range of objective criteria criteria (krītēr´ē  ),n. including Mystery Shop reports, operational assessments, participation in training programs, and the maintenance of required management infrastructure. At the end of the first quarter 2006, 87% of IHOP's franchisees were rated an "A" or a "B" based on this rating system. This reflects an improvement from 77% of IHOP's franchisees rated as "A" or "B" operators in the first quarter 2005. --Maximize Franchise Development: During the first quarter 2006, IHOP franchisees and its Florida area licensee opened 10 new IHOP restaurants, compared to 12 restaurants in the same quarter last year. IHOP also continued to build its U.S. pipeline of franchise development commitments with additional Multi-Store and Single-Store Development Agreements secured in the first quarter 2006 for its franchisees to build 23 new IHOP restaurants over the next several years. As of the end of the first quarter 2006, the Company's U.S. franchise pipeline included signed, optioned and pending commitments to develop a total of 445 new IHOP restaurants. Additionally, IHOP signed a Multi-Store Development Agreement for international expansion in Nuevo Leon Leon Medieval kingdom, northwestern Spain. Leon proper included the cities of León, Salamanca, and Zamora—the adjacent areas of Vallodolid and Palencia being disputed with Castile, originally its eastern frontier. , Mexico Mexico, city, Mexico Mexico or Mexico City, Span. Ciudad de México (Méjico), city (1990 pop. 8,236,960; 1991 met. area est. 20,899,000), central Mexico, capital and largest city of Mexico. , which includes signed and optioned commitments for the development of as many as 21 new IHOP restaurants. 2006 Guidance Reiterated IHOP reiterated its performance guidance for the full year 2006, which takes into account its strong financial results in the first quarter 2006. IHOP expects its 2006 earnings performance to range between $2.25 and $2.35 per diluted share, including estimated stock option and other stock 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, careful G&A management with expenses expected to range between $65 million to $67 million in 2006 including estimated stock option and other stock compensation expense, as well as continued share repurchases. Cash from Operations 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 “Cincinnati” redirects here. For other uses, see Cincinnati (disambiguation). Cincinnati is a city in the U.S. state of Ohio and the county seat of Hamilton County. , as well as supporting and optimizing the Company's Information Technology infrastructure. Cash commitments in 2006 are expected to be approximately ap·prox·i·mate adj. 1. Almost exact or correct: the approximate time of the accident. 2. $24 million, which includes the first principal repayment Repayment The act of paying back a debt. Notes: Everyone has to repay their debts eventually. See also: Debt, Defeasance, Loan of the Company's private placement debt, other scheduled principal payments on long-term debt Long-Term Debt Loans and financial obligations lasting over one year. Notes: For example debts obligations such as bonds and notes which have maturities greater than one year would be considered long-term debt. and capital lease obligations. Investor Conference Call Today IHOP will host an investor conference call to discuss its first quarter 2006 results today, Wednesday Wednesday: see week. , April 26, 2006 at 11:00 a.m. Eastern Time (8:00 a.m. Pacific Time). To participate on the call, please dial 800-659-2056 and reference pass code 78147334. 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 To receive a file transmitted over a network. In any communications session, "download" means receive, and "upload" means send. The download/upload often implies a big/little scenario, in which data is being downloaded from the "big" server into the "little" user's computer. any streaming media See streaming audio, streaming video and digital media hub. software needed to listen to the webcast. A telephonic replay of the call may be accessed through May 3, 2006 by dialing 888-286-8010 and referencing pass code 25138462. An online archive (1) A file that contains one or more compressed files. Most archive formats are also capable of storing folders in order to reconstruct the file/folder relationship when decompressed. See archive formats. 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 Burgers are hamburgers. Burgers may also refer to:
Forward-Looking Statements forward-looking statement A projected financial statement based on management expectations. A forward-looking statement involves risks with regard to the accuracy of assumptions underlying the projections. 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 The terminology used in the computer and telecommunications field adds tremendous confusion not only for the lay person, but for the technicians themselves. What many do not realize is that terms are made up by anybody and everybody in a nonchalant, casual manner without any regard or . 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 Inferred from circumstances; known indirectly. In its legal application, the term implied is used in contrast with express, where the intention regarding the subject matter is explicitly and directly indicated. 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 ful·fill also ful·fil tr.v. ful·filled, ful·fill·ing, ful·fills also ful·fils 1. To bring into actuality; effect: fulfilled their promises. 2. 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 reg·u·late tr.v. reg·u·lat·ed, reg·u·lat·ing, reg·u·lates 1. To control or direct according to rule, principle, or law. 2. approvals; conditions beyond the Company's control such as weather, natural disasters or acts of war Tom Clancy's Op-Center: Acts of War is a technothriller by Jeff Rovin Plot introduction The mobile Regional Operations Center (ROC) in Turkey investigates a dam blown up by Kurdish terrorists. or terrorism terrorism, the threat or use of violence, often against the civilian population, to achieve political or social ends, to intimidate opponents, or to publicize grievances. ; 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 for·ward-look·ing adj. Concerned with or making provision for the future: forward-looking educators; a forward-looking corporate plan. Adj. 1. information is provided by IHOP pursuant to the safe harbor Safe Harbor 1. A legal provision to reduce or eliminate liability as long as good faith is demonstrated. 2. A form of shark repellent implemented by a target company acquiring a business that is so poorly regulated that the target itself is less attractive. established under the Private Securities Litigation Reform Act The Private Securities Litigation Reform Act of 1995 (PSLRA) implemented several significant substantive changes affecting certain cases brought under the federal securities laws, including changes related to pleading, discovery, liability, class representation and awards fees and 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.
IHOP CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(In thousands, except per share amounts)
(Unaudited)
Three Months
Ended
March 31,
-----------------
2006 2005
-------- --------
Revenues
Franchise revenues $45,255 $40,897
Rental income 33,350 33,038
Company restaurant sales 3,372 3,986
Financing revenues 6,540 7,902
-------- --------
Total revenues 88,517 85,823
-------- --------
Costs and Expenses
Franchise expenses 20,498 19,455
Rental expenses 24,648 24,683
Company restaurant expenses 3,756 4,806
Financing expenses 3,040 3,361
General and administrative expenses 15,090 15,563
Other expense, net 1,172 1,625
-------- --------
Total costs and expenses 68,204 69,493
-------- --------
Income before income taxes 20,313 16,330
Provision for income taxes 7,719 6,255
-------- --------
Net income $12,594 $10,075
======== ========
Net Income Per Share
Basic $0.68 $0.50
======== ========
Diluted $0.68 $0.50
======== ========
Weighted Average Shares Outstanding
Basic 18,421 19,991
======== ========
Diluted 18,650 20,213
======== ========
Dividends Declared Per Share $0.25 $0.25
======== ========
Dividends Paid Per Share $0.25 $0.25
======== ========
IHOP CORP. AND SUBSIDIARIES
RESTAURANT DATA
(Unaudited)
Three Months
Ended
March 31,
---------------
2006 2005
------- -------
Restaurant Data
Effective restaurants(a)
Franchise 1,079 1,034
Company 7 8
Area license 155 148
------- -------
Total 1,241 1,190
======= =======
System-wide(b)
Sales percentage change(c) 9.4% 4.9%
Same-store sales percentage change(d) 5.1% 0.6%
Franchise
Sales percentage change(c) 10.0% 5.9%
Same-store sales percentage change(d) 5.2% 0.6%
Company
Sales percentage change(c) (15.4)% (62.2)%
Area License
Sales percentage change(c) 6.1% 11.4%
(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 of IHOP restaurants
operated by franchisees, area licensees and the Company, as
reported to the Company. Franchise restaurant sales were
$479.3 million for the first quarter ended March 31, 2006, and
sales at area license restaurants were $52.9 million for the
first quarter ended March 31, 2006. 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
Ended
March 31,
--------------
2006 2005
------ ------
Restaurant Development Activity
Beginning of period 1,242 1,186
New openings
Company-developed -- 2
Franchisee-developed 7 11
Area license 3 1
------ ------
Total new openings 10 14
Closings
Company and franchise -- (2)
Area license -- --
------ ------
End of period 1,252 1,198
====== ======
Summary-end of period
Franchise 1,090 1,041
Company 6 8
Area license 156 149
------ ------
Total 1,252 1,198
====== ======
Restaurant Franchising Activity
Company-developed -- 3
Franchisee-developed 7 11
Rehabilitated and refranchised 3 3
------ ------
Total restaurants franchised 10 17
Reacquired by the Company (2) (2)
Closed -- (2)
------ ------
Net addition 8 13
====== ======
IHOP CORP. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(In thousands, except share amounts)
March December
31, 31,
2006 2005
----------- ---------
(Unaudited)
Assets
Current assets
Cash and cash equivalents $34,919 $23,111
Receivables, net 42,816 43,690
Reacquired franchises and equipment held for
sale, net -- 273
Inventories 696 537
Prepaid expenses 1,458 2,899
----------- ---------
Total current assets 79,889 70,510
----------- ---------
Long-term receivables 315,500 319,335
Property and equipment, net 313,205 317,959
Excess of costs over net assets acquired 10,767 10,767
Other assets 55,629 52,509
----------- ---------
Total assets $774,990 $771,080
=========== =========
Liabilities and Stockholders' Equity
Current liabilities
Current maturities of long-term debt $19,606 $19,564
Accounts payable 21,498 15,083
Accrued employee compensation and benefits 7,348 10,745
Other accrued expenses 9,828 9,030
Deferred income taxes 3,091 2,882
Capital lease obligations 4,597 4,491
----------- ---------
Total current liabilities 65,968 61,795
----------- ---------
Long-term debt, less current maturities 113,654 114,210
Deferred income taxes 59,300 61,414
Capital lease obligations 171,529 172,681
Other liabilities 71,190 67,134
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; March 31, 2006: 22,630,009 shares
issued and 18,362,236 shares outstanding;
December 31, 2005: 22,464,760 shares issued
and 18,409,587 shares outstanding 225 225
Additional paid-in capital 122,237 120,922
Retained earnings 340,551 332,560
Deferred compensation -- (747)
Accumulated other comprehensive loss (127) (205)
Treasury stock, at cost (4,267,773 shares and
4,055,173 shares at March 31, 2006 and December
31, 2005, respectively) (169,537) (158,909)
----------- ---------
Total stockholders' equity 293,349 293,846
----------- ---------
Total liabilities and stockholders' equity $774,990 $771,080
=========== =========
IHOP CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
Three Months
Ended
March 31,
-----------------
2006 2005
-------- --------
Cash flows from operating activities
Net income $12,594 $10,075
Adjustments to reconcile net income to cash flows
provided by operating activities
Depreciation and amortization 5,025 4,885
Impairment and closure charges 11 54
Deferred income taxes (1,905) 217
Contribution to ESOP -- 225
Stock-based compensation expense 809 29
Excess tax benefit from stock-based compensation (269) --
Tax benefit from stock options exercised -- 622
Changes in operating assets and liabilities
Receivables 725 163
Inventories (159) 44
Prepaid expenses 1,441 1,027
Accounts payable 6,415 1,387
Accrued employee compensation and benefits (3,397) (2,650)
Other accrued expenses 798 (91)
Other (586) (1,060)
-------- --------
Cash flows provided by operating activities 21,502 14,927
-------- --------
Cash flows from investing activities
Additions to property and equipment (241) (1,163)
Additions to long-term receivables (144) (847)
Purchase and redemption of marketable securities,
net -- 8,192
Proceeds from sale of land and building -- 890
Principal receipts from notes and equipment
contracts receivable 4,242 4,878
Additions to reacquired franchises and equipment
held for sale (239) (381)
Property insurance proceeds 2,226 --
-------- --------
Cash flows provided by investing activities 5,844 11,569
-------- --------
Cash flows from financing activities
Repayment of long-term debt (514) (479)
Principal payments on capital lease obligations (1,046) (894)
Dividends paid (4,603) (4,992)
Purchase of treasury stock (10,628) (2,193)
Proceeds from stock options exercised 984 2,170
Excess tax benefit from stock-based compensation 269 --
-------- --------
Cash flows used in financing activities (15,538) (6,388)
-------- --------
Net change in cash and cash equivalents 11,808 20,108
Cash and cash equivalents at beginning of period 23,111 44,031
-------- --------
Cash and cash equivalents at end of period $34,919 $64,139
======== ========
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