DIN: GLANCE AT THE 2Q MENU

Choppy outlook given management’s recent conference presentations in June, here is a look at DIN’s guidance going into earnings tomorrow.

 

General commentary

  • Kids Eat Free promotion at IHOP for the month of April – impact on dinner traffic?
  • $5 coupon with purchase of $25 gift card
  • DIN is committed to the strategic objective of transitioning Applebee’s into a more highly franchised restaurant system over time

To that end DIN announced on July 23rd that the franchise, Apple American Group LLC agreed to buy 63 Applebee’s in Minnesota and Wisconsin.  Gross proceeds are estimated to be $32 million.

 

Guidance Goal Posts

  • The full year tax rate is expected to be approximately 34% - in line with earlier guidance
  • DIN expects to continue to use FCF to opportunistically repurchase debt when available
  • Full year stock based comp is expected to be ~$13m
  • FY10 Free Cash Flow between $118m and $128m
    • CFFO between $145m and $155m
    • $16m from run-off of long-term notes
    • Capex between $20m and $23m
  • FY10 Operating margin between 13.5% and 14.5%
  • Applebee’s FY10 domestic system same-restaurant sales between flat and 4%
    • 25-30 new franchise restaurants opening this year
  • IHOP’s FY10 domestic system same-restaurant sales between -1% and +1%
    • 60-70 new franchise restaurants opening this year
  • FY10 consolidated G&A expense to range between $158m and $161m.  In Q&A on the most recent earnings call management indicated that this will not be smooth and that, for modeling purposes, “would not flat [sic] that number through the remaining quarters”.
  • Food costs flat to slightly favorable for FY10

 

Howard Penney

Managing Director


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