IHOP Expects Earnings Growth in 2005 :: Restaurant Supply Resource

IHOP Expects Earnings Growth in 2005

IHOP Corp. Provides 2005 Financial Performance Guidance

The Company Expects Improved Business Performance As New Business Model Takes Hold in 2005

IHOP Corp. (NYSE:IHP) today announced that it expects earnings per diluted share for 2005 to range between $2.02 and $2.12. The Company's earning performance outlook is based on IHOP's expectation to continue positive same-store sales growth at 2% to 4% in 2005, and the addition of 62 to 72 new restaurants to the IHOP system this year. IHOP expects to generate between $55 million and $65 million in Cash from Operations in 2005.
Julia A. Stewart, IHOP's President and Chief Executive Officer, said, "2005 should be another exciting year for IHOP. It is a year in which we expect to fully experience the financial and strategic benefits of our completed business model transition. While we expect strong same-store sales and unit growth to drive our business forward, our commitment to shareholders is to also manage our G&A expense for improved financial leverage. We will continue to optimize the IHOP concept with an unwavering focus on initiatives designed to energize our brand, improve the operational performance of our restaurants and maximize franchise development."

2005 EPS Performance

IHOP's 2005 earnings performance range of $2.02 to $2.12 per diluted share is based on, among other things, the following assumptions:

• Positive same-store sales growth of between 2% and 4% in 2005. Key sales catalysts for 2005 include the addition of a fourth flight of national advertising, a strong line-up of promotional products, continued operational improvement at the restaurant level, and the system-wide introduction of a new, more contemporary menu, among other factors.
• The addition of 62 to 72 new restaurants to the IHOP system in 2005. This includes the development of 55 to 60 restaurants by franchisees, five to eight restaurants developed by IHOP's area licensee in Florida, and two to four restaurants developed by IHOP Corp. in its dedicated Company market of Cincinnati, Ohio. The majority of these restaurants are expected to open in the second half of 2005.
• G&A expenses are expected to be within the range of $61 million to $63 million in 2005. IHOP expects to keep G&A growth moderate as the Company works to improve its financial leverage. The Company's G&A spending will focus on initiatives designed to support same-store sales growth, enhance the IHOP brand and drive operational improvements throughout the IHOP system.

2005 Cash Flow Performance

An important aspect of IHOP's new business model is the Company's ability to generate significant cash flow. The following reflects anticipated cash generation as well as cash commitments in 2005:

• Cash from Operations is expected to be within the range of $55 million to $65 million in 2005, and principal receipts from note and equipment contracts receivables are expected to be within the range of $15 million to $20 million. These two combined sources of cash are expected to generate between $70 million and $85 million in 2005.
• Capital expenditures are expected to be within the range of $11 million to $13 million in 2005. This primarily reflects investment in the development of IHOP's Company market in Cincinnati as well as continued support of Information Technology initiatives.
• Cash commitments in 2005 are expected to be approximately $9 million for the repayment of long-term debt principal and capital lease obligations.

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Date Listed: 2005-01-26

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Industry: Restaurants
Category: Financial
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