Dine Brands Global, Inc. (DIN) Q4 2012 Earnings Report, Transcript and Summary

Good day, ladies and gentlemen, and welcome to the Fourth Quarter 2012 DineEquity, Inc. Earnings Conference Call. [Operator Instructions] I would now like to turn the presentation over to Mr. Ken Diptee, Executive Director of Investor Relations. Please proceed.

Good morning, and thank you for participating in DineEquity's Fourth Quarter and Fiscal 2012 Investor Conference Call. Today, I'm joined by Julia Stewart, Chairman and CEO; and Tom Emrey, CFO. Before I turn the call over to Julia and Tom, let me remind you of our Safe Harbor regarding forward-looking information. Today, management may discuss information that is forward-looking and involves 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. We caution you to evaluate such forward-looking information in the context of these factors, which are detailed in today's press releases, as well as in our most recent 10-Q -- 10-K filing with the Securities and Exchange Commission. Forward-looking statements made today are made as of the date hereof and assumes no obligation to update or supplement any forward-looking statements. Additionally, on this call, we may refer to certain non-GAAP financial measures. These non-GAAP financial measures are described in our press releases today and are also available on DineEquity's Investor Relations website. With that, I'll turn the call over to Julia Stewart, Chairman and CEO. Julia?

Thanks, Ken, and good morning, everyone. Welcome, and thank you for participating on DineEquity's Fourth Quarter 2012 Earnings Call. As you may know, this morning, we issued 3 press releases regarding our earnings results, our capital allocation strategy and our guidance for 2013. We'll use this opportunity to provide additional details on these announcements and further discuss resetting how our 99% franchise business will be measured going forward before opening the call for Q&A. We've got a lot to cover, so let's get started. When we acquired Applebee's in 2007, we intended to transition the business into a 99% franchise model, with lower capital requirements. We knew that by refranchising the company-operated restaurants, revitalizing the brand and paying down debt, we would create a larger business that is capable of generating strong free cash flow. Today, that's exactly what the business is doing, and we are well positioned to return cash to shareholders. This morning, we announced the capital allocation strategy, as we had promised last year. Our management team and Board of Directors have thoughtfully and thoroughly evaluated the options which we believe are in the best interest of the company and our shareholders, from both a business and value-creation perspective. DineEquity's board has approved a capital allocation strategy that returns significant free cash flow to shareholders through a combination of a quarterly cash dividend payment of $0.75 per share of common stock and a $100 million share repurchase authorization. Under the dividend policy, the company intends to pay the quarterly cash dividend beginning in March 2013. The expanded share repurchase authorization, which is effective immediately, replaces the previous $45 million share repurchase authorization announced in August 2011 and further demonstrates our commitment to create shareholder value. The capital allocation strategy underscores our solid, fundamental "strong free cash flow and less capital-intensive " business model. We're focused on prudently managing our capital structure with a long-term view and positioning the company to potentially refinance our overall debt in the next few years. Now let me recap what we've accomplished in the last year. In 2012, we completed our transition to a 99% franchise company, making us unique in the full-service restaurant industry. We reduced our total debt by over $330 million, bringing total debt reduction since the Applebee's acquisition in 2007 to over $1 billion. We implemented a comprehensive G&A restructuring to generate approximately $10 million to $12 million in annualized G&A savings, and we established new centers of excellence to pool talent from across the organization. This creates synergies and sharing of best demonstrated practices. In 2013, we are focused on building on these achievements and maximizing shareholder value, as evidenced by the recent successful repricing of our senior secured credit facility, lowering our interest costs, while providing the needed flexibility to return cash to shareholders. Now I'd like to provide an overview of the fourth quarter, and then, Tom will review the financial results. Let's begin with IHOP. As I've shared with you previously, IHOP remains focused on 4 key elements to drive improved performance: a revitalized and more compelling menu; operational excellence; maximizing media; and more effective advertising. And while we've made progress in these areas during the fourth quarter, we are not content with IHOP sales and see additional opportunities to drive performance. We are committed to our strategy and will continue to execute against it. Notably, we are working hard with several of our key franchisees on the next evolution of the remodel program as well. I'll share more details on our progress after a brief overview of the fourth quarter. On same-restaurant sales, IHOP's domestic systemwide same-restaurant sales declined 2.6% due to decreases in both traffic and average check. Clearly, I am not satisfied with these results, and we are executing on our plan to turn around both sales and traffic. We are evolving our media strategy to leverage advertising that resonates with our guests. We are refining our advertising message by taking our testimonial creative strategy to the next level with a bolder approach such as the new TV spot in Times Square for the launch of our brand-new breakfast sandwiches, Griddle Melts. These are made fresh to order, available and nationally advertised at $4.99 for a half-sandwich and a side. It's a great value for our guests. And to reiterate, we have a plan in place to drive IHOP's performance, and we are executing against it. Our franchisees and IHOP team members are working hard against their respective objectives: optimizing our advertising and media to increase our reach and frequency; improving our menu through culinary innovation, simplification and enhanced appeal; and focusing on achieving operational excellence at the restaurant level. We continue to maintain our operations evaluation program, with 3 evaluations completed last year for every domestic restaurant. Additionally, we are collaborating with our franchisees on continuous improvement of our service training programs, and we're holding them accountable to meet and exceed our even higher standards. We believe that this strategy will ultimately culminate in driving sales and traffic over time. The fourth quarter marked the start of our new menu items pipeline reaching the marketplace, including oatmeal in 3 different flavors, whole-wheat pancakes and whole-wheat waffles. This journey will continue as we plan for the expected June 1 release of our second menu launch, which will further simplify the ordering process for our guests and include additional brand-new menu items, such as Griddle Melts, which is currently being advertised. Regarding food innovation, we are emphasizing our brand heritage, offering everything you love about breakfast, any time, every day. We're developing new offerings to provide our guests with what they crave. While breakfast is a primary focus, we are continually innovating and testing to create menu items that are unique to IHOP which can cross every day part and help to differentiate the brand. We know value remains a high priority for our guests. Third-party research showed improved consumer scores, where IHOP is seen as a good value for the money. Although we've not fully achieved our goal, we are making great progress and will not be satisfied until our objectives are met. With the rollout of Griddle Melts earlier this month at an attractive price, we think this is a stellar example of a winning combination, value and a unique IHOP offering. Gift cards are an important part of our business, and we're seeing growth in this area. For 2012, IHOP's gift card sales increased by 16% to approximately $38 million. In the fourth quarter, IHOP's franchisees opened 15 new restaurants domestically and 5 internationally, including our first IHOP in the Dominican Republic and our second in Dubai. In 2013, we have an important opening in the Asia Pacific and the Middle East. Now let me turn to Applebee's performance for the fourth quarter. Our strategy at Applebee's is delivering results, supported by enticing and healthy menu items, advertising that resonates with the guests, a simplified menu, an 18-month pipeline of new and tested items and an industry-first value proposition in 2 for $20. Applebee's ability to remain at the forefront of innovation was recently acknowledged by Fast Company magazine, naming the brand to its annual list of most innovative companies as its #2 most innovative company in food. We are extremely proud of this recognition. Applebee's domestic systemwide same-restaurant sales increased 0.9%, which was the ninth positive quarter of the last 10. The increase in sales was mainly driven by a higher average guest check. We are clearly not satisfied with these results, and we are working even harder to drive sales and traffic. Our late night and dinner day parts were both solid performers. Late night continued to be supported by tags on our national advertising and remains a favored destination for neighborhood guests who have developed an affinity for the brand. Our See You Tomorrow advertising campaign continues to be well received by guests. Our marketing efforts are focused on 4 tracks of innovation: dinner, lunch, alcoholic beverages and nonalcoholic beverages. We are testing exciting new items in these areas to match consumer preferences for flavor, mixes and appearance to entice guests. Our goal is to drive same-restaurant sales and traffic by the following: improving the overall perception of our food and beverages; bringing new solutions to each day part to address new product development, value and quality of service; testing new service and guest interface models; and evolving our media to include more digital and social. We continued to make progress on streamlining the menu, making it easier to execute and a better experience for our guests. We introduced innovative entrées to the menu, such as Spirited Cuisine and refreshed our very popular Unbelievable and Under 550 Calories menu. While our menu pipeline is geared towards dinner, it also has a strong lunch offering. We are applying the same rigor and consumer insight to our lunch pipeline to invigorate this day part. At the end of the year, 51% of the domestic system have the new revitalized look, and a total of 370 franchise and company-operated restaurants were remodeled in 2012. Applebee's franchisees opened 20 restaurants, of which 13 were domestic. Applebee's gift card program is also experiencing growth and remains a popular platform for us. Gift card sales increased 3% to $309 million in 2012. And lastly, Applebee's celebrated Veterans Day in the fourth quarter with its fourth annual national event to thank our nation's veterans and active duty military by inviting them to their neighborhood Applebee's for a free entrée to say thank you during one of our highest traffic days of the year. We are proud to play a large part in this national day of remembrance and respect. In closing, IHOP is not yet where it needs to be, but we are confident that the strategy we were executing on will position this iconic brand to regain momentum and remain a leader in the family dining space. And at Applebee's, our strategy is yielding results and improved perception of the brand, but we're not satisfied with same-restaurant sales and traffic. We will continue to work even harder to differentiate ourselves and retain our leading position in the casual dining category. With that, I'd like to turn the call over to Tom Emrey, our CFO, for a discussion of our fourth quarter results. Tom?

Thanks, Julia. Good morning, everyone. I would like to review some more of the highlights of the press releases we issued today. As mentioned, we completed our final Applebee's refranchising transaction on October 3, making DineEquity 99% franchised. The net after-tax proceeds from the final transaction were approximately $25 million, which was used to pay down debt. For the fourth quarter, total debt was reduced by $77 million, as a result of the net after-tax proceeds from disposition of assets, the reduction in financing obligations due to refranchising and free cash flow. Total debt reduction for 2012 was $333 million, driven by refranchising activity and strong free cash flow. Lower debt balances for 2012 led to an $18 million reduction in interest expense versus 2011. This month, the company successfully completed the repricing of its senior secured credit facility, lowering the current effective term loan rate to 3.75% from 4.25%. Additionally, the term loan's debt covenants were modified to reduce the limitations on the company's capital allocation options. Our consolidated leverage ratio at the end of the fourth quarter was 4.6x, down from 4.8x at the end of the third quarter of 2012. Please remember that the current leverage ratio is based on trailing 12 months of EBITDA and that the leverage ratio moves with EBITDA. The full computation is defined in our publicly filed credit agreement. Now onto our full year 2012 financial results. Adjusted net income available to common stockholders was $78.1 million or $4.28 per diluted share. This compares to $78.2 million or $4.29 per diluted share in 2011. The minimal year-over-year decrease was due to the expected decline in segment profit as a result of the refranchising of Applebee's company-operated restaurants and higher income taxes. This was partially offset by lower cash interest expense and lower G&A expense. Franchise segment profit was up marginally for 2012 over the prior year, primarily driven by the increase in effective franchise restaurants due to refranchising, an increase in fees associated with the sales of Applebee's company-operated -- Applebee's franchises between franchisees and restaurant development predominantly by IHOP franchisees. Given that we are now 99% franchised, we will no longer consider restaurant operating margin to be a key indicator and affecting operating performance going forward. As a result, we will discontinue reporting company operated margins. As previously disclosed, we will maintain 23 company-operated restaurants as a test market for Applebee's, along with the 10 IHOP Restaurants in Cincinnati. On G&A, G&A expenses were $163 million for 2012 compared to $156 million in 2011. And a reminder that the year-over-year increase was primarily due to a $9 million nonrecurring litigation settlement of a case that arose prior to acquisition of Applebee's and severance charges associated with the company's G&A restructuring announced in the third quarter of 2012. Net severance is a minimal net driver of the change. Now regarding the tax rate for 2012, the effective tax rate was 34.5% for the year compared to 28.4% last year. The increase was primarily due to a decrease in the federal employment tax credit as a result of the refranchising of Applebee's company-operated restaurants and a decrease versus 2011 in the release of liabilities for unrecognized tax benefit, primarily due to the lapse of the statute of limitation. Please note that the rate for the fourth quarter was 41%. As we previously disclosed in our updated third quarter financial guidance, our full year 2012 tax rate was expected to be 35%. Given that our tax rate for the 9-month period ended September 30, 2012, was 33%, the Q4 rate of 41% gets you to full year rate of 35%. For the fourth quarter, adjusted net income available to common stockholders was $15.5 million or adjusted earnings per diluted share of $0.83. This compares to $16.4 million or adjusted earnings per diluted share of $0.91 for the fourth quarter of 2011. The decrease in adjusted earnings was primarily due to lower segment profit caused by refranchising and higher income taxes. These items were partially offset by lower cash interest expense and lower general and administrative expenses. And now onto the 2013 guidance. With refranchising complete, it's the right time for a reset of how the business is measured. The guidance reflects this and goes into some more details than we have in the past or plan to in the future. But I'd like to touch on just some of the highlights of this guidance now. Domestic systemwide same-restaurant sales for both brands are expected to range between negative 1.5% to positive 1.5%. That's for both brands. Development is the key factor for both brands. IHOP franchisees and its area licensee plan to develop between 50 and 60 new restaurants, most of which are expected to be domestic openings. And Applebee's franchisees are expected to develop between 40 and 50 new restaurants, the majority of which are expected to be opened in the U.S. Profitability-wise, we provided guidance on the main segments of our business this year. And let's start with the largest, the franchise segment, where segment profits are expected to range between $312 million and $325 million in 2013. Rental and financing segment margins are expected to decline versus 2012 due to the normal and gradual structural runoff under our previous business model, as well as the conservative outlook for the impact of restaurants that are reacquired and operated on a temporary basis until refranchised. This includes approximately $13 million in rental segment depreciation and $16 million in interest charges. This interest is in addition to the corporate interest guidance. Company restaurant profits are expected to be approximately $1 million, net of roughly $2 million of depreciation and amortization, reflecting their test product and process development nature. These results are similar to how these particular restaurants performed in 2012 and reflect that they do serve as test markets. We are evaluating how we can realize more financially from these restaurants. Given that we're now 99% franchised, we do not intend to guide on company operations after 2013. Consolidated G&A is expected to be between $144 million and $147 million, including noncash stock-based compensation expense and depreciation of approximately $19 million. This outlook is in line with our expectations from our G&A projects. Cash from operations is expected to range between $88 million and $102 million, reflecting the high margins and low capital expenditure requirements of the new business model. We expect capital expenditures to range between $8 million and $10 million. Free cash flow is expected to range between $77 million and $93 million before considering dividends. Free cash flow is driven by cash from operations, plus principal receipts of the long-term receivables, which is estimated to be $14 million in 2013, less approximately $10 million in principal payments on capital leases and financing obligation, an estimated $8 million to $10 million in CapEx this year and the mandatory annual repayment of 1%, equal to $4.7 million, on our outstanding term loan principal balance. Please note that this does not take into account any other future debt reduction impact which may occur. The tax rate for 2013 is estimated to be 38%. This is an increase from 34.5% in 2012, primarily due to the decline of our federal tip credit now that we are 99% franchised. In 2013, we will only receive the credit for our remaining company-operated test market restaurants. Interest expense is anticipated to range from between $101 million and $103 million, reflecting past debt reductions and the impact of the recent repricing of our term debt. The weighted average diluted shares outstanding are estimated to be 19.3 million, reflecting the increase in shares from the late-November 2012 conversions of the Series B preferred stock and estimates for equity awards in 2013. No provision is made in this number for any potential share repurchases. Finally, our capital allocation strategy announced today is confirmation of our view that the company has the resources necessary to return significant cash to shareholders. To reiterate from our press release, we expect dividends and share repurchase to be the primary components of our capital allocation strategy. We will also reduce debt when it is in the best interest of the company to do so, and importantly, we will continue to prudently manage our capital structure with a long-term view, placing real emphasis on positioning ourselves to potentially refinance our overall debt in the next few years. And now I'll turn the call back to Julia.

Thanks, Tom. And to conclude, there are a few things I just want to reemphasize. It's clear that the economy remains challenging, and as others have noted, the recent tax changes have had a negative impact on consumers' discretionary spending. It is way too early to assess the total magnitude of the impact or the likely duration of it, but we are maniacally focused on brand differentiation, delivering value to our guests and ongoing innovation. I'm very optimistic about our strategy to improve performance and drive profitability at both brands. We are confident that our capital allocation strategy, which includes a meaningful dividend and opportunistic share repurchase program and simply put, prudent management of our capital structure, will continue to create value for our shareholders. To close, Tom and I would be pleased to answer your questions. Operator?

[Operator Instructions] Your first question comes from the line of Will Slabaugh with Stephens Inc.

This is JR [ph] on for Will today. Just wondering if you guys could talk about the long-term opportunities internationally and how you think that could drive your unit count higher over time.

Well, we've had some steady growth in the international side of the business. As you've seen in the last couple of years, we are looking at a couple of new countries that I talked about briefly this morning, both at IHOP and now at Applebee's. But the real focus for us is to grow in the existing countries that we're in, and you'll see a lot of that development, South America, Central America, Middle East, and now you're seeing it in the Philippines and possibly Southeast Asia. So I think that's really our growth opportunity. Knowing that the footprint is about 4,800 square feet, you're -- it's not like you're going to build 1,000 of them in a new country anytime soon, but we've got steady opportunity, and we've always said that, that's a growth opportunity. When it gets larger and it becomes a major part of our business, then we would disclose it as an individual line item. But that's a few years off, I can be candid with you. We're just not seeing that much growth. But eventually -- it may take several years, but eventually, we'll get to a point where we would disclose that as a different segment. But right now, it's a work in progress.

Your next question comes from the line of Bryan Elliott with Raymond James. Bryan C. Elliott - Raymond James & Associates, Inc., Research Division: Just, Tom, actually, a couple of clarifications quickly and then, a question. On the interest expense guidance, I assume that only included the articulated paybacks, the cap lease and the required 1% payment. Just wondering what -- was there any additional debt payback assumed out of free cash flow in that interest expense guidance?

No. Bryan C. Elliott - Raymond James & Associates, Inc., Research Division: Okay. I didn't think so. I just want to double check. Also, working capital assumptions and cash tax assumptions embedded in the cash flow guidance.

Yes, there's -- is it $10 million? There's a $10 million cash tax impact on the cash from ops, greater than GAAP, approximately $10 million. Bryan C. Elliott - Raymond James & Associates, Inc., Research Division: So above -- the cash outflow will be $10 million more than the income statement tax expense?

Exactly -- approximately. Bryan C. Elliott - Raymond James & Associates, Inc., Research Division: Right, right, sure. And anything else noteworthy in the working capital? I assume that, that's 0.

No, nothing that comes to mind, no. Bryan C. Elliott - Raymond James & Associates, Inc., Research Division: Okay, great. And I guess a question for Julia. So a lot of us heard from Darden's research yesterday that -- or I guess, the day before, at their Analyst Day, they really focused on the 60K and below household income stratas, obviously, getting squeezed hard here with gas prices and payroll tax increase, et cetera. Maybe you could refresh our memory on kind of IHOP's core demographics and what you might be seeing or thinking about, more specifically as you deal with the value challenges that are out there with that middle -- lower-middle income consumer.

Yes, I think the thing I've -- that's a great question, Bryan. I think the thing I always said about IHOP is it has the widest range of consumers I have probably seen in my career, right? And I've always talked about the fact that in the parking lot, you can see the 50-year-old beat-up Volkswagen right next to the brand-new Mercedes. I mean, the wide swath that -- of consumers that come into IHOP, we've seen at both low income, medium income, high income, incredibly high income, it's a very wide range, dinks, families with children. I think you know we index extremely high to the African-American and Hispanic communities. It's just a wide range. So that's always been one of our sort of precursors to the value message and the success we've had, is the fact that the consumer demographics is so large at IHOP. It's much more confined at Applebee's. It's much more targeted in that middle income, slightly higher income. But at IHOP, it's just a huge swath. Bryan C. Elliott - Raymond James & Associates, Inc., Research Division: So the pressure on sales is not specific then to this purchasing power shrink, former customers unable to come or being forced to spend less when they do come. Is that a correct interpretation of that?

No, I think my closing comment in my script was the one that you should take away, that it is obvious in this environment that, clearly, we've had a challenge from consumers. And what I've said was, the recent tax changes have had a negative impact on consumer discretionary, period. I mean, there's no question. The length and the duration and the impact is just too soon to tell. Bryan C. Elliott - Raymond James & Associates, Inc., Research Division: According to the tests?

Yes, it really is at this point. And I think, the only other thing I would say, Bryan, is that the guidance tries to take all of that into consideration. So that's the way you should think about it.

The next question comes from the line of Michael Kelter with Goldman Sachs.

This is Ivan sitting in for Michael. First question for Julia. Now that you achieved your goal of transitioning to a fully franchised model, can you provide us with additional color on how you will prioritize the transition of the capital, given the context of the lower CapEx requirements? Specifically, how do you think about balancing share repurchases and potential increases to the dividend? And just to add one quick last thing in there, a variable which I don't believe was mentioned up until now, can you update us on your thoughts about potential acquisitions and the integration of a possible third brand? How does that fit into the mix?

Yes. I think the way to think about it from a capital allocation, I think we were very thoughtful about this whole strategy of the quarterly dividend and the share repurchase. And as you think about -- the board reviews that just like any other public company, once a quarter. I think we feel very good about the strategy that we've put in play and that we announced today. And I think we've got a very balanced approach. And that's the way we've thought about it, and that's the way you should think about it for the next couple of years. And I think I also said in the prepared remarks that we obviously still have in the back of our mind being able to refinance all of the debt in the next couple of years. So that's the way you should think about it. From an acquisition standpoint, we have no immediate interest in doing an acquisition. Our focus is very much on reenergizing both brands and making certain that we drive sales and traffic. So that's kind of our focus right now.

And actually that segues into my next question. Why not refinance now and pay a penalty versus waiting 18 to 24 months when interest rates could be higher and the debt markets may not be as accommodating? Have you made any inquiries there? Is there any feedback, any color you could provide?

We evaluate that on an ongoing basis, and right now, that doesn't seem like the right course for us to follow. The question of what future interest rates look like is too speculative right now, and we think that what we've elected to do in our capital allocation strategy is the right path to follow.

Your next question comes from the line of Reza Vahabzadeh with Barclays.

Just on the leverage question. Where does leverage fit into your overall financial policy? Would you anticipate some additional deleveraging here, slowly but surely? Or is this where -- are you already at the right leverage level? And then, on the IHOP same-store sales front, how should we think about the pace of progress that you would anticipate over the coming year or 2 as you are sort of refreshing the brand and sort of reengineering the menu?

So let me answer the IHOP question first, and then I'll let Tom answer the leverage question. So it's a great question. On the IHOP, we knew going in that the turnaround was going to take a while, and I think that's the real focus. We've done enough proprietary research to know that we've got some really key opportunities, both on the operating side and the menu side, and that's the focus. And obviously, you can't turn a menu around in 6 months. I wish you could. So it does take a bit of time to test each of the new promotions and products to make certain that we give the right framework, from a value perspective, to the consumer. But I think you should see this year the kind of progress we're making on -- you've got 3 new menus, right? One came out at the beginning of the year, one in June, one at the end of the year. So as consumers go in and see that new menu, as they see the improvement in operations, those are things they get once they go in. The improvement of what they see on television, right? So the television, the media, drives them in and the better execution and better menu brings them back. I think you'll see that progression throughout the year. And frankly, that's what the guidance is intended to do is to show you that -- obviously, we didn't guide with where we were fourth quarter, so that's intended to show the progress.

And on the leverage, there's a very modest principal pay-down that naturally occurs. But for right now, we think the leverage that we're at is where we need to be for the time being, and we'll evaluate that as we go forward based on how market conditions evolve because that sort of the key determining factor.

Your next question comes from the line of Amod Gautam. Shaurja Ray - JP Morgan Chase & Co, Research Division: This is actually Shaurja on for Amod. On your same-store sales guidance, what are some of the puts and takes for IHOP to achieve the higher end of that guidance in what seems to be a very transitionary year for the brand? Is there something you're seeing, current tests, that give you confidence in achieving that range? On the flip side, for Applebee's, I think a lot of people would expect this year to be pretty solid despite some of the consumer noise, given all the efforts and investments made at Applebee's over the last several years. So I just want to get a better sense of the variability from the low to high end of guidance.

Actually, it's a great question. So on the Applebee's side, I think it's fair to say we are in a testing mode, which I think I made on the prepared remarks, that we are in a testing mode with several areas of the brand, it's too soon to tell on any of those, and continuing the pretty serious innovation that we have sort of led the way on for the industry. And those things give us confidence. Clearly, the consumer environment right now is sort of the negative. But I think in general, we feel very good about the pipeline that we've got in place, as well as the work that we're doing in testing. That's sort of the positive. And I think I said that there is probably an 18-month pipeline at Applebee's, so that's really positive. On the IHOP side, we have come a long ways in a short period of time, not only on the pipeline and the menu work, but on the operational side. So I think that's the positive. Clearly, the consumer environment don't know enough yet, but that's sort of the negative, if you will. So when you balance that, it's a great question, it's sort of how we got to our guidance for the year on both brands, frankly. Shaurja Ray - JP Morgan Chase & Co, Research Division: Great. And just a quick follow-up on the free cash flow guidance of $77 million to $93 million, is that kind of a fair normalized run rate going forward?

Well, we aren't guarding on future years, but that's the number that we feel comfortable with for 2013.

Your next question comes from the line of Bryan Hunt with Wells Fargo Securities.

Tom, I was wondering if you could tell us where the RP basket is under the notes at the current time. And does that prevent you from executing the full $100 million share repurchase, as well as the dividend in year 1?

Well, we wouldn't be able to execute $100 million share purchase in year 1 anyway, unless I misunderstood your question.

Yes. I mean, okay. And what prevents that, just the amount of stock you can buy in any given day?

Well, if you look at the fourth page of the guidance press release, there's a table there that shows how the free cash flow is and how it's constituted. And it shows what the total amount of free cash flow that would be available for repurchases and further debt reduction and dividend, and that number is between $77 million and $93 million.

So what you're saying is you wouldn't dip into the revolver to buy back stock?

We could. We don't plan to at this point in time necessarily, but it's entirely possible.

Okay. And I guess the first part of that question, do you know what the restricted payments basket is under the notes at the current time?

We're actually checking on that right now, so give us a few minutes and we'll try and get it in before the end of the call.

Okay. And then my last question is, qualitatively, Julia, is there any way you can talk about the health of the IHOP franchisee in the current time given the pressures on food cost and the weaker same-store sales and how they feel about the program to reenergize the brand in the upcoming year?

So great question. On the -- we didn't get a chance to say that in the script, so it's actually a really good question. On the commodities inflation for both brands, I didn't mention that in the prepared remarks. Currently, working with a co-op, the inflation factor for IHOP for 2013 is 1.3% on just commodity inflation. So we've been able to really hold the line with the co-op, so I feel really good about that, from commodities inflation. And we've been working very hard with our franchisees to find savings so that's been a real focus for us at IHOP. And I've mentioned several times probably in prior calls that there's several ways we look at the health of our franchisees. I think I've mentioned to you that the IHOP franchisees pay weekly and the Applebee's franchisees pay monthly. So clearly, you have a pretty good view pretty quickly from just a receivables perspective. But beyond that, certainly Tom has done a tremendous amount of work in the last year, with the rest of the team, looking at the individual P&Ls, spending time with the franchisees. And in general, we feel pretty good about where the franchisees' health are and how they're doing. And obviously, they report out to us. The other notion is from time to time, we always have take-backs, we have since I've been here, and we presume there are some of those this year, just like there always have been. I mean, it's sort of been our standard operating procedure that, as you recall in the old model, we bought the land and building and sold it to them, and they have the right to return those. So in any given year, we'll always have some take-backs. But in general, we feel pretty good about where the IHOP franchisees are.

The restrictive payment basket as it stands right now on the term notes is approximately $85 million.

Your next question comes from the line of Ned Davis with North River Capital.

. I'd like to explore the board's decision on the dividend. Is there any sense of what kind of the breakpoint would be to modify this dividend going forward, particularly if economic conditions are not as strong as is implicit in your guidance?

It's a fair question, but I think I can't really speak for the board other than to say the board does a very thorough and thoughtful review every quarter with management. We go into a fair amount of evaluation, and we look at it every quarter.

And is -- what's kind of the feeling about share repurchase versus dividend as a return of capital, kind of the logic behind it? I mean, obviously, it would be devastating if the dividend had to be cut down the road because of just economic conditions or whatever. And I'm just wondering why they opted to go so heavy on the dividend side.

Yes, I think the way we talked about it was opportunistic on the share repurchase. And that's the way we look at it, it's being very opportunistic, right? And I think we tried to -- hopefully, we did a good job today on the call of communicating a very balanced approach between the dividend and the share repurchase and looking at both of them and the value that each of them brings to shareholders. So hopefully, we did a good job of creating this balanced approach and being opportunistic in the share repurchase world.

But the dividend is intended to be a permanent dividend, right? Correct?

Well, obviously, as we always say, the board evaluates it every quarter. But I think most people would say that, from a dividend perspective, we want to do everything we can to return cash to shareholders and be as flexible as possible. So I mean, I can't speak for the board in the next 10 years, but I think the intention with the dividend is to make it every quarter.

[Operator Instructions]

It doesn't sound like any other questions. So with that, let me thank you very much for joining us this morning. Our first quarter 2013 reporting date is May 2, 2013. If you have any questions, please feel free to call Ken, Tom or myself. Thanks for your time this morning. Take care.

Thank you for your participation in today's conference. This concludes the presentation. You may now disconnect, and have a great day.