Dine Brands Global, Inc. (DIN) Q2 2013 Earnings Report, Transcript and Summary

Good day, ladies and gentlemen. Welcome to the Second Quarter DineEquity Earnings Conference Call. My name is Philip, and I will be your operator for today. [Operator Instructions] As a reminder, this conference is being recorded for replay purposes. I would now like to turn the conference over to your host for today, Mr. Ken Diptee, Executive Director of Investor Relations. Please proceed, sir.

Good morning, and thank you for participating on DineEquity's second quarter 2013 conference call. Today, I'm joined by Julia Stewart, Chairman and CEO; Tom Emrey, CFO; and Gregg Kalvin, Corp Controller. 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, both known and unknown risks, uncertainties and other factors which can cause the actual results to be substantially different than those expressed or implied. We caution you to evaluate such forward-looking information and the context of these factors, which are detailed in today's press release, as well as in our most recent 10-Q filing with the SEC. The forward-looking information -- the forward-looking statements made today are made as of this date and assumes no obligation to supplement or update these statements. Additionally, we may refer to certain non-GAAP financial measures, which are described in our press release and are also available in 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, and welcome to DineEquity's second quarter earnings call. By now, you've had the opportunity to review the press release we issued today. I'm going to provide a brief overview of the quarter, and then Tom will discuss our second quarter financial results before we open the call for questions. I'll start by saying I am very pleased with our stronger same-restaurant sales performance this quarter and the progress we're making at both IHOP and Applebee's. We continue to effectively manage our G&A and delivered solid results. Our disciplined approach to G&A management has enabled us to enhance operating performance and adjust our comp structure to support our fully franchised business model. We're continuing to make progress on foundational improvements and brand innovation by leveraging our shared services model. We're sharing best practices across both brands, enabling us to efficiently test innovative platforms at the restaurant. Our shared services and Centers of Excellence structure, which is a real differentiator, was designed to allocate our best resources toward our biggest opportunities and drive both brands forward, and we're doing just that. Now during the first half of 2013, we returned over $43 million combined to our stockholders, affirming our commitment to allocate capital. In the second quarter, we returned approximately $29 million through the combination of a meaningful dividend of $0.75 per share of common stock and share repurchases. In fact, our dividend yield of 4.6% is among the highest in the restaurant industry. And while we expect dividend payments and opportunistic share repurchases to be the primary components of our capital allocation strategy, we will also use our strong free cash flow to reduce debt if it's in the best interest of the company to do so. Managing our capital structure remains of the utmost importance. We continually monitor the credit market and assess potentially refinancing our debt. We are evaluating our options very thoroughly. At the brand level, both IHOP and Applebee's are making progress to get to their strategic priorities, which we believe will drive performance over the long-term. We continue to work collaboratively with our franchisees to drive consistent and sustainable same-restaurant sales and traffic growth. I'm also pleased to announce that for the sixth consecutive year, both IHOP and Applebee's were, again, ranked #1 in their respective categories by Nation's Restaurant News on the basis of U.S. systemwide sales for the last year. This is a testament to the dedication and hard work of our franchisees and the popularity of both brands among guests. I'm proud to say we are the only restaurant company in America with 2 #1 brands. I'll now briefly review our second quarter highlights, and then I'll turn the call over to Tom to discuss our financial results. I'll begin with IHOP. Now I've previously discussed with you the 4 key pillars of our strategy to improve performance at IHOP. And we've remained focused on menu innovation, operational excellence, advertising and media, and our value proposition. These 4 pillars serve as a roadmap to turning IHOP around and driving sustainable, positive same-restaurant sales and traffic. The second quarter provided an opportunity to highlight the improvements we've made against these areas. I'm excited to announce that IHOP's domestic systemwide same-restaurant sales increased almost 2%, marking the first quarter of both positive comp sales and guest traffic since the fourth quarter of 2010. This is the second sequential quarter of improvement in same-restaurant sales. We believe the recent performance reflects the efforts made against our 4-pillar strategy. Let me give you a brief detail on each of them. Pillar #1, menu innovation. The strategy and principles that we've successfully applied at Applebee's, following the acquisition, are being implemented at IHOP. We are laser-focused on keeping the menu fresh. Additionally, we are alpha-testing several new innovative breakfast items to differentiate ourselves, create additional excitement and exceed the expectation of our guest. IHOP's menu has been redesigned and streamlined for better navigation and to emphasize the heritage of the brand. In early June, we launched the second of 3 new menus scheduled for this year. The third launch is scheduled for late 2013. Pillar #2, operational excellence. We are executing on our plan to achieve operational excellence at the restaurant level. We're driving the process by collaborating with our franchisees on continuous improvement of our service training programs and holding them accountable to meet and exceed our high standards. We are working to simplify processes and improve speed of service. IHOP's team members have laid the foundation to ensure we continue to deliver excellent service to each and every guest. In addition, we are testing several platforms that will further enhance guest service and operation. Pillar #3, advertising and media. We are evolving our media strategy to maximize our spin through an improved buying process. Our plan focuses on media weights and key decision time periods, a strong on-air presence to maintain share of voice and diversifying our media mix to reach our guests. Our goal is to increase new traffic to our restaurants and to encourage our existing guests to visit more often through compelling and focused communications. We are refining our advertising message by taking our testimonial creative strategy to the next level with a bolder approach. We will continue to drive innovative advertising that resonates with our guests. And lastly, pillar #4, our value proposition. Providing a compelling value proposition remains a core tenet in our strategy to improve sales and drive traffic to our restaurants. We remain keenly aware of the importance of affordability and quality to our guests. We also realize that value is not only price point, but rather a consumer-defined perception that includes price, portion size and customizable options. We responded to the needs of our guests, introducing new value-oriented items that are unique to IHOP such as our latest breakfast innovation, Brioche French Toast and Griddle Melts, earlier this year. We will continue to work on a variety of ways to improve our value perception. I would like to thank the entire IHOP leadership team and especially our franchisees for their dedication and hard work. I am very pleased with our accomplishments this quarter, but we still have much more to do. We will continue our efforts to deliver consistent and sustainable positive same-restaurant sales and traffic. Now let's turn to Applebee's second quarter results. The casual dining segment continues to face some challenging headwinds, but we're glad to say that we outperformed the category in the second quarter. Regarding same-restaurant sales, Applebee's performance was strong in an uneven consumer environment. Domestic systemwide same-restaurant sales were up 1.3% in the second quarter, with traffic down slightly. This is a solid improvement over the first quarter. Sales were primarily driven by the continuing evolution of our advertising strategy, which resonated with guests and directed more attention to our lunch business. To drive the brand forward, we are executing on a strategy that focuses on our key objective, driving sustainable positive sales and traffic while improving the guest experience. Our plan centers on the value proposition, our advertising approach, menu innovation and guest preferences. Let me provide a little detail on each. On our value proposition, value is a key component of our position as the leader in the casual dining industry and its important theme in our story. Applebee's represent great food at an affordable price. The value and variety in our menu makes Applebee's a destination of choice for guests every day. We understand that there is more to value than just price. We know that the quality of the food, the variety on our menu [Audio Gap] are just as important in our value proposition. Our guests visit our restaurants for different reasons at different times, so it's important that we provide compelling value throughout the day. We offer a wide variety of lunch combos starting at $6.99. Our new Take Two offering allows guests to choose 2 smaller portion entrées starting at $10.99. And half-priced late-night appetizers attract guests into our restaurants after the traditional dinner day part. Again, variety, price and quality are key drivers. Regarding our advertising approach. Even when the price point is not the main focus, our value message resonates with guests when we effectively communicate the quality of our food, the freshness of ingredients that we use, and the high level of service at our restaurants. The menu items we advertise on TV are an important part of our advertising strategy and a point of differentiation. For instance, we introduced 2 for $20 in 2007 as a way to drive traffic into our restaurants. Since then, it's what many guests first associate with Applebee's and what the competition has tried to duplicate without success. The evolution of our advertising strategy in the second quarter had a favorable impact on same-restaurant sales. We will look to build this momentum. On menu innovation. We remain at the forefront of differentiation by creating popular value platforms. Additionally, we consistently update our menu with enticing options at attractive price points. We are confident that providing the right item at the right price will continue to resonate with guests and drive sales and traffic across all day parts. During the second quarter, we launched Fresh Flavors of Summer starting at $9.99 and a new lunch combo, providing excellent value options for any mealtime. In addition, the recent introduction of Take Two, starting at $10.99, offers guests the opportunity to sample any 2 items from the new Fresh Flavors of Summer selection. It's about new high-quality food, a wide variety of choices and attractive price points. Our menu provides guests with all of these key value drivers. And finally, guest preferences. Bottom line, food quality remains an important driver and influences where guests choose to dine out. An environment of intense promotional activity, we are focused on differentiating ourselves more effectively, looking for new ways to be innovative and committed to continually improve our service platforms to provide a dining experience that you can only have at Applebee's. Now I'd like to turn the call over to Tom Emrey, our CFO, for a discussion of our second quarter results. Tom?

Thanks, Julia. Good morning, everyone. Let me run through the income statement highlights, and then I'll take a few -- make a few brief comments on the balance sheet. First, it's great to say that both Applebee's and IHOP reported improved same-restaurant sales versus the second quarter of last year. We are encouraged by the results, but we have more work to do to achieve our objectives of consistent and sustainable same-restaurant sales and traffic growth. Now our franchise segment profit was up $5.7 million in the second quarter of 2013 compared to the same period of last year, and this is primarily due to Applebee's refranchising activity and restaurant development mainly by IHOP franchisees. For the first 6 months of 2013, franchise segment profit increased by $8.7 million compared to the first half of 2012. Regarding G&A, G&A expenses were $35.6 million in the second quarter of 2013. This compares to $37.2 million a year ago. The decline was mainly due to lower personnel costs as a result of refranchising, our comprehensive restructuring and lower stock-based compensation costs. For the first half of 2013, G&A expenses were $69.7 million compared to $76.9 million for the same period last year. Looking to the second half of the year now, G&A is expected to be higher than it was for the first 6 months of 2013, and this is driven by the timing of various expenses such as franchisee conventions and some additional consumer research. We actively manage G&A and we're pleased we're delivering meaningful savings, and we now see G&A coming in between $142 million and $146 million for 2013. This is a reduction from our previous guidance of $144 million to $147 million, with lower personnel costs being the main driver. On free cash flow, I want to clarify that our 2013 guidance computes free cash flow after deducting mandatory lease payments and mandatory debt reductions to highlight how much is available for dividends, share repurchases and other debt reductions. Under this method, we generated $52.1 million in free cash flow in the first 6 months of the year, of which we've returned approximately 83% to our stockholders through the combination of cash dividend payments and share repurchases. Computing free cash flow before deducting mandatory lease payments and debt reductions, we have generated a very strong $59.5 million year-to-date. In the second quarter, we repurchased approximately 201,000 shares or $14.5 million of our common stock. This level of share repurchases is not necessarily indicative of our repurchases in the future quarters, so we will continue to be opportunistic regarding the repurchase program. Looking at the balance sheet. Our cash balance as of June 30, 2013, was $75.6 million, and this compares to $32.4 million a year ago. I want to point out that the cash balance of June 30 looks high mainly due to the timing of when we recorded IHOP rental segment payment this year versus last year. There is no fundamental change to our net working capital. Cash is down substantially from March 31, significantly because of sizable tax, interest and dividend payments along with share repurchases that occurred during the second quarter. Cash is up compared to December 31, 2012, significantly because of higher IHOP advertising funds on hand. Gift card and advertising funds are sizable pieces of the overall cash balance, and they can drive seasonal savings -- seasonal swings rather, along with tax and interest payments, which are also seasonal. This is why we focus more on our free cash flow and its utilization than our capital allocation strategy versus our cash on-hand at the end of a given period. Regarding the tax rate, our effective tax rate for the second quarter was 37.2%, which compares to 38.2% for the second quarter a year ago. The decline was mainly due to the normal fluctuations and the timing of our recognition of tax benefit. Our tax rate guidance for the full year remains unchanged at approximately 38%. Interest expense. A reduction on our long-term debt and the decrease of financing obligations as a result of refranchising led to a $4.7 million decline in interest expense compared to the same quarter in 2012. Maintaining financial flexibility and reducing our interest costs remain key strategic priorities. To that end, we are continually assessing the conditions of the credit market as well as taking into consideration the "make-whole" premium on our 9.5% bond, the computation of which is defined in our publicly available Offering Memorandum. In addition to the indenture "make-whole" premium, we would also be subject to the mandatory premium of 1% of the term loan principal balance through February 2014. We believe refinancing our debt is of great importance, and we must manage our cash flow to put ourselves in a good position to do so at the right time. So of course, we're actively evaluating our options. But right now, we do not believe it's the right time to refinance. We are always looking at it. Our consolidated leverage ratio at the end of the second quarter was 4.8x, marginally higher than 4.7x at the end of the previous quarter. Please remember that the current leverage ratio will continue to rise slightly as we move through the year. Again, this is because of the impact of refranchising. Since the calculation is based on trailing 12 months of EBITDA and the leverage ratio moves with EBITDA, the full computation is defined in our publicly filed credit agreement. Lastly, I want to give an update on the 2 franchisee bankruptcies we disclosed in our first quarter 10-Q. To recap, 1 IHOP franchisee and 1 Applebee's franchisee filed for bankruptcy protection, completely independent of each other for unrelated reasons. Now since these are legal matters, we are limited in what comments can be made. But I will say that while these events may occur from time to time, we do not see them as part of a larger pattern. Again, the reasons are specific to the franchisee and unique in each case. Regarding the IHOP franchisee, the bankruptcy court recently issued an order making it probable that 2 of the 19 restaurants owned and operated by the franchisee will be taken back by us temporarily until they can be refranchised. Accordingly, a noncash charge of $500,000 was recorded for the first 6 months of 2013. Pending the outcome of the bankruptcy proceedings regarding the remaining 17 restaurants, we may incur additional noncash charges of up to $5.4 million made up of some combination of deferred lease revenue and equipment lease receivable write-downs. To reiterate, these are noncash items. Turning to the Applebee's franchisee. 15 of the 33 restaurants owned and operated were sold in 2013, and the remaining 18 restaurants were closed. We believe we are entitled to cash termination payments and other cash fees associated with the closure of these restaurants. These amounts are subject to the bankruptcy proceedings and cannot be determined at this time. However, we do not expect the outcome of the Applebee's proceeding to have a material adverse impact on our results for 2013. Lastly, we have entered into a development agreement with a new franchisee to open additional Applebee's restaurants in the Illinois market. So again, these are legal matters and the final outcome is difficult to determine. It is possible that the P&L effect from these 2 bankruptcy matters may offset each other to some extent. We expect to know more in the coming months. To close, we are focused on continuing to drive strong results in a disciplined way, returning cash to shareholders and effectively managing our G&A. In addition, we will continue to closely monitor the credit market with an eye towards refinancing the debt as part of our strategy to minimize interest cost and generate strong returns for our shareholders. And with that, I will turn the call back to Julia. Thank you.

Thanks, Tom. In closing, we're very pleased with the performance of both brands, especially be improvement in IHOP same-restaurant sales. Again, in an uneven consumer environment, industry sales data has shown that both brands outperformed their respective categories in the second quarter. We will continue to execute on our plan to position the company for long-term success and create value for our stockholders. We are laser-focused on driving fundamental improvement and innovation across the organization, especially our brands. With that, Tom and I would be pleased to answer your questions. Operator?

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

I want to ask for a little bit more detail on IHOP and the success that you saw there. Just wondering where you're crediting that traffic improvement for the quarter and either -- is that a day part prospective there or is there anywhere on the menu that you're particularly pleased with on this quarter?

Yes. I would really say it's across-the-board with the day parts. I wouldn't pick to any particular day part. I would say it had more to do with the 4 pillars. And in particular, the menu work, if you hadn't been in an IHOP recently, was pretty meaningful and dramatic. I mean, you'd have to see the menu to have a full appreciation. But the consumer feedback that we got was so overwhelmingly positive that it was so much easier to navigate, so much easier to find your favorite item or your -- a new item that we hadn't had before. That, in combination with everything else and, frankly, the foundation that we've been laying for over a year, it all really came together.

Got it. And just a quick follow-up on IHOP as well. If you could talk about the check there, what the effective pricing was in the quarter and then where customers, if they are, may be mixing up or down, either way.

Yes. The -- it's hard with us because, as you know, we don't know when franchisees are going to take price. But it looks as if from a full pricing perspective, the franchisees may have taken about 1%, 1.2% in pricing and then there was a mix shift of maybe closer to 0.4%. So it's hard to say, but it looks like, year-to-date, there was probably a 1.5%, 1.6% year-to-date measure with a slight increase in pricing and a slight increase in mix shift, which is pretty normal on a yearly basis. We usually see a 1% to 2% price increase over the course of a year.

Your next question comes from the line of Michael Kelter from New York.

Yes, I was wondering, maybe first off, if you could talk about Applebee's and any changes in consumer behavior late in the quarter. And I ask because, as you're aware, the Knapp Track or Black Box numbers have fallen off in June. It would be great to hear what you're seeing, even if it's just qualitative, on weekdays versus weekends, some regions versus others, beverage or dessert attach rate, anything that helps us understand what's going on with the consumer.

Yes, Michael. Ours is a pretty steady state. We've had real success at the day parts. There's no question that both lunch and dinner and late-night did well for us at Applebee's. And I think that has everything to do with sort of hitting on all fronts that we talked about, the value message, the enhanced advertising, the work we're doing on innovation. All of it sort of came together. I didn't notice any big particular shift or change over. The one thing, and I'm looking at the numbers, I think when I look at the differences, we saw improvement really throughout the regions and throughout the different scenarios. I think the one thing I didn't make a lot of mention of on the call, but that I've spoken about, is the remodels. I must say when you have -- almost by the end of the year we'll have 3/4 of the system remodeled, I've got to give credit both to the franchisees for spending the money and for the actual remodel itself. I mean if you've been by an Applebee's, on the outside, it's pretty dramatic and, on the inside, it's much more contemporary, much more willing to resonate with the guest, if you will. I don't want to undercount that importance as well.

And then maybe shifting to the capital structure stuff. I mean, first off, you said it wasn't the right time to refinance quite yet, and I'm just curious why not? Is it -- are you waiting for the penalty to come down over time, or are there other considerations? And then also on that topic, you mentioned that the penalty could be calculated based on prior filings, but without going back and digging that up, can you maybe remind us on what the penalty would look like to execute something if you were to do it today?

Well, the math is that the penalty, we think, is too big right now versus the savings that we think that we could get. The bet is that interest rates are not going to go up enough in the future to -- in the next year or 2, to offset the size of the penalty, which is well in excess of $100 million.

And would you consider taking on more debt at the time of the refinancing? I guess the question is, what do you view as your optimal capital structure, is it 4.5, 5x leveraged or might you do something more than that?

We don't know that yet right now. We think that our capital structure is okay for the current capital markets and where our business is now. At such point in time in the future, as we do the refinancing, if we're in a different market, we're in a different economy, then we would have to look at it again.

Your next question comes from the line of John Ivankoe from JPMorgan. John W. Ivankoe - JP Morgan Chase & Co, Research Division: Actually maybe even just 2 follow-ups on Mike's question. Firstly, your comments that the penalty is in excess of $100 million, can you please kind of put that in the context of your bonds, which I think have a coupon of 9.5%? I mean, it seems like -- and I don't want you to give a number, but whether if you save 300 or 400 basis points, and I don't exactly what it would be, obviously. I mean, it seems like that you could kind of make up to that $100 million in just a couple of years, and that kind of the NPD [ph] of paying a penalty of that size might make sense. Can you just help us a little bit more with the mechanics of how you're thinking about interest savings versus that penalty and maybe what kind of return, if you will, that you need to see in order to make that big cash outlay?

That's kind of theoretical because it forces me to sort of forecast what interest rates look like in the future, and that's really the opportunity cost decision that we're making. So right now, our math internally is that we don't think this is the right time to do it. But we are, like I said, continuing to evaluate it. And I can't really get into all the specifics of those calculations.

Yes. But one thing, I think, that's worth saying is -- and I think this is public filings, John, is if you look over the next 12 to 16 months, you look at how that penalty goes dramatically down. I think that's the way you should really think about it. It's not like it stays at over $100 million indefinitely. I mean, there is a pretty dramatic slope here by the end of -- and we've said this very publicly, by the end of 2014, the slope goes down dramatically.

That's right.

So you should think about us looking at it all the time and evaluating it all the time, but also looking at that dramatic decline in the slope rate. And you're thinking it's a huge decline in terms of what the fee would be.

It goes down by 60%, 70%, right?

Right. So I think that's the way to think about it. And we're looking at it all the time.

And that's just the point. And that's really part of the opportunity cost decision, too, is that it does go down over time. John W. Ivankoe - JP Morgan Chase & Co, Research Division: Okay. Yes. And I think we do understand that. And then secondly, the question was asked kind of about how you were trending in June. And I know it's not your style, but since we're in a public forum, could you give us a little bit of color about July? I mean as people kind of moaned about June, it seems like July got -- took a step function down. I mean is there anything about your business that would have allowed you to kind of get outside of what seems to be a fairly pronounced industry trend?

Well, it's good that you say that we don't comment inter-quarter, we don't. I think the thing I would say is that you think about our pillars and our strategies and the foundational work that we did on both brands at the end of last year and early this year, and then our success that we've had, I think that's what you should look towards and evaluate us on the balance of the year. John W. Ivankoe - JP Morgan Chase & Co, Research Division: Okay. And when we think about 2012, I mean do you think things like the election and the Olympics, does it give you like kind of easy comparisons, if you will, or do you think we still have to just basically slug it out for the next 3 or 4 months? Classically, they're negatives for casual dining, which is why I asked, and we're just about to come across those numbers.

It's so interesting that you say that. I read all about it. It depends where the Olympics are, it depends when they're on television. I've heard all the factors, positive and negative. I think we look at the balance of the year and say, "We've got our work cut out for us."

We're still in a lumpy and bumpy environment anyway [ph].

Yes. And I don't like the operators use it as an excuse, either way, on whether or -- I mean, we just -- we look at it and say, "We've got our work cut out for us the balance of the year and we're staying focused on it." So I would say no. I mean, that's certainly not come up in conversation, that's for certain.

[Operator Instructions] And your next question comes from the line of Jeff Farmer from Wells Fargo.

I just want to know from John's last question, I absolutely understand the reluctance to speak to July, but I might have missed this, but can you guys provide some -- any type of inter-quarter same-store sales trend commentary at Applebee's as it relates to sort of how you went through April, May and June considering that June was a pretty material underperformance for the sector relative to the first 2 months? Any color there, just directionally, would be helpful.

Yes. What I've said earlier -- first of all, we don't comment on inter-quarter, but what I said earlier is we had a robust scenario across the country and we had a robust scenario across the day parts, so there wasn't anything dramatic one way or the other. It was just a good solid quarter on Applebee's end and, obviously, an excellent quarter on IHOP's end.

Okay. And then you're absolutely reporting to the marketing strategy or the shift in marketing strategy as a key top line driver at Applebee's in the second quarter. Can you just provide a little bit more color in terms of what potentially the consumer was seeing, what the real change was for the consumer?

The consumer saw 2 things. It's a great question. The consumer saw 2 major things different at Applebee's. One, it saw for the first time, in a fairly significant time frame, it saw us talking about lunch in a very different way on television. And that was uniquely different. And I think sometimes we get a little hung up when we go on television and talk about lunch that we're just going to get lunch sales, but I don't believe that's the case. I think it had a halo effect into the other day parts, which is your ultimate compliment, right, that the brand has that ability. The Take Two platform being well received in this whole notion of what we're talking about. And then I also think, I mentioned it earlier, this notion of lots of people went in from lots of Applebee's restaurants and saw remodeled restaurants. So as we finish up this remodel, I don't want to underestimate the power of this remodeled restaurant, both on the exterior and on the interior. I think it resonates with guests and is far more relevant and contemporary. So I want to give credit to the franchisees for spending that kind of money and for getting that kind of return.

All right. That's helpful. And just 2 more quick ones, a little bit more granular on the model. One of the things I wasn't sure about, it looks like you've guided to $34 million to $35 million on the rental and financing segment profit. Looks like you've achieved a big part of that in the first half of the year, so in terms of thinking about that number decelerating in the back half of the year, what are some of the pushes and pulls? Why would that number fall off in the back half of the year?

There's some contingency for what we talked about with respect to these bankruptcies that are in there, for the bankruptcy on the IHOP side. It may or may not come to pass.

Right. So just based on my model, it looks like I would need to have lower rental income or financing revenues relative to the first half of the year. Is that a fair comment?

Right.

Okay. And then final one. It looks like -- and it doesn't look like it's from bankruptcies, but you've had a little bit bigger number of restaurant closures than I would have expected in the second quarter. Can you provide some color on that and what we should expect moving forward with some of these closures?

Yes. That was all about the Applebee's side where we had our normal couple that we do throughout the year, and then we had the 18 closures from the bankruptcy.

So it was related to that?

Yes.

Yes. To the bankruptcy.

It was all related to Applebee's bankruptcy. We certainly had openings, but we also have that -- a high level of closures, which is unusual.

[Operator Instructions] And your next question comes from the line of Bryan Elliott from Raymond James. Bryan C. Elliott - Raymond James & Associates, Inc., Research Division: Julia, in the lunch discussion, you did not mention the test that was discussed, I believe, on the last call of kind of the to-go dedicated -- to-go order and pickup station. Could you update us on if that has helped your lunch business or how that's going?

Sure. Great question. So think of that as in our test market, which is the Kansas City company-operated market. And we are working not only on the operational aspects of that, but also on the mix profile, what are the right items to actually market and how to go to market. I'm very comfortable with the work the guys have done. But before we take that beyond just the Kansas City R&D market, we want to make certain that we have a proposition that can be quickly exploited outside Kansas City. So we're still a work in progress but feel really good about the progress the guys are making.

Your next question comes from the line of Michael Gallo from CL King. Michael W. Gallo - CL King & Associates, Inc., Research Division: Just a question on IHOP. Obviously, it was nice to see the significant improvement in same-store sales in the quarter. I was wondering if you can give us any more color on where you saw the drivers of that, whether it was consistent across midweek lunch and weekend or midweek breakfast and weekend breakfast, and then also what you saw in terms of limited time offer response. It seemed like Brioche French Toast did pretty well. So I was wondering if you could give us any further color on just what you saw out of the improvement in IHOP trends.

Yes. It really was, Michael, across all of the day parts. We saw increases across the country, across the day parts. And I think that has a lot to do with what I said earlier, sort of working on all tracks on the pillars. We had done the foundational work last year, and then it really began to come together this year. And I think we want to stay on that track with both the menu work, the operations work, the advertising work, the media work. And clearly, those promotions that you were speaking of, Brioche French Toast, the signature pancakes and this whole notion of the Griddle Melt which, in my humble opinion is like the best tasting breakfast sandwich in America, all worked. So it's really all of it coming together. There wasn't anything that I would highlight. I think it all worked in conjunction with each other.

Ladies and gentlemen, this will conclude the portion of the question-and-answer session of today's conference. I would now like to turn the call over to Julia Stewart for closing remarks.

So I just wanted to say thank you again for participating. Our third quarter 2013 reporting date is October 29. If you have any questions, I want you to please feel free to contact Ken, Tom or myself. And thanks, again, for everyone's time today.

Ladies and gentlemen, that concludes today's conference. Thank you for your participation, and you may now disconnect. Have a wonderful day.