Table of ~~2016 ended on July 3, 2016 and October 2, 2016, respectively.~~Contents

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements.

~~DineEquity,~~Dine Brands Global, Inc. and Subsidiaries

Consolidated Balance Sheets

(In thousands, except share and per share amounts)

Assets September 30, 2017 December 31, 2016
(Unaudited)
Current assets:

Cash and cash equivalents $ 104,212
$ 140,535
Receivables, net 96,657
141,389
Restricted cash 31,338
30,256
Prepaid gift card costs 36,667
47,115
Prepaid income taxes 8,749
2,483
Other current assets 5,703
4,370
Total current assets 283,326
366,148
Long-term receivables, net 131,033
141,152
Property and equipment, net 199,857
205,055
Goodwill 339,236
697,470
Other intangible assets, net 585,160
763,431
Deferred rent receivable 84,071
86,981
Non-current restricted cash 14,700
14,700
Other non-current assets, net 3,825
3,646
Total assets $ 1,641,208
$ 2,278,583
Liabilities and Stockholders’ (Deficit) Equity

Current liabilities:

Accounts payable $ 26,452
$ 50,503
Gift card liability 104,317
170,812
Dividends payable 17,755
17,465
Accrued employee compensation and benefits 13,527
14,609
Current maturities of long-term debt, capital lease and financing obligations 16,202
13,144
Accrued advertising 8,359
6,369
Other accrued expenses 16,775
13,410
Total current liabilities 203,387
286,312
Long-term debt, less current maturities 1,281,950
1,282,691
Capital lease obligations, less current maturities 64,923
74,665
Financing obligations, less current maturities 39,292
39,499
Deferred income taxes, net 178,848
253,898
Deferred rent payable 65,449
69,572
Other non-current liabilities 24,036
19,174
Total liabilities 1,857,885
2,025,811
Commitments and contingencies

Stockholders’ (deficit) equity:

Common stock, $0.01 par value, shares: 40,000,000 authorized; September 30, 2017 - 25,033,220 issued, 17,996,223 outstanding; December 31, 2016 - 25,134,223 issued, 17,969,636 outstanding 250
251
Additional paid-in-capital 292,255
292,809
(Accumulated deficit) retained earnings (86,634 ) 382,082
Accumulated other comprehensive loss (105 ) (107 )
Treasury stock, at cost; shares: September 30, 2017 - 7,036,997; December 31, 2016 - 7,164,587 (422,443 ) (422,263 )
Total stockholders’ (deficit) equity (216,677 ) 252,772
Total liabilities and stockholders’ (deficit) equity $ 1,641,208
$ 2,278,583


Assets
	March 31, 2021		December 31, 2020
	(Unaudited)
Current assets:
Cash and cash equivalents	$	179,567	$	383,369


Receivables, net of allowance of $11,854 (2021) and $15,057 (2020)	107,387		121,897
Restricted cash	60,063		39,884
Prepaid gift card costs	22,581		29,080
Prepaid income taxes	6,940		6,178
Other current assets	9,171		6,098
Total current assets	385,709		586,506
Other intangible assets, net	547,098		549,671
Operating lease right-of-use assets	338,572		346,086
Goodwill	251,628		251,628
Property and equipment, net	182,661		187,977


Long-term receivables, net of allowance of $6,455 (2021) and $7,999 (2020)	51,605		54,512
Deferred rent receivable	54,713		56,449
Non-current restricted cash	32,800		32,800
Other non-current assets, net	11,503		9,316
Total assets	$	1,856,289	$	2,074,945
Liabilities and Stockholders’ Deficit
Current liabilities:
Current maturities of long-term debt	$	13,000	$	13,000
Accounts payable	33,522		37,424
Gift card liability	121,814		144,159
Current maturities of operating lease obligations	70,270		69,672
Current maturities of finance lease and financing obligations	11,052		11,293
Accrued employee compensation and benefits	14,554		21,237




Deferred franchise revenue, short-term	8,990		7,682
Accrued advertising	44,477		21,641
Other accrued expenses	17,417		22,460
Total current liabilities	335,096		348,568
Long-term debt	1,271,438		1,491,996
Operating lease obligations, less current maturities	334,361		345,163
Finance lease obligations, less current maturities	66,234		69,012
Financing obligations, less current maturities	32,598		32,797
Deferred income taxes, net	70,006		78,293
Deferred franchise revenue, long-term	49,364		52,237

Other non-current liabilities	14,594		11,530
Total liabilities	2,173,691		2,429,596
Commitments and contingencies	0		0
Stockholders’ deficit:
Preferred stock, $1 par value, 10,000,000 shares authorized; 0 shares issued or outstanding	0		0
Common stock, $0.01 par value; shares: 40,000,000 authorized; March 31, 2021 - 25,033,181 issued, 17,142,367 outstanding; December 31, 2020 - 24,882,122 issued, 16,452,174 outstanding	250		249
Additional paid-in-capital	247,498		257,625
Accumulated deficit	(29,950)		(55,553)
Accumulated other comprehensive loss	(56)		(55)
Treasury stock, at cost; shares: March 31, 2021 - 7,890,814; December 31, 2020 - 8,429,948	(535,144)		(556,917)
Total stockholders’ deficit	(317,402)		(354,651)
Total liabilities and stockholders’ deficit	$	1,856,289	$	2,074,945

See the accompanying Notes to Consolidated Financial Statements.

~~DineEquity,~~

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Dine Brands Global, Inc. and Subsidiaries

Consolidated Statements of Comprehensive ~~(Loss)~~ Income

(In thousands, except per share amounts)

(Unaudited)

Three Months Ended Nine Months Ended
September 30, September 30,
2017 2016 2017 2016
Revenues:

Franchise and restaurant revenues $ 112,347
$ 123,259
$ 358,912
$ 380,034
Rental revenues 30,263
30,507
90,852
92,746
Financing revenues 2,061
2,251
6,280
7,019
Total revenues 144,671
156,017
456,044
479,799
Cost of revenues:

Franchise and restaurant expenses 41,800
41,553
123,476
122,129
Rental expenses 22,318
22,771
67,665
69,032
Financing expenses 449
9
449
155
Total cost of revenues 64,567
64,333
191,590
191,316
Gross profit 80,104
91,684
264,454
288,483
General and administrative expenses 38,030
36,002
125,701
111,937
Impairment and closure charges 532,522
206
535,440
3,932
Interest expense 15,353
15,358
46,496
46,107
Amortization of intangible assets 2,507
2,500
7,507
7,480
(Gain) loss on disposition of assets (35 ) 113
(6,387 ) 679
(Loss) income before income tax benefit (provision) (508,273 ) 37,505
(444,303 ) 118,348
Income tax benefit (provision) 56,555
(13,232 ) 28,228
(41,703 )
Net (loss) income (451,718 ) 24,273
(416,075 ) 76,645
Other comprehensive (loss) income, net of tax:
Foreign currency translation adjustment (2 ) (1 ) (2 ) —
Total comprehensive (loss) income $ (451,720 ) $ 24,272
$ (416,077 ) $ 76,645
Net (loss) income available to common stockholders:

Net (loss) income $ (451,718 ) $ 24,273
$ (416,075 ) $ 76,645
Less: Net loss (income) allocated to unvested participating restricted stock 8,496
(338 ) 6,921
(1,103 )
Net (loss) income available to common stockholders $ (443,222 ) $ 23,935
$ (409,154 ) $ 75,542
Net (loss) income available to common stockholders per share:

Basic $ (24.98 ) $ 1.33
$ (23.09 ) $ 4.17
Diluted $ (24.98 ) $ 1.33
$ (23.09 ) $ 4.15
Weighted average shares outstanding:

Basic 17,742
17,950
17,718
18,099
Diluted 17,742
18,041
17,718
18,201

Dividends declared per common share $ 0.97
$ 0.92
$ 2.91
$ 2.76
Dividends paid per common share $ 0.97
$ 0.92
$ 2.91
$ 2.76


	Three Months Ended
	March 31, 2021
		2021		2020
Revenues:
Franchise revenues:
Royalties, franchise fees and other		$	80,091	$	83,314
Advertising revenues		60,885		61,723
Total franchise revenues		140,976		145,037
Company restaurant sales		35,949		31,300
Rental revenues		26,142		29,009
Financing revenues		1,132		1,538
Total revenues		204,199		206,884
Cost of revenues:
Franchise expenses:
Advertising expenses		60,885		61,723
Bad debt (credit) expense		(1,993)		518
Other franchise expenses		6,051		7,209
Total franchise expenses		64,943		69,450
Company restaurant expenses		32,884		30,332
Rental expenses:
Interest expense from finance leases		962		1,210
Other rental expenses		19,996		21,323
Total rental expenses		20,958		22,533
Financing expenses		128		142
Total cost of revenues		118,913		122,457
Gross profit		85,286		84,427
General and administrative expenses		39,911		37,608
Interest expense, net		16,496		15,172
Closure and impairment charges (credit)		2,010		(12)
Amortization of intangible assets		2,688		2,826


Loss (gain) on disposition of assets		167		(233)
Income before income taxes		24,014		29,066
Income tax benefit (provision)		1,589		(6,738)
Net income		25,603		22,328
Other comprehensive income net of tax:

Foreign currency translation adjustment		(1)		0
Total comprehensive income		$	25,602	$	22,328
Net income available to common stockholders:
Net income		$	25,603	$	22,328
Less: Net income allocated to unvested participating restricted stock		(548)		(748)
Net income available to common stockholders		$	25,055	$	21,580

Net income available to common stockholders per share:
Basic		$	1.52	$	1.33
Diluted		$	1.51	$	1.31
Weighted average shares outstanding:
Basic		16,460		16,263
Diluted		16,630		16,470

See the accompanying Notes to Consolidated Financial Statements.

~~DineEquity,~~

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Dine Brands Global, Inc. and Subsidiaries

Consolidated Statements of Stockholders' Deficit

(In thousands)

(Unaudited)


	Three Months ended March 31, 2020
	Common Stock							Accumulated Other Comprehensive Loss		Treasury Stock
	Shares Outstanding	Amount		Additional Paid-in Capital		Retained Earnings				Shares	Cost		Total
Balance at December 31, 2019	16,522	$	249	$	246,192	$	61,653	$	(58)	8,404	$	(549,810)	$	(241,774)
Adoption of credit loss accounting guidance	—	—		—		(497)		—		—	—		(497)
Net income	—	—		—		22,328		—		—	—		22,328

Purchase of Company common stock	(460)	—		—		—		—		460	(26,527)		(26,527)
Reissuance of treasury stock	367	—		3,967		—		—		(368)	16,557		20,524
Net issuance of shares for stock plans	18	—		—		—		—		—	—		—
Repurchase of restricted shares for taxes	(26)	—		(2,000)		—		—		—	—		(2,000)
Stock-based compensation	—	—		4,038		—		—		—	—		4,038
Dividends on common stock	—	—		246		(12,715)		—		—	—		(12,469)

Balance at March 31, 2020	16,421	$	249	$	252,443	$	70,769	$	(58)	8,496	$	(559,780)	$	(236,377)


	Three Months ended March 31, 2021
	Common Stock							Accumulated Other Comprehensive Loss		Treasury Stock
	Shares Outstanding	Amount		Additional Paid-in Capital		Retained Earnings (Accumulated Deficit)				Shares	Cost		Total
Balance at December 31, 2020	16,452	$	249	$	257,625	$	(55,553)	$	(55)	8,430	$	(556,917)	$	(354,651)
Net income	—	—		—		25,603		—		—	—		25,603
Other comprehensive loss	—	—		—		—		(1)		—	—		(1)

Reissuance of treasury stock	539	1		(2,290)		—		—		(539)	21,773		19,484
Net issuance of shares for stock plans	166	—		—		—		—		—	—		—
Repurchase of restricted shares for taxes	(15)	—		(1,220)		—		—		—	—		(1,220)
Stock-based compensation	—	—		3,094		—		—		—	—		3,094

Tax withheld related to settlement of restricted stock units	—	—		(9,711)		—		—		—	—		(9,711)
Balance at March 31, 2021	17,142	$	250	$	247,498	$	(29,950)	$	(56)	7,891	$	(535,144)	$	(317,402)

See the accompanying Notes to Consolidated Financial Statements.

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Dine Brands Global, Inc. and Subsidiaries

Consolidated Statements of Cash Flows

(In thousands)

(Unaudited)


	Nine Months Ended							Three Months Ended
	September 30,							March 31,
	2017			2016				2021		2020
Cash flows from operating activities:							Cash flows from operating activities:
Net (loss) income	$	(416,075	)	$	76,645
Adjustments to reconcile net (loss) income to cash flows provided by operating activities:
Impairment and closure charges	535,306			1,461
Net income							Net income	$	25,603	$	22,328
Adjustments to reconcile net income to cash flows provided by operating activities:							Adjustments to reconcile net income to cash flows provided by operating activities:
Non-cash closure and impairment charges (credit)							Non-cash closure and impairment charges (credit)	1,959		(12)
Depreciation and amortization	23,053			22,924			Depreciation and amortization	9,995		10,641
Non-cash stock-based compensation expense							Non-cash stock-based compensation expense	3,094		4,038
Non-cash interest expense	2,509			2,400			Non-cash interest expense	712		655

Deferred income taxes	(77,345		)	(14,852		)	Deferred income taxes	(8,267)		(10,491)
Non-cash stock-based compensation expense	8,826			8,215
Tax benefit from stock-based compensation	—			1,153
Excess tax benefit from stock-based compensation	—			(966		)
(Gain) loss on disposition of assets	(6,422		)	679
Deferred revenue							Deferred revenue	(1,565)		(1,417)

Loss (gain) on disposition of assets							Loss (gain) on disposition of assets	167		(227)

Other	(2,791		)	456			Other	(1,580)		(1,293)
Changes in operating assets and liabilities:							Changes in operating assets and liabilities:
Accounts receivable, net	(1,569		)	4,312			Accounts receivable, net	(4,323)		12,077
Current income tax receivables and payables	(1,699		)	(1,138		)	Current income tax receivables and payables	(552)		6,443
Gift card receivables and payables	(26,387		)	(30,355		)	Gift card receivables and payables	(3,246)		11,693
Other current assets	(1,336		)	(824		)	Other current assets	(3,072)		(2,347)
Accounts payable	(7,530		)	(1,397		)	Accounts payable	809		(12,748)
Accrued employee compensation and benefits	(1,146		)	(9,293		)	Accrued employee compensation and benefits	(6,968)		(12,190)

Accrued advertising							Accrued advertising	22,836		(4,719)
Other current liabilities	3,606			2,638			Other current liabilities	(5,037)		7,214
Cash flows provided by operating activities	31,000			62,058			Cash flows provided by operating activities	30,565		29,645
Cash flows from investing activities:							Cash flows from investing activities:
Additions to property and equipment	(9,608		)	(3,543		)
Principal receipts from notes, equipment contracts and other long-term receivables							Principal receipts from notes, equipment contracts and other long-term receivables	4,651		5,544
Net additions to property and equipment							Net additions to property and equipment	(2,357)		(5,084)
Proceeds from sale of property and equipment	1,100			—			Proceeds from sale of property and equipment	946		6
Principal receipts from notes, equipment contracts and other long-term receivables	15,283			13,969
Additions to long-term receivables							Additions to long-term receivables	0		(1,511)
Other	(356		)	(393		)	Other	(110)		(195)
Cash flows provided by investing activities	6,419			10,033
Cash flows provided by (used in) investing activities							Cash flows provided by (used in) investing activities	3,130		(1,240)
Cash flows from financing activities:							Cash flows from financing activities:

Repayment of long-term debt							Repayment of long-term debt	(3,250)		0
Borrowing from revolving credit facility							Borrowing from revolving credit facility	0		220,000
Repayment of revolving credit facility							Repayment of revolving credit facility	(220,000)		0

Dividends paid on common stock	(52,326		)	(50,790		)	Dividends paid on common stock	0		(11,451)
Repurchase of common stock	(10,003		)	(45,010		)	Repurchase of common stock	0		(29,853)
Principal payments on capital lease and financing obligations	(10,621		)	(10,391		)
Principal payments on finance lease obligations							Principal payments on finance lease obligations	(2,621)		(2,981)
Proceeds from stock options exercised							Proceeds from stock options exercised	19,484		20,524
Tax payments for restricted stock upon vesting	(2,345		)	(2,680		)	Tax payments for restricted stock upon vesting	(1,220)		(2,000)
Proceeds from stock options exercised	2,635			1,282
Excess tax benefit from stock-based compensation	—			966
Cash flows used in financing activities	(72,660		)	(106,623		)
Tax payments for share settlement of restricted stock units							Tax payments for share settlement of restricted stock units	(9,711)		0
Cash flows (used in) provided by financing activities							Cash flows (used in) provided by financing activities	(217,318)		194,239
Net change in cash, cash equivalents and restricted cash	(35,241		)	(34,532		)	Net change in cash, cash equivalents and restricted cash	(183,623)		222,644
Cash, cash equivalents and restricted cash at beginning of period	185,491			192,013			Cash, cash equivalents and restricted cash at beginning of period	456,053		172,475
Cash, cash equivalents and restricted cash at end of period	$	150,250		$	157,481		Cash, cash equivalents and restricted cash at end of period	$	272,430	$	395,119
Supplemental disclosures:							Supplemental disclosures:
Interest paid in cash	$	50,808		$	51,940		Interest paid in cash	$	17,240	$	16,446
Income taxes paid in cash	$	50,813		$	56,734		Income taxes paid in cash	$	7,441	$	10,818
Non-cash conversion of accounts receivable to notes receivable							Non-cash conversion of accounts receivable to notes receivable	$	1,269	$	0

See the accompanying Notes to Consolidated Financial Statements.

~~DineEquity,~~

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Dine Brands Global, Inc. and Subsidiaries

Notes to Consolidated Financial Statements

(Unaudited)

1. General

The accompanying unaudited consolidated financial statements of ~~DineEquity,~~Dine Brands Global, Inc. (the “Company” or ~~“DineEquity”~~“Dine Brands Global”) have been prepared in accordance with United States generally accepted accounting principles (“U.S. GAAP”) for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by U.S. GAAP for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. The operating results for the ~~nine~~three months ended ~~September 30, 2017~~March 31, 2021 are not necessarily indicative of the results that may be expected for the twelve months ending December 31, ~~2017.~~2021.

The consolidated balance sheet at December 31, ~~2016~~2020 has been derived from the audited consolidated financial statements at that date but does not include all of ~~the~~ information and footnotes required by U.S. GAAP for complete financial statements.

These consolidated financial statements should be read in conjunction with the consolidated financial statements and footnotes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, ~~2016.~~2020.

2. Basis of Presentation

The Company’s fiscal quarters end on the Sunday closest to the last day of each calendar quarter. For convenience, the fiscal quarters of each year are referred to as ending on March 31, June 30, September 30 and December 31. The first fiscal quarter of ~~2017~~2021 began on January ~~2, 2017~~4, 2021 and ended on April ~~2, 2017~~ ~~and the second and third fiscal quarters of 2017 ended on July 2, 2017 and October 1, 2017, respectively.~~4, 2021. The first fiscal quarter of ~~2016~~2020 began on ~~January 4, 2016~~December 30, 2019 and ended on ~~April 3, 2016 and the second and third fiscal quarters of 2016 ended on July 3, 2016 and October 2, 2016, respectively.~~March 29, 2020.

The accompanying consolidated financial statements include the accounts of the Company and its subsidiaries that are consolidated in accordance with U.S. GAAP. All intercompany balances and transactions have been eliminated.

The preparation of financial statements in conformity with U.S. GAAP requires the Company’s management to make assumptions and estimates that affect the reported amounts of assets and liabilities, disclosures of contingent assets and liabilities, if any, at the date of the consolidated financial statements, and the reported amounts of revenues and expenses during the reporting period. Significant estimates ~~are made in~~may include the calculation and assessment of the following: impairment of goodwill, other intangible assets and tangible assets; income taxes; allowance for ~~doubtful~~credit losses on accounts and notes receivables; lease accounting estimates; contingencies; and stock-based compensation. On an ongoing basis, the Company evaluates its estimates based on historical experience, current conditions and various other assumptions that are believed to be reasonable under the circumstances. The Company adjusts such estimates and assumptions when facts and circumstances dictate. Actual results could differ from those estimates.

Risks and Uncertainties

The Company was subject to risks and uncertainties as a result of the continuing outbreak of a novel strain of coronavirus, designated “COVID-19.” The extent of the continued impact of the COVID-19 pandemic on the Company's business is highly uncertain and difficult to predict, as measures taken in response to and the effect of the pandemic has varied and continues to vary by state and municipalities within states. Assessments of the success of measures taken and the timing of any further restrictions, or lifting of such restrictions, is rapidly evolving. The Company first began to experience impacts from COVID-19 in March 2020, as federal, state, local and international governments began to react to the public health crisis by encouraging “social distancing” and requiring, in varying degrees, restaurant dine-in limitations and other restrictions that largely limited the restaurants of the Company's franchisees and its company-operated restaurants to take-out and delivery sales. Subsequently, government-imposed dine-in restrictions have been relaxed in many of the locations in which the Company operates as incidents of infection decline within the respective governmental jurisdictions, although dining room capacity continues to be limited to 50% or less at over two-thirds of the Company's restaurants as of March 31, 2021.

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Dine Brands Global, Inc. and Subsidiaries

Notes to Consolidated Financial Statements (Continued)

2. Basis of Presentation (Continued)

The Company took several actions to mitigate the effects of the COVID-19 pandemic on its operations and its franchisees, as follows: (i) drew down $220 million from its revolving credit facility in March 2020 and repaid the borrowing in March 2021;(ii) suspended repurchases of common stock; (iii) the Company's Board of Directors has not declared dividends after the first quarter of 2020; (iv) voluntarily increased the interest reserve for securitized debt from the required $16.4 million (approximately one quarter of estimated interest) to $32.8 million; (v) deferred franchisee payment of royalty, advertising and other fees, and lease obligations for up to two months on a case-by-case basis; (vi) deferred franchisee remodel and development obligations for up to 15 months; and (vii) negotiated deferrals and abatements for properties on which the Company was lessee.

The severity of the continued impact of the COVID-19 pandemic on the Company's business will depend on a number of factors, including, but not limited to, how long the pandemic will last, whether/when recurrences of the virus and variants of the virus may arise, the availability and acceptance of vaccines, what restrictions on in-restaurant dining may be imposed or re-imposed, the timing and extent of customer re-engagement with the Company's brands and, in general, what the short- and long-term impact on consumer discretionary spending the COVID-19 pandemic might have on the Company and the restaurant industry as a whole, all of which are uncertain and cannot be predicted. The Company's future results of operations and liquidity could adversely be impacted by the length of time dine-in restrictions remain in place and the success of any initiatives or programs that the Company may undertake to address financial and operational challenges faced by itself and its franchisees. As such, the extent to which the COVID-19 pandemic may continue to materially impact the Company's financial condition, liquidity, or results of operations is highly uncertain.

3. Accounting ~~Policies~~Standards Adopted and Newly Issued Accounting Standards Not Yet Adopted

Accounting Standards Adopted ~~Effective January 2, 2017~~in the Current Fiscal Year

In ~~March 2016,~~December 2019, the Financial Accounting Standards Board (“FASB”) issued new guidance ~~that addresses~~intended to simplify the accounting for income taxes, change the accounting for certain ~~aspects of share-based payments, including excess~~income tax ~~benefits or deficiencies, forfeiture estimates, statutory tax withholding~~transactions, and ~~cash flow classification of certain share-based payment activity.~~make other minor changes. The Company ~~applied the prospective transition method in adopting~~adopted the new guidance ~~and prior period amounts have not been restated.~~ ~~Because~~at the beginning of ~~the adoption, the Company recognized an excess tax deficiency from stock-based compensation as a discrete item, increasing the income tax provision for the three and~~ ~~nine months ended September 30, 2017~~ ~~by $0.1 million and $1.8 million, respectively. Historically,~~ ~~excess tax benefits or deficiencies~~ were recorded as additional paid-in capital. The Company applied the prospective transition method with respect to the cash flow classification of certain share-based payment activity; accordingly, the cash flows for the nine months ended September 30, 2016 have not been restated. ~~The Company has elected to maintain its practice of estimating forfeitures when recognizing expense for share-based payment awards. Amendments to the accounting for minimum statutory withholding requirements had no impact on the Company's Consolidated Financial Statements.~~

In November 2016, the FASB issued new guidance to reduce diversity in practice in the classification and presentation of changes in restricted cash in the statement of cash flows. The new guidance requires amounts generally described as restricted cash should be included with cash and cash equivalents when reconciling the beginning-of-period total amounts to the end-of-period total amounts shown on the statement of cash flows. Calendar year public entities will be required to adopt the new guidance beginning with the first fiscal quarter of ~~2018. The Company elected to adopt~~2021. Adoption did not have any material effect on the consolidated financial statements.

Additional new accounting guidance ~~retrospectively~~

~~Table of Contents~~

~~DineEquity, Inc. and Subsidiaries~~

~~Notes to Consolidated Financial Statements (Continued)~~

~~3. Accounting Policies (Continued)~~

became effective ~~January 2, 2017 and the cash flows~~ for the ~~nine months ended September 30, 2017 were restated. Adoption~~Company as of the ~~new guidance did~~beginning of fiscal 2021 that the Company reviewed and concluded was either not ~~impact~~applicable to its operations or had no material effect on its consolidated financial statements in the ~~Company's Consolidated Balance Sheets~~current or ~~Consolidated Statements of Comprehensive Income.~~future fiscal years.

In January 2017, the FASB issued new guidance simplifying the test of goodwill for impairment. The new guidance requires a single-step quantitative test to measure potential impairment based on the excess of a reporting unit's carrying amount over its fair value. Calendar year public entities will be required to adopt the new guidance beginning with the first fiscal quarter of 2020. The Company has elected early adoption of the new guidance, as is permitted for interim or annual tests of goodwill performed after January 1, 2017.

Newly Issued Accounting Standards Not Yet Adopted

In August 2016, the FASB issued new guidance on the classification of certain cash receipts and payments in the statement of cash flows. The new guidance is intended to reduce diversity in practice in how certain transactions are classified in the statement of cash flows. The Company will be required to adopt the new guidance beginning with its first fiscal quarter of 2018. Early adoption is permitted. The Company is currently assessing the impact that the new guidance will have on its consolidated statements of cash flows.

In June 2016, the FASB issued new guidance on the measurement of credit losses on financial instruments. The new guidance will replace the incurred loss methodology of recognizing credit losses on financial instruments that is currently required with a methodology that estimates the expected credit loss on financial instruments and reflects the net amount expected to be collected on the financial instrument. Application of the new guidance may result in the earlier recognition of credit losses as the new methodology will require entities to consider forward-looking information in addition to historical and current information used in assessing incurred losses. The Company will be required to adopt the new guidance on a modified retrospective basis beginning with its first fiscal quarter ofMarch 2020, with ~~early adoption permitted~~an update in its first fiscal quarter of 2019. The Company is currently evaluating the impact of the new guidance on its consolidated financial statements and related disclosures and whether early adoption will be elected.

In February 2016, the FASB issued new guidance with respect to the accounting for leases. The new guidance will require lessees to recognize a right-of-use asset and a lease liability for virtually all leases, other than leases with a term of 12 months or less, and to provide additional disclosures about leasing arrangements. Accounting by lessors is largely unchanged from existing accounting guidance. The Company will be required to adopt the new guidance on a modified retrospective basis beginning with its first fiscal quarter of 2019. Early adoption is permitted.

While the Company is still in the process of evaluating the impact of the new guidance on its consolidated financial statements and disclosures, the Company expects adoption of the new guidance will have a material impact on its Consolidated Balance Sheets due to recognition of the right-of-use asset and lease liability related to its operating leases. While the new guidance is also expected to impact the measurement and presentation of elements of expenses and cash flows related to leasing arrangements, the Company does not presently believe there will be a material impact on its Consolidated Statements of Comprehensive Income or Consolidated Statements of Cash Flows. Recognition of a lease liability related to operating leases will not impact any covenants related to the Company's long-term debt because the debt agreements specify that covenant ratios be calculated using U.S. GAAP in effect at the time the debt agreements were entered into.

In January ~~2016,~~2021, the FASB issued guidance on the recognition and measurement of financial instruments. The guidance modifies how entities measure certain equity investments and present changes in the fair value of those investments, as well as changes how fair value of financial instruments is measured for disclosure purposes. The amendment is effective commencing with the Company's first fiscal quarter of 2018. The Company is currently evaluating the impact of the new guidance on its financial statements and disclosures.

~~In May 2014, the FASB issued new accounting guidance on revenue recognition,~~ which provides optional expedients and exceptions for a single, five-step model to be applied to all revenue contracts with customers. The new standard also requires additional financial statement disclosures that will enable users to understand the nature, amount, timing and uncertainty of revenue and cash flows relating to customer contracts. Companies have an option to use either the full retrospective method or the modified retrospective method to implement the standard. In August 2015, the FASB deferred the effective date of the new revenue guidance by one year such that the Company will be required to adopt the new guidance beginning with its first fiscal quarter of 2018. The FASB has subsequently issued several clarifications on specific topics within the new revenue recognition guidance that did not change the core principles of the guidance originally issued in May 2014.

~~Table of Contents~~

~~DineEquity, Inc. and Subsidiaries~~

~~Notes to Consolidated Financial Statements (Continued)~~

~~3. Accounting Policies (Continued)~~

~~This new guidance supersedes nearly all the existing general revenue recognition guidance under~~applying current U.S. GAAP ~~as well as most industry-specific revenue recognition guidance, including guidance with respect~~ to ~~revenue recognition by franchisors. The Company believes the recognition of the majority of its revenues, including franchise royalty revenues~~contracts, hedging relationships, and ~~sales of IHOP pancake and waffle dry mix will not be~~other transactions affected by the ~~new guidance. Additionally, lease rental revenues are not within the scope~~discontinuation of the London Interbank Offered Rate (“LIBOR”) or by another reference rate expected to be discontinued. The guidance can be adopted immediately and is applicable to contracts entered into on or before December 31, 2022. We are currently evaluating our contracts that reference LIBOR and the potential effects of adopting this new guidance.

The Company believes the new guidance will impact the timing of recognition of franchise and development fees. Under existing guidance, these fees are typically recognized upon the opening of restaurants. Under the new guidance, the Company believes the fees will have to be deferred and recognized as revenue over the term of the individual franchise agreements. However, the effect of the required deferral of fees received in any given year will be mitigated by the recognition of revenue from fees retrospectively deferred from prior years. The Company has essentially completed reviewing most of its nearly 4,000 agreements to obtain the data elements necessary to implement the new guidance and is in the process of quantifying the impact of the new guidance on its consolidated financial statements and related disclosures.

The Company also believes the new guidance will impact the accounting for transactions related to the Applebee's national advertising fund. Currently, franchisee contributions to and expenditures of the Applebee's national advertising fund are not included in the Consolidated Statements of Comprehensive Income. Under the new guidance, the Company would include contributions to and expenditures from the Applebee's advertising fund within the Consolidated Statements of Comprehensive Income as is currently done with contributions to and expenditures from the IHOP national advertising fund and with international restaurants of both brands. While this change will materially impact the gross amount of reported franchise revenues and expenses, the impact would be an offsetting increase to both revenue and expense such that the impact on gross profit and net income, if any, would not be material.

~~The Company presently expects to use the full retrospective method of adoption when the new revenue guidance is adopted in the first fiscal quarter of 2018.~~

The Company reviewed all other newly issued accounting pronouncements and concluded that they either are not applicable to the Company's operations or that no material effect is expected on the Company's financial statements ~~because of future adoption.~~when adoption is required in the future.

4. ~~Goodwill~~Revenue Disclosures

Franchise revenue and ~~Intangible Assets~~revenue from company-operated restaurants are recognized in accordance with current guidance for revenue recognition as codified in Accounting Standards Topic 606 (“ASC 606”). Under ASC 606, revenue is recognized upon transfer of control of promised services or goods to customers in an amount that reflects the consideration the Company expects to receive for those services or goods.

~~Changes in the carrying amount of goodwill for the nine months ended September 30, 2017 are as follows:~~

Applebee's Franchise Unit IHOP Franchise Unit Total
(In millions)
Balance at December 31, 2016:

Goodwill, gross $ 686.7
$ 10.8
$ 697.5
Accumulated impairment loss —
—
—
Goodwill 686.7
10.8
697.5
Impairment loss (358.2 ) —
(358.2 )
Balance at September 30, 2017:
Goodwill, gross 686.7
10.8
697.5
Accumulated impairment loss (358.2 ) —
(358.2 )
Goodwill $ 328.5
$ 10.8
$ 339.2

Table of Contents

~~DineEquity,~~Dine Brands Global, Inc. and Subsidiaries

Notes to Consolidated Financial Statements (Continued)

4. ~~Goodwill and Intangible Assets~~Revenue Disclosures (Continued)

~~Changes~~Franchising Activities

The Company owns, franchises and operates the Applebee's Neighborhood Grill & Bar® (“Applebee's”) concept in the ~~carrying amount~~casual dining category of ~~intangible assets for~~ the ~~nine months ended September 30, 2017 are as follows:~~

Not Subject to Amortization Subject to Amortization
Applebee's Tradename Other
Applebee's Franchising
Rights
Leaseholds Total
(In millions)
Balance at December 31, 2016 $ 652.4
$ 2.0
$ 109.0
$ —
$ 763.4
Impairment (173.4 ) —
—
—
(173.4 )
Amortization expense —
—
(7.5 ) (0.0 ) (7.5 )
Additions —
0.4
—
2.3
2.7
Balance at September 30, 2017 $ 479.0
$ 2.4
$ 101.5
$ 2.3
$ 585.2

~~The Company evaluates its goodwill~~restaurant industry and the ~~indefinite-lived Applebee's tradename for impairment annually~~Company owns and franchises the International House of Pancakes® (“IHOP”) concept in the fourth quarter of each year. In addition to the annual evaluation for impairment, goodwill and indefinite-lived intangible assets are evaluated more frequently if the Company believes indicators of impairment exist.

~~In the third quarter of 2017, the Company noted that the decline in the market price~~family dining category of the Company's common stock since December 31, 2016, which the Company had believed to be temporary, persisted throughout the first eight months of 2017 and that the favorable trend in Applebee's domestic same-restaurant sales experienced in the second quarter of 2017 did not continue into the first two months of the third quarter.restaurant industry. The Company also noted a continuing increase in Applebee's bad debt expense and in royalties not recognized in income until paid in cash. Additionally, the Company also determined an increasing shortfall in franchisee contributions to the Applebee's national advertising fund could require a larger amount of future subsidizationfranchise arrangement for both brands is documented in the form of ~~additional~~a franchise agreement and, in most cases, a development agreement. The franchise arrangement between the Company as the franchisor ~~contributions~~and the franchisee as the customer requires the Company to perform various activities to support the brands that do not directly transfer goods and services to the ~~fund than previously estimated. Based on these unfavorable developments, primarily~~franchisee, but instead represent a single performance obligation, which is the ~~decline in the market price~~transfer of the ~~Company's common stock,~~franchise license. The intellectual property subject to the franchise license is symbolic intellectual property as it does not have significant standalone functionality, and substantially all the utility is derived from its association with the Company’s past or ongoing activities. The nature of the Company’s promise in granting the franchise license is to provide the franchisee with access to the respective brand’s symbolic intellectual property over the term of the license. The services provided by the Company ~~determined that indicators~~are highly interrelated with the franchise license and as such are considered to represent a single performance obligation.

The transaction price in a standard franchise arrangement for both brands primarily consists of ~~impairment existed~~(a) initial franchise/development fees; (b) continuing franchise fees (royalties); and ~~that an interim test~~(c) advertising fees. Since the Company considers the licensing of ~~goodwill~~the franchising right to be a single performance obligation, no allocation of the transaction price is required. All domestic IHOP franchise agreements require franchisees to purchase proprietary pancake and ~~indefinite-lived intangible assets for impairment should be performed.~~waffle dry mix from the Company.

The Company ~~performed an interim quantitative test~~recognizes the primary components of ~~impairment~~the transaction price as follows:

•Franchise and development fees are recognized as revenue ratably on a straight-line basis over the term of ~~Applebee's goodwill~~the franchise agreement commencing with the restaurant opening date. As these fees are typically received in cash at or near the beginning of the franchise term, the cash received is initially recorded as a contract liability until recognized as revenue over time;

•The Company is entitled to royalties and ~~tradename~~advertising fees based on a percentage of the franchisee's gross sales as defined in the ~~third quarter~~franchise agreement. Royalty and advertising revenue are recognized when the franchisee's reported sales occur. Depending on timing within a fiscal period, the recognition of ~~2017.~~ revenue results in either what is considered a contract asset (unbilled receivable) or, once billed, accounts receivable, and are included in “receivables, net” in the Consolidated Balance Sheets.

•Revenue from the sale of proprietary pancake and waffle dry mix is recognized in the period in which distributors ship the franchisee's order; recognition of revenue results in an accounts receivable included in “receivables, net” in the Consolidated Balance Sheets.

In ~~performing~~determining the ~~quantitative test~~amount and timing of ~~goodwill,~~revenue from contracts with customers, the Company ~~used~~exercises significant judgment with respect to collectibility of the ~~income approach method~~amount; however, the timing of ~~valuation that included the discounted cash flow method~~recognition does not require significant judgments as well as other generally accepted valuation methodologies to determine the fair value of goodwill and intangible assets. Significant assumptions used to determine fair value under the discounted cash flow model included expected future trends in sales, operating expenses, overhead expenses, capital expenditures and changes in working capital, along with an appropriate discount rateit is based on either the ~~Company's estimated cost of equity capital and after-tax cost of debt.~~

~~In performing the impairment review~~term of the ~~tradename,~~franchise agreement, the month of reported sales by the franchisee or the date of product shipment, none of which require estimation. The Company ~~used the relief~~does not incur a significant amount of ~~royalty method under the income approach method~~contract acquisition costs in conducting franchising activities. The Company's franchising arrangements do not contain a significant financing component.

Company Restaurant Revenue

Sales by company-operated restaurants are recognized when food and beverage items are sold. Company restaurant sales are reported net of ~~valuation. Significant assumptions used to determine fair value under the relief of royalty method include future trends in~~ sales ~~a royalty rate and a discount rate to be applied~~taxes collected from guests that are remitted to the ~~forecast revenue stream.~~appropriate taxing authorities.

As a result of performing the quantitative test of impairment, the Company recognized an impairment of Applebee's goodwill of $358.2 million and an impairment of Applebee's tradename of $173.4 million. The Company adopted the guidance in FASB Accounting Standards Update 2017-04 on January 1, 2017; accordingly, the amount of the goodwill impairment was determined as the amount by which the carrying amount of the goodwill exceeded the fair value of the Applebee's franchise reporting unit as estimated in the impairment test. These assets are at risk of additional impairment in the future in the event of sustained downward movement in the Company's stock price, downward revisions of long-term performance assumptions or increases in the assumed long-term discount rate.

Table of Contents

~~DineEquity,~~Dine Brands Global, Inc. and Subsidiaries

Notes to Consolidated Financial Statements (Continued)

4. Revenue Disclosures (Continued)

The following table disaggregates franchise revenue by major type for the three months ended March 31, 2021 and 2020:


	Three Months Ended
	March 31,
		2021		2020
		(In thousands)
Franchise Revenue:
Royalties		$	65,767	$	67,600
Advertising fees		60,885		61,723
Pancake and waffle dry mix sales and other		10,890		12,848
Franchise and development fees		3,434		2,866
Total franchise revenue		$	140,976	$	145,037

Accounts and other receivables from franchisees as of March 31, 2021 and December 31, 2020 were $79.5 million (net of allowance of $7.7 million) and $76.3 million (net of allowance of $11.4 million), respectively, and were included in receivables, net in the Consolidated Balance Sheets.

Changes in the Company's contract liability for deferred franchise and development fees during the three months ended March 31, 2021 are as follows:


	Deferred Franchise Revenue (short- and long-term)
	(In thousands)
Balance at December 31, 2020	$	59,919
Recognized as revenue during the three months ended March 31, 2021	(3,354)
Fees deferred during the three months ended March 31, 2021	1,789
Balance at March 31, 2021	$	58,354

The balance of deferred revenue as of March 31, 2021 is expected to be recognized as follows:


	(In thousands)
Remainder of 2021	$	7,931
2022	7,130
2023	6,629
2024	6,044
2025	5,268
Thereafter	25,352
Total	$	58,354

5. Current Expected Credit Losses

The CECL reserve methodology requires companies to measure expected credit losses on financial instruments based on the total estimated amount to be collected over the lifetime of the instrument. Under the CECL model, reserves may be established against financial asset balances even if the risk of loss is remote or has not yet manifested itself. The Company records specific reserves against account balances of franchisees deemed at-risk when a potential loss is likely or imminent as a result of prolonged payment delinquency (greater than 90 days past due) and where notable credit deterioration has become evident. For financial assets that are not currently deemed at-risk, an allowance is recorded based on expected loss rates derived pursuant to the Company's CECL methodology that assesses four components - historical losses, current conditions, reasonable and supportable forecasts, and a reversion to history, if applicable.

Dine Brands Global, Inc. and Subsidiaries

Notes to Consolidated Financial Statements (Continued)

5. Current Expected Credit Losses (Continued)

The Company considers its portfolio segments to be the following:

Accounts Receivable (Franchise-Related)

Most of the Company’s short-term receivables due from franchisees are derived from royalty, advertising and other franchise-related fees.

Gift Card Receivables

Gift card receivables consist primarily of amounts due from third-party vendors. Receivables related to gift card sales are subject to seasonality and usually peak around year end as a result of the December holiday season.

Notes Receivable

Notes receivable balances primarily relate to the conversion of certain Applebee's franchisee accounts receivable to notes receivable, cash loans to franchisees for working capital purposes, a note receivable in connection with the sale of IHOP company restaurants and IHOP franchise fee and other notes. The notes are typically collateralized by the franchise. A significant portion of these notes have specific reserves recorded against them amounting to $9.4 million as of March 31, 2021.

Equipment Leases Receivable

Equipment leases receivable also relate to IHOP franchise development activity prior to 2003. Equipment lease contracts are collateralized by the equipment in the restaurant. The estimated fair value of the equipment collateralizing these lease contracts are not deemed to be significant given the very seasoned and mature nature of this portfolio. The weighted average remaining life of the Company’s equipment leases is 5.2 years as of March 31, 2021.

Direct Financing Leases Receivable

Direct financing lease receivables relate to IHOP franchise development activity prior to 2003 when IHOP typically leased or purchased the restaurant site, built and equipped the restaurant, then franchised the restaurant to a franchisee. IHOP provided the financing for leasing or subleasing the site. Direct financing leases at March 31, 2021, comprised 85 leases with a weighted average remaining life of 4.1 years, and relate to locations that IHOP is leasing from third parties and subleasing to franchisees.

Distributor Receivables

Receivables due from distributors are related to the sale of IHOP’s proprietary pancake and waffle dry mix to franchisees through the Company’s network of suppliers and distributors and are included as part of Other receivables.


	March 31, 2021		December 31, 2020
	(In millions)
Accounts receivable	$	84.8	$	85.7
Gift card receivables	5.4		22.5
Notes receivable	20.4		18.6
Financing receivables:
Equipment leases receivable	40.8		43.9
Direct financing leases receivable	20.1		22.7
Franchise fee notes receivable	0.1		0.1
Other	5.7		6.0
	177.3		199.5
Less: allowance for credit losses	(18.3)		(23.1)
	159.0		176.4
Less: current portion	(107.4)		(121.9)
Long-term receivables	$	51.6	$	54.5

Dine Brands Global, Inc. and Subsidiaries

Notes to Consolidated Financial Statements (Continued)

5. Current Expected Credit Losses (Continued)

Changes in the allowance for credit losses during the three months ended March 31, 2021 were as follows:



	Accounts Receivable		Notes receivable, short-term		Notes receivable, long-term		Lease Receivables		Equipment Notes		Other (1)		Total
	(In millions)
Balance, December 31, 2020	$	11.2	$	3.6	$	5.3	$	0.4	$	2.3	$	0.3	$	23.1

Bad debt (credit) expense for the three months ended March 31, 2021	(2.0)		0.5		(0.0)		(0.3)		(0.1)		(0.1)		(2.0)
Advertising provision adjustment	(1.4)		(0.0)		0		0		0		0		(1.4)
Write-offs	(0.2)		0		0		0.0		(1.2)		0		(1.4)
Recoveries	0		0		0		0.0		0		0		0.0
Balance, March 31, 2021	$	7.6	$	4.1	$	5.3	$	0.1	$	1.0	$	0.2	$	18.3

(1)Primarily distributor receivables, gift card receivables and credit card receivables

The Company's primary credit quality indicator for all portfolio segments is delinquency. The delinquency status of receivables (other than accounts receivable, gift card receivables and distributor receivables) at March 31, 2021 was as follows:



	Notes receivable, short-term		Notes receivable, long-term		Lease Receivables		Equipment Notes		Other (1)		Total
	(In millions)
Current	$	5.2	$	12.7	$	20.1	$	40.8	$	2.2	$	81.0
30-59 days	0.1		0		0		0		0		0.1
60-89 days	0.1		0		0		0		0		0.1
90-119 days	0.1		0		0		0		0		0.1
120+ days	2.2		0		0		0		0		2.2
Total	$	7.7	$	12.7	$	20.1	$	40.8	$	2.2	$	83.5

(1) Primarily credit card receivables

The year of origination of the Company's financing receivables is as follows:



	Notes receivable, short and long-term		Lease Receivables		Equipment Notes		Total
	(In millions)
2021	$	2.2	$	0	$	0	$	2.2
2020	1.2		1.5		0		2.7
2019	2.6		0.9		0		3.5
2018	8.0		0		0		8.0
2017	6.3		0		0		6.3
2016	0.1		17.7		40.8		58.6
Total	$	20.4	$	20.1	$	40.8	$	81.3

The Company does not place its financing receivables in non-accrual status.

6. Lease Disclosures

The Company engages in leasing activity as both a lessee and a lessor. The Company currently leases from third parties the real property on which approximately 550 IHOP franchisee-operated restaurants and 1 Applebee's franchisee-operated restaurant are located; the Company (as lessor) subleases the property to the franchisees that operate those restaurants. The Company also leases property it owns to the franchisees that operate approximately 55 IHOP restaurants and 1 Applebee's restaurant. The Company leases from third parties the real property on which 69 Applebee's company-operated restaurants are located. The Company also leases office space for its principal corporate office in Glendale, California and restaurant support centers in Kansas City, Missouri and Raleigh, North Carolina. The Company does not have a significant amount of non-real estate leases.

Dine Brands Global, Inc. and Subsidiaries

Notes to Consolidated Financial Statements (Continued)

6. Lease Disclosures (Continued)

The Company's existing leases/subleases related to IHOP restaurants generally provide for an initial term of 20 to 25 years, with most having one or more five-year renewal options. Leases related to Applebee's restaurants generally have an initial term of 10 to 20 years, with renewal terms of five to 20 years. Option periods were not included in determining liabilities and right-of-use assets related to operating leases. Approximately 240 of the Company's leases met the sales levels that required variable rent payments to the Company (as lessor), based on a percentage of restaurant sales during the three months ended March 31, 2021. Approximately 30 of the leases met the sales levels that required variable rent payments by the Company (as lessee), based on a percentage of restaurant sales during the three months ended March 31, 2021.

The Company's lease cost for the three months ended March 31, 2021 and 2020 was as follows:


	Three months ended March 31,
			2021		2020
		(In millions)
Finance lease cost:
Amortization of right-of-use assets			$	1.2	$	1.3
Interest on lease liabilities			1.4		1.7
Operating lease cost			25.1		26.5
Variable lease cost			0.3		0.4
Short-term lease cost			0.0		0.0
Sublease income			(24.2)		(26.6)
Lease cost			$	3.8	$	3.3

Future minimum lease payments under noncancelable leases as lessee as of March 31, 2021 were as follows:


	Finance Leases		Operating Leases
	(In millions)
2021 (remaining nine months)	$	11.7	$	69.0
2022	14.4		86.2
2023	11.6		71.0
2024	9.7		65.8
2025	8.5		57.0
Thereafter	50.8		146.6
Total minimum lease payments	106.7		495.6
Less: interest/imputed interest	(30.2)		(90.9)
Total obligations	76.5		404.7
Less: current portion	(10.3)		(70.3)
Long-term lease obligations	$	66.2	$	334.4

The weighted average remaining lease term as of March 31, 2021 was 7.2 years for finance leases and 9.2 years for operating leases. The weighted average discount rate as of March 31, 2021 was 10.2% for finance leases and 5.6% for operating leases.

Dine Brands Global, Inc. and Subsidiaries

Notes to Consolidated Financial Statements (Continued)

6. Lease Disclosures (Continued)

During the three months ended March 31, 2021 and 2020, the Company made the following cash payments for leases:


	Three months ended March 31,
			2021		2020
		(In millions)
Principal payments on finance lease obligations			$	2.6	$	3.0
Interest payments on finance lease obligations			$	1.5	$	1.7
Payments on operating leases			$	23.0	$	23.4
Variable lease payments			$	0.3	$	0.1

The Company's income from operating leases for the three months ended March 31, 2021 and 2020 was as follows:


	Three months ended March 31,
			2021		2020
		(In millions)
Minimum lease payments			$	23.8	$	25.4
Variable lease income			1.6		2.4
Total operating lease income			$	25.4	$	27.8

Minimum payments to be received as lessor under noncancelable operating leases as of March 31, 2021 were as follows:



	(In millions)
2021 (remaining nine months)	$	75.6
2022	98.8
2023	95.0
2024	86.9
2025	75.0
Thereafter	164.3
Total minimum rents receivable	$	595.6

The Company's income from direct financing leases for the three months ended March 31, 2021 and 2020 was as follows:


	Three months ended March 31,
			2021		2020
		(In millions)
Interest income			$	0.6	$	1.0
Variable lease income			0.1		0.2
Total operating lease income			$	0.7	$	1.2

Minimum payments to be received as lessor under noncancelable direct financing leases as of March 31, 2021 were as follows:



	(In millions)
2021 (remaining nine months)	$	7.5
2022	7.5
2023	3.6
2024	1.5
2025	0.7
Thereafter	3.1
Total minimum rents receivable	23.9
Less: unearned income	(3.8)
Total net investment in direct financing leases	20.1
Less: current portion	(7.9)
Long-term investment in direct financing leases	$	12.2

Table of Contents

Dine Brands Global, Inc. and Subsidiaries

Notes to Consolidated Financial Statements (Continued)

7. Long-Term Debt

At March 31, 2021 and December 31, 2020, long-term debt consisted of the following:


	March 31, 2021		December 31, 2020
	(In millions)
Series 2019-1 4.194% Fixed Rate Senior Secured Notes, Class A-2-I	$	696.5	$	698.3
Series 2019-1 4.723% Fixed Rate Senior Secured Notes, Class A-2-II	597.0		598.5
Series 2019-1 Variable Funding Senior Notes Class A-1, variable interest rate of 2.42% at December 31, 2020	0		220.0
Debt issuance costs	(9.1)		(11.8)
Long-term debt, net of debt issuance costs	1,284.4		1,505.0
Current portion of long-term debt	(13.0)		(13.0)
Long-term debt	$	1,271.4	$	1,492.0

On June 5, 2019, Applebee’s Funding LLC and IHOP Funding LLC (the “Co-Issuers”), each a special purpose, wholly-owned indirect subsidiary of the Company, issued two tranches of fixed rate senior secured notes, the Series 2019-1 4.194% Fixed Rate Senior Secured Notes, Class A-2-I (“Class A-2-I Notes”) in an initial aggregate principal amount of $700 million and the Series 2019-1 4.723% Fixed Rate Senior Secured Notes, Class A-2-II (“Class A-2-II Notes”) in an initial aggregate

principal amount of $600 million (the “Class A-2-II Notes” and, together with the Class A-2-I Notes, the “2019 Class A-2 Notes”). The 2019 Class A-2 Notes were issued pursuant to an offering exempt from registration under the Securities Act of 1933, as amended.

The Co-Issuers also entered into a revolving financing facility, the 2019-1 Variable Funding Senior Notes, Class A-1 (the “Credit Facility”), that allows for drawings up to $225 million of variable funding notes and the issuance of letters of credit. The Credit Facility and the 2019 Class A-2 Notes are referred to collectively herein as the “New Notes.” The New Notes were issued in a securitization transaction pursuant to which substantially all the domestic revenue-generating assets and domestic intellectual property held by the Co-Issuers and certain other special-purpose, wholly-owned indirect subsidiaries of the Company (the “Guarantors”) were pledged as collateral to secure the New Notes.

The New Notes were issued under a Base Indenture, dated as of September 30, 2014, and amended and restated as of June 5, 2019 (the “Base Indenture”), and the related Series 2019-1 Supplement to the Base Indenture, dated June 5, 2019 (the “Series 2019-1 Supplement”), among the Co-Issuers and Citibank, N.A., as the trustee (in such capacity, the “Trustee”) and securities intermediary. The Base Indenture and the Series 2019-1 Supplement (collectively, the “Indenture”) will allow the Co-Issuers to issue additional series of notes in the future subject to certain conditions set forth therein.

2019 Class A-2 Notes

The legal final maturity of the 2019 Class A-2 Notes is in June 2049, but rapid amortization will apply if the Class A-2-I Notes are not repaid by June 2024 (the “Class A-2-I Anticipated Repayment Date”) and for the Class A-2-II Notes if not repaid by June 2026 (the “Class A-2-II Anticipated Repayment Date”). If the Co-Issuers have not repaid or refinanced the Class A-2-I Notes by the Class A-2-I Anticipated Repayment Date or the Class A-2-II Notes by the Class A-2-II Anticipated Repayment Date, then additional interest will accrue on the Class A-2-I Notes and the Class A-2-II Notes, as applicable, at the greater of: (A) 5.0% and (B) the amount, if any, by which the sum of the following exceeds the applicable Series 2019-1 Class A-2 Note interest rate: (x) the yield to maturity (adjusted to a quarterly bond-equivalent basis) on the applicable anticipated repayment date of the United States Treasury Security having a term closest to 10 years plus (y) 5.0%, plus (z) 2.15% for the Series 2019-1 Class A-2-I Notes and 2.64% for the Series 2019-1 Class A-2-II Notes.

While the 2019 Class A-2 Notes are outstanding, payment of principal and interest is required to be made on the 2019 Class A-2 Notes on a quarterly basis. The quarterly principal payment of $3.25 million on the 2019 Class A-2 Notes may be suspended when the leverage ratio for the Company and its subsidiaries is less than or equal to 5.25x. In general, the leverage ratio is the Company's indebtedness (as defined in the Indenture) divided by adjusted EBITDA (as defined in the Indenture) for the four preceding quarterly periods. The complete definitions of all calculation elements of the leverage ratio are contained in the Indenture.

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Dine Brands Global, Inc. and Subsidiaries

Notes to Consolidated Financial Statements (Continued)

7. Long-Term Debt (Continued)

As of March 31, 2021, the Company's leverage ratio was 7.02x. As a result, quarterly principal payments on the 2019 Class A-2 Notes of $3.25 million continue to be required. Exceeding the leverage ratio of 5.25x does not violate any covenant related to the New Notes.

The Company may voluntarily repay the 2019 Class A-2 Notes at any time; however, if the 2019 Class A-2 Notes are repaid prior to certain dates, the Company would be required to pay make-whole premiums. As of March 31, 2021, the make-whole premium associated with voluntary prepayment of the Class A-2-I Notes was approximately $29 million; this amount declines progressively each quarter to zero in June 2022. As of March 31, 2021, the make-whole premium associated with voluntary prepayment of the Class A-2-II Notes was approximately $59 million; this amount declines progressively each quarter to zero in June 2024. The Company would also be subject to a make-whole premium in the event of a mandatory prepayment required following a Rapid Amortization Event or certain asset dispositions. The mandatory make-whole premium requirements are considered derivatives embedded in the New Notes that must be bifurcated for separate valuation. The Company estimated the fair value of these derivatives to be immaterial as of March 31, 2021, based on the probability-weighted discounted cash flows associated with either event.

2019 Class A-1 Notes

The Co-Issuers entered into the Credit Facility that allows for drawings up to $225 million of variable funding notes and the issuance of letters of credit. The applicable interest rate under the Credit Facility depends on the type of borrowing by the Co-Issuers. The applicable interest rate for advances is generally calculated at a per annum rate equal to the commercial paper funding rate or one-, two-, three- or six-month Eurodollar Funding Rate, in either case, plus 2.15%. The applicable interest rate for swingline advances and unreimbursed draws on outstanding letters of credit is a per annum base rate equal to the sum of (a) 1.15% plus (b) the greatest of (i) the Prime Rate in effect from time to time, (ii) the Federal Funds Rate in effect from time to time plus 0.50% and (iii) the one-month Eurodollar Funding Rate plus 1.00%. There is no upfront fee for the Credit Facility. There is a fee of 50 basis points on any unused portion of the revolving financing facility. Undrawn face amounts of outstanding letters of credit that are not cash collateralized accrue a fee of 2.15% per annum.

In March 2020, the Company borrowed $220.0 million against the Credit Facility. The maximum amount of borrowings from the Credit Facility outstanding during the three months ended March 31, 2021 was $220.0 million. The $220.0 million was repaid on March 5, 2021 and as of March 31, 2021, there were no outstanding borrowings under the Credit Facility. The interest rate for borrowings under the Credit Facility is the three-month LIBOR rate plus 2.15% for 60% of the advances and the commercial paper funding rate of our conduit investor plus 2.15% for 40% of the advances. The weighted average interest rate on Credit Facility borrowings for the period outstanding during the three months ended March 31, 2021 was 2.4%.

At March 31, 2021, $3.3 million was pledged against the Credit Facility for outstanding letters of credit, leaving $221.7 million available for borrowing. The letters of credit are used primarily to satisfy insurance-related collateral requirements.

Covenants and Restrictions

The New Notes are subject to a series of covenants and restrictions customary for transactions of this type, including: (i) that the Co-Issuers maintain specified reserve accounts to be used to make required payments in respect of the New Notes, (ii) provisions relating to optional and mandatory prepayments, and the related payment of specified amounts, including specified call redemption premiums in the case of Class A-2 Notes under certain circumstances; (iii) certain indemnification payments in the event, among other things, the transfers of the assets pledged as collateral for the New Notes are in stated ways defective or ineffective and (iv) covenants relating to recordkeeping, access to information and similar matters. The New Notes are subject to customary rapid amortization events provided for in the Indenture, including events tied to failure of the Securitization Entities (as defined in the Indenture) to maintain the stated debt service coverage ratio (“DSCR”), the sum of domestic retail sales for all restaurants being below certain levels on certain measurement dates, certain manager termination events, certain events of default and the failure to repay or refinance the Class A-2 Notes on the anticipated repayment dates. The New Notes are also subject to certain customary events of default, including events relating to non-payment of required interest, principal or other amounts due on or with respect to the New Notes, failure of the Securitization Entities to maintain the stated DSCR, failure to comply with covenants within certain time frames, certain bankruptcy events, breaches of specified representations and warranties and certain judgments.

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Dine Brands Global, Inc. and Subsidiaries

Notes to Consolidated Financial Statements (Continued)

7. Long-Term Debt (Continued)

In general, the DSCR ratio is Net Cash Flow (as defined in the Indenture) for the four quarters preceding the calculation date divided by the total debt service payments (as defined in the Indenture) of the preceding four quarters. The complete definitions of the DSCR and all calculation elements are contained in the Indenture. Failure to maintain a prescribed DSCR can trigger a Cash Flow Sweeping Event, A Rapid Amortization Event, a Manager Termination Event or a Default Event as described below. In a Cash Flow Sweeping Event, the Trustee is required to retain 50% of excess Cash Flow (as defined in the Indenture) in a restricted account. In a Rapid Amortization Event, all excess Cash Flow is retained and used to retire principal amounts of debt. In a Manager Termination Event, the Company may be replaced as manager of the assets securitized under the Indenture. In a Default Event, the outstanding principal amount and any accrued but unpaid interest can be called to become immediately due and payable. Key DSCRs are as follows:

•DSCR less than 1.75x - Cash Flow Sweeping Event

•DSCR less than 1.20x - Rapid Amortization Event

•Interest-only DSCR less than 1.20x - Manager Termination Event

•Interest-only DSCR less than 1.10x - Default Event

The Company's DSCR for the reporting period ended March 31, 2021 was approximately 3.45x.

Debt Issuance Costs

Amortization of costs incurred in connection with the issuance of the 2019 Class A-2 Notes of $0.5 million and $0.5 million were included in interest expense for the three months ended March 31, 2021 and 2020, respectively. Amortization costs incurred in connection with the Company's Credit Facility and prior credit facility of $0.2 million and $0.2 million were included in interest expense for the three months ended March 31, 2021 and 2020, respectively.

At March 31, 2021, total unamortized debt issuance costs of $9.1 million are reported as a direct reduction of the 2019 Class A-2 Notes in the Consolidated Balance Sheets. At March 31, 2021, total unamortized debt issuance costs of $2.0 million related to the Credit Facility and prior credit facility are classified as other long-term assets because there are no borrowings outstanding against the Credit Facility.

Maturities of Long-term Debt

•The anticipated repayment date of the Class A-2-I Notes is June 2024.

•The anticipated repayment date of the Class A-2-II Notes is in June 2026.

•Quarterly principal payments on the Class A-2-I and Class A-2-II Notes totaling $3.25 million ($13.0 million per annum) are required if the Company's leverage ratio is greater than 5.25x.

8. Stockholders' ~~Equity~~Deficit

Dividends

~~During~~Dividends declared and paid per share for the ~~nine~~three months ended ~~September 30, 2017, the Company paid dividends on common stock of $52.3 million, representing cash dividends of $0.97 per share declared in the fourth quarter of 2016~~March 31, 2021 and the first and second quarters of 2017. On August 10, 2017, the Company's Board of Directors declared a third quarter 2017 cash dividend of $0.97 per share of common stock. This dividend was paid on October 6, 2017 to the Company's stockholders of record at the close of business on September 18, 2017. The Company reported dividends payable of $17.8 million at September 30, 2017.2020 were as follows:


	Three months ended March 31,
		2021		2020
Dividends declared per common share		$	0	$	0.76
Dividends paid per common share		$	0	$	0.69

Stock Repurchase Program

In ~~October 2015,~~February 2019, the ~~Company's~~Company’s Board of Directors approved a stock repurchase program authorizing the Company to repurchase up to ~~$150~~$200 million of ~~DineEquity~~the Company’s common stock (the ~~“2015~~“2019 Repurchase Program”) on an opportunistic basis from time to time in the open market ~~transactions and~~or in privately negotiated transactions based on business, market, applicable legal requirements and other considerations. The ~~2015~~2019 Repurchase Program, as approved by the Board of Directors, does not require the repurchase of a specific number of shares and can be terminated at any time. ~~A summary~~

Dine Brands Global, Inc. and Subsidiaries

Notes to Consolidated Financial Statements (Continued)

8. Stockholders' Deficit (Continued)

The Company did 0t repurchase any shares during three months ended March 31, 2021, as compared to repurchasing 459,899 shares during the three months ended March 31, 2020. As of March 31, 2021, cumulative repurchases of stock total 1,697,597 shares ~~repurchased~~at a cost of $129.8 million, with a dollar value of $70.2 million remaining for repurchase under the ~~2015~~2019 Repurchase ~~Program, during the nine months ended September 30, 2017 and cumulatively, is as follows:~~Program.

2015 Repurchase Program Shares Cost of shares
(In millions)
Repurchased during the three months ended September 30, 2017 —
$ —
Repurchased during the nine months ended September 30, 2017 145,786
$ 10.0
Cumulative repurchases as of September 30, 2017 1,000,657
$ 82.9
Remaining dollar value of shares that may be repurchased n/a $ 67.1

Treasury Stock

Repurchases of ~~DineEquity~~the Company's common stock are included in treasury stock at the cost of shares repurchased plus any transaction costs. Treasury stock may be re-issued when stock options are exercised, when restricted stock awards are granted and when restricted stock units settle in stock upon vesting. The cost of treasury stock re-issued is determined using the first-in, first-out (“FIFO”) method. During the ~~nine~~three months ended ~~September 30, 2017,~~March 31, 2021, the Company re-issued ~~273,376~~539,134 shares of treasury stock at a total FIFO cost of ~~$9.8~~$21.8 million.

6.9. Income Taxes

The Company's effective tax rate was ~~6.4% for the nine months ended September 30, 2017 as compared to 35.2% for the nine months ended September 30, 2016.~~ T~~he effective tax rate of 6.4% for the nine months ended September 30, 2017 (the~~(6.6)% (a tax benefit of ~~$28.2~~$1.6 million on the pretax book ~~loss~~income of ~~$444.3~~$24.0 million) for the three months ended March 31, 2021, as compared to 23.2% for the three months ended March 31, 2020. The effective tax rate for the three months ended March 31, 2021 was ~~significantly different~~lower than the ~~statutory federal tax~~ rate of ~~35% because~~ the $358.2 million impairment of goodwill (see Note 4) is not deductible for federal income tax purposes and therefore has no associated tax benefit. The Company did recognize a tax benefit of $65.1 million as a discrete item relatedprior year period primarily due to the ~~$173.4 million impairment~~recognition of ~~Applebee's tradename.~~excess tax benefits on stock-based compensation.

The total gross unrecognized tax benefit as of ~~September 30, 2017~~March 31, 2021 and December 31, ~~2016~~2020 was ~~$5.9~~$2.5 million and ~~$3.9~~$2.2 million, respectively, excluding interest, penalties and related tax benefits. The Company estimates the unrecognized tax benefit as of March 31, 2021 may decrease over the upcoming 12 months by an amount up to ~~$1.8~~$0.8 million related to settlements with taxing authorities and ~~the lapse of~~expiring statutes of limitations. For the remaining liability, due to the uncertainties related to these tax matters, the Company is unable to make a ~~reasonably reliable~~reasonable estimate as to when cash settlement with a taxing authority will occur.

As of ~~September 30, 2017,~~March 31, 2021, accrued interest was ~~$1.0~~$0.9 million and accrued penalties were less than $0.1 million, excluding any related income tax benefits. As of December 31, ~~2016,~~2020, accrued interest was ~~$1.0~~$0.9 million and accrued penalties were less than $0.1 million, excluding any related income tax benefits. The Company recognizes interest accrued related to unrecognized tax benefits and penalties as a component of its income tax provision recognized in its Consolidated Statements of Comprehensive Income.

The Company files federal income tax returns and the Company or one of its subsidiaries ~~files~~file income tax returns in various state and ~~foreign~~international jurisdictions. With few exceptions, the Company is no longer subject to federal tax examinations by tax authorities for years before 2017 and state or non-United States tax examinations by tax authorities for years before 2011. The ~~Internal Revenue Service commenced examination of the Company’s U.S. federal income tax return for the tax years 2011 to 2013 during the year. The examination is currently in process. The~~ Company believes that adequate reserves have been provided ~~relating~~related to all matters contained in the tax periods open to examination.

On March 11, 2021, the American Rescue Plan Act of 2021 (“ARP Act”) was enacted in response to the COVID-19 pandemic. The Company is continuing to evaluate the impact of the ARP Act, but at present does not expect the ARP Act would result in a material impact to our income tax benefit or provision.

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~~DineEquity,~~Dine Brands Global, Inc. and Subsidiaries

Notes to Consolidated Financial Statements (Continued)

7.10. Stock-Based Compensation

The following table summarizes the components of stock-based compensation expense included in general and administrative expenses in the Consolidated Statements of Comprehensive Income:


	Three months ended September 30,						Nine months ended September 30,
	2017			2016			2017			2016				Three months ended March 31,
	(In millions)															2021		2020
Total stock-based compensation expense:													Total stock-based compensation expense:		(In millions)

Equity classified awards expense	$	1.3		$	2.6		$	9.0		$	8.3		Equity classified awards expense			$	3.1	$	4.1
Liability classified awards expense	—			(0.5		)	(1.1		)	0.6
Liability classified awards expense (credit)													Liability classified awards expense (credit)			1.5		(0.6)
Total pre-tax stock-based compensation expense	1.3			2.1			7.9			8.9			Total pre-tax stock-based compensation expense			4.6		3.5
Book income tax benefit	(0.5		)	(0.7		)	(3.0		)	(3.3		)	Book income tax benefit			(1.1)		(0.9)
Total stock-based compensation expense, net of tax	$	0.8		$	1.4		$	4.9		$	5.6		Total stock-based compensation expense, net of tax			$	3.5	$	2.6

As of ~~September 30, 2017~~,March 31, 2021, total unrecognized compensation expense of ~~$17.6~~$23.6 million related to restricted stock and restricted stock units and ~~$3.2~~$4.6 million related to stock options are expected to be recognized over a weighted average period of ~~2.1~~1.7 years for restricted stock and restricted stock units and ~~1.9~~1.8 years for stock options.

Fair Value Assumptions

The Company granted ~~537,030~~91,743 stock options during the ~~nine~~three months ended ~~September 30, 2017~~March 31, 2021 for which the fair value was estimated using a Black-Scholes option pricing model. The following summarizes the weighted average assumptions used in the Black-Scholes model:



Risk-free interest rate	~~1.9~~0.5	%
~~Weighted average historical~~Historical volatility	~~22.9~~67.7	%
Dividend yield	~~7.3~~0	%
Expected years until exercise	4.5
~~Weighted average fair~~Fair value of options granted	$~~4.31~~39.85

The Company granted 350,000 performance-based stock options and 175,000 performance-based restricted stock units during the three months ended September 30, 2017 for which the fair value was estimated using a Monte Carlo simulation method. The following summarizes the assumptions used in estimating the fair values:



~~Risk-free interest rate~~	~~1.6~~	%
~~Weighted average historical volatility~~	~~30.0~~	%
~~Dividend yield~~	~~9.6~~	%
~~Expected years until exercise~~	~~3.4~~
~~Weighted average fair value of options granted~~	~~$3.07~~
~~Weighted average fair value of restricted stock units granted~~	~~$10.19~~

~~Table of Contents~~

~~DineEquity, Inc. and Subsidiaries~~

~~Notes to Consolidated Financial Statements (Continued)~~

~~7. Stock-Based Compensation (Continued)~~

Equity Classified Awards - Stock Options

Stock option balances at ~~September 30, 2017~~,March 31, 2021, and activity for the ~~nine~~three months ended ~~September 30, 2017~~March 31, 2021 were as follows:


	Shares	Weighted Average Exercise Price		Weighted Average Remaining Contractual Term (in Years)	Aggregate Intrinsic Value (in Millions)
Outstanding at December 31, 2020	1,014,670	$	64.16
Granted	91,743	74.57
Exercised	(428,376)	45.48
Expired	(20,169)	98.11
Forfeited	(36,093)	88.46
Outstanding at March 31, 2021	621,775	76.06		6.7	$	10.5
Vested at March 31, 2021 and Expected to Vest	595,541	75.87		6.6	$	10.2
Exercisable at March 31, 2021	423,603	$	72.91	5.6	$	8.7

Shares
Weighted
Average
Exercise
Price

Weighted Average
Remaining
Contractual Term
(in Years)

Aggregate
Intrinsic
Value (in Millions)
Outstanding at December 31, 2016 701,134
$ 80.04

Granted 887,030
48.35

Exercised (64,916 ) 40.59

Expired (58,217 ) 84.43

Forfeited (171,847 ) 65.82

Outstanding at September 30, 2017 1,293,184
61.98
7.3 $ 0.9
Vested at September 30, 2017 and Expected to Vest 1,111,610
64.50
7.0 $ 0.6
Exercisable at September 30, 2017 456,308
$ 81.35
3.3 $ 0.0

The aggregate intrinsic value in the table above represents the total pre-tax intrinsic value (the difference between the closing stock price of the Company’s common stock on the last trading day of the ~~third~~first quarter of ~~2017~~2021 and the exercise price, multiplied by the number of in-the-money options) that would have been received by the option holders had all option holders exercised their options on ~~September 30, 2017~~.March 31, 2021. The aggregate intrinsic value will change based on the fair market value of the Company’s common stock and the number of in-the-money options.

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Dine Brands Global, Inc. and Subsidiaries

Notes to Consolidated Financial Statements (Continued)

10. Stock-Based Compensation (Continued)

Equity Classified Awards - Restricted Stock and Restricted Stock Units

Outstanding balances as of ~~September 30, 2017~~,March 31, 2021, and activity related to restricted stock and restricted stock units for the ~~nine~~three months ended ~~September 30, 2017~~March 31, 2021 were as follows:


	Restricted Stock	Weighted Average Grant Date Fair Value		Stock-Settled Restricted Stock Units	Weighted Average Grant Date Fair Value
Outstanding at December 31, 2020	254,331	$	76.50	355,570	$	28.01
Granted	110,840	82.44		68,578	62.92
Released	(40,416)	66.16		(314,713)	22.84
Forfeited	(18,644)	84.15		0	0
Outstanding at March 31, 2021	306,111	$	79.55	109,435	$	64.76

Restricted
Stock

Weighted
Average
Grant Date
Fair Value

Restricted
Stock Units

Weighted
Average
Grant Date
Fair Value
Outstanding at December 31, 2016 235,472
$ 92.81
34,058
$ 93.95
Granted 208,460
52.08
275,578
22.37
Released (89,911 ) 88.65
(12,683 ) 81.63
Forfeited (73,409 ) 79.44
—
—
Outstanding at September 30, 2017 280,612
$ 67.38
296,953
$ 28.39

Liability Classified Awards - Cash-settled Restricted Stock Units

The Company has granted cash-settled restricted stock units to certain employees. These instruments are recorded as liabilities at fair value as of the respective period end.


						Cash-Settled Restricted Stock Units
Outstanding at December 31, 2020						52,956

Released						(38,171)
Forfeited						(54)
Outstanding at March 31, 2021						14,731

For the three months ended March 31, 2021 and 2020, an expense of $1.4 million and a credit of $1.3 million, respectively, was included as stock-based compensation expense related to cash-settled restricted stock units. At March 31, 2021 and December 31, 2020, liabilities of $0.8 million and $2.1 million, respectively, related to cash-settled restricted stock units were included as part of accrued employee compensation and benefits in the Consolidated Balance Sheets.

Liability Classified Awards - Long-Term Incentive Awards

The Company has granted cash long-term incentive awards (“LTIP awards”) to certain employees. Annual LTIP awards vest over a ~~three-year~~three-year period and are determined using ~~a multiplier~~multipliers from 0% to 200% of the target award based on the total stockholder return of ~~DineEquity~~Dine Brands Global common stock compared to the total stockholder returns of a peer group of companies. ~~Although LTIP awards are only paid in cash, since the multiplier is based on the price of the Company's common stock, the~~The awards are considered stock-based compensation ~~in accordance with U.S. GAAP~~ and are classified as ~~liabilities.~~liabilities measured at fair value as of the respective period end. For the three months ended September 30, 2017, no expense was recognized. For the three months ended September 30, 2016, a credit of $0.5 million was included in total stock-based compensation expense related to LTIP awards. For the nine months ended September 30, 2017March 31, 2021 and ~~2016, a credit of $1.0 million and~~2020, an expense of ~~$0.6~~$0.1 million and $0.8 million, respectively, were included in total stock-based compensation expense related to LTIP awards. At ~~September 30, 2017~~March 31, 2021 and December 31, ~~2016~~,2020, liabilities of ~~less than $0.1~~$0.8 million and ~~liabilities of $1.2~~$2.1 million, respectively, related to LTIP awards were included as part of accrued employee compensation and benefits in the Consolidated Balance Sheets.

11. Segments

The Company identifies its reporting segments based on the organizational units used by management to monitor performance and make operating decisions. The Company currently has 5 operating segments: Applebee's franchise operations, Applebee's company-operated restaurant operations, IHOP franchise operations, rental operations and financing operations. The Company has 4 reportable segments: franchise operations, (an aggregation of Applebee's and IHOP franchise operations), company-operated restaurant operations, rental operations and financing operations. The Company

considers these to be its reportable segments, regardless of whether any segment exceeds 10% of consolidated revenues, income before income tax provision or total assets.

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~~DineEquity,~~Dine Brand Global, Inc. and Subsidiaries

Notes to Consolidated Financial Statements (Continued)

11. Segments (Continued)

~~8. Segments~~

The Company currently has three operating segments: franchise operations (an aggregation of Applebee’s and IHOP franchise operations), rental operations and financing operations. Prior to June 2017, the Company operated 10 IHOP restaurants and those operations were considered to be a fourth operating segment. The Company views all operating segments as reportable segments regardless of whether an operating segment exceeds 10% of consolidated revenues, segment profit or total assets.

As of ~~September 30, 2017,~~March 31, 2021, the franchise operations segment consisted of (i) ~~1,945~~1,636 restaurants operated by Applebee’s franchisees in the United States, ~~two~~2 U.S. territories and 1411 countries outside the United States and (ii) ~~1,761~~1,749 restaurants operated by IHOP franchisees and area licensees in the United States, ~~three~~2 U.S. territories and 137 countries outside the United States. Franchise operations revenue consists primarily of franchise royalty revenues, franchise advertising revenue, sales of proprietary products to franchisees (primarily pancake and waffle dry mixes for the IHOP restaurants), ~~franchise advertising fees from domestic IHOP restaurants and international restaurants of both brands~~ and franchise fees. Franchise operations expenses include advertising expenses, ~~from domestic IHOP restaurants and international restaurants of both brands,~~ the cost of IHOP proprietary products, bad debt expense, franchisor contributions to marketing funds, pre-opening training expenses and other franchise-related costs.

Company restaurant sales are retail sales at 69 Applebee's company-operated restaurants. Company restaurant expenses are operating expenses at company-operated restaurants and include food, labor, utilities, rent and other restaurant operating costs.

Rental operations revenue includes revenue from operating leases and interest income from direct financing leases. Rental operations expenses are costs of operating leases and interest expense from ~~capital~~finance leases on ~~franchisee-operated restaurants.~~

Company restaurant sales are retail sales at company-operated restaurants. Company restaurant expenses are operating expenses at company-operated restaurants and include food, labor, utilities, rent and other restaurant operating costs. In June 2017,which the Company ~~refranchised nine of ten company-operated restaurants in~~is the Cincinnati, Ohio market area; the one restaurant not refranchised was permanently closed. As a result, the Company no longer operates any IHOP restaurants on a permanent basis. The Company has not presented these restaurants as discontinued operations as defined by U.S. GAAP because the refranchising of nine restaurants out of a total of over 3,700 restaurants did not represent a strategic shift that had a major effect on the Company's operations.

From time to time, the Company may operate IHOP restaurants reacquired from franchisees on a temporary basis until those restaurants are refranchised. There were no IHOP restaurants under temporary operation at September 30, 2017.

lessee.

Financing ~~operations revenue~~revenues primarily ~~consists~~consist of interest income from the financing of IHOP equipment leases and franchise fees and ~~equipment leases and sales of equipment associated with refranchised IHOP restaurants.~~interest income on Applebee's notes receivable from franchisees. Financing expenses are ~~primarily~~ the cost of ~~restaurant~~taxes related to IHOP equipment ~~associated with refranchised IHOP restaurants.~~leases.

Information on segments is as follows:



	Three months ended March 31,
		2021		2020
		(In millions)
Revenues from external customers:

Franchise operations		$	141.0	$	145.1
Rental operations		26.1		29.0
Company restaurants		36.0		31.3
Financing operations		1.1		1.5
Total		$	204.2	$	206.9

Interest expense:

Rental operations		$	1.3	$	1.6
Company restaurants		0.9		0.5
Corporate		16.5		15.2
Total		$	18.7	$	17.3

Depreciation and amortization:

Franchise operations		$	2.5	$	2.6
Rental operations		2.8		3.1
Company restaurants		1.8		1.6
Corporate		2.9		3.3
Total		$	10.0	$	10.6

Gross profit, by segment:

Franchise operations		$	76.0	$	75.6
Rental operations		5.2		6.5
Company restaurants		3.1		1.0
Financing operations		1.0		1.3
Total gross profit		85.3		84.4
Corporate and unallocated expenses, net		(61.3)		(55.3)
Income before income taxes		$	24.0	$	29.1

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~~DineEquity,~~Dine Brands Global, Inc. and Subsidiaries

Notes to Consolidated Financial Statements (Continued)

~~8. Segments (Continued)~~

~~Information on segments~~12. Net Income per Share

The computation of the Company's basic and diluted net income per share is as follows:



	Three months ended March 31,
			2021		2020
		(In thousands, except per share data)
Numerator for basic and diluted income per common share:
Net income			$	25,603	$	22,328
Less: Net income allocated to unvested participating restricted stock			(548)		(748)
Net income available to common stockholders - basic			25,055		21,580
Effect of unvested participating restricted stock in two-class calculation			6		4

Net income available to common stockholders - diluted			$	25,061	$	21,584
Denominator:
Weighted average outstanding shares of common stock - basic			16,460		16,263
Dilutive effect of stock options			170		207
Weighted average outstanding shares of common stock - diluted			16,630		16,470
Net income per common share:
Basic			$	1.52	$	1.33
Diluted			$	1.51	$	1.31

13. Closure and Impairment Charges

Closure and Long-lived Asset Impairment Charges

Closure and long-lived tangible asset impairment charges for the three months ended March 31, 2021 were as follows:


	Three Months Ended
	March 31,
		2021		2020
		(In millions)
Closure charges		$	1.9	$	(0.0)
Long-lived tangible asset impairment		0.1		0.0
Total closure and long-lived asset impairment charges		$	2.0	$	(0.0)

Closure Charges

The closure charges of $1.9 million for the three months ended March 31, 2021 related to the establishment of or revision to closure reserves for approximately 35 IHOP restaurants.

Long-lived Tangible Asset Impairment

The long-lived asset impairment of $0.1 million for the three months ended March 31, 2021 related 1 IHOP franchisee-operated restaurant for which the carrying amount exceeded the undiscounted cash flows. The impairment recorded represented the difference between the carrying value and the estimated fair value. The impairment related to operating lease right-of-use assets that had been recorded in 2019 upon adoption of new lease accounting guidance codified in Accounting Standards Codification Topic 842.

Three months ended September 30, Nine months ended September 30,
2017 2016 2017 2016
(In millions)
Revenues from external customers:

Franchise operations $ 112.3
$ 119.2
$ 351.4
$ 366.7
Rental operations 30.3
30.5
90.9
92.7
Company restaurants —
4.0
7.5
13.4
Financing operations 2.1
2.3
6.3
7.0
Total $ 144.7
$ 156.0
$ 456.0
$ 479.8

Interest expense:

Rental operations $ 2.6
$ 2.9
$ 8.0
$ 9.0
Company restaurants —
0.1
0.2
0.3
Corporate 15.4
15.4
46.5
46.1
Total $ 18.0
$ 18.4
$ 54.7
$ 55.4

Depreciation and amortization:

Franchise operations $ 2.7
$ 2.7
$ 8.1
$ 7.9
Rental operations 3.0
3.1
9.1
9.4
Company restaurants —
0.1
0.1
0.3
Corporate 1.9
1.5
5.8
5.3
Total $ 7.6
$ 7.4
$ 23.1
$ 22.9

Gross profit, by segment:

Franchise operations $ 70.5
$ 81.9
$ 235.7
$ 258.7
Rental operations 8.0
7.7
23.2
23.7
Company restaurants (0.0 ) (0.2 ) (0.3 ) (0.7 )
Financing operations 1.6
2.3
5.9
6.8
Total gross profit 80.1
91.7
264.5
288.5
Corporate and unallocated expenses, net (588.4 ) (54.2 ) (708.8 ) (170.1 )
(Loss) income before income tax provision $ (508.3 ) $ 37.5
$ (444.3 ) $ 118.3

Table of Contents

~~DineEquity,~~Dine Brands Global, Inc. and Subsidiaries

Notes to Consolidated Financial Statements (Continued)

~~9. Net (Loss) Income per Share~~

~~The computation of the Company's basic and diluted net (loss) income per share is as follows:~~

Three months ended September 30, Nine months ended September 30,
2017 2016 2017 2016
(In thousands, except per share data)
Numerator for basic and diluted (loss) income per common share:

Net (loss) income $ (451,718 ) $ 24,273
$ (416,075 ) $ 76,645
Less: Net loss (income) allocated to unvested participating restricted stock 8,496
(338 ) 6,921
(1,103 )
Net (loss) income available to common stockholders - basic (443,222 ) 23,935
(409,154 ) 75,542
Effect of unvested participating restricted stock in two-class calculation —
1
5
3
Net (loss) income available to common stockholders - diluted $ (443,222 ) $ 23,936
$ (409,149 ) $ 75,545
Denominator:

Weighted average outstanding shares of common stock - basic 17,742
17,950
17,718
18,099
Dilutive effect of stock options —
91
—
102
Weighted average outstanding shares of common stock - diluted 17,742
18,041
17,718
18,201
Net (loss) income per common share:

Basic $ (24.98 ) $ 1.33
$ (23.09 ) $ 4.17
Diluted $ (24.98 ) $ 1.33
$ (23.09 ) $ 4.15

For the three and nine months ended September 30, 2017, diluted loss per common share was computed using the weighted average number of shares outstanding during each period as the 1,000 and 11,000 shares, respectively, from common stock equivalents would have been antidilutive.

~~10.~~14. Fair Value Measurements

The Company does not have a material amount of financial assets or liabilities that are required under U.S. GAAP to be measured on a recurring basis at fair value. The Company is not a party to any material derivative financial instruments. The Company does not have a material amount of non-financial assets or non-financial liabilities that are required under U.S. GAAP to be measured at fair value on a recurring basis. The Company has not elected to use the fair value measurement option, as permitted under U.S. GAAP, for any assets or liabilities for which fair value measurement is not presently required.

The Company believes the fair values of cash equivalents, accounts receivable and accounts payable approximate their carrying amounts due to their short duration.

The fair values of the Company's ~~Series 2014-1~~2019 Class A-2 Notes ~~(the “Class A-2 Notes”)~~ at ~~September 30, 2017~~March 31, 2021 and December 31, ~~2016~~2020 were as follows:

September 30, 2017 December 31, 2016
Carrying Amount Fair Value Carrying Amount Fair Value
(In millions)
Long-term debt, current and long-term $ 1,285.2
$ 1,274.0
$ 1,282.7
$ 1,286.2


	March 31, 2021		December 31, 2020
	(In millions)
Face Value of Class A-2 Notes	$	1,293.5	$	1,296.8
Fair Value of Class A-2 Notes	$	1,338.5	$	1,259.5

The fair values were determined based on Level 2 inputs, including information gathered from brokers who trade in the Company’s 2019 Class A-2 Notes, ~~and~~as well as information on notes that are similar to those of the Company.

~~Table of Contents~~

~~DineEquity, Inc. and Subsidiaries~~

~~Notes to Consolidated Financial Statements (Continued)~~

~~11.~~15. Commitments and Contingencies

Litigation, Claims and Disputes

The Company is subject to various lawsuits, administrative proceedings, audits and claims arising in the ordinary course of business. Some of these lawsuits purport to be class actions and/or seek substantial damages. The Company is required under U.S. GAAP to record an accrual for litigation loss contingencies that are both probable and reasonably estimable. Legal fees and expenses associated with the defense of all of the Company's litigation are expensed as such fees and expenses are incurred. Management regularly assesses the Company's insurance coverage, analyzes litigation information with the Company's attorneys and evaluates the Company's loss experience in connection with pending legal proceedings. While the Company does not presently believe that any of the legal proceedings to which it is currently a party will ultimately have a material adverse impact on the Company, there can be no assurance that the Company will prevail in all the proceedings the Company is party to, or that the Company will not incur material losses from them.

Lease Guarantees

In connection with the sale of Applebee’s restaurants ~~or previous brands~~ to franchisees, ~~and other parties,~~ the Company has, in certain cases, guaranteed or has potential continuing liability for lease payments totaling ~~$325.2~~$235.9 million as of ~~September 30, 2017~~.March 31, 2021. This amount represents the maximum potential liability for future payments under these leases. These leases have been assigned to the buyers and expire at the end of the respective lease terms, which range from ~~2017~~2021 through ~~2048~~.2048. Excluding unexercised option periods, the Company's potential liability for future payments under these leases is ~~$54.5~~$34.2 million. In the event of default, the indemnity and default clauses in the sale or assignment agreements govern the Company's ability to pursue and recover damages incurred.No ~~material lease payment guarantee liabilities have been recorded as of~~ ~~September 30, 2017~~.

~~12. Allowance for Credit Losses~~

~~The Company's allowance for credit losses at September 30, 2017~~16. Cash, Cash Equivalents and ~~December 31, 2016 was $13.1 million and $3.1 million, respectively.~~

~~13.~~ Restricted Cash

Cash and Cash Equivalents

The Company considers all highly liquid investment securities with remaining maturities at the date of purchase of three months or less to be cash equivalents. These cash equivalents are stated at cost which approximates market value. Cash held related to IHOP advertising funds and the Company's gift card programs is not considered to be restricted cash as there are no restrictions on the use of these funds.

Table of Contents

Dine Brands Global, Inc. and Subsidiaries

Notes to Consolidated Financial Statements (Continued)

16. Restricted Cash (Continued)

The components of cash and cash equivalents were as follows:


	March 31, 2021		December 31, 2020
	(In millions)
Money market funds	$	30.0	$	175.0
IHOP advertising funds and gift card programs	72.0		71.6
Other depository accounts	77.6		136.8
Total cash and cash equivalents	$	179.6	$	383.4

The decrease in total cash and cash equivalents between December 31, 2020 and March 31, 2021 was due to the repayment of $220.0 million previously drawn on the Company's Credit Facility.

Current Restricted Cash

Current restricted cash ~~of $31.3 million at September 30, 2017~~ primarily consisted ~~of $23.9 million~~ of funds required to be held in trust in connection with the Company's securitized debt and ~~$7.0 million of~~ funds from Applebee's franchisees pursuant to franchise agreements, usage of which was restricted to advertising activities. ~~Current~~The components of current restricted cash of $30.3 million at December 31, 2016 primarily consisted of $25.7 million of funds required to be held in trust in connection with the Company's securitized debt and $4.3 million of funds from Applebee's franchisees pursuant to franchise agreements, usage of which was restricted to advertising activities. were as follows:



	March 31, 2021		December 31, 2020
	(In millions)
Securitized debt reserves	$	33.9	$	27.0
Applebee's advertising funds	26.1		12.8
Other	0.1		0.1
Total current restricted cash	$	60.1	$	39.9

Non-current Restricted Cash

Non-current restricted cash ~~of $14.7~~was $32.8 million at ~~September 30, 2017~~both March 31, 2021 and December 31, ~~2016~~2020 and represents interest reserves required to be set aside for the duration of the Company's securitized debt.

~~14. Refranchising of Company-operated Restaurants~~

~~In June 2017,~~ The required reserve is approximately one quarter's interest payment on the Company completed the refranchising and sale of related restaurant assets of nine company-operated IHOP restaurants in the Cincinnati, Ohio market area. As part of the transaction, the Company entered into an asset purchase agreement, nine franchise agreements and nine sublease agreements for land and buildings.Company's securitized debt, currently approximately $16 million. The Company ~~compared~~voluntarily increased the ~~stated rent under~~amount held in non-current cash to twice the sublease agreements with comparable market rents and recorded net favorable lease assets of $2.3 million in connection with the transaction. The Company also received cash of $1.1 million and a note receivable for $4.8 million. After allocating a portion of the consideration to franchise fees and derecognition of the assets sold, the Company recognized a gain of $6.2 million on the refranchising and salerequired amount during the ~~nine months~~year ended ~~September 30, 2017.~~December 31, 2020.

Table of Contents

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

~~Cautionary Statement Regarding Forward-Looking Statements~~

Statements contained in this report may constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These statements involve known and unknown risks, uncertainties and other factors, which may cause actual results to be materially different from those expressed or implied in such statements. You can identify these forward-looking statements by words such as “may,” “will,” “should,” “could,” “expect,” “anticipate,” “believe,” “estimate,” “intend,” “plan” and other similar expressions. You should consider our forward-looking statements in light of the risks discussed under the heading “Risk Factors” in our most recent Annual Report on Form 10-K, as well as our consolidated financial statements, related notes, and the other financial information appearing elsewhere in this report and our other filings with the United States Securities and Exchange Commission. The forward-looking statements contained in this report are made as of the date hereof and the Company assumes no obligation to update or supplement any forward-looking statements.

You should read the following Management's Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”) in conjunction with the consolidated financial statements and the related notes that appear elsewhere in this report. Statements contained in this report may constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Please refer to the section of this report under the heading “Cautionary Statement Regarding Forward-Looking Statements” for more information.

Overview

The following discussion and analysis provides information which we believe is relevant to an assessment and understanding of our consolidated results of operations and financial condition. The discussion should be read in conjunction with the consolidated financial statements and the notes thereto included in Item 1 of Part I of this Quarterly Report and the audited consolidated financial statements and notes thereto and the MD&A contained in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, ~~2016~~.2020. Except where the context indicates otherwise, the words “we,” “us,” “our,” ~~“DineEquity”~~“Dine Brands Global” and the “Company” refer to ~~DineEquity,~~Dine Brands Global, Inc., together with its subsidiaries that are consolidated in accordance with United States generally accepted accounting principles (“U.S. GAAP”). The financial tables appearing in MD&A present amounts in millions of dollars that are rounded from our consolidated financial statements presented in thousands of dollars. As a result, the tables may not foot or crossfoot due to rounding.

Through various subsidiaries, we own, franchise and ~~franchise~~operate the Applebee's Neighborhood Grill & Bar^® (“Applebee's”) concept in the bar and grill segment within the casual dining category of the restaurant industry and we own and franchise the International House of Pancakes^® (“IHOP”) concept in the family dining category of the restaurant industry. References herein to Applebee's^®and IHOP^® restaurants are to these two restaurant concepts, whether operated by franchisees, or area licensees and their sub-licensees (collectively, “area licensees”). or by us. With ~~over 3,700~~3,458 restaurants combined, ~~all~~the substantial majority of which are franchised, we believe we are one of the largest full-service restaurant companies in the world. ~~The June 19, 2017 issue of~~ ~~Nation's Restaurant News~~ ~~reported that~~

We identify our business segments based on the organizational units used by management to monitor performance and make operating decisions. We currently have five operating segments: Applebee's franchise operations, Applebee's company-operated restaurant operations, IHOP franchise operations, rental operations and Applebee's were the largest restaurant systems in the family dining and casual dining categories, respectively, in terms of United States system-wide sales during 2016. This marks the tenth consecutive year our two brandsfinancing operations. We have ~~achieved the number one ranking in~~ ~~Nation's Restaurant News~~.

~~The Company currently has three operating~~four reportable segments: franchise operations (an aggregation of ~~Applebee’s~~Applebee's and IHOP franchise operations), company-operated restaurant operations, rental operations and financing operations. ~~Prior to June 2017, the Company operated 10 IHOP restaurants and those operations were considered~~We consider these to be ~~a fourth operating segment. The Company views all operating segments as~~our reportable segments, regardless of whether ~~an operating~~any segment exceeds 10% of consolidated revenues, ~~segment profit~~income before income tax provision or total assets.

Ongoing Impact of COVID-19 Pandemic

The global pandemic declared in March 2020 by the World Health Organization related to the outbreak of a novel strain of coronavirus, designated “COVID-19,” continued to have an adverse impact on our operations during the three months ended March 31, 2021. The operating status of our restaurants was fluid throughout the first quarter of 2021 and subject to change as governmental authorities increased or reduced restrictions on restaurant operations in response to changes in the number of COVID-19 infections and in the availability and acceptance of vaccines within their respective jurisdictions. While the significant majority of our restaurants were open for in-restaurant dining during the three months ended March 31, 2021, many federal, state, local and international governments maintained protocols that limited restaurant dine-in occupancy levels to less than 100% of capacity.As of March 31, 2021, the operating status of our restaurants was as follows:


	Status as of March 31, 2021
	Domestic
Dining room capacity %/other status	Applebee's	IHOP	International
100% capacity	374	183	—
> 50% capacity	142	135	31
26%-50% capacity	959	1,086	112
Up to 25% capacity	106	209	28
Off-premise/outdoors only and other	9	21	22
Restaurants temporarily closed	6	26	9
Total	1,596	1,660	202

Table of Contents

Federal, state, local and international governments, began to implement restrictions on in-restaurant dining around the second week of March, 2020. Accordingly, during the three months ended March 31, 2020, our restaurants essentially operated without restriction for the first 10 weeks of the quarter, followed by an increasing level of restriction over the final three weeks of the quarter. As of March 31, 2020, the operating status of our restaurants was as follows :


	Status as of March 31, 2020
	Domestic
Restaurant status	Applebee's	IHOP	International
Dining rooms open*	4	204	63
Off-premise/outdoors only and other	1,402	1,158	55
Restaurants temporarily closed	251	347	131
Total	1,657	1,709	249

* In most instances limited to 50% capacity or less, and/or reduced operating hours.

Note that at the onset of the pandemic, information as to restaurant capacity was not available in the same detail as current data and therefore the dining room capacity details are unavailable as of March 31, 2020. Temporary closures can occur for a variety of reasons, and all temporary closures shown in the tables above were not necessarily related to COVID-19 restrictions.

Updates to several actions taken over the past 12 months to mitigate the effects of the COVID-19 pandemic on the Company, its operations and its franchisees, are discussed below:

•In March 2021, we repaid $220 million of borrowings outstanding under our revolving credit facility that initially had been drawn in March 2020. At the time of the initial draw, we had no immediate need for additional liquidity, but in light of then-current market conditions and significant uncertainty related to the COVID-19 pandemic, we drew on the revolving facility to maximize our financial flexibility. As of March 31, 2021, our borrowing capacity under the credit facility was $221.7 million. See Liquidity and Capital Resources of the Company.

•We offered Applebee's franchisees the opportunity to defer payment of their royalty, advertising and other fees, primarily amounts due for the months of March and April 2020. A total of 30 franchisees representing 94% of Applebee’s restaurants deferred payments totaling $33.4 million. Repayment of deferred amounts, scheduled over up to nine months, began in the third quarter of 2020. As of March 31, 2021, the outstanding balance of these deferrals was $3.9 million, with approximately $9.4 million collected during the three months ended March 31, 2021. Five franchisees have repaid their deferred balances in full.

•We offered IHOP franchisees the opportunity to defer their royalty, advertising, equipment rent and sublease rent payments, primarily amounts due for the months of March and April 2020. Initially, 193 franchisees representing 58% of IHOP restaurants deferred payments totaling $24.1 million. Including subsequent deferrals made on a case-by case basis, the deferral program totaled $28.5 million. Repayment of deferred amounts, scheduled over up to 36 weeks, began in the third quarter of 2020. In certain instances, repayments were temporarily paused for up to 60 days. As of March 31, 2021, the outstanding balance of these deferrals was $9.6 million, with approximately $6.8 million collected during the three months ended March 31, 2021. A total of 73 franchisees have repaid their deferred balances in full.

•We received rent deferrals and abatements on properties we lease of approximately $11 million during fiscal 2020, primarily related to rent deferrals for properties on which IHOP restaurants are located. As of March 31, 2021, the deferred rent balance of those deferrals was $2.4 million, with approximately $2.5 million paid during the three months ended March 31, 2021.

•We suspended our repurchasing of common stock after the first quarter of 2020. Our Board of Directors did not declare a dividend for the second, third and fourth quarters of 2020 and has decided not to declare a dividend for the first quarter of 2021. We evaluate dividend payments on common stock and repurchases of common stock within the context of our overall capital allocation strategy with our Board of Directors on an ongoing basis, giving consideration to our current and forecast earnings, financial condition, cash requirements and other factors. We will continue to evaluate our capital allocation strategy as industry conditions improve.

We have experienced a number of temporary and permanent closures of our restaurants during the COVID-19 pandemic. These closures occurred for a variety of reasons, and all closures were not necessarily related to the impact of the COVID-19 pandemic or related restrictions. We cannot predict how long the COVID-19 pandemic and its impact on our operations will last, whether or when recurrences of the virus and variants of the virus may arise, the availability and acceptance of vaccines, what restrictions on in-restaurant dining may be imposed or re-imposed, the timing and extent of customer re-engagement with our brands and, in general, what the short- and long-term impact on consumer discretionary spending the COVID-19 pandemic might have on our operations and the restaurant industry as a whole.

Table of Contents

Key Financial Results


	Three months ended March 31,				Favorable (Unfavorable) Variance
	2021	2020

		(In millions, except per share data)
Income before income taxes		$	24.0		$	29.1		$	(5.1)
Income tax benefit (provision)		1.6			(6.7)			8.3
Net income		$	25.6		$	22.3		$	3.3


Effective tax rate		(6.6)		%	23.2		%	29.8		%


Net income per diluted share		$	1.51		$	1.31		$	0.20
								% increase
Weighted average diluted shares		16.6			16.5			1.0		%

Three months ended September 30, Favorable
(Unfavorable) Variance Nine months ended September 30, Favorable
(Unfavorable) Variance
2017 2016 2017 2016
(In millions, except per share data)
(Loss) income before income taxes $ (508.3 ) $ 37.5
$ (545.8 ) $ (444.3 ) $ 118.3
$ (562.7 )
Income tax benefit (provision) 56.6
(13.2 ) 69.8
28.2
(41.7 ) 69.9
Net (loss) income $ (451.7 ) $ 24.3
$ (476.0 ) $ (416.1 ) $ 76.6
$ (492.7 )

Effective tax rate 11.1 % 35.3 % (24.2 )% 6.4 % 35.2 % (28.8 )%

% increase (decrease) % increase (decrease)
Net (loss) income per diluted share $ (24.98 ) $ 1.33
n.m $ (23.09 ) $ 4.15
n.m.
Weighted average shares 17.7
18.0
(1.7 )% 17.7
18.2
(2.7 )%

~~n.m. - percentage change is not meaningful~~The tax benefit recognized for the three months ended March 31, 2021 primarily was due to the one-time recognition of excess tax benefits on stock-based compensation related to the departure of our previous chief executive officer.

The following ~~sets forth~~table highlights the ~~significant reasons for~~primary components of the ~~decreases~~decrease in our income before income taxes ~~between each of~~for the three ~~and nine~~ months ended ~~September 30, 2017 and~~March 31, 2021, compared to our income before income taxes from the ~~respective comparable periods~~same period of ~~2016:~~2020:


	Favorable (Unfavorable) Variance
	(In millions)
Increase (decrease) in gross profit:
Applebee's franchise operations		$	1.0
IHOP franchise operations		(0.6)
Company restaurant operations		2.1
Rental and financing operations		(1.6)
Total increase in gross profit		0.9
Closure and impairment charges		(2.0)
Increase in G&A expenses		(2.3)


Other income and expense items		(1.6)
Decrease in income before income taxes		$	(5.1)

Three months ended September 30, 2017 Nine months ended September 30, 2017
(In millions)
Impairment of Applebee's goodwill and tradename $ (531.6 ) $ (531.6 )
Decrease in gross profit:
Applebee's franchise operations (10.8 ) (23.4 )
All other operations (0.8 ) (0.6 )
Total gross profit decrease (11.6 ) (24.0 )
Increase in General and Administrative (“G&A”) expenses:
Executive separation costs —
(8.8 )
All other G&A (2.0 ) (5.0 )
Total G&A increase (2.0 ) (13.8 )
Gain on disposition of assets 0.1
7.1

Other (0.7 ) (0.4 )
Decrease in income before income taxes $ (545.8 ) $ (562.7 )

We ~~performed an interim quantitative test~~recognized closure and impairment charges of ~~impairment of Applebee's goodwill and tradename~~$2.0 million during the three months ended ~~September 30, 2017. As~~March 31, 2021, primarily $1.9 million related to establishment of or revision to closure reserves for approximately 35 IHOP properties, as well as a ~~result~~$0.1 million impairment to one IHOP property. There were no similar charges during the three months ended March 31, 2020.

See “Consolidated Results of ~~performing this test, we recognized an impairment~~Operations - Comparison of ~~Applebee's goodwill of $358.2 million~~the Three Months ended March 31, 2021 and an impairment of Applebee's tradename of $173.4 million. See below under the heading “Significant Known Events, Trends or Uncertainties Impacting or Expecting to Impact Comparisons of Reported or Future Results - Impairment of Applebee's Goodwill and Tradename”March 31, 2020” for additional discussion of ~~these impairments.~~the changes shown above.

Our effective tax rate (“ETR”) was significantly different than the federal statutory rate of 35% for the three and nine months ended September 30, 2017, as compared to the respective periods of the prior year. The primary reason for the difference is the impairment of Applebee's goodwill noted above is not a deductible expense for federal income tax purposes so we received no tax benefit from this expense. We did recognize a deferred tax benefit of approximately $65 million related to the impairment of Applebee's tradename.

Key Performance Indicators

In evaluating the performance of each restaurant concept, we consider the key performance indicators to be the system-wide sales percentage change, the percentage change in domestic system-wide same-restaurant sales (“~~comp~~domestic same-restaurant sales”) ~~and~~, net franchise restaurant ~~development.~~development and the change in effective restaurants. Changes in both ~~comp~~domestic same-restaurant sales and in the number of Applebee's and IHOP ~~franchise~~ restaurants will impact our system-wide retail sales that drive franchise royalty revenues. Restaurant development also impacts franchise revenues in the form of initial franchise fees and, in the case of IHOP restaurants, sales of proprietary pancake and waffle dry mix.

~~An overview~~

Table of ~~these~~Contents

Our key performance indicators for the three ~~and nine~~ months ended ~~September 30, 2017 is~~March 31, 2021 were as follows:


Average Weekly Unit Sales	Three months ended March 31, 2021
		Applebee's		IHOP
Sales percentage increase (decrease) in reported retail sales		1.2	%	(12.1)	%
% increase (decrease) in domestic system-wide same-restaurant sales		11.9	%	(0.9)	%
Net franchise restaurant reduction (1)		(4)		(19)
Net decrease in total effective restaurants (2)		(69)		(101)


Title of each class	Trading symbol(s)	Name of each exchange on which registered
Common Stock, $0.01 par value	DIN	New York Stock Exchange



~~Class~~		~~Outstanding as of November 3, 2017~~
~~Common Stock, $0.01 par value~~		~~17,988,168~~



		Page
PART I.	FINANCIAL INFORMATION	23
	Item 1—Financial Statements	23
	Consolidated Balance ~~Sheets— September 30, 2017~~Sheets - March 31, 2021 (unaudited) and December 31, ~~2016~~2020	23
	Consolidated Statements of Comprehensive ~~(Loss)~~ Income (unaudited)— - Three ~~and Nine~~ Months Ended ~~September 30, 2017~~March 31, 2021 and ~~2016~~2020	34
	Consolidated Statements of Stockholders' Deficit (unaudited) - Three Months Ended March 31, 2021 and 2020	5
	Consolidated Statements of Cash Flows (unaudited)~~—Nine~~ - Three Months Ended ~~September 30, 2017~~March 31, 2021 and ~~2016~~2020	46
	Notes to Consolidated Financial Statements (unaudited)	57
	Item 2—Management’s Discussion and Analysis of Financial Condition and Results of Operations	1625
	Item 3—Quantitative and Qualitative Disclosures about Market Risk	3242
	Item 4—Controls and Procedures	3242
PART II.	OTHER INFORMATION	3243
	Item 1—Legal Proceedings	3243
	Item 1A—Risk Factors	3343
	Item 2—Unregistered Sales of Equity Securities and Use of Proceeds	3343
	Item 3—Defaults Upon Senior Securities	3343
	Item 4—Mine Safety Disclosures	3343
	Item 5—Other Information	3343
	Item 6—Exhibits	3444
	Signatures	3545


(818)			240-6055
(Registrant’s telephone number, including area code)



Assets	September 30, 2017			December 31, 2016
	(Unaudited)
Current assets:
Cash and cash equivalents	$	104,212		$	140,535
Receivables, net	96,657			141,389
Restricted cash	31,338			30,256
Prepaid gift card costs	36,667			47,115
Prepaid income taxes	8,749			2,483
Other current assets	5,703			4,370
Total current assets	283,326			366,148
Long-term receivables, net	131,033			141,152
Property and equipment, net	199,857			205,055
Goodwill	339,236			697,470
Other intangible assets, net	585,160			763,431
Deferred rent receivable	84,071			86,981
Non-current restricted cash	14,700			14,700
Other non-current assets, net	3,825			3,646
Total assets	$	1,641,208		$	2,278,583
Liabilities and Stockholders’ (Deficit) Equity
Current liabilities:
Accounts payable	$	26,452		$	50,503
Gift card liability	104,317			170,812
Dividends payable	17,755			17,465
Accrued employee compensation and benefits	13,527			14,609
Current maturities of long-term debt, capital lease and financing obligations	16,202			13,144
Accrued advertising	8,359			6,369
Other accrued expenses	16,775			13,410
Total current liabilities	203,387			286,312
Long-term debt, less current maturities	1,281,950			1,282,691
Capital lease obligations, less current maturities	64,923			74,665
Financing obligations, less current maturities	39,292			39,499
Deferred income taxes, net	178,848			253,898
Deferred rent payable	65,449			69,572
Other non-current liabilities	24,036			19,174
Total liabilities	1,857,885			2,025,811
Commitments and contingencies
Stockholders’ (deficit) equity:
Common stock, $0.01 par value, shares: 40,000,000 authorized; September 30, 2017 - 25,033,220 issued, 17,996,223 outstanding; December 31, 2016 - 25,134,223 issued, 17,969,636 outstanding	250			251
Additional paid-in-capital	292,255			292,809
(Accumulated deficit) retained earnings	(86,634		)	382,082
Accumulated other comprehensive loss	(105		)	(107		)
Treasury stock, at cost; shares: September 30, 2017 - 7,036,997; December 31, 2016 - 7,164,587	(422,443		)	(422,263		)
Total stockholders’ (deficit) equity	(216,677		)	252,772
Total liabilities and stockholders’ (deficit) equity	$	1,641,208		$	2,278,583



	Applebee's Franchise Unit			IHOP Franchise Unit		Total
	(In millions)
Balance at December 31, 2016:
Goodwill, gross	$	686.7		$	10.8	$	697.5
Accumulated impairment loss	—			—		—
Goodwill	686.7			10.8		697.5
Impairment loss	(358.2		)	—		(358.2		)
Balance at September 30, 2017:
Goodwill, gross	686.7			10.8		697.5
Accumulated impairment loss	(358.2		)	—		(358.2		)
Goodwill	$	328.5		$	10.8	$	339.2



	Not Subject to Amortization					Subject to Amortization
	Applebee's Tradename			Other		Applebee's Franchising Rights			Leaseholds			Total
	(In millions)
Balance at December 31, 2016	$	652.4		$	2.0	$	109.0		$	—		$	763.4
Impairment	(173.4		)	—		—			—			(173.4		)
Amortization expense	—			—		(7.5		)	(0.0		)	(7.5		)
Additions	—			0.4		—			2.3			2.7
Balance at September 30, 2017	$	479.0		$	2.4	$	101.5		$	2.3		$	585.2



2015 Repurchase Program	Shares	Cost of shares
		(In millions)
Repurchased during the three months ended September 30, 2017	—	$	—
Repurchased during the nine months ended September 30, 2017	145,786	$	10.0
Cumulative repurchases as of September 30, 2017	1,000,657	$	82.9
Remaining dollar value of shares that may be repurchased	n/a	$	67.1



	Restricted Stock		Weighted Average Grant Date Fair Value		Restricted Stock Units		Weighted Average Grant Date Fair Value
Outstanding at December 31, 2016	235,472		$	92.81	34,058		$	93.95
Granted	208,460		52.08		275,578		22.37
Released	(89,911	)	88.65		(12,683	)	81.63
Forfeited	(73,409	)	79.44		—		—
Outstanding at September 30, 2017	280,612		$	67.38	296,953		$	28.39



	September 30, 2017				December 31, 2016
	Carrying Amount		Fair Value		Carrying Amount		Fair Value
	(In millions)
Long-term debt, current and long-term	$	1,285.2	$	1,274.0	$	1,282.7	$	1,286.2



	Three months ended September 30, 2017				Nine months ended September 30, 2017
		(In millions)
Impairment of Applebee's goodwill and tradename		$	(531.6	)		$	(531.6	)
Decrease in gross profit:
Applebee's franchise operations		(10.8		)		(23.4		)
All other operations		(0.8		)		(0.6		)
Total gross profit decrease		(11.6		)		(24.0		)
Increase in General and Administrative (“G&A”) expenses:
Executive separation costs		—				(8.8		)
All other G&A		(2.0		)		(5.0		)
Total G&A increase		(2.0		)		(13.8		)
Gain on disposition of assets		0.1				7.1
Other		(0.7		)		(0.4		)
Decrease in income before income taxes		$	(545.8	)		$	(562.7	)


Restaurant Development Activity	Three months ended March 31,
			2021	2020
Applebee's		(Unaudited)
Summary - beginning of period:
Franchise			1,640	1,718
Company restaurants			69	69
Beginning of period			1,709	1,787

Franchise restaurants opened:
Domestic			2	—

Total franchise restaurants opened			2	—
Franchise restaurants permanently closed:
Domestic			(4)	(8)
International			(2)	(4)
Total franchise restaurants permanently closed			(6)	(12)
Net franchise restaurant reduction			(4)	(12)



Summary - end of period:
Franchise			1,636	1,706
Company restaurants			69	69
Total Applebee's restaurants, end of period			1,705	1,775
Domestic			1,596	1,657
International			109	118


Revenue	Three months ended March 31,				Favorable (Unfavorable) Variance
	2021	2020

		(In millions)
Franchise operations		$	141.0		$	145.1	$	(4.1)
Rental operations		26.1			29.0		(2.9)
Company restaurant operations		36.0			31.3		4.7
Financing operations		1.1			1.5		(0.4)
Total revenue		$	204.2		$	206.9	$	(2.7)
Change vs. prior period		(1.3)		%



Gross Profit (Loss)	Three months ended September 30,						Favorable (Unfavorable) Variance			Nine months ended September 30,						Favorable (Unfavorable) Variance
	2017			2016			Favorable (Unfavorable) Variance			2017			2016			Favorable (Unfavorable) Variance
	(In millions)
Franchise operations	$	70.5		$	81.9		$	(11.4	)	$	235.7		$	258.7		$	(23.0	)
Rental operations	8.0			7.7			0.3			23.2			23.7			(0.5		)
Company restaurant operations	(0.0		)	(0.2		)	0.2			(0.3		)	(0.7		)	0.4
Financing operations	1.6			2.3			(0.7		)	5.9			6.8			(0.9		)
Total gross profit	$	80.1		$	91.7		$	(11.6	)	$	264.5		$	288.5		$	(24.0	)
Change vs. prior period	(12.6		)%							(8.3		)%


	Three months ended March 31,					Increase (decrease)
		2021			2020
			(In millions)
Advertising Revenues and Expenses:
Applebee’s			$	38.6		$	36.6	$	2.0
IHOP			22.3			25.2		(2.9)
Total advertising revenues and expenses			$	60.9		$	61.8	$	(0.9)


G&A Expenses	Three months ended March 31,					Favorable (Unfavorable) Variance
		2021			2020
			(In millions)
Total G&A expenses			$	39.9		$	37.6	$	(2.3)


Income Taxes	Three months ended March 31,						Favorable (Unfavorable) Variance
		2021				2020
			(In millions)
Income before income taxes			$	24.0			$	29.1		$	(5.1)
Income tax (benefit) provision			$	(1.6)			$	6.7		$	8.3
Effective tax rate			(6.6)		%		23.2		%	29.8		%



Other Expense and Income Items	Three months ended September 30,				Favorable (Unfavorable) Variance			Nine months ended September 30,				Favorable (Unfavorable) Variance
	2017		2016		Favorable (Unfavorable) Variance			2017		2016		Favorable (Unfavorable) Variance
	(In millions)
Interest expense	$	15.4	$	15.4	$	0.0		$	46.5	$	46.1	$	(0.4	)
Amortization of intangible assets	2.5		2.5		(0.0		)	7.5		7.5		(0.0		)
Total	$	17.9	$	17.9	$	0.0		$	54.0	$	53.6	$	(0.4	)


Purchases of Equity Securities by the Company
Period	Total number of shares purchased	Average price paid per share		Total number of shares purchased as part of publicly announced plans or programs (b)	Approximate dollar value of shares that may yet be purchased under the plans or programs (b)
January 4, 2021 - January 31, 2021(a)	902	$	70.48	—	$	70,200,000
February 1, 2021 - February 28, 2021(a)	11,733	80.74		—	$	70,200,000
March 1, 2021 - April 4, 2021(a)	2,366	88.55		—	$	70,200,000
	15,001	$	81.35	—	$	70,200,000



~~3.1~~*†10.1			~~Restated Certificate of Incorporation of DineEquity, Inc. (Exhibit 99.3 to Registrant's Form 8-K filed on December 18, 2012 is incorporated herein by reference).~~
~~3.2~~	~~Amended Bylaws of DineEquity, Inc. (Exhibit 3.2 to Registrant's Form 8-K filed on August 10, 2017 is incorporated herein by reference).~~
*†#10.1	~~Employment~~Nonqualified Stock Option Agreement, dated ~~as of August 9, 2017~~January 4, 2021, by and between the ~~Corporation~~Registrant and ~~Stephen P. Joyce.~~John W. Peyton.
*†~~#10.2~~10.2			~~DineEquity, Inc. 2016~~Restricted Stock ~~Incentive Plan Nonqualified Stock Option~~Unit Agreement, dated January 4, 2021, by and between the ~~Corporation~~Registrant and ~~Stephen P. Joyce.~~John W. Peyton.
*~~†#10.3~~31.1			~~DineEquity, Inc. 2016 Stock Incentive Plan Restricted Stock Unit Award Agreement by and between the Corporation and Stephen P. Joyce - Performance-Based.~~
*†10.4	~~DineEquity, Inc. 2016 Stock Incentive Plan Restricted Stock Unit Agreement by and between the Corporation and Stephen P. Joyce - Time-Based.~~
*12.1	~~Computation of Debt Service Coverage Ratio for the Trailing Twelve Months Ended September 30, 2017 and Leverage Ratio as of September 30, 2017.~~
*31.1	Certification of Chief Executive Officer pursuant to Rule 13a-14(a) of the Securities Exchange Act of 1934, as amended.
*31.2			Certification of Chief Financial Officer pursuant to Rule 13a-14(a) of the Securities Exchange Act of 1934, as amended.
*32.1			Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.**
*32.2			Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.**
101.INS			XBRL Instance Document.***Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document.
101.SCH				Inline XBRL Schema Document.***
101.CAL				Inline XBRL Calculation Linkbase Document.***
101.DEF				Inline XBRL Definition Linkbase Document.***
101.LAB				Inline XBRL Label Linkbase Document.***
101.PRE				Inline XBRL Presentation Linkbase Document.***
104		Cover page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101)


**	The certifications attached as Exhibits 32.1 and 32.2 accompany this Quarterly Report pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 and shall not, except to the extent required by the Sarbanes-Oxley Act of 2002, be deemed filed by the Company for purposes of Section 18 of the Securities Exchange Act of 1934, as amended.


†	~~A contract, compensatory plan or arrangement in which directors or executive officers are eligible to participate.~~


#	~~Portions of this exhibit have been omitted pending a determination by the Securities and Exchange Commission as to whether these portions should be granted confidential treatment.~~