UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

__________________________________________________

FORM 10-Q

(Mark One)

x☒QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended ~~September~~June 30, ~~2018~~2019

o☐TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission File Number 001-15283

Dine Brands Global, Inc.

(Exact name of registrant as specified in its charter)



Delaware			95-3038279
(State or other jurisdiction of incorporation or organization)		~~95-3038279~~	(I.R.S. Employer Identification No.)
450 North Brand Boulevard,			91203-1903
Glendale,	CA
~~450 North Brand Boulevard, Glendale, California~~ (Address of principal executive offices)		~~91203-1903~~	(Zip Code)



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

______________________________________________________________

Securities registered pursuant to Section 12(b) of the Act:



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

~~(818) 240-6055~~

~~(Registrant’s telephone number, including area code)~~

~~______________________________________________________________~~

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x☒ No o☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes x☒ No o☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company or an emerging growth company. See definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.



Large accelerated filerx	☒		Accelerated filero	☐
Non-accelerated filer	☐

~~Non-accelerated filer~~ o Smaller reporting company	☐
		~~Smaller reporting company~~ o
		Emerging growth companyo	☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act o☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o☐

No x

~~Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.~~☒



~~Class~~		~~Outstanding as of October 26, 2018~~
~~Common Stock, $0.01 par value~~		~~17,712,434~~

As of July 25, 2019, the Registrant had 17,175,598 shares of Common Stock outstanding.

Dine Brands Global, Inc. and Subsidiaries

Index



		Page
PART I.	FINANCIAL INFORMATION	3
	Item 1—Financial Statements	3
	Consolidated Balance Sheets— ~~September~~June 30, ~~2018~~2019 (unaudited) and December 31, ~~2017~~2018	3
	Consolidated Statements of Comprehensive Income ~~(Loss)~~ (unaudited)— - Three and ~~Nine~~Six Months Ended ~~September~~June 30, ~~2018~~2019 and ~~2017~~2018	4
	Consolidated Statements of ~~Cash Flows~~Stockholders' Deficit (unaudited)~~—Nine~~ - Three and Six Months Ended ~~September~~June 30, ~~2018~~2019 and ~~2017~~2018	5
	Consolidated Statements of Cash Flows (unaudited) - Six Months Ended June 30, 2019 and 2018	7
	Notes to Consolidated Financial Statements (unaudited)	68
	Item 2—Management’s Discussion and Analysis of Financial Condition and Results of Operations	2124
	Item 3—Quantitative and Qualitative Disclosures about Market Risk	39
	Item 4—Controls and Procedures	3940
PART II.	OTHER INFORMATION	39
	~~Item 1—Legal Proceedings~~	39
	~~Item 1A—Risk Factors~~	40
	Item 1—Legal Proceedings	40
	Item 1A—Risk Factors	40
	Item 2—Unregistered Sales of Equity Securities and Use of Proceeds	40
	Item 3—Defaults Upon Senior Securities	40
	~~Item 4—Mine Safety Disclosures~~	40
	~~Item 5—Other Information~~	40
	~~Item 6—Exhibits~~	41
	~~Signatures~~Item 4—Mine Safety Disclosures	4241
	Item 5—Other Information	41
	Item 6—Exhibits	41
	Signatures	43

Cautionary Statement Regarding Forward-Looking Statements

Statements contained in this Quarterly Report on Form 10-Q may constitute “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. 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,” “would,” “should,” “could,” “expect,” “anticipate,” “believe,” “estimate,” “intend,” “plan,” “goal” and other similar expressions. You should consider our forward-looking statements in light of the risks discussed under the heading “Risk Factors,” 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 Dine Brands Global, Inc. does not intend to, nor does it assume any obligation to, update or supplement any forward-looking statements after the date of this report to reflect actual results or future events or circumstances.

Factors that could cause actual results to differ materially from the projections, forecasts, estimates and expectations discussed in this Quarterly Report on Form 10-Q include, among other things: general economic conditions; our level of indebtedness; compliance with the terms of our securitized debt; our ability to refinance our current indebtedness or obtain additional financing; our dependence on information technology; potential cyber incidents; the implementation of restaurant development plans; our dependence on our franchisees; the concentration of our Applebee’s franchised restaurants in a limited number of franchisees; the financial health of our ~~franchisees;~~franchisees, including any insolvency or bankruptcy; credit risks from our IHOP franchisees operating under our Previous IHOP Business Model; insufficient insurance coverage to cover potential risks associated with the ownership and operation of restaurants; our franchisees’ and other licensees’ compliance with our quality standards and trademark usage; general risks associated with the restaurant industry; potential harm to our brands’ reputation; risks of food-borne illness or food tampering; possible future impairment charges; ~~the effects of tax reform;~~ trading volatility and fluctuations in the price of our stock; our ability to achieve the financial guidance we provide to investors; successful implementation of our business strategy; the availability of suitable locations for new restaurants; shortages or interruptions in the supply or delivery of products from third parties or availability of utilities; the management and forecasting of appropriate inventory levels; development and implementation of innovative marketing and use of social media; changing health or dietary preference of consumers; risks associated with doing business in international markets; the results of litigation and other legal proceedings; third-party claims with respect to intellectual property assets; delivery initiatives and use of third-party delivery vendors; our

allocation of human capital and our ability to attract and retain management and other key employees; compliance with federal, state and local governmental regulations; risks associated with our self-insurance; natural disasters or other ~~series~~serious incidents; our success with development initiatives outside of our core business; the adequacy of our internal controls over financial reporting and future changes in accounting ~~standards.~~standards; and other matters in the “Risk Factors” section of this report and our Annual Report on Form 10-K for the fiscal year ended December 31, 2018, many of which are beyond our control.

Fiscal Quarter End

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 2019 began on December 31, 2018 and ended on March 31, 2019; the second fiscal quarter of 2019 ended on June 30, 2019. The first fiscal quarter of 2018 began on January 1, 2018 and ended on April 1, 2018; the second ~~and third~~ fiscal ~~quarters~~quarter of 2018 ended on July 1, 2018 and September 30, 2018, respectively. The first fiscal quarter of 2017 began on January 2, 2017 and ended on April 2, 2017; the second and third fiscal quarters of 2017 ended on July 2, 2017 and October 1, 2017, respectively.2018.

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements.

Dine Brands Global, Inc. and Subsidiaries

Consolidated Balance Sheets

(In thousands, except share and per share amounts)


Assets	September 30, 2018			December 31, 2017			June 30, 2019			December 31, 2018
	(Unaudited)			(as adjusted)			(Unaudited)
Current assets:
Cash and cash equivalents	$	102,667		$	117,010		$	127,555		$	137,164
Receivables, net	94,296			140,188			98,786			137,504
Restricted cash	41,866			31,436			34,387			48,515
Prepaid gift card costs	30,186			40,725			29,411			38,195
Prepaid income taxes	42,398			45,981			7,123			17,402
Other current assets	3,361			12,615			7,016			3,410
Total current assets	314,774			387,955			304,278			382,190
Long-term receivables, net	120,541			126,570
Other intangible assets, net	576,789			582,787			580,197			585,889
Operating lease right-of-use assets							378,520			—
Goodwill	339,236			339,236			343,862			345,314
Property and equipment, net	195,693			199,585			222,818			240,264
Long-term receivables, net							93,607			103,102
Deferred rent receivable	78,937			82,971			74,075			77,069
Non-current restricted cash	14,700			14,700			15,700			14,700
Other non-current assets, net	9,012			4,135			27,601			26,152
Total assets	$	1,649,682		$	1,737,939		$	2,040,658		$	1,774,680
Liabilities and Stockholders’ Deficit
Current liabilities:
Current maturities of long-term debt	$	23,241		$	12,965		$	—		$	25,000
Accounts payable	34,877			55,028			43,982			43,468
Gift card liability	99,769			164,441			111,281			160,438
Current maturities of operating lease obligations							67,724			—
Current maturities of finance lease and financing obligations							13,563			14,031
Accrued employee compensation and benefits							17,607			27,479
Dividends payable	11,398			17,748			12,176			11,389
Current maturities of capital lease and financing obligations	13,477			14,193
Accrued employee compensation and benefits	19,308			13,547
Deferred franchise revenue, short-term	10,641			11,001			10,244			10,138
Other accrued expenses	19,540			16,001			19,824			24,243
Total current liabilities	232,251			304,924			296,401			316,186
Long-term debt, less current maturities	1,273,287			1,269,849			1,287,227			1,274,087
Capital lease obligations, less current maturities	54,605			61,895
Operating lease obligations, less current maturities							379,123			—
Finance lease obligations, less current maturities							84,344			87,762
Financing obligations, less current maturities	38,653			39,200			38,125			38,482
Deferred income taxes, net	113,320			119,996			98,294			105,816
Deferred franchise revenue, long-term	65,920			70,432			60,302			64,557
Deferred rent payable	64,579			69,112
Other non-current liabilities	20,461			18,071			11,967			90,063
Total liabilities	1,863,076			1,953,479			2,255,783			1,976,953
Commitments and contingencies
Stockholders’ deficit:
Common stock, $0.01 par value; shares: 40,000,000 authorized; September 30, 2018 - 24,990,268 issued, 17,742,654 outstanding; December 31, 2017 - 25,022,312 issued, 17,993,124 outstanding	250			250
Common stock, $0.01 par value; shares: 40,000,000 authorized; June 30, 2019 - 24,949,103 issued, 17,252,391 outstanding; December 31, 2018 - 24,984,898 issued, 17,644,267 outstanding							249			250
Additional paid-in-capital	246,625			276,408			240,555			237,726
Accumulated deficit	(16,567		)	(69,940		)
Retained earnings							33,832			10,414
Accumulated other comprehensive loss	(61		)	(105		)	(59		)	(60		)
Treasury stock, at cost; shares: September 30, 2018 - 7,247,614; December 31, 2017 - 7,029,188	(443,641		)	(422,153		)
Treasury stock, at cost; shares: June 30, 2019 - 7,696,712; December 31, 2018 - 7,340,631							(489,702		)	(450,603		)
Total stockholders’ deficit	(213,394		)	(215,540		)	(215,125		)	(202,273		)
Total liabilities and stockholders’ deficit	$	1,649,682		$	1,737,939		$	2,040,658		$	1,774,680

See the accompanying Notes to Consolidated Financial Statements.

Dine Brands Global, Inc. and Subsidiaries

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

(In thousands, except per share amounts)

(Unaudited)


	Three Months Ended						Nine Months Ended						Three Months Ended						Six Months Ended
	September 30,						September 30,						June 30,						June 30,
	2018			2017			2018			2017			2019			2018			2019			2018
Revenues:				(as adjusted)						(as adjusted)
Franchise revenues	$	162,078		$	142,579		$	469,332		$	450,367
Franchise revenues:
Royalties, franchise fees and other													90,930			93,236			$	187,226		$	184,713
Advertising revenue													71,738			58,705			144,368			122,541
Total franchise revenues													162,668			151,941			331,594			307,254
Company restaurant sales													33,751			—			69,486			—
Rental revenues	30,127			30,263			91,292			90,852			29,878			30,324			60,589			61,165
Financing revenues	1,894			2,061			6,109			6,280			1,783			2,206			3,593			4,215
Company restaurant sales	—			—			—			7,518
Total revenues	194,099			174,903			566,733			555,017			228,080			184,471			465,262			372,634
Cost of revenues:
Franchise expenses	78,341			70,033			243,157			209,721
Rental expenses	22,982			22,318			68,411			67,665
Franchise expenses:
Advertising expenses													71,738			58,705			144,368			122,541
Other franchise expenses													7,169			24,239			14,842			42,275
Total franchise expenses													78,907			82,944			159,210			164,816
Company restaurant expenses													31,232			—			62,770			—
Rental expenses:
Interest expense from finance leases													1,445			1,770			2,974			3,647
Other rental expenses													21,495			21,018			42,590			41,782
Total rental expenses													22,940			22,788			45,564			45,429
Financing expenses	150			449			449			449			146			149			292			299
Company restaurant expenses	—			17			—			7,807
Total cost of revenues	101,473			92,817			312,017			285,642			133,225			105,881			267,836			210,544
Gross profit	92,626			82,086			254,716			269,375			94,855			78,590			197,426			162,090
General and administrative expenses	40,753			38,030			121,423			125,701			39,364			38,759			82,183			80,670
Interest expense	15,430			15,353			46,110			46,496
Interest expense, net													14,602			15,481			29,995			30,680
Amortization of intangible assets	2,505			2,507			7,513			7,507			2,925			2,506			5,849			5,008
Debt refinancing costs	2,532			—			2,532			—
Closure and other impairment charges	217			888			119			3,806
Impairment of goodwill and intangible assets	—			531,634			—			531,634
Gain on disposition of assets	(58		)	(35		)	(1,535		)	(6,387		)
Income (loss) before income tax (provision) benefit	31,247			(506,291		)	78,554			(439,382		)
Income tax (provision) benefit	(7,660		)	55,939			(25,181		)	26,732
Net income (loss)	23,587			(450,352		)	53,373			(412,650		)
Closure and impairment charges (credits)													289			(2,702		)	483			(98		)
Loss on extinguishment of debt													8,276			—			8,276			—
Loss (gain) on disposition of assets													332			(50		)	441			(1,477		)
Income before income tax provision													29,067			24,596			70,199			47,307
Income tax provision													(7,677		)	(11,883		)	(17,166		)	(17,521		)
Net income													21,390			12,713			53,033			29,786
Other comprehensive income (loss) net of tax:
Adjustment to unrealized loss on available-for-sale investments	—			—			50			—			—			—			—			50
Foreign currency translation adjustment	—			(2		)	(6		)	(2		)	2			(3		)	1			(6		)
Total comprehensive income (loss)	$	23,587		$	(450,354	)	$	53,417		$	(412,652	)
Net income (loss) available to common stockholders:
Net income (loss)	$	23,587		$	(450,352	)	$	53,373		$	(412,650	)
Less: Net (income) loss allocated to unvested participating restricted stock	(799		)	8,469			(1,793		)	6,863
Net income (loss) available to common stockholders	$	22,788		$	(441,883	)	$	51,580		$	(405,787	)
Net income (loss) available to common stockholders per share:
Total comprehensive income													$	21,392		$	12,710		$	53,034		$	29,830
Net income available to common stockholders:
Net income													$	21,390		$	12,713		$	53,033		$	29,786
Less: Net income allocated to unvested participating restricted stock													(719		)	(428		)	(1,827		)	(1,000		)
Net income available to common stockholders													$	20,671		$	12,285		$	51,206		$	28,786
Net income available to common stockholders per share:
Basic	$	1.31		$	(24.91	)	$	2.94		$	(22.90	)	$	1.20		$	0.70		$	2.97		$	1.63
Diluted	$	1.29		$	(24.91	)	$	2.90		$	(22.90	)	$	1.18		$	0.69		$	2.91		$	1.61
Weighted average shares outstanding:
Basic	17,439			17,742			17,562			17,718			17,181			17,544			17,262			17,623
Diluted	17,738			17,742			17,797			17,718			17,563			17,803			17,626			17,827

Dividends declared per common share	$	0.63		$	0.97		$	1.89		$	2.91
Dividends paid per common share	$	0.63		$	0.97		$	2.23		$	2.91

See the accompanying Notes to Consolidated Financial Statements.

Dine Brands Global, Inc. and Subsidiaries

Consolidated Statements of Stockholders' Deficit

Three and Six Months ended June 30, 2019

(In thousands)

(Unaudited)



	Three Months ended June 30, 2019
	Common Stock											Accumulated Other Comprehensive Loss			Treasury Stock
	Shares Outstanding		Amount			Additional Paid-in Capital			Retained Earnings			Accumulated Other Comprehensive Loss			Shares		Cost			Total
Balance at March 31, 2019	17,651		$	250		$	239,585		$	24,588		$	(61	)	7,324		$	(455,183	)	$	(190,821	)
Net income	—		—			—			21,390			—			—		—			21,390
Other comprehensive gain	—		—			—			—			2			—		—			2
Purchase of Company common stock	(392	)	—			—			—			—			392		(35,341		)	(35,341		)
Reissuance of treasury stock	19		(1		)	(651		)	—			—			(19	)	822			170
Net issuance of shares for stock plans	(21	)	—			—			—			—			—		—			—
Repurchase of restricted shares for taxes	(5	)	—			(425		)	—			—			—		—			(425		)
Stock-based compensation	—		—			1,787			—			—			—		—			1,787
Dividends on common stock	—		—			259			(12,146		)	—			—		—			(11,887		)
Balance at June 30, 2019	17,252		$	249		$	240,555		$	33,832		$	(59	)	7,697		$	(489,702	)	$	(215,125	)



	Six Months ended June 30, 2019
	Common Stock											Accumulated Other Comprehensive Loss			Treasury Stock
	Shares Outstanding		Amount			Additional Paid-in Capital			Retained Earnings			Accumulated Other Comprehensive Loss			Shares		Cost			Total
Balance at December 31, 2018	17,644		$	250		$	237,726		$	10,414		$	(60	)	7,341		$	(450,603	)	$	(202,273	)
Adoption of ASC 842 (Note 3)	—		—			—			(5,030		)	—			—		—			(5,030		)
Net income	—		—			—			53,033			—			—		—			53,033
Other comprehensive gain	—		—			—			—			1			—		—			1
Purchase of Company common stock	(543	)	—			—			—			—			543		(47,356		)	(47,356		)
Reissuance of treasury stock	187		(1		)	(1,318		)	—			—			(187	)	8,257			6,938
Net issuance of shares for stock plans	(12	)	—			—			—			—			—		—			—
Repurchase of restricted shares for taxes	(24	)	—			(2,242		)	—			—			—		—			(2,242		)
Stock-based compensation	—		—			5,894			—			—			—		—			5,894
Dividends on common stock	—		—			495			(24,585		)	—			—		—			(24,090		)
Balance at June 30, 2019	17,252		$	249		$	240,555		$	33,832		$	(59	)	7,697		$	(489,702	)	$	(215,125	)

See the accompanying Notes to Consolidated Financial Statements.

Dine Brands Global, Inc. and Subsidiaries

Consolidated Statements of Stockholders' Deficit

Three and Six Months ended June 30, 2018

(In thousands)

(Unaudited)



	Three Months ended June 30, 2018
	Common Stock										Accumulated Other Comprehensive Loss			Treasury Stock
	Shares Outstanding		Amount		Additional Paid-in Capital			Retained Earnings (Accumulated Deficit)			Accumulated Other Comprehensive Loss			Shares		Cost			Total
Balance at March 31, 2018	17,922		$	250	$	264,994		$	(52,867	)	$	(58	)	7,091		$	(429,205	)	$	(216,886	)
Net income	—		—		—			12,713			—			—		—			12,713
Other comprehensive loss	—		—		—			—			(3		)	—		—			(3		)
Purchase of Company common stock	(137	)	—		—			—			—			137		(10,000		)	(10,000		)
Reissuance of treasury stock	26		—		(843		)	—			—			(26	)	1,007			164
Net issuance of shares for stock plans	(3	)	—		—			—			—			—		—			—
Repurchase of restricted shares for taxes	(5	)	—		(317		)	—			—			—		—			(317		)
Stock-based compensation	—		—		2,273			—			—			—		—			2,273
Dividends on common stock	—		—		(295		)	—			—			—		—			(295		)
Dividends on common stock in excess of retained earnings	—		—		(10,900		)	—			—			—		—			(10,900		)
Balance at June 30, 2018	17,803		$	250	$	254,912		$	(40,154	)	$	(61	)	7,202		$	(438,198	)	$	(223,251	)



	Six Months ended June 30, 2018
	Common Stock										Accumulated Other Comprehensive Loss			Treasury Stock
	Shares Outstanding		Amount		Additional Paid-in Capital			Retained Earnings (Accumulated Deficit)			Accumulated Other Comprehensive Loss			Shares		Cost			Total
Balance at December 31, 2017	17,993		$	250	$	276,408		$	(69,940	)	$	(105	)	7,029		$	(422,153	)	$	(215,540	)
Net income	—		—		—			29,786			—			—		—			29,786
Other comprehensive gain	—		—		—			—			44			—		—			44
Purchase of Company common stock	(276	)	—		—			—			—			276		(20,003		)	(20,003		)
Reissuance of treasury stock	103		—		(3,338		)	—			—			(103	)	3,958			620
Net issuance of shares for stock plans	3		—		—			—			—			—		—			—
Repurchase of restricted shares for taxes	(20	)	—		(1,400		)	—			—			—		—			(1,400		)
Stock-based compensation	—		—		5,641			—			—			—		—			5,641
Dividends on common stock	—		—		—			—			—			—		—			—
Dividends on common stock in excess of retained earnings	—		—		(22,399		)	—			—			—		—			(22,399		)
Balance at June 30, 2018	17,803		$	250	$	254,912		$	(40,154	)	$	(61	)	7,202		$	(438,198	)	$	(223,251	)

See the accompanying Notes to Consolidated Financial Statements.

Dine Brands Global, Inc. and Subsidiaries

Consolidated Statements of Cash Flows

(In thousands)

(Unaudited)


	Nine Months Ended						Six Months Ended
	September 30,						June 30,
	2018			2017			2019			2018
Cash flows from operating activities:				(as adjusted)
Net income (loss)	$	53,373		$	(412,650	)
Adjustments to reconcile net income (loss) to cash flows provided by operating activities:
Net income							$	53,033		$	29,786
Adjustments to reconcile net income to cash flows provided by operating activities:
Depreciation and amortization	23,730			23,053			20,800			15,842
Non-cash stock-based compensation expense	8,016			8,826			5,894			5,641
Non-cash interest expense	2,689			2,509			2,083			1,744
Debt refinancing costs	875			—
Closure and other impairment charges	61			3,672
Closure and impairment charges (credits)							483			(114		)
Loss on extinguishment of debt							8,276			—
Deferred income taxes	(4,706		)	(75,849		)	(3,186		)	(3,606		)
Gain on disposition of assets	(1,535		)	(6,422		)
Impairment of goodwill and intangible assets	—			531,634
Loss (gain) on disposition of assets							441			(1,477		)
Other	(6,105		)	(7,683		)	(7,678		)	(8,438		)
Changes in operating assets and liabilities:
Accounts receivable, net	(7,222		)	(1,385		)	(1,976		)	(10,924		)
Current income tax receivables and payables	4,088			(1,699		)	9,442			2,776
Gift card receivables and payables	(22,797		)	(26,387		)	(7,444		)	(10,334		)
Other current assets	9,254			(1,336		)	(3,607		)	5,851
Accounts payable	(5,764		)	(7,530		)	8,995			3,816
Accrued employee compensation and benefits	5,761			(1,146		)	(9,872		)	(1,411		)
Other current liabilities	1,908			3,393			(6,355		)	(3,360		)
Cash flows provided by operating activities	61,626			31,000			69,329			25,792
Cash flows from investing activities:
Principal receipts from notes, equipment contracts and other long-term receivables							11,386			14,923
Additions to property and equipment	(11,018		)	(9,608		)	(9,175		)	(7,339		)
Proceeds from sale of property and equipment	655			1,100			400			655
Principal receipts from notes, equipment contracts and other long-term receivables	20,029			15,283
Additions to long-term receivables	(6,030		)	—			(1,555		)	(3,030		)
Other	(236		)	(356		)	(186		)	(246		)
Cash flows provided by investing activities	3,400			6,419			870			4,963
Cash flows from financing activities:
Borrowings under Variable Funding Notes	50,000			—
Repayments of Variable Funding Notes	(30,000		)	—
Borrowings under revolving financing facility							—			20,000
Repayment of revolving financing facility							(25,000		)	—
Proceeds from issuance of long-term debt							1,300,000			—
Repayment of long-term debt	(9,750		)	—			(1,283,750		)	(6,500		)
Payment of debt issuance costs	(3,118		)	—			(12,189		)	—
Dividends paid on common stock	(39,973		)	(52,326		)	(23,346		)	(28,757		)
Repurchase of common stock	(27,880		)	(10,003		)	(46,383		)	(20,003		)
Principal payments on capital lease and financing obligations	(10,374		)	(10,621		)
Principal payments on finance lease obligations							(6,964		)	(8,013		)
Proceeds from stock options exercised							6,938			620
Tax payments for restricted stock upon vesting	(1,731		)	(2,345		)	(2,242		)	(1,400		)
Proceeds from stock options exercised	3,887			2,635
Cash flows used in financing activities	(68,939		)	(72,660		)	(92,936		)	(44,053		)
Net change in cash, cash equivalents and restricted cash	(3,913		)	(35,241		)	(22,737		)	(13,298		)
Cash, cash equivalents and restricted cash at beginning of period	163,146			185,491			200,379			163,146
Cash, cash equivalents and restricted cash at end of period	$	159,233		$	150,250		$	177,642		$	149,848
Supplemental disclosures:
Interest paid in cash	$	49,761		$	50,808		$	32,954		$	33,199
Income taxes paid in cash	$	26,044		$	50,813		$	24,205		$	18,267
Non-cash conversion of accounts receivable to notes receivable	$	11,559		$	—		$	—		$	5,856

See the accompanying Notes to Consolidated Financial Statements.

Dine Brands Global, Inc. and Subsidiaries

Notes to Consolidated Financial Statements

(Unaudited)

1. General

The accompanying unaudited consolidated financial statements of Dine Brands Global, Inc. (the “Company” or “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 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~~six months ended ~~September~~June 30, ~~2018~~2019 are not necessarily indicative of the results that may be expected for the twelve months ending December 31, ~~2018.~~2019.

The consolidated balance sheet at December 31, ~~2017~~2018 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, ~~2017.~~2018.

2. Basis of Presentation

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 the calculation and assessment of the following: impairment of goodwill, other intangible assets and tangible assets; income taxes; allowance for doubtful 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.

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

Accounting Standards Adopted ~~Effective January 1, 2018~~

~~On January 1, 2018,~~In February 2016, the ~~Company adopted the guidance of~~Financial Accounting Standards ~~Codification 606 -Revenue from Contracts~~Board (“FASB”) issued guidance with ~~Customers~~respect to the accounting for leases, as codified in Accounting Standards Topic 842 (“ASC ~~606”~~842”). The guidance is intended to improve financial reporting of leasing transactions by requiring entities that lease assets to recognize assets and liabilities for the rights and obligations created by leases, as well as requiring additional disclosures related to an entity's leasing activities. The Company adopted this change in accounting ~~principles~~principle using the ~~full~~modified retrospective ~~method.~~method as of the first day of the first fiscal quarter of 2019. Accordingly, ~~previously reported~~ financial information for periods prior to the date of initial application has not been ~~adjusted to reflect the application of ASC 606 to all comparative periods presented.~~adjusted. The Company ~~utilized all~~has elected the package of practical expedients for adoption ~~allowed under~~that permitted the ~~full retrospective method.~~Company not to reassess its prior conclusions regarding lease identification, lease classification and initial direct costs. The Company ~~believes utilization~~did not elect to use an allowable expedient that permitted the use of hindsight in performing evaluations of its leases.

Upon adoption of ASC 842, the Company recognized operating lease obligations of $453.0 million, which represented the present value of the ~~practical expedients did not have a significant impact~~remaining minimum lease payments, discounted using the Company's incremental borrowing rate. The Company recognized operating lease right-of-use assets of $395.6 million. The Company recognized an adjustment to retained earnings upon adoption of $5.0 million, net of tax of $1.7 million, primarily related to an impairment resulting from an unfavorable differential between lease payments to be made and sublease rentals to be received on certain leases. The remaining difference of $50.7 million between the ~~consolidated financial statements of~~recognized operating lease obligation and right-of-use assets related to the ~~periods presented herein.~~

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Dine Brands Global, Inc. and Subsidiaries

Notes to Consolidated Financial Statements (Continued)

3. Accounting Standards Adopted and Newly Issued Accounting Standards Not Yet Adopted (Continued)

derecognition of certain liabilities and assets that had been recorded in accordance with U.S. GAAP that had been applied prior to the adoption of ASC 842, primarily $43.3 million of accrued rent payments. Lease-related reserves for lease incentives, closed restaurants and unfavorable leaseholds were also derecognized.

The accounting for the Company's existing finance (capital) leases upon adoption of ASC 842 remained substantially unchanged. Adoption of ASC ~~606 impacted our previously reported Consolidated Balance Sheet as follows:~~

Balance at December 31, 2017, as reported Adjustments/Reclassifications Due to ASC 606 adoption Balance at December 31, 2017, as adjusted
(In thousands)
Assets:
Receivables, net $ 150,174
$ (9,986 ) $ 140,188
Prepaid income taxes 43,654
2,327
45,981
Long-term receivables, net 131,212
(4,642 ) 126,570

Liabilities:
Deferred franchise revenue (short-term) —
11,001
11,001
Other accrued expenses 17,780
(1,779 ) 16,001
Deferred franchise revenue (long-term) —
70,432
70,432
Other non-current liabilities 23,003
(4,932 ) 18,071
Deferred income taxes, net 138,177
(18,181 ) 119,996

Equity:
Accumulated deficit $ (1,098 ) $ (68,842 ) $ (69,940 )

In conjunction with its adoption of ASC 606, the Company has separated “franchise and restaurant revenues” and “franchise and restaurant expenses,” previously combined when reported in the Statement of Comprehensive Income (Loss) for the three and nine months ended September 30, 2017, into separate line items for franchise revenues/expense and company restaurant sales/expense as follows:

Three months ended September 30, 2017 Nine months ended September 30, 2017
(in thousands)
Franchise and restaurant revenues, as combined $ 112,347
$ 358,912

Franchise revenues $ 112,347
$ 351,394
Company restaurant sales —
7,518
$ 112,347
$ 358,912

Franchise and restaurant expenses, as combined $ 41,800
$ 123,476

Franchise expenses 41,783
115,669
Company restaurant expenses 17
$ 7,807
$ 41,800
$ 123,476

~~Adoption of ASC 606 impacted our previously reported Consolidated Statement of Comprehensive Income (Loss) for the three months ended September 30, 2017, as follows:~~

Three Months ended September 30, 2017, as reported Adjustments due to ASC 606 adoption Three Months ended September 30, 2017, as adjusted
(In thousands)
Franchise revenues (as shown separately above) $ 112,347
$ 30,232
$ 142,579
Franchise expenses (as shown separately above) 41,783
28,250
70,033
Income before income tax benefit (508,273 ) 1,982
(506,291 )
Income tax benefit 56,555
(616 ) 55,939
Net loss (451,718 ) 1,366
(450,352 )
Net loss per share:
Basic $ (24.98 ) $ (24.91 )
Diluted $ (24.98 ) $ (24.91 )

~~Table of Contents~~

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

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

~~3. Accounting Standards Adopted and Newly Issued Accounting Standards Not Yet Adopted (Continued)~~

Recognition of Applebee's advertising revenue and expense comprised $28.3 million of the revenue adjustment and all the expense adjustment. Approximately $2.0 million of the revenue adjustment is due to the change in method of recognizing franchise and development fees. See Note 4 - Revenue Disclosures, of the Notes to Consolidated Financial Statements for a description of these changes.

~~Adoption of ASC 606 impacted our previously reported Consolidated Statement of Comprehensive Income (Loss) for the nine months ended September 30, 2017, as follows:~~

Nine Months ended September 30, 2017, as reported Adjustments due to ASC 606 adoption Nine Months ended September 30, 2017, as adjusted
(In thousands)
Franchise revenues (as shown separately above) $ 351,394
$ 98,973
$ 450,367
Franchise expenses (as shown separately above) 115,669
94,052
209,721
Income before income tax benefit (444,303 ) 4,921
(439,382 )
Income tax benefit 28,228
(1,496 ) 26,732
Net loss (416,075 ) 3,425
(412,650 )
Net loss per share:
Basic $ (23.09 ) $ (22.90 )
Diluted $ (23.09 )

$ (22.90 )

Recognition of Applebee's advertising revenue and expense comprised $94.1 million of the revenue adjustment and all the expense adjustment. Approximately $4.9 million of the revenue adjustment is due to the change in method of recognizing franchise and development fees. See Note 4 - Revenue Disclosures, of the Notes to Consolidated Financial Statements for a description of these changes.

~~The adoption of ASC 606~~842 had no significant impact on the Company's cash ~~provided by~~flows from operations or ~~used in operating, investing or financing activities as previously reported in~~ its ~~Consolidated Statements~~results of ~~Cash Flows.~~operations and did not impact any covenant related to the Company's long-term debt. The Company implemented internal controls necessary to ensure compliance with the accounting and disclosure requirements of ASC 842.

Additional new accounting guidance became effective for the Company as of ~~January 1, 2018~~the beginning of fiscal 2019 that the Company reviewed and concluded was either ~~are~~ not applicable to ~~the Company's~~its operations or had no material effect on ~~the Company's~~its consolidated financial ~~statements.~~statements in the current or future fiscal years.

Newly Issued Accounting Standards Not Yet Adopted

In June 2016, the ~~Financial Accounting Standards Board (“FASB”)~~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 of 2020, with early adoption permitted 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 beginning with its first fiscal quarter of 2019. In July 2018, the FASB modified the new guidance to provide for transition adoption using either 1) a modified retrospective approach with periods prior to the adoption date being recast or 2) a prospective adoption approach with a cumulative-effect adjustment recognized to the opening balance of retained earnings on the adoption date with prior periods not recast. Prior to modification, the first transition adoption method was the only method available. Early adoption is permitted. The Company expects to use the prospective approach to its adoption of the new lease guidance.

~~Table of Contents~~

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

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

~~3. Accounting Standards Adopted and Newly Issued Accounting Standards Not Yet Adopted (Continued)~~

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 (Loss) 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.

~~In August 2018, the Securities and Exchange Commission (“SEC”) adopted the final rule under SEC Release No. 33-10532,~~ ~~Disclosure Update and Simplification~~, amending certain disclosure requirements that were redundant, duplicative, overlapping, outdated or superseded. The amendments also expanded the disclosure requirements related to the analysis of stockholders' equity for interim financial statements. Under the amendments, an analysis of changes in each caption of stockholders' equity presented in the balance sheet must be provided in a note or separate statement. The analysis should present a reconciliation of the beginning balance to the ending balance of each period for which a statement of comprehensive income is required to be filed. This final rule is effective on November 5, 2018. Pursuant to guidance issued by the SEC, the Company will provide the required disclosures in its interim financial statements beginning with the first fiscal quarter of 2019.disclosures.

In August 2018, the FASB issued guidance designed to improve the effectiveness of disclosures by removing, modifying and adding disclosures related to fair value measurements. The Company will be required to adopt the new guidance beginning with its first fiscal quarter of 2020; early adoption in any interim period after issuance of the new guidance is permitted. The Company is currently assessing the impact this guidance will have on its consolidated financial statements.

In August 2018, the FASB issued new guidance on the accounting for implementation costs incurred in a cloud computing arrangement that is a service contract. The guidance aligns the requirements for capitalizing implementation costs incurred in a hosting arrangement that is a service contract with existing guidance for capitalizing implementation cost incurred to develop or obtain internal-use software. The guidance also provides presentation and disclosure requirements for such capitalized costs. The Company will be required to adopt the new guidance beginning with its first fiscal quarter of 2020; early adoption in any interim period after issuance of the new guidance is permitted. The Company is currently assessing the impact this guidance will have on its consolidated financial statements.

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.

4. Revenue Disclosures

Franchise revenue (which comprises most of the Company's revenues) and revenue from company-operated restaurants are recognized in accordance with current guidance for revenue recognition as codified in Accounting Standards Topic (“ASC ~~606.~~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. ~~The Company's rental and financing revenues are recognized in accordance with applicable U.S. GAAP accounting standards promulgated prior to the issuance of ASC 606, which remain in effect.~~

Franchising Activities

The Company owns and franchises the Applebee’s and IHOP restaurant concepts. The franchise arrangement for both brands is documented in the form of a franchise agreement and, in most cases, a development agreement. The franchise arrangement between the Company as the franchisor and the franchisee as the customer requires the Company to perform various activities to support the brand that do not directly transfer goods and services to the franchisee, but instead represent a single performance obligation, which is the transfer of the 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 brand’s symbolic intellectual property over the term of the

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Dine Brands Global, Inc. and Subsidiaries

Notes to Consolidated Financial Statements (Continued)

4. Revenue Disclosures (Continued)

license. The services provided by the Company are highly interrelated with the franchise license and as such are considered to represent a single performance obligation.

~~Table of Contents~~

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

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

~~4. Revenue Disclosures (Continued)~~

The transaction price in a standard franchise arrangement for both brands primarily consists of (a) initial franchise/development fees; (b) continuing franchise fees (royalties); and (c) advertising fees. Since the Company considers the licensing of the franchising right to be a single performance obligation, no allocation of the transaction price is required. Additionally, all domestic IHOP franchise agreements require franchisees to purchase proprietary pancake and waffle dry mix from the Company.

The Company recognizes the primary components of the transaction price as follows:

Franchise and development fees are recognized as revenue ratably on a straight-line basis over the term of 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 advertising fees based on a percentage of the franchisee's gross sales as defined in the 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 revenue results in either what is considered a contract asset (unbilled receivable) or, once billed, accounts receivable, on the balance sheet.

Revenue from the ~~sales~~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 accounts receivable on the balance sheet.

Company Restaurant Revenue

Sales by company-operated restaurants are recognized when food and beverage items are sold. Company restaurant sales are reported net of sales taxes collected from guests that are remitted to the appropriate taxing authorities.

In determining the amount and timing of revenue from contracts with customers, the Company exercises significant judgment with respect to collectibility of the amount; however, the timing of recognition does not require significant judgments as it is based on either the term of the franchise ~~term,~~agreement, the month of reported sales by the franchisee or the date of product shipment, none of which require estimation.

The Company does not incur a significant amount of contract acquisition costs in conducting its franchising activities. The Company believes its franchising arrangements do not contain a significant financing component.

~~Prior to~~The following table disaggregates franchise revenue by major type for the ~~adoption~~three and six months ended June 30, 2019 and 2018:



	Three Months Ended				Six Months Ended
	June 30,				June 30,
	2019		2018		2019		2018
	(In thousands)
Franchise Revenue:
Royalties	$	75,747	$	78,102	$	154,382	$	153,199
Advertising fees	71,738		58,705		144,368		122,541
Pancake and waffle dry mix sales and other	12,526		12,172		26,957		25,269
Franchise and development fees	2,657		2,962		5,887		6,245
Total franchise revenue	$	162,668	$	151,941	$	331,594	$	307,254

Accounts receivable from franchisees as of ~~ASC 606, the Company generally recognized the entire franchise and/or development fee as revenue at the restaurant opening date. The impact on the Company's previously reported financial statements~~June 30, 2019 and December 31, 2018 were $65.9 million (net of ~~the change from that policy to the policy described above is presented~~allowance of $2.1 million) and $62.6 million (net of allowance of $4.6 million), respectively, and were included in ~~Note 3 - Accounting Standards Adopted and Newly Issued Accounting Standards Not Yet Adopted, of the Notes to Consolidated Financial Statements.~~

Prior to the adoption of ASC 606, the Company did not record advertising fees received under Applebee's franchise agreements as franchise revenue. In evaluating advertising activity under the guidance of ASC 606, the Company considers itself to be primarily responsible for fulfilling the promise to provide all the services specifiedreceivables, net in the contract, including advertising activities, which are not considered to be distinct services in the context of providing the right to the symbolic intellectual property. Accordingly, under ASC 606, the Company records advertising fees received under Applebee's franchise agreements as franchise revenue. The Company had previously recorded advertising fees received under IHOP franchise agreements as franchise revenue. Under previously issued accounting guidance for franchisors, advertising revenue and expense were recognized in the same amount in each period. That guidance was superceded by ASC 606 such that advertising expense may now be different than the advertising revenue recognized as described above. The impact of these changes with respect to Applebee's advertising fees and advertising expenses on the Company's previously reported financial statements is presented in Note 3 - Accounting Standards Adopted and Newly Issued Accounting Standards Not Yet Adopted, of the Notes to Consolidated ~~Financial Statements. An excess or deficiency of advertising fee revenue compared to advertising expenditures, if any, will be recognized in the fourth quarter, as permitted under ASC 606.~~Balance Sheets.

~~The adoption of ASC 606 had no impact on the Company's recording of royalties and sales of proprietary pancake and waffle dry mix.~~

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Dine Brands Global, Inc. and Subsidiaries

Notes to Consolidated Financial Statements (Continued)

4. Revenue Disclosures (Continued)

~~The following table disaggregates our franchise revenue by major type for the three and nine months ended September 30, 2018 and 2017:~~

Three Months Ended Nine Months Ended
September 30, September 30,
2018 2017 2018 2017
(In thousands)
Franchise Revenue:

Royalties $ 75,262
$ 70,860
$ 227,172
$ 223,919
Advertising fees 71,017
56,218
193,557
178,381
Pancake and waffle dry mix sales and other 13,188
12,489
39,799
38,943
Franchise and development fees 2,611
3,012
8,804
9,124
Total franchise revenue $ 162,078
$ 142,579
$ 469,332
$ 450,367

Receivables from franchisees as of September 30, 2018 and December 31, 2017 were $61.7 million (net of allowance of $24.4 million) and $66.2 million (net of allowance of $22.2 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 ~~nine~~six months ended ~~September~~June 30, ~~2018~~2019 are as follows:



	Deferred Franchise Revenue (short- and long-term)
	(In thousands)
Balance at December 31, 2018	$	74,695
Recognized as revenue during the six months ended June 30, 2019	(5,515		)
Fees deferred during the six months ended June 30, 2019	1,366
Balance at June 30, 2019	$	70,546

Deferred Franchise Revenue (short- and long-term)
(In thousands)
Balance at December 31, 2017 $ 81,433
Recognized as revenue during the nine months ended September 30, 2018 (8,053 )
Fees received and deferred during the nine months ended September 30, 2018 3,181
Balance at September 30, 2018 $ 76,561

The balance of deferred revenue as of ~~September~~June 30, ~~2018~~2019 is expected to be recognized as follows:



	(In thousands)
Remainder of 2019	$	6,582
2020	7,887
2021	7,798
2022	7,269
2023	6,693
2024	6,005
Thereafter	28,312
Total	$	70,546

(In thousands)
Remainder of 2018 $ 2,261
2019 10,523
2020 8,165
2021 7,616
2022 7,093
2023 6,529
Thereafter 34,374
Total $ 76,561

~~Company-operated Restaurants~~

5. Lease Disclosures

The Company engages in leasing activity as both a lessee and a lessor. The majority of the Company's lease portfolio originated when the Company was actively involved in the development and financing of IHOP restaurants prior to the franchising of the restaurant to the franchisee. This activity included the Company's leasing or purchase of the site on which the restaurant was located and subsequently leasing/subleasing the site to the franchisee. With a few exceptions, the Company ended this practice in 2003 and the Company's current lease activity is predominantly comprised of renewals of existing lease arrangements and exercises of options on existing lease arrangements.

The Company currently leases from third parties the real property on which approximately 610 IHOP franchisee-operated restaurants and one 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 60 IHOP restaurants and one 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 ~~operate any~~have a significant amount of non-real estate leases.

The Company's existing leases related to IHOP restaurants ~~but did operate restaurants~~generally provided for an initial term of 20 to 25 years with most having one or more five-year renewal options. Option periods were not included in determining liabilities and right-of-use assets related to operating leases. Approximately 240 of the Company's leases contain provisions requiring additional rent payments to the Company (as lessor) based on a percentage of restaurant sales. Approximately 260 of the Company's leases contain provisions requiring additional rent payments by the Company (as lessee) based on a percentage of restaurant sales.

The individual lease agreements do not provide information to determine the implicit rate in the ~~comparative prior period. Sales by company-operated restaurants were recognized when food and beverage items were sold and were reported net of sales taxes collected from guests~~agreements. The Company made significant judgments in determining the incremental borrowing rates that were ~~remitted~~used in calculating operating lease liabilities as of the adoption date. Due to the ~~appropriate taxing authorities. Recognition~~large number of ~~revenue from company-operated restaurants was not impacted~~leases, the Company applied a portfolio approach by grouping the leases based on the original lease term. The Company estimated the rate for each grouping primarily by reference to yield rates on debt issuances by companies of a similar credit rating as the Company, U.S. Treasury rates as of the adoption ~~of ASC 606 using the full retrospective method.~~date and adjustments for differences in years to maturity.

Dine Brands Global, Inc. and Subsidiaries

Notes to Consolidated Financial Statements (Continued)

5. Lease Disclosures (Continued)

The Company's lease cost for the three and six months ended June 30, 2019 was as follows:



	Three months ended June 30, 2019			Six months ended June 30, 2019
Finance lease cost:	(In millions)
Amortization of right-of-use assets	$	1.3		$	2.6
Interest on lease liabilities	2.0			4.1
Operating lease cost	26.8			53.2
Variable lease cost	0.6			1.3
Short-term lease cost	0.0			0.0
Sublease income	(27.3		)	(55.4		)
Lease cost	$	3.4		$	5.8

Future minimum lease payments under noncancelable leases as lessee as of June 30, 2019 were as follows:



	Finance Leases			Operating Leases
	(In millions)
2019 (remaining six months)	$	10.3		$	46.2
2020	20.1			94.6
2021	16.5			77.8
2022	14.7			70.0
2023	11.6			57.5
Thereafter	65.0			217.7
Total minimum lease payments	138.2			563.8
Less: interest/imputed interest	(41.0		)	(117.0		)
Total obligations	97.2			446.8
Less: current portion	(12.9		)	(67.7		)
Long-term lease obligations	$	84.3		$	379.1

The weighted average remaining lease term as of June 30, 2019 was 8.6 years for finance leases and 7.9 years for operating leases. The weighted average discount rate as of June 30, 2019 was 10.4% for finance leases and 5.8% for operating leases.

During the three and six months ended June 30, 2019, the Company made the following payments for leases:



	Three months ended June 30, 2019		Six months ended June 30, 2019
	(In millions)
Principal payments on finance lease obligations	$	3.5	$	7.0
Interest payments on finance lease obligations	$	2.0	$	4.1
Payments on operating leases	$	22.8	$	45.8
Variable lease payments	$	0.6	$	1.5

The Company's income from operating leases for the three and six months ended June 30, 2019 was as follows:



	Three months ended June 30, 2019		Six months ended June 30, 2019
	(In millions)
Minimum lease payments	$	25.4	$	51.1
Variable lease income	2.8		6.0
Total operating lease income	$	28.2	$	57.1

Dine Brands Global, Inc. and Subsidiaries

Notes to Consolidated Financial Statements (Continued)

5. Lease Disclosures (Continued)

Future minimum payments to be received as lessor under noncancelable operating leases as of June 30, 2019 were as follows:



	(In millions)
2019 (remaining six months)	$	53.1
2020	107.3
2021	101.5
2022	98.4
2023	94.0
Thereafter	289.6
Total minimum rents receivable	743.9

The Company's income from direct financing leases for the three and six months ended June 30, 2019 was as follows:



	Three months ended June 30, 2019		Six months ended June 30, 2019
	(In millions)
Interest income	$	1.3	$	2.7
Variable lease income	0.3		0.7
Total operating lease income	$	1.6	$	3.4

Future minimum payments to be received as lessor under noncancelable direct financing leases as of June 30, 2019 were as follows:



	(In millions)
2019 (remaining six months)	$	7.9
2020	14.7
2021	11.6
2022	8.2
2023	3.6
Thereafter	3.8
Total minimum rents receivable	49.8
Less: unearned income	(10.0		)
Total net investment in direct financing leases	39.8
Less: current portion	(11.2		)
Long-term investment in direct financing leases	$	28.6

6. Long-Term Debt

At June 30, 2019 and December 31, 2018, long-term debt consisted of the following:



	June 30, 2019			December 31, 2018
	(In millions)
Series 2019-1 4.194% Fixed Rate Senior Secured Notes, Class A-2-I	$	700.0		$	—
Series 2019-1 4.723% Fixed Rate Senior Secured Notes, Class A-2-II	600.0			—
Series 2014-1 4.277% Fixed Rate Senior Secured Notes, Class A-2	—			1,283.8
Series 2018-1 Variable Funding Senior Notes Class A-1, variable interest rate of 4.93% at December 31, 2018	—			25.0
Class A-2-I and A-2-II (2019) and Class A-2 (2018) Note debt issuance costs	(12.8		)	(9.7		)
Long-term debt, net of debt issuance costs	1,287.2			1,299.1
Current portion of long-term debt	—			(25.0		)
Long-term debt	$	1,287.2		$	1,274.1

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Dine Brands Global, Inc. and Subsidiaries

Notes to Consolidated Financial Statements (Continued)

6. Long-Term Debt (Continued)

~~5. Long-Term Debt~~

On ~~September~~June 5, ~~2018 (the “Closing Date”),~~2019, Applebee’s Funding LLC and IHOP Funding LLC ~~(“Co-Issuers”~~(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 replaced their existing revolving financing facility, the 2018-1 Variable Funding Senior Notes, Class A-1 (“2018-1 Class A-1 Notes”), with a new revolving financing facility, the 2019-1 Variable Funding Senior Notes, Class A-1 (the “2019 Class A-1 Notes”), on substantially the same terms as the 2018-1 Class A-1 Notes in order to conform the term of the 2019 Class A-1 Notes to the anticipated repayment dates for the 2019 Class A-2 Notes. The 2019 Class A-1 Notes 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 of the domestic revenue-generating assets and domestic intellectual property, as further described below, 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 Company used the majority of the net proceeds of the offering to repay the entire outstanding balance of approximately $1.28 billion of Series 2014-1 4.277% Fixed Rate Senior Notes, Class A-2 (the “2014 Class A-2 Notes”). The Company used the remaining proceeds of the offering to pay for transactions costs associated with the securitization refinancing transaction and for general corporate purposes.

2019 Class A-2 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”) (see Exhibit 4.1 to this Form 10-Q), and the related Series 2019-1 Supplement to the Base Indenture, dated June 5, 2019 (the “Series 2019-1 Supplement”) (see Exhibit 4.2 to this Form 10-Q), 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.

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 Class A-2 Notes on a quarterly basis. The payment of principal 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. As of June 30, 2019, the Company's leverage ratio was 4.57x; accordingly, no principal payment on the 2019 Class A-2 Notes will be required during the third quarter of 2019. 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 Company repays the New Notes prior to certain dates it would be required to pay make-whole or call redemption premiums. As of June 30, 2019, the make-whole premium associated with voluntary prepayment of the Class A-2-I Notes was approximately $38 million; this amount declines progressively each quarter to zero in June 2022. As of June 30, 2019, the make-whole premium associated with voluntary prepayment of the Class A-2-II Notes was approximately $67 million; this amount declines progressively each quarter to zero in June 2024. In lieu of the applicable make whole premiums above, a call redemption premium will be payable upon any redemption or refinancing in full of the New Notes at any time on or after the quarterly payment date in June 2022 and on or prior to the quarterly payment date in June 2023. The call redemption premium is the lesser of 101% times the outstanding principal amount of the Class A-2-II Notes, less the outstanding principal amount of the Class A-2-II, at the time of redemption or refinancing and the applicable make-whole premium otherwise payable on the Class A-2-II Notes.

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Dine Brands Global, Inc. and Subsidiaries

Notes to Consolidated Financial Statements (Continued)

6. Long-Term Debt (Continued)

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 June 30, 2019, based on the probability-weighted discounted cash flows associated with either event.

2019 Class A-1 Notes

The Co-Issuers also entered into a revolving financing facility, the 2019 Class A-1 Notes, that allows for drawings of up to $225 million of variable funding notes ~~on a revolving basis~~ and the issuance of letters of ~~credit (the “2018 Variable Funding Notes”).~~credit. The ~~2018 Variable Funding~~2019 Class A-1 Notes were issued under the Base Indenture, dated September 30, 2014, as amended, among the Co-Issuers and Citibank, N.A., as Trustee and Securities Intermediary (“Base Indenture”), and the Series 2018-1 Supplement to the Base Indenture, dated September 5, 2018, among the Co-Issuers and Citibank, N.A., as Trustee and the 2018-1 Securities Intermediary (“Series 2018-1 Supplement”).Indenture. Drawings and certain additional terms related to the ~~2018 Variable Funding~~2019 Class A-1 Notes are governed by the 2019 Class A-1 Note Purchase Agreement, dated ~~September~~June 5, ~~2018,~~2019, among the Co-Issuers, certain special-purpose, wholly-owned indirect subsidiaries of the Company, each as a Guarantor, the ~~Corporation,~~Company, as manager, certain conduit investors, financial institutions and funding agents, and Barclays Bank PLC, as provider of letters credit, swingline lender and administrative agent (the “Purchase Agreement”), (see Exhibit 10.15 to this Form 10-Q).

The ~~2018 Variable Funding~~2019 Class A-1 Notes ~~will be~~are governed, in part, by the Purchase Agreement and by certain generally applicable terms contained in the ~~Base Indenture and the Series 2018-1 Supplement.~~Indenture. The applicable interest rate under the ~~2018 Variable Funding~~2019 Class A-1 Notes 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 ~~any~~either case, plus 2.15%. ~~There is an upfront fee of 1% and a fee of 50 basis points on any unused portion of the 2018 Variable Funding Notes facility.~~ 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 ~~greater~~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 2019 Class A-1 Notes. 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. It is anticipated that ~~the~~any principal and interest on the ~~2018 Variable Funding~~2019 Class A-1 Notes will be repaid in full on or prior to ~~September 7, 2021~~the quarterly payment date in June 2024 (the ~~“Anticipated~~“2019 Class A-1 Anticipated Repayment Date”), subject to ~~four~~two additional one-year extensions at the option of the Company upon the satisfaction of certain conditions.

The Company has not drawn on the 2019 Class A-1 Notes subsequent to their June 5, 2019, issuance. At June 30, 2019, $2.2 million was pledged against the 2019 Class A-1 Notes for outstanding letters of credit, leaving $222.8 million of 2019 Class A-1 Notes available for borrowing. The letters of credit are used primarily to satisfy insurance-related collateral requirements.

During the six months ended June 30, 2019, the Company repaid $25.0 million of 2018 ~~Variable Funding~~Class A-1 Notes, representing the amount outstanding at December 31, 2018; the Company did not draw on the 2018 Class A-1 Notes during the six months ended June 30, 2019. The maximum amount of 2018 Class A-1 Notes outstanding during the six months ended June 30, 2019 was $25.0 million and ~~other credit instruments issued under~~ the ~~Purchase~~weighted average interest rate on the 2018 Class A-1 Notes for the period outstanding was 4.88%.

Guarantee and Collateral Agreement ~~are secured by the collateral described in the Base Indenture and~~

Under the Guarantee and Collateral Agreement, dated September 30, 2014, as amended and restated as of June 5, 2019, (see Exhibit 10.16 to this Form 10-Q), among the Guarantors in favor of the Trustee, the Guarantors guarantee the obligations of the Co-Issuers under the Indenture and related documents and secure the guarantee by ~~certain special-purpose, wholly-owned indirect subsidiaries~~granting a security interest in substantially all of their assets.

The New Notes are secured by a security interest in substantially all of the assets of the Co-Issuers and the Guarantors (collectively, the “Securitization Entities”). On the Closing Date, these assets (the “Securitized Assets”) generally included substantially all of the domestic revenue-generating assets of the Company ~~each as a Guarantor, in favor~~and its subsidiaries, which principally consist of ~~Citibank, N.A., as Trustee (the “Guarantee~~franchise agreements, area license agreements, development agreements, franchisee fee notes, equipment leases, agreements related to the domestic production of and the sale of pancake and waffle dry-mixes, owned and leased real property and intellectual property.

The New Notes are the obligations only of the Co-Issuers pursuant to the Indenture and are unconditionally and irrevocably guaranteed by the Guarantors pursuant to the Guarantee and Collateral ~~Agreement”).~~

~~In connection with the above transaction,~~Agreement. Except as described below, neither the Company ~~also amended~~nor any subsidiary of the Company, other than the Securitization Entities, will guarantee or in any way be liable for the obligations of the Co-Issuers under the Indenture or the New Notes.

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

Notes to Consolidated Financial Statements (Continued)

6. Long-Term Debt (Continued)

Management Agreement

Under the terms of the Management Agreement, dated September 30, 2014, ~~(the “Management Agreement”)~~as amended and restated as of September 5, 2018 and as further amended and restated as of June 5, 2019, (see Exhibit 10.17 to this Form 10-Q), among the ~~Co-Issuers, other securitization entities party thereto from time to time,~~Company, the ~~Company,~~Securitization Entities, Applebee’s Services, Inc. ~~and~~, International House of Pancakes, LLC and the Trustee, the Company will act as ~~Sub-managers~~the manager with respect to the Securitized Assets. The primary responsibilities of the manager will be to perform certain franchising, distribution, intellectual property and ~~Citibank, N.A., as Trustee,~~operational functions on behalf of the Securitization Entities with respect to ~~revise~~ the ~~calculation~~Securitized Assets pursuant to the Management Agreement. The manager will be entitled to the payment of the weekly management fee, as set forth in the Management Agreement and will be subject to the liabilities set forth in the Management Agreement.

The manager will manage and administer the Securitized Assets in accordance with the terms of the Management Agreement and, except as otherwise provided in the Management Agreement, the management standard set forth in the Management Agreement. Subject to limited exceptions set forth in the Management Agreement, the Management Agreement does not require the manager to expend or risk its funds or otherwise incur any financial liability in the performance of any of its rights or powers under the Management Agreement if the manager has reasonable grounds for believing that repayment of such funds or adequate indemnity against such risk or liability is not compensated by payment of the weekly management fee or is otherwise not reasonably assured or provided to it.

Subject to limited exceptions set forth in the Management Agreement, the manager will indemnify each Securitization Entity, the trustee and certain other parties, and their respective officers, directors, employees and agents for all claims, penalties, fines, forfeitures, losses, liabilities, obligations, damages, actions, suits and related costs and judgments and other costs, fees and reasonable expenses that any of them may incur as a result of (a) failure of the manager to perform or observe its obligations under the Management Agreement, (b) the breach by the manager of any representation, warranty or covenant under the Management Agreement, or (c) the manager’s negligence, bad faith or willful misconduct in the performance of its duties under the Management Agreement.

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 ~~other revisions. The Company also amended~~circumstances; (iii) certain indemnification payments in the ~~Base Indenture to,~~event, among other things, ~~make certain administrative and definitional updates.~~

~~In connection with~~ the ~~2018 Variable Funding Notes above, on September 5, 2018, the Company repaid the entire $20 million then-outstanding principal amount~~transfers of the ~~Company’s $100 million revolving~~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 for similar types of financing, ~~facility under~~including events tied to our failure to maintain the stated debt service coverage ratio (“DSCR”), the sum of domestic retail sales for all restaurants being below certain ~~Series 2014-1 Class A-1~~levels on certain measurement dates, certain manager termination events, certain events of default and the failure to repay or refinance the New Notes ~~(the “2014 Variable Funding Notes”) pursuant~~on or before their respective 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 Base Indenture and the Series 2014-1 Supplement to the Base Indenture, dated September 30, 2014, among the Co-Issuers and Citibank, N.A., as Trustee and Series 2014-1 Securities Intermediary (“Series 2014-1 Supplement”) and terminated the corresponding Class A-1 Note Purchase Agreement, dated September 30, 2014, among the Co-Issuers, certain special-purpose, wholly-owned indirect subsidiariesNotes, failure of the ~~Corporation, each~~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.

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 ~~Guarantor, certain conduit investors, financial institutions~~Cash Flow Sweeping Event, the Trustee is required to retain 50% of excess Cash Flow (as defined) in a restricted account. In a Rapid Amortization Event, all excess Cash Flow is retained and ~~funding agents,~~used to retire principal amounts of debt. 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 June 30, 2019 was 5.40x.

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Dine Brands Global, Inc. and Cooperatieve Centrale Raiffeisen-Boerenleenbank, B.A., “Rabobank Nederland,” New York Branch, as provider of letters of credit, as swingline lender and as administrative agent (“2014 Purchase Agreement”).Subsidiaries

Notes to Consolidated Financial Statements (Continued)

6. Long-Term Debt (Continued)

Debt Issuance Costs

The Company incurred costs of approximately ~~$3.6~~$12.9 million in connection with the issuance of the ~~2018 Variable Funding~~2019 Class A-2 Notes. These debt issuance costs are being amortized using the effective interest method over estimated life of each tranche of the 2019 Class A-2 Notes. Amortization of $0.1 million of these costs was included in interest expense for the three and six months ended June 30, 2019. Unamortized debt issuance costs of $12.8 million are reported as a direct reduction of the 2019 Class A-2 Notes in the Consolidated Balance Sheets.

The Company incurred costs of approximately $0.2 million in connection with the replacement of the 2018-1 Class A-1 Notes with the 2019-1 Class A-1 Notes. These debt issuance costs have been added to the remaining unamortized costs of approximately $2.8 million related to the 2018-1 Class A-1 Notes, the total of which costs is being amortized using the effective interest method over the estimated ~~three-year~~five-year life of the ~~2018 Variable Funding~~2019-1 Class A-1 Notes. Amortization of these costs of $0.2 million and $0.5 million, respectively, was included in interest expense for the three and six months ended June 30, 2019.

Unamortized debt issuance costs of $3.0 million related to the 2019-1 Class A-1 Notes are reported as other long-term assets in the Consolidated Balance ~~Sheets.~~Sheets at June 30, 2019.

Loss on Extinguishment of Debt

In connection with the ~~termination referenced above~~repayment of the 2014 Class ~~A-1 Note Purchase Agreement, dated September 30, 2014,~~A-2 Notes, the Company ~~charged as expense $0.9~~recognized a loss on extinguishment of debt of $8.3 million, representing the remaining unamortized costs related to the 2014 Class A-2 Notes. Prior to the extinguishment, amortization of ~~unamortized debt issuance~~$0.6 million and $1.4 million, respectively, of costs associated with the 2014 ~~Variable Funding Notes. In addition,~~Class A-2 Notes was included in interest expense for the Company incurred costs of $1.6 million associated with the evaluation of various alternatives for refinancing its securitized indebtedness that were also charged to expense. These costs totaling $2.5 million are reported as “Debt refinancing costs” in the Consolidated Statements of Comprehensive Income (Loss).three and six months ended June 30, 2019.

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

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

~~5. Long-Term Debt~~

~~At September 30, 2018 and December 31, 2017, long-term debt consisted of the following components:~~

September 30, 2018 December 31, 2017
(In millions)
Series 2014-1 4.277% Fixed Rate Senior Secured Notes, Class A-2 $ 1,287.0
$ 1,296.8
Series 2018-1 Variable Funding Senior Notes Class A-1, at a variable interest rate of 4.403% as of September 30, 2018 20.0
—
Debt issuance costs (10.5 ) (13.9 )
Long-term debt, net of debt issuance costs 1,296.5
1,282.8
Current portion of long-term debt (23.2 ) (13.0 )
Long-term debt $ 1,273.3
$ 1,269.8

For a description of the ~~Series 2014-1 4.277% Fixed Rate Senior Secured~~2014 Class A-2 Notes and the 2018-1 Class ~~A-2,~~A-1 Notes, refer to Note 78 of the Notes to Consolidated Financial Statements included in the Company’s Annual Report on Form 10-K for the year ended December 31, ~~2017.~~2018.

6.7. Stockholders' Deficit

Dividends

During the ~~nine~~six months ended ~~September~~June 30, ~~2018~~,2019, the Company paid dividends on common stock of ~~$40.0~~$23.3 million, representing a cash dividend of ~~$0.97~~$0.63 per share declared in the fourth quarter of ~~2017~~2018, paid in January 2019 and a cash ~~dividends~~dividend of ~~$0.63~~$0.69 per share declared in the first ~~and second quarters~~quarter of ~~2018.~~2019, paid in April 2019. On ~~August 2, 2018,~~May 13, 2019, the Company's Board of Directors declared a ~~third~~second quarter ~~2018~~2019 cash dividend of ~~$0.63~~$0.69 per share of common stock. This dividend was paid on ~~October 5, 2018~~July 12, 2019 to ~~the Company's~~ stockholders of record at the close of business on ~~September~~June 20, ~~2018.~~2019. The Company reported dividends payable of ~~$11.4~~$12.2 million at ~~September~~June 30, ~~2018.~~2019.

Dividends declared and paid per share for the three and six months ended June 30, 2019 and 2018 were as follows:



	Three months ended June 30,				Six months ended June 30,
	2019		2018		2019		2018
Dividends declared per common share	$	0.69	$	0.63	$	1.38	$	1.26
Dividends paid per common share	$	0.69	$	0.63	$	1.32	$	1.60

Stock Repurchase Program

In February 2019, the Company’s Board of Directors approved a stock repurchase program authorizing the Company to repurchase up to $200 million of the Company’s common stock (the “2019 Repurchase Program”) on an opportunistic basis from time to time in the open market or in privately negotiated transactions based on business, market, applicable legal requirements and other considerations. The 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.

Dine Brands Global, Inc. and Subsidiaries

Notes to Consolidated Financial Statements (Continued)

7. Stockholders' Deficit (Continued)

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

A summary of shares repurchased under the 2019 Repurchase Program and the 2015 Repurchase Program, during the three and ~~nine~~six months ended ~~September~~June 30, ~~2018~~2019 and cumulatively, is as follows:



	Shares	Cost of shares
		(In millions)
2019 Repurchase Program:
Repurchased during the three months ended June 30, 2019	392,132	$	35.3
Repurchased during the six months ended June 30, 2019	432,949	$	39.0
Cumulative (life-of-program) repurchases	432,949	$	39.0
Remaining dollar value of shares that may be repurchased	n/a	$	161.0
2015 Repurchase Program:
Repurchased during the three months ended June 30, 2019	—	$	—
Repurchased during the six months ended June 30, 2019	110,499	$	8.4
Cumulative (life-of-program) repurchases	1,589,995	$	126.2
Remaining dollar value of shares that may be repurchased	n/a	n/a

2015 Repurchase Program Shares Cost of shares
(In millions)
Repurchased during the three months ended September 30, 2018 107,814
$ 7.9
Repurchased during the nine months ended September 30, 2018 383,615
$ 27.9
Cumulative (life-of-program) repurchases as of September 30, 2018 1,384,272
$ 110.8
Remaining dollar value of shares that may be repurchased n/a $ 39.2

Treasury Stock

Repurchases of 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~~six months ended ~~September~~June 30, ~~2018,~~2019, the Company re-issued ~~165,189~~187,367 shares of treasury stock at a total FIFO cost of ~~$6.4~~$8.3 million.

~~Table of Contents~~

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

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

7.8. Income Taxes

The Company's effective tax rate was ~~32.1%~~24.5% for the ~~nine~~six months ended ~~September~~June 30, ~~2018~~2019 as compared to ~~6.1%~~37.0% for the ~~nine~~six months ended ~~September~~June 30, ~~2017.~~ 2018. The effective tax rate of ~~32.1%~~24.5% for the ~~nine~~six months ended ~~September~~June 30, ~~2018~~2019 was ~~higher~~lower than the ~~current federal statutory~~ rate of ~~21%~~the prior comparable period primarily due to ~~a $5.7 million increase to our tax provision related to adjustments resulting from~~ Internal Revenue Service (“IRS”) ~~audits~~audit adjustments for tax years 2011 ~~through 2013. The effective tax rate of 6.1% for~~to 2013 recognized in the nine months ended September 30, 2017 was lower than the then-statutory federal tax rate of 35% because the Company’s $358.2 million impairment of goodwill was not deductible for federal income tax purposes and therefore had no associated tax benefit. See Note 14 - Impairment of Goodwill and Intangible Assets, of the Notes to Consolidated Financial Statements for the description of impairment.prior period.

The total gross unrecognized tax benefit as of ~~September~~June 30, ~~2018~~2019 and December 31, ~~2017~~2018 was ~~$8.3~~$5.6 million and ~~$5.9~~$5.2 million, respectively, excluding interest, penalties and related tax benefits. ~~The increase in the unrecognized tax benefit of $2.4 million was primarily related to the IRS examination of tax years 2011 to 2013.~~ The Company estimates the unrecognized tax benefit may decrease over the upcoming 12 months by an amount up to ~~$5.1~~$1.3 million related to settlements with taxing authorities and the lapse of 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 estimate as to when cash settlement with a taxing authority will occur.

As of ~~September~~June 30, ~~2018,~~2019, accrued interest was ~~$1.6~~$1.5 million and accrued penalties were less than $0.1 million, excluding any related income tax benefits. As of December 31, ~~2017,~~2018, accrued interest was $1.1 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 (Loss).~~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 jurisdictions.~~international jurisdictions.The IRS examination of tax years 2011 to 2013 concluded during the three months ended June 30, 2019, and the Company received a refund of $13.3 million, inclusive of interest income of $0.9 million. With few exceptions, the Company is no longer subject to federal, state or non-United States tax examinations by tax authorities for years before 2011. The ~~IRS commenced examination of the Company’s U.S. federal income tax return for the tax years 2011 to 2013 in fiscal year 2016. The examination is anticipated to conclude during fiscal year 2018. The~~ Company believes that adequate reserves have been provided ~~relating~~related to all matters contained in the tax periods open to examination.

~~The SEC has issued guidance which provides for a measurement period~~

Table of ~~one year from the enactment date~~Contents

Dine Brands Global, Inc. and Subsidiaries

Notes to finalize the accounting for effects of the Tax Act. Consistent with that guidance, the Company provisionally recorded income tax benefit of $77.5 million related to the Tax Act in the fourth quarter of 2017. As of September 30, 2018, the Company has not yet completed its accounting for the tax effects of the enactment of the Tax Act. The Internal Revenue Service is expected to issue additional guidance clarifying provisions of the Act. As additional guidance is issued, one or more of the provisional amounts may change.Consolidated Financial Statements (Continued)

8.9. 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 (Loss):~~Income:



	Three months ended June 30,						Six months ended June 30,
	2019			2018			2019			2018
	(In millions)
Total stock-based compensation expense:
Equity classified awards expense	$	1.8		$	2.3		$	5.9		$	5.7
Liability classified awards expense	1.4			0.4			2.4			0.9
Total pre-tax stock-based compensation expense	3.2			2.7			8.3			6.6
Book income tax benefit	(0.9		)	(0.7		)	(2.2		)	(1.7		)
Total stock-based compensation expense, net of tax	$	2.3		$	2.0		$	6.1		$	4.9

Three months ended September 30, Nine months ended September 30,
2018 2017 2018 2017
(In millions)
Total stock-based compensation expense:
Equity classified awards expense $ 2.4
$ 1.3
$ 8.1
$ 9.0
Liability classified awards expense (credit) 1.4
0.0
2.3
(1.1 )
Total pre-tax stock-based compensation expense 3.8
1.3
10.4
7.9
Book income tax benefit (1.0 ) (0.5 ) (2.7 ) (3.0 )
Total stock-based compensation expense, net of tax $ 2.8
$ 0.8
$ 7.7
$ 4.9

As of ~~September~~June 30, ~~2018~~2019, total unrecognized compensation expense of ~~$20.1~~$21.8 million related to restricted stock and restricted stock units and ~~$4.1~~$4.5 million related to stock options are expected to be recognized over a weighted average period of ~~1.8~~1.6 years for restricted stock and restricted stock units and ~~1.7~~1.6 years for stock options.

~~Table of Contents~~

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

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

~~8. Stock-Based Compensation (Continued)~~

Fair Value Assumptions

The Company granted ~~223,570~~132,832 stock options during the ~~nine~~six months ended ~~September~~June 30, ~~2018~~2019 for which the fair value was estimated using a Black-Scholes option pricing model. The following summarizes the assumptions used in the Black-Scholes model:



Risk-free interest rate	~~2.6~~2.5	%
Weighted average historical volatility	~~26.1~~30.3	%
Dividend yield	~~3.6~~2.8	%
Expected years until exercise	~~4.6~~4.7
Weighted average fair value of options granted	$~~11.94~~21.93

The Company granted 25,330 performance-based stock options and 26,670 performance-based restricted stock units during the nine months ended September 30, 2018 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~~	~~2.4~~	%
~~Weighted average historical volatility~~	~~33.0~~	%
~~Dividend yield~~	~~3.7~~	%
~~Expected years until exercise~~	~~3.0~~
~~Weighted average fair value of options granted~~	~~$9.79~~
~~Weighted average fair value of restricted stock units granted~~	~~$34.53~~

Equity Classified Awards - Stock Options

Stock option balances at ~~September~~June 30, ~~2018~~2019, and activity for the ~~nine~~six months ended ~~September~~June 30, ~~2018~~2019 were as follows:



	Shares		Weighted Average Exercise Price		Weighted Average Remaining Contractual Term (in Years)	Aggregate Intrinsic Value (in Millions)
Outstanding at December 31, 2018	1,439,708		$	63.21
Granted	132,832		98.97
Exercised	(118,991	)	58.32
Forfeited	(77,952	)	69.54
Outstanding at June 30, 2019	1,375,597		66.72		6.0	$	41.3
Vested at June 30, 2019 and Expected to Vest	1,263,536		67.54		5.7	$	36.9
Exercisable at June 30, 2019	684,738		$	75.93	3.4	$	14.7

Shares
Weighted
Average
Exercise
Price

Weighted Average
Remaining
Contractual Term
(in Years)

Aggregate
Intrinsic
Value (in Millions)
Outstanding at December 31, 2017 1,272,048
$ 61.44

Granted 248,899
69.12

Exercised (73,741 ) 52.72

Forfeited (6,309 ) 68.80

Outstanding at September 30, 2018 1,440,897
63.18
6.9 $ 30.4
Vested at September 30, 2018 and Expected to Vest 1,279,379
64.78
6.6 $ 25.5
Exercisable at September 30, 2018 572,957
$ 77.64
3.8 $ 6.2

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Dine Brands Global, Inc. and Subsidiaries

Notes to Consolidated Financial Statements (Continued)

9. Stock-Based Compensation (Continued)

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~~second quarter of ~~2018~~2019 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~~June 30, ~~2018~~2019. 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.

~~Table of Contents~~

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

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

~~8. Stock-Based Compensation (Continued)~~

Equity Classified Awards - Restricted Stock and Restricted Stock Units

Outstanding balances as of ~~September~~June 30, ~~2018~~2019, and activity related to restricted stock and restricted stock units for the ~~nine~~six months ended ~~September~~June 30, ~~2018~~2019 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, 2018	267,242		$	63.97	374,529		$	31.05
Granted	68,376		97.74		16,232		98.97
Released	(58,885	)	81.19		(12,293	)	90.34
Forfeited	(23,437	)	66.50		(27,802	)	34.53
Outstanding at June 30, 2019	253,296		$	68.84	350,666		$	30.66

Restricted
Stock

Weighted
Average
Grant Date
Fair Value

Restricted
Stock Units

Weighted
Average
Grant Date
Fair Value
Outstanding at December 31, 2017 275,191
$ 65.81
303,348
$ 28.39
Granted 91,448
68.96
55,584
48.12
Released (65,704 ) 81.68
(15,737 ) 98.54
Forfeited (23,666 ) 61.09
(71 ) 53.49
Outstanding at September 30, 2018 277,269
$ 63.61
343,124
$ 27.70

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. ~~During the nine months ended September 30, 2018, 59,229 units were issued, 60 units were vested and 3,806 units were forfeited. At September 30, 2018, there were 55,363 units outstanding.~~



	Cash-Settled Restricted Stock Units		Weighted Average Grant Date Fair Value
Outstanding at December 31, 2018	53,766		$	94.45
Granted	20,249		96.12
Released	(317	)	82.16
Forfeited	(4,054	)	98.35
Outstanding at June 30, 2019	69,644		$	98.59

For the three ~~and nine~~ months ended ~~September~~June 30, 2019 and 2018, $0.5 million and $0.2 million, respectively, was included as stock-based compensation expense related to cash-settled restricted stock units. For the six months ended June 30, 2019, and 2018, $1.1 million and $0.3 million, ~~and $0.7 million~~respectively, was included as stock-based compensation expense related to cash-settled restricted stock units.

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 period and are determined using ~~a multiplier~~multipliers from 0% to 200% of the target award based on (i) the total stockholder return of Dine Brands Global common stock compared to the total stockholder returns of a peer group of ~~companies. Although LTIP awards are only paid~~companies and (ii) the percentage increase in ~~cash, since the multiplier is based on the price of~~ the Company's ~~common stock, the~~adjusted earnings per share (as defined). 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~~June 30, 2019 and 2018, ~~and 2017, $1.1~~$0.8 million and ~~less than $0.1~~$0.2 million, respectively, ~~was~~were included in total stock-based compensation expense related to LTIP awards. For the ~~nine~~six months ended ~~September~~June 30, 2019 and 2018, ~~and 2017, an expense of $1.6~~$1.2 million and ~~a credit of $1.0~~$0.6 million, respectively, were included in total stock-based compensation expense related to LTIP awards. At ~~September~~June 30, ~~2018~~2019 and December 31, ~~2017,~~2018, liabilities of ~~$1.8~~$2.5 million and ~~$0.2~~$2.4 million, respectively, related to LTIP awards were included as part of accrued employee compensation and benefits in the Consolidated Balance Sheets.

Table of Contents

Dine Brands Global, Inc. and Subsidiaries

Notes to Consolidated Financial Statements (Continued)

10. 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 ~~four~~five operating segments: Applebee's franchise operations, Applebee's company-operated restaurant operations, IHOP franchise operations, rental operations and financing operations. During one or more of the comparative periods presented herein, the Company operated a small number of IHOP restaurants and those operations were considered to be a fifth operating segment. Including these historically company-operated restaurants, theThe Company has four reportable segments: franchise operations, (an aggregation of Applebee's and IHOP franchise operations), company-operated restaurant operations, rental operations ~~financing operations~~ and ~~company-operated restaurant~~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.

As of ~~September~~June 30, ~~2018,~~2019, the franchise operations segment consisted of (i) ~~1,856~~1,746 restaurants operated by Applebee’s franchisees in the United States, two U.S. territories and 13 countries outside the United States and (ii) ~~1,814~~1,828 restaurants operated by IHOP franchisees and area licensees in the United States, three U.S. territories and 12 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), and franchise fees. Franchise operations expenses include advertising expenses, 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 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 leases on franchisee-operated restaurants.

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

Information on segments is as follows:

1621

Table of Contents

Dine Brand Global, Inc. and Subsidiaries

Notes to Consolidated Financial Statements (Continued)

9.10. Segments (Continued)

Financing operations revenue primarily consists of interest income from the financing of franchise fees and equipment leases and sales of equipment associated with refranchised IHOP restaurants. Financing expenses are primarily the cost of restaurant equipment associated with refranchised IHOP restaurants.

Company restaurant sales were retail sales at company-operated restaurants. Company restaurant expenses were operating expenses at company-operated restaurants and include food, labor, utilities, rent and other restaurant operating costs. In June 2017, the Company refranchised nine of ten IHOP company-operated restaurants in the Cincinnati, Ohio market area; the one restaurant not refranchised was closed. As a result, the Company no longer operates any 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 approximately 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 restaurants reacquired from franchisees on a temporary basis until those restaurants are refranchised. There were no restaurants under temporary company operation at September 30, 2018.

~~Information on segments is as follows:~~



	Three months ended June 30,						Six months ended June 30,
	2019			2018			2019			2018
	(In millions)
Revenues from external customers:
Franchise operations	$	162.7		$	151.9		$	331.6		$	307.2
Rental operations	29.9			30.4			60.6			61.2
Company restaurants	33.7			—			69.5			—
Financing operations	1.8			2.2			3.6			4.2
Total	$	228.1		$	184.5		$	465.3		$	372.6

Interest expense:
Rental operations	$	1.9		$	2.3		$	4.3		$	4.8
Company restaurants	0.5			—			1.1			—
Corporate	14.6			15.5			30.0			30.7
Total	$	17.0		$	17.8		$	35.4		$	35.5

Depreciation and amortization:
Franchise operations	$	2.6		$	2.7		$	5.1		$	5.3
Rental operations	3.4			2.9			6.9			$	5.8
Company restaurants	1.8			—			3.1			—
Corporate	2.8			2.3			5.7			4.7
Total	$	10.6		$	7.9		$	20.8		$	15.8

Gross profit, by segment:
Franchise operations	$	83.8		$	69.0		$	172.4		$	142.4
Rental operations	7.0			7.6			15.0			15.8
Company restaurants	2.5			—			6.7			—
Financing operations	1.6			2.0			3.3			3.9
Total gross profit	94.9			78.6			197.4			162.1
Corporate and unallocated expenses, net	(65.8		)	(54.0		)	(127.2		)	(114.8		)
Income before income tax provision	$	29.1		$	24.6		$	70.2		$	47.3

Three months ended September 30, Nine months ended September 30,
2018 2017 (as adjusted) 2018 2017 (as adjusted)
(In millions)
Revenues from external customers:

Franchise operations $ 162.1
$ 142.6
$ 469.3
$ 450.4
Rental operations 30.1
30.3
91.3
90.9
Company restaurants —
—
—
7.5
Financing operations 1.9
2.1
6.1
6.3
Total $ 194.1
$ 174.9
$ 566.7
$ 555.0

Interest expense:

Rental operations $ 2.3
$ 2.6
$ 7.0
$ 8.0
Company restaurants —
—
—
0.2
Corporate 15.4
15.4
46.1
46.5
Total $ 17.7
$ 18.0
$ 53.1
$ 54.7

Depreciation and amortization:

Franchise operations $ 2.6
$ 2.7
$ 8.0
$ 8.1
Rental operations 2.9
3.0
8.7
9.1
Company restaurants —
—
—
0.1
Corporate 2.4
1.9
7.0
5.8
Total $ 7.9
$ 7.6
$ 23.7
$ 23.1

Gross profit, by segment:

Franchise operations $ 83.7
$ 72.5
$ 226.2
$ 240.6
Rental operations 7.1
7.9
22.9
23.2
Company restaurants —
(0.0 ) —
(0.3 )
Financing operations 1.7
1.6
5.7
5.8
Total gross profit 92.6
82.1
254.7
269.4
Corporate and unallocated expenses, net (61.4 ) (588.4 ) (176.1 ) (708.8 )
Income before income tax provision $ 31.2
$ (506.3 ) $ 78.6
$ (439.4 )

~~Table of Contents~~

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

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

~~10.~~11. Net Income per Share

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



	Three months ended June 30,						Six months ended June 30,
	2019			2018			2019			2018
	(In thousands, except per share data)
Numerator for basic and diluted income per common share:
Net income	$	21,390		$	12,713		$	53,033		$	29,786
Less: Net income allocated to unvested participating restricted stock	(719		)	(428		)	(1,827		)	(1,000		)
Net income available to common stockholders - basic	20,671			12,285			51,206			28,786
Effect of unvested participating restricted stock in two-class calculation	7			—			20			3
Net income available to common stockholders - diluted	$	20,678		$	12,285		$	51,226		$	28,789
Denominator:
Weighted average outstanding shares of common stock - basic	17,181			17,544			17,262			17,623
Dilutive effect of stock options	382			259			364			204
Weighted average outstanding shares of common stock - diluted	17,563			17,803			17,626			17,827
Net income per common share:
Basic	$	1.20		$	0.70		$	2.97		$	1.63
Diluted	$	1.18		$	0.69		$	2.91		$	1.61

Table of Contents

Dine Brands Global, Inc. and Subsidiaries

Notes to Consolidated Financial Statements (Continued)

Three months ended September 30, Nine months ended September 30,
2018 2017 2018 2017
(as adjusted) (as adjusted)
(In thousands, except per share data)
Numerator for basic and diluted income per common share:

Net income $ 23,587
$ (450,352 ) $ 53,373
$ (412,650 )
Less: Net income allocated to unvested participating restricted stock (799 ) 8,469
(1,793 ) 6,863
Net income available to common stockholders - basic 22,788
(441,883 ) 51,580
(405,787 )
Effect of unvested participating restricted stock in two-class calculation 7
—
8
4
Net income available to common stockholders - diluted $ 22,795
$ (441,883 ) $ 51,588
$ (405,783 )
Denominator:

Weighted average outstanding shares of common stock - basic 17,439
17,742
17,562
17,718
Dilutive effect of stock options 299
—
235
—
Weighted average outstanding shares of common stock - diluted 17,738
17,742
17,797
17,718
Net income per common share:

Basic $ 1.31
$ (24.91 ) $ 2.94
$ (22.90 )
Diluted $ 1.29
$ (24.91 ) $ 2.90
$ (22.90 )

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.

~~11.~~12. 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~~at June 30, 2019 and the Company's 2014 Class A-2 ~~Notes”)~~Notes at~~September 30, 2018~~ ~~and~~ December 31, ~~2017~~2018 were as follows:



	June 30, 2019		December 31, 2018
	(In millions)
Face Value of Notes	$	1,300.0	$	1,283.8
Fair Value of Notes	$	1,322.8	$	1,280.9

September 30, 2018 December 31, 2017
Carrying Amount Fair Value Carrying Amount Fair Value
(In millions)
Long-term debt, current and long-term $ 1,276.5
$ 1,268.8
$ 1,282.8
$ 1,265.5

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 traded in Company's 2014 Class A-2 Notes, as well as information on notes that are similar to those of the Company.

~~Table of Contents~~

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

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

~~12.~~13. 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 to franchisees, the Company has, in certain cases, guaranteed or has potential continuing liability for lease payments totaling ~~$288.7~~$271.5 million as of ~~September~~June 30, ~~2018~~2019. 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 ~~2018~~2019 through 2048. Excluding unexercised option periods, the Company's potential liability for future payments under these leases is ~~$47.1~~$42.1 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.

~~13.~~14. Restricted Cash

Current restricted cash of ~~$41.9~~$34.4 million at ~~September~~June 30, ~~2018~~2019 primarily consisted of ~~$37.6~~$32.4 million of funds required to be held in trust in connection with the Company's securitized debt and ~~$4.3~~$1.9 million of funds from Applebee's franchisees pursuant to franchise agreements, usage of which was restricted to advertising activities. Current restricted cash of ~~$31.4~~$48.5 million at December 31, ~~2017~~2018 primarily consisted of ~~$29.3~~$42.3 million of funds required to be held in trust in connection with the Company's securitized debt and ~~$2.1~~$6.2 million of funds from Applebee's franchisees pursuant to franchise agreements, usage of which was restricted to advertising activities.

Non-current restricted cash of $15.7 million at June 30, 2019 and $14.7 million at ~~September 30, 2018 and~~ December 31, ~~2017~~2018 represents interest reserves required to be set aside for the duration of the Company's securitized debt.

~~14. Impairment of Goodwill and Intangible Assets~~

The Company evaluates its goodwill and the indefinite-lived Applebee's tradename for impairment annually 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 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. 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 subsidization in the form of additional franchisor contributions to the fund than previously estimated. Based on these unfavorable developments, primarily the decline in the market price of the Company's common stock, the Company determined that indicators of impairment existed and that an interim test of goodwill and indefinite-lived intangible assets for impairment should be performed.

The Company performed an interim quantitative test of impairment of Applebee's goodwill and tradename in the third quarter of 2017. In performing the quantitative test of goodwill, the Company used the income approach method of valuation that included the discounted cash flow method 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 rate based on the Company's estimated cost of equity capital and after-tax cost of debt.

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

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

~~14. Impairment of Goodwill and Intangible Assets (Continued)~~

In performing the impairment review of the tradename, the Company used the relief of royalty method under the income approach method 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 to the forecast revenue stream.

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.

Throughout 2018, we performed assessments to determine whether events or changes in circumstances have occurred that could indicate any potential additional impairment to our goodwill and indefinite-lived intangible assets. We considered, among other things, Applebee's key performance indicators during the nine months ended September 30, 2018 and what, if any, impact that performance had on the long-term forecast of future trends in sales, operating expenses, overhead expenses, depreciation, capital expenditures and changes in working capital that was used in performing the quantitative impairment test in the third quarter of 2017. We also considered the current market price of our common stock and the favorable impact of the Tax Act on future cash flows. We concluded there were no indicators of impairment as of September 30, 2018.

~~15. Subsequent Event~~

On October 19, 2018, the Company signed an asset purchase agreement to acquire 69 Applebee’s restaurants in North Carolina and South Carolina from an Applebee's franchisee. The Company expects the transaction to close in the fourth quarter of 2018. The Company currently intends to own and operate these restaurants for the foreseeable future; results of their operations will be included as Company-operated restaurants for segment reporting purposes. The Company will assess and monitor opportunities to refranchise these restaurants under favorable circumstances.

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,” “goal” and other similar expressions. You should consider our forward-looking statements in light of the risks discussed under the heading “Risk Factors,” 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, ~~2017.~~2018. Except where the context indicates otherwise, the words “we,” “us,” “our,” “Dine Brands Global” and the “Company” refer to Dine Brands Global, Inc. ~~(formerly DineEquity, Inc.)~~, together with its subsidiaries that are consolidated in accordance with United States generally accepted accounting principles (“U.S. GAAP”).

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 ~~nearly 3,700~~over 3,600 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 ~~18, 2018~~17, 2019 issue of Nation's Restaurant News reported ~~that~~ IHOP was the largest family dining concept and Applebee's ~~were~~was the ~~largest restaurant systems in the family dining and~~second-largest casual dining ~~categories, respectively,~~concept in terms of 2018 United States system-wide ~~sales during 2017. This marks the eleventh consecutive year our two brands have achieved the number one ranking in~~ ~~Nation's Restaurant News~~.sales.

We identify our ~~reporting~~business segments based on the organizational units used by management to monitor performance and make operating decisions. We currently have ~~four~~five operating segments: Applebee's franchise operations, Applebee's company-operated restaurant operations, IHOP franchise operations, rental operations and financing operations. During one or more of the comparative periods presented herein we operated a small number of IHOP restaurants and those operations were considered to be a fifth operating segment. Including these company-operated restaurants, weWe have four reportable segments: franchise operations, (an aggregation of Applebee's and IHOP franchise operations), company-operated restaurant operations, rental operations ~~financing operations~~ and ~~company-operated restaurant~~financing operations. We consider these to be our reportable segments, regardless of whether any segment exceeds 10% of consolidated revenues, income before income tax provision or total assets.

The financial tables appearing in Management's Discussion and Analysis 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.

Key Financial Results

Three months ended September 30, Favorable
(Unfavorable) Variance Nine months ended September 30, Favorable
(Unfavorable) Variance
2018 2017 2018 2017
(as adjusted) (as adjusted)
(In millions, except per share data)
Income (loss) before income taxes $ 31.2
$ (506.3 ) $ 537.5
$ 78.6
$ (439.4 ) $ 517.9
Income tax (provision) benefit (7.7 ) 55.9
(63.6 ) (25.2 ) 26.7
(51.9 )
Net income (loss) $ 23.6
$ (450.4 ) $ 473.9
$ 53.4
$ (412.7 ) $ 466.0

Effective tax rate 24.5 % 11.0 % (13.5 )% 32.1 % 6.1 % (26.0 )%

Net income (loss) per diluted share $ 1.29
$ (24.91 ) $ 26.20
$ 2.90
$ (22.90 ) $ 25.80



	Three months ended June 30,						Favorable (Unfavorable) Variance			Six months ended June 30,						Favorable (Unfavorable) Variance
	2019			2018			Favorable (Unfavorable) Variance			2019			2018			Favorable (Unfavorable) Variance

	(In millions, except per share data)
Income before income taxes	$	29.1		$	24.6		$	4.5		$	70.2		$	47.3		$	22.9
Income tax provision	(7.7		)	(11.9		)	4.2			(17.2		)	(17.5		)	0.3
Net income	$	21.4		$	12.7		$	8.7		$	53.0		$	29.8		$	23.2

Effective tax rate	26.4		%	48.3		%	21.9		%	24.5		%	37.0		%	12.5		%

Net income per diluted share	$	1.18		$	0.69		$	0.49		$	2.91		$	1.61		$	1.30

The following table ~~summarizes~~highlights the ~~significant~~primary reasons for the increase in our income before income taxes ~~between~~in the three and ~~nine~~six months ended ~~September~~June 30, ~~2018 and~~2019 compared to the ~~comparable~~same periods of ~~2017 (as adjusted):~~2018:

Three months ended September 30, 2018 Nine months ended September 30, 2018
(In millions)

Impairment of goodwill and intangible assets taken in 2017 $ 531.6
$ 531.6
Increase (decrease) in gross profit:
Applebee's franchise operations 10.1
(18.2 )
IHOP franchise operations 1.0
3.8
All other operations (0.6 ) (0.3 )
Total gross profit increase (decrease) 10.5
(14.7 )
Change in General and Administrative (“G&A”) expenses:
Decrease due to executive separation costs in 2017 —
8.8
Increase in all other G&A (net) (2.7 ) (4.5 )
Total G&A (increase) decrease (2.7 ) 4.3
Other income/expense items, net (1.9 ) (3.3 )
Increase in income before income taxes $ 537.5
$ 517.9



	Favorable (Unfavorable) Variance
	Three months ended June 30, 2019			Six months ended June 30, 2019
	(In millions)			(In millions)
Increase (decrease) in gross profit:
Applebee's franchise operations	14.1			$	27.5
IHOP franchise operations	0.7			2.5
Company restaurant operations	2.5			6.7
All other operations	(1.0		)	(1.4		)
Total gross profit increase	16.3			35.3
Increase in General and Administrative (“G&A”) expenses	(0.6		)	(1.5		)
Loss on extinguishment of debt	(8.3		)	(8.3		)
Other income and expense items	(2.9		)	(2.7		)
Increase in income before income taxes	$	4.5		$	22.9

The changes in Applebee's franchise gross profit for the three and ~~nine~~six months ended ~~September~~June 30, ~~2018~~2019 compared to the ~~similar periods~~same period of the prior year were ~~impacted by our~~primarily due to franchisor contributions to the Applebee’s National Advertising Fund (the “Applebee's NAF”) of ~~$4.0~~$16.5 million and $30.0 million we made during the three and ~~nine~~six months ended ~~September~~June 30, ~~2017 and $30.0 million during the nine months ended September 30, 2018.~~2018, respectively, that did not recur in 2019. See “Consolidated Results of Operations - Comparison of the Three and ~~Nine~~Six Months ended ~~September~~June 30, ~~2018~~2019 and ~~2017”~~2018” for additional discussion of the ~~significant~~ changes presented above.

Our effective income ~~effective~~ tax ~~rates~~rate for the three and ~~nine~~six months ended ~~September~~June 30, 2019 was substantially lower than the comparable periods of 2018. During the three and six months ended June 30, 2018, ~~and 2017 were impacted by three items:~~

~~the December 2017 enactment of the Tax Cuts and Jobs Act (the “Tax Act”) that reduced the federal statutory tax rate from 35% to 21%, effective January 1, 2018;~~

~~an additional~~we increased our tax provision ofby $5.7 million related to adjustments resulting from Internal Revenue Service (“IRS”) audits offor tax years 2011 through ~~2013; and~~

~~the impairment in 2017 of Applebee's goodwill of $358.2 million was not deductible~~2013, which increased our effective tax rates for ~~federal income tax purposes; we did recognize a deferred tax benefit of $65.1 million related to the $173.4 million impairment charge related to Applebee's tradename.~~

~~See~~ ~~“Consolidated Results of Operations - Comparison~~those periods. Completion of the ~~Three and Nine Months ended September 30, 2018 and 2017 - Income Taxes”~~IRS audits for ~~discussion~~tax years 2011 through 2013 allowed us to accelerate the collection of ~~the significant changes presented above.~~

~~On January 1, 2018, we adopted the guidance~~certain tax benefits recognized in prior years. We received a cash refund of Accounting Standards Codification 606 - Revenue from Contracts with Customers (“ASC 606”) using the full retrospective method. Accordingly, previously reported financial information has been restated to reflect the applicationapproximately $13.3 million, inclusive of ~~ASC 606 to the comparative 2017 periods presented. The retrospective adoption~~interest income of ~~ASC 606 decreased our net loss for~~$0.9 million, during the three ~~and nine~~ months ended ~~September~~June 30, 2017 by $1.4 million (approximately $0.07 per diluted share) and $3.4 million (approximately $0.19 per diluted share), respectively. See Notes 3 and 4 of the Notes to Consolidated Financial Statements for additional discussion of our adoption of ASC 606.2019.

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 (“domestic same-restaurant sales”), net franchise restaurant development and the change in effective ~~franchise~~ restaurants. Changes in both 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.

~~Key~~Our key performance indicators for the three and ~~nine~~six months ended ~~September~~June 30, ~~2018~~2019 were as follows:

Three months ended September 30, 2018 Nine months ended September 30, 2018
Applebee's IHOP Applebee's IHOP
Sales percentage increase 5.1 % 3.9 % 3.0 % 3.6 %
% increase in domestic same-restaurant sales 7.7 % 1.2 % 5.5 % 1.0 %
Net franchise restaurant (reduction) development ⁽¹⁾
(27 ) 9
(80 ) 28
Net (decrease) increase in effective franchise restaurants (78 ) 54
(82 ) 58



	Three months ended June 30, 2019				Six months ended June 30, 2019
	Applebee's		IHOP		Applebee's		IHOP
Sales percentage (decrease) increase	(3.0	)%	3.2	%	(2.2	)%	2.8	%
% (decrease) increase in domestic system-wide same-restaurant sales	(0.5	)%	2.0	%	0.6	%	1.7	%
Net franchise restaurant (reduction) development ⁽¹⁾	(15	)	6		(22	)	(3	)
Net (decrease) increase in total effective restaurants ⁽²⁾	(78	)	21		(85	)	26

⁽¹⁾Franchise and area license restaurant openings, net of closings, during the three and six months ended June 30, 2019.

⁽²⁾Change in the weighted average number of franchise, area license and company-operated restaurants open during the three and six months ended June 30, 2019, compared to those open during the same periods of 2018.

The Applebee's sales percentage decrease for the three months ended June 30, 2019 compared to the same period of 2018 was due to a decrease in total effective restaurants caused by closures over the past 12 months and a decrease in domestic same-restaurant sales. The Applebee's sales percentage decrease for the six months ended June 30, 2019 compared to the same

period of the prior year was due to a decrease in total effective restaurants caused by closures over the past 12 months, partially offset by an increase in domestic same-restaurant sales. The IHOP sales percentage increases for the three and ~~nine~~six months ended ~~September~~June 30, ~~2018~~2019 was due to an increase in domestic same-restaurant sales that was partially offset by restaurant closures over the past 12 months. The IHOP sales percentage increase for the three and nine months ended September 30, 2018 was due tototal effective restaurants resulting from net restaurant development over the past 12 months and an increase in domestic same-restaurant sales.

Domestic Same-Restaurant Sales

Applebee’s system-wide domestic same-restaurant sales ~~increased 7.7%~~decreased 0.5% for the three months ended ~~September~~June 30, ~~2018~~2019 from the same period in ~~2017. This~~2018. The decrease was ~~the largest increase for~~due to a ~~quarterly period since we acquired Applebee's in 2007. The majority of the improvement resulted from an increase~~decline in customer traffic ~~with some~~that was partially offset by an increase in average customer ~~check~~check. The change in same-restaurant sales for the three months ended June 30, 2019 was impacted by comparisons against significant increases in same-restaurant sales and traffic for the three months ended June 30, 2018, as ~~well.~~well as by competitive discounting within the casual dining segment. Historically, Applebee's ~~traffic~~ has ~~increased over~~experienced a slight decline in sales during the ~~comparative prior year~~Easter holiday. The results for the second quarter of 2019 were adversely impacted by a shift in the Easter holiday period, ~~for four consecutive quarters. Applebee’s~~which fell in the second quarter of 2019 as compared to the first quarter of 2018. We estimate the shift in the Easter holiday period adversely impacted domestic same-restaurant sales ~~increased 5.5%~~for three months ended June 30, 2019 by approximately 20 basis points.

In terms of combined results for the ~~nine months ended September 30,~~second quarters of both 2018 ~~from the same period~~and 2019, Applebee's domestic same-restaurant sales have grown 5.2%, with increases in ~~2017. This increase was primarily due to a substantial increase in customer traffic as well as a small increase in~~both average customer ~~check.~~check and customer traffic. Off-premise sales comprised 12.8% of Applebee's sales mix during the second quarter of 2019, down slightly from 13.0% in the first quarter of 2019.

Based on data from Black Box Intelligence, a restaurant sales reporting firm (“Black Box”), Applebee's ~~significantly outperformed~~decrease in same-restaurant sales was larger than that of the casual dining segment of the restaurant industry during ~~both the three and nine months ended September 30, 2018. During~~ the three months ended ~~September~~June 30, ~~2018,~~2019. During that period, the casual dining segment also experienced ~~an increase~~a decrease in same-restaurant sales that was due to a decline in customer traffic that was partially offset by an increase in average customer check. While Applebee's increase in average customer check ~~that was partially offset by a decline in customer traffic. During~~for the ~~nine~~three months ended ~~September~~June 30, ~~2018, same-restaurant sales~~2019 was larger than that of the casual dining segment, ~~increased slightly due to an increase~~Applebee's decrease in ~~average customer check~~traffic was larger than that ~~was essentially offset by a decline in customer traffic.~~

~~We believe Applebee's significantly out-performed~~of the casual dining segment due to a multi-faceted strategy we began implementing in the latter half of 2017 to address a two-year decline in Applebee's same-restaurant sales that started in the second half of 2015. The goal of that strategy was to redefine the Applebee's brand identity and culture and reconnect with our core customer base. Our recent marketing, culinary and operational initiatives appear to have resonated positively with our guests as customer traffic has increased in each of the past four quarters. We also have seen a strong increase in off-premise sales, which have increased to nearly 10% of sales mix.segment.

~~The Applebee's franchisees are making, and we have also made, significant investments in national marketing. All domestic~~ Applebee’s franchisees have entered into an amendment to their franchise agreement to increase their contribution to the Applebee's NAF, with virtually all agreeing to a 0.25% increase to 3.50% of their gross sales and a decrease to their minimum local promotional expenditures to 0.25% of their gross sales for the period from January 1, 2018 to December 31, 2019. Such franchisees have also agreed to an incremental temporary increase of 0.75% in the advertising contribution rate to 4.25% effective July 1, 2018 to December 31, 2019. We contributed $30 million to the Applebee's NAF during the first six months of 2018.

~~IHOP’s~~system-wide domestic same-restaurant sales increased ~~1.2%~~0.6% for the ~~three~~six months ended ~~September~~June 30, ~~2018~~2019 from the same period in ~~2017.~~2018. The improvement resulted from an increase in average customer check as well as a slight increase in customer traffic. IHOP’s domestic same-restaurant sales increased 1.0% for the nine months ended September 30, 2018 from the same period in 2017; this increase was due to an increase in average customer check that was partially offset by a decline in customer traffic. Based on data from Black Box, Applebee's increase in same-restaurant sales was larger than that of the casual dining segment of the restaurant industry for the six months ended June 30, 2019. During that period, the casual dining segment experienced an increase in same-restaurant sales that, similar to Applebee's, was due to an increase in average customer check that was partially offset by a decline in customer traffic. Applebee's increase in average customer check was larger than that of the casual dining segment during the six months ended June 30, 2019, while Applebee's decline in customer traffic also was larger than that of the casual dining segment.

* Same-restaurant sales data includes area license restaurants beginning in 2019

IHOP’s system-wide domestic same-restaurant sales increased 2.0% (including area license restaurants) for the three months ended June 30, 2019 from the same period in 2018. This growth was due to an increase in average customer check that was partially offset by a decline in customer traffic. The increase in average customer check was due in part to a favorable mix shift we believe was driven by successful promotional activity during the quarter. Historically, IHOP has experienced an increase in sales during the Easter holiday. The results for the second quarter of 2019 were favorably impacted by a shift in the Easter holiday period, which fell in the second quarter of 2019 as compared to the first quarter of 2018. We estimate the shift in the Easter holiday period favorably impacted domestic same-restaurant sales for three months ended June 30, 2019 by approximately 30 basis points. Off-premise sales comprised 9.4% of IHOP's sales mix during the second quarter of 2019, down slightly from 9.5% for the first quarter of 2019.

Based on data from Black Box, the family dining segment of the restaurant industry also experienced ~~a decrease~~an increase in same-restaurant sales during ~~both~~ the three ~~and nine~~ months ended ~~September~~June 30, ~~2018,~~2019, compared to the same ~~periods~~period of the prior year, ~~in each case~~ due to an increase in average customer check that was offset by a decrease in customer ~~traffic~~traffic. The IHOP increase in same-restaurant sales during the three months ended June 30, 2019 was smaller than that of that the family dining segment. Both IHOP and the family dining segment experienced a similar decrease in customer traffic.

IHOP’s system-wide domestic same-restaurant sales increased 1.7% (including area license restaurants) for the six months ended June 30, 2019 from the same period in 2018. This growth was due to an increase in average customer check that was partially offset by ~~an increase in average customer check. The primary reason for IHOP's differentially favorable performance was customer traffic. IHOP experienced~~ a ~~slight increase in customer traffic during the three months ended September 30, 2018 compared to~~ decline in customer ~~traffic experienced by the overall family dining segment. During the nine months ended September 30, 2018, IHOP's decline in customer traffic was smaller than that of the family dining segment. IHOP's~~traffic. The increase in average customer check was ~~similar~~due in part to a favorable mix shift that impacted the first and second quarters of 2019.

Based on data from Black Box, the ~~overall~~ family dining segment ~~for both the three and nine months ended September 30, 2018.~~

~~In mid-June 2018, we launched our “Ultimate Steakburgers” campaign that extended into the third quarter of 2018. Over the course~~ of the ~~ten-week campaign we sold more than 4.5 million hamburgers and~~restaurant industry also experienced ~~increased sales during our lunch and dinner dayparts. This successful campaign contributed to the~~an increase in same-restaurant sales ~~and customer traffic~~ during the ~~three~~six months ended ~~September~~June 30, ~~2018.~~2019, compared to the same period of the prior year, due to an increase in average customer check that was offset by a decrease in customer traffic. The IHOP increase in same-restaurant sales during the six months ended June 30, 2019 was smaller than that of that the family dining segment. Both IHOP and the family dining segment experienced a similar decrease in customer traffic.

Restaurant Data

The following table sets forth the number of “Effective Restaurants” in the Applebee’s and IHOP systems and information regarding the percentage change in sales at those restaurants compared to the same period of the prior year. Sales at restaurants that are owned by franchisees and area licensees are not attributable to the Company and, as such, the percentage change in sales at Effective Restaurants is based on non-GAAP sales data. However, we believe that presentation of this information is

useful in analyzing our revenues because franchisees and area licensees pay us royalties and advertising fees that are based on a percentage of their sales, and, where applicable, rental payments under leases that partially may be based on a percentage of their sales. Management also uses this information to make decisions about plans for future development of additional restaurants as well as evaluation of current operations.


	Three months ended September 30,						Nine months ended September 30,						Three months ended June 30,						Six months ended June 30,
	2018			2017			2018			2017			2019			2018			2019			2018
Applebee's Restaurant Data	(Unaudited)												(Unaudited)
Effective Restaurants^(a)
Franchise	1,875			1,953			1,899			1,981			1,753			1,900			1,758			1,912
Company													69			—			69			—
Total													1,822			1,900			1,827			1,912
System-wide^(b)
Domestic sales percentage change^(c)													(3.0		)%	3.2		%	(2.2		)%	2.0		%
Domestic same-restaurant sales percentage change^(d)													(0.5		)%	5.7		%	0.6		%	4.5		%
Franchise^(b)
Domestic sales percentage change^(c)	5.1		%	(9.7		)%	3.0		%	(8.6		)%	(6.1		)%	3.2		%	(5.4		)%	2.0		%
Domestic same-restaurant sales percentage change^(d)	7.7		%	(7.7		)%	5.5		%	(7.3		)%	(0.6		)%	5.7		%	0.5		%	4.5		%
Average weekly domestic unit sales (in thousands)	$	44.8		$	40.9		$	46.7		$	43.5		$	48.4		$	47.6		$	49.0		$	47.6

IHOP Restaurant Data

Effective Restaurants^(a)
Franchise	1,640			1,586			1,628			1,568			1,656			1,627			1,656			1,623
Area license	162			162			163			165			155			163			156			163
Company	—			—			—			6
Total	1,802			1,748			1,791			1,739			1,811			1,790			1,812			1,786

System-wide^(b)
Sales percentage change^(c)	3.9		%	(0.7		)%	3.6		%	(0.1		)%	3.2		%	3.1		%	2.8		%	3.5		%
Domestic same-restaurant sales percentage change^(d)	1.2		%	(3.2		)%	1.0		%	(2.5		)%
Domestic same-restaurant sales percentage change, including area license restaurants^(d)													2.0		%	0.7		%	1.7		%	0.8		%
Domestic same-restaurant sales percentage change, excluding area license restaurants^(d)													1.9		%	0.7		%	1.5		%	0.9		%
Franchise^(b)
Sales percentage change^(c)	3.9		%	0.3		%	4.2		%	0.5		%	3.3		%	3.7		%	2.8		%	4.3		%
Domestic same-restaurant sales percentage change^(d)	1.2		%	(3.2		)%	1.0		%	(2.5		)%	1.9		%	0.7		%	1.5		%	0.9		%
Average weekly unit sales (in thousands)	$	35.9		$	35.7		$	36.4		$	36.3		$	36.8		$	36.2		$	36.9		$	36.7
Area License^(b)
Sales percentage change^(c)	3.7		%	(5.7		)%	1.7		%	(3.6		)%	2.0		%	1.8		%	2.3		%	0.8		%

(a) “Effective Restaurants” are the weighted average number of restaurants open in each fiscal period, adjusted to account for restaurants open for only a portion of the period. Information is presented for all Effective Restaurants in the Applebee’s and IHOP systems, which consist of restaurants owned by franchisees and area licensees as well as those owned by the Company.

(b) “System-wide sales” are retail sales at Applebee’s restaurants operated by franchisees and IHOP restaurants operated by franchisees and area licensees, as reported to the Company, in addition to retail sales at company-operated ~~IHOP~~Applebee's restaurants. Sales at restaurants that are owned by franchisees and area licensees are not attributable to the Company. An increase in franchisees' reported sales will result in a corresponding increase in our royalty revenue, while a decrease in franchisees' reported sales will result in a corresponding decrease in our royalty revenue. Unaudited reported sales for Applebee's domestic franchise restaurants, Applebee's company-operated restaurants, IHOP franchise restaurants and IHOP area license restaurants were as follows:


	Three months ended September 30,				Nine months ended September 30,				Three months ended June 30,				Six months ended June 30,
	2018		2017		2018		2017		2019		2018		2019		2018
Reported sales (in millions)	(Unaudited)								(Unaudited)

Applebee's domestic franchise restaurant sales	$	1,005.0	$	956.5	$	3,183.5	$	3,092.3	$	1,016.5	$	1,082.9	$	2,060.7	$	2,178.5
Applebee's company-operated restaurants									33.7		—		69.5		—
IHOP franchise restaurant sales	765.6		736.9		2,312.8		2,220.3		791.6		766.6		1,590.4		1,547.2
IHOP area license restaurant sales	69.4		67.0		212.2		208.7		71.8		70.4		146.1		142.8
Total	$	1,840.0	$	1,760.4	$	5,708.5	$	5,521.3	$	1,913.6	$	1,919.9	$	3,866.7	$	3,868.5

(c) “Sales percentage change” reflects, for each category of restaurants, the percentage change in sales in any given fiscal period compared to the prior fiscal period for all restaurants in that category.

(d) “Domestic same-restaurant sales percentage change” reflects the percentage change in sales in any given fiscal period, compared to the same weeks in the prior fiscal period, for domestic restaurants that have been operated throughout both fiscal periods that are being compared and have been open for at least 18 months. Because of new restaurant openings and restaurant closures, the domestic restaurants open throughout both fiscal periods being compared may be different from period to period. ~~Domestic same-restaurant sales percentage change does not include data on IHOP area license restaurants.~~


Restaurant Development Activity	Three months ended September 30,				Nine months ended September 30,				Three months ended June 30,				Six months ended June 30,
	2018		2017		2018		2017		2019		2018		2019		2018
Applebee's	(Unaudited)								(Unaudited)
Summary - beginning of period:
Franchise									1,761		1,912		1,768		1,936
Company restaurants									69		—		69		—
Beginning of period	1,883		1,968		1,936		2,016		1,830		1,912		1,837		1,936

Franchise restaurants opened:
Domestic	1		2		2		7		—		1		—		1
International	—		2		3		6		1		1		1		3
Total franchise restaurants opened	1		4		5		13		1		2		1		4
Franchise restaurants closed:
Domestic	(25	)	(22	)	(77	)	(74	)	(13	)	(30	)	(17	)	(52	)
International	(3	)	(5	)	(8	)	(10	)	(3	)	(1	)	(6	)	(5	)
Total franchise restaurants closed	(28	)	(27	)	(85	)	(84	)	(16	)	(31	)	(23	)	(57	)
Net franchise restaurant reduction	(27	)	(23	)	(80	)	(71	)	(15	)	(29	)	(22	)	(53	)

Summary - end of period:
Franchise									1,746		1,883		1,746		1,883
Company restaurants									69		—		69		—
Total Applebee's restaurants, end of period	1,856		1,945		1,856		1,945		1,815		1,883		1,815		1,883
Domestic	1,707		1,791		1,707		1,791		1,676		1,731		1,676		1,731
International	149		154		149		154		139		152		139		152


IHOP
Summary - beginning of period:
Franchise	1,640		1,586		1,622		1,556		1,663		1,627		1,669		1,622
Area license	165		166		164		167		159		164		162		164
Company	—		—		—		10		—		—		—		—
Total IHOP restaurants, beginning of period	1,805		1,752		1,786		1,733		1,822		1,791		1,831		1,786

Franchise/area license restaurants opened:
Domestic franchise	10		11		32		31		9		9		15		22
Domestic area license	1		1		3		1		2		2		2		2
International franchise	6		6		14		18		2		5		2		8
Total franchise/area license restaurants opened	17		18		49		50		13		16		19		32
Franchise/area license restaurants closed:
Domestic franchise	(4	)	(2	)	(10	)	(11	)	(1	)	(1	)	(12	)	(6	)
Domestic area license	(4	)	(1	)	(5	)	(2	)	(2	)	(1	)	(5	)	(1	)
International franchise	—		(5	)	(6	)	(7	)	(4	)	—		(5	)	(6	)
International area license	—		(1	)	—		(1	)
Total franchise/area license restaurants closed	(8	)	(9	)	(21	)	(21	)	(7	)	(2	)	(22	)	(13	)
Net franchise/area license restaurant development	9		9		28		29
Net franchise/area license restaurant development (reduction)									6		14		(3	)	19
Refranchised from Company restaurants	—		—		1		9		—		—		—		1
Franchise restaurants reacquired by the Company	—		—		(1	)	—		—		—		—		(1	)
Net franchise/area license restaurant additions	9		9		28		38
Net franchise/area license restaurant development (reduction)									6		14		(3	)	19

Summary - end of period:
Franchise	1,652		1,596		1,652		1,596		1,669		1,640		1,669		1,640
Area license	162		165		162		165		159		165		159		165
Company	—		—		—		—
Total IHOP restaurants, end of period	1,814		1,761		1,814		1,761		1,828		1,805		1,828		1,805
Domestic	1,691		1,655		1,691		1,655		1,705		1,688		1,705		1,688
International	123		106		123		106		123		117		123		117

For the full year of ~~2018,~~2019, we expect Applebee's franchisees to ~~develop~~close between 520 and ~~10 new~~30 net restaurants globally, the majority of which are expected to be ~~international openings. We anticipate the closing of between 80~~domestic closures. IHOP franchisees and 90 domestic Applebee's restaurants and approximately 20 international Applebee's restaurants in 2018 as part of the continuation of a system-wide analysis to optimize the health of the franchisee system. For the full year of 2018, we expect net closures of between 90 to 105 Applebee's restaurants globally.

~~IHOP franchisees~~area licensees are projected to develop between 7520 and 8530 net new IHOP restaurants globally, the majority of which are expected to be domestic openings. ~~We expect to close between 30 and 40 IHOP restaurants in 2018, due to lease expirations and system optimization. For the full year of 2018, we expect net openings of between 35 to 55 IHOP restaurants.~~

The actual number of openings may differ from both our expectations and development commitments. Historically, the actual number of restaurants developed in any given year has been less than the total number committed to be developed due to various factors, including economic conditions and franchisee noncompliance with development agreements. The timing of new restaurant openings also may be affected by various factors including weather-related and other construction delays, difficulties in obtaining timely regulatory approvals and the impact of currency fluctuations on our international franchisees. The actual number of closures also may differ from expectations. Our franchisees are independent businesses and decisions to close restaurants can be impacted by numerous factors, in addition to declines in same-restaurant sales, that are outside of our control, including but not limited to, franchisees' agreements with their landlords and lenders.

CONSOLIDATED RESULTS OF OPERATIONS

Comparison of the Three and ~~Nine~~Six Months ended~~September~~June 30, ~~2018~~2019 and ~~2017~~2018

~~Significant Known~~ Events ~~Trends or Uncertainties~~Impacting Comparability of Financial Information

~~Franchisee Financial Health~~Acquisition of Franchise Restaurants

In December 2018, we acquired 69 Applebee's ~~experienced~~restaurants in North and South Carolina from a ~~decline in system-wide sales between~~former Applebee's franchisee. While we currently intend to own and operate these restaurants for the ~~third quarter~~near term, we will assess and monitor opportunities to refranchise these restaurants under favorable circumstances. We operated no restaurants of ~~2015~~either brand during the three and six months ended June 30, 2018.

Franchisor Contributions to the ~~third quarter of 2017 that was primarily due to a decrease in customer traffic. This decline in sales at our franchisees' restaurants adversely impacted the financial health of some of the franchisees~~Applebee’s NAF

We contributed $16.5 million and the timely payment of amounts owed to us for royalty payments and advertising fund contributions. These franchisee health issues, in turn, had an adverse impact on our financial results in the form of increased bad debt expense, lower royalty and advertising revenue due to uncertainty as to their collectibility and the need for us to contribute$30.0 million, respectively, to the Applebee's NAF during the three and six months ended June 30, 2018, to mitigate the decline in franchisee contributions due to restaurant closures and the non-timely payment of advertising fees by certain franchisees.

We previously highlighted that non-timely or partial payments were primarily concentrated amongst three franchisees. We assisted one of these franchisees with a financial restructuring which has been completed, and the franchisee has been making timely royalty and advertising payments since June 2018.

With respect to the second franchisee, we have signed an asset purchase agreement to acquire 69 Applebee’s restaurants in North Carolina and South Carolina. We expect the transaction to close in the fourth quarter of 2018. We intend to own and operate these restaurants for the foreseeable future; however, we will assess and monitor opportunities to refranchise these restaurants under favorable circumstances.

As previously disclosed, the last of these three franchises previously filed for Chapter 11 bankruptcy, which proceedings are ongoing. We are also in active litigation with this franchisee regarding the complaint we filed in May 2018 related to, among other things, the nonpayment of royalties, advertising fees and other amounts due under pertinent franchise agreements and the counterclaim filed by the franchisee asserting certain claims, including breach of contract and tortious interference with business relationships. The franchisee continues to operate its current portfolio of restaurants in the normal course of business and has been making timely royalty and advertising payments since May 2018. As the bankruptcy and related litigation progresses, we will continue to take appropriate measures to ensure we are positioning the brand for the best possible outcome.

~~Lastly, we are closely monitoring and working with another franchisee of significantly smaller scale who has recently been making partial and/or non-timely royalty and advertising payments.~~

While we work through our few remaining franchisee financial health issues, we will continue to consider various forms of assistance to franchisees. To date, the assistance provided primarily has been the approved closures of non-viable restaurants and waiver of related termination fees, as well as making loans to certain franchisees, of which there are approximately $22.5 million outstanding at September 30, 2018. The majority of the loans resulted from the conversion of short-term accounts receivable for royalties and advertising fees into interest-bearing notes receivable. Any additional forms of assistance to franchisees may entail incremental costs.

While we are encouraged by the improvement in Applebee's same-restaurant sales and customer traffic over the past four quarters, there can be no assurance that this favorable trend will continue or to what extent any improvement in same-restaurant sales and customer traffic might mitigate franchisee health issues.

~~Events Impacting Comparability of Financial Information~~

~~Change in Accounting Policy~~

~~On January 1, 2018, we adopted the guidance of ASC 606. The two most significant impacts of this change in accounting policy are as follows:~~

Prior to the adoption of ASC 606, we did not record advertising fees received under Applebee's franchise agreements as franchise revenue and expense; we did record advertising fees received under IHOP franchise agreements as franchise revenue and expense. In evaluating advertising activity under the guidance of ASC 606, we consider ourselves to be primarily responsible for fulfilling the promise to provide all the services specified in the contract, including advertising activities, which are not considered to be distinct services in the context of providing the right to the symbolic intellectual property. Accordingly, under ASC 606, we are recording advertising fees received under Applebee's franchise agreements as franchise revenue. Under previous accounting guidance for franchisors, advertising revenue and expense were recognized in the same amount in each period. That guidance was superceded by ASC 606, such that advertising expense may now be recognized in a different period than the advertising revenue recognized as described above.

Prior to the adoption of ASC 606, the Company generally recognized the entire franchise and/or development fee as revenue at the restaurant opening date. Under ASC 606, franchise and development fees are recognized as revenue ratably on a straight-line basis over the term of the franchise agreement commencing with the restaurant opening date.

The Company adopted this change in accounting principle using the full retrospective method. Accordingly, previously reported financial information for the three months and nine months ended September 30, 2017 has been restated to reflect the changes as described above from application of ASC 606. See Notes 3 and 4 of the Notes to Consolidated Financial Statements for additional discussion of our adoption of ASC 606 and our policies for recognition of revenue from contracts with customers.

In conjunction with the adoption of ASC 606, we implemented internal controls to ensure we adequately evaluated our contracts with franchisees and properly assessed the impact of ASC 606 on our consolidated financial statements.

~~2018 Effective Tax Rate~~

The Tax Act enacted in December 2017 lowered the federal statutory corporate tax rate from 35% to 21%, beginning in 2018. During the nine months ended September 30, 2018, we increased our tax provision by $5.7 million related to adjustments resulting from IRS audits for tax years 2011 through 2013. This increased our effective tax rate from what would have been an estimated combined federal and state rate of 25% (reflecting the reduction in the federal tax rate from the Tax Act) to approximately 32% for the nine months ended September 30, 2018. Our ~~effective tax rate for the three months ended September 30, 2018 was approximately 25%.~~

Completion of the IRS audits for tax years 2011 through 2013 will allow us to accelerate the collection of certain tax benefits recognized in prior years. As a result, we expect to receive a cash refund of approximately $12 million within the next 12 months.

~~2017 Impairment of Applebee's Goodwill and Tradename~~

In the third quarter of 2017, we noted that the decline in the market price of our common stock since December 31, 2016, which we 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. We also noted a continuing increase in Applebee's bad debt expense and in royalties not recognized in income until paid in cash. Additionally, we determined an increasing shortfall in franchisee contributions to the Applebee's ~~national advertising fund could require a larger amount~~NAF ceased as of ~~future subsidization~~June 30, 2018.

Temporary Increase in Franchisee Contribution Rate to the Applebee's NAF

The contribution rate to the Applebee’s NAF for virtually all Applebee’s franchisees was 3.50% of their gross sales for the period from January 1, 2018 to June 30, 2018. Such franchisees agreed to an incremental temporary increase of 0.75% in the ~~form of additional franchisor contributions~~advertising contribution rate to the fund than previously estimated. Based on these unfavorable developments, primarily the decline in the market price of our common stock, we determined that indicators of impairment existed and that an interim quantitative test of goodwill and indefinite-lived intangible assets for impairment should be performed.4.25%, effective July 1, 2018 to December 31, 2019. As a result, ~~of performing~~ the ~~test, we recognized an~~

~~impairment of~~advertising contribution rate for virtually all Applebee's ~~goodwill of $358.2 million and an impairment of Applebee's tradename of $173.4 million~~franchisees was 4.25% during the three and six months ended ~~September~~June 30, ~~2017.~~

~~Throughout 2018, we performed assessments~~2019 as compared to determine whether events or changes in circumstances have occurred that could indicate any potential additional impairment to our goodwill and indefinite-lived intangible assets. We considered, among other things, Applebee's key performance indicators3.50% during the ~~nine~~three and six months ended September 30, 2018 and what, if any, impact that performance had on the long-term forecast of future trends in sales, operating expenses, overhead expenses, depreciation, capital expenditures and changes in working capital that was used in performing the quantitative impairment test in the third quarter of 2017. We also considered the current market price of our common stock and the favorable impact of the Tax Act on future cash flows. We concluded there were no indicators of impairment as of SeptemberJune 30, 2018. ~~We will perform our annual test of impairment in the fourth quarter of 2018.~~

~~Executive Separation Costs~~

In February 2017, we announced the resignation of our former Chairman and Chief Executive Officer (the “former CEO”), effective March 1, 2017. In accordance with the terms of the Separation Agreement and General Release filed as Exhibit 10.1 to Form 8-K filed on February 17, 2017, we recorded approximately $5.9 million for severance, separation pay and ancillary costs in the first quarter of 2017. All stock options and restricted stock awards held by the former CEO that were unvested at the time of the announcement became vested in connection with the separation. We recorded a charge of approximately $2.9 million related to the accelerated vesting of the equity awards in the first quarter of 2017. Total costs of $8.8 million related to the separation were included in G&A expenses for the nine months ended September 30, 2017.

~~Refranchising of Company-operated Restaurants~~

In June 2017, we refranchised nine of our ten company-operated IHOP restaurants in the Cincinnati, Ohio market area; the one restaurant not refranchised was closed. As a result, we no longer operate any IHOP restaurants on a permanent basis. This ~~refranchising reduced our~~increased advertising revenue by approximately $8$7.9 million and $15.6 million, respectively, for the ~~nine~~three and six months ended ~~September~~June 30, ~~2018 compared~~2019.

In July 2019, such franchisees agreed to extend the ~~same period of~~temporary increase in the ~~prior year. However, there was minimal impact from the refranchising on the comparison of gross profit with the prior period.~~

advertising contribution rate to 4.25% through December 31, 2020.

Financial Results


Revenue	Three months ended September 30,					Favorable (Unfavorable) Variance			Nine months ended September 30,					Favorable (Unfavorable) Variance			Three months ended June 30,					Favorable (Unfavorable) Variance			Six months ended June 30,					Favorable (Unfavorable) Variance
	2018			2017		Favorable (Unfavorable) Variance			2018			2017		Favorable (Unfavorable) Variance			2019			2018		Favorable (Unfavorable) Variance			2019			2018		Favorable (Unfavorable) Variance
				(as adjusted)								(as adjusted)
	(In millions)																(In millions)
Franchise operations	$	162.1		$	142.6	$	19.5		$	469.3		$	450.4	$	19.0		$	162.7		$	151.9	$	10.8		$	331.6		$	307.2	$	24.4
Rental operations	30.1			30.3		(0.1		)	91.3			90.9		0.4			29.9			30.4		(0.5		)	60.6			61.2		(0.6		)
Company restaurant operations	—			—		—			—			7.5		(7.5		)	33.7			—		33.7			69.5			—		69.5
Financing operations	1.9			2.1		(0.2		)	6.1			6.3		(0.2		)	1.8			2.2		(0.4		)	3.6			4.2		(0.6		)
Total revenue	$	194.1		$	174.9	$	19.2		$	566.7		$	555.0	$	11.7		$	228.1		$	184.5	$	43.6		$	465.3		$	372.6	$	92.7
Change vs. prior period	11.0		%						2.1		%						23.6		%						24.9		%

Total revenue for the both the three and six months ended ~~September~~June 30, ~~2018~~2019 increased compared with the same ~~period~~periods of the prior year, primarily due to the operation of 69 Applebee's restaurant acquired in December 2018, the impact of a higher advertising contribution rate on Applebee's advertising revenue ~~a 7.7% increase in Applebee's domestic same-restaurant sales~~ and IHOP restaurant development over the past 12 months. Total revenue for the nine months ended September 30, 2018 increased compared with the same period of the prior year, primarily due to the impact of a higher advertising contribution rate on Applebee's advertising revenue, a 5.5% increase in Applebee's domestic same-restaurant sales and IHOP restaurant development over the past 12 months,These items were partially offset by the ~~refranchising~~impact of ~~IHOP company-operated restaurants discussed above.~~Applebee's restaurant closures on franchise operations revenue.


Gross Profit (Loss)	Three months ended September 30,						Favorable (Unfavorable) Variance				Nine months ended September 30,								Favorable (Unfavorable) Variance
Gross Profit																	Three months ended June 30,								Favorable (Unfavorable) Variance			Six months ended June 30,						Favorable (Unfavorable) Variance
	2018			2017			Favorable (Unfavorable) Variance			Favorable (Unfavorable) Variance				2018				2017					Favorable (Unfavorable) Variance					2019			2018						2019				2018
				(as adjusted)										(as adjusted)					Favorable (Unfavorable) Variance
	(In millions)																						Favorable (Unfavorable) Variance	(In millions)
Franchise operations	$	83.7		$	72.5		$	11.2		Favorable (Unfavorable) Variance		$	226.2			$	240.6			$	(14.5	)		$	83.8		$	69.0		$	14.8		$	Favorable (Unfavorable) Variance	172.4			$	142.4			$	30.0
Rental operations	7.1			7.9			(0.8		)		22.9				23.2				(0.3		)		7.0			7.6			(0.6		)	15.0				15.8				(0.8		)
Company restaurant operations	—			(0.0		)	0.0				—				(0.3		)		0.3				2.5			—			2.5			6.7				—				6.7
Financing operations	1.7			1.6			0.1				5.7				5.8				(0.2		)		1.6			2.0			(0.4		)	3.3				3.9				(0.6		)
Total gross profit	$	92.6		$	82.1		$	10.5			$	254.7			$	269.4			$	(14.7	)		$	94.9		$	78.6		$	16.3		$	197.4			$	162.1			$	35.3
Change vs. prior period	12.8		%								(5.4		)%										20.7		%							21.8		%

Total gross profit for the three and six months ended ~~September~~June 30, ~~2018~~2019 increased ~~nearly 13%~~ compared with the same periods of the prior year, primarily due to ~~a 7.7% increase~~contributions of $16.5 million and $30.0 million we made to the Applebee's NAF during the three and six months ended June 30, 2018, respectively, that did not recur in 2019. Operation of 69 Applebee's ~~domestic same-restaurant sales, favorable developments with respect to Applebee's financial health issues~~restaurants favorably impacted total gross profit for the three months ended June 30, 2019 by $1.2 million, as the gross profit of $2.5 million from operating the 69 restaurants was partially offset by royalties of approximately $1.3 million that would have been recognized in franchise operations had the ~~form~~restaurants been franchisee-operated. Operation of ~~lower bad debt expense and a decrease~~these restaurants favorably impacted total gross profit for the six months ended June 30, 2019 by $4.0 million, as the gross profit of $6.7 million from operating the 69 restaurants was partially offset by royalties of approximately $2.7 million that would have been recognized in ~~revenue that was not recognized due to uncertainty as to collectibility and~~franchise operations had the restaurants been franchisee-operated. IHOP restaurant development over the past ~~twelve months.~~

~~Total gross profit for the nine~~12 months ~~ended September 30, 2018 declined compared with the same periods of the prior year, primarily due to our franchisor contribution~~also contributed to the ~~Applebee's NAF of $30.0 million during 2018 compared to a franchisor contribution of $4.0 million~~increases in ~~2017. This unfavorable factor was partially offset by lower bad debt expense, a 5.5% increase in Applebee's domestic same-restaurant sales and IHOP restaurant development over the past twelve months.~~gross profit.


	Three months ended September 30,						Favorable (Unfavorable) Variance				Nine months ended September 30,							Favorable (Unfavorable) Variance				Three months ended June 30,							Favorable (Unfavorable) Variance				Six months ended June 30,							Favorable (Unfavorable) Variance
Franchise Operations	2018			2017						2018				2017							2019				2018							2019				2018
	(In millions, except number of restaurants)																					(In millions, except number of restaurants)
Effective Franchise Restaurants:⁽¹⁾
Applebee’s	1,875			1,953			(78		)		1,899				1,981			(82		)		1,753				1,900			(147		)		1,758				1,912			(154		)
IHOP	1,802			1,748			54				1,791				1,733			58				1,811				1,790			21				1,812				1,786			26

Franchise Revenues:				(as adjusted)											(as adjusted)
Applebee’s franchise fees	$	42.6		$	39.6		$	3.0			$	127.6			$	129.6		$	(2.0	)		$	41.4			$	44.3		$	(2.9	)		$	84.7			$	85.0		$	(0.3	)
IHOP franchise fees	48.5			46.8			1.7				148.2				142.4			5.8				49.6				48.9			0.7				102.5				99.7			2.8
Advertising fees	71.0			56.2			14.8				193.6				178.4			15.2				71.7				58.7			13.0				144.4				122.5			21.9
Total franchise revenues	162.1			142.6			19.5				469.3				450.4			19.0				162.7				151.9			10.8				331.6				307.2			24.4
Franchise Expenses:
Applebee’s	1.2			8.4			7.2				30.7				14.5			(16.3		)		1.1				18.1			17.0				1.7				29.5			27.8
IHOP	6.1			5.4			(0.7		)		18.9				16.9			(2.0		)		6.1				6.1			0.0				13.1				12.8			(0.3		)
Advertising	71.0			56.2			(14.8		)		193.6				178.4			(15.2		)
Advertising expenses																						71.7				58.7			(13.0		)		144.4				122.5			(21.9		)
Total franchise expenses	78.3			70.0			(8.3		)		243.2				209.7			(33.4		)		78.9				82.9			4.0				159.2				164.8			5.6
Franchise Gross Profit:
Applebee’s	41.3			31.2			10.1				96.9				115.1			(18.2		)		40.3				26.2			14.1				83.0				55.5			27.5
IHOP	42.4			41.4			1.0				129.3				125.5			3.8				43.5				42.8			0.7				89.4				86.9			2.5
Total franchise gross profit	$	83.7		$	72.5		$	11.2			$	226.2			$	240.6		$	(14.5	)		$	83.8			$	69.0		$	14.8			$	172.4			$	142.4		$	30.0
Gross profit as % of revenue ⁽²⁾	51.7		%	50.9		%					48.2		%		53.4		%					51.5		%		45.4		%					52.0		%		46.4		%
Gross profit as % of franchise fees ^{(2) (3)}	92.0		%	84.0		%					82.0		%		88.5		%					92.1		%		74.0		%					92.1		%		77.1		%

_____________________________________________________

⁽¹⁾Effective Franchise Restaurants are the weighted average number of franchise and area license restaurants open in each fiscal period, adjusted to account for restaurants open for only a portion of the period.

⁽²⁾ Percentages calculated on actual amounts, not rounded amounts presented above.

⁽³⁾ From time to time, advertising fee revenue may be different from advertising expenses in a given accounting period. Over the long term, advertising revenue should not generate gross profit or loss.

Applebee’s franchise fee revenue for the three months ended ~~September~~June 30, ~~2018 increased nearly 8%~~2019 decreased 6.7% compared to the same period of the prior year. ~~The favorable impact on royalty revenue resulting from a 7.7% increase in domestic same-restaurant sales and favorable $1.5~~Approximately $2.4 million of the decrease ~~in revenue that~~ was ~~not recognized~~ due to ~~uncertainty as to collectibility was partially offset by a $1.1 million decrease~~147 fewer effective franchise restaurants in ~~domestic royalties~~operation, the number of which declined due to restaurant ~~closures.~~closures by franchisees and our acquisition of 69 Applebee's restaurants in North and South Carolina from a former Applebee's franchisee in December 2018. A decrease of 0.6% in domestic franchise same-restaurant sales also contributed to the decline in franchise revenue.

The significant decrease in Applebee's franchise expenses for the three months ended ~~September~~June 30, ~~2018~~2019 compared with the same period of the prior year was primarily due to a decrease of ~~$4.0~~$16.5 million in franchisor contributions to the Applebee's NAF, ~~and~~as well as a decrease ~~of $3.2 million~~ in bad debt expense. Our franchisor contributions to the Applebee's NAF ceased ~~on July 1,~~as of June 30, 2018.

IHOP franchise fee revenue for the three months ended June 30, 2019 increased 1.3% compared to the same period of the prior year, primarily due to a 2.0% increase in domestic franchise and area license same-restaurant sales and restaurant development over the past twelve months. These favorable items were partially offset by a decrease in sales of pancake and waffle dry mix and lower fees related to restaurant openings and transfers. IHOP franchise expenses for the three months ended June 30, 2019 were unchanged from the same period of the prior year.

Gross profit, gross profit as a percentage of revenue and gross profit as a percentage of franchise fees increased for the three months ended June 30, 2019 compared to the same period of the prior year, primarily due to the $16.5 million franchisor contribution to the Applebee's NAF made in the second quarter of 2018 that did not recur in 2019, partially offset by the decrease in Applebee's franchise revenue.

Applebee’s franchise fee revenue for the ~~nine~~six months ended ~~September~~June 30, ~~2018~~2019 decreased ~~1.5%~~slightly compared to the same period of the prior year. ~~This was primarily~~Revenue declined approximately $5.2 million due to ~~an unfavorable increase~~154 fewer effective franchise restaurants in operation during the period, the number of ~~$3.4 million in revenue not recognized~~which declined due to ~~uncertainty~~our acquisition of 69 Applebee's restaurants as noted above and to ~~collectibility and a $3.4 million~~restaurant closures by franchisees. This decrease ~~in royalties due to net closures of franchise restaurants. These unfavorable items were~~was partially offset by an improvement in revenue collectibility of $4.9 million as a ~~5.5% increase~~result of favorable changes in ~~domestic same-restaurant sales.~~franchisee health.

The ~~increase~~significant decrease in Applebee's franchise expenses for the ~~nine~~six months ended ~~September~~June 30, ~~2018~~2019 compared with the same period of the prior year was primarily due to ~~an increase~~a decrease of ~~$26.0~~$30.0 million in franchisor contributions to the Applebee's NAF, partially offset by ~~a decrease of $9.9~~$3.1 million in bad debt ~~expense~~recoveries that ~~was primarily due~~had taken place during the first six months of 2018 but did not recur to the ~~recovery~~same degree in 2019. Applebee's bad debt expense was a credit of ~~amounts reserved in prior periods. We contributed $30.0 million to the Applebee's NAF during the nine months ended September 30, 2018 as compared to $4.0~~$0.4 million during the ~~same period of 2017.~~six months ended June 30, 2019.

IHOP franchise fee revenue for the ~~three~~six months ended ~~September~~June 30, ~~2018~~2019 increased due primarily to restaurant development over the past twelve months and a 1.2% increase in domestic same-restaurant sales. IHOP franchise expenses for the three months ended September 30, 2018 increased slightly from the comparable 2017 period.

~~IHOP franchise fee revenue for the nine months ended September 30, 2018 increased 4.0%~~2.8% compared to the same period of the prior year, primarily due to ~~a 3.3%~~an increase in ~~Effective Franchise Restaurants because~~royalties and sales of pancake and waffle dry mix as result of net restaurant development over the past twelve months and a ~~1.0%~~1.7% increase in domestic same-restaurant sales.

The ~~increase in~~ IHOP franchise expenses for the ~~nine~~six months ended ~~September~~June 30, ~~2018~~2019 decreased compared with the same period of the prior year, ~~were~~ primarily due to ~~an increase of $0.5 million~~a decrease in bad debt expense of $0.9 million partially offset by an increase in purchases of pancake and waffle dry mix.

Gross profit, gross profit as a ~~$0.5~~percentage of revenue and gross profit as a percentage of franchise fees increased for the six months ended June 30, 2019 compared to the same period of the prior year, primarily due to the $30.0 million franchisor contribution to the ~~IHOP National Advertising Fund.~~Applebee's NAF made during the first six months of 2018 that did not recur in 2019, partially offset by a decrease in Applebee's bad debt recoveries. Our franchisor contributions to the Applebee's NAF ceased as of June 30, 2018.

Advertising revenue and expense ~~of both brands~~ for the three months ended ~~September~~June 30, ~~2018~~2019 increased compared to the same period of the prior year, primarily due to an increase in the franchisee advertising contribution rate to the Applebee's NAF. As ~~previously reported,~~noted above, virtually all domestic Applebee's franchisees agreed to increase their contribution rate to the Applebee's NAF, with virtually all agreeing to increase the rate by 0.25%, from 3.25% to 3.5% of gross sales, for the period from January 1, 2018 to December 31, 2019. Such franchisees also agreed to an incremental temporary increase of 0.75% in the advertising contribution rate to 4.25% effective July 1, 2018 to December 31, 2019. This change represented $7.9 million of the increase. In addition, advertising revenue and expense increased due to an improvement of franchisee collectibility of advertising fees from certain Applebee's franchisees, IHOP net restaurant development over the past twelve months ~~the~~and an increase in ~~Applebee's~~IHOP domestic franchise and area license same-restaurant sales, ~~and~~partially offset by a decrease in ~~franchisee non-payment~~the number of ~~advertising fees by certain~~ Applebee's ~~franchisees.~~Effective Restaurants.

Advertising revenue and expense ~~of both brands~~ for the ~~nine~~six months ended ~~September~~June 30, ~~2018~~2019 increased compared to the same period of the prior year, primarily due to ~~the same factors cited~~an increase in the ~~three-month comparison above, although the increase was not proportional over the nine-month period as the most significant factor, the 0.75% increase in Applebee's~~franchisee advertising contribution rate ~~did not take place until July 1, 2018. As~~to the Applebee's NAF noted ~~under~~ ~~Events Impacting Comparability~~above. This change represented $15.6 million of ~~Financial Information, adoption~~the increase. In addition, advertising revenue and expense increased due to an

improvement of ~~ASC 606 impacted our accounting for advertising fees. An excess or deficiency~~franchisee collectibility of advertising ~~fee revenue compared to advertising expenditures, if any, will be recognized in the fourth quarter, as permitted under ASC 606.~~

~~Gross profit as a percentage of franchise~~ fees ~~increased for the three months ended September 30, 2018 compared to the same period of the prior year, primarily because of favorable developments with respect to~~from certain Applebee's financial health issues in the form of lower bad debt expense and a decrease in revenue that was not recognized due to uncertainty as to collectibility. Lower franchisor contributions to advertising funds, the increase in Applebee's domestic same-restaurant sales andfranchisees, IHOP net restaurant development over the past twelve months ~~also contributed~~and an increase in IHOP domestic franchise and area license same-restaurant sales, partially offset by a decrease in the number of Applebee's Effective Restaurants.

It is our policy to ~~the improvement~~recognize any deficiency or recovery of a previously recognized deficiency in ~~gross profit percentage.~~

~~Gross profit as a percentage of franchise fees decreased for the nine months ended September 30, 2018~~advertising fee revenue compared to advertising expenditure in the ~~same period~~fourth quarter of ~~the prior~~our fiscal year. Our $30.0 million contribution to the Applebee's NAF in 2018 more than offset the benefit received from lower bad debt expense, the increase in Applebee's domestic same-restaurant sales and IHOP net restaurant development over the past twelve months.


Rental Operations	Three months ended September 30,						Favorable (Unfavorable) Variance				Nine months ended September 30,							Favorable (Unfavorable) Variance				Three months ended June 30,							Favorable (Unfavorable) Variance				Six months ended June 30,							Favorable (Unfavorable) Variance
	2018			2017						2018				2017				Favorable (Unfavorable) Variance			2019				2018				Favorable (Unfavorable) Variance			2019				2018				Favorable (Unfavorable) Variance
	(In millions)																					(In millions)
Rental revenues	$	30.1		$	30.3		Favorable (Unfavorable) Variance	$	(0.1	)		$	91.3			$	90.9		$	0.4			$	29.9			$	30.4		$	(0.5	)		$	60.6			$	61.2		$	(0.6	)
Rental expenses	23.0			22.3			(0.7		)		68.4				67.7			(0.7		)
Total rental expenses																						22.9				22.8			(0.1		)		45.6				45.4			(0.2		)
Rental operations gross profit	$	7.1		$	7.9		$	(0.8	)		$	22.9			$	23.2		$	(0.3	)		$	7.0			$	7.6		$	(0.6	)		$	15.0			$	15.8		$	(0.8	)
Gross profit as % of revenue ⁽¹⁾	23.7		%	26.3		%					25.1		%		25.5		%					23.2		%		24.9		%					24.8		%		25.7		%

⁽¹⁾ Percentages calculated on actual amounts, not rounded amounts presented above.

Rental operations relate primarily to IHOP franchise restaurants. Rental income includes sublease revenue from operating leases and interest income from direct financing leases. Rental expenses are costs of prime operating leases and interest expense on prime ~~capital leases on certain franchise restaurants.~~financing leases.

Rental segment revenue for the three months ended ~~September~~June 30, ~~2018~~2019 decreased as compared to the same period of the prior year as the expected progressive decline of $0.3 million in interest income as direct financing leases are repaid was partially offset by contractual increases in base sub-rental income. Rental segment revenue for the nine months ended September 30, 2018 increased compared to the same period of the prior year primarily due to ~~contractual increases in base sub-rental income, partially offset by~~ the ~~expected~~ progressive decline of ~~$1.0~~$0.4 million in interest income as direct financing leases are repaid.

Rental segment expenses for the three ~~and nine~~ months ended ~~September~~June 30, ~~2018 increased~~2019 were essentially unchanged from the same period of the prior year.

Rental segment revenue for the six months ended June 30, 2019 decreased as compared to the same ~~periods~~period of the prior year primarily due to the progressive decline of $0.7 million in interest income as direct financing leases are repaid partially offset by contractual increases in ~~prime lease~~base sub-rental income. Rental segment expenses ~~partially offset by declines~~for the six months ended June 30, 2019 were essentially unchanged from the same period of the prior year.

Company Restaurant Operations

As discussed above under “Events Impacting Comparability of Financial Information,” we acquired 69 Applebee’s restaurants in ~~interest expense as capital lease obligations are repaid~~North Carolina and ~~a decline~~South Carolina in ~~depreciation expense.~~December 2018. We had no company-operated restaurants of either brand during the three and six months ended June 30, 2018.

~~The adoption of ASC 606 did not impact our recognition of rental revenue.~~

Financing Operations

Financing revenues primarily consist of interest income from the financing of IHOP equipment leases and franchise fees, ~~as well as~~ sales of equipment associated with refranchised IHOP ~~restaurants.~~restaurants and interest income on Applebee's notes receivable from franchisees. Financing expenses are the cost of any restaurant equipment sold associated with refranchised IHOP restaurants.

Financing revenue and gross profit for the three and ~~nine~~six months ended June 30, 2019 declined due to decreases in interest income as note balances are repaid.



G&A Expenses	Three months ended June 30,				Favorable (Unfavorable) Variance			Six months ended June 30,				Favorable (Unfavorable) Variance
	2019		2018		Favorable (Unfavorable) Variance			2019		2018		Favorable (Unfavorable) Variance
	(In millions)
	$	39.4	$	38.8	$	(0.6	)	$	82.2	$	80.7	$	(1.5	)

G&A expenses for the three months ended June 30, 2019 increased 1.6% compared to the same period of the prior year, primarily due to an increase in personnel-related expenses and software maintenance costs, partially offset by a decrease in costs of consumer research.

G&A expenses for the six months ended June 30, 2019 increased 1.9% compared to the same period of the prior year, primarily due to a $4.2 million increase in personnel-related expenses and software maintenance costs, partially offset by decreases in costs of professional services, consumer research, travel and conferences. The increase in personnel-related costs was primarily due to management positions that were filled and higher costs of stock-based compensation.

Loss on Extinguishment of Debt

As discussed in additional detail under “Liquidity and Capital Resources,” on June 5, 2019, we repaid our outstanding long-term debt of $1.28 billion with an anticipated repayment date of September, 2021 (the “2014 Notes”) with proceeds from the issuance of new debt totaling $1.3 billion, comprised of tranches of $700 million and $600 million having anticipated repayments dates of June 2024 and June 2026, respectively. In connection with this transaction, we recognized a loss on extinguishment of debt of $8.3 million for the three and six months ended June 30, ~~2018 did not change significantly~~2019, representing the remaining unamortized issuance costs associated with the 2014 Notes.



Other Income and Expense Items	Three months ended June 30,					Favorable (Unfavorable) Variance			Six months ended June 30,					Favorable (Unfavorable) Variance
	2019		2018			Favorable (Unfavorable) Variance			2019		2018			Favorable (Unfavorable) Variance
	(In millions)
Interest expense, net	$	14.6	$	15.5		$	0.9		$	30.0	$	30.7		$	0.7
Amortization of intangible assets	2.9		2.5			(0.4		)	5.9		5.0			(0.9		)
Closure and impairment	0.3		(2.7		)	(3.0		)	0.5		(0.1		)	(0.6		)
Loss (gain) on disposition of assets	0.3		(0.1		)	(0.4		)	0.4		(1.5		)	(1.9		)
Total	$	18.1	$	15.2		$	(2.9	)	$	36.8	$	34.1		$	(2.7	)

Interest expense, net

Interest expense, net for the three and six months ended June 30, 2019 was slightly lower than the same periods of the prior year, primarily due to lower interest expense on borrowings under revolving credit facilities as well as an increase in interest income.

Amortization of intangible assets

Amortization of intangible assets for the three and six months ended June 30, 2019 increased compared to the same periods of the prior ~~year. Financing expenses~~year due to amortization of reacquired franchise rights recognized in conjunction with the December 2018 acquisition of 69 Applebee's restaurants.

Closure and impairment

There were no individually significant closure and impairment charges during the three and six months ended June 30, 2019. During the three and six months ended June 30, 2018 we recognized closure credits of $2.7 million and $0.1 million, respectively. The large credit for the three months ended ~~September~~June 30, 2018 ~~decreased slightly~~was due to ~~lower costs~~a downward revision of previously established reserves for property closures, primarily a reserve of $2.5 million that had been established in the first quarter of 2018 for lease closure obligations, net of estimated sub-rental income, related to ~~equipment sales associated with~~two properties on which refranchised ~~IHOP restaurants.~~

~~The adoption~~Applebee's company-operated restaurants had been located. During the second quarter of ~~ASC 606 did not impact our recognition of financing revenue.~~

~~Company Restaurant Operations~~

~~Effective June 19, 2017, we refranchised nine of our ten company-operated IHOP restaurants~~2018, it was determined the reserve related to the two properties was no longer required and the reserve taken in the ~~Cincinnati, Ohio market area;~~first quarter of 2018 was reversed.

During the ~~one restaurant not refranchised was closed. As a result, we did not operate any restaurants on a permanent basis during the three and nine~~six months ended ~~September~~June 30, ~~2018. From time to time, we may reacquire restaurants from franchisees for a variety of reasons. At September 30, 2018, we did not operate any such reacquired restaurants.~~

~~As discussed above under~~ ~~“Significant Known Events, Trends or Uncertainties,”~~ we have signed an asset purchase agreement to acquire 69 Applebee’s restaurants in North Carolina and South Carolina. We expect the transaction to close in the fourth quarter of 2018. We intend to own and operate these restaurants for the foreseeable future; however, we will assess and monitor opportunities to refranchise these restaurants under favorable circumstances. Results of their operations will be included as Company-operated restaurants for segment reporting purposes.

~~Impairment of Goodwill and Intangible Assets~~

~~As discussed above under~~ ~~“Events Impacting Comparability of Financial Information,”~~ we recognized an impairment of Applebee's goodwill of $358.2 million and an impairment of Applebee's tradename of $173.4 million during the three and nine months ended September 30, 2017. Throughout 2018,2019, we performed assessments to determine whether events or changes in ~~circu~~

~~mstances~~circumstances have occurred that could indicate ~~any~~a potential ~~additional~~ impairment to our goodwill and indefinite-lived intangible assets. We considered, among other things, ~~Applebee's~~changes in our key performance indicators during the ~~nine~~six months ended ~~September~~June 30, ~~2018~~2019 and what, if any, impact that performance had on ~~the~~our long-term ~~forecast~~view of future trends in sales, operating expenses, overhead expenses, depreciation, capital expenditures and changes in working ~~capital that was used in performing the quantitative impairment test in the third quarter of 2017.~~capital. We also considered the current market price of our common stock and the ~~favorable~~continuing impact of the Tax Cuts and Jobs Act ~~on future cash flows.~~of 2017. We concluded that an interim test for impairment was not necessary as of June 30, 2019. We also considered whether there were noany indicators that the carrying value of ~~impairment as of September 30, 2018 and will perform our annual test of goodwill and intangible~~tangible long-lived assets ~~for impairment in the fourth quarter of 2018.~~may not be recoverable. No significant indicators were noted.

G&A Expenses Three months ended September 30, Favorable
(Unfavorable) Variance Nine months ended September 30, Favorable
(Unfavorable) Variance
2018 2017 2018 2017
(In millions)

$ 40.8
$ 38.0
$ (2.7 ) $ 121.4
$ 125.7
$ 4.3

The increase in G&A expenses for the three months ended September 30, 2018 compared to the same period of the prior year was primarily due to a $5.7 million increase in personnel-related costs, partially offset by decreases of $1.3 million in recruiting and relocation expenses, $1.0 million in consumer research and $1.0 million in professional services. The increase in personnel-related costs was primarily related to higher costs of stock-based and other incentive compensation. The decrease in consumer research was due to increased expenditures in 2017 associated with brand revitalization; similar utilization did not recur in 2018. The decrease in professional services was due to the utilization of third-party consultants in 2017 related to Applebee's stabilization initiatives; similar utilization did not recur in 2018.

The decrease in G&A expenses for the nine months ended September 30, 2018 was primarily due to charges of $8.8 million recognized during the nine months ended September 30, 2017 related to the executive separation costs discussed under ~~“Events Impacting Comparability of Financial Information”~~ that did not recur in 2018. Additionally, professional services costs decreased $6.9 million due to less utilization of third-party consultants as noted above. Partially offsetting these decreases were increases of $10.6 million in personnel-related costs, as well as smaller increases in other categories. The increase in personnel-related costs primarily related to higher costs of stock-based and other incentive compensation.

Other Income and Expense Items

Three months ended September 30, Favorable
(Unfavorable) Variance Nine months ended September 30, Favorable
(Unfavorable) Variance
2018 2017 2018 2017
(In millions)
Interest expense $ 15.4
$ 15.4
$ (0.1 ) $ 46.1
$ 46.5
$ 0.4
Amortization of intangible assets 2.5
2.5
0.0
7.5
7.5
(0.0 )
Closure and other impairment costs 0.2
0.9
0.7
0.1
3.8
3.7
Debt refinancing costs 2.5
—
(2.5 ) 2.5
—
(2.5 )
Gain on disposition of assets (0.1 ) (0.0 ) 0.0
(1.5 ) (6.4 ) (4.9 )
Total $ 20.6
$ 18.7
$ (1.9 ) $ 54.7
$ 51.4
$ (3.3 )

~~Interest expense~~

~~Interest expense for the three and nine months ended September 30, 2018 was substantially consistent with the same periods of the prior year. See~~ ~~“Liquidity and Capital Resources”~~ ~~regarding the prospective impact on interest expense from recent changes in our revolving credit facilities.~~

~~Amortization of intangible assets~~

~~Amortization of intangible assets for the three and nine months ended September 30, 2018 was consistent with the same periods of the prior year.~~

~~Closure and other impairment costs~~

There were no individually significant closure and impairment charges during the three months and nine months ended September 30, 2018 and the three months ended September 30, 2017. For the nine months ended September 30, 2017, other

impairment and closure costs of $3.8 million primarily comprised $2.2 million of costs related to the closure of one company-operated IHOP restaurant in the Cincinnati, Ohio area. There were no other individually significant charges in that period.

~~Debt refinancing costs~~

~~During the three months ended September 30, 2018, we explored opportunities related to possible refinancing of our long-term debt. As discussed in additional detail under~~ ~~“Liquidity and Capital Resources,”~~ on September 5, 2018, certain subsidiaries of the Company entered into a financing facility that allows for drawings of up to $225 million of variable funding notes on a revolving basis and the issuance of letters of credit (the “2018 Variable Funding Notes”). In connection with the 2018 Variable Funding Notes, on September 5, 2018, we repaid $20 million, representing the entire outstanding principal amount of our $100 million revolving financing facility under certain Series 2014-1 Class A-1 Notes (the “2014 Class A-1 Notes”) and terminated the corresponding Class A-1 Note Purchase Agreement, dated September 30, 2014 (the “2014 Note Purchase Agreement”). In connection with the termination of the 2014 Note Purchase Agreement, we recognized as expense approximately $0.9 million of remaining unamortized issuance costs associated with the 2014 Class A-1 Notes.

We incurred approximately $1.6 million of costs in evaluating options with respect to refinancing our current securitization debt. After completing the evaluation, we did not consummate a refinancing transaction and the entire $1.6 million was charged to expense during the three months ended September 30, 2018.

The combined total related to these transactions of $2.5 million is reported as “Debt refinancing costs” in the Consolidated Statements of Comprehensive Income (Loss) for the three and nine months ended September 30, 2018.

~~Gain~~Loss/gain on disposition of assets

There were no individually significant asset dispositions during the three and six months ended ~~September~~June 30, ~~2018 and 2017.~~

2019. During the ~~nine~~six months ended ~~September~~June 30, 2018, the sublease tenant of a property with lease terms favorable to the Company purchased the property, which allowed us to recognize a gain of $1.4 million on disposition of the favorable lease asset.

During the nine months ended September 30, 2017, we 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, we entered into an asset purchase agreement, nine franchise agreements and nine sublease agreements for land and buildings. The Company compared the stated rent under the sublease agreements with comparable market rents and recorded net favorable lease assets of $2.3 million related to 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, we recognized a gain of $6.2 million on the refranchising and sale during the nine months ended September 30, 2017.


Income Taxes	Three months ended September 30,						Favorable (Unfavorable) Variance				Nine months ended September 30,								Favorable (Unfavorable) Variance				Three months ended June 30,							Favorable (Unfavorable) Variance				Six months ended June 30,							Favorable (Unfavorable) Variance
	2018			2017						2018				2017					Favorable (Unfavorable) Variance			2019				2018				Favorable (Unfavorable) Variance			2019				2018				Favorable (Unfavorable) Variance
	(In millions)																						(In millions)
Income tax provision (benefit)	$	7.7		$	(55.9	)	Favorable (Unfavorable) Variance	$	(63.6	)		$	25.2			$	(26.7	)		$	(51.9	)
Income tax provision																							$	7.7			$	11.9		$	4.2			$	17.2			$	17.5		$	0.3
Effective tax rate	24.5		%	11.0		%	(13.5		)%		32.1		%		6.1		%		(26.0		)%		26.4		%		48.3		%	21.9		%		24.5		%		37.0		%	12.5		%

Our income tax provision will vary from period to period for two reasons: a change in income before income taxes and a change in the effective tax rate. Changes in our income before income taxes ~~between 2018 and 2017~~ were addressed in the preceding sections of “Consolidated Results of Operations - Comparison of the Three and ~~Nine~~Six Months Ended ~~September~~June 30, ~~2018~~2019 and ~~2017.~~2018.”

Our effective tax rates for the three and ~~nine~~six months ended ~~September~~June 30, ~~2018~~2019 were ~~impacted by two events. The Tax Act enacted in December 2017 lowered~~lower than the ~~federal statutory corporate tax rate from 35% to 21%, beginning in 2018. However, during~~rates of the ~~second quarter of~~prior comparable periods. During the three and six months ended June 30, 2018, we increased our tax provision by $5.7 million related to adjustments resulting from IRS audits ~~by the Internal Revenue Service (“IRS”)~~ for tax years 2011 through ~~2013. This adjustment~~2013, which increased our effective tax rates for ~~the nine months ended September 30, 2018, offsetting the lower federal statutory corporate tax rate resulting from the Tax Act.~~those periods. Completion of the IRS audits for tax years 2011 through 2013 ~~will allow~~allowed us to accelerate the collection of certain tax benefits recognized in prior years. AsThe IRS examination of tax years 2011 to 2013 concluded during the three months ended June 30, 2019, and the Company received a ~~result, we expect to receive a cash~~ refund of ~~approximately $12~~$13.3 million, ~~within the next 12 months. The expected refund is currently included in Prepaid Income Taxes in the Consolidated Balance Sheets.~~inclusive of interest income of $0.9 million.

Our effective tax rates for the three and nine months ended September 30, 2017 were significantly different from the then-statutory federal tax rate of 35%. As noted under “Impairment of Goodwill and Intangible Assets” above, we recorded an impairment of Applebee's goodwill of $358.2 million, which was not deductible for federal income tax purposes and therefore there is no tax benefit associated with the impairment. We did recognize a deferred tax benefit of $65.1 million as a discrete item related to the $173.4 million impairment charge related to Applebee's tradename.

Liquidity and Capital Resources

On ~~September~~June 5, ~~2018 (the “Closing Date”),~~2019, Applebee’s Funding LLC and IHOP Funding LLC ~~(“Co-Issuers”~~(the “Co-Issuers”), each a special purpose, wholly-owned indirect subsidiary of the Company, ~~entered into a financing facility that allows for drawings~~issued two tranches of ~~up to $225~~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 ~~of variable funding notes on a revolving basis~~ and the ~~issuance~~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 ~~letters of credit~~$600 million (the ~~“2018 Variable Funding~~“Class A-2-II Notes” and, together with the Class A-2-I Notes, the “2019 Class A-2 Notes”). The ~~2018 Variable Funding~~2019 Class A-2 Notes were issued pursuant to an offering exempt from registration under the ~~Base Indenture, dated September 30, 2014,~~Securities Act of 1933, as ~~amended, among~~amended.

The New Notes were issued in a securitization transaction pursuant to which substantially all of the domestic revenue-generating assets and domestic intellectual property held by the Co-Issuers and Citibank, N.A., as Trustee and Securities Intermediary (“Base Indenture”), and the Series 2018-1 Supplement to the Base Indenture, dated September 5, 2018, among the Co-Issuers and Citibank, N.A., as Trustee and the 2018-1 Securities Intermediary (“Series 2018-1 Supplement”). Drawings and certain ~~additional terms related to the Variable Funding Notes are governed by the Class A-1 Note Purchase Agreement, dated September 5, 2018, among the Co-Issuers, certain~~other special-purpose, wholly-owned indirect subsidiaries of the Company ~~each~~(the “Guarantors”) were pledged as ~~a Guarantor,~~collateral to secure the Corporation, as manager, certain conduit investors, financial institutions and funding agents, and Barclays Bank PLC, as provider of letters credit, swingline lender and administrative agent (the “Purchase Agreement”).

The Variable Funding Notes will be governed, in part, by the Purchase Agreement and by certain generally applicable terms contained in the Base Indenture and the Series 2018-1 Supplement. The applicable interest rate under the Variable FundingNew Notes. See Note 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%. There is an upfront fee of 1% and a fee of 50 basis points on any unused portion8 - Long-Term Debt, of the ~~Variable Funding~~ Notes ~~facility. The applicable interest rate~~to Consolidated Financial Statements included in this report for ~~swingline advances and unreimbursed draws on outstanding letters of credit is a per annum base rate equal to~~additional information regarding the ~~sum of (a) 1.15% plus (b)~~New Notes.

We used the greater 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%. Undrawn face amounts of outstanding letters of credit that are not cash collateralized accrue a fee of 2.15% per annum. It is anticipated that the principal and interest on the Variable Funding Notes will be repaid in full on or prior to September 7, 2021 (the “Anticipated Repayment Date”), subject to four additional one-year extensions at the optionmajority of the Company upon the satisfaction of certain conditions. The Variable Funding Notes and other credit instruments issued under the Purchase Agreement are secured by the collateral described in the Base Indenture and the Guarantee and Collateral Agreement, dated September 30, 2014, by certain special-purpose, wholly-owned indirect subsidiariesnet proceeds of the ~~Company, each as a Guarantor, in favor of Citibank, N.A., as Trustee (the “Guarantee and Collateral Agreement”).~~

In connection with the above transaction, the Company also amended and restated the Management Agreement, dated September 30, 2014 (the “Management Agreement”), among the Co-Issuers, other securitization entities party thereto from timeoffering to time, the Company, Applebee’s Services, Inc. and International House of Pancakes, LLC as Sub-managers and Citibank, N.A., as Trustee, to revise the calculation of the weekly management fee and to make certain other revisions. The Company also amended the Base Indenture to, among other things, make certain administrative and definitional updates.

~~In connection with the 2018 Variable Funding Notes above, on September 5, 2018, the Company repaid~~repay the entire $20 million then-outstanding principal amount of the Company’s $100 million revolving financing facility under certain Series 2014-1 Class A-1 Notes (the “2014 Variable Funding Notes”) (pursuant to the Base Indenture and the Series 2014-1 Supplement to the Base Indenture, dated September 30, 2014, among the Co-Issuers and Citibank, N.A., as Trustee and Series 2014-1 Securities Intermediary (“Series 2014-1 Supplement”) and terminated the corresponding Class A-1 Note Purchase Agreement, dated September 30, 2014, among the Co-Issuers, certain special-purpose, wholly-owned indirect subsidiaries of the Corporation, each as a Guarantor, certain conduit investors, financial institutions and funding agents, and Cooperatieve Centrale Raiffeisen-Boerenleenbank, B.A., “Rabobank Nederland,” New York Branch, as provider of letters of credit, as swingline lender and as administrative agent (“2014 Purchase Agreement”).

Prior to the termination of the Class A-1 Note Purchase Agreement referenced above, during the nine months ended September 30, 2018, we borrowed and repaid a total of $30.0 million in 2014 Variable Funding Notes. The maximum amount of 2014 Variable Funding Notes outstanding during the nine months ended September 30, 2018 was $30.0 million and the weighted average interest rate on 2014 Variable Funding Notes outstanding during the nine months ended September 30, 2018 was 4.5%.

We borrowed $20.0 million in 2018 Variable Notes on the Closing Date, all of which was outstanding at September 30, 2018. The weighted average interest rate on the 2018 Variable Funding Notes for the period outstanding was 4.4%. Additionally, at September 30, 2018, $3.1 million was pledged against the 2018 Variable Funding Notes for outstanding letters of credit, leaving $201.9 million of 2018 Variable Funding Notes available for borrowings. The letters of credit are used primarily to satisfy insurance-related collateral requirements.

~~We incurred costs~~balance of approximately $3.6 million in connection with the establishment of the 2018 Variable Funding Note facility. These debt issuance costs are being amortized using the effective interest method over the estimated three-year life of the 2018 Variable Funding Notes. Amortization of the debt issuance costs will increase our interest expense by approximately $1.2 million per year over the next three years. Unamortized debt issuance costs are reported as other long-term assets in the Consolidated Balance Sheets.

In connection with the termination referenced above of the Class A-1 Note Purchase Agreement, dated September 30, 2014, we recognized as expense $0.9 million of unamortized debt issuance costs associated with the 2014 Variable Funding Notes. In addition, we incurred costs of $1.6 million associated with the evaluation of various alternatives for refinancing our securitized indebtedness that were also charged to expense. These costs totaling $2.5 million are reported as “Debt refinancing costs” in the Consolidated Statements of Comprehensive Income (Loss).

~~At September 30, 2018, our outstanding long-term debt consisted of $1.3~~$1.28 billion of Series 2014-1 4.277% Fixed Rate Senior Notes, Class A-2 (the ~~“Class~~“2014 Class A-2 Notes”). We used the remaining proceeds to pay for transactions costs associated with the securitization refinancing transaction and the 2018 Variable Funding Notes. The Class A-2 Notes and the 2018 Variable Funding Notes are referred to collectively as the “Notes.” The Notes were issued in private securitization transactions pursuant to which substantially all our domestic revenue-generating assets and our domestic intellectual property are held by certain special-purpose, wholly-owned indirect subsidiaries of the Company (the “Guarantors”) that act as guarantors of the Notes and that have pledged substantially all their assets to secure the Notes.for general corporate purposes.

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~~principal 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. ~~At September~~As of June 30, ~~2018, our~~2019, the Company's leverage ratio was ~~5.30x (see Exhibit 12.1).~~4.57x; accordingly, no principal payment on the 2019 Class A-2 Notes will be required during the third quarter of 2019. Exceeding the leverage ratio of 5.25x does not violate any covenant related to the Notes; however, we were required to make a principal payment of $3.25 million in each of the first three quarters of 2018 and we will be required to make a principal payment of $3.25 million in the fourth quarter of 2018.New Notes.

~~We may voluntarily repay the Class A-2 Notes at any time, and as of September 30, 2018, there is no longer any make-whole payment for voluntary repayment.~~

The New Notes are subject to customary rapid amortization events for similar types of financing, including events tied to our failure 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 Notes on the Class A-2 Anticipated Repayment Date in September 2021. The 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 Notes, failure 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.

. Failure to maintain a prescribed DSCR can trigger a Cash ~~Trapping~~Flow Sweeping Event, A Rapid Amortization Event, a Manager Termination Event or a Default Event as described below. In a Cash ~~Trapping~~Flow Sweeping Event, the Trustee is required to retain ~~a certain percentage~~50% of excess Cash Flow (as defined) in a restricted account. In a Rapid Amortization Event, all excess Cash Flow is retained and used to retire principal amounts of debt. Key DSCRs are as follows:

•DSCR less than 1.75x ~~but equal to or greater than 1.50x~~ - Cash ~~Trapping~~Flow Sweeping Event ~~50% of Net Cash Flow~~

•DSCR less than ~~1.50x - Cash Trapping Event, 100% of Net Cash Flow~~

•~~DSCR less than 1.30x~~1.20x - Rapid Amortization Event

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

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

Our DSCR for the reporting period ended ~~September~~June 30, 2019 was 5.40x.

Use of Credit Facilities

We have not drawn on the 2019 Class A-1 Notes subsequent to their June 5, 2019, issuance. At June 30, 2019, $2.2 million was pledged against the 2019 Class A-1 Notes for outstanding letters of credit, leaving $222.8 million of 2019 Class A-1 Notes available for borrowing. The letters of credit are used primarily to satisfy insurance-related collateral requirements.

During the six months ended June 30, 2019, we repaid $25.0 million of 2018 Class A-1 Notes, representing the amount outstanding at December 31, 2018; we did not draw on the 2018 Class A-1 Notes during the six months ended June 30, 2019. The maximum amount of 2018 Class A-1 Notes outstanding during the six months ended June 30, 2019 was ~~4.02x (see Exhibit 12.1)~~$25.0 million and the weighted average interest rate on the 2018 Class A-1 Notes for the period outstanding was 4.88%.

Debt Issuance Costs

We incurred costs of approximately $12.9 million in connection with the issuance of the 2019 Class A-2 Notes. These debt issuance costs are being amortized using the effective interest method over estimated life of each tranche of the 2019 Class A-2 Notes. Amortization of $0.1 million of these costs was included in interest expense for the three and six months ended June 30, 2019. Unamortized debt issuance costs of $12.8 million are reported as a direct reduction of the Class A-2 Notes in the Consolidated Balance Sheets.

We incurred debt issuance costs of approximately $0.2 million in connection with the replacement of the 2018-1 Class A-1 Notes with the 2019-1 Class A-1 Notes. These costs have been added to the remaining unamortized costs of approximately $2.8 million related to the 2018-1 Class A-1 Notes, the total of which costs is now being amortized using the effective interest method over the estimated five-year life of the 2019-1 Class A-1 Notes. Amortization of these costs of $0.2 million and $0.5 million, respectively, was included in interest expense for the three and six months ended June 30, 2019.

Unamortized debt issuance costs of $3.0 million related to the 2019-1 Class A-1 Notes are reported as other long-term assets in the Consolidated Balance Sheets at June 30, 2019.

Loss on Extinguishment of Debt

In connection with the repayment of the 2014 Class A-2 Notes, the Company recognized a loss on extinguishment of debt of $8.3 million, representing the remaining unamortized costs related to the 2014 Class A-2 Notes. Prior to the extinguishment, amortization of costs related to the 2014 Class A-2 Notes of $0.6 million and $1.4 million, respectively, was included in interest expense for the three and six months ended June 30, 2019.

Capital Allocation

Dividends

During the ~~nine~~six months ended ~~September~~June 30, ~~2018,~~2019, we paid dividends on common stock of ~~$40.0~~$23.3 million, representing a cash dividend of ~~$0.97~~$0.63 per share declared in the fourth quarter ~~of 2017 (paid~~on 2018, paid in January ~~2018)~~2019 and a cash ~~dividends~~dividend of ~~$0.63~~$0.69 per share declared in the first ~~and second quarters~~quarter of ~~2018 (paid~~2019, paid in April ~~2018 and July 2018).~~2019. On ~~August 2, 2018,~~May 13, 2019, our Board of Directors declared a ~~third~~second quarter ~~2018~~2019 cash dividend of ~~$0.63~~$0.69 per share of common stock. This dividend was paid on ~~October 5, 2018~~July 12, 2019 to our stockholders of record at the close of business on ~~September~~June 20, ~~2018.~~2019. We reported dividends payable of ~~$11.4~~$12.2 million at ~~September~~June 30, ~~2018.~~2019.

Share Repurchases

In ~~October 2015, our~~February 2019, the Company’s Board of Directors approved a stock repurchase program authorizing usthe Company to repurchase up to $200 million of the Company’s common stock (the “2019 Repurchase Program”) on an opportunistic basis from time to time in the open market or in privately negotiated transactions based on business, market, applicable legal requirements and other considerations. The 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.

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

A summary of shares repurchased under the 2019 Repurchase Program and the 2015 Repurchase Program, ~~currently~~during the three and six months ended June 30, 2019 and cumulatively, is as follows:

Shares Cost of shares
(In millions)
Repurchased during the three months ended September 30, 2018 107,814
$ 7.9
Repurchased during the nine months ended September 30, 2018 383,615
$ 27.9
Cumulative (life-of-program) repurchases as of September 30, 2018 1,384,272
$ 110.8
Remaining dollar value of shares that may be repurchased n/a $ 39.2



	Shares	Cost of shares
		(In millions)
2019 Repurchase Program:
Repurchased during the three months ended June 30, 2019	392,132	$	35.3
Repurchased during the six months ended June 30, 2019	432,949	$	39.0
Cumulative (life-of-program) repurchases	432,949	$	39.0
Remaining dollar value of shares that may be repurchased	n/a	$	161.0

2015 Repurchase Program:
Repurchased during the three months ended June 30, 2019	—	$	—
Repurchased during the six months ended June 30, 2019	110,499	$	8.4
Cumulative (life-of-program) repurchases	1,589,995	$	126.2
Remaining dollar value of shares that may be repurchased	n/a	n/a

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.

From time to time, we also repurchase shares owned and tendered by employees to satisfy tax withholding obligations on the vesting of restricted stock awards. Shares are deemed purchased at the closing price of our common stock on the vesting date. See Part II, Item 2 for detail on all share repurchase activity during the ~~third~~second quarter of ~~2018.~~2019.

Cash Flows

In summary, our cash flows for the ~~nine~~six months ended ~~September~~June 30, ~~2018~~2019 and ~~2017~~2018 were as follows:


	Nine months ended September 30,									Six months ended June 30,
	2018			2017			Variance			2019			2018			Variance
	(In millions)									(In millions)
Net cash provided by operating activities	$	61.6		$	31.0		$	30.6		$	69.3		$	25.8		$	43.5
Net cash provided by investing activities	3.4			6.4			(3.0		)	0.9			5.0			(4.1		)
Net cash used in financing activities	(68.9		)	(72.7		)	3.8			(92.9		)	(44.1		)	(48.8		)
Net decrease in cash, cash equivalents and restricted cash	$	(3.9	)	$	(35.2	)	$	31.3		$	(22.7	)	$	(13.3	)	$	(9.4	)

Operating Activities

~~Our net income for~~Cash provided by operating activities increased $43.5 million during the ~~nine~~six months ended ~~September~~June 30, ~~2018 increased $466.0 million~~2019 compared to the same period of ~~2017, primarily due to a non-cash impairment of goodwill and intangible assets in 2017 that did not recur.~~the prior year. Our net income ~~including~~plus the non-cash reconciling items shown in ~~the statement~~our statements of cash flows (primarily ~~impairment charges,~~depreciation, deferred taxes and ~~depreciation)~~stock-based compensation) increased $40.8 million from 2018. This change was ~~$82.5 million for the nine months ended September 30, 2018 compared~~primarily due to ~~$74.8 million the same period of 2017,~~ an increase in gross profit and a lower effective tax rate, each of ~~$7.7 million. Net~~which was discussed in preceding sections of the MD&A. Additionally, net changes in working capital used cash of ~~$14.8~~$10.8 million during the ~~first nine~~six months ~~of 2018,~~ended June 30, 2019 compared to ~~a use of~~using cash of ~~$36.1~~$13.6 million during the ~~first nine months~~same period of ~~2017. The working capital~~the prior year. This favorable change ~~favorably impacted cash~~of $2.8 million between years primarily resulted from ~~operating activities~~a decrease in prepaid rent partially offset by ~~$21.3 million.~~an increase in payments for income taxes. The increase of ~~$30.6~~$43.5 million in cash provided by operating activities for the ~~nine~~six months ended ~~September~~June 30, ~~2018~~2019 was ~~primarily~~ due to the favorability of ~~$21.3~~$40.8 million in net income plus non-cash reconciling items and the favorable change of $2.8 million in cash used by working capital changes and the $7.7 million increase in net income, including non-cash reconciling items. The increase in cash provided by operating activities was primarily due to a decrease in taxes paid and favorable working capital changes in prepaid rent, accounts receivable and accrued employee benefits, partially offset by lower gross profit as discussed above under ~~“Consolidated Results of Operations - Financial Results.”~~changes.

Investing Activities

Investing activities provided net cash of ~~$3.4~~$0.9 million for the ~~nine~~six months ended ~~September~~June 30, ~~2018~~.2019. Principal receipts from notes, equipment contracts and other long-term receivables of ~~$20.0 million and proceeds from asset sales of $0.7~~$11.4 million were partially offset by ~~$11.0~~$9.2 million in capital expenditures and loans to franchisees of ~~$6.0~~$1.6 million.

Financing Activities

Financing activities used net cash of ~~$68.9~~$92.9 million for the ~~nine~~six months ended ~~September~~June 30, ~~2018. Cash~~2019. As discussed above, we received proceeds of $1.3 billion from issuance of our 2019 Class A-2 Notes that were used to repay $1.28 billion of our 2014 Class A-2 Notes and to pay $12.2 million for costs associated with issuance of the New Notes. Other cash used in financing activities primarily consisted of repayments of 2018-1 Class A-1 Notes of $25.0 million, cash dividends paid on our common stock totaling ~~$40.0 million, repayments of 2014 Variable Funding Notes of $30.0~~$23.3 million, repurchases of our common stock totaling ~~$27.9~~$46.4 million and repayments of capital lease obligations ~~and long-term debt~~ of $~~20.1~~7.0 million ~~and payments of debt issuance costs of $3.1 million.~~. These financing outflows were partially offset by ~~borrowings from the 2014 and 2018 Variable Funding Notes of$50.0 millionand~~ a net cash inflow of approximately ~~$2.2~~$4.7 million related to equity compensation awards.

Cash and Cash Equivalents

At ~~September~~June 30, ~~2018~~2019, our cash and cash equivalents totaled ~~$102.7~~$127.6 million, including ~~$26.5~~$49.4 million of cash held for gift card programs and advertising funds. Additionally, our franchisor subsidiaries held a total of approximately ~~$28~~$29.3 million in cash at ~~September~~June 30, ~~2018,~~2019, to maintain certain net worth requirements under state franchise disclosure laws.

Based on our current level of operations, we believe that our cash flow from operations, available cash and available borrowing capacity under our ~~Variable Funding~~2019 Class A-2 Notes will be adequate to meet our liquidity needs for the next twelve months.

Adjusted Free Cash Flow

We define “adjusted free cash flow” for a given period as cash provided by operating activities, plus receipts from notes and equipment contract receivables, less additions to property and equipment. Management uses this liquidity measure in its periodic assessment of, among other things, cash dividends per share of common stock and repurchases of common stock and we believe it is important for investors to have the same measure used by management for that purpose. Adjusted free cash flow does not represent residual cash flow available for discretionary purposes.

Adjusted free cash flow is a non-U.S. GAAP measure. This non-U.S. GAAP measure is not defined in the same manner by all companies and may not be comparable to other similarly titled measures of other companies. Non-U.S. GAAP measures should be considered in addition to, and not as a substitute for, the U.S. GAAP information contained within our financial statements. Reconciliation of the cash provided by operating activities to adjusted free cash flow is as follows:


	Nine months ended September 30,									Six months ended June 30,
	2018			2017			Variance			2019			2018			Variance
	(In millions)									(In millions)
Cash flows provided by operating activities	$	61.6		$	31.0		$	30.6		$	69.3		$	25.8		$	43.5
Receipts from notes and equipment contracts receivable	12.0			8.0			4.0			5.9			9.6			(3.7		)
Additions to property and equipment	(11.0		)	(9.6		)	(1.4		)	(9.2		)	(7.3		)	(1.9		)
Adjusted free cash flow	$	62.6		$	29.4		$	33.2		$	66.0		$	28.1		$	37.9

The increase in adjusted free cash flow for the ~~nine~~six months ended ~~September~~June 30, ~~2018~~2019 compared to the same period of the prior year is primarily due to the increase in cash from operating activities discussed ~~above~~above.

Statement of Financial Position

As discussed in Note 3 - Accounting Standards Adopted and Newly Issued Accounting Standards Not Yet Adopted, in the ~~balloon payoff~~Notes to Consolidated Financial Statements, we adopted the guidance as codified in ASC 842 with respect to accounting for leases. We adopted this change in accounting principle using the modified retrospective method as of ~~one equipment contract receivable. Capital expenditures are expected~~the first day of our first fiscal quarter of 2019. Upon adoption of ASC 842, we recognized operating lease obligations of $453.0 million, which represented the present value of the remaining minimum lease payments, discounted using our incremental borrowing rate. We recognized operating lease right-of-use assets of $395.6 million and also recognized an adjustment to retained earnings upon adoption of $5.0 million, net of tax of $1.7 million, primarily related to an impairment resulting from an unfavorable differential between lease payments to be ~~approximately $14~~made and sublease rentals to be received on certain leases. The remaining difference of $50.7 million between the recognized operating lease obligation and right-of-use assets related to the derecognition of certain liabilities and assets that had been recorded in accordance with U.S. GAAP that had been applied prior to the adoption of ASC 842, primarily $43.3 million of accrued rent payments. Lease-related reserves for ~~fiscal 2018.~~lease incentives, closed restaurants and unfavorable leaseholds were also derecognized. The accounting for our existing finance (capital) leases upon adoption of ASC 842 remained substantially unchanged. Adoption of ASC 842 had no significant impact on our cash flows from operations or our results of operations.

Off-Balance Sheet Arrangements

We have obligations for guarantees on certain franchisee lease agreements, as disclosed in Note 1213 - Commitments and Contingencies, of Notes to Consolidated Financial Statements of Part I, Item 1 of this Form 10-Q. Other than such guarantees, we did not have any off-balance sheet arrangements, as defined in Item 303(a)(4) of SEC Regulation S-K as of ~~September~~June 30, ~~2018.~~2019.

Contractual Obligations and Commitments

There were no material changes to the contractual obligations table as disclosed in our Annual Report on Form 10-K for the year ended December 31, ~~2017.~~2018.

Critical Accounting Policies and Estimates

The preparation of financial statements in accordance with U.S. GAAP requires us to make estimates and assumptions affecting the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of net revenues and expenses in the reporting period. We base our estimates and assumptions on current facts, historical experience and various other factors that we believe to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities and the accrual of costs and expenses that are not readily apparent from other sources. We continually review the estimates and underlying assumptions to ensure they are appropriate for the circumstances. Accounting assumptions and estimates are inherently uncertain and actual results may differ materially from our estimates.

A summary of our critical accounting estimates is included in Management’s Discussion and Analysis of Financial Condition and Results of Operations contained in our Annual Report on Form 10-K for the year ended December 31, ~~2017.~~2018. During the ~~nine~~six months ended ~~September~~June 30, ~~2018~~2019, there were no significant changes in our estimates and critical accounting policies, other than our accounting policy for ~~revenue recognition,~~leases, which changed because of the adoption of ASC ~~606~~842 as discussed in Note 3 - Accounting Standards Adopted and Newly Issued Accounting Standards Not Yet Adopted, in the Notes to Consolidated Financial Statements.

Item 3. Quantitative and Qualitative Disclosures about Market Risk.

There were no material changes from the information contained in the Company’s Annual Report on Form 10-K for the year ended December 31, ~~2017.~~2018.

Item 4. Controls and Procedures.

Disclosure Controls and Procedures.

The Company’s management, with the participation of the Company’s Chief Executive Officer and Chief Financial Officer, has evaluated the effectiveness of the Company’s disclosure controls and procedures (as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”)) as of the end of the period covered by this report. Based on such evaluation, the Company’s Chief Executive Officer and Chief Financial Officer have concluded that, as of the end of such period, the Company’s disclosure controls and procedures are effective at the reasonable assurance level.

Changes in Internal Control Over Financial Reporting.

There have been no changes in the Company’s internal control over financial reporting (as such term is defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) during the fiscal quarter to which this report relates that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

Part II. OTHER INFORMATION

Item 1. Legal Proceedings.

We are 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. We are required 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 our litigation are expensed as such fees and expenses are incurred. Management regularly assesses our insurance deductibles, analyzes litigation information with our attorneys and evaluates our loss experience in connection with pending legal proceedings. While we do not presently believe that any of the legal proceedings to which we are currently a party will ultimately have a material adverse impact on us, there can be no assurance that we will prevail in all the proceedings we are party to, or that we will not incur material losses from them.

Item 1A. Risk Factors.

There are no material changes from the risk factors set forth under Item 1A of Part I of the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, ~~2017.~~2018.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.

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 (c)

Approximate dollar value of
shares that may yet be
purchased under the
plans or programs (c)
July 2, 2018 – July 29, 2018^(a)
105,357
$ 73.15
103,814
$ 39,500,000
July 30, 2018 – August 26, 2018^(a)
5,757
72.65
4,000
$ 39,200,000
August 27, 2018 – September 30, 2018^(b)
1,010
82.43
—
$ 39,200,000
Total 112,124
$ 73.21
107,814
$ 39,200,000



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)
April 1, 2019 - April 28, 2019^(a)	118,077	$	90.80	117,845	$	185,700,000
April 29, 2019 - May 26, 2019^(a)	173,709	87.82		170,419	$	170,700,000
May 27, 2019 - June 30, 2019^(a)	105,033	93.21		103,868	$	161,000,000
	396,819	$	90.13	392,132	$	161,000,000

^(a)These amounts include ~~1,543~~232 shares owned and tendered by employees at an average price of ~~$70.55~~$89.26 per share during the fiscal month ended ~~July 29, 2018, and 1,757~~April 28, 2019, 3,290 shares owned and tendered by employees at an average price of ~~$79.15~~$88.46 per share during the fiscal month ended ~~August~~May 26, ~~2018~~2019 and 1,165 shares owned and tendered by employees at an average price of $96.79 per share during the fiscal month ended June 30, 2019, to satisfy tax withholding obligations arising upon vesting of restricted stock awards. Shares so surrendered by the participants are repurchased by us pursuant to the terms of the plan under which the shares were issued and the applicable individual award agreements and not pursuant to publicly announced repurchase authorizations.

^(b)~~These amounts represent shares owned and tendered by employees to satisfy tax withholding obligations arising upon vesting of restricted stock awards.~~

^(c) In ~~October 2015, our~~February 2019, the Company’s Board of Directors approved ~~a stock repurchase program~~the 2019 Repurchase Program authorizing usthe Company to repurchase up to ~~$150~~$200 million of the Company's common stock on an opportunistic basis from time to time in open market transactions and in privately negotiated transactions, including Rule 10b-5 stock repurchase plans, based on business, market, applicable legal requirements and other considerations.stock. The ~~program~~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.

Item 3. Defaults Upon Senior Securities.

None.

Item 4. Mine Safety Disclosures.

Not Applicable.

Item 5. Other Information.

None.

Item 6. Exhibits.



3.1			Restated Certificate of Incorporation of Dine Brands Global, Inc. ~~(incorporated by reference to Exhibit~~(Exhibit 3.1 to Registrant’s Form 10-K filed on February 20, ~~2018)~~2018 is incorporated herein by reference).
3.2			Certificate of Amendment to Restated Certificate of Incorporation of Dine Brands Global, Inc. (Exhibit 3.1 to Registrant’s Form 8-K filed on May 14, 2019 is incorporated herein by reference).
3.3			Amended and Restated Bylaws of Dine Brands Global, Inc. ~~(incorporated by reference to Exhibit~~(Exhibit 3.2 to Registrant’s Form 8-K filed on May ~~15, 2018)~~14, 2019 is incorporated herein by reference).
4.1			~~Supplemental~~Base Indenture, dated as of September 30, 2014, and amended and restated as of June 5, ~~2018,~~2019, among Applebee’s Funding LLC and IHOP Funding LLC, each aas Co-Issuer, and Citibank, N.A., as Trustee and ~~Series 2018-1~~ Securities Intermediary ~~(incorporated~~(Exhibit 4.1 to Registrant's Form 8-K filed on June 5, 2019 is incorporated herein by ~~reference~~reference).
4.2			Series 2019-1 Supplement to ~~Exhibit 4.1~~Base Indenture, dated as of June 5, 2019, among Applebee’s Funding LLC and IHOP Funding LLC, each as Co-Issuer, and Citibank, N.A., as Trustee and Securities Intermediary (Exhibit 4.2 to Registrant’s Form 8-K filed on ~~September 6, 2018)~~June 5, 2019 is incorporated herein by reference).
†10.1			Dine Brands Global, Inc. 2019 Stock Incentive Plan (Appendix B to Registrant’s Definitive Proxy Statement with respect to the 2019 Annual Meeting of Stockholders filed on April 1, 2019 is incorporated herein by reference).
*†10.2			Dine Brands Global, Inc. 2019 Stock Incentive Plan Cash-Settled Restricted Stock Unit Agreement - Employees - 3-year Ratable Vesting
*†10.3			Dine Brands Global, Inc. 2019 Stock Incentive Plan Cash-Settled Restricted Stock Unit Agreement - Employees - 3-year Cliff Vesting
*†10.4			Dine Brands Global, Inc. 2019 Stock Incentive Plan Stock-Settled Restricted Stock Unit Agreement - Employees - Performance-Based Vesting
*†10.5			Dine Brands Global, Inc. 2019 Stock Incentive Plan Stock-Settled Restricted Stock Unit Agreement - International Employees -- 3-year Ratable Vesting
*†10.6			Dine Brands Global, Inc. 2019 Stock Incentive Plan Stock-Settled Restricted Stock Unit Agreement - International Employees - 3-year Cliff Vesting
*†10.7			Dine Brands Global, Inc. 2019 Stock Incentive Plan Stock-Settled Restricted Stock Unit Agreement - Non-Employee Directors - 1-year Cliff Vesting
*†10.8			Dine Brands Global, Inc. 2019 Stock Incentive Plan Nonqualified Stock Option Agreement - Employees - 3-year Ratable Vesting
*†10.9			Dine Brands Global, Inc. 2019 Stock Incentive Plan Nonqualified Stock Option Agreement - International Employees - 3-year Ratable Vesting
*†10.10			Dine Brands Global, Inc. 2019 Stock Incentive Plan Nonqualified Stock Option Agreement - Employees - Performance-Based Vesting
*†10.11			Dine Brands Global, Inc. 2019 Stock Incentive Plan Performance Unit Award Agreement - Double Metric
*†10.12			Dine Brands Global, Inc. 2019 Stock Incentive Plan Restricted Stock Award Agreement - Employees - 3-year Ratable Vesting
*†10.13			Dine Brands Global, Inc. 2019 Stock Incentive Plan Restricted Stock Award Agreement - Employees - 3-year Cliff Vesting



*†10.14			Dine Brands Global, Inc. 2019 Stock Incentive Plan Restricted Stock Award Agreement - Employees - 3-year Cliff Vesting with Accelerated Vesting for Termination without Cause
10.15			Class A-1 Note Purchase Agreement, dated ~~September~~June 5, ~~2018,~~2019, among Applebee’s Funding LLC and IHOP Funding LLC, each a Co-Issuer, certain special-purpose, wholly-owned indirect subsidiaries of the ~~Corporation,~~Registrant, each as a Guarantor, the ~~Corporation,~~Registrant, as manager, certain conduit investors, financial institutions and funding agents, Barclays Bank PLC as provider of letters credit and swingline lender and as administrative agent ~~(incorporated by reference to Exhibit~~(Exhibit 10.1 to Registrant’s Form 8-K filed on ~~September 6, 2018)~~June 5, 2019 is incorporated herein by reference).
~~10.2~~10.16			~~Amended~~Guarantee and ~~Restated~~ Collateral Agreement, dated September 30, 2014, and amended and restated as of June 5, 2019, among certain special-purpose, wholly-owned indirect subsidiaries of the Registrant, each as guarantor, in favor of Citibank, N.A., as Trustee (Exhibit 10.2 to Registrant’s Form 8-K filed on June 5, 2019 is incorporated herein by reference).
10.17			Management Agreement, dated September 30, 2014, and amended and restated as of September 5, 2018, and further amended and restated as of June 5, 2019, among Applebee’s Funding LLC and IHOP Funding LLC, each a Co-Issuer, other securitization entities party thereto from time to time, the ~~Corporation,~~Registrant, Applebee’s Services, Inc. and International House of Pancakes, LLC as Sub-managers and Citibank, N.A., as Trustee ~~(incorporated by reference to Exhibit 10.2~~(Exhibit 10.3 to Registrant’s Form 8-K filed on ~~September 6, 2018)~~
*12.1			~~Computation of Debt Service Coverage Ratio for the Trailing Twelve Months Ended September 30, 2018 and Leverage Ratio as of September 30, 2018.~~June 5, 2019 is incorporated herein by reference).
*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			XBRL Schema Document.***
101.CAL			XBRL Calculation Linkbase Document.***
101.DEF			XBRL Definition Linkbase Document.***
101.LAB			XBRL Label Linkbase Document.***
101.PRE			XBRL Presentation Linkbase Document.***

* Filed herewith.


**	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.

***

Pursuant to Rule 406T of Regulation S-T, the interactive data files on Exhibit 101 hereto are deemed not filed or part of a registration statement or prospectus for purposes of Section 11 or 12 of the Securities Act of 1933, as amended, are deemed not filed for purposes of Section 18 of the Securities and Exchange Act of 1934, as amended, and otherwise are not subject to liability under those sections.


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

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.



		Dine Brands Global, Inc. (Registrant)


Dated:	~~October 31, 2018~~31st day of July, 2019	By:	/s/ Stephen P. Joyce
			Stephen P. Joyce Chief Executive Officer (Principal Executive Officer)


Dated:	~~October 31, 2018~~31st day of July, 2019	By:	/s/ Thomas H. Song
			Thomas H. Song Chief Financial Officer (Principal Financial ~~Officer)~~


~~Dated:~~	~~October 31, 2018~~	~~By:~~	~~/s/ Greggory H. Kalvin~~
			~~Greggory H. Kalvin~~ ~~Senior Vice President, Corporate Controller~~ (Officer and Principal Accounting Officer)

4243



	Balance at December 31, 2017, as reported			Adjustments/Reclassifications Due to ASC 606 adoption			Balance at December 31, 2017, as adjusted
	(In thousands)
Assets:
Receivables, net	$	150,174		$	(9,986	)	$	140,188
Prepaid income taxes	43,654			2,327			45,981
Long-term receivables, net	131,212			(4,642		)	126,570

Liabilities:
Deferred franchise revenue (short-term)	—			11,001			11,001
Other accrued expenses	17,780			(1,779		)	16,001
Deferred franchise revenue (long-term)	—			70,432			70,432
Other non-current liabilities	23,003			(4,932		)	18,071
Deferred income taxes, net	138,177			(18,181		)	119,996

Equity:
Accumulated deficit	$	(1,098	)	$	(68,842	)	$	(69,940	)



	Three months ended September 30, 2017		Nine months ended September 30, 2017
	(in thousands)
Franchise and restaurant revenues, as combined	$	112,347	$	358,912

Franchise revenues	$	112,347	$	351,394
Company restaurant sales	—		7,518
	$	112,347	$	358,912

Franchise and restaurant expenses, as combined	$	41,800	$	123,476

Franchise expenses	41,783		115,669
Company restaurant expenses	17		$	7,807
	$	41,800	$	123,476



	Three Months ended September 30, 2017, as reported			Adjustments due to ASC 606 adoption			Three Months ended September 30, 2017, as adjusted
	(In thousands)
Franchise revenues (as shown separately above)	$	112,347		$	30,232		$	142,579
Franchise expenses (as shown separately above)	41,783			28,250			70,033
Income before income tax benefit	(508,273		)	1,982			(506,291		)
Income tax benefit	56,555			(616		)	55,939
Net loss	(451,718		)	1,366			(450,352		)
Net loss per share:
Basic	$	(24.98	)				$	(24.91	)
Diluted	$	(24.98	)				$	(24.91	)



	(In thousands)
Remainder of 2018	$	2,261
2019	10,523
2020	8,165
2021	7,616
2022	7,093
2023	6,529
Thereafter	34,374
Total	$	76,561



2015 Repurchase Program	Shares	Cost of shares
		(In millions)
Repurchased during the three months ended September 30, 2018	107,814	$	7.9
Repurchased during the nine months ended September 30, 2018	383,615	$	27.9
Cumulative (life-of-program) repurchases as of September 30, 2018	1,384,272	$	110.8
Remaining dollar value of shares that may be repurchased	n/a	$	39.2



	Restricted Stock		Weighted Average Grant Date Fair Value		Restricted Stock Units		Weighted Average Grant Date Fair Value
Outstanding at December 31, 2017	275,191		$	65.81	303,348		$	28.39
Granted	91,448		68.96		55,584		48.12
Released	(65,704	)	81.68		(15,737	)	98.54
Forfeited	(23,666	)	61.09		(71	)	53.49
Outstanding at September 30, 2018	277,269		$	63.61	343,124		$	27.70



	September 30, 2018				December 31, 2017
	Carrying Amount		Fair Value		Carrying Amount		Fair Value
	(In millions)
Long-term debt, current and long-term	$	1,276.5	$	1,268.8	$	1,282.8	$	1,265.5



	Three months ended September 30, 2018			Nine months ended September 30, 2018
	(In millions)

Impairment of goodwill and intangible assets taken in 2017	$	531.6		$	531.6
Increase (decrease) in gross profit:
Applebee's franchise operations	10.1			(18.2		)
IHOP franchise operations	1.0			3.8
All other operations	(0.6		)	(0.3		)
Total gross profit increase (decrease)	10.5			(14.7		)
Change in General and Administrative (“G&A”) expenses:
Decrease due to executive separation costs in 2017	—			8.8
Increase in all other G&A (net)	(2.7		)	(4.5		)
Total G&A (increase) decrease	(2.7		)	4.3
Other income/expense items, net	(1.9		)	(3.3		)
Increase in income before income taxes	$	537.5		$	517.9