View:
Document
false--12-31Q3201900000497544350.001.751.201.101.200.630.690.69690.000.010.014000000040000000249848982493436317644267167868600.042770.04930.041940.04723P10YP5YP5Y5.254650.00P3MP1YP1YP1YP1YP1YP3Y73406318147503 0000049754 2019-01-01 2019-09-30 0000049754 2019-10-25 0000049754 2019-09-30 0000049754 2018-12-31 0000049754 2018-07-01 2018-09-30 0000049754 2019-07-01 2019-09-30 0000049754 2018-01-01 2018-09-30 0000049754 us-gaap:AdvertisingMember 2019-01-01 2019-09-30 0000049754 us-gaap:FinancialServiceMember 2019-07-01 2019-09-30 0000049754 din:FranchisorRoyaltiesfranchisefeesandotherMember 2019-01-01 2019-09-30 0000049754 din:FranchisorRoyaltiesfranchisefeesandotherMember 2018-07-01 2018-09-30 0000049754 us-gaap:AdvertisingMember 2018-07-01 2018-09-30 0000049754 us-gaap:FranchisorMember 2019-01-01 2019-09-30 0000049754 us-gaap:AdvertisingMember 2019-07-01 2019-09-30 0000049754 us-gaap:FoodAndBeverageMember 2018-01-01 2018-09-30 0000049754 us-gaap:FranchisorMember 2018-07-01 2018-09-30 0000049754 us-gaap:FoodAndBeverageMember 2019-01-01 2019-09-30 0000049754 din:FranchisorRoyaltiesfranchisefeesandotherMember 2018-01-01 2018-09-30 0000049754 us-gaap:FinancialServiceMember 2018-01-01 2018-09-30 0000049754 us-gaap:AdvertisingMember 2018-01-01 2018-09-30 0000049754 us-gaap:FoodAndBeverageMember 2019-07-01 2019-09-30 0000049754 us-gaap:FinancialServiceMember 2018-07-01 2018-09-30 0000049754 us-gaap:FranchiseMember 2018-07-01 2018-09-30 0000049754 din:FranchisorRoyaltiesfranchisefeesandotherMember 2019-07-01 2019-09-30 0000049754 us-gaap:FranchisorMember 2018-01-01 2018-09-30 0000049754 din:FranchisorAdvertisingRevenueMember 2018-07-01 2018-09-30 0000049754 us-gaap:FoodAndBeverageMember 2018-07-01 2018-09-30 0000049754 din:FranchisorAdvertisingRevenueMember 2018-01-01 2018-09-30 0000049754 us-gaap:FinancialServiceMember 2019-01-01 2019-09-30 0000049754 us-gaap:FranchiseMember 2018-01-01 2018-09-30 0000049754 us-gaap:FranchisorMember 2019-07-01 2019-09-30 0000049754 us-gaap:FranchiseMember 2019-07-01 2019-09-30 0000049754 us-gaap:FranchiseMember 2019-01-01 2019-09-30 0000049754 din:FranchisorAdvertisingRevenueMember 2019-01-01 2019-09-30 0000049754 din:FranchisorAdvertisingRevenueMember 2019-07-01 2019-09-30 0000049754 2018-09-30 0000049754 us-gaap:TreasuryStockMember 2018-01-01 2018-09-30 0000049754 us-gaap:CommonStockMember 2018-01-01 2018-09-30 0000049754 us-gaap:TreasuryStockMember 2017-12-31 0000049754 us-gaap:AdditionalPaidInCapitalMember 2017-12-31 0000049754 us-gaap:AdditionalPaidInCapitalMember 2018-01-01 2018-09-30 0000049754 2017-12-31 0000049754 us-gaap:RetainedEarningsMember 2017-12-31 0000049754 us-gaap:AdditionalPaidInCapitalMember 2018-09-30 0000049754 us-gaap:RetainedEarningsMember 2018-09-30 0000049754 us-gaap:AccumulatedOtherComprehensiveIncomeMember 2018-09-30 0000049754 us-gaap:CommonStockMember 2017-12-31 0000049754 us-gaap:AccumulatedOtherComprehensiveIncomeMember 2018-01-01 2018-09-30 0000049754 us-gaap:TreasuryStockMember 2018-09-30 0000049754 us-gaap:CommonStockMember 2018-09-30 0000049754 us-gaap:RetainedEarningsMember 2018-01-01 2018-09-30 0000049754 us-gaap:AccumulatedOtherComprehensiveIncomeMember 2017-12-31 0000049754 us-gaap:AdditionalPaidInCapitalMember 2018-06-30 0000049754 us-gaap:CommonStockMember 2018-07-01 2018-09-30 0000049754 us-gaap:AdditionalPaidInCapitalMember 2018-07-01 2018-09-30 0000049754 2018-06-30 0000049754 us-gaap:CommonStockMember 2018-06-30 0000049754 us-gaap:RetainedEarningsMember 2018-07-01 2018-09-30 0000049754 us-gaap:TreasuryStockMember 2018-06-30 0000049754 us-gaap:TreasuryStockMember 2018-07-01 2018-09-30 0000049754 us-gaap:RetainedEarningsMember 2018-06-30 0000049754 us-gaap:AccumulatedOtherComprehensiveIncomeMember 2018-06-30 0000049754 2019-01-01 0000049754 us-gaap:TreasuryStockMember 2018-12-31 0000049754 us-gaap:CommonStockMember 2019-01-01 2019-09-30 0000049754 us-gaap:RetainedEarningsMember 2019-01-01 2019-09-30 0000049754 us-gaap:AccumulatedOtherComprehensiveIncomeMember 2019-09-30 0000049754 us-gaap:CommonStockMember 2018-12-31 0000049754 us-gaap:AdditionalPaidInCapitalMember 2019-01-01 2019-09-30 0000049754 us-gaap:AdditionalPaidInCapitalMember 2018-12-31 0000049754 us-gaap:AdditionalPaidInCapitalMember 2019-09-30 0000049754 us-gaap:AccumulatedOtherComprehensiveIncomeMember 2018-12-31 0000049754 us-gaap:TreasuryStockMember 2019-01-01 2019-09-30 0000049754 us-gaap:RetainedEarningsMember 2019-01-01 0000049754 us-gaap:CommonStockMember 2019-09-30 0000049754 us-gaap:RetainedEarningsMember 2018-12-31 0000049754 us-gaap:TreasuryStockMember 2019-09-30 0000049754 us-gaap:RetainedEarningsMember 2019-09-30 0000049754 us-gaap:TreasuryStockMember 2019-06-30 0000049754 us-gaap:CommonStockMember 2019-07-01 2019-09-30 0000049754 us-gaap:RetainedEarningsMember 2019-07-01 2019-09-30 0000049754 us-gaap:AccumulatedOtherComprehensiveIncomeMember 2019-06-30 0000049754 us-gaap:AccumulatedOtherComprehensiveIncomeMember 2019-07-01 2019-09-30 0000049754 us-gaap:AdditionalPaidInCapitalMember 2019-07-01 2019-09-30 0000049754 us-gaap:TreasuryStockMember 2019-07-01 2019-09-30 0000049754 us-gaap:AdditionalPaidInCapitalMember 2019-06-30 0000049754 us-gaap:CommonStockMember 2019-06-30 0000049754 us-gaap:RetainedEarningsMember 2019-06-30 0000049754 2019-06-30 0000049754 us-gaap:AccountingStandardsUpdate201602Member 2019-01-01 0000049754 us-gaap:AccountingStandardsUpdate201602Member 2019-01-01 2019-01-01 0000049754 us-gaap:AccountingStandardsUpdate201602Member us-gaap:RetainedEarningsMember 2019-01-01 0000049754 din:FranchiseRevenueTransactionsMember 2018-12-31 0000049754 din:FranchiseRevenueTransactionsMember 2019-09-30 0000049754 din:PancakeAndWaffleDryMixMember 2018-07-01 2018-09-30 0000049754 din:FranchiseAndDevelopmentFeesMember 2018-07-01 2018-09-30 0000049754 din:RoyaltiesMember 2018-01-01 2018-09-30 0000049754 din:RoyaltiesMember 2019-07-01 2019-09-30 0000049754 din:RoyaltiesMember 2019-01-01 2019-09-30 0000049754 din:FranchiseAndDevelopmentFeesMember 2018-01-01 2018-09-30 0000049754 din:PancakeAndWaffleDryMixMember 2018-01-01 2018-09-30 0000049754 din:FranchiseAndDevelopmentFeesMember 2019-01-01 2019-09-30 0000049754 din:PancakeAndWaffleDryMixMember 2019-01-01 2019-09-30 0000049754 din:PancakeAndWaffleDryMixMember 2019-07-01 2019-09-30 0000049754 din:FranchiseAndDevelopmentFeesMember 2019-07-01 2019-09-30 0000049754 din:RoyaltiesMember 2018-07-01 2018-09-30 0000049754 2019-09-30 0000049754 2022-01-01 2019-09-30 0000049754 2021-01-01 2019-09-30 0000049754 2020-01-01 2019-09-30 0000049754 2024-01-01 2019-09-30 0000049754 2019-10-01 2019-09-30 0000049754 2023-01-01 2019-09-30 0000049754 din:IhopMember srt:MinimumMember 2019-09-30 0000049754 din:ApplebeesMember 2019-09-30 0000049754 din:ApplebeesMember srt:MinimumMember 2019-09-30 0000049754 din:ApplebeesMember srt:MaximumMember 2019-09-30 0000049754 din:IhopMember 2019-09-30 0000049754 din:IhopMember srt:MaximumMember 2019-09-30 0000049754 din:Series20181VariableFundingSeniorNotesClassA1Member 2019-09-30 0000049754 din:Series201914.723FixedRateSeniorSecuredNotesClassA2IIMember 2018-12-31 0000049754 din:Series20181VariableFundingSeniorNotesClassA1Member 2018-12-31 0000049754 din:Series20141ClassA24.227FixedRateSeniorSecuredNotesMember 2018-12-31 0000049754 din:Series201914.723FixedRateSeniorSecuredNotesClassA2IIMember 2019-09-30 0000049754 din:Series201914.194FixedRateSeniorSecuredNotesClassA2IMember 2018-12-31 0000049754 din:Series20141ClassA24.227FixedRateSeniorSecuredNotesMember 2019-09-30 0000049754 din:Series201914.194FixedRateSeniorSecuredNotesClassA2IMember 2019-09-30 0000049754 din:Series20141ClassA24.227FixedRateSeniorSecuredNotesMember 2019-01-01 2019-09-30 0000049754 srt:ScenarioForecastMember din:Series201914.194FixedRateSeniorSecuredNotesClassA2IMember 2026-06-01 2026-06-30 0000049754 us-gaap:LetterOfCreditMember din:Series20191VariableFundingSeniorNotesClassA1Member 2019-01-01 2019-09-30 0000049754 us-gaap:RevolvingCreditFacilityMember din:A20181ClassA1NotesMember 2018-09-30 0000049754 us-gaap:LetterOfCreditMember us-gaap:EurodollarMember 2019-01-01 2019-09-30 0000049754 din:Series20181VariableFundingSeniorNotesClassA1Member 2019-01-01 2019-09-30 0000049754 din:Series201914.723FixedRateSeniorSecuredNotesClassA2IIMember 2019-06-05 0000049754 din:Series201914.194FixedRateSeniorSecuredNotesClassA2IMember 2019-06-05 0000049754 din:Series20181VariableFundingSeniorNotesClassA1Member 2019-07-01 2019-09-30 0000049754 us-gaap:RevolvingCreditFacilityMember din:A20181ClassA1NotesMember 2018-01-01 2018-09-30 0000049754 us-gaap:LetterOfCreditMember din:FederalFundsRateMember 2019-01-01 2019-09-30 0000049754 us-gaap:LetterOfCreditMember us-gaap:BaseRateMember 2019-01-01 2019-09-30 0000049754 srt:ScenarioForecastMember din:Series201914.723FixedRateSeniorSecuredNotesClassA2IIMember din:TenYearUnitedStatesTreasuryBillRateMember 2026-06-01 2026-06-30 0000049754 us-gaap:RevolvingCreditFacilityMember din:Series20191VariableFundingSeniorNotesClassA1Member 2019-09-30 0000049754 din:Series20191VariableFundingSeniorNotesClassA1Member 2019-09-30 0000049754 us-gaap:LetterOfCreditMember din:Series20181VariableFundingSeniorNotesClassA1Member 2019-09-30 0000049754 srt:ScenarioForecastMember din:Series201914.194FixedRateSeniorSecuredNotesClassA2IMember din:TenYearUnitedStatesTreasuryBillRateMember 2026-06-01 2026-06-30 0000049754 us-gaap:RevolvingCreditFacilityMember din:Series20191VariableFundingSeniorNotesClassA1Member us-gaap:EurodollarMember 2019-01-01 2019-09-30 0000049754 us-gaap:RevolvingCreditFacilityMember din:A20181ClassA1NotesMember 2018-09-05 0000049754 us-gaap:RevolvingCreditFacilityMember din:A20181ClassA1NotesMember us-gaap:InterestExpenseMember 2018-07-01 2018-09-30 0000049754 srt:MaximumMember din:Series201914.194FixedRateSeniorSecuredNotesClassA2IMember 2019-09-30 0000049754 srt:MaximumMember 2019-09-30 0000049754 2019-04-01 2019-06-30 0000049754 din:OctoberTwoThousandFifteenShareRepurchaseProgramMember 2015-10-31 0000049754 din:TwoThousandNineteenRepurchaseProgramMember 2019-02-20 0000049754 2018-10-01 2018-12-31 0000049754 2019-01-01 2019-03-31 0000049754 din:TwoThousandNineteenRepurchaseProgramMember 2019-09-30 0000049754 din:OctoberTwoThousandFifteenShareRepurchaseProgramMember 2019-01-01 2019-09-30 0000049754 din:OctoberTwoThousandFifteenShareRepurchaseProgramMember 2019-07-01 2019-09-30 0000049754 din:OctoberTwoThousandFifteenShareRepurchaseProgramMember 2019-09-30 0000049754 din:TwoThousandNineteenRepurchaseProgramMember 2019-01-01 2019-09-30 0000049754 din:TwoThousandNineteenRepurchaseProgramMember 2019-07-01 2019-09-30 0000049754 2019-07-12 2019-07-12 0000049754 us-gaap:SubsequentEventMember 2019-10-04 2019-10-04 0000049754 2019-04-05 2019-04-05 0000049754 2019-01-01 2019-01-31 0000049754 us-gaap:InternalRevenueServiceIRSMember 2019-04-01 2019-06-30 0000049754 srt:MinimumMember din:LongTermIncentivePlanMember 2019-01-01 2019-09-30 0000049754 din:LongTermIncentivePlanMember 2019-07-01 2019-09-30 0000049754 din:CashsettledRestrictedStockUnitsMember 2019-01-01 2019-09-30 0000049754 us-gaap:RestrictedStockUnitsRSUMember 2019-01-01 2019-09-30 0000049754 srt:MaximumMember din:LongTermIncentivePlanMember 2019-01-01 2019-09-30 0000049754 din:LongTermIncentivePlanMember 2018-01-01 2018-09-30 0000049754 din:CashsettledRestrictedStockUnitsMember 2018-07-01 2018-09-30 0000049754 din:LongTermIncentivePlanMember 2018-12-31 0000049754 us-gaap:EmployeeStockOptionMember 2019-09-30 0000049754 us-gaap:RestrictedStockUnitsRSUMember 2019-09-30 0000049754 din:LongTermIncentivePlanMember 2019-09-30 0000049754 din:LongTermIncentivePlanMember 2018-07-01 2018-09-30 0000049754 din:CashsettledRestrictedStockUnitsMember 2019-07-01 2019-09-30 0000049754 din:CashsettledRestrictedStockUnitsMember 2018-01-01 2018-09-30 0000049754 din:LongTermIncentivePlanMember 2019-01-01 2019-09-30 0000049754 us-gaap:EmployeeStockOptionMember 2019-01-01 2019-09-30 0000049754 us-gaap:RestrictedStockMember 2019-01-01 2019-09-30 0000049754 us-gaap:RestrictedStockUnitsRSUMember 2018-12-31 0000049754 us-gaap:RestrictedStockMember 2019-09-30 0000049754 us-gaap:RestrictedStockMember 2018-12-31 0000049754 din:CashsettledRestrictedStockUnitsMember 2018-12-31 0000049754 din:CashsettledRestrictedStockUnitsMember 2019-09-30 0000049754 us-gaap:EmployeeStockOptionMember 2018-12-31 0000049754 us-gaap:EmployeeStockOptionMember 2019-07-01 2019-09-30 0000049754 din:IhopMember us-gaap:FranchisedUnitsMember 2019-09-30 0000049754 din:ApplebeesMember us-gaap:FranchisedUnitsMember 2019-09-30 0000049754 din:ApplebeesMember us-gaap:EntityOperatedUnitsMember 2019-09-30 0000049754 us-gaap:OperatingSegmentsMember din:CompanyRestaurantsMember 2019-01-01 2019-09-30 0000049754 us-gaap:OperatingSegmentsMember us-gaap:FoodAndBeverageMember din:CompanyRestaurantsMember 2018-01-01 2018-09-30 0000049754 us-gaap:CorporateMember 2019-07-01 2019-09-30 0000049754 us-gaap:OperatingSegmentsMember din:RentalOperationsMember 2019-07-01 2019-09-30 0000049754 us-gaap:OperatingSegmentsMember din:CompanyRestaurantsMember 2018-01-01 2018-09-30 0000049754 us-gaap:OperatingSegmentsMember din:RentalOperationsMember 2018-01-01 2018-09-30 0000049754 us-gaap:OperatingSegmentsMember 2019-01-01 2019-09-30 0000049754 us-gaap:OperatingSegmentsMember din:RentalOperationsMember 2019-01-01 2019-09-30 0000049754 us-gaap:CorporateNonSegmentMember 2018-01-01 2018-09-30 0000049754 us-gaap:OperatingSegmentsMember us-gaap:FranchisorMember din:FranchiseOperationsMember 2019-07-01 2019-09-30 0000049754 us-gaap:OperatingSegmentsMember din:FinancingOperationsMember 2019-01-01 2019-09-30 0000049754 us-gaap:OperatingSegmentsMember din:FinancingOperationsMember 2018-01-01 2018-09-30 0000049754 us-gaap:OperatingSegmentsMember us-gaap:FinancialServiceMember din:FinancingOperationsMember 2018-01-01 2018-09-30 0000049754 us-gaap:OperatingSegmentsMember din:CompanyRestaurantsMember 2019-07-01 2019-09-30 0000049754 us-gaap:OperatingSegmentsMember din:FranchiseOperationsMember 2018-01-01 2018-09-30 0000049754 us-gaap:OperatingSegmentsMember din:FranchiseOperationsMember 2019-01-01 2019-09-30 0000049754 us-gaap:OperatingSegmentsMember din:CompanyRestaurantsMember 2018-07-01 2018-09-30 0000049754 us-gaap:OperatingSegmentsMember din:FinancingOperationsMember 2019-07-01 2019-09-30 0000049754 us-gaap:OperatingSegmentsMember 2019-07-01 2019-09-30 0000049754 us-gaap:OperatingSegmentsMember din:FranchiseOperationsMember 2018-07-01 2018-09-30 0000049754 us-gaap:OperatingSegmentsMember us-gaap:FoodAndBeverageMember din:CompanyRestaurantsMember 2019-07-01 2019-09-30 0000049754 us-gaap:OperatingSegmentsMember din:RentalOperationsMember 2018-07-01 2018-09-30 0000049754 us-gaap:CorporateNonSegmentMember 2019-07-01 2019-09-30 0000049754 us-gaap:CorporateNonSegmentMember 2019-01-01 2019-09-30 0000049754 us-gaap:CorporateMember 2018-01-01 2018-09-30 0000049754 us-gaap:OperatingSegmentsMember din:FinancingOperationsMember 2018-07-01 2018-09-30 0000049754 us-gaap:OperatingSegmentsMember us-gaap:FinancialServiceMember din:FinancingOperationsMember 2018-07-01 2018-09-30 0000049754 us-gaap:OperatingSegmentsMember us-gaap:FranchisorMember din:FranchiseOperationsMember 2018-07-01 2018-09-30 0000049754 us-gaap:OperatingSegmentsMember 2018-01-01 2018-09-30 0000049754 us-gaap:CorporateMember 2019-01-01 2019-09-30 0000049754 us-gaap:OperatingSegmentsMember us-gaap:FoodAndBeverageMember din:CompanyRestaurantsMember 2018-07-01 2018-09-30 0000049754 us-gaap:OperatingSegmentsMember us-gaap:FinancialServiceMember din:FinancingOperationsMember 2019-07-01 2019-09-30 0000049754 us-gaap:OperatingSegmentsMember us-gaap:FinancialServiceMember din:FinancingOperationsMember 2019-01-01 2019-09-30 0000049754 us-gaap:CorporateMember 2018-07-01 2018-09-30 0000049754 us-gaap:OperatingSegmentsMember us-gaap:FranchisorMember din:FranchiseOperationsMember 2018-01-01 2018-09-30 0000049754 us-gaap:OperatingSegmentsMember us-gaap:FranchisorMember din:FranchiseOperationsMember 2019-01-01 2019-09-30 0000049754 us-gaap:CorporateNonSegmentMember 2018-07-01 2018-09-30 0000049754 us-gaap:OperatingSegmentsMember 2018-07-01 2018-09-30 0000049754 us-gaap:OperatingSegmentsMember din:FranchiseOperationsMember 2019-07-01 2019-09-30 0000049754 us-gaap:OperatingSegmentsMember us-gaap:FoodAndBeverageMember din:CompanyRestaurantsMember 2019-01-01 2019-09-30 0000049754 us-gaap:FairValueInputsLevel2Member us-gaap:CarryingReportedAmountFairValueDisclosureMember 2018-12-31 0000049754 us-gaap:FairValueInputsLevel2Member us-gaap:EstimateOfFairValueFairValueDisclosureMember 2019-09-30 0000049754 us-gaap:FairValueInputsLevel2Member us-gaap:EstimateOfFairValueFairValueDisclosureMember 2018-12-31 0000049754 us-gaap:FairValueInputsLevel2Member us-gaap:CarryingReportedAmountFairValueDisclosureMember 2019-09-30 0000049754 din:ApplebeesMember us-gaap:PropertyLeaseGuaranteeMember 2019-09-30 0000049754 din:HeldforAdvertisingActivityDepositsMember 2018-12-31 0000049754 din:HeldinTrustDepositsMember 2019-09-30 0000049754 din:HeldinTrustDepositsMember 2018-12-31 0000049754 din:HeldforAdvertisingActivityDepositsMember 2019-09-30 din:properties xbrli:pure xbrli:shares iso4217:USD xbrli:shares utreg:Rate din:real_property iso4217:USD din:restaurant_concept din:Country din:Territory din:Restaurant din:segment
Table of Contents

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
__________________________________________________ 
FORM 10-Q
 (Mark One)
      QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 For the quarterly period ended September 30, 2019
 OR
      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
http://api.tenkwizard.com/cgi/image?quest=1&rid=23&ipage=13169247&doc=11 Dine Brands Global, Inc. http://api.tenkwizard.com/cgi/image?quest=1&rid=23&ipage=13169247&doc=14
(Exact name of registrant as specified in its charter)
Delaware
 
 
95-3038279
(State or other jurisdiction of incorporation or organization)
 
 
(I.R.S. Employer Identification No.)
450 North Brand Boulevard,
 
 
91203-1903
Glendale,
CA
 
 
 
(Address of principal executive offices)
 
 
(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
 
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   No 
 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   No 
 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 filer
 
Accelerated filer
Non-accelerated filer
 
 
 
 
 
 
Smaller reporting company 
 
 
 
Emerging growth company

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 
 
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes 
  No  
 
As of October 25, 2019, the Registrant had 16,791,860 shares of Common Stock outstanding.


Table of Contents

Dine Brands Global, Inc. and Subsidiaries
Index
 
 
Page
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 

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, including any insolvency or bankruptcy; credit risks from our IHOP franchisees operating under our previous IHOP business model in which we built and equipped IHOP restaurants and then franchised them to franchisees; 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; 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

1

Table of Contents

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 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; 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 and third fiscal quarters of 2019 ended on June 30, 2019 and September 29, 2019, respectively. The first fiscal quarter of 2018 began on January 1, 2018 and ended on April 1, 2018; the second and third fiscal quarters of 2018 ended on July 1, 2018 and September 30, 2018, respectively.

 





2

Table of Contents

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, 2019
 
December 31, 2018
 
 
(Unaudited)
 
 
Current assets:
 
 

 
 

Cash and cash equivalents
 
$
100,518

 
$
137,164

Receivables, net
 
91,426

 
137,504

Restricted cash
 
36,694

 
48,515

Prepaid gift card costs
 
29,090

 
38,195

Prepaid income taxes
 
11,349

 
17,402

Other current assets
 
6,928

 
3,410

Total current assets
 
276,005

 
382,190

Other intangible assets, net
 
577,357

 
585,889

Operating lease right-of-use assets
 
370,500

 

Goodwill
 
343,862

 
345,314

Property and equipment, net
 
220,744

 
240,264

Long-term receivables, net
 
93,262

 
103,102

Deferred rent receivable
 
72,366

 
77,069

Non-current restricted cash
 
15,700

 
14,700

Other non-current assets, net
 
27,712

 
26,152

Total assets
 
$
1,997,508

 
$
1,774,680

Liabilities and Stockholders’ Deficit
 
 

 
 

Current liabilities:
 
 

 
 

Current maturities of long-term debt
 
$

 
$
25,000

Accounts payable
 
33,689

 
43,468

Gift card liability
 
103,756

 
160,438

Current maturities of operating lease obligations
 
67,815

 

Current maturities of finance lease and financing obligations
 
13,219

 
14,031

Accrued employee compensation and benefits
 
21,410

 
27,479

Dividends payable
 
11,831

 
11,389

Deferred franchise revenue, short-term
 
10,328

 
10,138

Other accrued expenses
 
28,686

 
24,243

Total current liabilities
 
290,734

 
316,186

Long-term debt, less current maturities
 
1,287,738

 
1,274,087

Operating lease obligations, less current maturities
 
369,164

 

Finance lease obligations, less current maturities
 
81,317

 
87,762

Financing obligations, less current maturities
 
37,939

 
38,482

Deferred income taxes, net
 
100,455

 
105,816

Deferred franchise revenue, long-term
 
57,997

 
64,557

Other non-current liabilities
 
11,946

 
90,063

Total liabilities
 
2,237,290

 
1,976,953

Commitments and contingencies
 


 


Stockholders’ deficit:
 
 

 
 

Common stock, $0.01 par value; shares: 40,000,000 authorized; September 30, 2019 - 24,934,363 issued, 16,786,860 outstanding; December 31, 2018 - 24,984,898 issued, 17,644,267 outstanding
 
249

 
250

 Additional paid-in-capital
 
243,358

 
237,726

 Retained earnings
 
45,939

 
10,414

 Accumulated other comprehensive loss
 
(60
)
 
(60
)
Treasury stock, at cost; shares: September 30, 2019 - 8,147,503; December 31, 2018 - 7,340,631
 
(529,268
)
 
(450,603
)
Total stockholders’ deficit
 
(239,782
)
 
(202,273
)
Total liabilities and stockholders’ deficit
 
$
1,997,508

 
$
1,774,680


 See the accompanying Notes to Consolidated Financial Statements.

3

Table of Contents

Dine Brands Global, Inc. and Subsidiaries
Consolidated Statements of Comprehensive Income
(In thousands, except per share amounts)
(Unaudited)
 
 
Three Months Ended
 
Nine Months Ended
 
 
September 30,
 
September 30,
 
 
2019
 
2018
 
2019
 
2018
Revenues:
 
 

 
 
 
 
 
 
Franchise revenues:
 
 
 
 
 
 
 
 
Royalties, franchise fees and other
 
88,686

 
91,062

 
$
275,912

 
$
275,775

Advertising revenue
 
67,514

 
71,016

 
211,882

 
193,557

Total franchise revenues
 
156,200

 
162,078

 
487,794

 
469,332

Company restaurant sales
 
30,548

 

 
100,034

 

Rental revenues
 
28,970

 
30,127

 
89,559

 
91,292

Financing revenues
 
1,687

 
1,894

 
5,280

 
6,109

Total revenues
 
217,405

 
194,099

 
682,667

 
566,733

Cost of revenues:
 
 

 
 

 
 
 
 
Franchise expenses:
 
 
 
 
 
 
 
 
Advertising expenses
 
67,514

 
71,016

 
211,882

 
193,557

Other franchise expenses
 
7,063

 
7,325

 
21,905

 
49,600

Total franchise expenses
 
74,577

 
78,341

 
233,787

 
243,157

Company restaurant expenses
 
30,361

 

 
93,131

 

Rental expenses:
 
 
 
 
 
 
 
 
Interest expense from finance leases
 
1,351

 
1,668

 
4,325

 
5,315

Other rental expenses
 
21,251

 
21,314

 
63,841

 
63,096

Total rental expenses
 
22,602

 
22,982

 
68,166

 
68,411

Financing expenses
 
145

 
150

 
437

 
449

Total cost of revenues
 
127,685

 
101,473

 
395,521

 
312,017

Gross profit
 
89,720

 
92,626

 
287,146

 
254,716

General and administrative expenses
 
38,922

 
40,753

 
121,105

 
121,423

Interest expense, net
 
15,238

 
15,430

 
45,233

 
46,110

Amortization of intangible assets
 
2,925

 
2,505

 
8,774

 
7,513

Closure and impairment charges
 
157

 
217

 
640

 
119

Loss on extinguishment of debt
 

 

 
8,276

 

Debt refinancing costs
 

 
2,532

 

 
2,532

Loss (gain) on disposition of assets
 
746

 
(58
)
 
1,187

 
(1,535
)
Income before income tax provision
 
31,732

 
31,247

 
101,931

 
78,554

Income tax provision
 
(7,815
)
 
(7,660
)
 
(24,981
)
 
(25,181
)
Net income
 
23,917

 
23,587

 
76,950

 
53,373

Other comprehensive income (loss) net of tax:
 
 
 
 
 
 
 
 
Adjustment to unrealized loss on available-for-sale investments
 

 

 

 
50

Foreign currency translation adjustment
 
(1
)
 

 

 
(6
)
Total comprehensive income
 
$
23,916

 
$
23,587

 
$
76,950

 
$
53,417

Net income available to common stockholders:
 
 
 
 

 
 
 
 
Net income
 
$
23,917

 
$
23,587

 
$
76,950

 
$
53,373

Less: Net income allocated to unvested participating restricted stock
 
(795
)
 
(799
)
 
(2,621
)
 
(1,793
)
Net income available to common stockholders
 
$
23,122

 
$
22,788

 
$
74,329

 
$
51,580

Net income available to common stockholders per share:
 
 

 
 

 
 
 
 
Basic
 
$
1.38

 
$
1.31

 
$
4.35

 
$
2.94

Diluted
 
$
1.36

 
$
1.29

 
$
4.27

 
$
2.90

Weighted average shares outstanding:
 
 

 
 

 
 
 
 
Basic
 
16,762

 
17,439

 
17,095

 
17,562

Diluted
 
17,055

 
17,738

 
17,432

 
17,797

 
See the accompanying Notes to Consolidated Financial Statements.

4

Table of Contents

Dine Brands Global, Inc. and Subsidiaries
Consolidated Statements of Stockholders' Deficit
Three and Nine Months ended September 30, 2019
(In thousands)
(Unaudited)

 
 
Three Months ended September 30, 2019
 
 
Common Stock
 
 
 
 
 
Accumulated
Other
Comprehensive
Loss
 
Treasury Stock
 
 
 
 
Shares
Outstanding
 
Amount
 
Additional
Paid-in
Capital
 
Retained Earnings
 
Shares
 
Cost
 
Total
Balance at June 30, 2019
 
17,252

 
$
249

 
$
240,555

 
$
33,832

 
$
(59
)
 
7,697

 
$
(489,702
)
 
$
(215,125
)
Net income
 

 

 

 
23,917

 

 

 

 
23,917

Other comprehensive loss
 

 

 

 

 
(1
)
 

 

 
(1
)
Purchase of Company common stock
 
(524
)
 

 

 

 

 
524

 
(42,717
)
 
(42,717
)
Reissuance of treasury stock
 
73

 

 
582

 

 

 
(73
)
 
3,151

 
3,733

Net issuance of shares for stock plans
 
(10
)
 

 

 

 

 

 

 

Repurchase of restricted shares for taxes
 
(4
)
 

 
(347
)
 

 

 

 

 
(347
)
Stock-based compensation
 

 

 
2,326

 

 

 

 

 
2,326

Dividends on common stock
 

 

 
242

 
(11,810
)
 

 

 

 
(11,568
)
Balance at September 30, 2019
 
16,787

 
$
249

 
$
243,358

 
$
45,939

 
$
(60
)
 
8,148

 
$
(529,268
)
 
$
(239,782
)


 
 
Nine Months ended September 30, 2019
 
 
Common Stock
 
 
 
 
 
Accumulated
Other
Comprehensive
Loss
 
Treasury Stock
 
 
 
 
Shares
Outstanding
 
Amount
 
Additional
Paid-in
Capital
 
Retained Earnings
 
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
 

 

 

 
76,950

 

 

 

 
76,950

Purchase of Company common stock
 
(1,067
)
 

 

 

 

 
1,067

 
(90,073
)
 
(90,073
)
Reissuance of treasury stock
 
260

 
(1
)
 
(736
)
 

 

 
(260
)
 
11,408

 
10,671

Net issuance of shares for stock plans
 
(22
)
 

 

 

 

 

 

 

Repurchase of restricted shares for taxes
 
(28
)
 

 
(2,589
)
 

 

 

 

 
(2,589
)
Stock-based compensation
 

 

 
8,220

 

 

 

 

 
8,220

Dividends on common stock
 

 

 
737

 
(36,395
)
 

 

 

 
(35,658
)
Balance at September 30, 2019
 
16,787

 
$
249

 
$
243,358

 
$
45,939

 
$
(60
)
 
8,148

 
$
(529,268
)
 
$
(239,782
)

See the accompanying Notes to Consolidated Financial Statements.
















5

Table of Contents



Dine Brands Global, Inc. and Subsidiaries
Consolidated Statements of Stockholders' Deficit
Three and Nine Months ended September 30, 2018
(In thousands)
(Unaudited)


 
 
Three Months ended September 30, 2018
 
 
Common Stock
 
 
 
 
 
Accumulated
Other
Comprehensive
Loss
 
Treasury Stock
 
 
 
 
Shares
Outstanding
 
Amount
 
Additional
Paid-in
Capital
 
Retained Earnings (Accumulated Deficit)
 
Shares
 
Cost
 
Total
Balance at June 30, 2018
 
17,803

 
$
250

 
$
254,912

 
$
(40,154
)
 
$
(61
)
 
7,202

 
$
(438,198
)
 
$
(223,251
)
Net income
 

 

 

 
23,587

 

 

 

 
23,587

Purchase of Company common stock
 
(108
)
 

 

 

 

 
108

 
(7,877
)
 
(7,877
)
Reissuance of treasury stock
 
62

 

 
832

 

 

 
(62
)
 
2,434

 
3,266

Net issuance of shares for stock plans
 
(10
)
 

 

 

 

 

 

 

Repurchase of restricted shares for taxes
 
(4
)
 

 
(331
)
 

 

 

 

 
(331
)
Stock-based compensation
 

 

 
2,375

 

 

 

 

 
2,375

Dividends on common stock
 

 

 

 

 

 

 

 

Dividends on common stock in excess of retained earnings
 

 

 
(11,163
)
 

 

 

 

 
(11,163
)
Balance at September 30, 2018
 
17,743


$
250


$
246,625


$
(16,567
)

$
(61
)

7,248


$
(443,641
)

$
(213,394
)

 
 
Nine Months ended September 30, 2018
 
 
Common Stock
 
 
 
 
 
Accumulated
Other
Comprehensive
Loss
 
Treasury Stock
 
 
 
 
Shares
Outstanding
 
Amount
 
Additional
Paid-in
Capital
 
Retained Earnings (Accumulated Deficit)
 
Shares
 
Cost
 
Total
Balance at December 31, 2017
 
17,993

 
$
250

 
$
276,408

 
$
(69,940
)
 
$
(105
)
 
7,029

 
$
(422,153
)
 
$
(215,540
)
Net income
 

 

 

 
53,373

 

 

 

 
53,373

Other comprehensive gain
 

 

 

 

 
44

 

 

 
44

Purchase of Company common stock
 
(384
)
 

 

 

 

 
384

 
(27,880
)
 
(27,880
)
Reissuance of treasury stock
 
165

 

 
(2,506
)
 

 

 
(165
)
 
6,392

 
3,886

Net issuance of shares for stock plans
 
(8
)
 

 

 

 

 

 

 

Repurchase of restricted shares for taxes
 
(23
)
 

 
(1,731
)
 

 

 

 

 
(1,731
)
Stock-based compensation
 

 

 
8,016

 

 

 

 

 
8,016

Dividends on common stock
 

 

 

 

 

 

 

 

Dividends on common stock in excess of retained earnings
 

 

 
(33,562
)
 

 

 

 

 
(33,562
)
Balance at September 30, 2018
 
17,743

 
$
250

 
$
246,625

 
$
(16,567
)
 
$
(61
)
 
7,248

 
$
(443,641
)
 
$
(213,394
)


See the accompanying Notes to Consolidated Financial Statements.


6

Table of Contents

Dine Brands Global, Inc. and Subsidiaries
Consolidated Statements of Cash Flows
(In thousands)
(Unaudited)
 
 
Nine Months Ended
 
 
September 30,
 
 
2019
 
2018
Cash flows from operating activities:
 
 

 
 
Net income
 
$
76,950

 
$
53,373

Adjustments to reconcile net income to cash flows provided by operating activities:
 
 
 
 

Depreciation and amortization
 
31,515

 
23,730

Non-cash stock-based compensation expense
 
8,220

 
8,016

Non-cash interest expense
 
2,722

 
2,689

Loss on extinguishment of debt
 
8,276

 

Debt refinancing costs
 

 
875

Closure and impairment charges
 
640

 
61

Deferred income taxes
 
(2,890
)
 
(4,706
)
Deferred revenue
 
(6,590
)
 
(4,017
)
Loss (gain) on disposition of assets
 
1,187

 
(1,535
)
Other
 
(4,584
)
 
(2,088
)
Changes in operating assets and liabilities:
 
 
 
 

Accounts receivable, net
 
4,233

 
(7,222
)
Current income tax receivables and payables
 
7,101

 
4,088

Gift card receivables and payables
 
(15,868
)
 
(22,797
)
Other current assets
 
(3,519
)
 
9,254

Accounts payable
 
359

 
(5,764
)
Accrued employee compensation and benefits
 
(6,069
)
 
5,761

Other current liabilities
 
3,916

 
1,908

Cash flows provided by operating activities
 
105,599

 
61,626

Cash flows from investing activities:
 
 

 
 

Principal receipts from notes, equipment contracts and other long-term receivables
 
16,156

 
20,029

Additions to property and equipment
 
(13,360
)
 
(11,018
)
Proceeds from sale of property and equipment
 
400

 
655

Additions to long-term receivables
 
(6,955
)
 
(6,030
)
Other
 
(258
)
 
(236
)
Cash flows (used in) provided by investing activities
 
(4,017
)
 
3,400

Cash flows from financing activities:
 
 
 
 

Proceeds from issuance of long-term debt
 
1,300,000

 

Repayment of long-term debt
 
(1,283,750
)
 
(9,750
)
Borrowing from revolving financing facility
 

 
50,000

Repayment of revolving financing facility
 
(25,000
)
 
(30,000
)
Payment of debt issuance costs
 
(12,707
)
 
(3,118
)
Dividends paid on common stock
 
(35,273
)
 
(39,973
)
Repurchase of common stock
 
(90,073
)
 
(27,880
)
Principal payments on finance lease obligations
 
(10,329
)
 
(10,374
)
Proceeds from stock options exercised
 
10,672

 
3,887

Tax payments for restricted stock upon vesting
 
(2,589
)
 
(1,731
)
Cash flows used in financing activities
 
(149,049
)
 
(68,939
)
Net change in cash, cash equivalents and restricted cash
 
(47,467
)
 
(3,913
)
Cash, cash equivalents and restricted cash at beginning of period
 
200,379

 
163,146

Cash, cash equivalents and restricted cash at end of period
 
$
152,912

 
$
159,233

Supplemental disclosures:
 
 

 
 

Interest paid in cash
 
$
49,554

 
$
49,761

Income taxes paid in cash
 
$
34,337

 
$
26,044

Non-cash conversion of accounts receivable to notes receivable
 
$

 
$
11,559


See the accompanying Notes to Consolidated Financial Statements.

7

Table of Contents

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 months ended September 30, 2019 are not necessarily indicative of the results that may be expected for the twelve months ending December 31, 2019.
 
The consolidated balance sheet at December 31, 2018 has been derived from the audited consolidated financial statements at that date but does not include all of 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, 2018.
 
2. Basis of Presentation
 
The Company’s fiscal quarters end on the Sunday closest to the last day of each calendar quarter. For convenience, the fiscal quarters of each year are referred to as ending on March 31, June 30, September 30 and December 31. The first fiscal quarter of 2019 began on December 31, 2018 and ended on March 31, 2019; the second and third fiscal quarters of 2019 ended on June 30, 2019 and September 29, 2019, respectively. The first fiscal quarter of 2018 began on January 1, 2018 and ended on April 1, 2018; the second and third fiscal quarters of 2018 ended on July 1, 2018 and September 30, 2018, respectively.

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 in the Current Fiscal Year
 
In February 2016, the Financial Accounting Standards Board (“FASB”) issued guidance with respect to the accounting for leases, as codified in Accounting Standards Topic 842 (“ASC 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 by requiring additional disclosures related to an entity's leasing activities. The Company adopted this change in accounting principle as of the first day of the first fiscal quarter of 2019 using the modified retrospective method. Accordingly, financial information for periods prior to the date of initial application has not been adjusted. The Company has elected the package of practical expedients for adoption that permitted the Company not to reassess its prior conclusions regarding lease identification, lease classification and initial direct costs. The Company also elected a short-term lease exception policy and an accounting policy to not separate non-lease components from lease components. The Company 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 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

8

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)

remaining difference of $50.7 million between the recognized operating lease obligation and the right-of-use assets related to the derecognition of certain assets and liabilities 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 842 had no significant impact on the Company's cash flows from operations or its results of 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. See Note 5 for additional disclosures related to the Company's leasing activities.

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

Newly Issued Accounting Standards Not Yet Adopted

In June 2016, the FASB issued new guidance on the measurement of credit losses on financial instruments. The new guidance will replace the incurred loss methodology of recognizing credit losses on financial instruments that is currently required with a methodology that estimates the expected credit loss on financial instruments and reflects the net amount expected to be collected on the financial instrument. Application of the new guidance may result in the earlier recognition of credit losses as the new methodology will require entities to consider forward-looking information in addition to historical and current information used in assessing incurred losses. The Company will be required to adopt the new guidance on a modified retrospective basis beginning with its first fiscal quarter of 2020. The Company is currently in the process of developing the methodology and key assumptions it will use in estimating expected credit losses but has not yet quantified the impact of the new guidance on its consolidated financial statements and related 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 when adoption is required in the future.
 
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 606 (“ASC 606”). Under ASC 606, revenue is recognized upon transfer of control of promised services or goods to customers in an amount that reflects the consideration the Company expects to receive for those services or goods.

Franchising Activities

The Company owns, franchises and operates the Applebee's Neighborhood Grill & Bar® (“Applebee's”) concept in the casual dining category of the restaurant industry and the Company owns and franchises the International House of Pancakes® (“IHOP”) concept in the family dining category of the restaurant industry. 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 brands that do not directly transfer goods and services to the franchisee, but instead represent a single

9

Table of Contents
Dine Brands Global, Inc. and Subsidiaries
Notes to Consolidated Financial Statements (Continued)

4. Revenue Disclosures (Continued)

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 respective brand’s symbolic intellectual property over the term of the 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.

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

In 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 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 franchising activities. The Company's franchising arrangements do not contain a significant financing component.

Company Restaurant Revenue

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

The following table disaggregates franchise revenue by major type for the three and nine months ended September 30, 2019 and 2018:
 
 
Three Months Ended
 
Nine Months Ended
 
 
 September 30,
 
 September 30,
 
 
2019
 
2018
 
2019
 
2018
 
 
(In thousands)
Franchise Revenue:
 
 

 
 

 
 
 
 
Royalties
 
$
72,506

 
$
75,910

 
$
226,888

 
$
229,162

Advertising fees
 
67,514

 
71,016

 
211,882

 
193,557

Pancake and waffle dry mix sales and other
 
13,201

 
12,541

 
40,158

 
37,809

Franchise and development fees
 
2,979

 
2,611

 
8,866

 
8,804

Total franchise revenue
 
$
156,200

 
$
162,078

 
$
487,794

 
$
469,332



Accounts receivable from franchisees as of September 30, 2019 and December 31, 2018 were $59.5 million (net of allowance of $1.0 million) and $62.6 million (net of allowance of $4.6 million), respectively, and were included in receivables, net in the Consolidated Balance Sheets.

10

Table of Contents
Dine Brands Global, Inc. and Subsidiaries
Notes to Consolidated Financial Statements (Continued)

4. Revenue Disclosures (Continued)


Changes in the Company's contract liability for deferred franchise and development fees during the nine months ended September 30, 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 nine months ended September 30, 2019
 
(8,385
)
Fees deferred during the nine months ended September 30, 2019
 
2,015

Balance at September 30, 2019
 
$
68,325


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

(In thousands)
Remainder of 2019
$
2,250

2020
10,197

2021
7,832

2022
7,310

2023
6,739

2024
6,050

Thereafter
27,947

Total
$
68,325




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 purchase or leasing 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 600 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 have a significant amount of non-real estate leases.

The Company's existing leases/subleases related to IHOP restaurants generally provided for an initial term of 20 to 25 years, with most having one or more five-year renewal options. Leases related to Applebee's restaurants generally have an initial term of 10 to 20 years, with renewal terms of five to 20 years. Option periods were not included in determining liabilities and right-of-use assets related to operating leases. Approximately 200 of the Company's leases contain provisions requiring additional rent payments to the Company (as lessor) based on a percentage of restaurant sales. Approximately 250 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 interest rate in the agreements. The Company made significant judgments in determining the incremental borrowing rates that were used in calculating operating lease liabilities as of the adoption date. Due to the large number of leases, the Company applied a portfolio approach by grouping the leases based on the original lease term. The Company estimated the interest rate for each grouping primarily by

11


Dine Brands Global, Inc. and Subsidiaries
Notes to Consolidated Financial Statements (Continued)

5. Lease Disclosures (Continued)

reference to (i) yield rates on debt issuances by companies of a similar credit rating as the Company; (ii) U.S. Treasury rates as of the adoption date; and (iii) adjustments for differences in years to maturity.

The Company's lease cost for the three and nine months ended September 30, 2019 was as follows:
 
Three months ended September 30, 2019
 
Nine months ended September 30, 2019
Finance lease cost:
 (In millions)
Amortization of right-of-use assets
$
1.3

 
4.0

Interest on lease liabilities
1.9