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 ~~June 30, 2017~~March 31, 2018

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

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

(Exact name of registrant as specified in its charter)



Delaware (State or other jurisdiction of incorporation or organization)		95-3038279 (I.R.S. Employer Identification No.)

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)

______________________________________________________________

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 and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted 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 and post 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 filer x		Accelerated filer o

Non-accelerated filer o (Do not check if a smaller reporting company)
		Smaller reporting company o
		Emerging growth company o

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 ~~August 4, 2017~~April 27, 2018
Common Stock, $0.01 par value		~~17,998,802~~17,831,460

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

Index



		Page
PART I.	FINANCIAL INFORMATION	23
	Item 1—Financial Statements	23
	Consolidated Balance Sheets—~~June 30, 2017~~ March 31, 2018 (unaudited) and December 31, ~~2016~~2017	23
	Consolidated Statements of Comprehensive Income (unaudited)—Three ~~and Six~~ Months Ended ~~June 30,~~March 31, 2018 and 2017 ~~and 2016~~	34
	Consolidated Statements of Cash Flows (unaudited)—~~Six~~Three Months Ended ~~June 30,~~March 31, 2018 and 2017 ~~and 2016~~	45
	Notes to Consolidated Financial Statements (unaudited)	56
	Item 2—Management’s Discussion and Analysis of Financial Condition and Results of Operations	1417
	Item 3—Quantitative and Qualitative Disclosures about Market Risk	2931
	Item 4—Controls and Procedures	2931
PART II.	OTHER INFORMATION	2931
	Item 1—Legal Proceedings	2931
	Item 1A—Risk Factors	3032
	Item 2—Unregistered Sales of Equity Securities and Use of Proceeds	3032
	Item 3—Defaults Upon Senior Securities	3032
	Item 4—Mine Safety Disclosures	3032
	Item 5—Other Information	3032
	Item 6—Exhibits	3133
	Signatures	3235

Cautionary Statement Regarding Forward-Looking Statements

Statements contained in this ~~report~~Quarterly Report on Form 10-Q may constitute ~~forward-looking statements~~“forward-looking statements” within the meaning of Section 27A of the ~~Private~~ Securities ~~Litigation Reform~~ Act of ~~1995.~~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”~~“plan,” “goal” and other similar expressions. You should consider our forward-looking statements in light of the risks discussed under the heading “Risk ~~Factors” in our most recent Annual Report on Form 10-K,~~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~~does not intend to, nor does it assume any obligation to, update or supplement any forward-looking ~~statements.~~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; 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; 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; 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 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.

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 ~~2017~~2018 began on January 1, 2018 and ended on April 1, 2018. The first fiscal quarter of 2017 began on January 2, 2017 and ended on April 2, ~~2017; the second fiscal quarter of 2017 ended on July 2,~~ 2017. ~~The first fiscal quarter of 2016 began on January 4, 2016 and ended on April 3, 2016; the second fiscal quarter of 2016 ended on July 3, 2016.~~

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements.

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

Consolidated Balance Sheets

(In thousands, except share and per share amounts)


Assets	June 30, 2017			December 31, 2016			March 31, 2018			December 31, 2017
	(Unaudited)						(Unaudited)			(as adjusted)
Current assets:
Cash and cash equivalents	$	112,346		$	140,535		$	96,399		$	117,010
Receivables, net	97,487			141,389			105,834			140,188
Restricted cash	31,411			30,256			32,391			31,436
Prepaid gift card costs	37,364			47,115			31,174			40,725
Prepaid income taxes	7,458			2,483			36,078			45,981
Other current assets	6,584			4,370			6,906			12,615
Total current assets	292,650			366,148			308,782			387,955
Long-term receivables, net	136,276			141,152			122,362			126,570
Other intangible assets, net							581,639			582,787
Goodwill							339,236			339,236
Property and equipment, net	200,815			205,055			198,624			199,585
Goodwill	697,470			697,470
Other intangible assets, net	760,977			763,431
Deferred rent receivable	85,052			86,981			81,720			82,971
Non-current restricted cash	14,700			14,700			14,700			14,700
Other non-current assets, net	3,717			3,646			3,983			4,135
Total assets	$	2,191,657		$	2,278,583		$	1,651,046		$	1,737,939
Liabilities and Stockholders’ Equity
Liabilities and Stockholders’ Deficit
Current liabilities:
Current maturities of long-term debt							$	12,965		$	12,965
Accounts payable	$	28,931		$	50,503		45,236			55,028
Gift card liability	115,516			170,812			117,266			164,441
Dividends payable	17,490			17,465			11,520			17,748
Current maturities of capital lease and financing obligations							12,986			14,193
Accrued employee compensation and benefits	9,930			14,609			10,098			13,547
Current maturities of capital lease and financing obligations	13,946			13,144
Accrued advertising	13,121			6,369
Deferred franchise revenue, short-term							10,851			11,001
Other accrued expenses	15,113			13,410			15,047			16,001
Total current liabilities	214,047			286,312			235,969			304,924
Long-term debt, net	1,284,354			1,282,691
Long-term debt, less current maturities							1,267,468			1,269,849
Capital lease obligations, less current maturities	65,982			74,665			60,268			61,895
Financing obligations, less current maturities	39,393			39,499			38,981			39,200
Deferred income taxes, net	247,682			253,898			114,522			119,996
Deferred franchise revenue, long-term							68,581			70,432
Deferred rent payable	66,795			69,572			62,371			69,112
Other non-current liabilities	21,920			19,174			19,772			18,071
Total liabilities	1,940,173			2,025,811			1,867,932			1,953,479
Commitments and contingencies
Stockholders’ equity:
Common stock, $0.01 par value, shares: 40,000,000 authorized; June 30, 2017 - 25,060,155 issued, 17,984,934 outstanding; December 31, 2016 - 25,134,223 issued, 17,969,636 outstanding	251			251
Stockholders’ deficit:
Common stock, $0.01 par value, shares: 40,000,000 authorized; March 31, 2018 - 25,013,067 issued, 17,922,137 outstanding; December 31, 2017 - 25,022,312 issued, 17,993,124 outstanding							250			250
Additional paid-in-capital	292,387			292,809			264,994			276,408
Retained earnings	382,808			382,082
Accumulated deficit							(52,867		)	(69,940		)
Accumulated other comprehensive loss	(107		)	(107		)	(58		)	(105		)
Treasury stock, at cost; shares: June 30, 2017 - 7,075,221; December 31, 2016 - 7,164,587	(423,855		)	(422,263		)
Total stockholders’ equity	251,484			252,772
Total liabilities and stockholders’ equity	$	2,191,657		$	2,278,583
Treasury stock, at cost; shares: March 31, 2018 - 7,090,930; December 31, 2017 - 7,029,188							(429,205		)	(422,153		)
Total stockholders’ deficit							(216,886		)	(215,540		)
Total liabilities and stockholders’ deficit							$	1,651,046		$	1,737,939

See the accompanying Notes to Consolidated Financial Statements.

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

Consolidated Statements of Comprehensive Income

(In thousands, except per share amounts)

(Unaudited)


	Three Months Ended						Six Months Ended						Three Months Ended
	June 30,						June 30,						March 31,
	2017			2016			2017			2016			2018			2017
Revenues:																(as adjusted)
Franchise and restaurant revenues	$	122,987		$	126,989		$	246,565		$	256,775
Franchise revenues													$	155,313		$	154,725
Rental revenues	30,124			30,830			60,589			62,239			30,841			30,465
Financing revenues	2,088			2,439			4,219			4,768			2,009			2,131
Company restaurant sales													—			4,140
Total revenues	155,199			160,258			311,373			323,782			188,163			191,461
Cost of revenues:
Franchise and restaurant expenses	40,669			39,707			81,676			80,576
Franchise expenses													81,872			70,167
Rental expenses	22,681			23,030			45,347			46,261			22,641			22,666
Financing expenses	—			146			—			146			150			—
Company restaurant expenses													—			4,343
Total cost of revenues	63,350			62,883			127,023			126,983			104,663			97,176
Gross profit	91,849			97,375			184,350			196,799			83,500			94,285
General and administrative expenses	37,366			36,511			87,671			75,935			41,911			50,305
Interest expense	15,780			15,383			31,143			30,749			15,199			15,363
Closure and impairment charges													2,604			217
Amortization of intangible assets	2,500			2,500			5,000			4,980			2,502			2,500
Closure and impairment charges, net	2,701			3,291			2,918			3,726
(Gain) loss on disposition of assets	(6,243		)	(48		)	(6,352		)	566
Gain on disposition of assets													(1,427		)	(109		)
Income before income tax provision	39,745			39,738			63,970			80,843			22,711			26,009
Income tax provision	(18,465		)	(12,909		)	(28,327		)	(28,471		)	(5,638		)	(10,414		)
Net income	21,280			26,829			35,643			52,372			17,073			15,595
Other comprehensive income, net of tax:
Other comprehensive (loss) income, net of tax:
Adjustment to unrealized loss on available-for-sale investments													50			—
Foreign currency translation adjustment	—			—			—			1			(3		)	—
Total comprehensive income	$	21,280		$	26,829		$	35,643		$	52,373
Net income and total comprehensive income													$	17,120		$	15,595
Net income available to common stockholders:
Net income	$	21,280		$	26,829		$	35,643		$	52,372		$	17,073		$	15,595
Less: Net income allocated to unvested participating restricted stock	(342		)	(384		)	(602		)	(766		)	(568		)	(283		)
Net income available to common stockholders	$	20,938		$	26,445		$	35,041		$	51,606		$	16,505		$	15,312
Net income available to common stockholders per share:
Basic	$	1.18		$	1.46		$	1.98		$	2.84		$	0.93		$	0.87
Diluted	$	1.18		$	1.45		$	1.98		$	2.82		$	0.92		$	0.86
Weighted average shares outstanding:
Basic	17,719			18,085			17,707			18,173			17,703			17,694
Diluted	17,725			18,188			17,721			18,280			17,845			17,737

Dividends declared per common share	$	0.97		$	0.92		$	1.94		$	1.84		$	0.63		$	0.97
Dividends paid per common share	$	0.97		$	0.92		$	1.94		$	1.84		$	0.97		$	0.97

See the accompanying Notes to Consolidated Financial Statements.

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

Consolidated Statements of Cash Flows

(In thousands)

(Unaudited)


	Six Months Ended						Three Months Ended
	June 30,						March 31,
	2017			2016			2018			2017
Cash flows from operating activities:										(as adjusted)
Net income	$	35,643		$	52,372		$	17,073		$	15,595
Adjustments to reconcile net income to cash flows provided by operating activities:
Depreciation and amortization	15,422			15,554			7,940			7,706
Closure and impairment charges							2,594			209
Non-cash interest expense	1,663			1,591			864			827
Deferred income taxes	(8,514		)	(11,896		)	(1,182		)	(2,714		)
Non-cash stock-based compensation expense	7,567			5,647			3,368			6,165
Tax benefit from stock-based compensation	—			1,169
Excess tax benefit from stock-based compensation	—			(865		)
Closure and impairment charges	2,910			1,249
(Gain) loss on disposition of assets	(6,352		)	566
Gain on disposition of assets							(1,421		)	(109		)
Other	(2,067		)	416			(6,199		)	(2,932		)
Changes in operating assets and liabilities:
Accounts receivable, net	(711		)	880			(8,804		)	(818		)
Current income tax receivables and payables	(481		)	5,291			5,529			7,176
Gift card receivables and payables	(14,121		)	(18,311		)	(2,269		)	(7,855		)
Other current assets	(2,215		)	(1,424		)	5,709			(736		)
Accounts payable	(8,153		)	8,544			65			1,745
Accrued employee compensation and benefits	(4,743		)	(10,949		)	(3,448		)	(2,162		)
Other current liabilities	5,046			4,077			(3,351		)	(2,554		)
Cash flows provided by operating activities	20,894			53,911			16,468			19,543
Cash flows from investing activities:
Additions to property and equipment	(6,945		)	(1,931		)	(3,488		)	(2,997		)
Proceeds from sale of property and equipment	1,100			—			655			—
Principal receipts from notes, equipment contracts and other long-term receivables	9,946			8,658			4,930			5,002
Additions to long-term receivables							(2,325		)	—
Other	(292		)	(250		)	(27		)	(188		)
Cash flows provided by investing activities	3,809			6,477
Cash flows (used in) provided by investing activities							(255		)	1,817
Cash flows from financing activities:
Repayment of long-term debt							(3,250		)	—
Dividends paid on common stock	(34,879		)	(34,029		)	(17,453		)	(17,432		)
Repurchase of common stock	(10,003		)	(35,008		)	(10,003		)	(10,003		)
Principal payments on capital lease and financing obligations	(7,170		)	(6,853		)	(4,536		)	(3,608		)
Tax payments for restricted stock upon vesting	(2,320		)	(2,432		)	(1,083		)	(2,022		)
Proceeds from stock options exercised	2,635			880			456			1,474
Excess tax benefit from stock-based compensation	—			865
Cash flows used in financing activities	(51,737		)	(76,577		)	(35,869		)	(31,591		)
Net change in cash, cash equivalents and restricted cash	(27,034		)	(16,189		)	(19,656		)	(10,231		)
Cash, cash equivalents and restricted cash at beginning of period	185,491			192,013			163,146			185,491
Cash, cash equivalents and restricted cash at end of period	$	158,457		$	175,824		$	143,490		$	175,260
Supplemental disclosures:
Interest paid in cash	$	34,007		$	34,747		$	16,621		$	16,231
Income taxes paid in cash	$	37,241		$	33,980		$	934		$	6,018

See the accompanying Notes to Consolidated Financial Statements.

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

Notes to Consolidated Financial Statements

(Unaudited)

1. General

The accompanying unaudited consolidated financial statements of ~~DineEquity,~~Dine Brands Global, Inc. (the “Company” or ~~“DineEquity”~~“Dine Brands Global”) have been prepared in accordance with United States generally accepted accounting principles (“U.S. GAAP”) for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by U.S. GAAP for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. The operating results for the ~~six~~three months ended ~~June 30, 2017~~March 31, 2018 are not necessarily indicative of the results that may be expected for the twelve months ending December 31, ~~2017.~~2018.

The consolidated balance sheet at December 31, ~~2016~~2017 has been derived from the audited consolidated financial statements at that date, but does not include all of the information and footnotes required by U.S. GAAP for complete financial statements.

These consolidated financial statements should be read in conjunction with the consolidated financial statements and footnotes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, ~~2016.~~2017.

2. Basis of Presentation

~~The first fiscal quarter of 2016 began on January 4, 2016 and ended on April 3, 2016; the second fiscal quarter of 2016~~

~~ended on July 3, 2016.~~

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

Accounting Standards Adopted Effective January ~~2, 2017~~1, 2018

~~In March 2016,~~On January 1, 2018, the ~~Financial~~Company adopted the guidance of Accounting Standards ~~Board~~Codification 606 - Revenue from Contracts with Customers (“~~FASB”~~ASC 606”) issued new guidance that addresses accounting for certain aspects of share-based payments, including excess tax benefits or deficiencies, forfeiture estimates, statutory tax withholding and cash flow classification of certain share-based payment activity.. The Company ~~applied~~adopted this change in accounting principles using the ~~prospective transition method in adopting~~full retrospective method. Accordingly, previously reported financial information has been restated to reflect the ~~new guidance and prior period amounts have not been restated.~~ ~~Because~~application of ASC 606 to all comparative periods presented. The Company utilized all of the practical expedients for adoption allowed under the Company recognized an excess tax deficiency from stock-based compensation as a discrete item, increasing the income tax provision for the three and six months ended June 30, 2017 by $0.9 million and $1.7 million, respectively. Historically, ~~excess tax benefits or deficiencies~~ ~~were recorded as additional paid-in capital.~~full retrospective method. The Company ~~applied~~believes utilization of the ~~prospective transition method with respect to the cash flow classification of certain share-based payment activity; accordingly, the cash flows for the six months ended June 30, 2016~~practical expedients did not have ~~not been restated.~~ ~~The Company has elected to maintain its practice of estimating forfeitures when recognizing expense for share-based payment awards. Amendments to the accounting for minimum statutory withholding requirements had no~~a significant impact on the ~~Company's Consolidated Financial Statements.~~consolidated financial statements of the periods presented herein.

In November 2016, the FASB issued new guidance to reduce diversity in practice in the classification and presentation of changes in restricted cash in the statement of cash flows. The new guidance requires amounts generally described as restricted cash should be included with cash and cash equivalents when reconciling the beginning-of-period total amounts to the end-of-period total amounts shown on the statement of cash flows. Calendar year public entities will be required to adopt the new guidance beginning with the first fiscal quarter of 2018. The Company elected to adopt the new guidance retrospectively

Table of Contents

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

Notes to Consolidated Financial Statements (Continued)

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

~~effective January 2, 2017~~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 ~~cash flows~~Statement of Comprehensive Income for the ~~six~~three months ended ~~June 30, 2016 were restated.~~ March 31, 2017, into “franchise revenues/expense” and “company restaurant sales/expense” as follows:



	(in thousands)
Franchise and restaurant revenues, as reported	$	123,578

Franchise revenues, as reclassified	$	119,438
Company restaurant sales, as reclassified	4,140
	$	123,578

Franchise and restaurant expenses, as reported	$	41,007

Franchise expenses, as reclassified	36,664
Company restaurant expenses, as reclassified	4,343
	$	41,007

Adoption of ASC 606 impacted our previously reported Consolidated Statement of Comprehensive Income for the ~~new guidance did not~~three months ended March 31, 2017, as follows:



	Three Months ended March 31, 2017, as reported			Adjustments due to ASC 606 adoption			Three Months ended March 31, 2017, as adjusted
	(In thousands)
Franchise revenues (as reclassified above)	$	119,438		$	35,287		$	154,725
Franchise expenses (as reclassified above)	36,664			33,503			70,167
Income before income tax provision	24,225			1,784			26,009
Income tax provision	(9,862		)	(552		)	(10,414		)
Net income	14,363			1,232			15,595
Net income per share:
Basic	$	0.80					$	0.87
Diluted	$	0.79					$	0.86

Recognition of Applebee's advertising revenue and expense comprised $33.5 million of the revenue adjustment and all of the expense adjustment. Approximately $1.8 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.

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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)

The adoption of ASC 606 had no impact on the Company's ~~Consolidated Balance Sheets~~cash provided by or used in operating, investing or financing activities as previously reported in its Consolidated Statements of ~~Comprehensive Income.~~Cash Flows.

Additional new accounting guidance became effective for the Company effective January ~~2017,~~1, 2018 that the ~~FASB issued new guidance simplifying~~Company reviewed and concluded was either are not applicable to the ~~test of goodwill for impairment. The new guidance requires a single-step quantitative test to measure potential impairment based~~Company's operations or had no material effect on the excess of a reporting unit's carrying amount over its fair value. Calendar year public entities will be required to adopt the new guidance beginning with the first fiscal quarter of 2020. The Company has elected early adoption of the new guidance, as is permitted for interim or annual tests of goodwill performed after January 1, 2017.Company's consolidated financial statements.

Newly Issued Accounting Standards Not Yet Adopted

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

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

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

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

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

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

~~3. Accounting Policies (Continued)~~

This new guidance supersedes nearly all the existing general revenue recognition guidance under U.S. GAAP as well as most industry-specific revenue recognition guidance, including guidance with respect to revenue recognition by franchisors. The Company believes the recognition of the majority of its revenues, including franchise royalty revenues, sales of IHOP pancake and waffle dry mix and retail sales at company-operated restaurants will not be affected by the new guidance. Additionally, lease rental revenues are not within the scope of the new guidance.

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

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

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

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

4. Revenue Disclosures

Franchise revenue (which comprises the majority of the Company's revenues) and revenue from company-operated restaurants are recognized in accordance with 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. 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 of the utility is derived from its association with the Company’s past or ongoing activities. The nature of the Company’s promise in

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Dine Brands Global, Inc. and Subsidiaries

Notes to Consolidated Financial Statements (Continued)

4. Revenue Disclosures (Continued)

granting the franchise license is to provide the franchisee with access to the 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. 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 is 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 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.

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 franchise term, 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 and has not capitalized any such costs. The Company believes its franchising arrangements do not contain a significant financing component.

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. The impact on the Company's previously reported financial statements of the change from that policy to the policy described above is presented 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 of 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, the Company will record 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.

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 months ended March 31, 2018 and 2017:



	Three Months Ended
	March 31,
	2018		2017
	(In thousands)
Franchise Revenue:
Royalties	$	75,097	$	77,772
Advertising fees	63,836		61,701
Pancake and waffle dry mix sales and other	13,097		12,434
Franchise and development fees	3,283		2,818
Total franchise revenue	$	155,313	$	154,725

Receivables (both unbilled and billed) from franchise revenue transactions as of March 31, 2018 and December 31, 2017 were $69.8 million (net of allowance of $21.3 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 three months ended March 31, 2018 are as follows:



	Deferred Revenue (short- and long-term)
Balance at December 31, 2017	$	81,433
Recognized as revenue during the three months ended March 31, 2018	(2,848		)
Fees received and deferred during the three months ended March 31, 2018	847
Balance at March 31, 2018	$	79,432

Company-operated Restaurants

The Company currently does not operate any restaurants but did operate restaurants 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 that are remitted to the appropriate taxing authorities. Recognition of revenue from company-operated restaurants was not impacted by the adoption of ASC 606 using the full retrospective method.

5. Stockholders' ~~Equity~~Deficit

Dividends

During the ~~six~~three months ended ~~June 30, 2017~~March 31, 2018, the Company paid dividends on common stock of ~~$34.9~~$17.5 million, representing cash dividends of $0.97 per share declared in ~~both~~ the fourth quarter of ~~2016 and the first quarter of~~ 2017. On ~~May 15, 2017,~~February 14, 2018, the Company's Board of Directors declared a ~~second~~first quarter ~~2017~~2018 cash dividend of ~~$0.97~~$0.63 per share of common stock. This dividend was paid on ~~July 7, 2017~~April 6, 2018 to the Company's stockholders of record at the close of business on ~~June~~March 19, ~~2017.~~2018. The Company reported dividends payable of ~~$17.5~~$11.5 million at ~~June 30, 2017.~~March 31, 2018.

Stock Repurchase Program

In October 2015, the Company's Board of Directors approved a stock repurchase program authorizing the Company to repurchase up to $150 million of ~~DineEquity~~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 not require the repurchase of a specific number of shares and can be terminated at any time. A summary of shares repurchased under the 2015 Repurchase Program, during the ~~six~~three months ended ~~June 30, 2017~~March 31, 2018 and cumulatively, is as follows:

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

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Notes to Consolidated Financial Statements (Continued)

4.5. Stockholders' Equity (Continued)



2015 Repurchase Program	Shares	Cost of shares
		(In millions)
Repurchased during the three months ended March 31, 2018	138,638	$	10.0
Cumulative repurchases as of March 31, 2018	1,139,295	$	92.9
Remaining dollar value of shares that may be repurchased	n/a	$	57.1

Treasury Stock

Repurchases of ~~DineEquity~~the Company's common stock are included in treasury stock at the cost of shares repurchased plus any transaction costs. Treasury stock may be re-issued when stock options are exercised, when restricted stock awards are granted and when restricted stock units settle in stock upon vesting. The cost of treasury stock re-issued is determined using the first-in, first-out (“FIFO”) method. During the ~~six~~three months ended ~~June 30, 2017,~~March 31, 2018, the Company re-issued ~~235,152~~76,896 shares of treasury stock at a total FIFO cost of ~~$8.4~~$3.0 million.

5.6. Income Taxes

The Company's effective tax rate was ~~44.3%~~24.8% for the ~~six~~three months ended ~~June 30, 2017~~March 31, 2018 as compared to ~~35.2%~~40.0% for the ~~six~~three months ended ~~June 30, 2016.~~March 31, 2017. The effective tax rate of 24.8% for the ~~six~~three months ended ~~June 30, 2017~~March 31, 2018 was ~~higher due to an increase in unrecognized tax benefits primarily related to~~ §~~199 domestic production activity deductions pertaining to internal software development and to~~significantly lower than the Company’s adoption of accounting guidance which requires excess tax benefits and deficiencies on share-based payments to be recorded as income tax benefits or expense in the income statement, rather than being recorded in additional paid-in capital on the balance sheet as was the practice prior to adoptionrate of the new accounting guidance. The effective tax rate for the six months ended June 30, 2017 increased by 4.3% because of the additional unrecognized tax benefits, while adoption of the new accounting guidance, effective January 2, 2017, increased the Company's effective tax rate by 2.6%. The effective tax rate for the six months ended June 30, 2016 was lower by 2.5%prior period primarily due to ~~applying a lower state income~~the federal statutory tax rate decreasing from 35% to 21% in accordance with the ~~deferred tax balances.~~Tax Cuts and Jobs Act enacted in December 2017.

The total gross unrecognized tax benefit as of ~~June 30, 2017~~March 31, 2018 and December 31, ~~2016~~2017 was ~~$6.0~~$6.1 million and ~~$3.9~~$5.9 million, respectively, excluding interest, penalties and related tax benefits. The Company estimates the unrecognized tax benefit may decrease over the upcoming 12 months by an amount up to ~~$3.8~~$3.1 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 ~~June 30, 2017,~~March 31, 2018, accrued interest was $1.0 million and accrued penalties were less than $0.1 million, excluding any related income tax benefits. As of December 31, ~~2016,~~2017, accrued interest was ~~$1.0~~$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.

The Company files federal income tax returns and the Company or one of its subsidiaries files income tax returns in various ~~state~~states and foreign jurisdictions. 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 Internal Revenue Service commenced examination of the Company’s U.S. federal income tax return for the tax years 2011 to 2013 ~~during the year.~~in fiscal year 2016. The examination is ~~currently in process.~~anticipated to conclude during fiscal year 2018. The Company believes that adequate reserves have been provided relating to all matters contained in the tax periods open to examination.

The Securities and Exchange Commission has issued guidance which provides for a measurement period of one year from the enactment date 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 March 31, 2018, we have not yet completed our 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.

7. Stock-Based Compensation

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

Three months ended June 30, Six months ended June 30,
2017 2016 2017 2016
(In millions)
Total stock-based compensation expense:
Equity classified awards expense $ 1.5
$ 2.5
$ 7.7
$ 5.7
Liability classified awards expense (1.3 ) 0.3
(1.1 ) 1.1
Total pre-tax stock-based compensation expense 0.2
2.8
6.6
6.8
Book income tax benefit (0.1 ) (1.1 ) (2.5 ) (2.6 )
Total stock-based compensation expense, net of tax $ 0.1
$ 1.7
$ 4.1
$ 4.2

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Notes to Consolidated Financial Statements (Continued)

6.7. Stock-Based Compensation (Continued)



	Three months ended March 31,
	2018			2017
	(In millions)
Total stock-based compensation expense:
Equity classified awards expense	$	3.4		$	6.2
Liability classified awards expense	0.5			0.2
Total pre-tax stock-based compensation expense	3.9			6.4
Book income tax benefit	(1.0		)	(2.4		)
Total stock-based compensation expense, net of tax	$	2.9		$	4.0

As of ~~June 30, 2017~~March 31, 2018, total unrecognized compensation expense of ~~$14.2~~$22.8 million related to restricted stock and restricted stock units and ~~$3.1~~$5.0 million related to stock options are expected to be recognized over a weighted average period of ~~1.71~~2.0 years for restricted stock and restricted stock units and ~~1.72~~2.0 years for stock options.

~~Equity Classified Awards - Stock Options~~Fair Value Assumptions

The ~~estimated fair value of the~~Company granted 209,634 stock options ~~granted~~ during the ~~six~~three months ended ~~June 30, 2017~~March 31, 2018 for which the fair value was ~~calculated~~estimated using a Black-Scholes option pricing model. The following summarizes the assumptions used in the Black-Scholes model:



Risk-free interest rate	~~1.9~~2.6	%
Weighted average historical volatility	~~22.9~~26.0	%
Dividend yield	~~7.3~~3.7	%
Expected years until exercise	~~4.5~~4.6
Weighted average fair value of options granted	$~~4.31~~11.77

The Company granted 25,330 performance-based stock options and 26,670 performance-based restricted stock units during the three months ended March 31, 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 ~~as of~~at ~~June 30, 2017~~March 31, 2018, and ~~related~~ activity for the ~~six~~three months ended ~~June 30, 2017~~March 31, 2018 were as follows:

Shares
Weighted
Average
Exercise
Price

Weighted Average
Remaining
Contractual Term
(in Years)

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

Granted 537,030
53.42

Exercised (64,916 ) 40.59

Expired (46,088 ) 79.76

Forfeited (67,033 ) 73.84

Outstanding at June 30, 2017 1,060,127
69.38
7.0 $ 0.0
Vested at June 30, 2017 and Expected to Vest 962,331
70.58
6.7 $ 0.0
Exercisable at June 30, 2017 468,437
$ 81.88
3.8 $ 0.0



	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	234,964		68.71
Exercised	(8,527	)	53.49
Outstanding at March 31, 2018	1,498,485		62.63		7.2	$	15.1
Vested at March 31, 2018 and Expected to Vest	1,295,298		64.44		6.8	$	11.9
Exercisable at March 31, 2018	632,737		$	74.90	4.2	$	3.3

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 ~~second~~first quarter of ~~2017~~2018 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

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Dine Brands Global, Inc. and Subsidiaries

Notes to Consolidated Financial Statements (Continued)

7. Stock-Based Compensation (Continued)

exercised their options on ~~June 30, 2017~~March 31, 2018. 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.

Equity Classified Awards - Restricted Stock and Restricted Stock Units

Outstanding balances as of ~~June 30, 2017~~March 31, 2018, and activity related to restricted stock and restricted stock units for the ~~six~~three months ended ~~June 30, 2017~~March 31, 2018 were as follows:


	Restricted Stock		Weighted Average Grant Date Fair Value		Restricted Stock Units		Weighted Average Grant Date Fair Value		Restricted Stock		Weighted Average Grant Date Fair Value		Restricted Stock Units		Weighted Average Grant Date Fair Value
Outstanding at December 31, 2016	235,472		$	92.91	34,058		$	93.95
Outstanding at December 31, 2017									275,191		$	65.81	303,348		$	28.39
Granted	170,236		54.43		22,926		54.97		68,369		66.88		49,706		47.85
Released	(88,341	)	88.83		(12,199	)	81.57		(39,728	)	87.61		(10,734	)	112.74
Forfeited	(47,005	)	81.77		—		—		(4,628	)	60.58		(71	)	53.49
Outstanding at June 30, 2017	270,362		$	71.86	44,785		$	78.15
Outstanding at March 31, 2018									299,204		$	63.25	342,248		$	28.25

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 three months ended March 31, 2018, 54,822 units were issued and 365 units were forfeited. At March 31, 2018, there were 54,457 units outstanding. For the three months ended March 31, 2018, $0.1 million 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 from 0% to 200% of the target award based on the total stockholder return of ~~DineEquity~~Dine Brands Global common stock compared to the total stockholder returns of a peer group of companies. Although LTIP awards are only paid in cash, since the multiplier is based on the price of the Company's common stock, the awards are considered stock-based compensation in accordance with U.S. GAAP and are classified as liabilities. For the three

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~~DineEquity, Inc. and Subsidiaries~~

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

~~6. Stock-Based Compensation (Continued)~~

months ended ~~June 30,~~March 31, 2018 and 2017, ~~and 2016, a credit of $1.3~~$0.4 million and ~~an expense of $0.3~~$0.2 million, respectively were included in total stock-based compensation expense related to LTIP awards. For the six months ended June 30, 2017 and 2016, a credit of $1.1 million and an expense of $1.1 million, respectively, werewas included in total stock-based compensation expense related to LTIP awards. At ~~June 30, 2017~~March 31, 2018 and December 31, ~~2016~~2017, liabilities of ~~$0.1~~$0.6 million and ~~$1.2~~$0.2 million, respectively, related to LTIP awards were included as part of accrued employee compensation and benefits in the Consolidated Balance Sheets.

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

As of ~~June 30, 2017,~~March 31, 2018, the franchise operations segment consisted of (i) ~~1,968~~1,912 restaurants operated by Applebee’s franchisees in the United States, two U.S. territories and 1415 countries outside the United States and (ii) ~~1,752~~1,791 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), ~~franchise advertising fees from domestic IHOP restaurants and international restaurants of both brands~~ and franchise fees. Franchise operations expenses include advertising expenses, ~~from domestic IHOP restaurants and international restaurants of both brands,~~ the cost of IHOP proprietary products, ~~IHOP and Applebee's~~bad debt expense, franchisor contributions to marketing funds, pre-opening training expenses and other franchise-related 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.

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Dine Brand Global, Inc. and Subsidiaries

Notes to Consolidated Financial Statements (Continued)

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

From time to time, the Company may operate ~~IHOP~~ restaurants reacquired from franchisees on a temporary basis until those restaurants are refranchised. There were no ~~IHOP~~ restaurants under temporary operation at ~~June 30, 2017.~~March 31, 2018.

Information on segments is as follows:



		Three months ended March 31,
		2018			2017 (as adjusted)
	(In millions)
Revenues from external customers:
Franchise operations		$	155.3		$	154.7
Rental operations		30.9			30.5
Company restaurants		—			4.2
Financing operations		2.0			2.1
Total		$	188.2		$	191.5

Interest expense:
Rental operations		$	2.4		$	2.7
Company restaurants		—			0.1
Corporate		15.2			15.4
Total		$	17.6		$	18.2

Depreciation and amortization:
Franchise operations		$	2.7		$	2.7
Rental operations		2.9			3.0
Company restaurants		—			0.1
Corporate		2.3			1.9
Total		$	7.9		$	7.7

Gross profit, by segment:
Franchise operations		$	73.4		$	84.6
Rental operations		8.2			7.8
Company restaurants		—			(0.2		)
Financing operations		1.9			2.1
Total gross profit		83.5			94.3
Corporate and unallocated expenses, net		(60.8		)	(68.3		)
Income before income tax provision		$	22.7		$	26.0

1014

Table of Contents

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

Notes to Consolidated Financial Statements (Continued)

~~7. Segments (Continued)~~

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

Franchise operations $ 119.6
$ 122.5
$ 239.1
$ 247.5
Rental operations 30.1
30.8
60.6
62.2
Company restaurants 3.4
4.5
7.5
9.3
Financing operations 2.1
2.5
4.2
4.8
Total $ 155.2
$ 160.3
$ 311.4
$ 323.8

Interest expense:

Rental operations $ 2.6
$ 3.0
$ 5.4
$ 6.1
Company restaurants 0.1
0.1
0.2
0.2
Corporate 15.8
15.4
31.1
30.7
Total $ 18.5
$ 18.5
$ 36.7
$ 37.0

Depreciation and amortization:

Franchise operations $ 2.7
$ 2.6
$ 5.4
$ 5.2
Rental operations 3.0
3.2
6.0
6.3
Company restaurants —
0.1
0.1
0.2
Corporate 2.0
1.6
3.9
3.8
Total $ 7.7
$ 7.5
$ 15.4
$ 15.5

Gross profit, by segment:

Franchise operations $ 82.4
$ 87.5
$ 165.2
$ 176.8
Rental operations 7.5
7.8
15.3
16.0
Company restaurants (0.1 ) (0.2 ) (0.3 ) (0.6 )
Financing operations 2.1
2.3
4.2
4.6
Total gross profit 91.9
97.4
184.4
196.8
Corporate and unallocated expenses, net (52.2 ) (57.7 ) (120.4 ) (116.0 )
Income before income tax provision $ 39.7
$ 39.7
$ 64.0
$ 80.8

8.9. 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,
2017 2016 2017 2016
(In thousands, except per share data)
Numerator for basic and diluted income per common share:

Net income $ 21,280
$ 26,829
$ 35,643
$ 52,372
Less: Net income allocated to unvested participating restricted stock (342 ) (384 ) (602 ) (766 )
Net income available to common stockholders - basic 20,938
26,445
35,041
51,606
Effect of unvested participating restricted stock in two-class calculation —
1
—
1
Net income available to common stockholders - diluted $ 20,938
$ 26,446
$ 35,041
$ 51,607
Denominator:

Weighted average outstanding shares of common stock - basic 17,719
18,085
17,707
18,173
Dilutive effect of stock options 6
103
14
107
Weighted average outstanding shares of common stock - diluted 17,725
18,188
17,721
18,280
Net income per common share:

Basic $ 1.18
$ 1.46
$ 1.98
$ 2.84
Diluted $ 1.18
$ 1.45
$ 1.98
$ 2.82

~~Table of Contents~~

~~DineEquity, Inc. and Subsidiaries~~

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



	Three months ended March 31,
	2018			2017 (as adjusted)
	(In thousands, except per share data)
Numerator for basic and diluted income per common share:
Net income	$	17,073		$	15,595
Less: Net income allocated to unvested participating restricted stock	(568		)	(283		)
Net income available to common stockholders - basic	16,505			15,312
Effect of unvested participating restricted stock in two-class calculation	2			—
Net income available to common stockholders - diluted	$	16,507		$	15,312
Denominator:
Weighted average outstanding shares of common stock - basic	17,703			17,694
Dilutive effect of stock options	142			43
Weighted average outstanding shares of common stock - diluted	17,845			17,737
Net income per common share:
Basic	$	0.93		$	0.87
Diluted	$	0.92		$	0.86

10. 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 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 Class A-2 Notes (the “Class A-2 Notes”) at ~~June 30, 2017~~March 31, 2018 and December 31, ~~2016~~2017 were as follows:

June 30, 2017 December 31, 2016
Carrying Amount Fair Value Carrying Amount Fair Value
(In millions)
Long-term debt $ 1,284.4
$ 1,278.1
$ 1,282.7
$ 1,286.2



	March 31, 2018				December 31, 2017
	Carrying Amount		Fair Value		Carrying Amount		Fair Value
	(In millions)
Long-term debt, current and long-term	$	1,280.4	$	1,277.3	$	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 Class A-2 Notes and 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)

~~10.~~11. Commitments and Contingencies

Litigation, Claims and Disputes

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

Lease Guarantees

In connection with the sale of Applebee’s restaurants or previous brands to franchisees and other parties, the Company has, in certain cases, guaranteed or has potential continuing liability for lease payments totaling ~~$331.5~~$300.6 million as of ~~June 30, 2017~~March 31, 2018. This amount represents the maximum potential liability for future payments under these leases. ~~Excluding unexercised option periods, the Company's potential liability for future payments under these leases is $58.7 million.~~ These leases have been assigned to the buyers and expire at the end of the respective lease terms, which range from ~~2017~~2018 through 2048. Excluding unexercised option periods, the Company's potential liability for future payments under these leases is $50.0 million. In the event of default, the indemnity and default clauses in the sale or assignment agreements govern the Company's ability to pursue and recover damages incurred.No ~~material lease payment guarantee liabilities have been recorded as of~~ ~~June 30, 2017~~.

~~11.~~12. Restricted Cash

Current restricted cash of ~~$31.4~~$32.4 million at ~~June 30, 2017~~March 31, 2018 primarily consisted of ~~$27.1~~$31.2 million of funds required to be held in trust in connection with the Company's securitized debt and ~~$3.9~~$1.2 million of funds from Applebee's franchisees pursuant to franchise agreements, usage of which was restricted to advertising activities. Current restricted cash of ~~$30.3~~$31.4 million at December 31, ~~2016~~2017 primarily consisted of ~~$25.7~~$29.3 million of funds required to be held in trust in connection with the Company's securitized debt and ~~$4.3~~$2.1 million of funds from Applebee's franchisees pursuant to franchise agreements, usage of which was restricted to advertising activities. Non-current restricted cash of $14.7 million at ~~June 30, 2017~~March 31, 2018 and December 31, ~~2016~~2017 represents interest reserves required to be set aside for the duration of the Company's securitized debt.

~~Table of Contents~~

~~DineEquity, Inc. and Subsidiaries~~

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

~~11. Facility Exit Costs (Continued)~~

~~12. Refranchising of Company-operated Restaurants~~

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”~~“plan,” “goal” and other similar expressions. You should consider our forward-looking statements in light of the risks discussed under the heading “Risk ~~Factors” in our most recent Annual Report on Form 10-K,~~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.

Overview

The following discussion and analysis provides information which we believe is relevant to an assessment and understanding of our consolidated results of operations and financial condition. The discussion should be read in conjunction with the consolidated financial statements and the notes thereto included in Item 1 of Part I of this Quarterly Report and the audited consolidated financial statements and notes thereto and the MD&A contained in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, ~~2016~~2017. Except where the context indicates otherwise, the words “we,” “us,” “our,” ~~“DineEquity”~~“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 and franchise 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”). With over 3,700 restaurants combined, all of which are franchised, we believe we are one of the largest full-service restaurant companies in the world. ~~The~~

We identify our reporting segments based on the organizational units used by management to monitor performance and make operating decisions. We currently have four operating segments: Applebee's franchise operations, IHOP franchise operations, rental operations and financing operations. Prior to June ~~19,~~ 2017, ~~issue~~we operated 10 IHOP restaurants and those operations were considered to be a fifth operating segment. We have four reportable segments: franchise operations, (an aggregation of ~~Nation's Restaurant News~~ ~~reported that~~Applebee's and IHOP franchise operations), rental operations, financing operations and ~~Applebee's were the largest~~company-operated restaurant ~~systems in the family dining and casual dining categories, respectively, in terms~~operations. We consider these to be our reportable segments, regardless of ~~United States system-wide sales during 2016. This marks the tenth consecutive year our two brands have achieved the number one ranking in~~ ~~Nation's Restaurant News~~.whether any segment exceeds 10% of consolidated revenues, income before income tax provision or total assets.

Key Financial Results


	Three months ended June 30,						Favorable (Unfavorable) Variance			Six months ended June 30,						Favorable (Unfavorable) Variance				Three months ended March 31,						Favorable (Unfavorable) Variance
	2017			2016			Favorable (Unfavorable) Variance			2017			2016			Favorable (Unfavorable) Variance				2018			2017 (as adjusted)			Favorable (Unfavorable) Variance
	(In millions, except per share data)																		(In millions, except per share data)
Income before income taxes	$	39.7		$	39.7		$	0.0		$	63.9		$	80.8		$	(16.9	)		$	22.7		$	26.0		$	(3.3	)
Income tax provision	(18.4		)	(12.9		)	(5.5		)	(28.3		)	(28.4		)	0.1				(5.6		)	(10.4		)	4.8
Net income	$	21.3		$	26.8		$	(5.5	)	$	35.6		$	52.4		$	(16.8	)		$	17.1		$	15.6		$	1.5
% change vs. prior period	(20.7		)%							(31.9		)%

Effective tax rate	46.5		%	32.5		%	(14.0		)%	44.3		%	35.2		%	(9.1		)%		24.8		%	40.0		%	15.2		%

							% increase (decrease)									% increase (decrease)										% increase (decrease)
Net income per diluted share	$	1.18		$	1.45		(18.6		)%	$	1.98		$	2.82		(29.8		)%		$	0.92		$	0.86		7.0		%
Weighted average shares	17.7			18.2			(2.5		)%	17.7			18.3			(3.1		)%		17.8			17.7			0.6		%

~~Following are~~Our net income for the three months ended March 31, 2018 increased 9.5% from the the comparable period of 2017 (as adjusted). A decrease in income before income taxes was more than offset by a larger decrease in the effective tax rate and, in turn, the income tax provision. The December 2017 enactment of the Tax Cuts and Jobs Act (the “Tax Act”) reduced the federal statutory tax rate from 35% to 21%, effective January 1, 2018. The decrease in our effective tax rate was approximately the same as the decrease in the federal statutory rate resulting from the Tax Act.

On January 1, 2018, we adopted the guidance 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 application of ASC 606 to all comparative periods presented. The retrospective adoption of ASC 606 increased our net income for the three months ended March 31, 2017 by $1.2 million, approximately $0.07 per diluted share. See Notes 3 and 4 of the Notes to Consolidated Financial Statements for additional discussion of our adoption of ASC 606.

The following sets forth the significant reasons for the ~~changes~~decrease in our income before income taxes between the ~~respective periods:~~three months ended March 31, 2018 and the comparable period of 2017 (as adjusted):

Three months ended June 30, 2017 Six months ended June 30, 2017
Decrease in gross profit: (In millions)
Applebee's franchise operations $ (5.7 ) $ (12.5 )
All other operations 0.2
0.1

Total gross profit decrease (5.5 ) (12.4 )
Increase in General and Administrative (G&A) expenses:
Executive separation costs —
(8.8 )
All other G&A (0.9 ) (3.0 )
Total G&A increase (0.9 ) (11.8 )
Gain on disposition of assets 6.2
6.9

Other 0.2
0.4

Increase (decrease) in income before income taxes $ 0.0
$ (16.9 )

Our effective tax rate (“ETR”) was significantly higher during the three and six months ended June 30, 2017, as compared to the respective periods of the prior year. The increase was primarily due to the following items:

~~An increase in estimated unrecognized tax benefits in 2017 related to our~~ §~~199 domestic production activity deductions pertaining to internal software development (“~~§~~199 deductions”) (increased the 2017 ETR);~~

Adoption of a new accounting standard in 2017 that required excess tax benefits or deficiencies be recorded as an income tax benefit or expense when the awards vest or are settled (increased the 2017 ETR); and

~~A reduction in deferred tax liabilities in 2016 due to a change in estimated state tax rates (lowered the 2016 ETR).~~

See “Events Impacting Comparability of Financial Information,” for additional discussion of each item. We currently expect our effective tax rate for the second half of 2017 will be approximately 40%.

A decrease in weighted average shares outstanding increased our net income per diluted share for the three and six months ended June 30, 2017 by approximately $0.03 and $0.06, respectively. The decrease in weighted average shares outstanding is primarily due to the repurchase of our common stock pursuant to stock repurchase programs (see “Liquidity and Capital Resources of the Company, Share Repurchases”), partially offset by net issuances of shares pursuant to stock-based compensation programs.



	(In millions)
Decrease in gross profit:
Applebee's franchise operations		$	(13.3	)
IHOP franchise operations		2.2
All other operations		0.3
Total gross profit decrease		(10.8		)
Decrease in General and Administrative (“G&A”) expenses:
Decrease due to executive separation costs in 2017		8.8
Increase in all other G&A (net)		(0.4		)
Total G&A decrease		8.4
Increase in closure charges		(2.4		)
Increase in gain on disposition of assets		1.3
Other		0.2
Decrease in income before income taxes		$	(3.3	)

Key Performance Indicators

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

An overview of these key performance indicators for the three ~~and six~~ months ended ~~June 30, 2017~~March 31, 2018 is as follows:

Three months ended June 30, 2017 Six months ended June 30, 2017
Applebee's IHOP Applebee's IHOP
Sales percentage (decrease) increase (7.5 )% 0.2 % (8.1 )% 0.2 %
% decrease in domestic system-wide same-restaurant sales (6.2 )% (2.6 )% (7.0 )% (2.1 )%
Net franchise restaurant (reduction) development ⁽¹⁾
(30 ) 12
(48 ) 20



	Three months ended March 31, 2018
	Applebee's		IHOP
Sales percentage increase	0.9	%	3.9	%
% increase in domestic same-restaurant sales	3.3	%	1.0	%
Net franchise restaurant (reduction) development ⁽¹⁾	(24	)	5

⁽¹⁾ Franchise and area license restaurant openings, net of closings

The Applebee's sales percentage ~~decrease~~increase for the three ~~and six~~ months ended ~~June 30, 2017~~March 31, 2018 was due to ~~the combined effects of declines~~an increase in ~~comp~~domestic same-restaurant sales ~~and~~that was partially offset by restaurant closures. The IHOP sales percentage increase for the three ~~and six~~ months ended ~~June 30, 2017~~March 31, 2018 was due to net restaurant development ~~that was offset by declines~~over the past 12 months and an increase in ~~comp~~domestic same-restaurant sales.

Detailed information on each of these key performance indicators is presented under the captions ~~“Restaurant Data,”~~ “Domestic Same-Restaurant ~~Sales”~~Sales,” “Restaurant Data” and “Restaurant Development Activity” that follow.

Domestic Same-Restaurant Sales

Applebee’s domestic ~~system-wide~~ same-restaurant sales ~~decreased 6.2%~~increased 3.3% for the three months ended ~~June 30, 2017~~March 31, 2018 from the same period in ~~2016. The decrease primarily~~2017. This was the largest increase for a quarterly period for Applebee's since the first quarter of 2011.The improvement resulted from ~~a decline~~an increase in customer traffic that was partially offset by a small increase in average customer check. As depicted above, the change in same-restaurant sales for the second quarter 2017 marked the first improvement in quarterly results from that of the immediately preceding quarter in two years. The improvement was due primarily to a smaller decline in traffic than in the preceding quarter. For the six months ended June 30, 2017, Applebee’s domestic system-wide same-restaurant sales decreased 7.0% from the same period in 2016. The decrease primarily resulted from a decline in customer traffic as well as a small decrease in average customer check. ~~Same-restaurant sales for the first six months of 2017 are not necessarily indicative of results expected for the full year.~~

Based on data from Black Box Intelligence, a restaurant sales reporting firm (“Black Box”), Applebee's outperformed the casual dining segment of the restaurant industry ~~also~~during the three months ended March 31, 2018. During that period, the casual dining segment experienced ~~an overall~~a decrease in same-restaurant sales ~~during both the three and six months ended June 30, 2017. These decreases were~~ due to a decline in customer traffic that was partially offset by an increase in average customer check. ~~For both the three and six months ended June 30, 2017, Applebee's declines in traffic and same-restaurant sales were substantially larger than those experienced by the overall casual dining segment.~~

We believe the differential between Applebee's performance and that of the casual dining segment is due to a multi-faceted strategy we began implementing in ~~large part~~the latter half of 2017 to tactical initiatives previously implemented by Applebee's that did not generate desired results and to the inconsistent quality of operations across the Applebee's system. We have engaged third-party consultants to assess the continuedaddress a two-year decline in Applebee's ~~traffic and~~ 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 what historically had been our core customer base. Our recent marketing, culinary and operational initiatives appear to ~~provide actionable recommendations~~have resonated positively with our guests as customer traffic has increased in each of the past two quarters.

We and the Applebee's franchisees are making significant investments in national marketing. Virtually all domestic Applebee’s franchisees have entered into an amendment to stabilize the decline. We expect to incur approximately $10 million of costs related to these stabilization initiatives in 2017, of which approximately $6 million was incurred as G&A expense during the six months ended June 30, 2017. We also expect to contribute approximately $8 milliontheir franchise agreements that will increase their contribution to the ~~Applebee's~~Applebee’s National Advertising Fund (the “Applebee's NAF”) by 0.25% to 3.50% of their gross sales and decrease 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 in the ~~second half~~advertising contribution rate, subject to certain contingencies. We will contribute $30 million to the Applebee's NAF during the first six months of ~~2017 to help mitigate~~2018, of which $13.5 million was contributed during the ~~decline in franchisee~~three months ended March 31, 2018. As discussed under Consolidated Results of Operations - Franchise Operations, our contributions to the Applebee's NAF had an adverse impact on franchise operations gross profit for that ~~are based on a percentage of restaurant sales.~~period.

Some of the stabilization actions we are implementing relate to brand repositioning and operational improvements. Shorter-term actions, such as reducing the variability of the customer experience across the Applebee's system, have shown improvement as the number of restaurants receiving the lowest of our internal ratings has declined since the end of 2016.

~~As discussed under “Financial Results - Franchise Operations,” Applebee's has experienced a decrease in royalty revenue because of the decline in~~

IHOP’s domestic same-restaurant sales increased 1.0% for the three months ended March 31, 2018 from the same period in 2017. The improvement resulted from an increase in average customer check that ~~is primarily due to~~was partially offset by a decline in customer traffic. ~~The decline in same-restaurant sales~~IHOP customer traffic has adversely impacted franchisee's financial health, resulting in increases in our bad debt expense and in our royalties not recognized as revenue until paid in cash (“cash basis royalties”). A franchisee that represents approximately 5% of Applebee's domestic system-wide sales is exhibiting a higher level of financial difficulty. We are addressing all franchisee's financial health through a collaborative effort between ourselves, a third-party advisor and franchisee representatives. We are considering various forms of assistance to franchisees, such as restaurant closures, assessing franchisee debt arrangements, temporary forbearance on payment obligations, extensions of credit and other support programs. To date,declined for ten consecutive quarters; however, the ~~assistance provided primarily~~percentage decrease has been ~~the approved closures of non-viable restaurants. Any additional assistance to franchisees may entail incremental costs.~~

IHOP’s domestic system-wide same-restaurant sales decreased 2.6% for the three months ended June 30, 2017 from the same period in 2016. The decrease resulted from a decline in customer traffic that was partially offset by an increase in average customer check. The decline in IHOP's quarter-over-quarter customer traffic during the second quarter of 2017 was larger than the decline during the first quarter of 2017. Other than a slightlyprogressively smaller ~~decrease in customer traffic~~ in the first quarter of 2017, the decline in IHOP's quarter-over-quarter customer traffic had grown progressively larger from the fourth quarter of 2015 to the current quarter. For the six months ended June 30, 2017, IHOP’s domestic system-wide same-restaurant sales decreased 2.1% from the same period in 2016. That decrease was also due to a decline in customer traffic that was partially offset by an increase in average customer check. We believe the decrease in customer traffic during the three and six months ended June 30, 2017 was due in part to softness in our dinner daypart as the result of advertising promotions that did not drive sales and traffic as anticipated. Same-restaurant sales for the first six months of 2017 are not necessarily indicative of results expected for the full year.two most recent fiscal quarters.

Based on data from Black Box, the family dining segment of the restaurant industry experienced a decrease in same-restaurant sales during the three ~~and six~~ months ended ~~June 30, 2017,~~March 31, 2018, compared to the same periods of the prior year, due to a decrease in customer traffic that was partially offset by an increase in average customer check. ~~IHOP's declines~~The IHOP decline in customer traffic ~~and same-restaurant sales were larger~~was smaller than ~~those~~that experienced by the overall family dining segment for the three ~~and six~~ months ended ~~June 30, 2017.~~March 31, 2018. IHOP's increase in average customer check was ~~approximately the same as that of the overall family dining segment for the three months ended June 30, 2017, whereas IHOP's increase in average customer check was larger~~also smaller than that of the overall family dining segment for ~~the six months ended June 30, 2017.~~

As reported by Black Box, customer traffic declined for the overall restaurant industry as well as for both the casual dining and family dining segments of the restaurant industry during the three and six months ended June 30, 2017. A decline in customer traffic may be offset in the short term by anthat same period. We believe that IHOP's moderated increase in average customer check ~~resulting from an increase~~was in ~~menu prices, a~~part responsible for the differentially favorable ~~change~~performance in ~~product sales mix, or a combination thereof. A sustained decline in same-restaurant~~ customer traffic ~~that cannot be offset by an increase in average customer check could have an adverse effect on our business, results of operations~~ and ~~financial condition due~~overall same-restaurant sales compared to ~~among other things, reduced royalty revenues, higher bad debt expense resulting from~~ the ~~failure or inability of franchisees to pay amounts owed to us when due, and a possible decline in the number of franchise restaurants because of reduced development or restaurant closures.~~family dining segment.

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 ~~periods in~~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 June 30,						Six months ended June 30,							Three months ended March 31,
		2017			2016			2017			2016				2018			2017
Applebee's Restaurant Data	Applebee's Restaurant Data	(Unaudited)												Applebee's Restaurant Data	(Unaudited)
Effective Restaurants^(a)	Effective Restaurants^(a)													Effective Restaurants^(a)
Franchise	Franchise	1,984			2,028			1,995			2,029			Franchise	1,923			2,007
System-wide^(b)	System-wide^(b)													System-wide^(b)
Sales percentage change^(c)		(7.5		)%	(4.4		)%	(8.1		)%	(4.2		)%
Domestic sales percentage change^(c)														Domestic sales percentage change^(c)	0.9		%	(8.6		)%
Domestic same-restaurant sales percentage change^(d)	Domestic same-restaurant sales percentage change^(d)	(6.2		)%	(4.2		)%	(7.0		)%	(3.9		)%	Domestic same-restaurant sales percentage change^(d)	3.3		%	(7.9		)%
Franchise^(b)	Franchise^(b)													Franchise^(b)
Sales percentage change^(c)		(7.5		)%	(3.4		)%	(8.1		)%	(3.2		)%
Domestic sales percentage change^(c)														Domestic sales percentage change^(c)	0.9		%	(8.6		)%
Domestic same-restaurant sales percentage change^(d)	Domestic same-restaurant sales percentage change^(d)	(6.2		)%	(4.2		)%	(7.0		)%	(3.9		)%	Domestic same-restaurant sales percentage change^(d)	3.3		%	(7.9		)%
Average weekly domestic unit sales (in thousands)	Average weekly domestic unit sales (in thousands)	$	44.2		$	46.5		$	44.7		$	47.6		Average weekly domestic unit sales (in thousands)	$	47.6		$	45.2

IHOP Restaurant Data	IHOP Restaurant Data													IHOP Restaurant Data

Effective Restaurants^(a)	Effective Restaurants^(a)													Effective Restaurants^(a)
Franchise	Franchise	1,565			1,510			1,559			1,508			Franchise	1,619			1,552
Area license	Area license	166			165			166			165			Area license	164			166
Company	Company	9			11			9			11			Company	—			10
Total	Total	1,740			1,686			1,734			1,684			Total	1,783			1,728

System-wide^(b)	System-wide^(b)													System-wide^(b)
Sales percentage change^(c)	Sales percentage change^(c)	0.2		%	2.5		%	0.2		%	2.4		%	Sales percentage change^(c)	3.9		%	0.2		%
Domestic same-restaurant sales percentage change^(d)	Domestic same-restaurant sales percentage change^(d)	(2.6		)%	0.2		%	(2.1		)%	0.8		%	Domestic same-restaurant sales percentage change^(d)	1.0		%	(1.7		)%
Franchise^(b)	Franchise^(b)													Franchise^(b)
Sales percentage change^(c)	Sales percentage change^(c)	0.5		%	2.8		%	0.6		%	2.6		%	Sales percentage change^(c)	4.9		%	0.7		%
Domestic same-restaurant sales percentage change^(d)	Domestic same-restaurant sales percentage change^(d)	(2.6		)%	0.2		%	(2.1		)%	0.8		%	Domestic same-restaurant sales percentage change^(d)	1.0		%	(1.7		)%
Average weekly domestic unit sales (in thousands)	Average weekly domestic unit sales (in thousands)	$	36.3		$	37.5		$	36.6		$	37.6		Average weekly domestic unit sales (in thousands)	$	37.1		$	36.9
Area License^(b)	Area License^(b)													Area License^(b)
Sales percentage change^(c)	Sales percentage change^(c)	(1.4		)%	0.5		%	(2.6		)%	0.4		%	Sales percentage change^(c)	(0.2		)%	(3.7		)%

(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 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, IHOP franchise restaurants and IHOP area license restaurants were as follows:


	Three months ended June 30,				Six months ended June 30,				Three months ended March 31,
	2017		2016		2017		2016		2018		2017
Reported sales (In millions)	(Unaudited)								(Unaudited)

Applebee's domestic franchise restaurant sales	$	1,049.6	$	1,134.2	$	2,135.8	$	2,323.2	$	1,095.6	$	1,086.2
IHOP franchise restaurant sales	739.2		735.4		1,483.4		1,474.3		780.6		744.2
IHOP area license restaurant sales	69.2		70.2		141.7		145.5		75.3		72.5
Total	$	1,858.0	$	1,939.8	$	3,760.9	$	3,943.0	$	1,951.5	$	1,902.9

(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 March 31,
	2018		2017
Applebee's	(Unaudited)
Beginning of period	1,936		2,016

Franchise restaurants opened:
Domestic	—		1
International	2		—
Total franchise restaurants opened	2		1
Franchise restaurants closed:
Domestic	(22	)	(19	)
International	(4	)	—
Total franchise restaurants closed	(26	)	(19	)
Net franchise restaurant reduction	(24	)	(18	)

Total Applebee's restaurants, end of period	1,912		1,998
Domestic	1,760		1,843
International	152		155

Restaurant Development Activity
Three months ended June 30, Six months ended June 30,
2017 2016 2017 2016
Applebee's (Unaudited)
Beginning of period 1,998
2,029
2,016
2,033

Franchise restaurants opened:

Domestic 4
2
5
7
International 4
3
4
4
Total franchise restaurants opened 8
5
9
11
Franchise restaurants closed:

Domestic (33 ) (6 ) (52 ) (12 )
International (5 ) (1 ) (5 ) (5 )
Total franchise restaurants closed (38 ) (7 ) (57 ) (17 )
Net franchise restaurant reduction (30 ) (2 ) (48 ) (6 )

Total Applebee's restaurants, end of period 1,968
2,027
1,968
2,027
Domestic 1,811
1,873
1,811
1,873
International 157
154
157
154

IHOP

Summary - beginning of period:
Franchise 1,564
1,509
1,556
1,507
Area license 167
164
167
165
Company 10
11
10
11
Total IHOP restaurants, beginning of period 1,741
1,684
1,733
1,683

Franchise/area license restaurants opened:
Domestic franchise 9
13
20
19
Domestic area license —
2
—
2
International franchise 8
2
12
3
Total franchise/area license restaurants opened 17
17
32
24
Franchise/area license restaurants closed:

Domestic franchise (2 ) (5 ) (9 ) (8 )
Domestic area license (1 ) —
(1 ) (1 )
International franchise (2 ) (1 ) (2 ) (3 )
Total franchise/area license restaurants closed (5 ) (6 ) (12 ) (12 )
Net franchise/area license restaurant development 12
11
20
12
Refranchised from Company restaurants 9
1
9
1
Net franchise/area license restaurant additions 21
12
29
13

Summary - end of period:
Franchise 1,586
1,519
1,586
1,519
Area license 166
166
166
166
Company^(a)
—
10
—
10
Total IHOP restaurants, end of period 1,752
1,695
1,752
1,695
Domestic 1,646
1,616
1,646
1,616
International 106
79
106
79

^(a)~~During the three months ended June 30, 2017, nine company-operated restaurants were refranchised and one was permanently closed.~~



IHOP
Summary - beginning of period:
Franchise	1,622		1,556
Area license	164		167
Company	—		10
Total IHOP restaurants, beginning of period	1,786		1,733

Franchise/area license restaurants opened:
Domestic franchise	13		11
International franchise	3		4
Total franchise/area license restaurants opened	16		15
Franchise/area license restaurants closed:
Domestic franchise	(5	)	(7	)
International franchise	(6	)	—
Total franchise/area license restaurants closed	(11	)	(7	)
Net franchise/area license restaurant development	5		8

Summary - end of period:
Franchise	1,627		1,564
Area license	164		167
Company	—		10
Total IHOP restaurants, end of period	1,791		1,741
Domestic	1,679		1,641
International	112		100

For the full year of ~~2017,~~2018, we expect Applebee's franchisees to develop between 2010 and 3015 new restaurants globally, ~~most~~the majority of which are expected to be international openings. AsIHOP franchisees are projected to develop between 85 and 100 new IHOP restaurants globally, the majority of which are expected to be domestic openings. Historically, the majority of restaurant openings have taken place in the second half of any given year. We anticipate the closing of between 60 and 80 Applebee's restaurants in 2018 as part of the continuation of a ~~detailed~~ system-wide analysis to optimize the health of the franchisee ~~system, we anticipate the closing of~~system. We expect to close between 105 to 135 Applebee's restaurants globally for the full year of 2017. The anticipated net decline in the number of Applebee's restaurants will result in a decrease in Applebee's royalty revenues. IHOP franchisees are projected to develop between 8030 and ~~95 new~~40 IHOP restaurants ~~globally, most of which are expected~~in 2018, due to ~~be domestic openings. We expect the closing of between 20~~lease expirations and ~~25 IHOP restaurants from natural attrition in 2017.~~system optimization.

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 ~~our~~ 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 landlords and lenders.

CONSOLIDATED RESULTS OF OPERATIONS

Comparison of the ~~Three and~~ ~~Six~~Three Months Ended ~~June 30, 2017~~March 31, 2018 and ~~2016~~2017

Significant Known Events, Trends or Uncertainties

Franchisee Financial Health

Applebee's experienced a decline in system-wide sales between the third quarter of 2015 and 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 and the timely payment of amounts they owe us for royalty payments and advertising fund contributions. The non-timely or partial payments are primarily concentrated amongst three franchisees. Two franchisees representing approximately 13% of Applebee's domestic system-wide sales are exhibiting a higher level of financial difficulty than the other franchisees. These franchisee health issues, in turn, have 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 its collectibility and the need for us to contribute to the Applebee's NAF to mitigate the decline in franchisee contributions due to restaurant closures and the non-timely payment by certain franchisees.

We continue to address franchisee financial health through a collaborative effort between ourselves, a third-party advisor and franchisee representatives. We have provided, and may continue to provide, various forms of assistance to franchisees, such as approval of restaurant closures, assessing franchisee debt arrangements, temporary forbearance on payment obligations, extensions of credit and other support programs. 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 $8 million outstanding at March 31, 2018. Any additional assistance to franchisees may entail incremental costs.

While we are encouraged by the improvement in Applebee's same-restaurant sales and customer traffic during the first quarter of 2018 and the fourth quarter of 2017, 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 the franchisee health issues discussed above. Until such mitigation occurs, we may, in the future, continue to experience one or more of the adverse financial impacts discussed above.

Change in Accounting Policy

On January 1, 2018, we adopted the guidance of Accounting Standards Codification 606 - Revenue from Contracts with Customers (“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 of 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 principles using the full retrospective method. Accordingly, previously reported financial information for the three months ended March 31, 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.

Events Impacting Comparability of Financial Information

Tax Cuts and Jobs Act

The Tax Cuts and Jobs Act (the “Tax Act”) enacted in December 2017 ~~Events~~lowered the federal statutory corporate tax rate from 35% to 21%, beginning in 2018. We expect to benefit meaningfully from the Tax Act in future periods, primarily due to the impact of reducing the statutory federal tax rate to 21%.

Executive Separation Costs

OnIn February ~~17,~~ 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. ~~The former CEO also vested in all~~All stock options and restricted stock awards held by the former CEO that were unvested at the time of the ~~announcement.~~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 ~~six~~three months ended ~~June 30, 2017, all of which were incurred in the first quarter of~~March 31, 2017.

~~Change in Accounting Principle~~Refranchising of Company-operated Restaurants

In ~~March 2016, the Financial Accounting Standards Board (“FASB”) issued new guidance that addressed accounting for certain aspects~~June 2017, we refranchised nine of share-based payments, including excess tax benefits or deficiencies, which represent the difference between the actual tax benefit received at the date of vesting or settlement of an equity award and the book tax benefit recognized over the vesting period of share-based payments. We adopted the new guidanceour ten company-operated IHOP restaurants in the ~~first quarter of 2017. The new guidance requires that excess tax benefits or deficiencies be recorded as an income tax benefit or expense when~~Cincinnati, Ohio market area; the ~~awards vest or are settled. Previously, the excess tax benefits or deficiencies were recorded in additional paid-in capital~~one restaurant not refranchised was closed. As a result, we no longer operate any IHOP restaurants on the balance sheet. As the result of adopting the new guidance, during the three and six months ended June 30, 2017, we recorded excess tax deficiencies of $0.9 million and $1.7 million, respectively, as part ofa permanent basis. While this refranchising reduced our ~~income tax provision, which increased our effective tax rate in these periods by 2.2% and 2.6%, respectively.~~

~~Adjustment to Unrecognized Tax Benefits~~

~~During the three months ended June 30, 2017, we increased~~ ~~unrecognized tax benefits primarily related to our~~ §~~199 deductions. The change in unrecognized tax benefits increased our effective tax rate for the three and six months ended June 30, 2017 by 6.9% and 4.3%, respectively.~~

~~2016 Events~~

~~Consolidation of Kansas City Restaurant Support Center~~

In September 2015, we announced a decision to consolidate many core Applebee's restaurant and franchisee support functions and relocate them from Kansas City, Missouri to our Glendale, California headquarters. We recorded G&A expenses of $0.5 million and $2.6 million related to the consolidation in the three and six months ended June 30, 2016, respectively, most of which related to relocation and severance costs for employees impacted by the consolidation action. The consolidation action was completed in 2016 and no significant consolidation charges were incurred in fiscal 2017.

During the three months ended June 30, 2016, we negotiated the termination of our lease on two of four floors of the Kansas City facility and recorded charges of $2.5 million related to this termination as part of closure and impairment costs in the Consolidated Statement of Comprehensive Income.

~~Adjustment to Deferred Tax Liabilities~~

Because of the consolidation action discussed above, our estimated state tax rate that will be effective when temporary book/tax differences are realized in the future will be lower than the effective state tax rate that was used to record net deferred tax liabilities when the temporary book/tax differences arose. Primarily because of this lower rate, we reduced deferred tax liabilities and our income tax provisiongross revenue by approximately ~~$2.0~~$4 million ~~during the three months ended June 30, 2016. This change lowered our combined effective tax rate~~ for the three months ended ~~June 30, 2016 from what would have been 37.5% without~~March 31, 2018 compared to the ~~adjustment to 32.5% and~~same period of the prior year, there was minimal impact on our ~~combined effective tax rate for the six months ended June 30, 2016 from what would have been 37.7% without the adjustment to 35.2%.~~gross profit.

Financial Results


Revenue	Three months ended June 30,					Favorable (Unfavorable) Variance			Six months ended June 30,					Favorable (Unfavorable) Variance				Three months ended March 31,					Favorable (Unfavorable) Variance
	2017			2016		Favorable (Unfavorable) Variance			2017			2016		Favorable (Unfavorable) Variance				2018			2017 (as adjusted)		Favorable (Unfavorable) Variance
	(In millions)																(In millions)
Franchise operations	$	119.6		$	122.5	$	(2.9	)	$	239.1		$	247.5	$	(8.4	)		$	155.3		$	154.7	$	0.6
Rental operations	30.1			30.8		(0.7		)	60.6			62.2		(1.6		)		30.9			30.5		0.4
Company restaurant operations	3.4			4.5		(1.1		)	7.5			9.3		(1.8		)		—			4.1		(4.1		)
Financing operations	2.1			2.5		(0.4		)	4.2			4.8		(0.6		)		2.0			2.1		(0.1		)
Total revenue	$	155.2		$	160.3	$	(5.1	)	$	311.4		$	323.8	$	(12.4	)		$	188.2		$	191.4	$	(3.2	)
Change vs. prior period	(3.2		)%						(3.8		)%							(1.7		)%

Total revenue for the three months ended ~~June 30, 2017~~March 31, 2018 decreased compared with the same period of the prior year, primarily due to the ~~decrease~~refranchising of IHOP company-operated restaurants discussed above. Smaller changes in ~~revenue from Applebee's~~ franchise restaurants. Additional reasons for the decline in revenue include the operation of fewer reacquired IHOP franchise restaurants, the impact of a 2.6% decrease in IHOP domestic same-restaurant sales on royalty and rental ~~revenue and~~revenues are discussed in the expected progressive decline in interest revenue from rental and financing operations as receivable balances are repaid. These unfavorable factors were partially offset by IHOP franchisee restaurant development over the past twelve months.

Total revenue for the six months ended June 30, 2017 decreased compared with the same period of the prior year, primarily due to the decrease in revenue from Applebee's franchise restaurants. Additional reasons for the decline in revenue include the operation of fewer reacquired IHOP franchise restaurants, the impact of a 2.1% decrease in IHOP domestic same-restaurant sales on royalty and rental revenue and the expected progressive decline in interest revenue from rental and financing operations as receivable balances are repaid. These unfavorable factors were partially offset by IHOP franchisee restaurant development over the past twelve months.

sections that follow.


Gross Profit (Loss)	Three months ended June 30,						Favorable (Unfavorable) Variance				Six months ended June 30,							Favorable (Unfavorable) Variance				Three months ended March 31,							Favorable (Unfavorable) Variance
	2017			2016						2017				2016				Favorable (Unfavorable) Variance			2018				2017 (as adjusted)				Favorable (Unfavorable) Variance
	(In millions)																					(In millions)
Franchise operations	$	82.4		$	87.5		Favorable (Unfavorable) Variance	$	(5.1	)		$	165.2			$	176.8		$	(11.6	)		$	73.4			$	84.6		$	(11.1	)
Rental operations	7.5			7.8			(0.3		)		15.3				16.0			(0.7		)		8.2				7.8			0.4
Company restaurant operations	(0.1		)	(0.2		)	0.1				(0.3		)		(0.6		)	0.3				—				(0.2		)	0.2
Financing operations	2.1			2.3			(0.2		)		4.2				4.6			(0.4		)		1.9				2.1			(0.3		)
Total gross profit	$	91.9		$	97.4		$	(5.5	)		$	184.4			$	196.8		$	(12.4	)		$	83.5			$	94.3		$	(10.8	)
Change vs. prior period	(5.7		)%								(6.3		)%									(11.4		)%

Total gross profit for the three ~~and six~~ months ended ~~June 30, 2017~~March 31, 2018 declined compared with the same periods of the prior year, primarily due to increased franchisor contributions to the ~~decreases~~Applebee's NAF, partially offset by IHOP restaurant development over the past twelve months and increases in ~~revenue from franchise,~~Applebee's and IHOP's domestic same-restaurant sales. Smaller changes in rental and financing operations ~~for~~are discussed in the reasons described above as well as an increase in bad debt expense of franchise operations. These unfavorable factors were partially offset in rental operations by declines in interest expense as capital lease obligations are repaid and in depreciation expense as assets age.

sections that follow.


	Three months ended June 30,						Favorable (Unfavorable) Variance				Six months ended June 30,							Favorable (Unfavorable) Variance				Three months ended March 31,							Favorable (Unfavorable) Variance
Franchise Operations	2017			2016						2017				2016							2018				2017 (as adjusted)
	(In millions, except number of restaurants)																					(In millions, except number of restaurants)
Effective Franchise Restaurants:⁽¹⁾
Applebee’s	1,984			2,028			(44		)		1,995				2,029			(34		)		1,923				2,007			(84		)
IHOP	1,731			1,675			56				1,725				1,673			52				1,783				1,718			65
Franchise Revenues:
Applebee’s	$	44.6		$	48.1		$	(3.5	)		$	90.0			$	99.0		$	(9.0	)		$	40.7			$	45.4		$	(4.7	)
IHOP	46.9			46.5			0.3				92.7				92.5			0.2				50.8				47.6			3.2
Advertising	28.1			27.9			0.2				56.4				56.0			0.4				63.8				61.7			2.1
Total franchise revenues	119.6			122.5			(2.9		)		239.1				247.5			(8.4		)		155.3				154.7			0.6
Franchise Expenses:
Applebee’s	3.6			1.4			(2.2		)		6.6				3.1			(3.5		)		11.4				2.8			(8.6		)
IHOP	5.5			5.7			0.2				10.9				11.6			0.7				6.7				5.7			(1.0		)
Advertising	28.1			27.9			(0.2		)		56.4				56.0			(0.4		)		63.8				61.7			(2.1		)
Total franchise expenses	37.2			35.0			(2.2		)		73.9				70.7			(3.2		)		81.9				70.2			(11.7		)
Franchise Gross Profit:
Applebee’s	41.0			46.7			(5.7		)		83.4				95.9			(12.5		)		29.3				42.6			(13.3		)
IHOP	41.4			40.8			0.5				81.8				80.9			0.9				44.1				41.9			2.2
Total franchise gross profit	$	82.4		$	87.5		$	(5.1	)		$	165.2			$	176.8		$	(11.6	)		$	73.4			$	84.6		$	(11.1	)
Gross profit as % of revenue ⁽²⁾	68.9		%	71.4		%					69.1		%		71.4		%					47.3		%		54.7		%

_____________________________________________________

⁽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.

Applebee’s franchise revenue for the three months ended ~~June 30, 2017 declined 7.3%~~March 31, 2018 decreased 10.3% compared to the same period of the prior year. ~~Approximately $2.6 million of the decline~~This was primarily due to an increase of $4.4 million in revenue not recognized due to uncertainty as to collectibility and a ~~6.2% decrease in domestic same-restaurant sales. Additional factors contributing to the revenue decline were a $0.7~~$1.3 million decrease in royalties due to the net closure of franchise ~~restaurants and an~~restaurants. These unfavorable items were partially offset by a 3.3% increase ~~of $0.4 million in cash basis royalties.~~

~~Applebee’s franchise revenue for the six months ended June 30, 2017 declined 9.1% compared to the same period of the prior year. Approximately $6.3 million of the decline was due to a 7.0% decrease~~ in domestic same-restaurant sales. Additional factors contributing to the revenue decline were a $1.1 million decrease in royalties due to the net closure of franchise restaurants, a $1.0 million increase in cash basis royalties and a $0.5 million decrease in termination fees. We do not expect to receive any termination fees from approved closures of restaurants in 2017.

The ~~increases~~increase in Applebee's franchise expenses for the three ~~and six~~ months ended ~~June 30, 2017 compared with the same periods of the prior year were primarily due to increases in bad debt expense of $2.1 million and $3.6 million, respectively.~~

IHOP franchise revenue for the three months ended June 30, 2017 increased slightly compared to the same period of the prior year. A 3.1% increase in Effective Franchise Restaurants due to net restaurant development and a $0.5 million increase in international royalties were offset by a 2.6% decrease in domestic same-restaurant sales.

IHOP franchise revenue for the six months ended June 30, 2017 increased slightly compared to the same period of the prior year. A 3.3% increase in Effective Franchise Restaurants due to net restaurant development and a $0.7 million increase in international royalties were largely offset by a 2.1% decrease in domestic same-restaurant sales and an $0.8 million decrease in sales of pancake and waffle dry mix.

~~The decrease in IHOP franchise expenses for the six months ended June 30, 2017~~March 31, 2018 compared with the same period of the prior year was primarily due to an increase of $13.5 million in franchisor contributions to the Applebee's NAF, partially offset by a decrease of $4.9 million in bad debt expense. The decrease in bad debt expense was due to the recovery of certain amounts reserved in prior periods.

IHOP franchise revenue for the three months ended March 31, 2018 increased compared to the same period of the prior year, primarily due to a 3.8% increase in Effective Franchise Restaurants because of net restaurant development over the past twelve months and a 1.0% increase in domestic same-restaurant sales. An increase in sales of pancake and waffle dry mix and royalty revenue from refranchised company-operated restaurants contributed to the revenue improvement as well.

The increase in IHOP franchise expenses for the three months ended March 31, 2018 compared with the same period of the prior year were primarily due to an increase in purchases of pancake and waffle dry mix ~~partially offset by increased Company contributions to marketing funds.~~and an increase of $0.3 million in bad debt expense.

Advertising contributions designated for IHOP’s national advertising fund and local marketing and advertising cooperatives, as well as advertising contributions from international franchise restaurants of both brands, are recognized as revenue and expense of franchise operations. However, due to differences in the administration of the Applebee’s marketing fund, contributions to Applebee's domestic marketing fund are not recognized as franchise revenue and expense. Advertising revenue and expenseboth brands for the three ~~and six~~ months ended ~~June 30, 2017~~March 31, 2018 increased ~~slightly~~3.9% compared to the same ~~periods~~period of the

prior year, primarily due to ~~increased contributions from international franchise restaurants of both brands. The impact on advertising revenue~~IHOP net restaurant development over the past twelve months and ~~expense of~~ the ~~increase~~increases in ~~the number of~~Applebee's and IHOP ~~restaurants was~~domestic same-restaurant sales, partially offset by the ~~decrease~~net decline in ~~IHOP domestic same-restaurant sales.~~Applebee's restaurants due to closures.

Gross profit as a percentage of revenue declined for the three ~~and six~~ months ended ~~June 30, 2017~~March 31, 2018 compared to the same ~~respective periods~~period of the prior year, primarily because of the ~~decrease in Applebee's domestic same-restaurant sales and the~~ increase in ~~bad debt expense. We expect that gross profit of franchise operations in~~franchisor contributions to the ~~second half of 2017 will continue to be adversely impacted~~Applebee's NAF, partially offset by ~~additional Applebee's~~IHOP restaurant ~~closures and increases in bad debt expense and cash basis royalties, the effects of which may be greater in the last six months of 2017 than they were in the first six months of 2017.~~development.


Rental Operations	Three months ended June 30,						Favorable (Unfavorable) Variance				Six months ended June 30,							Favorable (Unfavorable) Variance				Three months ended March 31,							Favorable (Unfavorable) Variance
	2017			2016						2017				2016				Favorable (Unfavorable) Variance			2018				2017				Favorable (Unfavorable) Variance
	(In millions)																					(In millions)
Rental revenues	$	30.1		$	30.8		Favorable (Unfavorable) Variance	$	(0.7	)		$	60.6			$	62.2		$	(1.6	)		$	30.9			$	30.5		$	0.4
Rental expenses	22.6			23.0			0.4				45.3				46.2			0.9				22.7				22.7			—
Rental operations gross profit	$	7.5		$	7.8		$	(0.3	)		$	15.3			$	16.0		$	(0.7	)		$	8.2			$	7.8		$	0.4
Gross profit as % of revenue ⁽¹⁾	24.7		%	25.3		%					25.2		%		25.7		%					26.6		%		25.6		%

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

Rental operations relate primarily to IHOP franchise restaurants. Rental income includes 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.

Rental segment revenue for the three months ended ~~June 30, 2017 was lower than~~March 31, 2018 increased compared to the same period of the prior year primarily due to ~~a $0.4 million decrease~~contractual increases in base sub-rental income and an increase in rental income based on a percentage of franchisees' retail sales, ~~and~~partially offset by the expected progressive decline of $0.3 million in interest income as direct financing leases are repaid. ~~Rental segment revenue for the six months ended June 30, 2017~~

There was ~~lower than the same period~~no impact of the ~~prior year primarily due to an $0.8 million decrease in~~adoption of ASC 606 on rental ~~income based on a percentage of franchisees' retail sales and the expected progressive decline of $0.6 million in interest income as direct financing leases are repaid.~~

Rental segment expenses decreased for the three and six months ended June 30, 2017 compared to the same periods of the prior year primarily because of the expected progressive declines in interest expense as capital lease obligations are repaid and in depreciation as assets age. The decreases in rental operation gross profit for the three and six months ended June 30, 2017 compared to the same periods of the prior year were primarily due to decreases in rental income based on a percentage of franchisees' retail sales.revenues.

Financing Operations

Financing revenues primarily consist of interest income from the financing of equipment leases and franchise fees, as well as sales of equipment associated with refranchised IHOP restaurants. Financing expenses are the cost of any restaurant equipment sold associated with refranchised IHOP restaurants.

The decrease in financing revenue and gross profit for the three ~~and six~~ months ended ~~June 30, 2017~~March 31, 2018 was primarily due to the expected progressive declines of $0.2 million ~~and $0.4 million, respectively,~~ in interest revenue as note balances are repaid.

There was no impact of the adoption of ASC 606 on financing revenues.

Company Restaurant Operations

Effective June 19, 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. We did not consider these restaurants to be “discontinued operations” as defined by U.S. GAAP because the refranchising of nine restaurants out of a total of over 3,700 restaurants did not represent a strategic shift that had a major effect on our operations. From time to time, we may continue to operate IHOP restaurants reacquired from franchisees on a temporary basis until those restaurants are refranchised. There were no IHOP restaurants under temporary operation as of June 30, 2017.

Company restaurant revenues and expenses decreased for the three and six months ended June 30, 2017 compared to the same periods of the prior year primarily because we did not operate any reacquired restaurants during the first six months of 2017, whereas we did operate one reacquired restaurant during the first six months of 2016. Additionally, because of the

refranchising discussed above, we operated the Cincinnati restaurants for two fewer weeks during the three and six months ended June 30, 2017 as compared to the same periods of the prior year. Gross profit for the three and six months ended June 30, 2017 improved slightly because the temporary operation of reacquired restaurants typically results in a small loss.

General and Administrative Expenses

Three months ended June 30, Favorable
(Unfavorable) Variance Six months ended June 30, Favorable
(Unfavorable) Variance
2017 2016 2017 2016
(In millions)

$ 37.4
$ 36.5
$ (0.9 ) $ 87.7
$ 75.9
$ (11.8 )



G&A Expenses	Three months ended March 31,				Favorable (Unfavorable) Variance
	2018		2017		Favorable (Unfavorable) Variance
	(In millions)
	$	41.9	$	50.3	$	8.4

The ~~increase~~decrease in G&A expenses for the three months ended June 30, 2017 compared to the same period of the prior year was primarily due to a $2.9 million increase in professional services partially offset by a $1.1 million decrease in personnel-related costs and a decrease of $0.7 million in conference and travel costs.

The increase in professional services primarily related to our utilization of third-party consultants related to the Applebee's stabilization initiatives discussed under “Domestic Same-restaurant Sales - Applebee's.” The decrease in personnel-related costs is primarily due to lower costs of stock-based compensation, which was partially offset by higher costs of severance, an increase in salary and benefits related to the hiring of several senior management positions over the past twelve months and a decrease in certain employment-related incentive credits because of our reduction of personnel in the state of Missouri.

~~The increase in G&A expenses for the six months ended June 30, 2017~~March 31, 2018 compared to the same period of the prior year was primarily due to charges of $8.8 million recognized during the three months ended March 31, 2017 related to the executive separation costs discussed under “Events Impacting Comparability of Financial ~~Information.” The additional increase~~Information” that did not recur in G&A of $3.0 million was due to a $5.4 million increase in professional services and a $0.6 million increase in personnel-related costs, partially offset by a decrease of $1.3 million in recruiting and relocation costs, a $1.0 million decrease in travel and conference costs and a $0.7 million decrease in occupancy costs.2018.

~~The increase in professional services~~



Closure and Impairment Charges

Closure and impairment charges of $2.5 million for the three months ended March 31, 2018 primarily comprised lease closure obligations, net of estimated subrental income, related to two properties on which refranchised Applebee's company-operated restaurants had been located. Closure and impairment charges for the three months ended March 31, 2017 were not significant.

During the three months ended March 31, 2018, we performed assessments to determine whether events or changes in circumstances have occurred that could indicate a potential impairment to our ~~utilization~~goodwill and indefinite-lived intangible assets. We considered, among other things, Applebee's key performance indicators during the three months ended March 31, 2018 and what, if any, impact that performance had on the long-term forecast of ~~third-party consultants related to~~future trends in sales, operating expenses, overhead expenses, depreciation, capital expenditures and changes in working capital that was used in performing the ~~Applebee's stabilization initiatives discussed under “Domestic Same-restaurant Sales - Applebee's.” The increase~~qualitative impairment test in ~~personnel-related costs was primarily due to an increase in salary and benefits related to~~ the ~~hiring~~third quarter of ~~several senior management positions over~~2017. We also considered the ~~past twelve months, an increase in severance costs and a decrease in certain employment-related incentive credits because~~current market price of our ~~reduction~~common stock and the impact of ~~personnel~~the Tax Act. We concluded that an interim test for impairment was not necessary as of March 31, 2018. We also considered whether there were any indicators that the carrying value of tangible long-lived assets may not be recoverable. No significant impairments were noted in performing the ~~state~~assessments.



(Gain) Loss on Disposition of Assets

As part of ~~Missouri, partially offset by lower costs of stock-based compensation The decrease in recruiting, relocation and occupancy expenses related to costs incurred in 2016 related to~~ the ~~consolidation action~~transaction discussed above under “Events Impacting Comparability of Financial ~~Information” that did not recur in 2017.~~

(Gain) Loss on Disposition of Assets

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

2017 2016 2017 2016
(In millions)
$ (6.2 ) $ (0.0 ) $ 6.2
$ (6.4 ) $ 0.6
$ 6.9

In June 2017, the Company completed the refranchising and sale of related restaurant assets of nine company-operated IHOP restaurants in the Cincinnati, Ohio market area. As part of the transaction, the CompanyInformation,” 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 ~~in connection with~~related to the transaction. ~~The Company also received cash~~During the three months ended March 31, 2018, the sublease tenant of ~~$1.1 million and a note receivable for $4.8 million. After allocating a portion~~one of the ~~consideration~~properties with lease terms favorable to ~~franchise fees and derecognition of the assets sold,~~ the Company ~~recognized~~purchased the property, terminating the lease which allowed us to recognize a gain of ~~$6.2~~$1.4 million on disposition of the ~~refranchising and sale during the three and six months ended June 30, 2017.~~favorable lease asset. There were no ~~other~~ individually significant asset dispositions ~~in either of~~during the ~~comparative periods presented above.~~

three months ended March 31, 2017.


Other Expense and Income Items	Three months ended June 30,				Favorable (Unfavorable) Variance				Six months ended June 30,							Favorable (Unfavorable) Variance				Three months ended March 31,							Favorable (Unfavorable) Variance
	2017		2016					2017				2016				Favorable (Unfavorable) Variance			2018				2017				Favorable (Unfavorable) Variance
	(In millions)																			(In millions)
Interest expense	$	15.8	$	15.4	Favorable (Unfavorable) Variance	$	(0.4	)		$	31.1			$	30.7		$	(0.4	)		$	15.2			$	15.4		$	0.2
Amortization of intangible assets	2.5		2.5		—				5.0				5.0			(0.0		)		2.5				2.5			(0.0		)
Closure and impairment charges	2.7		3.3		0.6				2.9				3.7			0.8
Total	$	21.0	$	21.2	$	0.2			$	39.0			$	39.4		$	0.4			$	17.7			$	17.9		$	0.2

Interest expense and amortization of intangible assets for the three ~~and six~~ months ended ~~June 30, 2017~~March 31, 2018 were consistent with the same periods of the prior year.

In June 2017, we permanently closed one company-operated IHOP restaurant in the Cincinnati, Ohio market area and recorded charges of approximately $2.2 million related to the closure. There were no other individually significant closure and impairment charges during the three and six months ended June 30, 2017.

During the three months ended June 30, 2016, we recorded $2.5 million of lease termination costs related to the consolidation action discussed under “Events Impacting Comparability of Financial Information” above. We also recorded an impairment charge of $0.6 million related to one IHOP company-operated restaurant. There were no other individually significant charges during the three and six months ended June 30, 2016.

During the six months ended June 30, 2017, we performed assessments to determine whether events or changes in circumstances have occurred that could indicate a potential impairment to our goodwill and indefinite-lived intangible assets. We considered, among other things, Applebee's key performance indicators during the six months ended June 30, 2017 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 fourth quarter of 2016. We also considered recent personnel changes and the current market price of our common stock. We concluded that an interim test for impairment was not necessary as of June 30, 2017. We also considered whether there were any indicators that the carrying value of tangible long-lived assets may not be recoverable. No significant impairments were noted in performing the assessments.


Income Taxes	Three months ended June 30,						Favorable (Unfavorable) Variance				Six months ended June 30,							Favorable (Unfavorable) Variance				Three months ended March 31,							Favorable (Unfavorable) Variance
	2017			2016						2017				2016				Favorable (Unfavorable) Variance			2018				2017				Favorable (Unfavorable) Variance
	(In millions)																					(In millions)
Income tax provision	$	18.4		$	12.9		Favorable (Unfavorable) Variance	$	(5.5	)		$	28.3			$	28.4		$	0.1			$	5.6			$	10.4		$	4.8
Effective tax rate	46.5		%	32.5		%	(14.0		)%		44.3		%		35.2		%	(9.1		)%		24.8		%		40.0		%	15.2		%

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 ~~2017~~2018 and ~~2016~~2017 were addressed in the preceding sections of “Consolidated Results of Operations - Comparison of the Three ~~and Six~~ Months Ended ~~June 30, 2017~~March 31, 2018 and ~~2016.~~2017.”

Our effective tax rates for the three and six months ended June 30, 2017 were higher than the statutory federal tax rate of 35%. As discussed under “Events Impacting Comparability of Financial Information,” the increase was primarily due to an increase in our estimated unrecognized tax benefits primarily related to our §199 deductions and to the adoption of new accounting guidance. The change in unrecognized tax benefits increased our effective tax rate for the three and six months ended June 30, 2017 by 6.9% and 4.3%, respectively. Adoption of the new guidance increased our effective tax rate for the three and six months ended June 30, 2017 by 2.2% and 2.6%, respectively. We currently expect our effective tax rate for the second half of 2017 will be approximately 40%.

Our effective tax rates for the three ~~and six~~ months ended ~~June 30, 2016~~March 31, 2018 were significantly lower than the ~~statutory federal tax rate~~same period of ~~35%. In each case, the lower rate was primarily~~prior year due to the ~~adjustment~~Tax Act, enacted in December 2017, that lowered the federal statutory corporate tax rate from 35% to ~~deferred tax balances because of the consolidation action discussed under “Events Impacting Comparability of Financial Information,” above.~~21%.

Liquidity and Capital Resources

At ~~June 30, 2017,~~March 31, 2018, our outstanding long-term debt consisted of $1.3 billion of Series 2014-1 4.277% Fixed Rate Senior Notes, Class A-2 (the “Class A-2 Notes”). We also have a revolving financing facility consisting of Series 2014-1 Variable Funding Senior Notes, Class A-1 (the “Variable Funding Notes”), which allows for drawings of up to $100 million of Variable Funding Notes and the issuance of letters of credit. The Class A-2 Notes and the Variable Funding Notes are referred to collectively as the “Notes.” The Notes were issued in a private securitization transaction 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.

While the Notes are outstanding, payment of principal and interest is required to be made on the Class A-2 Notes on a quarterly basis. The quarterly principal payment of $3.25 million on the 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 ~~June 30, 2017,~~March 31, 2018, our leverage ratio was ~~5.02x~~5.70x (see Exhibit 12.1). ~~Our leverage ratio has been less than 5.25x for each quarterly period since the Notes were issued and accordingly, no payments of principal have been required.~~ Exceeding the leverage ratio of 5.25x ~~would~~does not violate any covenant related to the ~~Notes.~~Notes; however, we were required to make a principal payment of $3.25 million in the first quarter of 2018 and anticipate we will be required to make principal payments in each of the remaining quarters of 2018.

We may voluntarily repay the Class A-2 Notes at any time; however, if we voluntarily repay the Class A-2 Notes prior to September 2018 we would be required to pay a make-whole premium. As of March 31, 2018, the make-whole payment for voluntary repayment was approximately $12 million; this amount declines ratably to zero in September 2018. We would also be subject to a make-whole premium in the event of a mandatory prepayment occurring prior to September 2018 following a Rapid Amortization Event (as defined in the Class A-2 Notes) or certain asset dispositions. The make-whole premium requirements are considered derivatives embedded in the Class A-2 Notes that must be bifurcated for separate valuation. We estimated the fair value of these derivatives to be ~~immaterial~~insignificant at ~~June 30, 2017,~~March 31, 2018, based on the probability-weighted discounted cash flows associated with either event.

The Variable Funding Notes were not drawn upon at ~~June 30, 2017 and we have not drawn on them since issuance.~~March 31, 2018. At ~~June 30, 2017, $5.0~~March 31, 2018, $3.1 million was pledged against the Variable Funding Notes for outstanding letters of credit, leaving ~~$95.0~~$96.9 million of Variable Funding Notes available for borrowings. The letters of credit are used primarily to satisfy insurance-related collateral requirements. In April 2018, we drew $20 million against this revolving credit facility.

The 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 Event, A Rapid Amortization Event, a Manager Termination Event or a Default Event as described below. In a Cash Trapping Event, the Trustee is required to retain a certain percentage 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 Event, 50% of Net Cash Flow

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

•DSCR less than 1.30x - Rapid Amortization Event

•DSCR less than 1.20x - Manager Termination Event

•DSCR less than 1.10x - Default Event

Our DSCR for the reporting period ended ~~June 30, 2017~~March 31, 2018 was ~~4.82x~~3.85x (see Exhibit 12.1).

Capital Allocation

Dividends

During the ~~six~~three months ended ~~June 30, 2017,~~March 31, 2018, we paid dividends on common stock of ~~$34.9~~$17.5 million, representing cash dividends of $0.97 per share declared in the fourth quarter of ~~2016 and the first quarter of~~ 2017. On ~~May 15, 2017,~~February 14, 2018, our Board of Directors declared a first quarter ~~2017~~2018 cash dividend of ~~$0.97~~$0.63 per share of common stock. This dividend was paid on ~~July 7, 2017~~April 6, 2018 to our stockholders of record at the close of business on ~~June~~March 19, ~~2017.~~2018. We reported dividends payable of ~~$17.5~~$11.5 million at ~~June 30, 2017.~~March 31, 2018.

Share Repurchases

In October 2015, our Board of Directors approved a stock repurchase program authorizing us to repurchase up to $150 million of ~~DineEquity~~our 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 not require the repurchase of a

specific number of shares and can be terminated at any time. A summary of shares repurchased under the 2015 Repurchase Program, currently and cumulatively, is as follows:

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



	Shares	Cost of shares
		(In millions)
Repurchased during the three months ended March 31, 2018	138,638	$	10.0
Cumulative repurchases as of March 31, 2018	1,139,295	$	92.9
Remaining dollar value of shares that may be repurchased	n/a	$	57.1

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 ~~second~~first quarter of ~~2017.~~2018.

Cash Flows

In summary, our cash flows for the ~~six~~three months ended ~~June 30,~~March 31, 2018 and 2017 ~~and 2016~~ were as follows:


	Six months ended June 30,									Three months ended March 31,
	2017			2016			Variance			2018			2017			Variance
	(In millions)									(In millions)
Net cash provided by operating activities	$	20.9		$	53.9		$	(33.0	)	$	16.5		$	19.5		$	(3.0	)
Net cash provided by investing activities	3.8			6.5			(2.7		)
Net cash (used in) provided by investing activities										(0.3		)	1.8			(2.1		)
Net cash used in financing activities	(51.7		)	(76.6		)	24.9			(35.9		)	(31.6		)	(4.3		)
Net decrease in cash, cash equivalents and restricted cash	$	(27.0	)	$	(16.2	)	$	(10.8	)	$	(19.7	)	$	(10.2	)	$	(9.5	)

Operating Activities

Our net income for the three months ended March 31, 2018 increased $1.5 million compared to the same period of 2017, primarily due to a decrease in the federal statutory tax rate and a decrease in G&A expenses, partially offset by a decline in gross profit from franchise operations, each of which was discussed in preceding sections of the MD&A. Our net income including the non-cash reconciling items shown in the statement of cash flows (primarily depreciation, deferred taxes and stock-based compensation expense) was $23.0 million for the three months ended March 31, 2018 compared to $24.7 million the same period of 2016, a decrease of $1.7 million. This decrease was primarily due to the timing of deferred rent recognition. Net changes in working capital used cash of $6.6 million during the first three months of 2018, compared to a use of cash of $5.2 million during the first three months of 2017. The working capital change adversely impacted cash from operations by $1.4 million and was primarily due to a decrease in taxes paid offset by the timing of marketing accruals.

The decrease of $3.0 million in cash provided by operating activities for the ~~six~~three months ended June 30, 2017 was primarily due to lower net income as well as unfavorable net changes in working capital. Our net income for the six months ended June 30, 2017 decreased $16.8 million compared to the same period of 2016, primarily because of a decrease in gross profit from franchise operations and an increase in G&A expenses. Each of these factors was discussed in preceding sections of MD&A.

Net changes in working capital used cash of $25.4 million during the first six months of 2017 compared to having used cash of $11.9 million during the first six months of 2016, an unfavorable variance of $13.5 million. The unfavorable variance in working capital changesMarch 31, 2018 was primarily due to the ~~timing of payments related to advertising funds, partially offset by a~~$1.7 million decrease in ~~payments for incentive compensation during~~net income including the ~~six months ended June 30, 2017.~~

non-cash reconciling items and the $1.4 million increase in cash used by working capital changes.

Investing Activities

Investing activities ~~provided~~used net cash of $~~3.8~~0.3 million for the ~~six~~three months ended ~~June 30, 2017~~March 31, 2018. Principal receipts from notes, equipment contracts and other long-term receivables of $~~9.9~~4.9 million and proceeds from asset sales of ~~$1.1~~$0.7 million were ~~partially~~more than offset by $~~6.9~~3.5 million in capital ~~expenditures.~~expenditures and additions to long-term receivables of $2.3 million.

Financing Activities

Financing activities used net cash of $~~51.7~~35.9 million for the ~~six~~three months ended ~~June 30, 2017~~March 31, 2018. Cash used in financing activities primarily consisted of cash dividends paid on our common stock totaling $~~34.9~~17.5 million, repurchases of our common stock totaling $10.0 million, ~~and~~ repayments of capital lease obligations and long-term debt of ~~$7.2~~$7.8 million, ~~partially offset by~~and a net cash ~~inflow~~outflow of approximately $~~0.3~~0.6 million related to equity compensation awards.

Cash and Cash Equivalents

At ~~June 30, 2017~~March 31, 2018, our cash and cash equivalents totaled $~~112.3~~96.4 million, including ~~$51.8~~$46.9 million of cash held for gift card programs and advertising funds. Additionally, several of our franchisor subsidiaries held a total of approximately $28 million in cash at March 31, 2018, 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 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. Reconciliation of the cash provided by operating activities to adjusted free cash flow is as follows:


	Six months ended June 30,									Three months ended March 31,
	2017			2016			Variance			2018			2017			Variance
	(In millions)									(In millions)
Cash flows provided by operating activities	$	20.9		$	53.9		$	(33.0	)	$	16.5		$	19.5		$	(3.0	)
Receipts from notes and equipment contracts receivable	5.2			4.4			0.8			2.3			2.7			(0.4		)
Additions to property and equipment	(6.9		)	(1.9		)	(5.0		)	(3.5		)	(3.0		)	(0.5		)
Adjusted free cash flow	$	19.2		$	56.4		$	(37.2	)	$	15.3		$	19.2		$	(3.9	)

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.

The decrease in adjusted free cash flow for the ~~six~~three months ended ~~June 30, 2017~~March 31, 2018 compared to the same period of the prior year is primarily due to the decrease in cash from operating activities discussed ~~above and an increase in capital expenditures.~~above. Capital expenditures are expected to be approximately ~~$14~~$16 million for fiscal ~~2017.~~2018.

Off-Balance Sheet Arrangements

We have obligations for guarantees on certain franchisee lease agreements, as disclosed in Note 10 - 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 ~~June 30, 2017.~~March 31, 2018.

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, ~~2016~~.2017.

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, ~~2016~~2017. During the ~~six~~three months ended ~~June 30, 2017~~March 31, 2018, there were no significant changes in our estimates and critical accounting ~~policies.~~

~~See~~policies, other than the adoption of ASC 606 as discussed in Note 3, “Accounting ~~Policies,”~~Standards Adopted and Newly Issued Accounting Standards Not Yet Adopted” in the Notes to Consolidated Financial ~~Statements for a discussion of recently adopted accounting standards and newly issued accounting standards.~~

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, ~~2016~~2017.

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, ~~2016~~2017.

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 (b)	Approximate dollar value of shares that may yet be purchased under the plans or programs (b)		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)
April 3, 2017 – April 30, 2017^(a)	2,471	$54.44	—	$	67,100,000
May 1, 2017 – May 28, 2017^(a)	2,798	$51.12	—	$	67,100,000
May 29, 2017 – July 2, 2017^(a)	468	$44.06	—	$	67,100,000
January 1, 2018 – January 28, 2018^(a)						10	$	53.42	—	$	67,100,000
January 29, 2018 – February 25, 2018^(a)						8,665	68.99		—	$	67,100,000
February 26, 2018 – April 1, 2018^(b)						145,196	72.23		138,638	$	57,100,000
Total	5,737	$51.98	—	$	67,100,000	153,871	$	72.05	138,638	$	57,100,000

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

^(b)These amounts include 6,558 shares owned and tendered by employees at an average price of $73.93 to satisfy tax withholding obligations arising upon vesting of restricted stock awards.

^(c) In October 2015, our Board of Directors approved a stock repurchase program authorizing us to repurchase up to $150 million of ~~DineEquity~~it'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. The program 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 ~~DineEquity,~~Dine Brands Global, Inc. (Exhibit ~~99.3~~3.1 to ~~Registrant's~~Registrant’s Form ~~8-K~~10-K filed on ~~December 18, 2012~~February 20, 2018 is incorporated herein by reference).
3.2			Amended Bylaws of ~~DineEquity,~~Dine Brands Global, Inc. (Exhibit 3.2 to ~~Registrant's~~Registrant’s Form ~~8-K~~10-K filed on ~~May 23, 2016~~February 20, 2018 is incorporated herein by reference).
*†10.1			Dine Brands Global, Inc. 2016 Stock Incentive Plan
*†10.2			Dine Brands Global, Inc. 2016 Stock Incentive Plan Cash-Settled RSU Agreement - Non-Employee Directors
*†10.3			Dine Brands Global, Inc. 2016 Stock Incentive Plan Cash-Settled RSU Agreement - Employees
*†10.4			Dine Brands Global, Inc. 2016 Stock Incentive Plan Cash-Settled RSU Agreement - International Employees
*†10.5			Dine Brands Global, Inc. 2016 Stock Incentive Plan Stock-Settled RSU Agreement - Employees - Performance Based
*†10.6			Dine Brands Global, Inc. 2016 Stock Incentive Plan Stock-Settled RSU Agreement 50/50% Annual Vesting - International Employees
*†10.7			Dine Brands Global, Inc. 2016 Stock Incentive Plan Stock-Settled RSU Agreement - International Employees
*†10.8			Dine Brands Global, Inc. 2016 Stock Incentive Plan Stock-Settled RSU Agreement - Employees
*†10.9			Dine Brands Global, Inc. 2016 Stock Incentive Plan Nonqualified Stock Option Agreement - Employees
*†10.10			Dine Brands Global, Inc. 2016 Stock Incentive Plan Nonqualified Stock Option Agreement - International Employees
*†10.11			Dine Brands Global, Inc. 2016 Stock Incentive Plan Nonqualified Stock Option Agreement - Non-Employee Directors
*†10.12			Dine Brands Global, Inc. 2016 Stock Incentive Plan Nonqualified Stock Option Agreement - Employees - Performance Based
*†10.13			Dine Brands Global, Inc. 2016 Stock Incentive Plan Performance Shares Agreement - Employees
*†10.14			Dine Brands Global, Inc. 2016 Stock Incentive Plan Performance Shares Agreement - Employees - 50% stock/50% cash
*†10.15			Dine Brands Global, Inc. 2016 Stock Incentive Plan Performance Award Agreement - Employees - Single Metric
*†10.16			Dine Brands Global, Inc. 2016 Stock Incentive Plan Performance Award Agreement - Employees - Double Metric
*†10.17			Dine Brands Global, Inc. 2016 Stock Incentive Plan Restricted Stock Agreement Employees - 25/25/50% Annual Vesting
*†10.18			Dine Brands Global, Inc. 2016 Stock Incentive Plan Restricted Stock Agreement - Employees
*†10.19			Dine Brands Global, Inc. 2016 Stock Incentive Plan Restricted Stock Agreement - Non-Employee Directors
*†10.20			Dine Brands Global, Inc. 2016 Stock Incentive Plan Restricted Stock Agreement - Employees - Specified Date Vesting
*†10.21			Dine Brands Global, Inc. 2016 Stock Incentive Plan - Employees - 5-/50% Annual Vesting
*†10.22			Dine Brands Global, Inc. 2016 Stock Incentive Plan Restricted Stock Agreement - Employees - One-Fourth Annual Vesting
*†10.23			Dine Brands Global, Inc. 2016 Stock Incentive Plan Restricted Stock Agreement - Employees - One Third Annual Vesting
*†10.24			Dine Brands Global, Inc. 2016 Stock Incentive Plan Restricted Stock Agreement - Employees - Annual Vesting
*†10.25			Dine Brands Global, Inc. 2016 Stock Incentive Plan SAR Agreement - Employees
*12.1			Computation of Debt Service Coverage Ratio for the Trailing Twelve Months Ended ~~June 30, 2017~~March 31, 2018 and Leverage Ratio as of ~~June 30, 2017.~~March 31, 2018.
*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.***
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.


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

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.



		~~DineEquity,~~Dine Brands Global, Inc. (Registrant)


Dated:	~~August 10, 2017~~May 2, 2018	By:	/s/ ~~Richard J. Dahl~~Stephen P. Joyce
			~~Richard J. Dahl~~Stephen P. Joyce ~~Chairman and Interim~~ Chief Executive Officer (Principal Executive Officer)

Dated:	~~August 10, 2017~~May 2, 2018	By:	/s/ Greggory H. Kalvin
			Greggory H. Kalvin Interim Chief Financial Officer, Senior Vice President, Corporate Controller (Principal Accounting Officer)

3235



	Three months ended June 30, 2017				Six months ended June 30, 2017
Decrease in gross profit:		(In millions)
Applebee's franchise operations		$	(5.7	)		$	(12.5	)
All other operations		0.2				0.1
Total gross profit decrease		(5.5		)		(12.4		)
Increase in General and Administrative (G&A) expenses:
Executive separation costs		—				(8.8		)
All other G&A		(0.9		)		(3.0		)
Total G&A increase		(0.9		)		(11.8		)
Gain on disposition of assets		6.2				6.9
Other		0.2				0.4
Increase (decrease) in income before income taxes		$	0.0			$	(16.9	)